-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TpkzAMP5icIiLqFzLf+u1PZGjgXknI5KEoC8bmtgdxb4eeYg2zgYkFhXyMtL7cJx +f50SH1L2SMgNE9/oSH48w== 0000950149-98-000222.txt : 19980218 0000950149-98-000222.hdr.sgml : 19980218 ACCESSION NUMBER: 0000950149-98-000222 CONFORMED SUBMISSION TYPE: 485BPOS PUBLIC DOCUMENT COUNT: 46 FILED AS OF DATE: 19980213 EFFECTIVENESS DATE: 19980213 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SCHWAB CHARLES FAMILY OF FUNDS CENTRAL INDEX KEY: 0000857156 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: SEC FILE NUMBER: 033-31894 FILM NUMBER: 98538850 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: SEC FILE NUMBER: 811-05954 FILM NUMBER: 98538851 BUSINESS ADDRESS: STREET 1: 101 MONTGOMERY ST CITY: SAN FRANCISCO STATE: CA ZIP: 94104 BUSINESS PHONE: 4156277000 MAIL ADDRESS: STREET 1: 101 MONTGOMERY ST CITY: SAN FRANCISCO STATE: CA ZIP: 94104 485BPOS 1 CHARLES SCHWAB FAMILY OF FUNDS PE AMEND.33 - N-1A 1 As filed with the Securities and Exchange Commission on FEBRUARY 14, 1998 File Nos. 33-31894 and 811-5954 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------- FORM N-1A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 Post-Effective Amendment No. 33 [X] and REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 Amendment No. 35 [X] -------------- THE CHARLES SCHWAB FAMILY OF FUNDS (Exact Name of Registrant as Specified in Charter) 101 Montgomery Street, San Francisco, California 94104 (Address of Principal Executive Offices) Registrant's Telephone Number, including Area Code: (415) 627-7000 Tom D. Seip, President The Charles Schwab Family of Funds 101 Montgomery Street, San Francisco, California 94104 (Name and Address of Agent for Service) Copies of communications to: Martin E. Lybecker, Esq. Frances Cole, Esq. Ropes & Gray Charles Schwab Investment Management, 1301 K Street, NW, Suite 800 East Inc. Washington, D.C. 20005 101 Montgomery Street San Francisco, CA 94104 It is proposed that this filing will become effective (check appropriate box): / / Immediately upon filing pursuant to paragraph (b) /X/ On FEBRUARY 16, 1998 pursuant to paragraph (b) / / 60 days after filing pursuant to paragraph (a)(1) / / On (date) pursuant to paragraph (a)(1) / / 75 days after filing pursuant to paragraph (a)(2) / / On (date) pursuant to paragraph (a)(2) of Rule 485 if appropriate, check the following box: / / This post-effective amendment designates a new effective date for a previously filed post-effective amendment. 1 2 PART A CROSS REFERENCE SHEET PROSPECTUS Schwab Florida Municipal Money Fund PART A ITEM PROSPECTUS CAPTION 1. Cover Page Cover Page 2. Synopsis Key Features; Expenses 3. Condensed Financial Information Not applicable 4. General Description of Registrant Organization & Management; Investment Objective, Policies & Risks 5. Management of the Fund Organization & Management 5A. Management's Discussion of Fund Not applicable Performance 6. Capital Stock and Other Securities Organization & Management; Investing in Shares 7. Purchase of Securities Being Investing in Shares Offered 8. Redemption or Repurchase Investing in Shares 9. Pending Legal Proceedings Not applicable 2 3 TABLE OF CONTENTS
PAGE ---- KEY FEATURES......................... 2 EXPENSES............................. 3 PERFORMANCE.......................... 4 ORGANIZATION & MANAGEMENT............ 5 INVESTMENT OBJECTIVES, POLICIES & RISKS.............................. 6 INVESTING IN SHARES.................. 9
The Prospectus provides concise information that you should know before investing. Retain it for future reference. The Statement of Additional Information (SAI), dated February 16, 1998, contains additional information and is incorporated by reference into the Prospectus. The SAI has been filed with the Securities and Exchange Commission (SEC). The SEC maintains a web site (http://www.sec.gov) that contains the SAI, material incorporated by reference and other information. The SAI is available without charge by calling 1-800-435-4000 (1-800-345-2550 for TDD users) or writing to 101 Montgomery Street, San Francisco, CA 94104. LIKE ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SEC OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. SCHWAB FLORIDA MUNICIPAL MONEY FUND SWEEP SHARES PROSPECTUS FEBRUARY 16, 1998 SCHWAB FLORIDA MUNICIPAL MONEY FUND (the Fund) seeks income exempt from federal income taxes, consistent with liquidity and stability of capital, and also seeks to have its shares exempt from the Florida intangible tax. The Fund intends to invest in municipal money market securities of a single state, and may invest a significant percentage of its assets in the securities of a single issuer. Therefore, the Fund may be riskier than other types of money market funds. AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S. GOVERNMENT. THERE CAN BE NO ASSURANCE THAT THE FUND WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE PER SHARE OF $1.00. 4 KEY FEATURES MATCHING THE FUND TO YOUR INVESTMENT NEEDS: The Fund seeks tax-exempt income while preserving the value of your investment and, therefore, may be appropriate for a variety of investment programs. However, an investment in the Fund is not a substitute for building an investment portfolio tailored to your specific investment needs and risk tolerance. The Fund is designed to provide income exempt from federal income taxes. The Fund also seeks to have its shares exempt from the Florida intangible tax. The Fund is not suitable for investors who would not benefit from the tax-exempt character of the Fund's investments, such as IRAs, qualified retirement plans or other tax-exempt entities. SWEEP FEATURE: The Fund may provide automatic investment ("sweep") of the cash balance in your Schwab account. Also, shares of the Fund may be automatically redeemed to cover any negative cash balance in your Schwab account. The Fund is suitable for investors who wish to have the cash balance in their Schwab account invested automatically in a municipal money market fund. GOAL: The Fund seeks tax-exempt income, while maintaining a stable share price of $1.00. There is no guarantee that the Fund will achieve its goal. STRATEGY: The Fund invests in high-quality, short-term Florida municipal money market securities. The Fund is a non-diversified mutual fund. RISKS: Because the Fund invests substantially in Florida municipal money market securities, the performance of the Fund may be especially affected by Florida's economic conditions and political developments, as well as the ability of issuers to meet their obligations. MANAGEMENT: Charles Schwab Investment Management, Inc. (the Investment Manager) currently provides investment management services to the SchwabFunds(R), a family of 31 mutual funds with over $56 billion in assets as of December 31, 1997. SHAREHOLDER SERVICE: Charles Schwab & Co., Inc. (Schwab) provides professional representatives 24 hours a day at 1-800-435-4000 to service your account. Read the "Investing in Shares" section of the prospectus for information on how to buy, sell and exchange shares of the Fund. LOW-COST INVESTING: The Investment Manager and Schwab have voluntarily guaranteed that, through at least February 28, 1999, total operating expenses of the Fund will not exceed 0.59% of its average daily net assets. 2 5 EXPENSES ANNUAL OPERATING EXPENSES are paid by the Fund. These expenses include management fees paid to the Investment Manager, and other fees for services such as maintaining shareholder records and furnishing shareholder statements and financial reports. These expenses are factored into the dividends paid to shareholders. As a shareholder, you are not charged any of these fees directly. The annual operating expenses stated below are based on estimated other expenses and are stated as a percentage of average daily net assets of the Fund. Management fee (after reduction) 0.08% 12b-1 fee NONE Other expenses (after reduction) 0.51% ------ TOTAL OPERATING EXPENSES (AFTER REDUCTION) 0.59%
EXAMPLE. If the Fund were to provide an annual return of 5%, you would pay the following expenses on a $1,000 investment, whether you redeemed your shares at the end of each period or left your shares invested.
1 YEAR 3 YEARS - ------ ------- $6 $19
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE SHOWN. The Investment Manager and Schwab have voluntarily agreed to guarantee, at least through February 28, 1999, that total operating expenses (excluding interest, taxes and extraordinary expenses) of the Fund will not exceed 0.59% of its average daily net assets. If these guarantees were not in effect the management fee, other expenses and total operating expenses of the Fund would be 0.46%, 0.51% and 0.97% of its average daily net assets. Read the "Organization & Management" section of the prospectus for more information on expenses. 3 6 PERFORMANCE Typically, money market funds report performance in terms of total return or yield. TOTAL RETURN is the actual return of an investment, assuming both the reinvestment of any income earned and any change in share price. A cumulative total return is the actual total return of an investment over a stated period of time, while an average annual total return is a hypothetical rate of return, which, if achieved annually would have produced the same cumulative total return. An average annual total return will smooth out the actual year-to-year fluctuations of an investment's return. YIELD is the actual income earned on an investment over a stated period of time and annualized (assumed to be generated over a year). For example, a seven-day yield measures the income earned on an investment over a seven-day period, annualizes it and expresses that income as a percentage of the original investment. An effective yield is calculated similarly, but income earned is assumed to be reinvested. Because of this compounding effect, effective yields are generally higher. Taxable equivalent yield shows the yield that a taxable investment would have to generate in order to equal a tax-free yield. A taxable equivalent effective yield is calculated similarly, except that the effective yield is used in the calculation. Because money market funds seek to maintain a stable share price, yields are generally the most common method of measuring performance, rather than total return. Fund strategies, performance and holdings are detailed in financial reports, which are sent to shareholders twice a year. 4 7 ORGANIZATION & MANAGEMENT THE FUND IS A NON-DIVERSIFIED MUTUAL FUND. The Fund is a series of The Charles Schwab Family of Funds (the Trust). THE FUND IS OVERSEEN BY A BOARD OF TRUSTEES. The Board of Trustees meets regularly to review the Fund's activities, contractual arrangements and performance. The Board of Trustees is responsible for protecting the interests of the Fund's shareholders. THE FUND MAY HOLD SPECIAL MEETINGS. These meetings may be called for purposes such as electing Trustees, changing fundamental policies and amending management contracts. Shareholders are entitled to one vote for each share owned and may vote by proxy or in person. Proxy materials will be mailed to shareholders prior to any meetings, and will include a voting card and information explaining the matters to be voted upon. THE FUND IS MANAGED BY THE INVESTMENT MANAGER. The Investment Manager is responsible for managing the Fund's day-to-day business affairs, including picking the Fund's investments. The Investment Manager, however, is subject to the overall authority of the Board of Trustees. For the services performed under its contract with the Fund, the Investment Manager is entitled to receive a graduated annual fee, payable monthly, of 0.46% of the Fund's average daily net assets not in excess of $1 billion, 0.41% of such net assets over $1 billion but not in excess of $2 billion, and 0.40% of such net assets over $2 billion. SCHWAB IS THE FUND'S SHAREHOLDER SERVICES AND TRANSFER AGENT. Schwab provides Fund information to shareholders, including share price, reporting shareholder ownership and account activities and distributing the Fund's prospectuses, financial reports and other informational literature. Schwab also maintains the office space, equipment and personnel necessary to provide these services. Schwab also distributes and markets SchwabFunds(R) and provides other services. For the services performed as transfer agent under its contract with the Fund, Schwab is entitled to receive an annual fee from the Fund, payable monthly in the amount of 0.25% of the Fund's average daily net assets. For the services performed as shareholder services agent under its contract with the Fund, Schwab is entitled to receive an annual fee from the Fund, payable monthly in the amount of 0.20% of the average daily net assets of the Fund. THE FUND PAYS OTHER EXPENSES. These expenses are typically connected with the Trust's operations, and include legal, audit and custodian fees, as well as the costs of accounting and registration of the Fund. Expenses not directly attributable to a particular fund will generally be allocated among the funds in the Trust on the basis of each fund's relative net assets as the time the expense is incurred. The Charles Schwab Corporation is the parent company of the Investment Manager and Schwab. Charles R. Schwab is the founder, Chairman, Chief Executive Officer and Director of The Charles Schwab Corporation. As a result of his ownership of and interests in The Charles Schwab Corporation, Mr. Schwab may be deemed a controlling person of the Investment Manager and Schwab. 5 8 INVESTMENT OBJECTIVE, POLICIES & RISKS INVESTMENT OBJECTIVE The Fund seeks to provide maximum current income exempt from federal income taxes, consistent with liquidity and stability of capital, and also seeks to have its shares exempt from the Florida intangible tax. The Fund's investment objective may be changed only by vote of a majority of its shareholders. Unless otherwise noted, policies and limitations may be changed without shareholder approval. INVESTMENT STRATEGY The Fund seeks to achieve its investment objective by investing in Florida municipal money market securities. The Fund seeks to maintain a stable share price of $1.00, although there is no guarantee that it will be able to do so. The Fund follows regulations set forth by the SEC that dictate the quality, maturity and diversification of the Fund's investments. These requirements are designed to help the Fund maintain a stable share price of $1.00. The Fund earns tax-exempt income at current money market rates and its yield will fluctuate from day to day. The Fund emphasizes capital preservation, so it will not provide the higher yield or capital appreciation that a more aggressive mutual fund or other investment may provide. INVESTMENT RISKS In general, the longer the maturity, the more sensitive the security will be to interest rate changes. While these securities, as well as securities with more credit risk, may provide higher yields, they also pose more risks, and could result in losses to the Fund and a possible change in share price. The Fund may purchase only high-quality, short-term securities that the Investment Manager believes present minimal credit risk. Because the Fund intends to invest substantially in Florida municipal money market securities, its performance and, possibly, its share price may be affected by the economic and political conditions within Florida. An investment in the Fund poses additional risk considerations not present in municipal money market funds that do not invest substantially in the securities of a single state. PRINCIPAL SECURITIES AND INVESTMENT TECHNIQUES MUNICIPAL MONEY MARKET SECURITIES are high-quality, short-term securities (money market securities) issued by or on behalf of a state, including its counties, municipalities, authorities and other subdivisions, or the territories and possessions of the United States and the District of Columbia, including their subdivisions, agencies and instrumentalities. These securities are issued to raise money for various public purposes or private activities, such as general financing for state and local governments or financing for specific projects or facilities. Municipal securities pay fixed, variable or floating rates of interest, which is meant to be exempt from federal income tax, and, typically, personal income tax of a state or locality. Municipal securities may be owned directly or through participation interests, and include general obligation or revenue 6 9 securities, notes and leases. The maturity date or price of and financial assets collateralizing a municipal security may be structured in order to make it qualify as or act like a municipal money market security. These securities may be subject to greater credit and interest rate risks than other municipal money market securities because of their structure. The value of municipal securities may be affected by legislation or litigation involving the taxation of municipal securities or the rights of holders of municipal securities. In addition, some municipal securities involve private entities, and the value of these securities could be affected by the credit quality of the private entity and possibly by the circumstances affecting the project. Restriction: The Fund will normally invest at least 80% of its total assets in municipal money market securities. This policy may be changed only by shareholders. In addition, the Fund may invest more than 25% in municipal securities financing similar projects. FLORIDA MUNICIPAL MONEY MARKET SECURITIES are municipal money market securities issued by or on behalf of either the state of Florida, or its counties, municipalities, authorities or other subdivisions. These securities are subject to the same general risks associated with other municipal money market securities, although their values will be particularly affected by economic, political, geographic and demographic conditions and developments within Florida. Additionally, like all securities, the value of municipal money market securities, including those of Florida issuers, may be affected by any change in the perceived ability of issuers to meet their obligations. Restriction: The Fund will normally invest at least 65% of its total assets in municipal money market securities of Florida issuers. CREDIT AND LIQUIDITY SUPPORTS may be employed by issuers to reduce the credit risk of their securities. Credit supports include letters of credit, insurance and guarantees provided by foreign and domestic entities, as well as moral obligations, which are sometimes issued with municipal money market securities. Liquidity supports include puts and demand features. Most of these arrangements move the credit risk of an investment from the issuer of the security to the support provider. Changes in the credit quality of a support provider could cause losses to the Fund, and affect its share price. In addition, credit and liquidity supports provided by foreign entities may involve more risks because of the possibility of adverse foreign economic, political and legal developments. VARIABLE AND FLOATING RATE SECURITIES pay an interest rate, which is adjusted either periodically or at specific intervals or floats continuously according to a formula or benchmark. Although these structures generally are intended to minimize the fluctuations in value that occur when interest rates rise and fall, some structures may be linked to a benchmark in such a way as to cause greater volatility to the security's value. Some variable rate securities may be combined with a put or demand feature (variable rate demand securities) that entitles the holder to the 7 10 right to demand repayment in full. While the demand feature is intended to reduce credit risks, it is not always unconditional, and may make the securities more difficult to sell quickly or without losses. Some fixed-rate securities may be structured in such a way as to make the securities act like or pay variable or floating rates of interest. These synthetic variable or floating rate securities include tender option bonds, and involve more risks due to their synthesized structures. PUTS, sometimes called demand features or guarantees, are agreements that allow the buyer to sell a security at a specified price and time to the seller or "put provider." When the Fund buys a put, losses could occur as a result of the costs of the put or if it exercises its rights under the put and the put provider does not perform as agreed. Standby commitments are types of puts. ILLIQUID SECURITIES are securities that are not actively traded, and therefore may be difficult to sell quickly or without losses. Restriction: The Fund will not invest more than 10% of its net assets in illiquid securities. RESTRICTED SECURITIES are securities that are subject to legal restrictions on their sale. To the extent a Fund invests in liquid restricted securities, its general level of illiquidity may increase if these securities become difficult to sell. OTHER MUNICIPAL SECURITIES include leases, purchases and sales contracts. These securities may be issued to finance the acquisition of equipment or facilities. These securities are subject to the risks that the municipality may reduce or not make its lease payments, thereby reducing the value of the securities. WHEN-ISSUED AND DELAYED DELIVERY SECURITIES are securities that are purchased at a specified price and yield, but delivered to the buyer at a later than customary date. Generally, the purchaser does not pay for these securities or earn interest on them until they are delivered, but their value could change prior to delivery. SECURITIES OF OTHER INVESTMENT COMPANIES may be purchased by the Fund. These investments will cause the Fund to bear duplicative fees for certain services. The Fund also may employ the policies described below. BORROWING money is a form of leveraging if the Fund continues to make investments while borrowings remain outstanding. Borrowing subjects the Fund to interest costs that may exceed the interest received on the securities purchased with the borrowed funds. Restriction: The Fund may borrow up to 33 1/3% of its total assets for temporary or emergency purposes; provided that the Fund will not purchase securities while borrowings represent more than 5% of its total assets. TEMPORARY INVESTMENTS in U.S. government securities, money market securities or other taxable securities, and repurchase agreements for all of these securities may be made by the Fund as a defensive measure or under abnormal market conditions. 8 11 INVESTING IN SHARES BUSINESS DAYS The Fund is open each day that both the Federal Reserve Bank of New York (New York Fed) and New York Stock Exchange (NYSE) are open (business days). The following holiday closings are currently scheduled for 1998: New Year's Day, Martin Luther King's Birthday (observed), President's Day, Good Friday, Memorial Day (observed), Independence Day (observed), Labor Day, Columbus Day (observed), Veterans Day, Thanksgiving Day and Christmas Day. On any day that the New York Fed, NYSE or principal government securities markets close early, such as days in advance of holidays, the Fund reserves the right to advance the time by which purchase, redemption and exchanges orders must be received on that day. NET ASSET VALUE The price of each share of the Fund is its net asset value per share (NAV). NAV is determined each business day, first at 10 a.m. Eastern time, then again at the close of the NYSE, generally 4 p.m. Eastern time. NAV is calculated by adding the value of the Fund's assets, subtracting its liabilities and dividing the result by the number of outstanding shares. Investment holdings are valued on the basis of amortized cost, which means that the Fund's securities are valued at cost, plus or minus any premium or discount that has accrued since purchase. The amortized cost method is designed for money market funds, which seek to maintain a stable share price, and most money market funds use this method to calculate NAV. HOW TO BUY, SELL OR EXCHANGE SHARES Schwab is soliciting subscriptions for shares of the Fund during an initial offering period, currently scheduled to end March 17, 1998, subject to extension by the Fund and Schwab. The Fund is scheduled to commence operations and continuously offer its shares immediately following settlement of the subscription offering. Shares may be purchased, sold or exchanged through an account at Schwab or any other entity designated by Schwab. The following information on how to buy, sell and exchange shares is for transactions through an account at Schwab. Shares are purchased or sold at the NAV next determined after your purchase, redemption or exchange order is received in good order. AUTOMATIC INVESTMENT. When opening a Schwab One(R) account, investors with combined household accounts at Schwab of at least $10,000 may choose the Fund as their primary fund, and free credit balances in their Schwab account will be invested automatically in shares of the Fund according to the terms and conditions of the account agreement. Shares will be sold as necessary to settle any negative cash balance in the Schwab account. Existing Schwab accounts with primary funds previously selected will not be subject to the $10,000 household minimum 9 12 requirement in order to maintain or change their primary fund. DIRECT PURCHASE. Shares of the Fund may be bought (even if it is not a primary fund) in several ways. The minimum initial investment through direct purchase is $1,000. Subsequent direct purchases must be in amounts of at least $100. - - BY TELEPHONE. Call 1-800-435-4000, 24 hours a day (1-800-345-2550 for TDD users). Telephone orders received in good order after the close of the NYSE but prior to 8 p.m. Eastern time will be executed at the NAV next determined for the Fund. However, telephone orders received in good order after 8 p.m. Eastern time but prior to 10 a.m. Eastern time will be executed at the Fund's second NAV calculation. - - BY MAIL. Write to the Fund at 101 Montgomery Street, San Francisco, CA 94104. - - BY WIRE. Call 1-800-435-4000 for wire instructions. Please provide the following information: - - your name and Schwab account number; - - the name of the Fund; - - the dollar amount you would like to purchase, sell or exchange; and - - for initial purchases only, one of the two distribution choices below: AUTOMATIC REINVESTMENT. All distributions will be reinvested in full shares of the Fund you are purchasing. If you do not choose an option, this option will be assigned to you; or CASH OPTION. All distributions will be paid to your Schwab account and, if requested, mailed to you the next business day. - - for exchanges, the name of the Fund and class, if applicable, into which you want to exchange shares and the distribution option you select; and - - if selling or exchanging by mail, a signature of at least one of the persons named on you Schwab account. PLEASE NOTE THE FOLLOWING WHEN SELLING OR EXCHANGING SHARES OF THE FUND: - - the Fund requires a minimum balance of $100; - - your shares may be automatically redeemed if, as a result of selling or exchanging shares, you no longer meet the Fund's minimum balance requirements, although you will be given 30 days' notice prior to redemption to increase your holdings to the required minimum balance; - - redemptions and exchange requests by mail are irrevocable and, once mailed, may not be modified or canceled; - - payment for redeemed shares will be made to your Schwab account within 7 days and a check may be mailed to you upon request; 10 13 - - if you bought your shares by check, a check for your redemption proceeds will be issued as soon as your check clears, which may take up to 15 days from the date of purchase; - - depending on the type of Schwab account you have, your money may earn interest during any holding period; - - you may exchange your shares for shares of other SchwabFunds, provided you meet the Fund's minimum investment or other requirements; - - an exchange of the Fund's shares for shares of other SchwabFunds will be treated as a taxable event for federal income tax purposes; - - the Fund and Schwab reserve the right to modify, limit or terminate the exchange privilege upon 60 days' written notification; and - - the Fund may suspend the right to sell shares or postpone payment for a sale of shares when trading on the NYSE is restricted, the NYSE is closed for any reason other than its customary weekend and holiday closings, emergency circumstances exist as determined by the SEC or as otherwise permitted by the SEC. OPENING A SCHWAB ACCOUNT Schwab was established in 1971 and is one of America's largest discount brokers. Schwab helps over 4.1 million customers make investment decisions by offering low-cost brokerage services and providing financial products and information. Visit one of Schwab's 277 branch offices or Schwab's web site (http://www.schwab.com) for information on investment products and services. Investors may open a Schwab account by simply completing an application, although institutional investors should contact Schwab to find out if any additional forms need to be completed. Using a Schwab account, investors have access to investments other than just mutual funds, such as stocks and bonds. The Securities Investor Protection Corporation (SIPC) provides account protection of up to $500,000 for the securities held in a Schwab account, including shares of the Fund. It is important to remember that SIPC account protection does not protect against losses due to market or economic conditions. Schwab One(R) accounts are available with a minimum initial investment of $2,500. A monthly fee of $5 will be charged to Schwab One accounts that fall below a $5,000 minimum balance, unless there have been at least two commissionable trades within the previous 12 months. Existing Schwab accounts (no longer available for opening) require a $1,000 minimum account balance ($500 for custodial accounts). A fee of $7.50 will be charged to Schwab accounts that fall below these minimums for three consecutive months. The fee, if applicable, will be charged at the end of each quarter, but will be waived if there has been at least one 11 14 commissionable trade within the previous six months, or if your combined Schwab accounts equal $10,000 or more. The account fees for Schwab and Schwab One accounts will be replaced with a calendar quarter account fee of $15, effective April 1, 1998. However, this fee will not be charged if the combined balances of your household's accounts at Schwab exceed $25,000 at the end of any month in that quarter, you have one commissionable trade in that or the preceding quarter or you have two or more commissionable trades during the last four quarters. If you have more than one account at Schwab, you will be charged only one quarterly fee. Deposits to your Schwab accounts may be made by check, wire and other forms of electronic funds transfer. Securities also may be deposited. All checks should be made out to Charles Schwab & Co., Inc. Schwab will charge a $15 service fee for any checks returned as a result of insufficient or uncollected funds or a stop order. Monies received by Schwab before 4 p.m. Eastern time will be available for investment that day. Monies received by Schwab after 4 p.m. Eastern time will be available for investment the next business day. Contact Schwab for instructions and any applicable fees if you would like to wire money from your Schwab account. DIVIDENDS & TAXES Each business day, the Fund's net investment income is determined as of the close of the NYSE as dividend to shareholders of record as of the previous NAV calculation. Net investment income is calculated by subtracting its expenses from the income earned on its investments that day. Dividends are declared each business day based on the net investment income determined and are paid on the 15th of each month, if it is a business day, except in December when dividends are paid on the last business day of the month. If the 15th is not a business day, dividends are paid on the next business day. The following is only a brief summary of some of the federal income tax and state intangible tax consequences that may affect the Fund and its shareholders. You should consider the tax implications of investing in the Fund, and consult with your own tax advisor. The Fund will distribute its net investment income and capital gains, if any, to shareholders each year. Dividends derived from exempt-interest income will be exempt from federal income tax when distributed to shareholders. In addition, the Fund's shares are expected to be exempt from the Florida intangibles tax. Some distributions received by shareholders may be subject to federal income taxes. The interest from some municipal money market securities is subject to the federal alternative minimum tax. The Fund may invest all of its assets in these securities. Shareholders subject to federal alternative 12 15 minimum tax must take this interest into account when computing their federal alternative minimum tax liability. Shareholders receive a record of all distributions by the Fund, as well as purchases and sales they have made, via their monthly Schwab account statement. Each year, the Fund notifies shareholders of the tax treatment of all distributions made that year. GENERAL INFORMATION The right to initiate transactions by telephone is automatically available through your Schwab account. As long as the Fund or Schwab follows reasonable procedures to confirm that your telephone order is genuine, they will not be liable for any losses an investor may experience due to unauthorized or fraudulent instructions. These procedures may include: - - requiring a form of personal identification before acting upon any telephone order; - - providing written confirmation of telephone orders; and - - tape-recording all telephone orders. It may be difficult to place orders by telephone during periods of drastic economic or market changes because Schwab's phone lines may become very busy with calls from other investors. Consider other methods for placing an order, such as writing to the Fund. Share certificates will not be issued in order to avoid additional administrative costs, however, share ownership records are maintained by Schwab. Twice a year, financial reports will be mailed to shareholders describing the Fund's performance and investment holdings. In order to reduce these mailing costs, each household will receive one consolidated mailing. If you do not want to receive consolidated mailings, you may write to the Fund and request that your mailings not be consolidated. The Fund, in its sole discretion and without prior notice, reserves the right to reject orders to purchase shares, change or waive minimum investment requirements or withdraw or suspend any part of the offering made by this prospectus. - --------------------------------------------------- NO ONE HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY STATEMENTS ABOUT THIS OFFERING OTHER THAN THE INFORMATION CONTAINED IN THIS PROSPECTUS AND IN OFFICIAL SALES MATERIALS. IF ANYONE GIVES ANY OTHER INFORMATION OR MAKES ANY OTHER REPRESENTATIONS, DO NOT RELY ON SUCH INFORMATION OR REPRESENTATIONS. - --------------------------------------------------- THIS PROSPECTUS IS NOT AN OFFER IN ANY STATE IN WHICH SUCH AN OFFER MAY NOT LAWFULLY BE MADE, NOR IS IT AN OFFER TO ANY PERSON TO WHOM SUCH AN OFFER MAY NOT BE MADE. - --------------------------------------------------- 13 16 THIS SPACE RESERVED FOR YOUR COMMENTS AND QUESTIONS. A SCHWAB REPRESENTATIVE WILL BE HAPPY TO ASSIST YOU. 17 THIS SPACE RESERVED FOR YOUR COMMENTS AND QUESTIONS. A SCHWAB REPRESENTATIVE WILL BE HAPPY TO ASSIST YOU. 18 Schwab FLORIDA Municipal Money Fund PROSPECTUS February 16, 1998 SCHWABFUNDS(R) SCHWABFUNDS(R) 101 Montgomery Street San Francisco, CA 94104 CRS12113 MKT2483-3(1/98) Printed on recycled paper. 19 PART B CROSS REFERENCE SHEET STATEMENT OF ADDITIONAL INFORMATION Schwab Florida Municipal Money Fund
PART B ITEM STATEMENT OF ADDITIONAL INFORMATION CAPTION 10. Cover Page Cover Page 11. Table of Contents Cover Page 12. General Information and History General Information 13. Investment Objectives and Policies Investment Policies and Restrictions 14. Management of the Fund Management of the Trust 15. Control Persons and Principal Holders of General Information Securities 16. Investment Advisory and Other Services Management of the Trust 17. Brokerage Allocation and Other Practices Portfolio Transactions and Turnover 18. Capital Stock and Other Securities General Information 19. Purchase, Redemption and Pricing of Share Price Calculation; Purchase and Securities Being Offered Redemption of Shares 20. Tax Status Distributions and Taxes 21. Underwriters Management of the Trust 22. Calculation of Performance Data How the Funds Report Performance 23. Financial Statements Not applicable
3 20 STATEMENT OF ADDITIONAL INFORMATION THE CHARLES SCHWAB FAMILY OF FUNDS 101 Montgomery Street, San Francisco, CA 94104 SCHWAB FLORIDA MUNICIPAL MONEY FUND FEBRUARY 16, 1998 The Statement of Additional Information (SAI) is not a prospectus. It should be read in conjunction with the Prospectus dated February 16, 1998 (and as may be amended from time to time) for Schwab Florida Municipal Money Fund (the Fund). To obtain a copy of the Prospectus, call 1-800-435-4000 (1-800-345-2550 for TDD Users), or write to the Fund at 101 Montgomery Street, San Francisco, California 94104. TABLE OF CONTENTS
PAGE INVESTMENT SECURITIES ................................ 2 INVESTMENT POLICIES AND RESTRICTIONS ................. 5 MANAGEMENT OF THE TRUST .............................. 8 PORTFOLIO TRANSACTIONS AND TURNOVER ..................14 DISTRIBUTIONS AND TAXES ..............................15 SHARE PRICE CALCULATION ..............................18 HOW THE FUNDS REPORT PERFORMANCE .....................19 GENERAL INFORMATION ..................................20 PURCHASE AND REDEMPTION OF SHARES ....................22 OTHER INFORMATION ....................................22 APPENDIX - RATINGS OF INVESTMENT SECURITIES ..........24
1 21 INVESTMENT SECURITIES MUNICIPAL SECURITIES. Municipal securities are securities issued by a state, its political subdivisions, agencies, authorities and corporations. These securities may be issued to obtain money for various public purposes, including the construction of a wide range of public facilities such as airports, bridges, highways, housing, hospitals, mass transportation, public utilities, schools, streets, and water and sewer works. Other public purposes include refunding outstanding obligations, obtaining funds for general operating expenses and obtaining funds to loan to other public institutions and facilities. Municipal securities also may be issued to finance various private activities, including certain types of private activity bonds ("industrial development bonds" under prior law). These securities may be issued by or on behalf of public authorities to obtain funds to provide certain privately owned or operated facilities. The Fund may not be desirable investments for "substantial users" of facilities financed by private activity bonds or industrial development bonds or for "related persons" of substantial users because distributions from the Fund attributable to interest on such bonds may not be tax-exempt. Shareholders should consult their own tax advisors regarding the potential effect on them (if any) of any investment in the Fund. Municipal securities are generally classified as "general obligation" or "revenue" and may be purchased directly or through participation interests. General obligation securities are typically secured by the issuer's pledge of its full faith and credit and taxing power for the payment of principal and interest. Revenue securities are typically payable only from the revenues derived from a particular facility or class of facilities or, in some cases, from the proceeds of a special tax or other specific revenue source. Private activity bonds and industrial development bonds are, in most cases, revenue bonds and generally do not constitute the pledge of the credit of the issuer of such bonds. The credit quality of private activity bonds is frequently related to the credit standing of private corporations or other entities. Examples of municipal securities that are issued with original maturities of one year or less are short-term tax anticipation notes, bond anticipation notes, revenue anticipation notes, construction loan notes and tax-free commercial paper. Tax anticipation notes are typically sold to finance working capital needs of municipalities in anticipation of the receipt of property taxes on a future date. Bond anticipation notes are sold on an interim basis in anticipation of a municipality's issuance of a longer-term bond in the future. Revenue anticipation notes are issued in expectation of the receipt of other types of revenue such as that available under the Federal Revenue Sharing Program. Construction loan notes are instruments insured by the Federal Housing Administration with permanent financing by "Fannie Mae" (the Federal National Mortgage Association) or "Ginnie Mae" (the Government National Mortgage Association) at the end of the project construction period. Pre-refunded municipal bonds are bonds that are not yet refundable, but for which securities have been placed in escrow to refund an original municipal bond issue when it becomes refundable. Tax-free commercial paper is an unsecured promissory obligation issued or guaranteed by a municipal issuer. The Fund may purchase other municipal securities similar to the foregoing, which are or may become available, including securities issued to pre-refund other outstanding obligations of municipal issuers. 2 22 The Fund also may invest in moral obligation securities, which are normally issued by special purpose public authorities. If the issuer of a moral obligation security is unable to meet its obligation from current revenues, it may draw on a reserve fund. The state or municipality that created the entity has only a moral commitment, not a legal obligation, to restore the reserve fund. The value of municipal securities may be affected by uncertainties with respect to the rights of holders of municipal securities in the event of bankruptcy or the taxation of municipal securities as a result of legislation or litigation. For example, under federal law, certain issuers of municipal securities may be authorized in certain circumstances to initiate bankruptcy proceedings without prior notice to or the consent of creditors. Such action could result in material adverse changes in the rights of holders of the securities. In addition, litigation challenging the validity under the state constitutions of present systems of financing public education has been initiated or adjudicated in a number of states, and legislation has been introduced to effect changes in public school finances in some states. In other instances there has been litigation challenging the issuance of pollution control revenue bonds or the validity of their issuance under state or federal law, which ultimately could affect the validity of those municipal securities or the tax-free nature of the interest thereon. Charles Schwab Invement Management, Inc., (the Investment Manager) relies on the opinion of the issuer's counselnsel, which is rendered at the time the security is issued, to determine whether the security is fit, with respect to its tax status, to be purchased by the Fund. MUNICIPAL LEASES. Municipal leases are obligations issued to finance the construction or acquisition of equipment or facilities. These obligations may take the form of a lease, an installment purchase contract, a conditional sales contract or a participation interest in any of these obligations. Municipal leases may be considered illiquid investments. Generally, municipal leases are subject to "nonappropriation risk," which is the risk that the municipality may terminate the lease because funds have not been allocated to make the necessary lease payments. Further, certain leases are subject to "abatement risk"which is the risk that the municipality may not be able to use the property or project and therefore can reduce the amount of its lease payment in direct proportion to the unusable part of the property or project. The lessor would then be entitled to repossess the property, but the value of the property may be less to private sector entities than it would be to the municipality. ILLIQUID SECURITIES. Investments that cannot be sold or disposed of in the normal course of business within seven days at their approximate value will be considered illiquid. The Investment Manager determines the liquidity of the Fund's investments under the supervision and direction of the Board of Trustees. Investments currently considered illiquid include repurchase agreements not maturing within seven days, some restricted securities and municipal lease obligations. VARIABLE AND FLOATING RATE SECURITIES. Some variable rate securities have a demand feature, which entitles the holder to resell the securities at a specified price and/or times. There are risks involved with these securities because there may be no active secondary market for a particular variable rate demand security purchased by the Fund. In addition, the Fund may only exercise its 3 23 demand rights at certain times. The Fund could suffer losses in the event that the issuer defaults on its obligation. Synthetic variable or floating rate securities include tender option bonds. TAXABLE SECURITIES. Under normal conditions, the Fund does not intend to invest in securities the interest on which is subject to federal income and/or state and local personal income taxes. However, from time to time, as a defensive measure or under abnormal market conditions, the Fund may make temporary investments in securities, the interest on which is subject to federal income and/or state and local personal income taxes. U.S. GOVERNMENT SECURITIES. U.S. government securities are securities issued by the U.S. Treasury or issued or guaranteed by the U.S. government or any of its agencies or instrumentalities. U.S. Treasury securities are backed by the full faith and credit of the United States. Not all U.S. government securities are backed by the full faith and credit of the United States. Some U.S. government securities are supported by a line of credit the issuing entity has with the U.S. Treasury. Others are supported solely by the credit of the issuing agency or instrumentality. Of course U.S. government securities are among the safest securities, but they are still sensitive to interest rate changes, which will cause their yields to fluctuate. ASSET-BACKED SECURITIES. Asset-Backed securities are securities that are backed by the loans or account receivables of an entity, such as a bank or credit card company. These securities are obligations which the issuer intends to repay using the assets backing them (once collected). Therefore, repayment may depend largely on the cash-flows generated by the assets backing the securities. Sometimes the credit support for these securities is limited to the underlying assets, but, in other cases, may be provided by a third party via a letter of credit or insurance guarantee. Asset-backed securities are subject to credit and prepayment risks. Currently, there are no tax-exempt Asset-Backed Securities in the Fund. Repayment of these is intended to be obtained from an identified pool of assets, typically receivables related to a particular industry, such an asset-backed securities related to credit card receivables, automobile receivables, trade receivables or diversified financial assets. Based on the primary characteristics of the various types of asset-backed securities, for purposes of the Fund's concentration policy, the Fund has selected the following asset-backed securities industries: credit card receivables, automobile receivables, trade receivables and diversified financial assets, and the Fund will limit its investments in each such industry to less than 25% of its total assets. REPURCHASE AGREEMENTS. Repurchase agreements involve the Fund buying securities (usually U.S. government securities) from a seller and simultaneously agreeing to sell them back at an agreed-upon price (usually higher) and time. There are risks that losses will result if the seller does not perform as agreed. REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement, the Fund sells portfolio securities to another party and simultaneously agrees to buy them back at an agreed-upon price and time. These agreements may increase the possibility of the Fund's NAV to fluctuate and may be viewed as a form of leveraging. Reverse repurchase agreements may be entered into by the 4 24 Fund under similar conditions and limitations applicable to borrowing. Read non-fundamental policy (d) for more detailed information. LENDING. The lending of securities is a common practice in the securities industry. The Fund will engage in security lending arrangements with the primary objective of increasing its income through investment of the cash collateral in short-term, interest-bearing obligations, but will do so only to the extent that the Fund will not lose the tax treatment available to regulated investment companies. The Fund is entitled to all dividends or interest on any loaned securities. Loans of securities involve a risk that the borrower may fail to return the securities or provide additional collateral. The Fund may loan securities to qualified broker-dealers or other institutional investors provided: (i) the loan is secured continuously by collateral consisting of U.S. Government securities, letters of credit, cash or cash-equivalents, and maintained on a daily marked-to-market basis in an amount at least equal to the current market value of the securities loaned; (ii) the Fund may at any time call the loan and obtain the return of the securities loaned; (iii) the Fund will receive any interest or dividends paid on the loaned securities; and (iv) the aggregate market value of securities loaned will not at any time exceed one-third of the total assets of the Fund. QUALITY OF INVESTMENTS. The Fund will invest in high-quality securities. Generally, high-quality securities are securities that are rated in one of the two highest rating categories by two nationally recognized statistical rating organizations (NRSROs), or by one if only one NRSRO has rated the securities, or, if unrated, determined to be of comparable quality by the Investment Manager pursuant to guidelines adopted by the Board of Trustees. High-quality securities may be "first tier" or "second tier" securities. First tier securities are rated within the highest category, and second tier securities are rated within the second-highest category. Should a security's high-quality rating change after purchase by the Fund, the Investment Manager would take such action, including no action, as determined to be in the best interest of the Fund by the Board of Trustees. For more information about the ratings assigned by some NRSROs, refer to the Appendix section of the SAI. MATURITY OF INVESTMENTS. The Fund will purchase only short-term debt securities. Basically, a short-term security is a security that is deemed to mature within 397 days or less. INVESTMENT POLICIES AND RESTRICTIONS THE FOLLOWING INVESTMENT POLICIES AND RESTRICTIONS MAY BE CHANGED ONLY BY APPROVAL OF A MAJORITY OF THE FUND'S SHAREHOLDERS. ALL OTHER INVESTMENT POLICIES AND RESTRICTIONS CONTAINED IN THE SAI MAY BE CHANGED WITHOUT SHAREHOLDER APPROVAL OR PRIOR NOTICE. THE FUND MAY NOT: 5 25 (1) lend or borrow money, except as permitted by the Investment Company Act of 1940 or the rules or regulations thereunder, as such statute, rules or regulations may be amended from time to time. (2) pledge, mortgage or hypothecate any of its assets, except as permitted by the Investment Company Act of 1940 or the rules or regulations thereunder, as such statute, rules or regulations may be amended from time to time. (3) issue senior securities, except as permitted by the Investment Company Act of 1940 or the rules or regulations thereunder, as such statute, rules or regulations may be amended from time to time. (4) underwrite securities, except as permitted by the Investment Company Act of 1940 or the rules or regulations thereunder, as such statute, rules or regulations may be amended from time to time. (5) concentrate investments in a particular industry or group of industries, as concentration is defined under the Investment Company Act of 1940 or the rules or regulations thereunder, as such statute, rules or regulations may be amended from time to time. (6) purchase or sell commodities, commodities contracts, futures contracts, or real estate, except as permitted by the Investment Company Act of 1940 or the rules or regulations thereunder, as such statute, rules or regulations may be amended from time to time. THE FOLLOWING DESCRIPTIONS OF THE 1940 ACT MAY ASSIST INVESTORS IN UNDERSTANDING THE ABOVE POLICIES AND RESTRICTIONS. Borrowing. The 1940 Act presently restricts the Fund from borrowing (including pledging, mortgaging or hypothecating assets) in excess of 33 1/3% of its total assets (not including temporary borrowings not in excess of 5% of its total assets). Lending. Under the 1940 Act, the Fund may only make loans if expressly permitted by its investment policies. Concentration. The 1940 Act presently defines concentration as investing 25% or more of the Fund's total assets in an industry or group of industries, with certain exceptions. This means that the Fund currently may not purchase securities of any issuer, if, as a result, 25% or more (other than U.S. government securities) of its total assets would be invested in the securities of an issuer from a single industry or group of industries. THE FOLLOWING ARE NON-FUNDAMENTAL INVESTMENT POLICIES AND RESTRICTIONS. THE FUND MAY NOT: 6 26 (a) with respect to 75% of its total assets, purchase securities of any issuer (other than U.S. government securities or securities subject to a guarantee issued by a person not controlled by the issuer) if, as a result, more than 5% of total assets would be invested in the securities of such issuer; provided that the Fund may not invest more than 5% of its total assets in securities of a single issuer unless such securities are first tier securities. (b) purchase second tier conduit securities of any issuer (other than securities subject to a guarantee issued by a person not controlled by the issuer) if, as a result, more than the greater of 1% of its total assets or $1 million would be invested in second tier conduit securities of such issuer. (c) purchase securities of other investment companies, except as permitted by the 1940 Act. (d) borrow money [for temporary or emergency purposes] except that the Fund may (i) borrow money from banks and (ii) engage in reverse repurchase agreements with any party; provided that (i) and (ii) in combination do not exceed 33 1/3% of its total assets (any borrowings that come to exceed this amount will be reduced to the extent necessary to comply with the limitation within three business days) and the Fund will not purchase securities while borrowings represent more than 5% of its total assets. (e) purchase securities of any issuer (other than obligations of, or guaranteed by the U.S. government its agencies or instrumentalities), if, as a result, 25% or more of its total assets would be invested in the securities of an issuer from a single industry or group of industries. (f) lend any security or make any other loan if, as a result, more than 33 1/3% of its total assets would be lent to other parties (this restriction does not apply to purchases of securities or repurchase agreements). (g) purchase securities of any issuer if, as a result, more than 10% of its net assets would be invested in illiquid securities. (h) sell securities short unless it owns the security or the right to obtain the security or equivalent securities (transactions in futures contracts and options are not considered selling securities short). (i) purchase securities on margin, except that the Fund may obtain short-term credits that are necessary for the clearance of transactions, and provided that margin payments in connection with futures contracts and options on futures contracts shall not constitute purchasing securities on margin. MANAGEMENT OF THE TRUST 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: 7 27
NAME/DATE OF BIRTH POSITION WITH PRINCIPAL OCCUPATION THE TRUST CHARLES R. SCHWAB* Chairman and Trustee Chairman, Co-Chief Executive July 29, 1937 Officer and Director, The Charles Schwab Corporation; Chairman, Chief Executive Officer and Director, Charles Schwab Holdings Inc.; Chairman and Director, Charles Schwab & Co. Investment Management, Inc., The Charles Schwab Trust Company Retirement Plan Services, Inc.; 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). TOM D. SEIP* President and Trustee Executive Vice President, The February 15, 1950 Charles Schwab Corporation; Enterprise President - International and Mutual Funds, Charles Schwab & Co., Inc.; Chief Executive Officer, Charles Schwab Investment Management, Inc. DONALD F. DORWARD Trustee Executive Vice President and September 23, 1931 Managing Director, Grey Advertising. From 1990 to 1996, Mr. Dorward was President and Chief Executive Officer, Dorward & Associates. Dorward & Associates is an advertising and marketing/consulting firm. ROBERT G. HOLMES Trustee Chairman, Chief Executive May 15, 1931 Officer and Director, Semloh Financial, Inc. Semloh Financial is an international financial services and investment advisory firm. DONALD R. STEPHENS Trustee Managing Partner, D.R. Stephens June 28, 1938 & Co. (investment banking). Prior to 1995, Mr. Stephens was Chairman and Chief Executive Officer of North American Trust (a real estate investment trust). Prior to 1992, Mr. Stephens was Chairman and Chief Executive Officer of the Bank of San Francisco. MICHAEL W. WILSEY Trustee Chairman, Chief Executive Officer August 18, 1943
- ------------- * This Trustee is an "interested person" of the Trust. 28 and Director, Wilsey Bennett, Inc. (truck and air transportation, real estate investment and management, and investments). TAI-CHIN TUNG Treasurer and Vice President - Finance, March 7, 1951 Principal Charles Schwab & Co., Inc.; Financial Officer Controller, Charles Schwab Investment Management, Inc. From 1994 to 1996, Ms. Tung was Controller for Robertson Stephens Investment Management, Inc. From 1993 to 1994, she was Vice President of Fund Accounting, Capital Research and Management Co. Prior to 1993, Ms. Tung was Senior Vice President of the Sierra Funds and Chief Operating Officer of Great Western Financial Securities. WILLIAM J. KLIPP* Executive Vice Executive Vice President, December 9, 1955 President, Chief SchwabFunds(R), Charles Schwab & Operating Officer and Co., Inc.; President and Chief Trustee Operating Officer, Charles Schwab Investment Management, Inc. Prior to 1993, Mr. Klipp was Treasurer of Charles Schwab & Co., Inc. and Mayer & Schweitzer, Inc. STEPHEN B. WARD Senior Vice President Senior Vice President and Chief April 5, 1955 and Chief Investment Investment Officer, Charles Officer Schwab Investment Management, Inc. FRANCES COLE Secretary Senior Vice President, Chief September 9, 1955 Counsel, Chief Compliance Officer and Assistant Corporate Secretary, Charles Schwab Investment Management, Inc. DAVID H. LUI Assistant Secretary Vice President and Senior October 14, 1960 Counsel, Charles Schwab Investment Management, Inc. From 1991 to 1992, he was Assistant Secretary for the Franklin Group of Mutual Funds and Assistant Corporate Counsel for Franklin Resources, Inc. KAREN L. SEAMAN Assistant Secretary Corporate Counsel, Charles February 27, 1968 Schwab Investment Management, Inc. From October 1994 to July 1996, she was an Attorney for Franklin Resources, Inc. Prior to 1994, Ms. Seaman was an Attorney for The Benham Group. MATTHEW O'TOOLE Assistant Secretary Corporate Counsel, Charles September 26, 1964 Schwab Investment Management, Inc. From November 1995 to April 1997, Mr. O'Toole was Assistant General
- ------------- * This Trustee is an "interested person" of the Trust. 29 Counsel for Chancellor LGT Asset Management, Inc. Prior there to, Mr. O'Toole was Senior Counsel at the U.S. Securities and Exchange Commission in Washington, D.C. AMY L. MAUK Assistant Secretary Corporate Counsel, Charles Schwab January 5, 1969 Investment Management, Inc. From April 1995 to March 1997, she was a Legal Product Manager for Fidelity Investments.]
Each of the above-referenced Officers and/or Trustees also serves in the same capacity as described for the Trust, Schwab Capital Trust, Schwab Investments and Schwab Annuity Portfolios. The address of each individual listed above is 101 Montgomery Street, San Francisco, California 94104. 30 COMPENSATION TABLE 1
Name of Person, Aggregate Pension or Position Compensation Retirement Estimate Total from the Benefits Accrued Annual Compensation Trust as Part of Fund Benefits from the Expenses from Upon Fund Complex 2 the Fund Retirement Complex 2 from the Fund Complex 2 Charles Schwab, R. 0 N/A N/A 0 Chairman and Trustee Tom D. Seip, 0 N/A N/A 0 President and Trustee 3 Timothy F. 0 N/A N/A 0 McCarthy, President and Trustee 4 William J. Klipp, 0 N/A N/A 0 Executive Vice President, Chief Operating Officer and Trustee Donald F. Dorward, $51,500 N/A N/A $93,450 Trustee Robert G. Holmes, $51,500 N/A N/A $93,450 Trustee Donald R. Stephens, $51,500 N/A N/A $93,450 Trustee Michael W. Wilsey, $51,500 N/A N/A $93,450 Trustee
1 Figures are for the Trust's fiscal year ended December 31, 1997. 2 "Fund Complex" comprises all 31 funds of the Trust, Schwab Investments, Schwab Capital Trust and Schwab Annuity Portfolios as of December 31, 1997. 3 Mr. Seip became a Trustee of the Trust on November 24, 1997. 4 Mr. McCarthy ceased serving as a Trustee of the Trust on November 24, 1997. 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"). 31 As of the date of this SAI, none of the Independent Trustees has elected to participate in the Fee Deferral Plan. If an Independent Trustee does elect to participate in the Plan, the Plan would operate as described below. Under the Plan, deferred Trustee's fees will be credited to a book reserve account established by the Trust (the "Deferred Fee Account"), as of the date such fees would have been paid to such Trustee. The value of the Deferred Fee Account, as of any date, will be equal to the value the Account would have had as of that date, if the amounts credited to the Account had been invested and reinvested in the securities of the SchwabFund or SchwabFunds(R) selected by 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, the 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 Fund 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 Fund. INVESTMENT MANAGER The Investment Manager, a wholly owned subsidiary of The Charles Schwab Corporation, serves as the Fund's investment adviser and administrator pursuant to an Investment Advisory and Administration Agreement (the "Advisory Agreement") between it and the Trust. The Investment Manager is registered as an investment adviser under the Investment Advisers Act of 1940, as amended, and currently provides investment management services to the SchwabFunds(R), a family of 31 mutual funds with over $56 billion in assets as of December 31, 1997. The Investment Manager is an affiliate of Schwab; the Trust's distributor and the shareholder services and transfer agent. The Advisory Agreement will continue in effect for one-year terms subject to annual approval by: (1) the Trust's Board of Trustees or (2) a vote of a majority of the Fund's shareholders. In either event, the continuance also must be approved by a majority of the Trust's Board of Trustees who are not parties to the Agreement or interested persons of any such party by vote cast in person at a meeting called for the purpose of voting on such approval. The Advisory Agreement may be terminated at any time upon 60 days' notice by either party, or by a majority vote of the Fund's shareholders and will terminate automatically upon assignment. Pursuant to the Advisory Agreement, the Investment Manager is entitled to receive a graduated annual fee, payable monthly, of 0.46% of the Fund's average daily net assets not in excess of $1 billion, 0.41% of such net assets over $1 billion but not in excess of $2 billion and 0.40% of such net assets over $2 billion. The Investment Manager and Schwab have voluntarily agreed to limit, or reimburse, if necessary, the Fund's total operating expenses to 0.59% of its average daily net assets through February 28, 1999. EXPENSES 32 The Trust pays the expenses of its operations, including: the fees and expenses of independent accountants, counsel and the custodian; the cost of reports and notices to shareholders; the cost of calculating net asset value per share (NAV); registration fees; the fees and expenses of qualifying the Trust and its shares for distribution under federal and state securities laws; and membership dues in the Investment Company Institute or any similar organization. The Trust's expenses generally are allocated among the Fund on the basis of relative net assets at the time the expense is incurred, except that expenses directly attributable to a particular Fund or class of a Fund are charged to that Fund or class, respectively. DISTRIBUTOR Pursuant to a Distribution Agreement, Schwab is the principal underwriter for shares of the Trust and is the Trust's agent for the purpose of the continuous offering of the Fund's shares. The Fund pays the cost of its prospectuses and shareholder reports to be prepared and delivered to existing shareholders. Schwab pays such costs when the described materials are used in connection with the offering of shares to prospective investors and for supplementary sales literature and advertising. Schwab receives no fee under the Distribution Agreement. Terms of continuation, termination and assignment under the Distribution Agreement are identical to those described above with respect to the Advisory Agreement. CUSTODIAN AND FUND ACCOUNTANT PNC Bank, National Association, at the Airport Business Center, 200 Stevens Drive, Suite 440, Lester, Pennsylvania 19113, serves as Custodian for the Trust. PFPC, Inc., at 400 Bellevue Parkway, Wilmington, Delaware 19809, serves as Fund Accountant for the Trust. ACCOUNTANTS AND REPORTS TO SHAREHOLDERS The Trust's independent accountants audit and report on the annual financial statements of each series of the Trust and review certain regulatory reports and the Fund's federal income tax return. It also performs other professional accounting, auditing, tax and advisory services when the Trust engages it to do so. Shareholders will be sent audited annual and unaudited semi-annual financial statements. 33 PORTFOLIO TRANSACTIONS AND TURNOVER PORTFOLIO TRANSACTIONS Portfolio transactions are undertaken principally to pursue the objective of the Fund in relation to movements in the general level of interest rates; invest money obtained from the sale of Fund shares; reinvest proceeds from maturing portfolio securities; and meet redemptions of Fund shares. Portfolio transactions may increase or decrease the yield of the Fund depending upon management's ability to correctly time and execute them. The Investment Manager, in effecting purchases and sales of portfolio securities for the account of the Fund, seeks to obtain best price and execution. Subject to the supervision of the Board of Trustees, the Investment Manager will generally select brokers and dealers for the Fund primarily on the basis of the quality and reliability of brokerage services, including execution capability and financial responsibility. When the execution and price offered by two or more broker-dealers are comparable, the Investment Manager may, in its discretion, utilize the services of broker-dealers that provide it with investment information and other research resources. Such resources may also be used by the Investment Manager when providing advisory services to other investment advisory clients, including mutual funds. The Trust expects that purchases and sales of portfolio securities usually will be principal transactions. Securities normally will be purchased directly from the issuer or from an underwriter or market maker for the securities. Purchases from underwriters will include a commission or concession paid by the issuer to the underwriter, and purchases from dealers serving as market makers will include the spread between the bid and asked prices. The investment decisions for the Fund are reached independently from those for other accounts managed by the Investment Manager. Such other accounts may also make investments in instruments or securities at the same time as the Fund. When two or more accounts managed by the Investment Manager have funds available for investment in similar instruments, available instruments are allocated as to amount in a manner considered equitable to each account. In some cases, this procedure may affect the size or price of the position obtainable for the Fund. However, it is the opinion of the Board of Trustees that the benefits conferred by the Investment Manager outweigh any disadvantages that may arise from exposure to simultaneous transactions. PORTFOLIO TURNOVER Because securities with maturities of less than one year are excluded from required portfolio turnover rate calculations, the Fund's portfolio turnover rate for reporting purposes is expected to be zero. DISTRIBUTIONS AND TAXES 34 DISTRIBUTIONS On each day that the NAV of the Fund is determined ("Business Day"), the Fund's net investment income will be declared as of the close of trading on the New York Stock Exchange ("NYSE") (normally 4:00 p.m. Eastern time) as a daily dividend to shareholders of record as of the last calculation of NAV prior to the declaration. Shareholders will receive dividends in additional shares unless they elect to receive cash. Dividends normally will be reinvested monthly in full shares of the Fund at the NAV on the 15th day of each month, if a Business Day, otherwise on the next Business Day. If cash payment is requested, checks normally will be mailed on the Business Day following the reinvestment date. The Fund will pay shareholders, who redeem all of their shares, all dividends accrued to the time of the redemption within seven days. The Fund calculates its dividends based on its daily net investment income. For this purpose, the net investment income of the Fund consists of: (1) accrued interest income, plus or minus amortized discount or premium, minus (2) accrued expenses allocated to that Fund. If the Fund realizes any capital gains, they will be distributed at least once during the year as determined by the Board of Trustees. Any realized capital losses, to the extent not offset by realized capital gains, will be carried forward. It is not anticipated that the Fund will realize any long-term capital gains. Expenses of the Trust are accrued each day. Should the NAV of the Fund deviate significantly from market value, the Board of Trustees could decide to value the investments at market value and any unrealized gains and losses could affect the amount of the Fund's distributions. FEDERAL INCOME TAXES It is the Fund's policy to qualify for taxation as a "regulated investment company" by meeting the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). By following this policy, the Fund expects to eliminate or reduce to a nominal amount the federal income tax to which it is subject. In order to qualify as a regulated investment company, the Fund must, among other things, (1) derive at least 90% of its gross income from dividends, interest, payments with respect to securities loans and gains from the sale or other disposition of stocks, securities, foreign currencies or other income (including gains from options, futures or forward contracts) derived with respect to its business of investing in stocks, securities or currencies; (2) diversify its holdings so that at the end of each quarter of its taxable year (i) at least 50% of the market value of the Fund's total assets is represented by cash or cash items, U.S. government securities, securities of other regulated investment companies and other securities limited, in respect of any one issuer, to a value not greater than 5% of the value of the Fund's total assets and 10% of the outstanding voting securities of such issuer, and (ii) not more than 25% of the value of its assets is invested in the securities of any one issuer (other than U.S. government securities or securities of any other regulated investment company) or of two or more issuers that the Fund controls, within the meaning of the Code, and that are engaged in the same, similar or related trades or businesses. These requirements may restrict the degree to which the Fund may engage in certain hedging transactions and may limit the range of its investments. If the Fund qualifies as a regulated investment company, it will not be subject to federal income tax on the part of its net investment income and net realized capital gains, if any, which it distributes to shareholders, provided that the Fund meets certain minimum distribution requirements. To comply with these requirements, the 35 Fund must distribute at least (a) 90% of its "investment company taxable income" (as that term is defined in the Code) and (b) 90% of the excess of its (i) tax-exempt interest income over (ii) certain deductions attributable to that income (with certain exception), for its taxable year. The Fund intends to make sufficient distributions to shareholders to meet these requirements. If the Fund fails to distribute in a calendar year (regardless of whether it has a non-calendar taxable year) substantially all of its (i) ordinary income for such year; and (ii) capital gain net income for the year ending October 31 (or later if the Fund is permitted so to elect and so elects), plus any retained amount from the prior year, the Fund will be subject to a nondeductible 4% excise tax on the undistributed amounts. The Fund generally intends to make distributions sufficient to avoid imposition of this excise tax. Any distributions declared by the Fund in October, November or December to shareholders of record during those months and paid during the following January are treated, for tax purposes, as if they were received by each shareholder on December 31 of the year in which they were declared. The Fund may adjust its schedule for the reinvestment of distributions for the month of December to assist in complying with the reporting and minimum distribution requirements of the Code. The Fund does not expect to realize any significant amount of long-term capital gain. However, any distributions of long-term capital gain will be taxable to the shareholders as long-term capital gain, regardless of how long a shareholder has held the Fund's shares. If a shareholder disposes of shares at a loss before holding such shares for longer than six months, the loss will be treated as a long-term capital loss to the extent the shareholder received a capital gain dividend on the shares. The Fund may engage in investment techniques that may alter the timing and character of its income. The Fund may be restricted in its use of these techniques by rules relating to its qualification as regulated investment companies. The Fund will be required in certain cases to withhold and remit to the U.S. Treasury 31% of taxable dividends paid to any shareholder who (1) fails to provide a correct taxpayer identification number certified under penalty of perjury; (2) is subject to withholding by the Internal Revenue Service for failure to properly report all payments of interest or dividends; or (3) fails to provide a certified statement that he or she is not subject to "backup withholding." This "backup withholding" is not an additional tax and any amounts withheld may be credited against the shareholder's ultimate U.S. tax liability. As noted in the prospectus, exempt-interest dividends are excludable from a shareholder's gross income for federal income tax purposes. Exempt-interest dividends may nevertheless be subject to the federal alternative minimum tax (AMT) imposed by Section 55 of the Code. The AMT is imposed at rates of 26% and 28%, in the case of non-corporate taxpayers, and at the rate of 20%, in the case of corporate taxpayers, to the extent it exceeds the taxpayer's federal income tax liability. The AMT may be imposed in the following two circumstances. First, exempt-interest dividends derived from certain private activity bonds issued after August 7, 1986, will generally be an item of tax preference (and therefore potentially subject to AMT) for both corporate and non-corporate taxpayers. Second, in the case of exempt-interest dividends received by corporate shareholders, all exempt-interest dividends, regardless of when the bonds from which they are derived were issued or whether they are derived from private activity bonds, will be included in 36 the corporation's "adjusted current earnings," as defined in Section 56(g) of the Code, in calculating the corporations' alternative minimum taxable income for purposes of determining the AMT. 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 Fund are generally not subject to U.S. taxation, unless the recipient is an individual who meets the Code's definition of "resident alien." Different tax consequences may result if the foreign shareholder is engaged in a trade or business within the United States. In addition, the tax consequences to a foreign shareholder entitled to claim the benefits of a tax treaty may be different than those described above. Distributions by the Fund also may be subject to state, local and foreign taxes, and its treatment under applicable tax laws may differ from the federal income tax treatment. The Fund will distribute all of its net investment income (including net short-term capital gain) to its shareholders. If, at the close of each quarter of its taxable year, at least 50% of the value of the Fund's assets consist of obligations the interest on which is excludable from gross income, the Fund may pay "exempt-interest dividends" to its shareholders. Those dividends constitute the portion of the aggregate dividends as designated by the Fund, equal to the excess of the excludable interest over certain amounts disallowed as deductions. Exempt-interest dividends are excludable from a shareholder's gross income for federal income tax purposes, but may have federal alternative minimum tax consequences. Current federal law limits the types and volume of bonds qualifying for the federal income tax exemption of interest, which may have an effect on the ability of the Fund to purchase sufficient amounts of tax-exempt securities to satisfy the Code's requirements for the payment of "exempt-interest dividends." Interest on indebtedness incurred or continued by the Shareholder in order to purchase or carry shares of the Fund is not deductible for federal income tax purposes. Furthermore, the Fund may not be an appropriate investment for persons (including corporations and other business entities) who are "substantial users" (or persons related to "substantial users") or facilities financed by industrial development private activity bonds. Such persons should consult their tax advisors before purchasing shares. A "substantial user" is defined generally to include "certain persons" who regularly use in their trade or business a part of a facilities financed from the proceeds of such bonds. FLORIDA INTANGIBLE TAX Florida does not currently impose an income tax on individuals therefore distributions made by the Fund to Florida residents will not be subject to any state income taxes. Distribution made to shareholders which are Florida corporations may be subject to Florida's corporate income tax. Florida imposes an intangible personal property tax of 0.20% on all intangible personal property owned by Florida residents on January 1st of each year, including stocks and other securities. 37 Certain types of property are exempt from the intangibles tax such as, securities issued by the United States government or its agencies and obligations issued by the State of Florida or its municipalities or counties. The Florida Department of Revenue has released several Technical Assistance Advisements which state that a fund will be exempt from Florida's intangibles tax for any given year, if as of the close of business on December 31st of the previous year, the fund's portfolio consists solely of exempt securities. Therefore, in order for the Fund and its shareholders to benefit from the exemption, the Fund will have to sell any non-exempt securities which it holds in its portfolio prior to the close of business on December 31st of each year. This may cause the Fund to liquidate certain of its investments when it would be disadvantageous to do so in order to qualify for the exemption thereby reducing the Fund's aggregate investment return. SHARE PRICE CALCULATION The Fund values its portfolio instruments at amortized cost, which means they are valued at their acquisition cost, as adjusted for amortization of premium or discount, rather than at current market value. Calculations are made to compare the value of the Fund's investments at amortized cost with market values. Market valuations are obtained by using actual quotations provided by market makers, estimates of market value or values obtained from yield data relating to classes of money market instruments published by reputable sources at the mean between the bid and asked prices for the instruments. The amortized cost method of valuation seeks to maintain a stable NAV of $1.00, even where there are fluctuations in interest rates that affect the value of portfolio instruments. Accordingly, this method of valuation can in certain circumstances lead to a dilution of a shareholder's interest. If a deviation of 1/2 of 1% or more were to occur between the NAV calculated by reference to market values and the Fund's NAV of $1.00, or if there were any other deviation that the Board of Trustees of the Trust believed would result in a material dilution to shareholders or purchasers, the Board of Trustees would promptly consider what action, if any, should be initiated. If the Fund's NAV (computed using market values) declined, or were expected to decline, below $1.00 (computed using amortized cost), the Board of Trustees might temporarily reduce or suspend dividend payments in an effort to maintain the NAV. As a result of such reduction or suspension of dividends or other action by the Board of Trustees, an investor would receive less income during a given period than if such a reduction or suspension had not taken place. Such action could result in investors receiving no dividend for the period during which they hold their shares and receiving, upon redemption, a price per share lower than that which they paid. On the other hand, if the Fund's NAV (computed using market values) were to increase, or were anticipated to increase above $1.00 (computed using amortized cost), the Board of Trustees might supplement dividends in an effort to maintain the NAV at $1.00. HOW THE FUND REPORT PERFORMANCE The historical performance of the Fund may be shown in the form of total return, yield and effective yield. These measures of performance are described below. TOTAL RETURN 38 Standardized Total Return. Average annual total return for a period is determined by calculating the actual dollar amount of investment return on a $1,000 investment in the Fund made at the beginning of the period, then calculating the average annual compounded rate of return that would produce the same investment return on the $1,000 over the same period. In computing average annual total return, the Fund assumes the reinvestment of all distributions at NAV on applicable reinvestment dates. Nonstandardized Total Return. Nonstandardized total return for the Fund differs from standardized total return in that it relates to periods other than the period for standardized total return and/or that it represents aggregate (rather than average) total return. In addition, an after-tax total return for the Fund may be calculated by taking the Fund's standardized or non-standardized total return and subtracting applicable federal taxes from the portions of the Fund's total return attributable to capital gains distributions and ordinary income. This after-tax total return may be compared to that of other mutual funds with similar investment objectives as reported by independent sources. The Fund may also report the percentage of the Fund's standardized or non-standardized total return that would be paid to taxes annually (at the applicable federal personal income and capital gains tax rates before redemption of Fund shares). This proportion may be compared to that of other mutual funds with similar investment objectives as reported by independent sources. The Fund also may advertise its cumulative total return. Cumulative total return measures the change in value of an investment over a stated period of time. In computing the cumulative total return, the Fund assumes reinvestment of all distributions at NAV or at applicable reinvestment dates. YIELD The Fund's yield refers to the net investment income generated by a hypothetical investment in the Fund over a specific seven-day period. This net investment income is then annualized, which means that the net investment income generated during the seven-day period is assumed to be generated in each {7} [seven]-day period over an annual period, and is shown as a percentage of the investment. EFFECTIVE YIELD The Fund's effective yield is calculated similarly, but the net investment income earned by the investment is assumed to be compounded weekly when annualized. The effective yield will be slightly higher than the yield due to this compounding effect. TAX-EQUIVALENT YIELD The tax equivalent yield for the Fund is computed by dividing that portion of the Fund's yield which is tax-exempt by one minus a stated federal and/or state income tax rate and adding the product to that portion, if any, of the Fund's yield that is not tax-exempt. (Tax equivalent yields assume the payment of federal income taxes at a rate of 39.6%.) 39 Yields are one basis upon which investors may compare the Fund with other funds; however, yields of other funds and other investment vehicles may not be comparable because of the factors set forth above and differences in the methods used in valuing portfolio instruments. The yield of the Fund fluctuates, and the annualization of a week's dividend is not a representation by the Trust as to what an investment in the Fund will actually yield in the future. Actual yields will depend on such variables as asset quality, average asset maturity, the type of instruments the Fund invests in, changes in interest rates on money market instruments, changes in the expenses of the Fund and other factors. GENERAL INFORMATION The Trust is an open-end investment management company organized as a Massachusetts business trust on October 20, 1989. Currently, there are thirteen funds of the Trust: Schwab Money Market Fund, Schwab Government Money Fund, Schwab Municipal Money Fund, Schwab U.S. Treasury Money Fund, Schwab Value Advantage Money Fund, Schwab Institutional Advantage Money Fund, Schwab Retirement Money Fund, Schwab New York Municipal Money Fund, and Schwab California Municipal Money Fund, Schwab Government Cash Reserves, Schwab New Jersey Municipal Money Fund, Schwab Pennsylvania Municipal Money Fund and Schwab Florida Municipal Money Fund. The Declaration of Trust permits the Trustees to create additional funds. There is a remote possibility that one fund might become liable for a misstatement in the prospectus or SAI about another fund. The Trust generally is not required to hold shareholder meetings. However, as provided in its Agreement and Declaration of Trust and Bylaws, shareholder meetings will be held in connection with the following matters: (1) election or removal of Trustees, if a meeting is requested in writing by a shareholder or shareholders who beneficially own(s) 10% or more of the Trust's shares; (2) adoption of any contract for which shareholder approval is required by the 1940 Act; (3) any termination of the Trust to the extent and as provided in the Declaration of Trust; (4) any amendment of the Declaration of Trust (other than amendments changing the name of the Trust or any of its investment portfolios, supplying any omission, curing any ambiguity or curing, correcting or supplementing any defective or inconsistent provision thereof); (5) determination of whether a court action, proceeding or claim should or should not be brought or maintained derivatively or as a class action on behalf of the Trust or the shareholders, to the same extent as the stockholders of a Massachusetts business corporation; and (6) such additional matters as may be required by law, the Declaration of Trust, the Bylaws or any registration of the Trust with the SEC or any state or as the Board of Trustees may consider desirable. The shareholders also would vote upon changes to the 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. 40 Upon the written request of ten or more shareholders who have been such for at least six months and who hold shares constituting at least 1% of the Trust's outstanding shares, stating that they wish to communicate with the other shareholders for the purpose of obtaining signatures necessary to demand a meeting to consider removal of one or more Trustees, the Trust has undertaken to disseminate appropriate materials at the expense of the requesting shareholders. The Bylaws provide that a majority of shares entitled to vote shall be a quorum for the transaction of business at a shareholders' meeting, except that where any provision of law, of the Declaration of Trust or of the Bylaws permits or requires that (i) holders of any series shall vote as a series, then a majority of the aggregate number of shares of that series entitled to vote shall be necessary to constitute a quorum for the transaction of business by that series, or (ii) holders of any class shall vote as a class, then a majority of the aggregate number of shares of that class entitled to vote shall be necessary to constitute a quorum for the transaction of business by that class. Any lesser number shall be sufficient for adjournments. Any adjourned session or sessions may be held, within a reasonable time after the date set for the original meeting, without the necessity of further notice. The Declaration of Trust specifically authorizes the Board of Trustees to terminate the Trust (or any of its investment portfolios) by notice to the shareholders without shareholder approval. Under Massachusetts law, shareholders of a Massachusetts business trust could, under certain circumstances, be held personally liable for the Trust's obligations. The Declaration of Trust, however, disclaims shareholder liability for the Trust's acts or obligations and requires that notice of such disclaimer be given in each agreement, obligation or instrument entered into or executed by the Trust or the Trustees. In addition, the Declaration of Trust provides for indemnification out of the property of an investment portfolio in which a shareholder owns or owned shares for all losses and expenses of such shareholder or former shareholder if he or she is held personally liable for the obligations of the Trust solely by reason of being or having been a shareholder. Moreover, the Trust will be covered by insurance which the Trustees consider adequate to cover foreseeable tort claims. Thus, the risk of a shareholder incurring financial loss on account of shareholder liability is considered remote, because it is limited to circumstances in which a disclaimer is inoperative and the Trust itself is unable to meet its obligations. For further information, please refer to the registration statement and exhibits for the Trust on file with the SEC in Washington, D.C. and available upon payment of a copying fee. The statements in the Prospectus and this Statement of Additional Information concerning the contents of contracts or other documents, copies of which are filed as exhibits to the registration statement, are qualified by reference to such contracts or documents. PRINCIPAL HOLDERS OF SECURITIES As of February 1, 1998, no person owns of record directly or beneficially 5% of the Fund's shares. In addition, as of February 1, 1998, the officers and Trustees of the Trust, as a group, owned less than 1% of the Fund's outstanding voting securities. PURCHASE AND REDEMPTION OF SHARES The Trust has made an election with the SEC to pay in cash all redemptions requested by any shareholder of record limited in amount during any 90-day period to the lesser of $250,000 or 1% 41 of its net assets at the beginning of such period. This election is irrevocable without the SEC's prior approval. Redemption requests in excess of the stated limits may be paid, in whole or in part, in investment securities or in cash, as the Trust's Board of Trustees may deem advisable; however, payment will be made wholly in cash unless the Board of Trustees believes that economic or market conditions exist that would make such a practice detrimental to the best interests of a Fund. If redemption proceeds are paid in investment securities, such securities will be valued as set forth in "Share Price Calculation" and a redeeming shareholder would normally incur brokerage expenses if he or she converted the securities to cash. OTHER INFORMATION The Prospectus and SAI do not contain all the information included in the Registration Statement filed with the SEC under the Securities Act of 1933, as amended, with respect to the securities offered by the Prospectus. Certain portions of the Registration Statement have been omitted from the Prospectus and the SAI pursuant to the rules and regulations of the SEC. The Registration Statement including the exhibits filed therewith may be examined at the office of the SEC in Washington, D.C. Statements contained in the Prospectus or SAI as to the contents of any contract or other document referred to are not necessarily complete, and in each instance, reference is made to the copy of such contract or other document filed as an exhibit to the Registration Statement of which the Prospectus and SAI form a part, each such statement being qualified in all respects by such reference. THIS SAI DOES NOT CONSTITUTE AN OFFERING BY THE TRUST, ANY SERIES THEREOF, OR BY THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT BE LAWFULLY MADE. 42 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. 43 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 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 as 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. 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. 44 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. 45 PART C OTHER INFORMATION February 16, 1998 THE CHARLES SCHWAB FAMILY OF FUNDS Item 24. Financial Statements and Exhibits. (a) Financial Statements: (1) Financial statements and financial highlights included in the Annual Report for Schwab Money Market Fund, Schwab Government Money Fund and Schwab U.S. Treasury Fund for the fiscal year ended December 31, 1996, are incorporated by reference into the SAI, were filed on March 6, 1997, pursuant to Rule 30d-1 under the Investment Company Act of 1940 ("1940 Act"), and are incorporated herein by reference. (2) Financial statements and financial highlights included in the Annual Report for Schwab Municipal Money Fund - Value Advantage Shares, Schwab California Municipal Money Fund - Value Advantage Shares and Schwab New York Municipal Money Fund - Value Advantage Shares for the fiscal year ended December 31, 1996, are incorporated by reference into the SAI, were filed on March 6, 1997, pursuant to Rule 30d-1 under the 1940 Act, and are incorporated herein by reference. (3) Financial statements and financial highlights included in the Annual Report for Schwab New York Municipal Money Fund - Sweep Shares for the fiscal year ended December 31, 1996, are incorporated by reference into the SAI, were filed on March 6, 1997, pursuant to Rule 30d-1 under the 1940 Act, and are incorporated herein by reference. (4) Financial statements and financial highlights included in the Annual Report for Schwab California Municipal Money Fund - Sweep Shares for the fiscal year ended December 31, 1996, are incorporated by reference into the SAI, were filed on March 6, 1997, pursuant to Rule 30d-1 under the 1940 Act, and are incorporated herein by reference. (5) Financial statements and financial highlights included in the Annual Report for Schwab Municipal Money Fund - Sweep Shares for the fiscal year ended December 31, 1996, are incorporated by reference into the SAI, were filed on March 6, 1997, pursuant to Rule 30d-1 under the 1940 Act, and are incorporated herein by reference. 4 46 (6) Financial statements and financial highlights included in the Annual Report for Schwab Value Advantage Money Fund - Investor Shares (formerly known as Schwab Value Advantage Money Fund) for the fiscal year ended December 31, 1996, are incorporated by reference into the SAI, were filed on March 6, 1997, pursuant to Rule 30d-1 under the 1940 Act, and are incorporated herein by reference. (7) Financial statements and financial highlights included in the Annual Report for Schwab Retirement Money Fund for the fiscal year ended December 31, 1996, are incorporated by reference into the SAI, were filed on March 6, 1997, pursuant to Rule 30d-1 under the 1940 Act, and are incorporated herein by reference. (8) Financial statements and financial highlights included in the Annual Report for Schwab Institutional Advantage Money Fund for the fiscal year ended December 31, 1996, are incorporated by reference into the SAI, were filed on March 6, 1997, pursuant to Rule 30d-1 under the 1940 Act, and are incorporated herein by reference. 5 47 (b) Exhibits: (1) Amended and Restated Agreement and Declaration of Trust to Registrant's Registration Statement on Form N-1A, dated May 9, 1995, is electronically file herein as Exhibit (1). (2) Amended and Restated By-Laws are incorporated by reference to Exhibit (2) to Post-Effective Amendment No. 23 to Registrant's Registration Statement on Form N-1A, electronically filed on March 29, 1996. (3) Inapplicable. (4) (a) Article III, Sections 4 and 5; Article IV, Section 1; Article V; Article VI, Section 2; Article VIII, Section 4; and Article IX, Sections 1, 4 and 7 of the Agreement and Declaration of Trust are incorporated by reference to Exhibit (1) above. (b) Article 9 and Article 11 of the By-Laws are incorporated by reference to Exhibit (2) above. (5) (a) Investment Advisory and Administration Agreement between Registrant and Charles Schwab Investment Management, Inc. (the "Investment Manager") with respect to Schwab Money Market Fund, Schwab Government Money Fund and Schwab Municipal Money Fund, dated May 1, 1997, was electronically filed and is incorporated herein by reference to Exhibit 5(a) to Post-Effective Amendment No. 29. (b) Schedule A to the Investment Advisory and Administration Agreement between Registrant and Charles Schwab Investment Management, Inc. (the "Investment Manager") with respect to Schwab Money Market Fund, Schwab Government Money Fund and Schwab Municipal Money Fund was electronically filed and is incorporated herein by reference to Exhibit 5(b) to Post-Effective Amendment No. 27. 6 48 (c) Schedule B to the Investment Advisory and Administration Agreement between Registrant and Charles Schwab Investment Management, Inc. (the "Investment Manager") with respect to Schwab Money Market Fund, Schwab Government Money Fund and Schwab Municipal Money Fund was electronically filed and is incorporated herein by reference to Exhibit 5(c) to Post-Effective Amendment No. 27. (d) Investment Advisory and Administration Agreement between Registrant and the Investment Manager, dated June 15, 1994, was electronically filed and is incorporated herein by reference to Exhibit (5)(d) to Post-Effective Amendment No. 27. (e) Form of Schedule A to the Investment Advisory and Administration Agreement between Registrant and the Investment Manager with respect to Schwab California Municipal Money Fund, Schwab U.S. Treasury Money Fund, Schwab Value Advantage Money Fund, Schwab Institutional Advantage Money Fund(R), Schwab Retirement Money Fund(R), Schwab New York Municipal Money Fund, Schwab Government Cash Reserves Fund, Schwab New Jersey Municipal Money Fund, Schwab Pennsylvania Municipal Money Fund and Schwab Florida Municipal Money Fund, dated June 15, 1994, is electronically filed as Exhibit (5)(e). (f) Schedule A to the Investment Advisory and Administration Agreement between Registrant and the Investment Manager with respect to Schwab California Municipal Money Fund, Schwab U.S. Treasury Money Fund, Schwab Value Advantage Money Fund, Schwab Institutional Advantage Money Fund(R), Schwab Retirement Money Fund(R), Schwab New York Municipal Money Fund, Schwab Government Cash Reserves Fund, Schwab New Jersey Municipal Money Fund, and Schwab Pennsylvania Municipal Money Fund, dated June 15, 1994, is electronically filed herein as Exhibit (5)(f). (g) Schedule B to the Investment Advisory and Administration Agreement between Registrant and the Investment Manager, dated June 15, 1994, was electronically filed and is incorporated herein by reference to Exhibit (5)(f) to Post-Effective Amendment No. 27. 7 49 (h) Schedule C to the Investment Advisory and Administration Agreement between Registrant and the Investment Manager with respect to Schwab California Municipal Money Fund, Schwab U.S. Treasury Money Fund, Schwab Value Advantage Money Fund, Schwab Institutional Advantage Money Fund(R), Schwab Retirement Money Fund(R), Schwab New York Municipal Money Fund, Schwab Government Cash Reserves Fund, Schwab New Jersey Municipal Money Fund and Schwab Pennsylvania Municipal Money Fund, dated June 15, 1994, was electronically filed and is incorporated herein by reference to Exhibit (5)(g) to Post-Effective Amendment No. 27. (i) Schedule D to the Investment Advisory and Administration Agreement between Registrant and the Investment Manager with respect to Schwab California Municipal Money Fund, Schwab U.S. Treasury Money Fund, Schwab Value Advantage Money Fund, Schwab Institutional Advantage Money Fund(R), Schwab Retirement Money Fund(R), Schwab New York Municipal Money Fund, Schwab Government Cash Reserves Fund, Schwab New Jersey Municipal Money Fund, and Schwab Pennsylvania Municipal Money Fund, dated June 15, 1994, is electronically filed herein as Exhibit (5)(h). (j) Form of Schedule D to the Investment Advisory and Administration Agreement between Registrant and the Investment Manager with respect to Schwab California Municipal Money Fund, Schwab U.S. Treasury Money Fund, Schwab Value Advantage Money Fund, Schwab Institutional Advantage Money Fund(R), Schwab Retirement Money Fund(R), Schwab New York Municipal Money Fund, Schwab Government Cash Reserves Fund, Schwab New Jersey Municipal Money Fund, Schwab Pennsylvania Municipal Money Fund and Schwab Florida Municipal Money Fund, dated June 15, 1994, is electronically filed herein as Exhibit (5)(h). (6) (a) Distribution Agreement between Registrant and Charles Schwab & Co., Inc. ("Schwab"), dated June 15, 1994, to Registrant's Registration Statement on Form N-1A, is electronically filed herein as Exhibit (6)(a). (b) Form of Schedule A to the Distribution Agreement between Registrant and Schwab referred to at Exhibit (6)(a) above is electronically filed herein as Exhibit (6)(b). 8 50 (c) Schedule A to the Distribution Agreement between Registrant and Schwab referred to at Exhibit (6)(a) above is electronically filed herein as Exhibit (6)(c). (7) Inapplicable. (8) (a) Accounting Services Agreement between Registrant and PFPC Inc. (formerly, Provident Financial Processing Corporation) dated April 8, 1991 to Registrant's Registration Statement on Form N-1A, is electronically filed herein as Exhibit (8)(a). (b) Form of Schedule B to the Accounting Services Agreement referred to at Exhibit (8)(a) above is electronically filed herein as Exhibit (8)(b). (c) Form of Amended Schedule B to the Accounting Services Agreement referred to at Exhibit (8)(a) above is electronically filed herein as Exhibit (8)(c). (d) Amendment Nos. 1 and 2 to the Accounting Services Agreement referred to at Exhibit (8)(a) above are electronically filed herein as Exhibit (8)(d). (e) Amended and Restated Transfer Agency Agreement and Schedule B between Registrant and Schwab dated June 5, 1995 to Registrant's Registration Statement on Form N-1A, is electronically filed herein as Exhibit (8)(e). (f) Form of Schedule A and Form of Schedule C to the Amended and Restated Transfer Agency Agreement referred to at Exhibit (8)(d)(8)(e) above are electronically filed herein as Exhibit (8)(f). (g) Schedule A and Schedule C to the Amended and Restated Transfer Agency Agreement referred to at Exhibit (8)(e) above are electronically filed herein as Exhibit (8)(g). (h) Shareholder Service Agreement between Registrant and Schwab dated May 1, 1993 to Registrant's Registration Statement on Form N-1A, is electronically filed herein as Exhibit (8)(h). 9 51 (i) Schedules A, B, and C to the Shareholder Service Agreement between Registrant and Schwab referred to at Exhibit(8)(h) above to Registrant's Registration Statement on Form N-1A, are electronically filed herein as Exhibit (8)(i). (j) Form of Schedules A and C to the Shareholder Service Agreement referred to at Exhibit (8)(h) above is electronically filed herein as Exhibit (8)(j). (k) Custodian Services Agreement between Registrant and PNC Bank, N.A. (formerly, Provident National Bank) dated April 8, 1991 to Registrant's Registration Statement on Form N-1A, is electronically filed herein as Exhibit (8)(k). (l) Form of A to the Custodian Services Agreement referred to at Exhibit (8)(k) above is electronically filed herein as Exhibit (8)(l). (m) Form of Schedule A to the Custodian Services Agreement referred to at Exhibit (8)(k) above is electronically filed herein as Exhibit (8)(m). (n) Amendment Nos. 1 and 2 to the Custodian Services Agreement referred to at Exhibit (8)(k) above are electronically filed herein as Exhibit (8)(n). (9) Inapplicable. (10) (a) Inapplicable. (b) Opinion of Ropes & Gray as to legality of the securities being registered is electronically filed herein as Exhibit (10)(b). (11) (a) Inapplicable. (b) Inapplicable. (12) Inapplicable. 10 52 (13) (a) Purchase Agreement between Registrant and Schwab relating to the Schwab U.S. Treasury Money Fund to Registrant's Registration Statement on Form N-1A, is electronically filed herein as Exhibit (13)(a). (b) Purchase Agreement between Registrant and Schwab relating to the Schwab Value Advantage Money Fund to Registrant's Registration Statement on Form N-1A, is electronically filed herein as Exhibit (13)(b). (c) Purchase Agreement between Registrant and Schwab relating to the Schwab Retirement Money Fund(R) and the Schwab Institutional Advantage Money Fund(R) to Registrant's Registration Statement on Form N-1A, is electronically filed herein as Exhibit (13)(c). (d) Purchase Agreement between Registrant and Schwab relating to the Schwab New York Municipal Money Fund to Registrant's Registration Statement on Form N-1A, is electronically filed herein as Exhibit (13)(d). (e) Purchase Agreement between Registrant and Schwab relating to the Schwab Municipal Money Fund-Value Advantage Shares to Registrant's Registration Statement on Form N-1A, is electronically filed herein as Exhibit (13)(e). (f) Purchase Agreement between Registrant and Schwab relating to the Schwab California Municipal Money Fund-Value Advantage Shares to Registrant's Registration Statement on Form N-1A, is electronically filed herein as Exhibit (13)(f). (g) Purchase Agreement between Registrant and Schwab relating to the Schwab New York Municipal Money Fund-Value Advantage Shares to Registrant's Registration Statement on Form N-1A, is electronically filed herein as Exhibit (13)(g). (h) Form of Purchase Agreement between Registrant and Schwab relating to the Schwab Government Cash Reserves Fund is incorporated herein by reference as Exhibit (13)(h) to Post-Effective Amendment No. 28 to Registrant's Registration Statement on Form N-1A, electronically filed on August 6, 1997. 11 53 (i) Purchase Agreement between Registrant and Schwab relating to the Schwab New Jersey Municipal Money Fund is electronically filed herein as Exhibit (13)(i) Post-Effective. (j) Purchase Agreement between Registrant and Schwab relating to the Schwab Pennsylvania Municipal Money Fund is electronically filed herein as Exhibit (13)(j). (k) Form of Purchase Agreement between Registrant and Schwab relating to the Schwab Florida Municipal Money Fund was electronically filed and is incorporated by reference as Exhibit (13)(k) to Post-Effective Amendment No. 31 to Registrant's Registration Statement on form N-1A, filed on December 3, 1997. (14) (a) Model Charles Schwab & Co., Inc. Individual Retirement Plan is incorporated by reference to Exhibit (14)(a) to Post-Effective Amendment No. 14 to Registrant's Registration Statement on Form N-1A, filed on August 25, 1995. (14) (b) Model Charles Schwab & Co., Inc. KEOGH Plan is incorporated by reference to Exhibit (14)(b) to Post-Effective Amendment No. 14 to Registrant's Registration Statement on Form N-1A, filed on August 25, 1995. (15) Inapplicable. (16) (a) Performance Calculations for Schwab Money Market Fund, Schwab Government Money Fund, Schwab Municipal Money Fund, Schwab California Municipal Money Fund and Schwab U.S. Treasury Money Fund are incorporated by reference to Exhibit (16) to Post-Effective Amendment No. 6 to Registrant's Registration Statement on Form N-1A, filed on March 3, 1992. (b) Performance Calculations for Schwab Value Advantage Money Fund are incorporated by reference to Exhibit (16) to Post-Effective Amendment No. 7 to Registrant's Registration Statement on Form N-1A, filed on August 7, 1992. 12 54 (c) Performance Calculations for Schwab Institutional Advantage Money Fund(R) and Schwab Retirement Money Fund(R) are incorporated by reference to Exhibit (16) to Post-Effective Amendment No. 17 to Registrant's Registration Statement on Form N-1A, filed on April 6, 1995. (d) Performance Calculations for Schwab New York Municipal Money Fund-Sweep Shares are incorporated by reference to Exhibit (16)(d) to Post-Effective Amendment No. 20 to Registrant's Registration Statement on Form N-1A, filed on August 25, 1995. (17) (a) Financial Data Schedule for Schwab Money Market Fund is electronically filed herein as Exhibit (17)(a). (b) Financial Data Schedule for Schwab Government Money Fund is electronically filed herein as Exhibit (17)(b). (c) Financial Data Schedule for Schwab Municipal Money Fund-Sweep Shares is electronically filed herein as Exhibit (17)(c). (d) Financial Data Schedule for Schwab Municipal Money Fund-Value Advantage Shares is electronically filed herein as Exhibit (17)(d). (e) Financial Data Schedule for Schwab California Municipal Money Fund-Sweep Shares is electronically filed herein as Exhibit (17)(e). (f) Financial Data Schedule for Schwab California Municipal Money Fund-Value Advantage Shares is electronically filed herein as Exhibit (17)(f). (g) Financial Data Schedule for Schwab U.S. Treasury Money Fund is electronically filed herein as Exhibit (17)(g). (h) Financial Data Schedule for Schwab Value Advantage Money Fund-Investor Shares is electronically filed herein as Exhibit (17)(h). (i) Financial Data Schedule for Schwab Institutional Advantage Money Fund(R) is electronically filed herein as Exhibit (17)(i). 13 55 (j) Financial Data Schedule for Schwab Retirement Money Fund(R) is electronically filed herein as Exhibit (17)(j). (k) Financial Data Schedule for Schwab New York Municipal Money Fund-Sweep Shares is electronically filed herein as Exhibit (17)(k). (l) Financial Data Schedule for Schwab New York Municipal Money Fund-Value Advantage Shares is electronically filed herein as Exhibit (17)(l). (18) Form of Amended and Restated Multiple Class Plan of Registrant is incorporated by reference to Exhibit (18) to Post-Effective Amendment No. 25 to Registrant's Registration Statement on Form N-1A, filed on February 21, 1997. 14 56 Item 25. Persons Controlled by or under Common Control with Registrant. Schwab Investments, Schwab Capital Trust, and Schwab Annuity Portfolios each are Massachusetts business trusts registered under the Investment Company Act of 1940, as amended (the "1940 Act"); are advised by the Investment Manager; and employ Schwab as their principal underwriter, transfer agent and shareholder services agent. As a result, Schwab Investments, Schwab Capital Trust, and Schwab Annuity Portfolios may be deemed to be under common control with Registrant. Item 26. Number of Holders of Securities. As of January 1, 1998, the number of record holders of shares of beneficial interest for the series of Registrant was:
Title of Class Number of Record Holders - -------------- ------------------------ Schwab Money Market Fund 1 (for the benefit of 2,194,337) Schwab Government Money Fund 1 (for the benefit of 127,095) Schwab U.S. Treasury Money Fund 1 (for the benefit of 67,874) Schwab Municipal Money Fund-Sweep Shares 1 (for the benefit of 148,156) Schwab Municipal Money Fund-Value Advantage Shares 1 (for the benefit of 4,587) Schwab California Municipal Money Fund-Sweep Shares 1 (for the benefit of 59,437) Schwab California Municipal Money Fund-Value Advantage Shares 1 (for the benefit of 3,763) Schwab Value Advantage Money Fund-Investor Shares 1 (for the benefit of 124,205) Schwab Retirement Money Fund(R) 1 (for the benefit of 1,008) Schwab Value Advantage Money Fund-Sweep Shares 0 (for the benefit of ) Schwab Institutional Advantage Money Fund(R) 1 (for the benefit of 496) Schwab New York Municipal Money Fund-Sweep Shares 1 (for the benefit of 12,966) Schwab New York Municipal Money Fund-Value Advantage Shares 1 (for the benefit of 746) Schwab Government Cash Reserves Fund 0 (for the benefit of ) Schwab New Jersey Municipal Money Fund 0 (for the benefit of ) Schwab Pennsylvania Municipal Money Fund 0 (for the benefit of ) Schwab Florida Municipal Money Fund 0 (for the benefit of )
Item 27. Indemnification. Article VIII of Registrant's Amended and Restated Agreement and Declaration of Trust (Exhibit (1) hereto, which is incorporated herein by reference) provides in effect that Registrant will indemnify its officers and trustees against all liabilities and expenses, including but not limited to amounts paid in satisfaction of judgments, in compromise, or as fines and penalties, and counsel fees reasonably incurred by any such officer or trustee in connection with the defense or disposition of any action, suit, or other proceeding. However, in accordance with Section 17(h) and 17(i) of the 1940 Act and its own terms, said Agreement and Declaration of Trust does not protect any person against any liability to Registrant or its shareholders to which he or she would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his or her office. In any event, Registrant will 15 57 comply with 1940 Act Releases Nos. 7221 and 11330 respecting the permissible boundaries of indemnification by an investment company of its officers and trustees. Insofar as indemnification for liability arising under the Securities Act of 1933, as amended (the "1933 Act"), may be permitted to trustees, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, Registrant has been advised that, in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the 1933 Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by Registrant of expenses incurred or paid by a trustee, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such trustee, officer or controlling person in connection with the securities being registered, Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the 1933 Act and will be governed by the final adjudication of such issue. Item 28. Business and Other Connections of Investment Manager. (a) Information pertaining to business and other connections of Registrant's Investment Manager is hereby incorporated by reference to the section of the Prospectuses for Schwab Money Market Fund, Schwab Government Money Fund, Schwab U.S. Treasury Money Fund, Schwab Municipal Money Fund-Sweep Shares, Schwab California Municipal Money Fund-Sweep Shares, Schwab New York Municipal Money Fund-Sweep Shares, Schwab Institutional Advantage Money Fund(R) and Schwab Retirement Money Fund(R) captioned "Management of the Fund(s);" the section of the Prospectuses for Schwab Value Advantage Money Fund, Schwab Municipal Money Fund-Value Advantage Shares, Schwab California Municipal Money Fund-Value Advantage Shares and Schwab New York Municipal Money Fund-Value Advantage Shares captioned "Organization and Management of the Fund(s);" and the section of the Statements of Additional Information captioned "Management of the Trust." Registrant's Investment Manager, Charles Schwab Investment Management, Inc., a Delaware corporation, organized in October 1989 to serve as Investment Manager to Registrant, also serves as the Investment Manager to Schwab Investments, Schwab Capital Trust, and Schwab Annuity Portfolios, each an open-end, management investment company. The principal place of business of the Investment Manager is 101 Montgomery Street, San Francisco, California 94104. The only business in which the Investment Manager engages is that of investment manager and administrator to Registrant, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and any other investment companies that Schwab may sponsor in the future. (b) The business, profession, vocation or employment of a substantial nature in which each director and/or executive officer of Schwab and/or the Investment Manager is or has been engaged during the past two fiscal years for his or her own account in the capacity of director, officer, employee, partner or trustee is as follows: 16 58
Name and Position with Registrant Name of Company Capacity --------------- --------------- -------- Karen W. Chang Charles Schwab & Co., Inc. Enterprise President John P. Coghlan Charles Schwab & Co., Inc. Enterprise President The Charles Schwab Corporation Executive Vice President The Charles Schwab Trust Company President, Chief Executive Officer and Director Schwab Retirement Plan Services, Inc. Director Frances Cole, Charles Schwab Investment Management, Inc. Senior Vice President, Chief Secretary Counsel, Chief Compliance Officer and Assistant Corporate Secretary Linnet F. Deily Charles Schwab & Co., Inc. Enterprise President Christopher V. Dodds Charles Schwab & Co., Inc. Controller and Senior Vice President The Charles Schwab Corporation Treasurer and Senior Vice President Mayer & Schweitzer, Inc. Treasurer Carrie Dwyer Charles Schwab & Co., Inc. Executive Vice President Wayne W. Fieldsa Charles Schwab & Co., Inc. Executive Vice President Lon Gorman Charles Schwab & Co., Inc. Enterprise President James M. Hackley Charles Schwab & Co., Inc. Executive Vice President Cynthia K. Holbrook The Charles Schwab Corporation Assistant Corporate Secretary Charles Schwab & Co., Inc. Assistant Corporate Secretary Charles Schwab Investment Management, Inc. Corporate Secretary
17 59
Name and Position with Registrant Name of Company Capacity --------------- --------------- -------- The Charles Schwab Trust Company Assistant Corporate Secretary Mayer & Schweitzer Secretary Colleen M. Hummer Charles Schwab & Co., Inc. Senior Vice President William J. Klipp, Charles Schwab & Co., Inc. Executive Vice President Trustee, Executive Vice President and Chief Operating Officer Charles Schwab Investment Management, Inc. President and Chief Operating Officer Daniel O. Leemon The Charles Schwab Corporation Executive Vice President Charles Schwab & Co., Inc. Executive Vice President and Chief Strategy Officer Dawn G. Lepore Charles Schwab & Co., Inc. Executive Vice President and Chief Information Officer The Charles Schwab Corporation Executive Vice President and Chief Information Officer David H. Lui, Charles Schwab Investment Management, Inc. Vice President and Senior Counsel Assistant Secretary Susanne D. Lyons Charles Schwab & Co., Inc. Enterprise President Amy L. Mauk Charles Schwab Investment Management, Inc. Corporate Counsel Assistant Secretary Timothy F. McCarthy Charles Schwab & Co., Inc. President and Chief Operating Officer The Charles Schwab Corporation Executive Vice President Jardine Fleming Unit Trusts Ltd. Chief Executive Officer until
18 60
Name and Position with Registrant Name of Company Capacity --------------- --------------- -------- October 1995 Fidelity Investment Advisor Group President until 1994 Mayer & Schweitzer, Inc. Director Peter J. McIntosh Charles Schwab & Co., Inc. Executive Vice President Matthew M. O'Toole, Charles Schwab Investment Management, Inc. Corporate Counsel Assistant Secretary David S. Pottruck Charles Schwab & Co., Inc. Chief Executive Officer and Director The Charles Schwab Corporation President, Co-Chief Executive Officer, Chief Operating Officer and Director Schwab Holdings, Inc. Director Schwab Retirement Plan Services, Inc. Director Charles Schwab Limited Director Charles Schwab Investment Management, Inc. Director Mayer & Schweitzer, Inc. Director Performance Technologies, Inc. Director Schwab (SIS) Holdings, Inc. I President, Chief Operating Officer and Director Schwab International Holdings, Inc. President, Chief Operating Officer and Director Ronald W. Readmond Charles Schwab & Co., Inc. Vice Chairman and Director until January 1996; Senior Executive Vice President and Chief Operating Officer until January 1995
19 61
Name and Position with Registrant Name of Company Capacity --------------- --------------- -------- The Charles Schwab Corporation Executive Vice President until January 1996; Senior Executive Vice President until January 1995 Mayer & Schweitzer, Inc. Director until January 1996 Gideon Sasson Charles Schwab & Co., Inc. Enterprise President Beth Sawi The Charles Schwab Corporation Executive Vice President Charles Schwab & Co., Inc. Executive Vice President until December 1997 Steven L. Scheid Charles Schwab & Co., Inc. Executive Vice President, Chief Financial Officer and Director The Charles Schwab Corporation Executive Vice President and Chief Financial Officer Schwab Holdings, Inc. Executive Vice President, Chief Financial Officer and Director Charles Schwab Investment Management, Inc. Chief Financial Officer and Director The Charles Schwab Trust Company Chief Financial Officer and Director Charles Schwab Limited Finance Officer and Director Schwab Retirement Plan Services, Inc. Director Performance Technologies, Inc. Director Mayer & Schweitzer, Inc. Director Schwab (SIS) Holdings, Inc. I Chief Financial Officer and Director
20 62
Name and Position with Registrant Name of Company Capacity --------------- --------------- -------- Schwab International Holdings, Inc. Chief Financial Officer and Director Charles R. Schwab, Charles Schwab & Co., Inc. Chairman and Director Chairman and Trustee The Charles Schwab Corporation Chairman, Co-Chief Executive Officer and Director Schwab Holdings, Inc. Chairman, Chief Executive Officer and Director Charles Schwab Investment Management, Inc. Chairman and Director The Charles Schwab Trust Company Chairman and Director Mayer &Schweitzer, Inc. Chairman and Director Schwab Retirement Plan Services, Inc. Chairman and Director Charles Schwab Limited Chairman, Chief Executive Officer and Director Performance Technologies, Inc. Chairman and Director TrustMark, Inc. Chairman and Director Schwab (SIS) Holdings, Inc. I Chairman, Chief Executive Officer and Director Schwab International Holdings, Inc. Chairman, Chief Executive Officer and Director The Gap, Inc. Director Transamerica Corporation Director AirTouch Communications Siebel Systems Director Karen L. Seaman, Charles Schwab Investment Management, Corporate Counsel
21 63
Name and Position with Registrant Name of Company Capacity --------------- --------------- -------- Assistant Secretary Inc. Tom D. Seip Charles Schwab & Co., Inc. Enterprise President The Charles Schwab Corporation Executive Vice President Charles Schwab Investment Management, Inc. Chief Executive Officer Leonard Short Charles Schwab & Co., Inc. Executive Vice President Lawrence J. Stupski Charles Schwab & Co., Inc. Director until February 1995; Vice Chairman until August 1994 The Charles Schwab Corporation Vice Chairman and Director; Chief Operating Officer until March 1994 Mayer & Schweitzer, Inc. Director until February 1995 The Charles Schwab Trust Company Director until December 1996 Mary B. Templeton Charles Schwab Investment Management, Inc. Assistant Corporate Secretary until September 1997 The Charles Schwab Corporation Senior Vice President, General Counsel and Corporate Secretary until September 1997 Charles Schwab & Co., Inc. Senior Vice President, General Counsel and Corporate Secretary until September 1997 Mayer & Schweitzer Assistant Corporate Secretary until September 1997 The Charles Schwab Trust Company Assistant Corporate
22 64
Name and Position with Registrant Name of Company Capacity --------------- --------------- -------- Secretary until February 1996 until September 1997 Tai-Chin Tung, Charles Schwab & Co., Inc. Vice President Treasurer and Principal Financial Officer Charles Schwab Investment Management, Inc. Controller Robertson Stephens Investment Management, Inc. Controller until 1996 Luis E. Valencia Charles Schwab & Co., Inc. Executive Vice President and Chief Administrative Officer The Charles Schwab Corporation Executive Vice President and Chief Administrative Officer Commercial Credit Corporation Managing Director until February 1994 Stephen B. Ward, Charles Schwab Investment Management, Inc. Senior Vice President and Chief Senior Vice President and Investment Officer Chief Investment Officer
23 65 Item 29. Principal Underwriters. (a) Schwab acts as principal underwriter and distributor of Registrant's shares. Schwab currently also acts as principal underwriter for Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and intends to act as such for any other investment company which Schwab may sponsor in the future. (b) See Item 28(b) for information on the officers and directors of Schwab. The principal business address of Schwab is 101 Montgomery Street, San Francisco, California 94104. (c) Not applicable. Item 30. Location of Accounts and Records. All accounts, books and other documents required to be maintained pursuant to Section 31(a) of the 1940 Act and the Rules thereunder are maintained at the offices of: Registrant (transfer agency and shareholder records); Registrant's investment manager and administrator, Charles Schwab Investment Management, Inc., 101 Montgomery Street, San Francisco, California 94104; Registrant's sub-investment adviser, Dimensional Fund Advisors Inc., 1299 Ocean Avenue, Suite 1100, Santa Monica, California 90401; Registrant's principal underwriter, Charles Schwab & Co., Inc., 101 Montgomery Street, San Francisco, California 94104; Registrant's Custodian, PNC Bank, National Association, Broad and Market Streets, Philadelphia, Pennsylvania 19104 (ledgers, receipts and brokerage orders); Registrant's fund accountants, PFPC, Inc., 400 Bellevue Parkway, Wilmington, Delaware 19809; or Ropes & Gray, counsel to Registrant, 1301 K Street, N.W., Suite 800 East, Washington, D.C. 20005 (minute books, bylaws and declaration of trust). Item 31. Management Services. Not applicable. Item 32. Undertakings. (a) Registrant undertakes to call a meeting of Shareholders, at the request of at least 10% of registrant's outstanding shares, for the purpose of voting upon the question of removal of a trustee or trustees and to assist in communications with other Shareholders as required by Section (16) of the 1940 Act. (b) Registrant undertakes to furnish to each person to whom a prospectus is delivered a copy of Registrant's latest Annual Report to Shareholders upon request and without charge. (c) Registrant undertakes to file a post-effective amendment, using financial statements which need not be certified, within four to six months from the commencement of the Fund's operations. 24 66 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended (the "1933 Act"), and the Investment Company Act of 1940, as amended, Registrant certifies that it meets all of the requirements for effectiveness of this Post-Effective Amendment No. 33 to Registrant's Registration Statement on Form N-1A pursuant to Rule 485(b) under the 1933 Act and has duly caused this Post-effective Amendment No. 33 to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Washington, District of Colombia on the 12th day of February, 1998. THE CHARLES SCHWAB FAMILY OF FUNDS Registrant Charles R. Schwab* ---------------------------------- Charles R. Schwab, Chairman Pursuant to the requirements of the 1933 Act, this Post-Effective Amendment No. 33 to Registrant's Registration Statement on Form N-1A has been signed below by the following persons in the capacities indicated this 12th day of February, 1998. Signature Title - --------- ----- Charles R. Schwab* Chairman and Trustee - -------------------------- Charles R. Schwab Tom D. Seip* President and Trustee - -------------------------- Tom D. Seip William J. Klipp* Executive Vice President, Trustee and - -------------------------- Chief Operating Officer William J. Klipp Donald F. Dorward* Trustee - -------------------------- Donald F. Dorward Robert G. Holmes* Trustee - -------------------------- Robert G. Holmes Donald R. Stephens* Trustee - -------------------------- Donald R. Stephens Michael W. Wilsey* Trustee - -------------------------- Michael W. Wilsey Tai-Chin Tung* Treasurer and Principal Financial Officer - -------------------------- Tai-Chin Tung *By: /s/ Alan G. Priest ------------------------------------- Alan G. Priest, Attorney-in-Fact pursuant to Powers of Attorney previously filed. 25 67 Exhibit Description - ------- ----------- 1 Amended and Restated Agreement and Declaration of Trust (5)(e) Form of Schedule A to the Investment Advisory Agreement (5)(f) Schedule A to the Investment Advisory Agreement (5)(i) Schedule D to the Investment Advisory Agreement Fees (5)(j) Form of Schedule D to the Investment Advisory Agreement Fees (6)(a) Distribution Agreement (6)(b) Form of Schedule A to the Distribution Agreement (6)(c) Schedule A to the Distribution Agreement (8)(a) Accounting Services Agreement (8)(b) Schedule B to the Accounting Services Agreement (8)(c) Form of Amended Schedule B to the Accounting Services Agreements (8)(d) Amendment No. 1 and No. 2 to the Accounting Services Agreement (8)(e) Amended and Restated Transfer Agency Agreement (8)(f) Form of Schedule A to the Transfer Agency Agreement (8)(g) Schedule A and C to the Transfer Agency Agreement (8)(h) Shareholder Services Agreement (8)(i) Schedule A, B, and C to the Shareholder Services Agreement (8)(j) Form of Schedule A to the Shareholder Services Agreement (8)(k) Custodian Services Agreement Terms and Conditions (8)(l) Schedule A to the Custodian Services Agreement (8)(m) Form of Schedule A to the Custodian Services Agreement (8)(n) Amendments No.s 1 and 2 to the Custodian Services Agreement (10)(b) Opinion of Ropes & Gray (13)(a) Purchase Agreement (13)(b) Purchase Agreement (13)(c) Purchase Agreement 1 68 (13)(d) Purchase Agreement (13)(e) Purchase Agreement (13)(f) Purchase Agreement (13)(g) Purchase Agreement (13)(i) Purchase Agreement (13)(j) Purchase Agreement (13)(k) Form of Purchase Agreement (17)(a) Financial Data Schedule (17)(b) Financial Data Schedule (17)(c) Financial Data Schedule (17)(d) Financial Data Schedule (17)(e) Financial Data Schedule (17)(f) Financial Data Schedule (17)(g) Financial Data Schedule (17)(h) Financial Data Schedule (17)(i) Financial Data Schedule (17)(j) Financial Data Schedule (17)(k) Financial Data Schedule (17)(l) Financial Data Schedule 2 EX-1 2 AMENDED & RESTATED AGREE.& DECLARATION OF TRUST 1 EXHIBIT 1 THE CHARLES SCHWAB FAMILY OF FUNDS --------------- AMENDED AND RESTATED AGREEMENT AND DECLARATION OF TRUST --------------- AGREEMENT AND RESTATED DECLARATION OF TRUST made at San Francisco, California on the 9th day of May, 1995, by the Trustees hereunder, and by the holders of shares of beneficial interest to be issued hereunder as hereinafter provided. WITNESSETH that WHEREAS, this Trust has been formed to carry on the business of an investment company; and WHEREAS, the Trustees have agreed to manage all property coming into their hands as trustees of a Massachusetts voluntary association with transferable shares in accordance with the provisions hereinafter set forth. NOW, THEREFORE, the Trustees hereby declare that they will hold all cash, securities and other assets, which they may from time to time acquire in any manner as Trustees hereunder IN TRUST to manage and dispose of the same upon the following terms and conditions for the pro rata benefit of the holders from time to time of Shares in this Trust as hereinafter set forth. ARTICLE I Name and Definitions Name Section 1. This Trust shall be known as "THE CHARLES SCHWAB FAMILY OF FUNDS", and the Trustees shall conduct the business of the Trust under that name or any other name as they may from time to time determine. Definitions Section 2. Whenever used herein, unless otherwise required by the context or specifically provided: (a) The "Trust" refers to the Massachusetts business trust established by this Agreement and Declaration of Trust, as amended from time to time; (b) "Trustees" refers to the Trustees of the Trust named herein or elected in accordance with Article IV; 2 (c) "Shares" means the equal proportionate transferable units of interest into which the beneficial interest in the Trust shall be divided from time to time or, if more than one series or classes of Shares is authorized by the Trustees, the equal proportionate transferable units into which the beneficial interest of each series or classes of Shares shall be divided from time to time, and includes fractions of Shares as well as whole Shares; (d) "Shareholder" means a record owner of Shares; (e) The "1940 Act" refers to the Investment Company Act of 1940 and the Rules and Regulations thereunder, all as amended from time to time; (f) The terms "Affiliated Person", "Assignment", "Commission", "Interested Person", "Principal Underwriter" and "Majority Shareholder Vote" (the 67% or 50% requirement of the third sentence of Section 2(a)(42) of the 1940 Act, whichever may be applicable) shall have the meanings given them in the 1940 Act; (g) "Declaration of Trust" shall mean this Agreement and Declaration of Trust, as amended or restated from time to time; and (h) "Bylaws" shall mean the Bylaws of the Trust, as amended from time to time. -2- 3 ARTICLE II Purpose of Trust The purpose of the Trust is to provide investors a managed investment primarily in securities and debt instruments and to carry on such other business as the Trustees may from time to time determine pursuant to their authority under this Declaration of Trust. ARTICLE III Shares Division of Beneficial Interests Section 1. The Shares of the Trust shall be issued in one or more series as the Trustees may, without Shareholder approval, authorize. Each series shall be preferred over all other series in respect of the assets allocated to that series. Each series may be divided into two or more classes, as the Trustees may, without Shareholder approval, authorize. The beneficial interest in each series shall be divided into Shares, with a par value of $0.00001. Unless the Trustees have authorized the issuance of Shares of a series in two or more classes, each Share of a series shall represent an equal proportionate interest in the series with each other Share of the same series, none having priority or preference over another. If the Trustees have authorized the issuance of Shares of a series in two or more classes, then the classes may have such variations as to dividend, redemption, and voting rights, net asset values, expenses borne by the classes, and other matters as the Trustees have authorized. The number of Shares authorized shall be unlimited. The Trustees may from time to time divide or combine the Shares of any series or of any class of a series into a greater or lesser number without thereby changing the proportionate beneficial interests in the series. Ownership of Shares Section 2. The ownership of Shares shall be recorded on the books of the Trust or a transfer or similar agent. No certificates certifying the ownership of Shares shall be issued except as the Trustees may otherwise determine from time to time. The Trustees may make such rules as they consider appropriate for the issuance of Share certificates, the transfer of Shares and similar matters. The record books of the Trust as kept by the Trust or by any transfer or similar agent, as the case may be, shall be conclusive as to who are the Shareholders of each series and as to the number of Shares of each series held from time to time by each Shareholder. Investment in the Trust Section 3. The Trustees shall accept investments in the Trust from such persons and on such terms and for such consideration, which may consist of cash or tangible or intangible property or a combination thereof, as they from time to time authorize. -3- 4 All consideration received by the Trust for the issue or sale of Shares of each series, together with all income, earnings, profits, and proceeds thereof, including any proceeds derived from the sale, exchange or liquidation thereof, and any funds or payments derived from any reinvestment of such proceeds in whatever form the same may be, shall irrevocably belong to the series of Shares with respect to which the same were received by the Trust for all purposes, subject only to the rights of creditors, and shall be so handled upon the books of account of the Trust and are herein referred to as "assets of" such series. No Preemptive Rights Section 4. Shares shall have no preemptive or other right to subscribe to any additional Shares or other securities issued by the Trust. Status of Shares and Limitation of Personal Liability Section 5. Shares shall be deemed to be personal property giving only the rights provided in this instrument. Every Shareholder by virtue of having become a Shareholder shall be held to have expressly assented and agreed to the terms hereof and to have become a party hereto. The death of a Shareholder during the continuance of the Trust shall not operate to terminate the same nor entitle the representative of any deceased Shareholder to an accounting or to take any action in court or elsewhere against the Trust or the Trustees, but only to the rights of said decedent under this Trust. Ownership of Shares shall not entitle the Shareholder to any title in or to the whole or any part of the Trust property or right to call for a partition or division of the same or for an accounting, nor shall the ownership of Shares constitute the Shareholders partners. Neither the Trust nor the Trustees, nor any officer, employee or agent of the Trust shall have any power to bind personally any Shareholder, nor except as specifically provided herein to call upon any Shareholder for the payment of any sum of money or assessment whatsoever other than such as the Shareholder may at any time personally agree to pay. ARTICLE IV The Trustees Election Section 1. The number of Trustees shall be as provided in the Bylaws or as fixed from time to time by the Trustees. The Shareholders may elect Trustees at any meeting of Shareholders called by the Trustees for that purpose. Each Trustee shall serve during the continued lifetime of the Trust until he or she dies, resigns or is removed, or, if sooner, until the next meeting of Shareholders called for the purpose of electing Trustees and the election and qualification of his or her successor. Any Trustee may resign at any time by written instrument signed by him and delivered to any officer of the Trust, to each other Trustee or to a meeting of the Trustees. Such resignation shall be effective upon receipt unless specified to be effective at some other time. Except to the extent expressly provided in a written agreement with the Trust, no Trustee resigning and no Trustee removed shall have any right to any compensation for any period following his or her resignation or removal, or any right to damages on account of such removal. Effect of Death, Resignation, etc. of a Trustee -4- 5 Section 2. The death, declination, resignation, retirement, removal or incapacity of the Trustees, or any one of them, shall not operate to annul the Trust or to revoke any existing agency created pursuant to the terms of this Declaration of Trust. -5- 6 Powers Section 3. Subject to the provisions of this Declaration of Trust, the business of the Trust shall be managed by the Trustees, and they shall have all powers necessary or convenient to carry out that responsibility. Without limiting the foregoing, the Trustees may adopt Bylaws not inconsistent with this Declaration of Trust providing for the conduct of the business of the Trust and may amend and repeal them to the extent that such Bylaws do not reserve that right to the Shareholders; they may enlarge or reduce their number, may fill vacancies in their number, including vacancies caused by enlargement of their number, and may remove Trustees with or without cause; they may elect and remove, with or without cause, such officers and appoint and terminate such agents as they consider appropriate; they may appoint from their own number, and terminate, any one or more committees consisting of two or more Trustees, including an executive committee which may, when the Trustees are not in session, exercise some or all of the power and authority of the Trustees as the Trustees may determine; they may employ one or more custodians of the assets of the Trust and may authorize such custodians to employ subcustodians and to deposit all or any part of such assets in a system or systems for the central handling of securities, retain a transfer agent or a Shareholder servicing agent, or both, provide for the distribution of Shares by the Trust, through one or more principal underwriters or otherwise, set record dates for the determination of Shareholders with respect to various matters, and in general delegate such authority as they consider desirable to any officer of the Trust, to any committee of the Trustees and to any agent or employee of the Trust or to any such custodian or underwriter. Without limiting the foregoing, the Trustees shall have power and authority: (a) To invest and reinvest cash, and to hold cash uninvested; (b) To sell, exchange, lend, pledge, mortgage, hypothecate, write options on and lease any or all of the assets of the Trust; (c) To act as a distributor of Shares and as underwriter of, or broker or dealer in, securities or other property; (d) To vote or give assent, or exercise any rights of ownership, with respect to stock or other securities or property; and to execute and deliver proxies or powers of attorney to such person or persons as the Trustees shall deem proper, granting to such person or persons such power and discretion with relation to securities or property as the Trustees shall deem proper; (e) To exercise powers and rights of subscription or otherwise which in any manner arise out of ownership of securities; (f) To hold any security or property in a form not indicating any trust, whether in bearer, unregistered or other negotiable form, or in the name of the Trustees or of the Trust or in the name of a custodian, subcustodian or other depository or a nominee or nominees or otherwise; (g) To allocate assets, liabilities and expenses of the Trust to a particular series of Shares or to apportion the same among two or more series, provided that any liabilities or expenses incurred by a particular series of Shares shall be payable solely out of the assets -6- 7 of that series; (h) To consent to or participate in any plan for the reorganization, consolidation or merger of any corporation or issuer, any security of which is or was held in the Trust; to consent to any contract, lease, mortgage, purchase or sale of property by such corporation or issuer, and to pay calls or subscriptions with respect to any security held in the Trust; (i) To join with other security holders in acting through a committee depositary, voting trustee or otherwise, and in that connection to deposit any security with, or transfer any security to, any such committee, depositary or trustee, and to delegate to them such power and authority with relation to any security (whether or not so deposited or transferred) as the Trustees shall deem proper, and to agree to pay, and to pay, such portion of the expenses and compensation of such committee, depositary or trustee as the Trustees shall deem proper; (j) To compromise, arbitrate or otherwise adjust claims in favor of or against the Trust or any matter in controversy, including but not limited to claims for taxes; (k) To enter into joint ventures, general or limited partnerships and any other combinations or associations; (l) To borrow funds; (m) To endorse or guarantee the payment of any notes or other obligations of any person; to make contracts of guaranty or suretyship, or otherwise assume liability for payment thereof; and to mortgage and pledge the Trust property or any part thereof to secure any of or all such obligations; (n) To purchase and pay for entirely out of Trust property such insurance as they may deem necessary or appropriate for the conduct of the business, including without limitation, insurance policies insuring the assets of the Trust and payment of distributions and principal on its portfolio investments, and insurance policies insuring the Shareholders, Trustees, officers, employees, agents, investment advisers or managers, principal underwriters, or independent contractors of the Trust individually against all claims and liabilities of every nature arising by reason of holding, being or having held any such office or position, or by reason of any action alleged to have been taken or omitted by any such person as Shareholder, Trustee, officer, employee, agent, investment adviser or manager, principal underwriter, or independent contractor, including any action taken or omitted that may be determined to constitute negligence, whether or not the Trust would have the power to indemnify such person against such liability; (o) To pay pensions for faithful service, as deemed appropriate by the Trustees, and to adopt, establish and carry out pension, profit-sharing, Share bonus, Share purchase, savings, thrift and other retirement, incentive and benefit plans, trusts and provisions, including the purchasing of life insurance and annuity contracts as a means of providing such retirement and other benefits, for any or all of the Trustees, officers, employees and agents of the Trust; and -7- 8 (p) To engage in any other lawful act or activity in which corporations organized under the Massachusetts Business Corporation Law may engage. The Trustees shall not in any way be bound or limited by any present or future law or custom in regard to investments by trustees. -8- 9 Except as otherwise provided herein or from time to time in the Bylaws, any action to be taken by the Trustees may be taken by a majority of the Trustees present at a meeting of Trustees (a quorum being present), within or without Massachusetts, including any meeting held by means of a conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other at the same time and participation by such means shall constitute presence in person at a meeting, or by written consents of a majority of the Trustees then in office. Payment of Expenses by Trust Section 4. The Trustees are authorized to pay or to cause to be paid out of the principal or income of the Trust, or partly out of principal and partly out of income, as they deem fair, all expenses, fees, charges, taxes and liabilities incurred or arising in connection with the Trust, in connection with the management thereof, or in connection with the financing of the sale of Shares, including, but not limited to, the Trustees' compensation and such expenses and charges for the services of the Trust's officers, employees, any investment adviser, sub-adviser, principal underwriter, auditor, counsel, custodian, sub-custodian, transfer agent, administrator, sub-administrator, distributor, shareholder servicing agent, and such other agents or independent contractors and such other expenses and charges as the Trustees may deem necessary or proper to incur, provided, however, that all expenses, fees, charges, taxes and liabilities incurred or arising in connection with a particular series of Shares as determined by the Trustees, shall be payable solely out of the assets of that series. Ownership of Assets of the Trust Section 5. Title to all of the assets of each series of Shares and of the Trust shall at all times be considered as vested in the Trustees. Advisory, Management and Distribution Section 6. The Trustees may, at any time and from time to time, contract for exclusive or nonexclusive advisory and/or management services with any corporation, trust, association or other organization (the "Manager"), every such contract to comply with such requirements and restrictions as may be set forth in the Bylaws; and any such contract may provide for one or more Sub-advisers who shall perform all or part of the obligations of the Manager under such Contract and may contain such other terms interpretive of or in addition to said requirements and restrictions as the Trustees may determine, including, without limitation, authority to determine from time to time what investments shall be purchased, held, sold or exchanged and what portion, if any, of the assets of the Trust shall be held uninvested and to make changes in the Trust's investments. The Trustees may also, at any time and from time to time, contract with the Manager or any other corporation, trust, association or other organization, appointing it exclusive or nonexclusive distributor or principal underwriter for the Shares, every such contract to comply with such requirements and restrictions as may be set forth in the Bylaws; and any such contract may contain such other terms interpretive of or in addition to said requirements and restrictions as the Trustees may determine. The fact that: (i) any of the Shareholders, Trustees or officers of the Trust is a shareholder, -9- 10 director, officer, partner, trustee, employee, manager, adviser, principal underwriter or distributor or agent of or for any corporation, trust, association, or other organization, or of or for any parent or affiliate of any organization, with which an advisory or management contract, or principal underwriter's or distributor's contract, or transfer, Shareholder servicing or other agency contract may have been or may hereafter be made, or that any such organization, or any parent or affiliate thereof, is a Shareholder or has an interest in the Trust, or that -10- 11 (ii) any corporation, trust, association or other organization with which an advisory or management contract or principal underwriter's or distributor's contract, or transfer, Shareholder servicing or other agency contract may have been or may hereafter be made also has an advisory or management contract, or principal underwriter's or distributor's contract, or transfer, Shareholder servicing or other agency contract with one or more other corporations, trusts, associations, or other organizations, or has other business or interests shall not affect the validity of any such contract or disqualify any Shareholder, Trustee or officer of the Trust from voting upon or executing the same or create any liability or accountability to the Trust or its Shareholders. ARTICLE V Shareholders' Voting Powers and Meetings Shareholders shall have such power to vote as is provided for in, and may hold meetings and take actions pursuant to the provisions of the Bylaws. ARTICLE VI Distributions, Redemptions and Repurchases Distributions Section 1. The Trustees may each year, or more frequently if they so determine, distribute to the Shareholders of each series such income and capital gains, accrued or realized, as the Trustees may determine, after providing for actual and accrued expenses and liabilities (including such reserves as the Trustees may establish) determined in accordance with good accounting practices. The Trustees shall have full discretion to determine which items shall be treated as income and which items as capital and their determination shall be binding upon the Shareholders. Distributions of each year's income of each series shall be distributed pro rata to Shareholders in proportion to the number of Shares of each series held by each of them. Such distributions shall be made in cash or Shares or a combination thereof as determined by the Trustees. Any such distribution paid in Shares will be paid at the net asset value thereof as determined in accordance with the Bylaws. Redemptions and Repurchases -11- 12 Section 2. The Trust shall purchase such Shares as are offered by any Shareholder for redemption, upon the presentation of any certificate for the Shares to be purchased, a proper instrument of transfer and a request directed to the Trust or a person designated by the Trust that the Trust purchase such Shares, or in accordance with such other procedures for redemption as the Trustees may from time to time authorize; and the Trust will pay therefor the net asset value thereof, as next determined in accordance with the Bylaws, less such redemption charge or fee as the Trustees may determine from time to time. Payment for said Shares shall be made by the Trust to the Shareholder within seven days after the date on which the request is made. The obligation set forth in this Section 2 is subject to the provision that in the event that any time the New York Stock Exchange is closed for other than customary weekends or holidays, or, if permitted by rules of the Commission, during periods when trading on the Exchange is restricted or during any emergency which makes it impractical for the Trust to dispose of its investments or to determine fairly the value of its net assets, or during any other period permitted by order of the Commission for the protection of investors, such obligation may be suspended or postponed by the Trustees. The Trust may also purchase or repurchase Shares at a price not exceeding the net asset value of such Shares in effect when the purchase or repurchase or any contract to purchase or repurchase is made. The Trust may refuse to honor a request by a Shareholder for redemption of his or her Shares for a specified time after such Shareholder's purchase of such Shares, such specified time, if any, to be set forth in the Bylaws. Redemptions at the Option of the Trust Section 3. The Trust shall have the right at its option and at any time to redeem Shares of any Shareholder at the net asset value thereof as determined in accordance with the Bylaws: (i) if at such time such Shareholder owns fewer Shares than, or Shares having an aggregate net asset value of less than, an amount determined from time to time by the Trustees; or (ii) to the extent that such Shareholder owns Shares of a particular series of Shares equal to or in excess of a percentage of the outstanding Shares of that series determined from time to time by the Trustees; or (iii) to the extent that such Shareholder owns Shares of the Trust representing a percentage equal to or in excess of such percentage of the aggregate number of outstanding Shares of the Trust or the aggregate net asset value of the Trust determined from time to time by the Trustees. In addition, if the Net Income of any series of Shares of the Trust which uses the amortized cost method of valuation pursuant to the 1940 Act is determined at any time to be a negative amount, then, with respect to a Shareholder owning Shares of such series, such Shareholder's pro rata share of such negative amount shall constitute a liability of such Shareholder to the Trust which shall be paid at such times and in such manner as the Trustees may from time to time determine out of such Shareholder's accrued dividend account in such series or otherwise. As used in this Article VI, Section 3, "Net Income" shall mean all interest income accrued on portfolio investments of the series plus or minus realized or unrealized gains and losses on portfolio investments of the series, less all actual and accrued expenses and liabilities determined in according with generally accepted accounting practices. Determination of Net Income of a series made by the Trustees, or as they may authorize, in good faith, shall be binding on all parties concerned. Dividends, Distributions, Redemptions and Repurchases -12- 13 Section 4. No dividend or distribution (including, without limitation, any distribution paid upon termination of the Trust or of any series) with respect to, nor any redemption or repurchase of, the Shares of any series shall be effected by the Trust other than from the assets of such series. ARTICLE VII Compensation and Limitation of Liability of Trustees Compensation Section 1. The Trustees as such shall be entitled to reasonable compensation from the Trust; they may fix the amount of their compensation. Nothing herein shall in any way prevent the employment of any Trustee for advisory, management, legal, accounting, investment banking, underwriting, brokerage, or investment dealer or other services and payment for the same by the Trust. Limitation of Liability Section 2. The Trustees shall not be responsible or liable in any event for any neglect or wrongdoing of any officer, agent, employee, manager or principal underwriter of the Trust, nor shall any Trustee be responsible for the act or omission of any other Trustee, but nothing herein contained shall protect any Trustee against any liability to which he or she would otherwise be subject by reason of wilful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his or her office. -13- 14 Every note, bond, contract, instrument, certificate or undertaking and every other act or thing whatsoever executed or done by or on behalf of the Trust or the Trustees or any of them in connection with the Trust shall be conclusively deemed to have been executed or done only in or with respect to their or his or her capacity as Trustees or Trustee, and such Trustees or Trustee shall not be personally liable thereon. ARTICLE VIII Indemnification Trustees, Officers, etc. Section 1. The Trust shall indemnify each of its Trustees and officers (including persons who serve at the Trust's request as directors, officers or trustees of another organization in which the Trust has any interest as a shareholder, creditor or otherwise) (hereinafter referred to as a "Covered Person") against all liabilities and expenses, including but not limited to amounts paid in satisfaction of judgments, in compromise or as fines and penalties, and counsel fees reasonably incurred by any Covered Person in connection with the defense or disposition of any action, suit or other proceeding, whether civil or criminal, before any court or administrative or legislative body, in which such Covered Person may be or may have been involved as a party or otherwise or with which such Covered Person may be or may have been threatened, while in office or thereafter, by reason of being or having been such a Covered Person except with respect to any matter as to which such Covered Person shall have been finally adjudicated in any such action, suit or other proceeding to be liable to the Trust or its Shareholders by reason of wilful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of such Covered Person's office. Expenses, including counsel fees so incurred by any such Covered Person (but excluding amounts paid in satisfaction of judgments, in compromise or as fines or penalties), shall be paid from time to time by the Trust in advance of the final disposition of any such action, suit or proceeding upon receipt of an undertaking by or on behalf of such Covered Person to repay amounts so paid to the Trust if it is ultimately determined that indemnification of such expenses is not authorized under this Article, provided, however, that either (a) such Covered Person shall have provided appropriate security for such undertaking, (b) the Trust shall be insured against losses arising from any such advance payments or (c) either a majority of the disinterested Trustees acting on the matter (provided that a majority of the disinterested Trustees then in office act on the matter), or independent legal counsel in a written opinion, shall have determined, based upon a review of readily available facts (as opposed to a full trial type inquiry) that there is reason to believe that such Covered Person will be found entitled to indemnification under this Article. Compromise Payment -14- 15 Section 2. As to any matter disposed of (whether by a compromise payment, pursuant to a consent decree or otherwise) without an adjudication by a court, or by any other body before which the proceeding was brought, that such Covered Person either (a) did not act in good faith in the reasonable belief that his or her action was in the best interests of the Trust or (b) is liable to the Trust or its Shareholders by reason of wilful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his or her office, indemnification shall be provided if (a) approved as in the best interests of the Trust, after notice that it involves such indemnification, by at least a majority of the disinterested Trustees acting on the matter (provided that a majority of the disinterested Trustees then in office act on the matter) upon a determination, based upon a review of readily available facts (as opposed to a full trial type inquiry) that such Covered Person acted in good faith in the reasonable belief that his or her action was in the best interests of the Trust and is not liable to the Trust or its Shareholders by reasons of wilful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his or her office, or (b) there has been obtained an opinion in writing of independent legal counsel, based upon a review of readily available facts (as opposed to a full trial type inquiry) to the effect that such Covered Person appears to have acted in good faith in the reasonable belief that his or her action was in the best interests of the Trust and that such indemnification would not protect such Person against any liability to the Trust to which he or she would otherwise be subject by reason of wilful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his or her office. Any approval pursuant to this Section shall not prevent the recovery from any Covered Person of any amount paid to such Covered Person in accordance with this Section as indemnification if such Covered Person is subsequently adjudicated by a court of competent jurisdiction not to have acted in good faith in the reasonable belief that such Covered Person's action was in the best interests of the Trust or to have been liable to the Trust or its Shareholders by reason of wilful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of such Covered Person's office. Indemnification Not Exclusive Section 3. The right of indemnification hereby provided shall not be exclusive of or affect any other rights to which such Covered Person may be entitled. As used in this Article VIII, the term "Covered Person" shall include such person's heirs, executors and administrators and a "disinterested Trustee" is a Trustee who is not an "interested person" of the Trust as defined in Section 2(a)(19) of the 1940 Act (or who has been exempted from being an "interested person" by any rule, regulation or order of the Commission) and against whom none of such actions, suits or other proceedings or another action, suit or other proceeding on the same or similar grounds is then or has been pending. Nothing contained in this Article shall affect any rights to indemnification to which personnel of the Trust, other than Trustees or officers, and other persons may be entitled by contract or otherwise under law, nor the power of the Trust to purchase and maintain liability insurance on behalf of any such person; provided, however, that the Trust shall not purchase or maintain any such liability insurance in contravention of applicable law, including without limitation the 1940 Act. Shareholders -15- 16 Section 4. In case any Shareholder or former Shareholder shall be held to be personally liable solely by reason of his or her being or having been a Shareholder and not because of his or her acts or omissions or for some other reason, the Shareholder or former Shareholder (or his or her heirs, executors, administrators or other legal representatives or in the case of a corporation or other entity, its corporate or other general successor) shall be entitled to be held harmless from and indemnified against all loss and expense arising from such liability, but only out of the assets of the particular series of Shares of which he or she is or was a Shareholder. ARTICLE IX Miscellaneous Trustees, Shareholders, etc. Not Personally Liable; Notice Section 1. All persons extending credit to, contracting with or having any claim against the Trust or a particular series of Shares shall look only to the assets of the Trust or the assets of that particular series of Shares for payment under such credit, contract or claim; and neither the Shareholders nor the Trustees, nor any of the Trust's officers, employees or agents, whether past, present or future, shall be personally liable therefor. Nothing in this Declaration of Trust shall protect any Trustee against any liability to which such Trustee would otherwise be subject by reason of wilful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of the office of Trustee. -16- 17 Every note, bond, contract, instrument, certificate or undertaking made or issued by the Trustees or by any officer or officers shall give notice that this Declaration of Trust is on file with the Secretary of The Commonwealth of Massachusetts and shall recite that the same was executed or made by or on behalf of the Trust or by them as Trustee or Trustees or as officer or officers and not individually and that the obligations of such instrument are not binding upon any of them or the Shareholders individually but are binding only upon the assets and property of the Trust, and may contain such further recital as he or she or they may deem appropriate, but the omission thereof shall not operate to bind any Trustee or Trustees or officer or officers or Shareholder or Shareholders individually. Trustee's Good Faith Action, Expert Advice, No Bond or Surety Section 2. The exercise by the Trustees of their powers and discretion hereunder shall be binding upon everyone interested. A Trustee shall be liable for his or her own wilful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of the office of Trustee, and for nothing else, and shall not be liable for errors of judgment or mistakes of fact or law. The Trustees may take advice of counsel or other experts with respect to the meaning and operation of this Declaration of Trust, and shall be under no liability for any act or omission in accordance with such advice or for failing to follow such advice. Except as may be required by applicable law, including, without limitation, the 1940 Act, the Trustees shall not be required to give any bond as such, nor any surety if a bond is required. Liability of Third Persons Dealing with Trustees Section 3. No person dealing with the Trustees shall be bound to make any inquiry concerning the validity of any transaction made or to be made by the Trustees or to see to the application of any payments made or property transferred to the Trust or upon its order. Duration and Termination of Trust Section 4. Unless terminated as provided herein, the Trust shall continue without limitation of time. The Trust may be terminated at any time by the vote of Shareholders holding at least a majority of the Shares of each series entitled to vote or by the Trustees by written notice to the Shareholders. Any series of Shares may be terminated at any time by vote of Shareholders holding at least a majority of the Shares of such series entitled to vote or by the Trustees by written notice to the Shareholders of such series. Upon termination of the Trust or of any one or more series of Shares, after paying or otherwise providing for all charges, taxes, expenses and liabilities, whether due or accrued or anticipated, of the Trust or of the particular series as may be determined by the Trustees, the Trust shall, in accordance with such procedures as the Trustees consider appropriate, reduce the remaining assets to distributable form in cash or shares or other securities, or any combination thereof, and distribute the proceeds to the Shareholders of the series involved, ratably according to the number of Shares of such series held by the several Shareholders of such series on the date of termination. Filing of Copies, References, Headings -17- 18 Section 5. The original or a copy of this instrument and of each amendment hereto shall be kept at the office of the Trust where it may be inspected by any Shareholder. A copy of this instrument and of each amendment hereto shall be filed by the Trust with the Secretary of The Commonwealth of Massachusetts and with the Boston City Clerk, as well as any other governmental office where such filing may from time to time be required. Anyone dealing with the Trust may rely on a certificate by an officer of the Trust as to whether or not any such amendments have been made and as to any matters in connection with the Trust hereunder, and, with the same effect as if it were the original, may rely on a copy certified by an officer of the Trust to be a copy of this instrument or of any such amendments. In this instrument and in any such amendment, references to this instrument, and all expressions like "herein", "hereof" and "hereunder" shall be deemed to refer to this instrument as amended or affected by any such amendments. Headings are placed herein for convenience of reference only and shall not be taken as a part hereof or control or affect the meaning, construction or effect of this instrument. This instrument may be executed in any number of counterparts each of which shall be deemed an original. Applicable Law Section 6. This Declaration of Trust is made in The Commonwealth of Massachusetts, and it is created under and is to be governed by and construed and administered according to the laws of said Commonwealth. The Trust shall be of the type commonly called a Massachusetts business trust, and without limiting the provisions hereof, the Trust may exercise all powers which are ordinarily exercised by such a trust. Amendments Section 7. This Declaration of Trust may be amended at any time by an instrument in writing signed by a majority of the then Trustees when authorized to do so by vote of Shareholders holding a majority of the Shares of each series entitled to vote, except that an amendment which shall affect the holders of one or more series of Shares but not the holders of all outstanding series shall be authorized by vote of the Shareholders holding a majority of the Shares entitled to vote of each series affected and no vote of Shareholders of a series not affected shall be required. Amendments having the purpose of changing the name of the Trust, of establishing, changing, or eliminating the par value of the Shares or of supplying any omission, curing any ambiguity or curing, correcting or supplementing any defective or inconsistent provision contained herein shall not require authorization by Shareholder vote. -18- 19 IN WITNESS WHEREOF, the undersigned have executed this Amended and Restated Agreement and Declaration of Trust as Trustee and not individually, as of the 9th day of May, 1995. /s/ Charles R. Schwab - ------------------------- Charles R. Schwab Trustee /s/ Elizabeth G. Sawi - ------------------------- Elizabeth G. Sawi Trustee /s/ Donald F. Dorward - ------------------------- Donald F. Dorward Trustee /s/ Robert G. Holmes - ------------------------- Robert G. Holmes Trustee /s/ Donald R. Stephens - ------------------------- Donald R. Stephens Trustee /s/ Michael W. Wilsey - ------------------------- Michael W. Wilsey Trustee /s/ William J. Klipp - ------------------------- William J. Klipp Trustee -19- 20 COUNTY OF SAN FRANCISCO : : ss STATE OF CALIFORNIA : On this 9th day of May, 1995, Charles R. Schwab, Elizabeth G. Sawi, Donald F. Dorward, Robert G. Holmes, Donald R. Stephens, Michael W. Wilsey, and William J. Klipp, known to me and known to be the individuals described herein and who executed the foregoing instrument, before me and acknowledged the foregoing instrument to be their free act and deed. /s/ Sebastian Chanler von Nagel ------------------------------- Notary Public [Notary's Seal] My Commission Expires: April 10, 1999 -------------- Address of the Trustees: Charles R. Schwab Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, California 94104 Elizabeth G. Sawi Charles Schwab & Co., Inc. 101 Montgomery Street, 101-27 San Francisco, CA 94104 Robert G. Holmes Semloh Financial, Inc. 60 Melody Lane, Building H Post Office Box 719 Orinda, California 94563 Donald F. Dorward Dorward & Associates 150 Grand Avenue, 2nd Floor Oakland, CA 94612 -20- 21 Donald R. Stephens D.R. Stephens & Co. 500 Sansome Street Suite 600 San Francisco, California 94111 Michael W. Wilsey Wilsey, Bennett Company 2351 Powell Street 5th Floor San Francisco, California 94133 William J. Klipp Charles Schwab & Co., Inc. 101 Montgomery Street, 101-27 San Francisco, CA 94104 Address of the Trust: 101 Montgomery Street Suite 1M-19 San Francisco, CA 94101 Resident Agent: CT Corporation System 2 Oliver Street Boston, MA 02109 -21- EX-5.(E) 3 FORM OF SCHEDULE A TO THE INVEST. ADVISORY AGREE. 1 EXHIBIT 5(e) FORM OF SCHEDULE A INVESTMENT ADVISORY AGREEMENT
FUND FUND EFFECTIVE DATE - ---- ------------------- Schwab California Municipal Money Fund November 5, 1990 (formerly Schwab California Tax-Exempt Money Fund) Schwab U.S. Treasury Money Fund November 5, 1991 Schwab Value Advantage Money Fund February 7, 1992 Schwab Institutional Advantage Money Fund November 26, 1993 Schwab Retirement Money Fund November 26, 1993 Schwab New York Municipal Money Fund November 10, 1994 (formerly Schwab New York Tax-Exempt Money Fund) Schwab New Jersey Municipal Money Fund January 20, 1998 Schwab Pennsylvania Municipal Money Fund January 20, 1998 Schwab Florida Municipal Money Fund February 16, 1998
THE CHARLES SCHWAB FAMILY OF FUNDS By: __________________________________ Name: William J. Klipp Title: Executive Vice President and Chief Operating Officer CHARLES SCHWAB & CO., INC. By: __________________________________ Name: Colleen M. Hummer Title: Senior Vice President EX-5.(F) 4 SCHEDULE A TO THE INVEST. ADVISORY AGREE. 1 EXHIBIT 5(f) SCHEDULE A INVESTMENT ADVISORY AGREEMENT
FUND FUND EFFECTIVE DATE - ---- ------------------- Schwab California Municipal Money Fund November 5, 1990 (formerly Schwab California Tax-Exempt Money Fund) Schwab U.S. Treasury Money Fund November 5, 1991 Schwab Value Advantage Money Fund February 7, 1992 Schwab Institutional Advantage Money Fund November 26, 1993 Schwab Retirement Money Fund November 26, 1993 Schwab New York Municipal Money Fund November 10, 1994 (formerly Schwab New York Tax-Exempt Money Fund) Schwab New Jersey Municipal Money Fund January 20, 1998 Schwab Pennsylvania Municipal Money Fund January 20, 1998
THE CHARLES SCHWAB FAMILY OF FUNDS By: /s/ William J. Klipp ---------------------------------- Name: William J. Klipp Title: Executive Vice President and Chief Operating Officer CHARLES SCHWAB & CO., INC. By: /s/ Colleen M. Hummer ---------------------------------- Name: Colleen M. Hummer Title: Senior Vice President EX-5.(I) 5 SCHEDULE D TO THE INVEST. ADVISORY AGREE. FEES 1 EXHIBIT 5(i) SCHEDULE D INVESTMENT ADVISORY AGREEMENT FEES THE FEES LISTED BELOW ARE FOR SERVICES PROVIDED UNDER THIS AGREEMENT AND ARE TO BE ACCRUED DAILY AND PAID MONTHLY IN ARREARS: FUND DATE - ---- ---- SCHWAB CALIFORNIA MUNICIPAL MONEY FUND November 5, 1990 Forty-six one-hundredths of one percent (.46%) of the Schwab California Municipal Money Fund's average daily net assets not in excess of $1 billion; forty-one one-hundredths of one percent (.41%) of such net assets over $1 billion but not in excess of $2 billion; and forty one-hundredths of one percent (.40%) of such net assets over $2 billion. SCHWAB U.S. TREASURY MONEY FUND November 5, 1991 Forty-six one-hundredths of one percent (.46%) of the Schwab U.S. Treasury Money Fund's average daily net assets not in excess of $1 billion; forty-one one-hundredths of one percent (.41%) of such net assets over $1 billion but not in excess of $2 billion; and forty one-hundredths of one percent (.40%) of such net assets over $2 billion. SCHWAB VALUE ADVANTAGE MONEY FUND February 7, 1992 Forty-six one-hundredths of one percent (.46%) of the Schwab Value Advantage Money Fund's average daily net assets not in excess of $1 billion; forty-five one-hundredths of one percent (.45%) of such net assets over $1 billion but not in excess of $3 billion; forty one-hundredths of one percent (.40%) of such net assets over $3 billion but not in excess of $10 billion; thirty-seven one-hundredths of one percent (.37%) of such net assets over $10 billion but not in excess of $20 billion; and thirty-four one-hundredths of one percent (.34%) of such net assets over $20 billion. SCHWAB INSTITUTIONAL ADVANTAGE MONEY FUND November 26, 1993 Forty-six one-hundredths of one percent (.46%) of the Schwab Institutional Advantage Money Fund's average daily net assets not in excess of $1 billion; forty-five one-hundredths of one percent (.45%) of such net assets over $1 billion but not in excess of $3 billion; forty one-hundredths of one percent (.40%) of such net assets over $3 billion but not in excess of $10 billion; thirty-seven one-hundredths of one percent (.37%) of such net assets over $10 billion but not in excess of $20 billion; and thirty-four one-hundredths of one percent (.34%) of such net assets over $20 billion. SCHWAB RETIREMENT MONEY FUND November 26, 1993 Forty-six one-hundredths of one percent (.46%) of the Schwab Retirement 2 Money Fund's average daily net assets not in excess of $1 billion; forty-five one-hundredths of one percent (.45%) of such net assets over $1 billion but not in excess of $3 billion; forty one-hundredths of one percent (.40%) of such net assets over $3 billion but not in excess of $10 billion; thirty-seven one-hundredths of one percent (.37%) of such net assets over $10 billion but not in excess of $20 billion; and thirty-four one-hundredths of one percent (.34%) of such net assets over $20 billion. SCHWAB NEW YORK MUNICIPAL MONEY FUND November 10, 1994 Forty-six one-hundredths of one percent (.46%) of the Schwab New York Municipal Money Fund's average daily net assets not in excess of $1 billion; forty-one one-hundredths of one percent (.41%) of such net assets over $1 billion but not in excess of $2 billion; and forty one-hundredths of one percent (.40%) of such net assets over $2 billion. SCHWAB NEW JERSEY MUNICIPAL MONEY FUND January 20, 1998 Forty-six one-hundredths of one percent (.46%) of the Schwab New Jersey Municipal Money Fund's average daily net assets not in excess of $1 billion; forty-one one-hundredths of one percent (.41%) of such net assets over $1 billion but not in excess of $2 billion; and forty one-hundredths of one percent (.40%) of such net assets over $2 billion. SCHWAB PENNSYLVANIA MUNICIPAL MONEY FUND January 20, 1998 Forty-six one-hundredths of one percent (.46%) of the Schwab Pennsylvania Municipal Money Fund's average daily net assets not in excess of $1 billion; forty-one one-hundredths of one percent (.41%) of such net assets over $1 billion but not in excess of $2 billion; and forty one-hundredths of one percent (.40%) of such net assets over $2 billion. THE CHARLES SCHWAB FAMILY OF FUNDS By: /s/ William J. Klipp ---------------------------------- Name: William J. Klipp Title: Executive Vice President and Chief Operating Officer CHARLES SCHWAB & CO., INC. By: /s/ Colleen M. Hummer ---------------------------------- Name: Colleen M. Hummer Title: Senior Vice President EX-5.(J) 6 FORM OF SCHEDUEL D TO THE INVEST. ADVISORY AGREE. 1 EXHIBIT 5(j) FORM OF SCHEDULE D INVESTMENT ADVISORY AGREEMENT FEES THE FEES LISTED BELOW ARE FOR SERVICES PROVIDED UNDER THIS AGREEMENT AND ARE TO BE ACCRUED DAILY AND PAID MONTHLY IN ARREARS: FUND DATE - ---- ---- SCHWAB CALIFORNIA MUNICIPAL MONEY FUND November 5, 1990 Forty-six one-hundredths of one percent (.46%) of the Schwab California Municipal Money Fund's average daily net assets not in excess of $1 billion; forty-one one-hundredths of one percent (.41%) of such net assets over $1 billion but not in excess of $2 billion; and forty one-hundredths of one percent (.40%) of such net assets over $2 billion. SCHWAB U.S. TREASURY MONEY FUND November 5, 1991 Forty-six one-hundredths of one percent (.46%) of the Schwab U.S. Treasury Money Fund's average daily net assets not in excess of $1 billion; forty-one one-hundredths of one percent (.41%) of such net assets over $1 billion but not in excess of $2 billion; and forty one-hundredths of one percent (.40%) of such net assets over $2 billion. SCHWAB VALUE ADVANTAGE MONEY FUND February 7, 1992 Forty-six one-hundredths of one percent (.46%) of the Schwab Value Advantage Money Fund's average daily net assets not in excess of $1 billion; forty-five one-hundredths of one percent (.45%) of such net assets over $1 billion but not in excess of $3 billion; forty one-hundredths of one percent (.40%) of such net assets over $3 billion but not in excess of $10 billion; thirty-seven one-hundredths of one percent (.37%) of such net assets over $10 billion but not in excess of $20 billion; and thirty-four one-hundredths of one percent (.34%) of such net assets over $20 billion. SCHWAB INSTITUTIONAL ADVANTAGE MONEY FUND November 26, 1993 Forty-six one-hundredths of one percent (.46%) of the Schwab Institutional Advantage Money Fund's average daily net assets not in excess of $1 billion; forty-five one-hundredths of one percent (.45%) of such net assets over $1 billion but not in excess of $3 billion; forty one-hundredths of one percent (.40%) of such net assets over $3 billion but not in excess of $10 billion; thirty-seven one-hundredths of one percent (.37%) of such net assets over $10 billion but not in excess of $20 billion; and thirty-four one-hundredths of one percent (.34%) of such net assets over $20 billion. SCHWAB RETIREMENT MONEY FUND November 26, 1993 Forty-six one-hundredths of one percent (.46%) of the Schwab Retirement Money Fund's average daily net assets not in excess of $1 billion; forty-five one-hundredths of one percent (.45%) of such net assets over $1 billion but not in excess of $3 billion; forty one-hundredths of one percent (.40%) of such net assets over $3 billion but not in excess of $10 billion; thirty-seven one-hundredths of one percent (.37%) of such net assets over $10 billion but not in 2 excess of $20 billion; and thirty-four one-hundredths of one percent (.34%) of such net assets over $20 billion. SCHWAB NEW YORK MUNICIPAL MONEY FUND November 10, 1994 Forty-six one-hundredths of one percent (.46%) of the Schwab New York Municipal Money Fund's average daily net assets not in excess of $1 billion; forty-one one-hundredths of one percent (.41%) of such net assets over $1 billion but not in excess of $2 billion; and forty one-hundredths of one percent (.40%) of such net assets over $2 billion. SCHWAB NEW JERSEY MUNICIPAL MONEY FUND January 20, 1998 Forty-six one-hundredths of one percent (.46%) of the Schwab New Jersey Municipal Money Fund's average daily net assets not in excess of $1 billion; forty-one one-hundredths of one percent (.41%) of such net assets over $1 billion but not in excess of $2 billion; and forty one-hundredths of one percent (.40%) of such net assets over $2 billion. SCHWAB PENNSYLVANIA MUNICIPAL MONEY FUND January 20, 1998 Forty-six one-hundredths of one percent (.46%) of the Schwab Pennsylvania Municipal Money Fund's average daily net assets not in excess of $1 billion; forty-one one-hundredths of one percent (.41%) of such net assets over $1 billion but not in excess of $2 billion; and forty one-hundredths of one percent (.40%) of such net assets over $2 billion. SCHWAB FLORIDA MUNICIPAL MONEY FUND February 16, 1998 Forty-six one-hundredths of one percent (.46%) of the Schwab Florida Municipal Money Fund's average daily net assets not in excess of $1 billion; forty-one one-hundredths of one percent (.41%) of such net assets over $1 billion but not in excess of $2 billion; and forty one-hundredths of one percent (.40%) of such net assets over $2 billion. THE CHARLES SCHWAB FAMILY OF FUNDS By: __________________________________ Name: William J. Klipp Title: Executive Vice President and Chief Operating Officer CHARLES SCHWAB & CO., INC. By: __________________________________ Name: Colleen M. Hummer Title: Senior Vice President EX-6.(A) 7 DISTRIBUTION AGREEMENT 1 EXHIBIT 6(a) DISTRIBUTION AGREEMENT June 15, 1994 Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, California 94104 Ladies and Gentlemen: This is to confirm that, in consideration of the agreements hereinafter contained, the undersigned, The Charles Schwab Family of Funds (the "Trust"), a Massachusetts business trust, has agreed that Charles Schwab & Co., Inc. (the "Distributor") shall be, for the period of this Agreement, the distributor of the units of beneficial interest of the investment portfolios of the Trust identified on Schedule A hereto (each a "Fund", and collectively, the "Funds"). Such units of beneficial interest are hereinafter called "Shares." 1. Services as Distributor. 1.1. Distributor will act as agent for the distribution of the Shares covered by the registration statement and prospectus of the Trust in effect under the Securities Act of 1933, as amended. 1.2. Distributor agrees to use appropriate efforts to solicit orders for the sale of the Shares and will undertake such advertising and promotion as it believes reasonable in connection with such solicitation. The Trust understands that Distributor may, in the future, be the distributor of the shares of several investment companies or series (together, "Companies"), including Companies having investment objectives similar to those of the Trust. The Trust further understands that investors and potential investors in the Trust may invest in shares of such other Companies. The Trust agrees that Distributor's duties to such Companies shall not be deemed to be in conflict with its duties to the Trust under this paragraph 1.2. Distributor shall, at its own expense, finance appropriate activities which it deems reasonable which are primarily intended to result in the sale of the Shares, including, but not limited to, advertising, compensation of underwriters, dealers and sales personnel, the printing and mailing of prospectuses to other than current Shareholders, and the printing and mailing of sales literature. 1.3. All activities by Distributor and its partners, agents, and employees as distributor of the Shares shall comply with all applicable laws, rules and regulations, including, 2 without limitation, all rules and regulations made or adopted pursuant to the Investment Company Act of 1940 by the Securities and Exchange Commission or any securities association registered under the Securities Exchange Act of 1934. 1.4. Distributor will provide one or more persons, during normal business hours, to respond to telephone questions with respect to the Trust. 1.5. Distributor will transmit any orders received by it for purchase or redemption of the Shares to the transfer agent and custodian for the Funds. 1.6. Whenever in their judgment such action is warranted by unusual market, economic or political conditions, or by abnormal circumstances of any kind, the Trust's officers may decline to accept any orders for, or make any sales of the Shares until such time as those officers deem it advisable to accept such orders and to make such sales. 1.7. Distributor will act only on its own behalf as principal if it chooses to enter into selling agreements with selected dealers or others. 1.8. The Trust agrees at its own expense to execute any and all documents and to furnish any and all information and otherwise to take all actions that may be reasonably necessary in connection with the qualification of the Shares for sale in such states as Distributor may designate. 1.9. The Trust shall furnish from time to time, for use in connection with the sale of the Shares, such information with respect to the Funds and the Shares as Distributor may reasonably request; and the Trust warrants that the statements contained in any such information shall fairly show or represent what they purport to show or represent. The Trust shall also furnish Distributor upon request with: (a) unaudited semi-annual statements of the Funds' books and accounts prepared by the Trust, (b) quarterly earnings statements prepared by the Trust, (c) a monthly itemized list of the securities in the Funds, (d) monthly balance sheets as soon as practicable after the end of each month, and (e) from time to time such additional information regarding the financial condition of the Funds as Distributor may reasonably request. 1.10. The Trust represents to Distributor that all registration statements and prospectuses filed by the Trust with the Securities and Exchange Commission under the Securities Act of 1933, as amended, with respect to the Shares have been carefully prepared in conformity with the requirements of said Act and rules and regulations of the Securities and Exchange Commission thereunder. As used in this agreement the terms -2- 3 "registration statement" and "prospectus" shall mean any registration statement and any prospectus and Statement of Additional Information relating to the Funds filed with the Securities and Exchange Commission and any amendments and supplements thereto which at any time shall have been filed with the same Commission. The Trust represents and warrants to Distributor that any registration statement and prospectus, when such registration statement becomes effective, will contain all statements required to be stated therein in conformity with said Act and the rules and regulations of said Commission; that all statements of fact contained in any such registration statement and prospectus will be true and correct when such registration statement becomes effective; and that neither any registration statement nor any prospectus when such registration statement becomes effective will include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading to a purchaser of the Shares. The Trust may but shall not be obligated to propose from time to time such amendment or amendments to any registration statement and such supplement or supplements to any prospectus as, in the light of future developments, may, in the opinion of the Trust's counsel, be necessary or advisable. If the Trust shall not propose such amendment or amendments and/or supplement or supplements within fifteen days after receipt by the Trust of a written request from Distributor to do so, Distributor may, at its option, terminate this agreement. The Trust shall not file any amendment to any registration statement or supplement to any prospectus without giving Distributor reasonable notice thereof in advance; provided, however, that nothing contained in this agreement shall in any way limit the Trust's right to file at any time such amendments to any registration statement and/or supplements to any prospectus, of whatever character, as the Trust may deem advisable, such right being in all respects absolute and unconditional. 1.11. The Trust authorizes Distributor and dealers to use any prospectus in the form furnished from time to time in connection with the sale of the Shares. The Trust agrees to indemnify, defend and hold Distributor, its directors, officers and employees, and any person who controls Distributor within the meaning of Section 15 of the Securities Act of 1933, as amended, free and harmless from and against any and all claims, demands, liabilities and expenses (including the cost of investigating or defending such claims, demands or liabilities and any counsel fees incurred in connection therewith) which Distributor, its partners and employees, or any such controlling person, may incur under the Securities Act of 1933, as amended, or under common law or otherwise, arising out of or based upon any untrue statement, or alleged untrue statement, of a material fact contained in any registration statement or any prospectus or arising out of or based upon any omission, or alleged omission, to state a material -3- 4 fact required to be stated in either any registration statement or any prospectus or necessary to make the statements in either thereof not misleading; provided, however, that the Trust's agreement to indemnify Distributor, its directors, officers or employees, and any such controlling person shall not be deemed to cover any claims, demands, liabilities or expenses arising out of any statements or representations as are contained in any prospectus and in such financial and other statements as are furnished in writing to the Trust by Distributor and used in the answers to the registration statement or in the corresponding statements made in the prospectus, or arising out of or based upon any omission or alleged omission to state a material fact in connection with the giving of such information required to be stated in such answers or necessary to make the answers not misleading; and further provided that the Trust's agreement to indemnify Distributor and the Trust's representations and warranties hereinbefore set forth in paragraph 1.10 shall not be deemed to cover any liability to the Trust or its Shareholders to which Distributor would otherwise be subject by reason of willful misfeasance, bad faith or gross negligence in the performance of its duties, or by reason of Distributor's reckless disregard of its obligations and duties under this agreement. The Trust's agreement to indemnify Distributor, its partners and employees, and any such controlling person, as aforesaid, is expressly conditioned upon the Trust's being notified of any action brought against Distributor, its directors, officers or employees, or any such controlling person, such notification to be given by letter or by telegram addressed to the Trust at its principal office in San Francisco, California and sent to the Trust by the person against whom such action is brought, within 10 days after the summons or other first legal process shall have been served. The failure to so notify the Trust of any such action shall not relieve the Trust from any liability which the Trust may have to the person against whom such action is brought by reason of any such untrue, or allegedly untrue, statement or omission, or alleged omission, otherwise than on account of the Trust's indemnity agreement contained in this paragraph 1.11. The Trust will be entitled to assume the defense of any suit brought to enforce any such claim, demand or liability, but, in such case, such defense shall be conducted by counsel of good standing chosen by the Trust and approved by Distributor, which approval shall not be unreasonably withheld. In the event the Trust elects to assume the defense of any such suit and retain counsel of good standing approved by Distributor, the defendant or defendants in such suit shall bear the fees and expenses of any additional counsel retained by any of them; but in case the Trust does not elect to assume the defense of any such suit, or in case Distributor reasonably does not approve of counsel chosen by the Trust, the Trust will reimburse Distributor, its directors, officers and employees, or the controlling person or persons named as defendant or defendants in such suit, for the fees and expenses of any counsel retained by Distributor or them. The -4- 5 Trust's indemnification agreement contained in this paragraph 1.11 and the Trust's representations and warranties in this agreement shall remain operative and in full force and effect regardless of any investigation made by or on behalf of Distributor, its partners and employees, or any controlling person, and shall survive the delivery of any Shares. This agreement of indemnity will inure exclusively to Distributor's benefit, to the benefit of its several partners and employees, and their respective estates, and to the benefit of the controlling persons and their successors. The Trust agrees promptly to notify Distributor of the commencement of any litigation or proceedings against the Trust or any of its officers or Trustees in connection with the issue and sale of any Shares. 1.12. Distributor agrees to indemnify, defend and hold the Trust, its several officers and Trustees and any person who controls the Trust within the meaning of Section 15 of the Securities Act of 1933, as amended, free and harmless from and against any and all claims, demands, liabilities and expenses (including the costs of investigating or defending such claims, demands or liabilities and any counsel fees incurred in connection therewith) which the Trust, its officers or Trustees or any such controlling person, may incur under the Securities Act of 1933, as amended, or under common law or otherwise, but only to the extent that such liability or expense incurred by the Trust, its officers or Trustees or such controlling person resulting from such claims or demands, shall arise out of or be based upon any untrue, or alleged untrue, statement of a material fact contained in information furnished in writing by Distributor to the Trust and used in the answers to any of the items of the registration statement or in the corresponding statements made in the prospectus, or shall arise out of or be based upon any omission, or alleged omission, to state a material fact in connection with such information furnished in writing by Distributor to the Trust required to be stated in such answers or necessary to make such information not misleading. Distributor's agreement to indemnify the Trust, its officers and Trustees, and any such controlling person, as aforesaid, is expressly conditioned upon Distributor's being notified of any action brought against the Trust, its officers or Trustees, or any such controlling person, such notification to be given by letter or telegram addressed to Distributor at its principal office in San Francisco, California and sent to Distributor by the person against whom such action is brought, within 10 days after the summons or other first legal process shall have been served. Distributor shall have the right of first control of the defense of such action, with counsel of its own choosing, satisfactory to the Trust, if such action is based solely upon such alleged misstatement or omission on Distributor's part, and in any other event the Trust, its officers or Trustees or such controlling person shall each have the right to participate in the defense or -5- 6 preparation of the defense of any such action. The failure to so notify Distributor of any such action shall not relieve Distributor from any liability which Distributor may have to the Trust, its officers or Trustees, or to such controlling person by reason of any such untrue or alleged untrue statement, or omission or alleged omission, otherwise than on account of Distributor's indemnity agreement contained in this paragraph 1.12. 1.13. No Shares shall be offered by either Distributor or the Trust under any of the provisions of this agreement and no orders for the purchase or sale of Shares hereunder shall be accepted by the Trust if and so long as the effectiveness of the registration statement then in effect or any necessary amendments thereto shall be suspended under any of the provisions of the Securities Act of 1933, as amended, or if and so long as a current prospectus as required by Section 10(b)(2) of said Act, as amended, is not on file with the Securities and Exchange Commission; provided, however, that nothing contained in this paragraph 1.13 shall in any way restrict or have an application to or bearing upon the Trust's obligation to repurchase Shares from any Shareholder in accordance with the provisions of the Trust's prospectus, Declaration of Trust, or By-laws. 1.14. The Trust agrees to advise Distributor as soon as reasonably practical by a notice in writing delivered to Distributor or its counsel: (a) of any request by the Securities and Exchange Commission for amendments to the registration statement or prospectus then in effect or for additional information; (b) in the event of the issuance by the Securities and Exchange Commission of any stop order suspending the effectiveness of the registration statement or prospectus then in effect or the initiation by service of process on the Trust of any proceeding for that purpose; (c) of the happening of any event that makes untrue any statement of a material fact made in the registration statement or prospectus then in effect or which requires the making of a change in such registration statement or prospectus in order to make the statements therein not misleading; and (d) of all action of the Securities and Exchange Commission with respect to any amendment to any registration statement or prospectus which may from time to time be filed with the Securities and Exchange Commission. For purposes of this section, informal requests by or acts of the Staff of the Securities and Exchange Commission shall not be deemed actions of or requests by the Securities and Exchange -6- 7 Commission. 1.15. Distributor agrees on behalf of itself and its directors, officers and employees to treat confidentially and as proprietary information of the Trust all records and other information relative to the Trust and its prior, present or potential Shareholders, and not to use such records and information for any purpose other than performance of its responsibilities and duties hereunder, except after prior notification to and approval in writing by the Trust, which approval shall not be unreasonably withheld and may not be withheld where Distributor may be exposed to civil or criminal contempt proceedings for failure to comply, when requested to divulge such information by duly constituted authorities, or when so requested by the Trust. 1.16. This agreement shall be governed by the laws of the Commonwealth of Massachusetts. 2. Issuance of Shares. The Trust reserves the right to issue, transfer or sell Shares of the Funds at net asset value (a) in connection with the merger or consolidation of the Trust or the Funds with any other investment company or the acquisition by the Trust or the Funds of all or substantially all of the assets or of the outstanding Shares of any other investment company; (b) in connection with a pro rata distribution directly to the holders of Shares of a Fund in the nature of a stock dividend or split; (c) upon the exercise of subscription rights granted to the holders of Shares of a Fund on a pro rata basis; (d) in connection with the issuance of Shares of a Fund pursuant to any exchange and reinvestment privileges described in any then-current prospectus of a Fund; and (e) otherwise in accordance with any then-current prospectus of the Funds. 3. Term and Matters Relating to the Trust as a Massachusetts Business Trust. This agreement shall become effective as to the Trust on December 15, 1989, and, unless sooner terminated as provided herein, shall continue until two years, and thereafter shall continue automatically for successive one-year periods ending on December 15 of each successive year; provided, however, that such continuance is specifically approved at least annually by (i) the Trust's Board of Trustees or (ii) by "vote of a majority of the outstanding Shares" (as defined below) of the Trust, and provided further, that in either event the continuance is also approved at least annually by the majority of the Trust's Trustees who are not parties to the agreement or interested persons (as defined in the 1940 Act) of any party to this agreement, by vote cast in person at a meeting called for the purpose of voting on such -7- 8 approval. This agreement is terminable on not less than sixty days' notice by the Trust's Board of Trustees, by "vote of a majority of the outstanding Shares" (as defined below) of the Trust or by Distributor. This agreement will also terminate automatically in the event of its assignment (as defined in the 1940 Act). For purposes of this Agreement, the term "vote of a majority of the outstanding Shares" shall mean the approval, at a meeting of Shareholders duly called, of the lesser of (i) the holders of 67% or more of the votes present at any such meeting, if the holders of more than 50% of the outstanding votes are present or represented by proxy thereat; or (ii) the holders of more than 50% of the outstanding votes. The names "The Charles Schwab Family of Funds" and "Trustees of Charles Schwab Family of Funds" refer respectively to the Trust created and the Trustees, as trustees but not individually or personally, acting from time to time under a Declaration of Trust dated as of October 20, 1989 to which reference is hereby made and a copy of which is on file at the office of the Secretary of State of The Commonwealth of Massachusetts and elsewhere as required by law, and to any and all amendments thereto so filed or hereafter filed. The obligations of "The Charles Schwab Family of Funds" entered into in the name or on behalf thereof by any of the Trustees, representatives or agents are made not individually, but in such capacities, and are not binding upon any of the Trustees, Shareholders or representatives of the Trust personally, but bind only the assets of the Trust, and all persons dealing with any series of Shares of the Trust must look solely to the assets of the Trust belonging to such series for the enforcement of any claims against the Trust. 4. Severability. If any provision of this Agreement is found by a court or agency of competent jurisdiction to be in violation of any state or federal law, rule or regulation, then the invalidity of such provision shall not affect the enforceability or validity of the remaining provisions. -8- 9 Please confirm that the foregoing is in accordance with your understanding by indicating your acceptance hereof at the place below indicated, whereupon it shall become a binding agreement between us. Yours very truly, THE CHARLES SCHWAB FAMILY OF FUNDS By: /s/ Elizabeth G. Sawi ---------------------- Name: Elizabeth G. Sawi Title: President Accepted: CHARLES SCHWAB & CO., INC. By: /s/ William J. Klipp ----------------------------- Name: William J. Klipp Title: Senior Vice President - SchwabFunds -9- EX-6.(B) 8 FORM OF SCHEDULE A TO THE DISTRIBUTION AGREEMENT 1 EXHIBIT 6(b) FORM OF SCHEDULE A TO THE DISTRIBUTION AGREEMENT BETWEEN THE CHARLES SCHWAB FAMILY OF FUNDS AND CHARLES SCHWAB & CO., INC.
FUND EFFECTIVE DATE - ---- -------------- Schwab Money Market Fund December 15, 1989 Schwab Government Money Fund December 15, 1989 Schwab Municipal Money Fund December 15, 1989 Schwab California Municipal Money Fund November 5, 1990 (formerly Schwab California Tax-Exempt Money Fund) Schwab U.S. Treasury Money Fund November 5, 1991 Schwab Value Advantage Money Fund February 7, 1992 Schwab Institutional Advantage Money Fund November 26, 1993 Schwab Retirement Money Fund November 26, 1993 Schwab New York Municipal Money Fund November 10, 1994 (formerly Schwab New York Tax-Exempt Money Fund) Schwab New Jersey Municipal Money Fund January 20, 1998 Schwab Pennsylvania Municipal Money Fund January 20, 1998 Schwab Florida Municipal Money Fund February 16, 1998
THE CHARLES SCHWAB FAMILY OF FUNDS By: ________________________ Name: William J. Klipp Title: Executive Vice President and Chief Executive CHARLES SCHWAB & CO., INC. By: ________________________ Name: Colleen M. Hummer Title: Senior Vice President EX-6.(C) 9 SCHEDULE A TO THE DISTRIBUTION AGREEMENT 1 EXHIBIT 6(c) SCHEDULE A TO THE DISTRIBUTION AGREEMENT BETWEEN THE CHARLES SCHWAB FAMILY OF FUNDS AND CHARLES SCHWAB & CO., INC.
FUND EFFECTIVE DATE - ---- -------------- Schwab Money Market Fund December 15, 1989 Schwab Government Money Fund December 15, 1989 Schwab Municipal Money Fund December 15, 1989 Schwab California Municipal Money Fund November 5, 1990 (formerly Schwab California Tax-Exempt Money Fund) Schwab U.S. Treasury Money Fund November 5, 1991 Schwab Value Advantage Money Fund February 7, 1992 Schwab Institutional Advantage Money Fund November 26, 1993 Schwab Retirement Money Fund November 26, 1993 Schwab New York Municipal Money Fund November 10, 1994 (formerly Schwab New York Tax-Exempt Money Fund) Schwab New Jersey Municipal Money Fund January 20, 1998 Schwab Pennsylvania Municipal Money Fund January 20, 1998
THE CHARLES SCHWAB FAMILY OF FUNDS By: /s/ William J. Klipp -------------------------------------------- Name: William J. Klipp Title: Executive Vice President and Chief Executive Officer CHARLES SCHWAB & CO., INC. By: /s/ Colleen M. Hummer -------------------------------------------- Name: Colleen M. Hummer Title: Senior Vice President EX-8.(A) 10 ACCOUNTING SERVICES AGREEMENT 1 EXHIBIT 8(a) ACCOUNTING SERVICES AGREEMENT TERMS AND CONDITIONS This Agreement is made as of April 8, 1991 by and between THE CHARLES SCHWAB FAMILY OF FUNDS (the "Fund"), a Massachusetts business trust, and PROVIDENT FINANCIAL PROCESSING CORPORATION ("PFPC"), a Delaware corporation which is an indirect wholly-owned subsidiary of PNC Financial Corp. The Fund is registered as a open-end, diversified investment company under the Investment Company Act of 1940 (the "1940 Act"), as amended. The Fund wishes to retain PFPC to provide accounting services to the Fund's investment portfolios as listed on Schedule B attached ("Portfolio(s)") , and PFPC wishes to furnish such services. In consideration of the promises and mutual covenants herein contained, the parties agree as follows: 1. Definitions. (a) "Authorized Person." The term "Authorized Person" shall mean any officer of the Fund and any other person, who is duly authorized by the Fund's Governing Board, to give Oral and Written Instructions on behalf of the Fund. Such persons are listed in the Certificate attached hereto as the Authorized Persons Appendix to each Services Attachment to this, Agreement. If Provident provides more than one service hereunder, the Fund's designation of Authorized Persons may vary by service. (b) "Book-Entry System." The term "Book-Entry System" means Federal Reserve Treasury book-entry system for United States and federal agency securities, its 2 successor or successors, and its nominee or nominees and any book-entry system maintained by an exchange registered with the SEC under the 1934 Act. (c) "CFTC." The term "CFTC" shall mean the Commodities Futures Trading Commission. (d) "Governing Board." The Term "Governing Board" shall mean the Fund's Board of Directors if the Fund is a corporation or the Fund's Board of Trustees if the Fund is a trust, or, where duly authorized, a competent committee thereof. (e) "Oral Instructions." The term "Oral Instructions" shall mean oral instructions received by PFPC from an Authorized Person or from a person reasonably believed by PFPC to be an Authorized Person. (f) "Provident." The term "Provident" shall mean Provident National Bank or a subsidiary or affiliate of Provident National Bank. (g) "SEC." The term "SEC" shall mean the Securities and Exchange Commission. (h) "Securities and Commodities Laws." The terms the "1933 Act" shall mean the Securities Act of 1933, as amended, the "1934 Act" shall mean the Securities Exchange Act of 1934, as amended, the "1940 Act" shall mean the Investment Company Act 1940, as amended, and the "CEA" shall mean the Commodities Exchange Act, as amended. (i) "Services." The term "Services" shall mean the service provided to the Portfolios by PFPC. (j) "Shares." The terms "Shares" shall mean the shares of stock of any series or class of the Fund, or, where appropriate, units of beneficial interest in a trust where the Fund is organized as a Trust. 3 (k) "Property." The term Property shall mean: (i) any and all securities and other investment items which the Fund may from time to time deposit, or cause to be deposited, with Provident or which Provident may from time to time hold for the Fund; (ii) all income in respect of any of such securities or other investment items; (iii) all proceeds of the sale of any of such securities or investment items; and (iv) all proceeds of the sale of securities issued by the Fund, which are received by Provident from time to time, from or on behalf of the Fund. (l) "Written Instructions." The term "Written Instructions" shall mean written instructions signed by two Authorized Persons and received by PFPC. The instructions may be delivered by hand, mail, tested telegram, cable, telex or facsimile sending device. 2. Appointment. The Fund-hereby appoints PFPC to provide accounting services to the Portfolios in accordance with the terms set forth in this Agreement. PFPC accepts such appointment and agrees to furnish such services. The Fund may from time to time issue separate series or classes or classify and reclassify shares of such series or class. PFPC shall identify to each such series or class property belonging to such series or class and in such reports, confirmations and notices to the Fund called for under this Agreement shall identify the series or class to which such report, confirmation or notice pertains. 4 3. Delivery of Documents. The Fund has provided or, where applicable, will provide PFPC with the following: (a) certified or authenticated copies of the resolutions of the Fund's Governing Board, approving the appointment of Provident or its affiliates to provide services; (b) a copy of the Fund's most recent effective registration statement; (c) a copy of the Fund's advisory agreement or agreements; (d) a copy of the Fund's distribution agreement or agreements; (e) copies of any shareholder servicing agreements made in respect of the Fund; and (f) certified or authenticated copies of any and all amendments or supplements to the foregoing. 4. Compliance with Government rules and Regulations. PFPC undertakes to comply with all applicable requirements of the 1933 Act, the 1934 Act, the 1940 Act, and the CEA, and any laws, rules and regulations of governmental authorities having Jurisdiction with respect to all duties to be performed by PFPC hereunder. Except as specifically set forth herein, PFPC assumes no responsibility for such compliance by the Fund. 5. Instructions. Unless otherwise provided in this Agreement, PFPC shall act only upon Oral and Written Instructions. PFPC shall be entitled to rely upon any Oral and Written instructions it receives from an Authorized Person (or from a person reasonably believed by PFPC to be an Authorized 5 Person) pursuant to this Agreement. In the exercise of reasonable judgment, PFPC may assume that any Oral or Written Instruction received hereunder is not in any way inconsistent with the provisions of organizational documents or this Agreement or of any vote, resolution or proceeding of the Fund's Governing Board or of the Fund's shareholders. The Fund agrees to forward to PFPC Written Instructions confirming Oral Instructions so that PFPC receives the Written Instructions by the close of business on the same day that such Oral Instructions are received. The fact that such confirming written Instructions are not received by PFPC shall in no way invalidate the transactions or enforceability of the transactions authorized by the Oral Instructions. The Fund further agrees that PFPC shall incur no liability to the Fund solely by reason of acting upon Oral or Written instructions provided such instructions reasonably appear to have been received from an Authorized Person. 6. Right to Receive Advice. (a) Advice of the Fund. If PFPC is in doubt as to any action it should or should not take, PFPC may request directions or advice, including Oral or Written Instructions, from the Fund. (b) Advice of Counsel. If PFPC shall be in doubt as to any questions of law pertaining to any action it should or should not take, PFPC may request advice at its own cost form such counsel of its own choosing (who may be counsel for the Fund, the Fund's advisor or PFPC, at the option of PFPC). (c) Conflicting Advice. In the event of a conflict between directions, advice or Oral or Written Instructions Provident receives from the Fund, and the advice it receives from counsel, PFPC shall be entitled in good faith, to rely upon and follow the advice of counsel. 6 (d) Protection of PFPC. PFPC shall be protected in any action it takes or does not take in reliance upon directions, advice or Oral or Written Instructions it receives from the Fund or from counsel and which PFPC believes, in good faith, to be consistent with those directions, advice and Oral or Written Instructions. Nothing in this paragraph shall be construed so as to impose an obligation upon PFPC (i) to seek such directions, advice or Oral or Written Instructions, or (ii) to act in accordance with such directions, advice or Oral or Written Instructions unless, under the terms of other provisions of this Agreement, the same is a condition of PFPC's properly taking or not taking such action. 7. Records. The books and records pertaining to the Fund, which are in the possession of PFPC, shall be the property of the Fund. Such books and records shall be prepared and maintained as required by the 1940 Act and other applicable securities laws, rules and regulations. The Fund, or the Fund's Authorized Persons, shall have access to such books and records at all times during PFPC's normal business hours. Upon the reasonable request of the Fund, copies of any such books and records shall be provided by PFPC to the Fund or to an Authorized Person of the Fund, at the Fund's expense. PFPC shall keep the following records: (a) all books and records with respect to the Fund's books of account; (b) records of the Fund's securities transaction; (c) all other books and records as PFPC is required to maintain pursuant to Rule 3la-1 of the 1940 Act and as specifically set forth in Appendix A hereto. 7 8. Confidentiality, PFPC agrees to keep confidential all records of the Fund and information relative to the Fund and its shareholders (past, present and potential), unless the release of such records or information is otherwise consented to, in writing, by the Fund. The Fund agrees that such consent shall not be unreasonably withheld. The Fund further agrees that, should PFPC be required to provide such information or records to duly constituted authorities (who may institute civil or criminal contempt proceedings for failure to comply) , PFPC shall not be required to seek the Fund's prior written consent before disclosing such information, but shall instead notify an officer of the Fund and obtain the officer's oral consent, which consent shall be timely and shall not be unreasonably withheld. 9. Liaison with Accountants. PFPC shall act as liaison with the Fund's independent public accountants and shall provide account analyses, fiscal year summaries, and other audit-related schedules. PFPC shall take all reasonable action in the performance of its obligations under this Agreement to assure that the necessary information is made available to such accountants for the expression of their opinion, as such may be required by the Fund from time to time. 10. Disaster Recovery. PFPC shall enter into and shall maintain in effect with appropriate parties one or more agreements making reasonable provision of emergency use of electronic data processing equipment to the extent appropriate equipment is available. In the event of equipment failures, 8 PFPC shall, at no additional expense to the Fund, take reasonable steps to minimize service interruptions but shall have no liability with respect thereto. 11. Compensation. The fees for services rendered by PFPC during the term of this Agreement shall be paid by the Fund to PFPC as may be agreed to in writing by the Fund and PFPC from time to time. 12. Indemnification. The Fund agrees to indemnify and hold harmless PFPC and its nominees from all taxes, charges, expenses, assessments, claims and liabilities (including, without limitation, liabilities arising under the 1933 Act, the 1934 Act, the 1940 Act, the CEA, and any state and foreign securities and blue sky laws, and amendments thereto), and expenses, including (without limitation) reasonable attorneys' fees and disbursements, arising directly or indirectly from any action which PFPC takes or does not take (i) at the request or on the direction of or in reliance on the advice of the Fund or (ii) upon oral or Written Instructions. Neither PFPC nor any of its nominees, shall be indemnified against any liability to the Fund or to its shareholders (or any expenses incident to such liability) arising out of PFPC's own willful misfeasance, gross negligence or reckless disregard of its duties and obligations under this Agreement. 13. Responsibility of PFPC. PFPC shall be under no duty to take any action on behalf of the Fund except as specifically set forth herein or as may be specifically agreed to by PFPC, in writing. PFPC shall be obligated to exercise reasonable care and diligence in the performance of its duties hereunder, to act in good faith and to use its best efforts, within reasonable limits, in performing services 9 provided for under this Agreement. PFPC shall be responsible for damages arising out of its failure to perform its duties under this Agreement arising out of PFPC's gross negligence. Notwithstanding the foregoing, PFPC shall not be responsible for losses beyond its reasonable control, provided that PFPC has acted in accordance with the standard of care set forth above; and provided further that PFPC shall only be responsible for that portion of losses or damages suffered by the Fund that are attributable to the gross negligence of PFPC. Without limiting the generality of the foregoing or of any other provision of this Agreement, PFPC, in connection with its duties under this Agreement, shall not be liable for (a) the validity or invalidity or authority or lack thereof of any Oral or Written Instruction, notice or other instrument which conforms to the applicable requirements of this Agreement, and which PFPC reasonably believes to be genuine; or (b) delays or errors or loss of data occurring by reason of circumstances beyond PFPC's reasonable control, including acts of civil or military authority, national emergencies, labor difficulties, fire, flood or catastrophe, acts of God, insurrection, war, riots or failure of the mails, transportation, communication or power supply. 14. Description of Accounting Services. (a) Services on a Continuing Basis. PFPC will perform the following accounting functions if required: (i) Journalize each Portfolio's investment, capital share and income and expense activities; (ii) Verify investment buy/sell trade tickets when received from the Fund's investment advisor and transmit trades to the Fund's custodian for proper settlement; 10 (iii) Maintain individual ledgers for investment securities; (iv) Maintain historical tax lots for each security; (v) Reconcile cash and investment balances of the Fund with the custodian, and provide the Fund's investment advisor with the beginning cash balance available for investment purposes; (vi) Update the cash availability throughout the day as required by the Fund's advisor; (vii) Post to and prepare the Fund's Statement of Assets and Liabilities and the Statement of Operations; (viii) Calculate various contractual expenses (e.g., advisory and custody fees); (ix) Monitor the expense accruals and notify Fund management of any proposed adjustments; (x) Control all disbursements from the Fund and authorize such disbursements upon Written Instructions; (xi) Calculate capital gains and losses; (xii) Determine each Portfolio's net income; (xiii) Obtain security market quotes from independent pricing services approved by the Advisor, or if such quotes are unavailable, then obtain such prices from the Advisor, and in either case calculate the market value of each Portfolio's investments; (xiv) Transmit or mail a copy of the daily portfolio valuation to the Advisor; (xv) Compute the net asset value of each class or series of shares in a Portfolio; (xvi) As appropriate, Compute each Portfolio's yields, total return, expense ratios, portfolio turnover rate, and, if required, portfolio average dollar-weighted maturity; and (xvii) Prepare a monthly financial statement, which will include the following items: 11 Schedule of Investments Statement of Assets and Liabilities Statement of Operations Statement of Changes in Net Assets Cash Statement Schedule of Capital Gains and Losses. (b) PFPC will provide the Funds' Administrator with the following services: (i) Assist with preparation of: Federal and State Tax Returns Excise Tax Returns Annual and Semi-Annual Shareholder Reports Rules 24(e)-2 and 24(f)-2 Notices; (ii) Assist in the Blue Sky and Federal registration and compliance process; (iii) Assist in the review of registration statements; and (iv) Assist in monitoring compliance with Sub-Chapter M of the Internal Revenue Code. 15. Duration and Termination. This Agreement shall continue, with respect to each Portfolio, unless sooner terminated by the Fund or by PFPC for "cause" (as defined below) on sixty (60) days prior written notice to the other party, for a period of 4 years. For purposes of this Agreement "cause" shall mean any circumstances which materially impair the ability of either party to this Agreement to perform all of its duties and obligations hereunder. 16. Notices. All notices and other communications, including Written Instructions, shall be in writing or by confirming telegram, cable, telex or facsimile sending device. If notice is sent by 12 confirming telegram, cable, telex or facsimile sending device, it shall be deemed to have been given immediately. If notice is sent by first-class mail, it shall be deemed to have been given three days after it has been mailed. If notice is sent by messenger, it shall be deemed to have been given on the day it is delivered. Notices shall be addressed (a) if to PFPC at PFPC's address, 103 Bellevue Parkway, Wilmington, Delaware 19809; (b) if to the Fund, at the address of the Fund; or (c) if to neither of the foregoing, at such other address as shall have been notified to the sender of any such Notice or other communication. 17. Amendments. This Agreement, or any term thereof, may be changed or waived only by written amendment, signed by the party against whom enforcement of such change or waiver is sought. 18. Delegation. PFPC may, with the prior written consent of the Fund, which such consent may not be unreasonably withheld, assign its rights and delegate its duties hereunder to any wholly-owned direct or indirect subsidiary of Provident National Bank or PNC Financial Corp, provided that (i) PFPC gives the Fund a minimum of thirty (30) days in which to decide and consent by written notice; (ii) the delegate agrees with PFPC to comply with all relevant provisions of this Agreement and the 1940 Act; and (iii) PFPC and such delegate promptly provide such information as the Fund may request, and respond to such questions as the Fund may ask, relative to the delegation, including (without limitation) the capabilities of the delegate. 13 19. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 20. Further Actions. Each party agrees to perform such further acts and execute such further documents as are necessary to effectuate the purposes hereof. 21. Miscellaneous. This Agreement embodies the entire agreement and understanding between the parties and supersedes all prior agreements and understandings relating to the subject matter hereof, provided that the parties may embody in one or more separate documents their agreement, if any, with respect to delegated and/or Oral Instructions. A copy of the Declaration of Trust of the Fund is on file with the Secretary of the Commonwealth of Massachusetts and notice is hereby given that the Fund by the undersigned officer of the Fund in his/her capacity as an officer of the Fund. The obligations of this Agreement shall only be binding upon the assets and property of the Fund and shall not be binding upon any Trustee, officer or shareholder of the Fund individually. 14 The captions in this Agreement are included for convenience of reference only and in no way define or delimit any of the provisions hereof or otherwise affect their construction or effect. This Agreement shall be deemed to be a contract made in California and governed by California law. If any provision of this Agreement shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder of this Agreement shall not be affected thereby. This Agreement shall be binding and shall inure to the benefit of the parties hereto and their respective successors. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their officers designated below on the day and year first above written. PROVIDENT FINANCIAL PROCESSING CORPORATION By: /s/ Joseph Gramlich ------------------------------------- THE CHARLES SCHWAB FAMILY OF FUNDS By: /s/ Tim Cox ------------------------------------- 15 APPENDIX A [List Books and Records to be Maintained by PFPC] EX-8.(B) 11 SCHEDULE B TO THE ACCOUNTING SERVICES AGREEMENT 1 Exhibit 8(b) SCHEDULE B ACCOUNTING SERVICES AGREEMENT 1. Schwab California Municipal Money Fund November 6, 1990 (formerly Schwab California Tax-Exempt Money Fund) 2. Schwab Money Market Fund April 8, 1991 3. Schwab Government Money Fund April 8, 1991 4. Schwab Municipal Money Fund May 3, 1991 (formerly Tax-Exempt Money Fund) 5. Schwab US Treasury Money Fund November 5, 1991 6. Schwab Value Advantage Money Fund February 7, 1992 7. Schwab Institutional Advantage Money Fund November 26, 1993 8. Schwab Retirement Money Fund November 26, 1993 9. Schwab New York Municipal Money Fund November 8, 1994 (formerly Schwab New York Tax-Exempt Money Fund) 10. Schwab New Jersey Municipal Money Fund January 20, 1998 11. Schwab Pennsylvania Municipal Money Fund January 20, 1998 PFPC INC. By: /s/ Joseph T. Gramlich ---------------------------------- Joseph T. Gramlich Title: Senior Vice President THE CHARLES SCHWAB FAMILY OF FUNDS By: /s/ William J. Klipp ---------------------------------- William J. Klipp Title: Executive Vice President and Chief Operating Officer EX-8.(C) 12 FORM OF AMENDED SCH.B TO ACCOUNTING SERVICES AGREE 1 Exhibit 8(c) FORM OF AMENDED SCHEDULE B ACCOUNTING SERVICES AGREEMENT 1. Schwab California Municipal Money Fund November 6, 1990 (formerly Schwab California Tax-Exempt Money Fund) 2. Schwab Money Market Fund April 8, 1991 3. Schwab Government Money Fund April 8, 1991 4. Schwab Municipal Money Fund May 3, 1991 (formerly Tax-Exempt Money Fund) 5. Schwab US Treasury Money Fund November 5, 1991 6. Schwab Value Advantage Money Fund February 7, 1992 7. Schwab Institutional Advantage Money Fund November 26, 1993 8. Schwab Retirement Money Fund November 26, 1993 9. Schwab New York Municipal Money Fund November 8, 1994 (formerly Schwab New York Tax-Exempt Money Fund) 10. Schwab New Jersey Municipal Money Fund January 20, 1998 11. Schwab Pennsylvania Municipal Money Fund January 20, 1998 12 Schwab Florida Municipal Money Fund February 16, 1998 PFPC INC. By: __________________________________ Joseph T. Gramlich Title: Senior Vice President THE CHARLES SCHWAB FAMILY OF FUNDS By: __________________________________ William J. Klipp Title: Executive Vice President and Chief Operating Officer EX-8.(D) 13 AMEND.#1 & #2 TO THE ACCOUNTING AGREE. SERVICES 1 Exhibit 8(d) AMENDMENT NO. 1 TO ACCOUNTING SERVICES AGREEMENT This Amendment, dated August 8, 1995, is entered into between THE CHARLES SCHWAB FAMILY OF FUNDS, a Massachusetts business trust (the "Fund"), and PFPC INC. (formerly Provident Financial Processing Corporation), a Delaware corporation which is an indirect wholly-owned subsidiary of PNC Bank Corp. (formerly, PNC Financial Corp.) ("PFPC"). WHEREAS, the Fund and PFPC have entered into an Accounting Services Agreement dated as of April 8, 1991 (the "Agreement"), pursuant to which the Fund appointed PFPC to provide accounting services to its investment portfolios listed on schedule B to the Agreement; and WHEREAS, the Fund and PFPC desire to amend the Agreement and remove the limitation on the duration of the Agreement. NOW THEREFORE, the parties hereto, intending to be legally bound, hereby agree as follows: 1. All references in the Agreement to "Provident Financial Processing Corporation" are hereby revised to read "PFPC Inc." and all references to "PNC Financial Corp." are revised to read "PNC Bank Corp." 2. Paragraph 15 is hereby deleted and replaced with the following: Duration and Termination. This Agreement shall continue with respect to each Portfolio, unless terminated by the Fund or by PFPC for "cause" (as defined below) on sixty (60) days prior written notice to the other party. For purposes of this 2 Agreement "cause" shall mean any circumstances which materially impair the ability of either party to this Agreement to perform all of its duties and obligations hereunder. 3. Any defined terms not defined herein shall have the same meaning as given in the Agreement. 4. Miscellaneous. Except to the extent amended and supplemented hereby, the Agreement shall remain unchanged and in full force and effect and is hereby ratified and confirmed in all respects as amended and supplemented hereby. IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the date and year first above written. THE CHARLES SCHWAB FAMILY OF FUNDS By: /s/ William J. Klipp -------------------------------- William J. Klipp Title: Chief Operating Officer PFPC INC. By: /s/ Joseph T. Gramlich -------------------------------- Joseph T. Gramlich Title: Senior Vice President 3 AMENDMENT NO. 2 TO ACCOUNTING SERVICES AGREEMENT This Amendment, dated February 5, 1996, is entered into between THE CHARLES SCHWAB FAMILY OF FUNDS, a Massachusetts business trust (the "Fund"), and PFPC INC. (formerly Provident Financial Processing Corporation), a Delaware corporation which is an indirect wholly-owned subsidiary of PNC Bank Corp. (formerly, PNC Financial Corp.) ("PFPC"). WHEREAS, the Fund and PFPC have entered into an Accounting Services Agreement dated as of April 8, 1991 (the "Agreement"), and amended as of August 8, 1995, pursuant to which the Fund appointed PFPC to provide accounting services to its investment portfolios listed on schedule B to the Agreement; and WHEREAS, the Fund and PFPC desire to amend the Agreement; NOW THEREFORE, the parties hereto, intending to be legally bound, hereby agree as follows: 1. Paragraph 15 is hereby deleted and replaced with the following: Duration and Termination. This Agreement shall continue in full force and effect with respect to each Portfolio, unless terminated as hereinafter provided or amended by mutual, written agreement of the parties hereto. This Agreement may be terminated by either party by an instrument in writing delivered, faxed or mailed, postage prepaid, to the other party, such termination to take effect on the date stated therein, which date shall not be sooner than sixty (60) days after the date of such delivery or mailing. 4 2. Any defined terms not defined herein shall have the same meaning as given in the Agreement. 3. Miscellaneous. Except to the extent amended and supplemented hereby, the Agreement shall remain unchanged and in full force and effect and is hereby ratified and confirmed in all respects as amended and supplemented hereby. IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the date and year first above written. THE CHARLES SCHWAB FAMILY OF FUNDS By: /s/ William J. Klipp ---------------------------------- Title: Senior Vice President and Chief Operating Officer PFPC INC. By: /s/ Robert J. Perlsweig ---------------------------------- Robert J. Perlsweig Title: Executive Vice President EX-8.(E) 14 AMENDED AND RESTATED TRANSFER AGENCY AGREEMENT 1 Exhibit 8(e) AMENDED AND RESTATED TRANSFER AGENCY AGREEMENT AGREEMENT made this 5th day of June 1995, between The Charles Schwab Family of Funds (the "Trust"), a Massachusetts business trust having its principal place of business at 101 Montgomery Street, San Francisco, California 94104, and CHARLES SCHWAB & CO., INC. ("Schwab"), a corporation organized under the laws of the State of California which is a Securities and Exchange Commission licensed transfer agent and which has its principal place of business at 101 Montgomery Street, San Francisco, California 94104. WHEREAS, the Trust desires that Schwab perform certain services for the Trust, and for its series denominated as "Funds" and whose shares of beneficial interest comprise the shares of the Trust identified on Schedule A hereto (individually referred to herein as a "Fund" and collectively as the "Funds"); and WHEREAS, Schwab is willing to perform such services on the terms and conditions set forth in this Agreement; NOW, THEREFORE, in consideration of the mutual premises and covenants herein set forth, the parties agree as follows: 1. SERVICES; USE OF SUBTRANSFER AGENTS. Schwab will perform for the Trust the services set forth in Schedule B hereto, including services as Transfer Agent. Schwab also agrees to perform for the Trust such special services incidental to the performance of the services enumerated herein as agreed to by the parties from time to time. Schwab will perform such additional services as are provided on an amendment to Schedule B hereof, in consideration of such fees as the parties hereto may agree. Schwab may, in its discretion, appoint in writing other parties qualified to perform transfer agency and shareholder services (individually, a "Subtransfer Agent") to carry out some or all of its responsibilities under this Agreement with respect to a Fund; provided, however, that the Subtransfer Agent will be the agent of Schwab and not the agent of the Trust or such Fund, and that Schwab will be fully responsible for the acts of such Subtransfer Agent and shall not be relieved of any of its responsibilities hereunder by the appointment of such Subtransfer Agent. 2 2. FEES. The Trust will pay Schwab for the services to be provided by Schwab under this Agreement in accordance with, and in the manner set forth in, Schedule C hereto. Schwab will not change the fees it charges pursuant to the fee schedule until the expiration of one year from the Effective Date of this Agreement (as defined below), unless the Trust otherwise agrees to such change in writing; thereafter, Schwab may change its fees only upon the written consent of the Trust. Fees for any additional services to be provided by Schwab pursuant to an amendment to Schedule B hereto shall be subject to mutual agreement at the time such amendment to Schedule B is proposed. 3. REIMBURSEMENT OF EXPENSES. In addition to paying Schwab the fees described in Section 2 hereof, the Trust agrees to reimburse Schwab for Schwab's out-of-pocket expenses in providing services hereunder, including without limitation the following: A. All freight and other delivery and bonding charges incurred by Schwab in delivering materials to and from the Trust and in delivery of all materials to shareholders; B. All direct telephone, telephone transmission and telecopy or other electronic transmission expenses incurred by Schwab in communication with the Trust, the Trust's investment adviser, sub-investment advisers or custodian, dealers, shareholders or others as required for Schwab to perform the services to be provided hereunder; C. Costs of postage, couriers, stock computer paper, statements, labels, envelopes, checks, reports, letters, tax forms, proxies, notices or other forms of printed material which shall be required by Schwab for the performance of the services to be provided hereunder; D. The cost of microfilm or microfiche of records or other materials; and E. Any expenses Schwab may incur at the written direction of an officer of the Trust thereunto duly authorized. 4. EFFECTIVE DATE. This Agreement will become effective with respect to each Fund as of the date set forth across from its name on Schedule A, such date for each Fund to be referred to herein as the "Effective Date." 5. TERM AND TERMINATION. This Agreement will continue in effect with respect to the Trust and to each Fund, unless earlier terminated as to a Fund by either party hereto as provided hereunder, for an initial term of one year from the Effective Date. Thereafter, this Agreement will continue in effect unless either party hereto terminates this Agreement with -2- 3 respect to a Fund by giving 90 days' written notice to the other party, whereupon this Agreement with respect to that Fund will terminate automatically upon the expiration of said 90 days; provided, however, that after such termination, for so long as Schwab, with the written consent of the Trust, in fact continues to perform any one or more of the services contemplated by this Agreement or any Schedule or exhibit hereto, the provisions of this Agreement, including without limitation the provisions dealing with indemnification, shall continue in full force and effect. Fees and out-of-pocket expenses incurred by Schwab but unpaid by the Trust upon such termination shall be immediately due and payable upon and notwithstanding such termination. Schwab will be entitled to collect from the Trust, in addition to the fees and disbursements provided by Paragraphs 2 and 3 hereof, the amount of all of Schwab's cash disbursements and a reasonable fee (which fee shall be not less than the actual costs incurred by Schwab in performing such service) for services in connection with Schwab's activities in effecting such termination, including without limitation, the delivery to the Trust and/or its distributors or investment advisers and/or other parties, of the Trust's property, records, instruments and documents, or any copies thereof. 6. SCHWAB'S RELIANCE ON RECORDS AND INSTRUCTIONS. Schwab may rely on any written records or instructions provided to it by the Trust or any investment adviser and on any written records provided by any prior transfer agent or custodian thereof, and each Fund agrees to indemnify Schwab and hold it, its employees, officers, directors and agents harmless from and against any and all claims, demands, actions, suits, judgments, liabilities, losses, damages, costs, charges, counsel fees and other expenses of every nature arising out of or in any way relating to any actions taken by Schwab with respect to such Fund in reasonable reliance upon such records or instructions. 7. UNCONTROLLABLE EVENTS. Schwab assumes no responsibility hereunder, and will not be liable, for any damage, loss of data, delay or any other loss whatsoever caused by events beyond its reasonable control. 8. STANDARD OF CARE. Schwab will use its best efforts to insure the accuracy of all services performed under this Agreement, but will not be liable to the Trust for any action taken or omitted by Schwab in the absence of bad faith, willful misconduct or gross negligence. 9. LEGAL ADVICE. Schwab will notify the Trust at any time Schwab believes that it is in need of the advice of counsel (other than counsel in the regular employ of Schwab or any affiliated companies) with regard to Schwab's responsibilities and duties pursuant to this Agreement; and after so notifying the Trust, Schwab, at its discretion, will be entitled to seek, receive and act upon advice of legal counsel of its choosing, such advice to be at the expense of the Trust or the Fund involved unless such advice relates to a matter involving Schwab's bad faith, willful misconduct or gross negligence with respect to Schwab's responsibilities and duties hereunder, and Schwab in no event be liable to the Trust or the Fund involved or any shareholder or beneficial owner of the Trust or such Fund for any action reasonably taken pursuant to such advice. -3- 4 10. INSTRUCTIONS. Whenever Schwab is requested or authorized to take action hereunder pursuant to instructions from a shareholder concerning an account in the Trust, Schwab will be entitled to rely upon any certificate, letter or other instrument or communication, whether in writing or by electronic or telephone transmission, believed by Schwab to be genuine and to have been properly made, signed or authorized by an officer or other authorized agent of the Trust or by the shareholder, as the case may be, and shall be entitled to receive as conclusive proof of any fact or matter required to be ascertained by it hereunder a certificate signed by an officer of the Trust or any other person authorized by the Trust's Board of Trustees or by the shareholder, as the case may be. As to the services to be provided hereunder, Schwab may rely conclusively upon the terms of the Prospectus of a Fund and the Statement of Additional Information of the Trust to the extent that such services are described therein unless Schwab receives written instructions to the contrary in a timely manner from the Trust. 11. INDEMNIFICATION. Each Fund agrees to indemnify and hold harmless Schwab and Schwab's employees, agents, directors, officers and nominees from and against any and all claims, demands, actions and suits, whether groundless or otherwise, and from and against any and all judgments, liabilities, losses, damages, costs, charges, counsel fees and other expenses of every nature and character arising out of or in any way relating to Schwab's actions taken or non-actions with respect to the performance of services under this Agreement with respect to such Fund or based, if applicable, upon information, instructions or requests with respect to such Fund given or made to Schwab by an officer of the Trust thereunto duly authorized; provided that this indemnification shall not apply to actions or omissions of Schwab in cases of its own bad faith, willful misconduct or gross negligence, and further provided that prior to confessing any claim against it which may be the subject of this indemnification, Schwab shall give the Trust written notice of and reasonable opportunity to defend against said claim in its own name or in the name of Schwab. 12. RECORD RETENTION AND CONFIDENTIALITY. Schwab will keep and maintain on behalf of the Trust all records which the Trust or Schwab is, or may be, required to keep and maintain pursuant to any applicable statutes, rules and regulations, including without limitation Rules 31a-1 and 31a-2 under the Investment Company Act of 1940, relating to the maintenance of records in connection with the services to be provided hereunder. Schwab agrees to make such records available for inspection by the Trust or by the Securities and Exchange Commission at reasonable times and otherwise to keep confidential all records and other information relative to the Trust and its shareholders, except when requested to divulge such information by duly-constituted authorities or court process, or requested by a shareholder with respect to information concerning an account as to which such shareholder has either a legal or beneficial interest or when requested by the Trust, the shareholder, or the dealer of record as to such account. -4- 5 13. REPORTS. Schwab will furnish to the Trust and to the Trust's properly-authorized auditors, investment advisers, examiners, distributors, dealers, underwriters, salesmen, insurance companies and others designated by the Trust in writing, such reports at such times as are prescribed in Schedule D attached hereto, or as subsequently agreed upon by the parties pursuant to an amendment to Schedule D. The Trust agrees to examine each such report or copy promptly and will report or cause to be reported any errors or discrepancies therein no later than three business days from the receipt thereof. In the event that errors or discrepancies, except such errors and discrepancies as may not reasonably be expected to be discovered by the recipient within three days after conducting a diligent examination, are not so reported within the aforesaid period of time, a report will for all purposes be accepted by and binding upon the Trust and any other recipient, and Schwab shall have no liability for errors or discrepancies therein and shall have no further responsibility with respect to such report except to perform reasonable corrections of such errors and discrepancies within a reasonable time after requested to do so by the Trust. 14. RIGHTS OF OWNERSHIP. All computer programs and procedures developed to perform services required to be provided by Schwab under this Agreement are the property of Schwab. All records and other data except such computer programs and procedures are the exclusive property of the Trust and all such other records and data will be furnished to the Trust in appropriate form as soon as practicable after termination of this Agreement for any reason. 15. RETURN OF RECORDS. Schwab may at its option at any time, and shall promptly upon the Trust's demand, turn over to the Trust and cease to retain Schwab's files, records and documents created and maintained by Schwab pursuant to this Agreement which are no longer needed by Schwab in the performance of its services or for its legal protection. If not so turned over to the Trust, such documents and records will be retained by Schwab for six years from the year of creation. At the end of such six-year period, such records and documents will be turned over to the Trust unless the Trust authorizes in writing the destruction of such records and documents. 16. BANK ACCOUNTS. The Trust and a Fund shall establish and maintain such bank accounts with such bank or banks as are selected by the Trust, as are necessary in order that Schwab may perform the services required to be performed hereunder. To the extent that the performance of such services shall require Schwab directly to disburse amounts for payment of dividends, redemption proceeds or other purposes, the Trust and a Fund will provide such bank or banks with all instructions and authorizations necessary for the Fund to effect such disbursements. 17. PURCHASE AND REDEMPTION OF SHARES. Schwab will process instructions from the Shareholders of the Trust to purchase and redeem shares of the Trust as the agent for the Trust. -5- 6 With respect to those funds identified on Schedule A hereto as "Sweep Funds" (if any), Schwab will perform such daily, weekly or other periodic monitoring as is necessary to carry out the automatic investment and redemption features associated with each individual shareholder's account. 18. REPRESENTATIONS OF THE TRUST. The Trust certifies to Schwab that: (1) as of the close of business on the Effective Date, each Fund has authorized unlimited shares and (2) by virtue of its Declaration of Trust, shares of each Fund which are redeemed by the Trust may be sold by the Trust from its treasury and (3) this Agreement has been duly authorized by the Trust and, when executed and delivered by the Trust, will constitute a legal, valid and binding obligation of the Trust, enforceable against the Trust in accordance with its terms, subject to bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting the rights and remedies of creditors and secured parties. 19. REPRESENTATIONS OF SCHWAB. Schwab represents and warrants that the various procedures and systems which Schwab has implemented with regard to safeguarding from loss or damage attributable to fire, theft, or any other cause of the blank checks, records, and other data of the Trust and Schwab's records, data, equipment facilities and other property used in the performance of its obligations hereunder are adequate and that it will make such changes therein from time to time as are required for the secure performance of its obligations hereunder. 20. INSURANCE. Schwab will use reasonable efforts to obtain insurance covering the services to be performed by it under this Agreement and shall notify the Trust in the event it is unable to do so within 90 days after the Effective Date of this Agreement. Thereafter, Schwab will notify the Trust should any of its insurance coverage be changed for any reason. Such notification shall include the date of change and the reasons therefor. Schwab will notify the Trust of any material claims against it with respect to services performed under this Agreement, whether or not they may be covered by insurance, and shall notify the Trust from time to time as may be appropriate of the total outstanding claims made by Schwab under its insurance coverage. 21. INFORMATION TO BE FURNISHED BY THE TRUST. The Trust has furnished to Schwab the following: A. Copies of the Declaration of Trust of the Trust and of any amendments thereto, certified by the proper official of the state in which such Declaration has been filed. B. Copies of the following documents: 1. The Trust's Bylaws and any amendments thereto. -6- 7 2. Certified copies of resolutions of the Board of Trustees covering the following matters: a. Approval of this Agreement, authorization of an officer of the Trust to execute and deliver this Agreement and authorization for officers of the Trust to instruct Schwab hereunder; and b. Authorization of Schwab to act as Registrar, Transfer Agent and Dividend Disbursing Agent for the Trust. C. A list of all the officers of the Trust, together with specimen signatures of those officers who are authorized to instruct Schwab in all matters. D. Two copies of the following (if such documents are employed by the Trust): 1. Prospectuses for each Fund and the Statement of Additional Information of the Trust; 2. Distribution Agreement; 3. Investment Advisory and Administration Agreement(s); and 4. All other forms commonly used by the Trust or its Distributor with regard to their relationships and transactions with shareholders of the Trust. E. A certified statement as to shares of beneficial interest of the Trust authorized, issued, and outstanding as of the Effective Date of Schwab's appointment as Transfer Agent (or as of the date on which Schwab's services are commenced, whichever is the later date) and as to receipt of full consideration by the Trust for all shares outstanding, such statement to be certified by the Treasurer of the Trust; 22. INFORMATION FURNISHED BY SCHWAB. Schwab has furnished to the Trust the following: A. Schwab's Articles of Incorporation. -7- 8 B. Schwab's By-Laws and any amendments thereto. C. Certified copies of actions of Schwab covering the following matters: 1. Approval of this Agreement, and authorization of an officer of Schwab to execute and deliver this Agreement; and 2. Authorization of Schwab to act as Transfer Agent for the Trust. 23. AMENDMENTS TO DOCUMENTS. The Trust shall furnish Schwab written copies of any amendments to, and changes in, any of the items referred to in Section 21 hereof forthwith upon such amendments and changes becoming effective. In addition, the Trust agrees that no amendments will be made to the Prospectus of a Fund or the Statement of Additional Information of the Trust which might have the effect of changing the procedures employed by Schwab in providing the services agreed to hereunder or which amendment might affect the duties of Schwab hereunder unless the Trust first obtains Schwab's approval of such amendments or changes. 24. RELIANCE ON AMENDMENTS. Schwab may rely on any amendments to or changes in any of the documents and other items to be provided by the Trust pursuant to Sections 21 and 23 of this Agreement and a Fund will indemnify and hold harmless Schwab from and against any and all claims, demands, actions, suits, judgments, liabilities, losses, damages, actions, suits, judgments, liabilities, losses, damages, costs, charges, counsel fees and other expenses of every nature and character which may result from actions or omissions on the part of Schwab with respect to such Fund in reliance upon such amendments and/or changes. Although Schwab is authorized to rely on the above-mentioned amendments to and changes in the documents and other items to be provided pursuant to Sections 21 and 23 hereof, Schwab will be under no duty to comply with or take any action as a result of any of such amendments or changes unless the Trust first obtains Schwab's written consent to and approval of such amendments or changes. 25. COMPLIANCE WITH LAW. Except for the obligations of Schwab set forth in Section 12 hereof, the Trust assumes full responsibility for the preparation, contents and distribution of each Prospectus of the Trust, as to compliance with all applicable requirements of the Securities Act of 1933, as amended, the Investment Company Act of 1940, as amended, and any other laws, rules and regulations of governmental authorities having jurisdiction. Schwab will have no obligation to take cognizance of any laws relating to the sale of the Trust's shares. -8- 9 26. NOTICES. Any notice provided hereunder shall be sufficient given when sent by registered or certified mail to the party required to be served with such notice, at the following address: 101 Montgomery Street, San Francisco, California 94104 or at such other address as such party may from time to time specify in writing to the other party pursuant to this Section. 27. HEADINGS. Paragraph headings in this Agreement are included for convenience only and are not to be used to construe or interpret this Agreement. 28. ASSIGNMENT. This Agreement and the rights and duties hereunder shall not be assignable with respect to a Fund by either of the parties hereto except by the specific written consent of the other party. This Section 28 shall not limit or in any way affect Schwab's right to appoint a Subtransfer Agent pursuant to Section 1 hereof. 29. GOVERNING LAW. This Agreement shall be governed by and provisions shall be construed in accordance with the laws of the State of California. 30. LIMITATION OF LIABILITY. A copy of the Declaration of Trust of the Trust is on file with the Secretary of The Commonwealth of Massachusetts, and notice is hereby given that this instrument is executed on behalf of the Trustees of the Trust as Trustees and not individually and that the obligations of this instrument are not binding upon any of the Trustees or shareholders individually but are binding only upon the assets and property of the Trust. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed all as of the day and year first above written. THE CHARLES SCHWAB FAMILY OF FUNDS By: /s/ William J. Klipp ----------------------------------- Name: William J. Klipp Title: Senior Vice President, Chief Operating Officer and Trustee CHARLES SCHWAB & CO., INC. By: /s/ Colleen M. Hummer ----------------------------------- Name: Colleen M. Hummer Title: Senior Vice President -9- 10 SCHEDULE B TRANSFER AGENCY SERVICES I. Record Maintenance. Schwab will provide full maintenance of all shareholder records for each account in the Trust. Such records will include: A. Share balance; B. Account transaction history, including dividends paid and the date and price for all transactions; C. Name and address of the record shareholder (including zip codes and tax identification numbers but will not include responsibility for obtaining certified tax identification numbers or impending back-up withholding); D. Records of distributions and dividend payments; E. Transfer records; and F. Overall control records. II. Regular Daily Operations. A. Schwab will perform the following functions for the Trust, including all classes of shares of the Trust: 1. Process new accounts on the shareholder file by processing directly from the Trust's distributor or dealer; 2. Process additional purchases to the records of accounts already on the shareholder file. In such instances, on the distributor's or dealer's instructions, allocate investor payments among the Funds; B-1 11 3. Transfer shares upon the receipt of proper instructions from distributor or dealer; and 4. Process changes of dealer/representative on accounts. B. Schwab will perform the following function only for the Funds of the Trust that are not offered in multiple classes and for the Sweep Shares of each Fund of the Trust that is offered in multiple classes: 1. Process purchases and redemptions to accounts already on the shareholder file in accordance with the terms of all automatic purchase and redemption provisions set forth in shareholders' account relationship with the Trust's distributor. III. Periodic Operations. A. Upon receipt of instructions as to payment of dividends and distributions, which may be standing instructions, compute distributions and inform the Trust of the amount to be reinvested in additional shares. B. Process redemptions as instructed by distributor or dealer. C. Mail semi-annual and annual Trust and/or Fund reports and prospectuses. D. Produce transcripts of account history as requested by the Trust or by the distributor or dealer. E. Prepare and file Form 1099's with Internal Revenue Service. IV. Controls. A. Maintain all balance controls daily and produce monthly summaries expressed in: 1. shares; and 2. dollar amounts. B-2 12 V. Special Services Included. A. Prepare envelopes/labels (from address data supplied by distributor or dealer as to transmission accounts) and mail proxy statements; tabulate and certify votes from returned ballots. THE CHARLES SCHWAB FAMILY OF FUNDS By: /s/ William J. Klipp --------------------------------- Name: William J. Klipp Title: Senior Vice President, Chief Operating Officer and Trustee CHARLES SCHWAB & CO., INC. By: /s/ Colleen M. Hummer --------------------------------- Name: Colleen M. Hummer Title: Senior Vice President B-3 EX-8.(F) 15 FORM OF SCHEDULE A TO THE TRANSFER AGENCY AGREE. 1 Exhibit (8)(f) FORM OF SCHEDULE A TRANSFER AGENCY AGREEMENT
NAME OF FUND EFFECTIVE DATE - ------------ -------------- A. Sweep Funds - --------------- Schwab Money Market Fund May 1, 1993 Schwab Government Money Fund May 1, 1993 Schwab Municipal Money Fund -- Sweep Shares May 1, 1993 Schwab California Municipal Money Fund -- Sweep Shares May 1, 1993 (formerly Schwab California Tax-Exempt Money Fund) Schwab US Treasury Money Fund May 1, 1993 Schwab New York Municipal Money Fund -- Sweep Shares November 10, 1994 (formerly Schwab New York Tax-Exempt Money Fund) Schwab New Jersey Municipal Money Fund January 20, 1998 Schwab Pennsylvania Municipal Money Fund January 20, 1998 Schwab Florida Municipal Money Fund February 16, 1998 B. Other Funds - --------------- Schwab Value Advantage Money Fund-Investor Shares May 1, 1993 Schwab Institutional Advantage Money Fund May 1, 1993 Schwab Retirement Money Fund November 26, 1993 Schwab Municipal Money Fund -- Value Advantage Shares June 6, 1995 Schwab California Municipal Money Fund -- Value Advantage Shares June 6, 1995 (formerly Schwab California Tax-Exempt Money Fund) Schwab New York Municipal Money Fund -- Value Advantage Shares June 6, 1995 (formerly Schwab New York Tax-Exempt Money Fund)
THE CHARLES SCHWAB FAMILY OF FUNDS By: ---------------------------------- Name: William J. Klipp Title: Executive Vice President and Chief Operating Officer CHARLES SCHWAB & CO., INC. By: ---------------------------------- Name: Colleen M. Hummer Title: Senior Vice President 2 Exhibit (8)(f) FORM OF SCHEDULE C TRANSFER AGENCY AGREEMENT The fees listed below are for services provided under this Agreement and are to be accrued daily and paid monthly in arrears:
FUND FEE ---- --- A. Sweep Funds ----------- Schwab Money Market Fund An annual fee, payable monthly, of twenty five one-hundredths of one percent (.25%) of the Fund's average daily net assets Schwab Government Money Fund An annual fee, payable monthly, of twenty five one-hundredths of one percent (.25%) of the Fund's average daily net assets Schwab Municipal Money Fund-Sweep Shares An annual fee, payable monthly, of twenty five one-hundredths of one percent (.25%) of the Fund's average daily net assets Schwab California Municipal Money Fund-Sweep Shares An annual fee, payable monthly, of (formerly Schwab California Tax-Exempt Money Fund) twenty five one-hundredths of one percent (.25%) of the Fund's average daily net assets Schwab US Treasury Money Fund An annual fee, payable monthly, of twenty five one-hundredths of one percent (.25%) of the Fund's average daily net assets Schwab New York Municipal Money Fund-Sweep Shares An annual fee, payable monthly, of (formerly Schwab New York Tax-Exempt Money Fund) twenty five one-hundredths of one percent (.25%) of the Fund's average daily net assets Schwab New Jersey Municipal Money Fund An annual fee, payable monthly, of twenty five one-hundredths of one percent (.25%) of the Fund's average daily net assets Schwab Pennsylvania Municipal Money Fund An annual fee, payable monthly, of twenty five one-hundredths of one percent (.25%) of the Fund's average daily net assets
3 Schwab Florida Municipal Money Fund An annual fee, payable monthly, of twenty five one-hundredths of one percent (.25%) of the Fund's average daily net assets B. Other Funds ----------- Schwab Value Advantage Money Fund An annual fee, payable monthly, of five one-hundredths of one percent (.05%) of the Fund's average daily net assets Schwab Institutional Advantage Money Fund An annual fee, payable monthly, of five one-hundredths of one percent (.05%) of the Fund's average daily net assets Schwab Retirement Money Fund An annual fee, payable monthly, of five one-hundredths of one percent (.05%) of the Fund's average daily net assets Schwab Municipal Money Fund-Value Advantage Shares An annual fee, payable monthly, of five one-hundredths of one percent (.05%) of the Fund's average daily net assets Schwab California Municipal Money Fund-Value Advantage Shares An annual fee, payable monthly, of (formerly Schwab California Tax-Exempt Money Fund) five one-hundredths of one percent (.05%) of the Fund's average daily net assets Schwab New York Municipal Money Fund-Value Advantage Shares An annual fee, payable monthly, of (formerly Schwab New York Tax-Exempt Money Fund) five one-hundredths of one percent (.05%) of the Fund's average daily net assets
THE CHARLES SCHWAB FAMILY OF FUNDS By: ________________________________________ Name: William J. Klipp Title: Executive Vice President and Chief Operating Officer CHARLES SCHWAB & CO., INC. By: ________________________________________ Name: Colleen M. Hummer Title: Senior Vice President EX-8.(G) 16 SCHEDULE A & C TO THE TRANSFER AGENCY AGREE. 1 Exhibit (8)(g) SCHEDULE A TRANSFER AGENCY AGREEMENT
NAME OF FUND EFFECTIVE DATE - ------------ -------------- A. Sweep Funds - --------------- Schwab Money Market Fund May 1, 1993 Schwab Government Money Fund May 1, 1993 Schwab Municipal Money Fund -- Sweep Shares May 1, 1993 Schwab California Municipal Money Fund -- Sweep Shares May 1, 1993 (formerly Schwab California Tax-Exempt Money Fund) Schwab US Treasury Money Fund May 1, 1993 Schwab New York Municipal Money Fund -- Sweep Shares November 10, 1994 (formerly Schwab New York Tax-Exempt Money Fund) Schwab New Jersey Municipal Money Fund January 20, 1998 Schwab Pennsylvania Municipal Money Fund January 20, 1998 B. Other Funds Schwab Value Advantage Money Fund-Investor Shares May 1, 1993 Schwab Institutional Advantage Money Fund May 1, 1993 Schwab Retirement Money Fund November 26, 1993 Schwab Municipal Money Fund -- Value Advantage Shares June 6, 1995 Schwab California Municipal Money Fund -- Value Advantage Shares June 6, 1995 (formerly Schwab California Tax-Exempt Money Fund) Schwab New York Municipal Money Fund -- Value Advantage Shares June 6, 1995 (formerly Schwab New York Tax-Exempt Money Fund)
THE CHARLES SCHWAB FAMILY OF FUNDS By: /s/ William J. Klipp ---------------------------------- Name: William J. Klipp Title: Executive Vice President and Chief Operating Officer CHARLES SCHWAB & CO., INC. By: /s/ Colleen M. Hummer ---------------------------------- Name: Colleen M. Hummer Title: Senior Vice President 2 Exhibit (8)(g) SCHEDULE C TRANSFER AGENCY AGREEMENT The fees listed below are for services provided under this Agreement and are to be accrued daily and paid monthly in arrears:
FUND FEE ---- --- A. Sweep Funds ----------- Schwab Money Market Fund An annual fee, payable monthly, of twenty five one-hundredths of one percent (.25%) of the Fund's average daily net assets Schwab Government Money Fund An annual fee, payable monthly, of twenty five one-hundredths of one percent (.25%) of the Fund's average daily net assets Schwab Municipal Money Fund-Sweep Shares An annual fee, payable monthly, of twenty five one-hundredths of one percent (.25%) of the Fund's average daily net assets Schwab California Municipal Money Fund-Sweep Shares An annual fee, payable monthly, of (formerly Schwab California Tax-Exempt Money Fund) twenty five one-hundredths of one percent (.25%) of the Fund's average daily net assets Schwab US Treasury Money Fund An annual fee, payable monthly, of twenty five one-hundredths of one percent (.25%) of the Fund's average daily net assets Schwab New York Municipal Money Fund-Sweep Shares An annual fee, payable monthly, of (formerly Schwab New York Tax-Exempt Money Fund) twenty five one-hundredths of one percent (.25%) of the Fund's average daily net assets Schwab New Jersey Municipal Money Fund An annual fee, payable monthly, of twenty five one-hundredths of one percent (.25%) of the Fund's average daily net assets Schwab Pennsylvania Municipal Money Fund An annual fee, payable monthly, of twenty five one-hundredths of one percent (.25%) of the Fund's average daily net assets
3 B. Other Funds ----------- Schwab Value Advantage Money Fund An annual fee, payable monthly, of five one-hundredths of one percent (.05%) of the Fund's average daily net assets Schwab Institutional Advantage Money Fund An annual fee, payable monthly, of five one-hundredths of one percent (.05%) of the Fund's average daily net assets Schwab Retirement Money Fund An annual fee, payable monthly, of five one-hundredths of one percent (.05%) of the Fund's average daily net assets Schwab Municipal Money Fund-Value Advantage Shares An annual fee, payable monthly, of five one-hundredths of one percent (.05%) of the Fund's average daily net assets Schwab California Municipal Money Fund-Value Advantage Shares An annual fee, payable monthly, of (formerly Schwab California Tax-Exempt Money Fund) five one-hundredths of one percent (.05%) of the Fund's average daily net assets Schwab New York Municipal Money Fund-Value Advantage Shares An annual fee, payable monthly, of (formerly Schwab New York Tax-Exempt Money Fund) five one-hundredths of one percent (.05%) of the Fund's average daily net assets
THE CHARLES SCHWAB FAMILY OF FUNDS By: /s/ William J. Klipp ----------------------------------- Name: William J. Klipp Title: Executive Vice President and Chief Operating Officer CHARLES SCHWAB & CO., INC. By: /s/ Colleen M. Hummer ----------------------------------- Name: Colleen M. Hummer Title: Senior Vice President EX-8.(H) 17 SHAREHOLDER SERVICES AGREEMENT 1 Exhibit 8(h) SHAREHOLDER SERVICE AGREEMENT AGREEMENT made this 1st day of May, 1993, between The Charles Schwab Family of Funds (the "Trust"), a Massachusetts business trust having its principal place of business at 101 Montgomery Street, San Francisco, California 94104, and CHARLES SCHWAB & CO., INC. ("Schwab"), a corporation organized under the laws of the State of California and a broker-dealer registered with the Securities and Exchange Commission and member of the National Association of Securities Dealers, Inc., which has its principal place of business at 101 Montgomery Street, San Francisco, California 94104. WHEREAS, the Trust desires that Schwab perform certain shareholder-related services for the Trust and for its series denominated as "Funds" whose shares of beneficial interest currently comprise the shares of the Trust identified on Schedule A hereto (individually referred to herein as a "Fund" and collectively as the "Funds"); and WHEREAS, Schwab is willing to perform such services on the terms and conditions set forth in this Agreement; NOW, THEREFORE, in consideration of the mutual premises and covenants herein set forth, the parties agree as follows: 1. SERVICES. Schwab will perform for the Trust the services set forth in Schedule B hereto. 2. FEES. The Trust will pay Schwab for the services to be provided by Schwab under this Agreement in accordance with, and in the manner set forth in, Schedule C hereto. Schwab will not change the fees it charges pursuant to the fee schedule until the expiration of one year from the Effective Date of this Agreement (as defined below), unless the Trust otherwise agrees to such change in writing; thereafter, Schwab may change its fees only upon the written consent of the Trust. Fees for any additional services to be provided by Schwab pursuant to an amendment to Schedule B hereto shall be subject to mutual agreement at the time such amendment to Schedule B is proposed. 3. REIMBURSEMENT OF EXPENSES. In addition to paying Schwab the fees described in Section 2 hereof, the Trust agrees to reimburse Schwab for Schwab's out-of-pocket expenses in providing additional services incurred at the written direction of an officer of the Trust thereunto duly authorized. 4. EFFECTIVE DATE. This Agreement will become effective with respect to each Fund as of the date set forth across from its name on Schedule A, such date for each Fund to be referred to herein as the "Effective Date." 1 2 5. TERM AND TERMINATION. This Agreement will continue in effect with respect to each Fund, unless earlier terminated by either party hereto as to a Fund as provided hereunder, for an initial term of one year from its Effective Date. Thereafter, this Agreement will continue in effect unless either party hereto terminates this Agreement with respect to a Fund by giving 90 days' written notice to the other party, whereupon this Agreement with respect to that Fund will terminate automatically upon the expiration of said 90 days; provided, however, that after such termination, for so long as Schwab, with the written consent of the Trust, in fact continues to perform any one or more of the services contemplated by this Agreement or any Schedule or exhibit hereto, the provisions of this Agreement, including without limitation the provisions dealing with indemnification, shall continue in full force and effect. Fees and out-of-pocket expenses incurred by Schwab but unpaid by the Trust upon such termination shall be immediately due and payable upon and notwithstanding such termination. Schwab will be entitled to collect from the Trust, in addition to the fees and disbursements provided by Paragraphs 2 and 3 hereof, the amount of all of Schwab's cash disbursements and a reasonable fee (which fee shall be not less than the actual costs incurred by Schwab in performing such service) for services in connection with Schwab's activities in effecting such termination. 6. SCHWAB'S RELIANCE ON RECORDS AND INSTRUCTIONS. Schwab may rely on any written records or instructions provided to it by the Trust or any investment adviser or sub-adviser thereto, and on any written records provided by any transfer agent or custodian thereof, and each Fund agrees to indemnify Schwab and hold it, its employees, officers, directors and agents harmless from and against any and all claims, demands, actions, suits, judgments, liabilities, losses, damages, costs, charges, counsel fees and other expenses of every nature arising out of or in any way relating to any actions taken by Schwab with respect to such Fund in reasonable reliance upon such records or instructions. 7. UNCONTROLLABLE EVENTS. Schwab assumes no responsibility hereunder, and will not be liable, for any damage, loss of data, delay or any other loss whatsoever caused by events beyond its reasonable control. 8. STANDARD OF CARE. Schwab will use its best efforts to insure the accuracy of all services performed under this Agreement, but will not be liable to the Trust for any action taken or omitted by Schwab in the absence of bad faith, willful misconduct or gross negligence. 9. LEGAL ADVICE. Schwab will notify the Trust at any time Schwab believes that it is in need of the advice of counsel (other than counsel in the regular employ of Schwab or any 2 3 affiliated companies) with regard to Schwab's responsibilities and duties pursuant to this Agreement; and after so notifying the Trust, Schwab, at its discretion, will be entitled to seek, receive and act upon advice of legal counsel of its choosing, such advice to be at the expense of the Trust or the Fund involved unless such advice relates to a matter involving Schwab's bad faith, willful misconduct or gross negligence with respect to Schwab's responsibilities and duties hereunder, and Schwab in no event be liable to the Trust or the Fund involved or any shareholder or beneficial owner of the Trust or such Fund for any action reasonably taken pursuant to such advice. 10. INSTRUCTIONS. Whenever Schwab is requested or authorized to take action hereunder pursuant to instructions from a shareholder concerning an account in the Trust, Schwab will be entitled to rely upon any certificate, letter or other instrument or communication, whether in writing or by electronic or telephone transmission, believed by Schwab to be genuine and to have been properly made, signed or authorized by an officer or other authorized agent of the Trust or by the shareholder, as the case may be, and shall be entitled to receive as conclusive proof of any fact or matter required to be ascertained by it hereunder a certificate signed by an officer of the Trust or any other person authorized by the Trust's Board of Trustees or by the shareholder, as the case may be. As to the services to be provided hereunder, Schwab may rely conclusively upon the terms of the Prospectus of a Fund and the Statement of Additional Information of the Trust to the extent that such services are described therein unless Schwab receives written instructions to the contrary in a timely manner from the Trust. 11. INDEMNIFICATION. Each Fund agrees to indemnify and hold harmless Schwab and Schwab's employees, agents, directors, officers and nominees from and against any and all claims, demands, actions and suits, whether groundless or otherwise, and from and against any and all judgments, liabilities, losses, damages, costs, charges, counsel fees and other expenses of every nature and character arising out of or in any way relating to Schwab's actions taken or non-actions with respect to the performance of services under this Agreement with respect to such Fund or based, if applicable, upon information, instructions or requests with respect to such Fund given or made to Schwab by an officer of the Trust thereunto duly authorized; provided that this indemnification shall not apply to actions or omissions of Schwab in cases of its own bad faith, willful misconduct or gross negligence, and further provided that, prior to confessing any claim against it which may be the subject of this indemnification, Schwab shall give the Trust written notice of and reasonable opportunity to defend against said claim in its own name or in the name of Schwab. 3 4 12. RECORD RETENTION AND CONFIDENTIALITY. Schwab will keep and maintain all records which Schwab is, or may be, required to keep and maintain pursuant to any applicable statutes, rules and regulations in connection with the services to be provided hereunder. Schwab agrees to make such records available for inspection by the Trust or by the Securities and Exchange Commission at reasonable times and otherwise to keep confidential all records and other information relative to the Trust and its shareholders, except when requested to divulge such information by duly-constituted authorities or court process, or requested by a shareholder with respect to information concerning an account as to which such shareholder has either a legal or beneficial interest or when requested by the Trust. 13. RIGHTS OF OWNERSHIP. All computer programs and procedures developed to perform services required to be provided by Schwab under this Agreement are the property of Schwab. All records and other data except such computer programs and procedures are the exclusive property of the Trust and all such other records and data will be furnished to the Trust in appropriate form as soon as practicable after termination of this Agreement for any reason. 14. RETURN OF RECORDS. Schwab may at its option at any time, and shall promptly upon the Trust's demand, turn over to the Trust and cease to retain all files, records and documents created and maintained by Schwab pursuant to this Agreement which are no longer needed by Schwab in the performance of its services or for its legal protection. If not so turned over to the Trust, such documents and records will be retained by Schwab for six years from the year of creation. At the end of such six-year period, such records and documents will be turned over to the Trust unless the Trust authorizes in writing the destruction of such records and documents. 15. REPRESENTATIONS OF THE TRUST. The Trust certifies to Schwab that this Agreement has been duly authorized by the Trust and, when executed and delivered by the Trust, will constitute a legal, valid and binding obligation of the Trust, enforceable against the Trust in accordance with its terms, subject to bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting the rights and remedies of creditors and secured parties. 16. REPRESENTATIONS OF SCHWAB. Schwab represents and warrants that the various procedures and systems which Schwab has implemented with regard to safeguarding from loss or damage attributable to fire, theft, or any other cause of the records, data, equipment facilities and other property used in the performance of its obligations hereunder are adequate and that it will make such changes therein from time to time as are required 4 5 for the secure performance of its obligations hereunder. 17. INFORMATION TO BE FURNISHED BY THE TRUST. The Trust has furnished to Schwab the following: A. Copies of the Declaration of Trust of the Trust and of any amendments thereto, certified by the proper official of the state in which such Declaration has been filed. B. Copies of the following documents: 1. The Trust's Bylaws and any amendments thereto. 2. Certified copies of resolutions of the Board of Trustees covering the following matters: a. Approval of this Agreement, authorization of an officer of the Trust to execute and deliver this Agreement and authorization for officers of the Trust to instruct Schwab hereunder; and b. Authorization of Schwab to act as Shareholder Service Agent for the Trust. C. A list of all the officers of the Trust, together with specimen signatures of those officers who are authorized to instruct Schwab in all matters. D. Two copies of the following (if such documents are employed by the Trust): 1. Prospectuses for each Fund and the Statement(s) of Additional Information of the Trust; 2. Distribution Agreement; 3. Investment Advisory and Administration Agreement(s); and 4. All other forms commonly used by the Trust or its Distributor with regard to their relationships and transactions with shareholders of the Trust. 18. INFORMATION FURNISHED BY SCHWAB. Schwab has furnished to the Trust the following: A. Schwab's Articles of Incorporation. 5 6 B. Schwab's By-Laws and any amendments thereto. C. Certified copies of actions of Schwab covering the following matters: 1. Approval of this Agreement, and authorization of an officer of Schwab to execute and deliver this Agreement; and 2. Authorization of Schwab to act as Shareholder Service Agent for the Trust. 19. AMENDMENTS TO DOCUMENTS. The Trust shall furnish Schwab written copies of any amendments to, and changes in, any of the items referred to in Section 17 hereof forthwith upon such amendments and changes becoming effective. In addition, the Trust agrees that no amendments will be made to the Prospectus of a Fund or a Statement of Additional Information of the Trust which might have the effect of changing the procedures employed by Schwab in providing the services agreed to hereunder or which amendment might affect the duties of Schwab hereunder unless the Trust first obtains Schwab's approval of such amendments or changes. 20. RELIANCE ON AMENDMENTS. Schwab may rely on any amendments to or changes in any of the documents and other items to be provided by the Trust pursuant to Sections 17 and 19 of this Agreement and a Fund will indemnify and hold harmless Schwab from and against any and all claims, demands, actions, suits, judgments, liabilities, losses, damages, actions, suits, judgments, liabilities, losses, damages, costs, charges, counsel fees and other expenses of every nature and character which may result from actions or omissions on the part of Schwab with respect to such Fund in reliance upon such amendments and/or changes. Although Schwab is authorized to rely on the above-mentioned amendments to and changes in the documents and other items to be provided pursuant to Sections 17 and 19 hereof, Schwab will be under no duty to comply with or take any action as a result of any of such amendments or changes unless the Trust first obtains Schwab's written consent to and approval of such amendments or changes. 21. NOTICES. Any notice provided hereunder shall be sufficient given when sent by registered or certified mail to the party required to be served with such notice, at the following address: 101 Montgomery Street, San Francisco, California 94104 or at such other address as such party may from time to time specify in writing to the other party pursuant to this Section. 22. HEADINGS. Paragraph headings in this Agreement are included for convenience only and are not to be used to construe 6 7 or interpret this Agreement. 23. ASSIGNMENT. This Agreement and the rights and duties hereunder shall not be assignable with respect to a Fund by either of the parties hereto except by the specific written consent of the other party. 24. GOVERNING LAW. This Agreement shall be governed by and provisions shall be construed in accordance with the laws of the State of California. 25. LIMITATION OF LIABILITY. A copy of the Declaration of Trust of the Trust is on file with the Secretary of The Commonwealth of Massachusetts, and notice is hereby given that this instrument is executed on behalf of the Trustees of the Trust as Trustees and not individually and that the obligations of this instrument are not binding upon any of the Trustees or shareholders individually but are binding only upon the assets and property of the Trust. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed all as of the day and year first above written. THE CHARLES SCHWAB FAMILY OF FUNDS By: /s/ Tom D. Seip --------------------------------- Name: Tom D. Seip --------------------------------- Title: President --------------------------------- CHARLES SCHWAB & CO., INC. By: /s/ Peter J. McIntosh --------------------------------- Name: Peter J. McIntosh --------------------------------- Title: Senior Vice President --------------------------------- 7 EX-8.(I) 18 SCHEDULE A,B & C TO THE SHAREHOLDER SERVICES AGREE 1 Exhibit 8(i) SCHEDULE A SHAREHOLDER SERVICES AGREEMENT
FUND EFFECTIVE DATE - ---- -------------- A. Sweep Funds - -------------- Schwab Money Market Fund May 1, 1993 Schwab Government Money Fund May 1, 1993 Schwab Municipal Money Fund-Sweep May 1, 1993 Shares Schwab California Municipal Money May 1, 1993 Fund-Sweep Shares Schwab US Treasury Money Fund May 1, 1993 Schwab New York Municipal Money Fund- November 10, 1994 Sweep Shares Schwab New Jersey Municipal Money Fund January 20, 1998 Schwab Pennsylvania Municipal Money January 20, 1998 Fund B. Other Funds - -------------- Schwab Value Advantage Money Fund- May 1, 1993 Investor Shares Schwab Institutional Advantage Money May 1, 1993 Fund Schwab Retirement Money Fund November 26, 1993 Schwab Municipal Money Fund-Value June 6, 1995 Advantage Shares Schwab California Municipal Money June 6, 1995 Fund-Value Advantage Shares Schwab New York Municipal Money Fund- June 6, 1995 Sweep Shares-Value Advantage Shares
THE CHARLES SCHWAB FAMILY OF FUNDS By: /s/ William J. Klipp ---------------------------- Name: William J. Klipp Title: Executive Vice President and Chief Operating Officer CHARLES SCHWAB & CO., INC. By: /s/ Colleen M. Hummer ---------------------------- Name: Colleen M. Hummer Title: Senior Vice President 1 2 SCHEDULE B SHAREHOLDER SERVICES Schwab will maintain accounts for, and serve as a customer liaison to, the shareholders of each Fund, and through its employees will perform various services in relation thereto, which services shall include responding to requests for information and other types of shareholder account inquiries, both by telephone and in writing. The parties hereto expressly agree that the services provided under this Agreement shall not include, and the amounts payable hereunder shall not constitute compensation for, services relating to transfer agency or sub-accounting services for the Trust or any Fund thereof. THE CHARLES SCHWAB FAMILY OF FUNDS By: /s/ Tom D. Seip -------------------------------- Name: Tom D. Seip -------------------------------- Title: President -------------------------------- CHARLES SCHWAB & CO., INC. By: /s/ Peter J. McIntosh -------------------------------- Name: Peter J. McIntosh -------------------------------- Title: Senior Vice President -------------------------------- 2 3 SCHEDULE C SHAREHOLDER SERVICES AGREEMENT The fees listed below are for services provided under this Agreement and are to be accrued daily and paid monthly in arrears:
FUND FEE ---- --- A. Sweep Funds ----------- Schwab Money Market Fund An annual fee, payable monthly, of twenty one-hundredths of one percent (.20%) of the Fund's average daily net assets Schwab Government Money Fund An annual fee, payable monthly, of twenty one-hundredths of one percent (.20%) of the Fund's average daily net assets Schwab Municipal Money Fund-Sweep An annual fee, payable Shares monthly, of twenty (formerly Schwab Tax-Exempt Money Fund) one-hundredths of one percent (.20%) of the Fund's average daily net assets Schwab California Municipal Money Fund- An annual fee, payable Sweep Shares monthly, of twenty (formerly Schwab California Tax-Exempt one-hundredths of one Money Fund) percent (.20%) of the Fund's average daily net assets Schwab US Treasury Money Fund An annual fee, payable monthly, of twenty one-hundredths of one percent (.20%) of the Fund's average daily net assets Schwab New York Municipal Money Fund- An annual fee, payable Sweep Shares monthly, of twenty (formerly Schwab New York Tax-Exempt one-hundredths of one Money Fund) percent (.20%) of the Fund's average daily net assets
3 4 Schwab New Jersey Municipal Money Fund An annual fee, payable monthly, of twenty one-hundredths of one percent (.20%) of the Fund's average daily net assets Schwab Pennsylvania Municipal Money An annual fee, payable Fund monthly, of twenty one-hundredths of one percent (.20%) of the Fund's average daily net assets B. Other Funds ----------- Schwab Value Advantage Money Fund- An annual fee, payable Investor Shares monthly, of twenty one-hundredths of one percent (.20%) of the Fund's average daily net assets Schwab Institutional Advantage Money An annual fee, payable Fund monthly, of twenty one-hundredths of one percent (.20%) of the Fund's average daily net assets Schwab Retirement Money Fund An annual fee, payable monthly, of twenty one-hundredths of one percent (.20%) of the Fund's average daily net assets Schwab Municipal Money Fund-Value An annual fee, payable Advantage Shares monthly, of twenty (formerly Schwab Tax-Exempt Money Fund) one-hundredths of one percent (.20%) of the Fund's average daily net assets Schwab California Municipal Money Fund- An annual fee, payable Value Advantage Shares monthly, of twenty (formerly Schwab California Tax-Exempt one-hundredths of one Money Fund) percent (.20%) of the Fund's average daily net assets Schwab New York Municipal Money Fund- An annual fee, payable
4 5 Value Advantage Shares monthly, of twenty (formerly Schwab New York Tax-Exempt one-hundredths of one Money Fund) percent (.20%) of the Fund's average daily net assets
THE CHARLES SCHWAB FAMILY OF FUNDS By: /s/ William J. Klipp ------------------------------- Name: William J. Klipp Title: Executive Vice President and Chief Operating Officer CHARLES SCHWAB & CO., INC. By: /s/ Colleen M. Hummer ------------------------------- Name: Colleen M. Hummer Title: Senior Vice President 5 EX-8.(J) 19 FORM OF SCH. A TO THE SHAREHOLDER SERVICES AGREE. 1 Exhibit 8(j) FORM OF SCHEDULE A SHAREHOLDER SERVICES AGREEMENT
FUND EFFECTIVE DATE - ---- -------------- A. Sweep Funds - -------------- Schwab Money Market Fund May 1, 1993 Schwab Government Money Fund May 1, 1993 Schwab Municipal Money Fund-Sweep May 1, 1993 Shares Schwab California Municipal Money May 1, 1993 Fund-Sweep Shares Schwab US Treasury Money Fund May 1, 1993 Schwab New York Municipal Money Fund- November 10, 1994 Sweep Shares Schwab New Jersey Municipal Money Fund January 20, 1998 Schwab Pennsylvania Municipal Money January 20, 1998 Fund Schwab Florida Municipal Money Fund February 16, 1998 B. Other Funds - -------------- Schwab Value Advantage Money Fund- May 1, 1993 Investor Shares Schwab Institutional Advantage Money May 1, 1993 Fund Schwab Retirement Money Fund November 26, 1993 Schwab Municipal Money Fund-Value June 6, 1995 Advantage Shares Schwab California Municipal Money June 6, 1995 Fund-Value Advantage Shares Schwab New York Municipal Money Fund- June 6, 1995 Sweep Shares-Value Advantage Shares
THE CHARLES SCHWAB FAMILY OF FUNDS By: _________________________________ Name: William J. Klipp Title: Executive Vice President and Chief Operating Officer CHARLES SCHWAB & CO., INC. By: _________________________________ Name: Colleen M. Hummer Title: Senior Vice President 1 2 FORM OF SCHEDULE C SHAREHOLDER SERVICES AGREEMENT The fees listed below are for services provided under this Agreement and are to be accrued daily and paid monthly in arrears:
FUND FEE ---- --- A. Sweep Funds ----------- Schwab Money Market Fund An annual fee, payable monthly, of twenty one-hundredths of one percent (.20%) of the Fund's average daily net assets Schwab Government Money Fund An annual fee, payable monthly, of twenty one-hundredths of one percent (.20%) of the Fund's average daily net assets Schwab Municipal Money Fund-Sweep An annual fee, payable Shares monthly, of twenty (formerly Schwab Tax-Exempt Money Fund) one-hundredths of one percent (.20%) of the Fund's average daily net assets Schwab California Municipal Money Fund- An annual fee, payable Sweep Shares monthly, of twenty (formerly Schwab California Tax-Exempt one-hundredths of one Money Fund) percent (.20%) of the Fund's average daily net assets Schwab US Treasury Money Fund An annual fee, payable monthly, of twenty one-hundredths of one percent (.20%) of the Fund's average daily net assets Schwab New York Municipal Money Fund- An annual fee, payable Sweep Shares monthly, of twenty (formerly Schwab New York Tax-Exempt one-hundredths of one Money Fund) percent (.20%) of the Fund's average daily net assets
2 3 Schwab New Jersey Municipal Money Fund An annual fee, payable monthly, of twenty one-hundredths of one percent (.20%) of the Fund's average daily net assets Schwab Pennsylvania Municipal Money An annual fee, payable Fund monthly, of twenty one-hundredths of one percent (.20%) of the Fund's average daily net assets Schwab Florida Municipal Money Fund An annual fee, payable monthly, of twenty one-hundredths of one percent (.20%) of the Fund's average daily net assets B. Other Funds ----------- Schwab Value Advantage Money Fund- An annual fee, payable Investor Shares monthly, of twenty one-hundredths of one percent (.20%) of the Fund's average daily net assets Schwab Institutional Advantage Money An annual fee, payable Fund monthly, of twenty one-hundredths of one percent (.20%) of the Fund's average daily net assets Schwab Retirement Money Fund An annual fee, payable monthly, of twenty one-hundredths of one percent (.20%) of the Fund's average daily net assets Schwab Municipal Money Fund-Value An annual fee, payable Advantage Shares monthly, of twenty (formerly Schwab Tax-Exempt Money Fund) one-hundredths of one percent (.20%) of the Fund's average daily net assets
3 4 Schwab California Municipal Money Fund- An annual fee, payable Value Advantage Shares monthly, of twenty (formerly Schwab California Tax-Exempt one-hundredths of one Money Fund) percent (.20%) of the Fund's average daily net assets Schwab New York Municipal Money Fund- An annual fee, payable Value Advantage Shares monthly, of twenty (formerly Schwab New York Tax-Exempt one-hundredths of one Money Fund) percent (.20%) of the Fund's average daily net assets
THE CHARLES SCHWAB FAMILY OF FUNDS By: ________________________________ Name: William J. Klipp Title: Executive Vice President and Chief Operating Officer CHARLES SCHWAB & CO., INC. By: ________________________________ Name: Colleen M. Hummer Title: Senior Vice President 4 EX-8.(K) 20 CUSTODIAN SERVICES AGREEMENT TERMS & CONDITIONS 1 Exhibit 8(k) CUSTODIAN SERVICES AGREEMENT TERMS AND CONDITIONS This Agreement is made as of April 8, 1991 by and between THE CHARLES SCHWAB FAMILY OF FUNDS (the "Fund"), a Massachusetts business trust, and PROVIDENT NATIONAL BANK ("Provident"), a national banking association. The Fund is registered as an open-end investment company under the Investment Company Act of 1940 (the "1940" Act), as amended. The Fund wishes to retain Provident to provide custody services to its investment portfolios as listed in Schedule A attached ("Portfolio") , and Provident wishes to furnish such services, either directly or though an affiliate or affiliates, as more fully described herein. In consideration of the promises and mutual covenants herein contained, the parties agree as follows: 1. Definitions (a) "Authorized Person." The term "Authorized Person" shall mean any officer of the Fund and any other person, who is duly authorized by the Fund's Governing Board, to give Oral and Written Instructions on behalf of the Fund. Such persons are listed in the Certificate attached hereto as the Authorized Persons Appendix. (b) "Book-Entry System." The term "Book-Entry System" means Federal Reserve Treasury book-entry system for United States and federal agency securities, its successor or successors, and its nominee or nominees and any book-entry system maintained by an exchange registered with the SEC under the 1934 Act. (c) "CFTC." The term "CFTC" shall mean the Commodities Futures Trading Commission. (d) "Governing Board." The term "Governing Board" shall mean the Fund's Board of Directors if the Fund is a corporation or the Fund's Board of Trustees if the Fund is a trust, or, where duly authorized, a competent committee thereof. -1- 2 (e) "Oral Instructions." The term "Oral Instructions" shall mean oral instructions received by Provident from an Authorized Person or from a person reasonably believed by Provident to be an Authorized Person. (f) "Provident." The term Provident shall mean Provident National Bank or a subsidiary or affiliate of Provident National Bank. (g) "SEC." The term "SEC" shall mean the Securities and Exchange Commission. (h) "Securities and Commodities Laws." The terms the "1933 Act" shall mean the Securities Act of 1933, the "1934 Act" shall mean the Securities Exchange Act of 1934, the "1940 Act" shall mean the Investment Company Act of 1940, as amended, and the "CEA" shall mean the Commodities Exchange Act, as amended. (i) "Shares." The term "Shares" shall mean the shares of stock of any series or class of the Fund, or, where appropriate, units of beneficial interest in a trust where the Fund is organized as a Trust. (j) "Property." The term "Property" shall mean: (i) any and all securities and other investment items which the Fund may from time to time deposit, or cause to be deposited, with Provident or which Provident may from time to time hold for the Fund; (ii) All income in respect of any of such securities or other investment items; (iii) all proceeds of the sale of any of such securities or investment items; and (iv) all proceeds of the sale of securities issued by the Fund, which are received by Provident from time to time, from or on behalf of the Fund. -2- 3 (k) "Written Instructions." The term "Written Instructions" shall mean written instructions signed by two Authorized Persons and received by Provident. The instructions may be delivered by hand, mail, tested telegram, cable, telex or facsimile sending device. 2. Appointment. The Fund hereby appoints Provident to provide custodian services to its Portfolios, and Provident accepts such appointment and agrees to finish such services. The Fund may from time to time issue separate series or classes or classify and reclassify shares of such series or class. PFPC shall identify to each such series or class property belonging to such series or class and in such reports, confirmations and notices to the Fund called for under this Agreement shall identify the series or class to which such report, confirmation or notice pertains. 3. Delivery of Documents. The Fund has provided or, where applicable, will provide Provident with the following: (a) certified or authenticated copies of the resolutions of the Fund's Governing Board, approving the appointment of Provident or its affiliates to provide services; (b) a copy of the Fund's most recent effective registration statement; (c) a copy of the Fund's advisory agreement or agreements; (d) a copy of the Fund's distribution agreement or agreements; (e) a copy of the Fund's administration agreements if Provident is not providing the Fund with such services; (f) copies of any shareholder servicing agreements made in respect of the Fund; and (g) certified or authenticated copies of any and all amendments or supplements to the foregoing. 4. Compliance with Government Rules and Regulations. Provident undertakes to comply with all applicable requirements of the 1933 Act, the 1934 Act, the 1940 Act, and the -3- 4 CEA, and any laws, rules and regulations of governmental authorities having jurisdiction with respect to all duties to be performed by Provident hereunder. Except as specifically set forth herein, Provident assumes no responsibility for such compliance by the Fund. 5. Instructions. Unless otherwise provided in this Agreement, Provident shall act only upon oral and Written Instructions. Provident shall be entitled to rely upon any Oral and Written Instructions it receives from an Authorized Persons (or from a person reasonably believed by Provident to be an Authorized Person) pursuant to this Agreement. Provident may assume that any oral or Written Instructions received hereunder are not in any way inconsistent with the provisions of organizational documents or this Agreement or of any vote, resolution or proceeding of the Fund's Governing Board or of the Fund's shareholders. The Fund agrees to forward to Provident Written Instructions confirming Oral Instructions so that Provident receives the Written Instructions by the close of business on the same day that such Oral Instructions are received. The fact that such confirming Written Instructions are not received by Provident shall in no way invalidate the transactions or enforceability of the transactions authorized by the Oral Instructions. The Fund further agrees that Provident shall incur no liability to the Fund in acting upon Oral or Written Instructions provided such instructions reasonably appear to have been received from an Authorized Person. 6. Right to Receive Advice. (a) Advice of the Fund. If Provident is in doubt as to any action it should or should not take, Provident may request directions or advice, including Oral or Written Instructions, from the Fund. -4- 5 (b) Advice of Counsel. If Provident shall be in doubt as to any questions of law pertaining to any action it should or should not take, Provident may request advice at its own cost from such counsel of its own choosing (who may be counsel for the Fund, the Fund's advisor or Provident, at the option of Provident). (c) Conflicting Advice. In the event of a conflict between directions, advice or Oral or Written Instructions Provident receives from the Fund, and the advice it receives from counsel, Provident shall be entitled to rely upon and follow the advice of counsel. (d) Protection of Provident. Provident shall be protected in any action it takes or does not take in reliance upon directions, advice or Oral or Written Instructions it receives from the Fund or from counsel to the Fund and which Provident believes, in good faith, to be consistent with those directions, advice or Oral or Written Instructions. Nothing in this paragraph shall be construed so as to impose an obligation upon Provident (i) to seek such directions, advice or Oral or Written Instructions, or (ii) to act in accordance with such directions, advice or Oral or Written Instructions unless, under the terms of other provisions of this Agreement, the same is a condition of Provident's properly taking or not taking such action. 7. Records. The books and records pertaining to the Fund, which are in the possession of Provident, shall be the property of the Fund. Such books and records shall be prepared and maintained as required by the 1940 Act and other applicable securities laws, rules and regulations. The Fund, or the Fund's Authorized Persons, shall have access to such books and records at all time during Provident's normal business hours. Upon the reasonable request of -5- 6 the Fund, copies of any such books and records shall be provided by Provident to the Fund or to an Authorized Person of the Fund, at the Fund's expense. 8. Confidentiality. Provident agrees to keep confidential all records of the Fund and information relative to the Fund and its Shareholders (past, present and potential), unless the release of such records or information is otherwise consented to, in writing, by the Fund. The Fund agrees that such consent shall not be unreasonably withheld. The Fund further agrees that, should Provident be required to provide such information or records to duly constituted authorities (who may institute civil or criminal contempt proceedings for failure to comply), Provident shall not be required to seek the Fund's consent prior to disclosing such information. 9. Cooperation with Accountants. Provident shall cooperate with the Fund's independent public accountants and shall take all reasonable action in the performance of its obligations under this Agreement to ensure that the necessary information is made available to such accountants for the expression of their opinion, as required by the Fund. 10. Disaster Recovery. Provident shall enter into and shall maintain in effect with appropriate parties one or more agreements making reasonable provision for emergency use of electronic data processing equipment to the extent appropriate equipment is available. In the event of equipment failures, Provident shall, at no additional expense to the Fund, take reasonable steps to minimize service interruptions but shall have no liability with respect thereto. 11. Compensation. As compensation for services rendered by Provident during the term of this Agreement, the Fund will pay to Provident a fee or fees as may be agreed to in writing by the Fund and Provident from time to time. -6- 7 12. Indemnification. The Fund agrees to indemnify and hold harmless Provident and its nominees from all taxes, charges, expenses, assessment, claims and liabilities (including, without limitation, liabilities arising under the 1933 Act, the 1934 Act, the 1940 Act, the CEA, and any state and foreign securities and blue sky laws, and amendments thereto), and expenses, including (without limitation) reasonable attorneys' fees and disbursements, arising directly or indirectly from any action which Provident takes or does not take (i) at the request or on the direction of or in reliance on the advice of the Fund or (ii) upon Oral or Written Instructions. Neither Provident, nor any of its nominees, shall be indemnified against any liability to the Fund or to its shareholders (or any expenses incident to such liability) arising out of Provident's own willful misfeasance, bad faith, negligence or reckless disregard of its duties and obligations under this Agreement. 13. Responsibility of Provident. Provident shall be under no duty to take any action on behalf of the Fund except as specifically set forth herein or as may be specifically agreed to by Provident, in writing. Provident shall be obligated to exercise reasonable care and diligence in the performance of its duties hereunder, to act in good faith and to use its best effort, within reasonable limits, in performing Services provided for under this Agreement. Provident shall be responsible for damages arising out of its failure to perform its duties under this Agreement arising out of Provident's negligence. Without limiting the generality of the foregoing or of any other provision of this Agreement, Provident, in connection with its duties under this Agreement, shall not be under any duty or obligation to inquire into and shall not be liable for (a) the validity or invalidity or authority or lack thereof of any Oral or Written Instruction, notice or other instrument which -7- 8 conforms to the applicable requirements of this Agreement, and which Provident reasonably believes to be genuine; or (b) delays or errors or loss of data occurring by reason of circumstances beyond Provident's control, including acts of civil or military authority, national emergencies, labor difficulties, fire, flood or catastrophe, acts of God, insurrection, war, riots or failure of the mails, transportation, communication or power supply. 14. Description of Services. (a) Delivery of the Property. The Fund will deliver or arrange for delivery to Provident, all the property it owns, including cash received as a result of the distribution of its shares, during the period that is set forth in this Agreement. Provident will not be responsible for such property until actual receipt. (b) Receipt and Disbursement of Money. Provident, acting upon Written Instructions, shall open and maintain separate account(s) in the name of each Portfolio using all cash received from or for the account of such Portfolio, subject to the terms of this Agreement. In addition, upon Written Instructions, Provident shall open separate custodial accounts for each separate series or class of the Portfolio and shall hold in such account(s) all cash received from or for the accounts of the Portfolio specifically designated to each separate series, portfolio or class. Provident shall make cash payments from or for the account of the Fund only for: (i) purchases of securities in the name of each Portfolio or Provident or Provident's nominee as provided in sub-paragraph j and for which Provident has received a copy of the broker's or dealer's confirmation or payee's invoice, as appropriate; (ii) purchase or redemption of shares of each Portfolio delivered to Provident; -8- 9 (iii) payment of, subject to Written Instructions, interest, taxes, administration, accounting, distribution, advisory, management fees or similar expenses which are to be borne by each Portfolio; (iv) payment to, subject to receipt of Written Instructions, the Fund's transfer agent, as agent for the shareholders, an amount equal to the amount of dividends and distributions stated in the Written Instructions to be distributed in cash by the transfer agent to shareholders, or, in lieu of paying the Fund's transfer agent, Provident may arrange for the direct payment of cash dividends and distributions to shareholders in accordance with procedures mutually agreed upon from' time to time by and among the Fund, Provident and the Fund's transfer agent. (v) payments, upon receipt Written Instructions in connection with the conversion, exchange or surrender of securities owned or subscribed to by the each Portfolio and held by or delivered to Provident; (vi) payments of the amounts of dividends received with respect to securities sold short; (vii) payments made to a sub-custodian pursuant to provisions in sub-paragraph c of this Agreement; and (viii) payments, upon Written Instructions made for other proper Fund purposes. Provident is hereby authorized to endorse and collect all check, drafts or other orders for the payment of money received as custodian for the account of the Fund. (c) Receipt of Securities. (i) Provident shall hold all securities received by it for or for the account of each Portfolio in a separate account that physically segregates such securities from those of any other persons, firms or corporations. All such securities shall be held or disposed of only upon Written Instructions of the Fund pursuant to the terms of this Agreement. Provident shall have no power or authority to assign, hypothecate, pledge or otherwise dispose of any such securities or investment, except upon the express terms of this Agreement and upon Written Instructions, accompanied by a certified resolution of the Fund's Governing Board, authorizing -9- 10 the transaction. In no case may any member of the Fund's Board of Trustees, or any officer, employee or agent of the Fund withdraw any securities. At Provident's own expense and for its own convenience, Provident may enter into sub-custodian agreements with other United States banks or trust companies to perform duties described in this sub-paragraph c. Such bank or trust company shall have an aggregate capital, surplus and undivided profits, according to its last published report, of at least one million dollars ($1,000,000), if it is a subsidiary or affiliate of Provident, or at least fifty million dollars ($50,000,000) if such bank or trust company is not a subsidiary or affiliate of Provident. In addition, such bank or trust company must agree to comply with the relevant provisions of the 1940 Act and other applicable rules and regulations. Provident shall remain responsible for the performance of all of its duties as described in this Agreement and shall hold the Fund harmless from its own acts or omissions, under the standards of care provided for herein, or of any sub-custodian chosen by Provident under the terms of this sub-paragraph c. d. Transactions Requiring Instructions. Upon receipt of Oral or Written Instructions and not otherwise, Provident, directly or through the use of the Book-Entry System, shall: (i) deliver any securities held for each Portfolio against the receipt of payment for the sale of such securities; (ii) execute and deliver to such persons as may be designated in such, Oral or Written Instructions proxies consents, authorizations, and any other instruments whereby the authority of the Fund as owner of any securities may be exercised; (iii) deliver any securities to the issuer thereof, or its agent, when such securities are called, redeemed, retired or otherwise become payable; provided that, in any such case, the cash or other consideration is to be delivered to Provident; -10- 11 (iv) deliver any securities held for each Portfolio against receipt of other securities or cash issued or paid in connection with the liquidation, reorganization, refinancing, tender offer, merger, consolidation or recapitalization of any corporation, or the exercise of any conversion privilege; (v) deliver any securities Portfolio to any protective committee, reorganization committee or other person in connection with the reorganization, refinancing, merger, consolidation, recapitalization or sale of assets of any corporation, and receive and hold under the terms of this Agreement such certificates of deposit, interim receipts or other instruments or documents as may be issued to it to evidence such delivery; (vi) make such transfer or exchanges of the assets of the Fund and take such other steps as shall be stated in said Oral or Written Instructions to be for the purpose of effectuating a duly authorized plan of liquidation, reorganization, merger, consolidation or recapitalization of such Portfolio; (vii) release securities belonging to a Portfolio to any bank or trust company for the purpose of a pledge or hypothecation to secure any loan incurred by that Portfolio; provided, however, that securities shall be released only upon payment to Provident of the monies borrowed, except that in cases where additional collateral is required to secure a borrowing already made subject to proper prior authorization, further securities may be released for that purpose; and repay such loan upon redelivery to it of the securities pledged or hypothecated therefor and upon surrender of the note or notes evidencing the loan; (viii) release and deliver securities owned by a Portfolio in connection with any repurchase agreement entered into on behalf of a Portfolio, but only on receipt of payment therefor; and pay out moneys of a Portfolio in connection- with such repurchase agreements, but only upon the delivery of the securities; (ix) release and deliver or exchange securities owned by a Portfolio in connection with any conversion of such securities, pursuant to their terms, into other securities; (x) release and deliver securities owned by a Portfolio for the purpose of redeeming in kind shares of a Portfolio upon delivery thereof to Provident; and -11- 12 (xi) release and deliver or exchange securities owned by a Portfolio for other corporate purposes. Provident must also receive a certified resolution describing the nature of the corporate purpose and the name and address of the person(s) to whom delivery shall be made when such action is pursuant to sub-paragraph d. (xi) above. e. Use of Book-Entry System. The Fund shall deliver to Provident certified resolutions of the Fund's Governing Board approving, authorizing and instructing Provident on a continuous and on-going basis, to deposit in the Book-Entry System all securities belonging to each Portfolio eligible for deposit therein and to utilize the Book-Entry System to the extent possible in connection with settlements of purchases and sales of securities by the Fund, and deliveries and returns of securities loaned, subject to repurchase agreements or used as collateral in connection with borrowings. Provident shall continue to perform such duties until it receives Written or Oral Instructions authorizing contrary actions(s). To administer the Book-Entry System properly, the following provisions shall apply: (i) With respect to securities of a Portfolio which are maintained in the Book-Entry system, established pursuant to this sub-paragraph e hereof, the records of Provident shall identify by Book-Entry or otherwise those securities belonging to a Portfolio. Provident shall furnish the Fund a detailed statement of the Property held for the Fund under this Agreement at least monthly and from time to time and upon written request. (ii) Securities and any cash of a Portfolio deposited in the Book-Entry System will at all times be segregated from any assets and cash controlled by Provident in other than a fiduciary or custodian capacity but may be commingled with other assets held in such capacities. Provident and its sub-custodian, if any, will pay out -12- 13 money only upon receipt of securities and will deliver securities only upon the receipt of money. (iii) All books and records maintained by Provident which relate to the Fund's participation in the Book-Entry System will at all times during Provident's regular business hours be open to the inspection of the Fund's duly authorized employees or agents, and the Fund will be furnished with all information in respect of the services rendered to it as it may require. (iv) Provident will provide the Fund with copies of any report obtained by Provident on the system of internal accounting control of the Book-Entry System promptly after receipt of such a report by Provident. Provident will also provide the Fund with such reports on its own system of internal control as the Fund may reasonably request from time to time. f. Registration of Securities. All Securities held for the Fund which are issued or issuable only in bearer form, except such securities held in the Book-Entry System, shall be held by Provident in bearer form; all other securities held for the Fund may be registered in the name of the Fund; Provident; the Book-Entry System; a sub-custodian; or any duly appointed nominee(s) of the Fund, Provident, Book-Entry system or sub-custodian. The Fund reserves the right to instruct Provident as to the method of registration and safekeeping of the securities of each Portfolio. The Fund agrees to furnish to Provident appropriate instruments to enable Provident to hold or deliver in proper form for transfer, or to register its registered nominee or in the name of the Book-Entry System, any securities which it may hold for the account of each Portfolio and which may from time to time be registered in the name of the -13- 14 Portfolio. Provident shall hold all such securities which are not held in the Book-Entry System in a separate account for each Portfolio in the name of each Portfolio physically segregated at all times from those of any other person or persons. g. Voting and Other Action. Neither Provident nor its nominee shall vote any of the securities held pursuant to this Agreement by or for the account of the Fund, except in accordance with Written Instructions. Provident, directly or through the use of the Book-Entry System, shall execute in blank and promptly deliver all notice, proxies, and proxy soliciting materials to the registered holder of such securities. If the registered holder is not the Fund then Written or Oral Instructions must designate the person(s) who owns such securities. h. Transactions Not Requiring Instructions. In the absence of contrary Written Instructions, Provident is authorized to take the following actions: (i) Collection of Income and Other Payments. (A) collect and receive for the account of each Portfolio, all income, dividends, distributions, coupons, option premiums, other payments and similar items, included or to be included in the Property, and, in addition, promptly advise the Fund of such receipt and credit such income, as collected, to the Fund's custodian account; (B) endorse and deposit for collection, in the name of the applicable Portfolio, checks, drafts, or other orders f or the payment of money; (C) receive and hold for the account of each Portfolio all securities received as a distribution on the Fund's portfolio securities as a result of a stock dividend, share split-up or reorganization, recapitalization, readjustment or other rearrangement or distribution of rights or similar securities issued with respect to any portfolio securities belonging to a Portfolio held by Provident hereunder; (D) present for payment and collect the amount payable upon all securities which may mature or be called, redeemed, or -14- 15 retired, or otherwise become payable on the date such securities become payable; and (E) take any action which may be necessary and proper in connection with the collection and receipt of such income and other payments and the endorsement for collection of checks, drafts, and other negotiable instruments. (ii) Miscellaneous Transactions. (A) Provident is authorized to deliver or cause to be delivered Property against payment or other consideration or written receipt therefor in the following cases: (1) for examination by a broker or dealer selling for the account of a Portfolio in accordance with street delivery custom; (2) for the exchange of interim receipts or temporary securities for definitive securities; and (3) for transfer of securities into the name of a Portfolio or Provident or nominee of either, or for exchange of securities for a different number of bonds, certificates, or other evidence, representing the same aggregate face amount or number of units bearing the same interest rate, maturity date and call provisions, if any; provided that, in any such case, the new securities are to be delivered to Provident. (B) Unless and until Provident receives oral or Written Instructions to the contrary, Provident shall: (1) pay all income items held by it which call for payment upon presentation and hold the cash received by it upon such payment for the account of a Portfolio; (2) collect interest and cash dividends received, with notice to the Fund, to the account of a Portfolio; (3) hold for the account of a Portfolio all stock dividends, rights and similar securities issued with respect to any securities held by us; and -15- 16 (4) execute as agent on behalf of the Fund all necessary ownership certificates required by the Internal Revenue Code or the Income Tax Regulations of the United States Treasury Department or under the laws of any State now or hereafter in effect, inserting the Fund's name on such certificate- as the owner of the securities covered thereby, to the extent it may lawfully do so. i. Segregated Accounts. (i) Provident shall upon receipt of Written or Oral Instructions establish and maintain a segregated accounts(s) on its records for and on behalf of each Portfolio. Such account(s) may be used to transfer cash and securities, including securities in the Book-Entry System: (A) for the purposes of compliance by the Fund with the procedures required by a securities or option exchange, providing such procedures comply with the 1940 Act and any releases of the SEC relating to the maintenance of segregated accounts by registered investment companies; and (B) Upon receipt of Written Instructions, for other proper corporate purposes. (ii) Provident may enter into separate custodial agreements with various futures commission merchants ("FCMs") that the Fund uses ("FCM Agreement"). Pursuant to an FCM Agreement, the Fund's margin deposits in any transactions involving futures contracts and options on futures contracts will be held by Provident in accounts ("FCM Account") subject to the disposition by the FCM involved in such contracts and in accordance with the customer contract between FCM and the Fund ("FCM Contract"), SEC rules and the rules of the applicable commodities exchange. Such FCM Agreements shall only be entered into upon receipt of Written Instructions from the Fund which state that: (A) a customer agreement between the FCM and the Fund has been entered into; and (B) the Fund is in compliance with all the rules and regulations of the CFTC. Transfers of initial margin shall be made into a -16- 17 FCM Account only upon Written Instructions; transfers of premium and variation margin may be made into a FCM Account pursuant to Oral Instructions. Transfers of funds from a FCM Account to the FCM for which Provident holds such an account may only occur upon certification by the FCM to Provident that pursuant to the FCM Agreement and the FCM Contract, all conditions precedent to its right to give Provident such instructions have been satisfied. (iii) Provident shall arrange for the establishment of IRA custodian accounts for such shareholders holding shares through IRA accounts, in accordance with the Prospectus, the Internal Revenue Code (including regulations), and with such other procedures as are mutually agreed upon from time to time by and among the Fund, Provident and the Fund's transfer agent. j. Purchases of Securities. Provident shall settle purchased securities upon receipt of Oral or Written Instructions from the Fund or its investment advisor(s) that specify: (i) the name of the issuer and the title of the securities, including CUSIP number if applicable; (ii) the number of shares or the principal amount purchased and accrued interest, if any; (iii) the date of purchase and settlement; (iv) the purchase price per unit; (v) the total amount payable upon such purchase; (vi) the name of the person from whom or the broker through whom the purchase was made; and (vii) the Portfolio to which such purchase applies. Provident shall upon receipt of securities purchased by or for a Portfolio pay out of the moneys held for the account of a Portfolio the total amount payable to the person from whom or the broker through whom the purchase was made, provided that the same conforms to the total amount payable as set forth in such oral or Written Instructions. -17- 18 k. Sales of securities. Provident shall sell securities upon receipt of Oral Instructions from the Fund that specify: (i) the name of the issuer and the title of the security, including CUSIP number if applicable; (ii) the number of shares or principal amount sold, and accrued interest, if any; (iii) the date of trade, settlement and sale; (iv) the sale price per unit; (v) the total amount payable to the Fund upon such sale; (vi) the name of the broker through whom or the person to whom the sale was made; and (vii) the location to which the security must be delivered and delivery deadline, if any. Provident shall deliver the securities upon receipt of the total amount payable to the Fund upon such sale, provided that the total amount payable is the same as was set forth in the Oral or Written Instructions. Subject to the foregoing Provident may accept payment in such form as shall be satisfactory to it, and may deliver securities and arrange for payment in accordance with the customs prevailing among dealers in securities. l. Reports. (i) Provident shall furnish the Fund the following reports: (A) such periodic and special reports as the Fund may reasonably request; (B) a monthly statement summarizing all transactions and entries for the account of each Portfolio, listing the portfolio securities belonging to each Portfolio with the adjusted -18- 19 average cost of each issue and the market value at the end of such month, and stating the cash account of the Portfolio including disbursement; (C) the reports to be furnished to the Fund pursuant to Rule 17f-4; and (D) such other information as may be agreed upon from time to time between the Fund and Provident. (ii) Provident shall transmit promptly to the Fund any proxy statement, proxy material, notice of a call or conversion or similar communication received by it as custodian of the Property. Provident shall be under no other obligation to inform the Fund as to such actions or events. m. Collections. All collections of monies or other property, in respect, or which are to become part of the Property (but not the safekeeping thereof upon receipt by Provident) shall be at the sole risk of the Fund. If payment is not received by Provident within a reasonable time after proper demands have been made, Provident shall notify the Fund in writing, including copies of all demand letters, any written responses, memoranda of all oral responses and to telephonic demands thereto, and await instructions from the Fund. Provident shall not be obliged to take legal action for collection unless and until reasonably indemnified to its satisfaction. Provident shall also notify the Fund as soon as reasonably practicable whenever income due on securities is not collected in due course. 15. Duration and Termination. This Agreement shall continue unless sooner terminated by the Fund or by Provident for "cause" (as defined below) on sixty (60) days prior written notice to the other party, for a period of four years. For purposes of this Agreement, "cause" shall mean any circumstances which materially impair the ability of either party to this Agreement to perform all of its duties and obligations hereunder. In the event this Agreement is terminated (pending appointment of a successor to Provident or vote of the shareholders of a Portfolio of the Fund to dissolve or to function without a custodian of its cash, securities or -19- 20 other property) , Provident shall not deliver cash, securities or other property of the applicable Portfolio to the Portfolio or Fund. It may deliver them to a bank or trust company of Provident's, having an aggregate capital, surplus and undivided profits, as shown by its last published report, of not less than twenty million dollars ($20,000,000), as a custodian for such Portfolio of the Fund to be held under terms similar to those of this Agreement. Provident shall not be required to make any such delivery or payment until full payment shall have been made to Provident of all of its fees, compensation, costs and expenses. Provident shall have a security interest in and shall have a right of setoff against Property in the Fund's or such Portfolio's possession as security for the payment of such fees, compensation, costs and expenses. 16. Notices. All notices and other communications, including Written Instructions, shall be in writing or by confirming telegram, cable, telex or facsimile sending device. Notice shall be addressed (a) if to Provident at Provident's address, Airport Business Center, International Court 2, 200 Stevens Drive, Philadelphia, Pennsylvania 19113, marked for the attention of the Custodian Services Department (or its successor) (b) if to the Fund, at the address of the Fund; or (c) if to neither of the foregoing, at such other address as shall have been notified to the sender of any such Notice or other Communication. If notice is sent by confirming telegram, cable, telex or facsimile sending device, it shall be deemed to have been given immediately. If notice is sent by first-class mail, it shall be deemed to have been given five days after it has been mailed. If notice is sent by messenger, it shall be deemed to have been given on the day it is delivered. 17. Amendments. This Agreement, or any term hereof, may be changed or waived only by a written amendment, signed by the party against whom enforcement of such change or waiver is sought. 18. Delegation. Provident may, with the prior written consent of the Fund, which consent may not be unreasonably withheld, assign its rights and delegate its duties hereunder to any wholly-owned direct or indirect subsidiary of Provident National Bank or PNC Financial -20- 21 Corp, provided that (i) Provident provides the Fund a minimum of thirty (30) days in which to decide and to consent by written notice; (ii) the delegate agrees with Provident to comply with all relevant provisions of this Agreement and the 1940 Act; and (iii) Provident and such delegate promptly provide such information as the Fund may request, and respond to such questions as the Fund may ask, relative to the delegation, including (without limitation) the capabilities of the delegate. 19. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 20. Further Actions. Each party agrees to perform such further acts and execute such further documents as are necessary to effectuate the purposes hereof. 21. Miscellaneous. This Agreement embodies the entire agreement and understanding between the parties and supersedes all prior agreements and understandings relating to the subject matter hereof, provided that the parties may embody in one more separate documents their agreement, if any, with respect to delegated and/or Oral Instructions. The captions in this Agreement are included for convenience of reference only and in no way define or delimit any of the provisions hereof or otherwise affect their construction or effect. A copy of the Declaration of Trust of the Fund is on file with the Secretary of the Commonwealth of Massachusetts and notice is hereby given that the Fund by the undersigned officer of the Fund in his/her capacity as an officer of the Fund. The obligations of this Agreement shall only be binding upon the assets and property of the Fund and shall not be binding upon any Trustee, officer or shareholder of the Fund individually. -21- 22 This Agreement shall be deemed to be a contract made in California and governed by California law. If any provision of this Agreement shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder of this Agreement shall not be affected thereby. This Agreement shall be binding and shall in the benefit of the parties hereto and their respective successors. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their officers designated below on the day and year first above written. PROVIDENT NATIONAL BANK By: /s/ Joseph Gramlich --------------------------------- THE CHARLES SCHWAB FAMILY OF FUNDS By: /s/ Tim Cox --------------------------------- -22- EX-8.(L) 21 SCHEDULE A TO THE CUSTODIAN SERVICES AGREEMENT 1 Exhibit 8(l) CUSTODIAN SERVICES AGREEMENT SCHEDULE A AMENDED FEBRUARY 2, 1998 1. Schwab California Municipal Money Fund November 6, 1990 (formerly Schwab California Tax-Exempt Money Fund) 2. Schwab Money Market Fund April 8, 1991 3. Schwab Government Money Fund April 8, 1991 4. Schwab Municipal Money Fund May 3, 1991 (formerly Tax-Exempt Money Fund) 5. Schwab US Treasury Money Fund November 5, 1991 6. Schwab Value Advantage Money Fund February 7, 1992 7. Schwab Institutional Money Fund November 26, 1993 8. Schwab Retirement Money Fund November 26, 1993 9. Schwab New York Municipal Money Fund November 8, 1994 (formerly Schwab New York Tax-Exempt Money Fund) 10. Schwab Government Cash Reserves Fund October 20, 1997 11. Schwab New Jersey Municipal Money Fund January 20, 1998 12. Schwab Pennsylvania Municipal Money Fund January 20, 1998 PFPC INC. By: /s/ Joseph T. Gramlich --------------------------------------- Joseph T. Gramlich Title: Senior Vice President THE CHARLES SCHWAB FAMILY OF FUNDS By: /s/ William J. Klipp --------------------------------------- William J. Klipp Title: Executive Vice President and Chief Operating Officer EX-8.(M) 22 FORM OF SCHEDULE A TO THE CUSTODIAN SERIVCES AGREE 1 Exhibit 8(m) FORM OF SCHEDULE A 1. Schwab California Municipal Money Fund November 6, 1990 (formerly Schwab California Tax-Exempt Money Fund) 2. Schwab Money Market Fund April 8, 1991 3. Schwab Government Money Fund April 8, 1991 4. Schwab Municipal Money Fund May 3, 1991 5. Schwab US Treasury Money Fund November 5, 1991 6. Schwab Value Advantage Money Fund February 7, 1992 7. Schwab Institutional Money Fund November 26, 1993 8. Schwab Retirement Money Fund November 26, 1993 9. Schwab New York Municipal Money Fund November 8, 1994 (formerly Schwab New York Tax-Exempt Money Fund) 10. Schwab Government Cash Reserves Fund October 20, 1997 11. Schwab New Jersey Municipal Money Fund January 20, 1998 12. Schwab Pennsylvania Municipal Money Fund January 20, 1998 13. Schwab Florida Municipal Money Fund February 16, 1998 PFPC INC. By: ---------------------------------------- Joseph T. Gramlich Title: Senior Vice President THE CHARLES SCHWAB FAMILY OF FUNDS By: ---------------------------------------- William J. Klipp Title: Executive Vice President and Chief Operating Officer EX-8.(N) 23 AMENDMENTS #1 & 2 TO THE CUSTODIAN SERVICES AGREE. 1 Exhibit 8(n) AMENDMENT NO. 1 TO CUSTODIAN SERVICES AGREEMENT This Amendment, dated August 8, 1995, is entered into between THE CHARLES SCHWAB FAMILY OF FUNDS, a Massachusetts business trust (the "Fund"), and PNC Bank, National Association (formerly Provident National Bank), a national banking association ("PNC Bank"). WHEREAS, the Fund and PNC Bank have entered into a Custodian Services Agreement dated as of April 8, 1991 (the "Agreement"), pursuant to which the Fund appointed PNC Bank to provide custodian services to its investment portfolios listed on Schedule A to the Agreement; and WHEREAS, the Fund and PNC Bank desire to amend the Agreement and remove the limitation on the duration of the Agreement. NOW THEREFORE, the parties hereto, intending to be legally bound, hereby agree as follows: 1. All references in the Agreement to "Provident National Bank" are hereby revised to read "PNC Bank, National Association" and references to "Provident" are revised to read "PNC Bank." 2. Paragraph 15 is hereby deleted and replaced with the following: Duration and Termination. This Agreement shall continue unless terminated by the Fund or by PNC Bank for "cause" (as defined below) on sixty (60) days prior written notice to the other party. For purposes of this Agreement, "cause" shall mean any circumstances which materially impair the ability of either party to this Agreement to perform all of its duties and obligations hereunder. In the event this Agreement is terminated 2 (pending appointment of a successor to PNC Bank or vote of the shareholders of a Portfolio of the Fund to dissolve or to function without a custodian of its cash, securities or other property), PNC Bank shall not deliver cash, securities or other property of the applicable Portfolio to the Portfolio or the Fund. It may deliver them to a bank or trust company of PNC Bank's, having an aggregate capital, surplus and undivided profits, as shown by its last published report, of not less than twenty million dollars ($20,000,000), as a custodian for such Portfolio of the Fund to be held under terms similar to those of this Agreement. PNC Bank shall not be required to make any such delivery or payment until full payment shall have been made to PNC Bank of all of its fees, compensation, costs and expenses. PNC Bank shall have a security interest in and shall have a right of setoff against Property in such Portfolio's possession as security for the payment of such fees, compensation, costs and expenses. 3. Any defined terms not defined herein shall have the same meaning as given in the Agreement. 4. Miscellaneous. Except to the extent amended and supplemented hereby, the Agreement shall remain unchanged and in full force and effect and is hereby ratified and confirmed in all respects as amended and supplemented hereby. 3 IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the date and year first above written. THE CHARLES SCHWAB FAMILY OF FUNDS By: /s/ William J. Klipp --------------------------------------- William J. Klipp Title: Chief Operating Officer PNC BANK, NATIONAL ASSOCIATION By: /s/ Joseph T. Gramlich --------------------------------------- Joseph T. Gramlich Title: Vice President 4 AMENDMENT NO. 2 TO CUSTODIAN SERVICES AGREEMENT This Amendment, dated February 5, 1996, is entered into between THE CHARLES SCHWAB FAMILY OF FUNDS, a Massachusetts business trust (the "Fund"), and PNC BANK, NATIONAL ASSOCIATION (formerly Provident National Bank), a national banking association ("PNC Bank"). WHEREAS, the Fund and PNC Bank have entered into a Custodian Services Agreement dated as of April 8, 1991 (the "Agreement"), and amended as of August 8, 1995, pursuant to which the Fund appointed PNC Bank to provide custodian services to its investment portfolios listed on Schedule A to the Agreement; and WHEREAS, the Fund and PNC Bank desire to amend the Agreement; NOW THEREFORE, the parties hereto, intending to be legally bound, hereby agree as follows: 1. Paragraph 15 is hereby deleted and replaced with the following: Duration and Termination. This Agreement shall continue in full force and effect unless terminated as hereinafter provided or amended at any time by mutual, written agreement of the parties hereto. This Agreement may be terminated by either party by an instrument in writing delivered, faxed or mailed, postage prepaid, to the other party, such termination to take effect on the date stated therein, which date shall not be sooner than sixty (60) days after the date of such delivery or mailing. In the event this Agreement is terminated (pending appointment of a successor to PNC Bank or vote of the shareholders of any Portfolio of the Fund to dissolve or to function without a custodian of its cash, securities 5 or other property), PNC Bank shall not deliver cash, securities or other property of the applicable Portfolio to the Portfolio or the Fund. It may deliver them to a bank or trust company of PNC Bank's, having an aggregate capital, surplus and undivided profits, as shown by its last published report, of not less than twenty million dollars ($20,000,000), as a custodian for such Portfolio to be held under terms similar to those of this Agreement. PNC Bank shall not be required to make any such delivery or payment until full payment shall have been made to PNC Bank of all of its fees, compensation, costs and expenses. PNC Bank shall have a security interest in and shall have a right of setoff against Property in such Portfolio's possession as security for the payment of such fees, compensation, costs and expenses. 2. Any defined terms not defined herein shall have the same meaning as given in the Agreement. 3. Miscellaneous. Except to the extent amended and supplemented hereby, the Agreement shall remain unchanged and in full force and effect and is hereby ratified and confirmed in all respects as amended and supplemented hereby. 6 IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the date and year first above written. THE CHARLES SCHWAB FAMILY OF FUNDS By: /s/ William J. Klipp -------------------------------------- William J. Klipp Title: Senior Vice President and Chief Operating Officer PNC BANK, NATIONAL ASSOCIATION By: /s/ Robert J. Perlsweig -------------------------------------- Robert J. Perlsweig Title: Senior Vice President EX-10.(B) 24 OPINION OF ROPES & GRAY 1 Exhibit 10(b) [ropes & gray letterhead] WRITER'S DIRECT DIAL NUMBER: (202) 626-3925 February 12, 1998 The Charles Schwab Family of Funds c/o Charles Schwab Investment Management, Inc. 101 Montgomery Street San Francisco, California 94104 Gentlemen: You have registered under the Securities Act of 1933, as amended (the "1933 Act") an indefinite number of shares of beneficial interest ("Shares") of The Charles Schwab Family of Funds ("Trust"), as permitted by Rule 24f-2 under the Investment Company Act of 1940, as amended (the "1940 Act"). You propose to file a post-effective amendment on Form N-1A (the "Post-Effective Amendment") to your Registration Statement as required by Section 10(a)(3) of the 1933 Act and the Rules thereunder and Section 8(b) of the 1940 Act and the rules thereunder. We have examined your Agreement and Declaration of Trust on file in the office of the Secretary of The Commonwealth of Massachusetts and the Clerk of the City of Boston. We have also examined a copy of your Bylaws and such other documents, receipts and records as we have deemed necessary for the purpose of this opinion. Based upon the foregoing, we are of the opinion that the issue and sale of the authorized but unissued Shares of the Trust have been duly authorized under Massachusetts law. Upon the original issue and sale of your authorized but unissued Shares of the Trust and upon receipt of the authorized consideration therefor in an amount not less than the net asset value of the Shares of the Trust established and in force at the 2 time of their sale (plus any applicable sales charge), the Shares of the Trust issued will be validly issued, fully paid and non-assessable. The Trust is an entity of the type commonly known as a "Massachusetts business trust." Under Massachusetts law, shareholders could, under certain circumstances, be held personally liable for the obligations of the Trust. However, the Agreement and Declaration of Trust provides for indemnification out of the property of a particular series of shares for all loss and expenses of any shareholder of that series held personally liable solely by reason of his being or having been a shareholder. Thus, the risk of shareholder liability is limited to circumstances in which that series of shares itself would be unable to meet its obligations. We understand that this opinion is to be used in connection with the filing of the Post-Effective Amendment. We consent to the filing of this opinion with and as part of your Post-Effective Amendment. Sincerely, /s/ Ropes & Gray ------------------------ Ropes & Gray EX-13.(A) 25 PURCHASE AGREEMENT 1 Exhibit 13(a) PURCHASE AGREEMENT The Charles Schwab Family of Funds ( the "Fund"), a Massachusetts business trust, and Charles Schwab & Co., Inc. ("Schwab"), a California corporation, hereby agree as follows: 1. The Fund hereby offers and Schwab hereby purchases 1000 Series E units of beneficial interest (representing interests in the Schwab U.S. Treasury Money Fund) of the Fund (such 1000 units of beneficial interest being hereafter collectively known as "Shares") at a price of $1.00 per Share. Schwab hereby acknowledges purchase of the Shares and the Fund hereby acknowledges receipt from Schwab of funds in the amount of $1,000 in full payment for the Shares. It is further agreed that no certificate for the Shares will be issued by the Fund. 2. Schwab represents and warrants to the Fund that the Shares are being acquired for investment purposes and not with a view to the distribution thereof. 3. The names "The Charles Schwab Family of Funds" and "Trustees of The Charles Schwab Family of Funds" refer, respectively to the Trust created and the Trustees as Trustees but not individually or personally, acting from time to time under an Agreement and Declaration of Trust dated as of October 20, 1989, to which reference is hereby made and a copy of which is on file at the Office of the Secretary of State of the Commonwealth of Massachusetts and elsewhere as required by law, and to any and all amendments thereto so filed or hereafter filed. The obligations of "The Charles Schwab Family of Funds" entered into in the name or on behalf thereof by any of the Trustees, representatives or agents are not made individually, but only in such-capacities, and are not binding upon any of the Trustees, Shareholders or representatives of the Trust personally, but bind only the assets of the Trust, and all persons dealing with any series of Shares of the Trust must look solely to the assets of the Trust must look solely to the assets for the Trust belonging to such series for the enforcement of any claims against the Trust. IN WITNESS WHEREOF, the parties hereto have executed the Agreement as of the 29th day of October , 1991. Attest: CHARLES SCHWAB FAMILY OF FUNDS /s/ Fran Cole By: /s/ Tom D. Seip - ------------------------------- ------------------------------ Name: Tom D. Seip Title: Chief Operating Officer Attest: CHARLES SCHWAB & CO., INC. /s/ Tim Cox By: /s/ David S. Pottruck - ------------------------------- ------------------------------ Name: David S. Pottruck Title: President EX-13.(B) 26 PURCHASE AGREEMENT 1 Exhibit 13(b) PURCHASE AGREEMENT The Charles Schwab Family of Funds (the "Trust"), a Massachusetts business trust, and Charles Schwab & Co., Inc. ("Schwab"), a California corporation, hereby agree as follows: 1. The Trust hereby offers and Schwab hereby purchases 1000 Series F units of beneficial interest (representing interests in the Schwab Value Advantage Money Fund) of the Trust (such 1000 units of beneficial interest being hereafter collectively known as "Shares") at a price of $1.00 per Share. Schwab hereby acknowledges purchase of the Shares and the Trust hereby acknowledges receipt from Schwab of funds in the amount of $1,000 in full payment for the Shares. It is further agreed that no certificate for the Shares will be issued by the Trust. 2. Schwab represents and warrants to the Trust that the Shares are being acquired for investment purposes and not with a view to the distribution thereof. 3. The names "The Charles Schwab Family of Funds" and "Trustees of The Charles Schwab Family of Funds" refer, respectively to the Trust created and the Trustees as Trustees but not individually or personally, acting from time to time under an Agreement and Declaration of Trust dated as of October 20, 1989, to which reference is hereby made and a copy of which is on file at the Office of the Secretary of State of the Commonwealth of Massachusetts and elsewhere as required by law, and to any and all amendments thereto so filed or hereafter filed. The obligations of "The Charles Schwab Family of Funds" entered into in the name or on behalf thereof by any of the Trustees, representatives or agents are not made individually, but only in such capacities, and are not binding upon any of the Trustees, Shareholders or representatives of the Trust personally, but bind only the assets of the Trust, and all persons dealing with any series of Shares of the Trust must look solely to the assets of the Trust must look solely to the assets for the Trust belonging to such series for the enforcement of any claims against the Trust. IN WITNESS WHEREOF, the parties hereto have executed the Agreement as of the 5th day of February, 1992. Attest: CHARLES SCHWAB FAMILY OF FUNDS /s/ Fran Cole By: /s/ Tom D. Seip - -------------------------------- ---------------------------------- Name: Tom D. Seip Title: Chief operating Officer Attest: CHARLES SCHWAB & CO., INC. /s/ Fran Cole By: /s/ David S. Pottruck - -------------------------------- ---------------------------------- Name: David S. Pottruck Title: President EX-13.(C) 27 PURCHSE AGREEMENT 1 Exhibit 13(c) PURCHASE AGREEMENT The Charles Schwab Family of Funds (the "Trust"), a Massachusetts business trust, and Charles Schwab & Co., Inc. ("Schwab"), a California corporation, hereby agree as follows: 1. The Trust hereby offers and Schwab hereby purchases 1000 units of beneficial interest of each of Series G and H of the Trust representing interests in the series of shares known as the Schwab Institutional Advantage Money Fund and the Schwab Retirement Money Fund, respectively, (such 1000 units of beneficial interest being hereafter collectively known as "Shares") at a price of $1.00 per Share. Schwab hereby acknowledges purchase of the Shares and the Trust hereby acknowledges receipt from Schwab of funds in the amount of $1,000 for each such series of the Trust in full payment for the Shares. It is further agreed that no certificates for the Shares will be issued by the Trust. 2. Schwab represents and warrants to the Trust that the Shares are being acquired for investment purposes and not with a view to the distribution thereof. 3. The names "The Charles Schwab Family of Funds" and "Trustees of The Charles Schwab Family of Funds" refer, respectively to the Trust created and the Trustees as Trustees but not individually or personally, acting from time to time under an Agreement and Declaration of Trust dated as of October 20, 1989, to which reference is hereby made and a copy of which is on file at the Office of the Secretary of State of the Commonwealth of Massachusetts and elsewhere as required by law, and to any and all amendments thereto so filed or hereafter filed. The obligations of "The Charles Schwab Family of Funds" entered into in the name or on behalf thereof by any of the Trustees, representatives or agents are not made individually, but only in such capacities, and are not binding upon any of the Trustees, Shareholders or representatives of the Trust personally, but bind only the assets of the Trust, and all persons dealing with any series of Shares of the Trust must look solely to the assets of the Trust must look solely to the assets for the Trust belonging to such series for the enforcement of any claims against the Trust. 2 IN WITNESS WHEREOF, the parties hereto have executed the Agreement as of the 23rd day of November 1993. Attest: THE CHARLES SCHWAB FAMILY OF FUNDS /s/ Ana Canillas By: /s/ William J. Klipp - ------------------------------ --------------------------------- Name: William J. Klipp Title: Senior Vice President Attest: CHARLES SCHWAB & CO., INC. /s/ Ana Canillas By: /s/ Tom D. Seip - ------------------------------ --------------------------------- Name: Tom D. Seip Title: Executive Vice President EX-13.(D) 28 PURCHASE AGREEMENT 1 Exhibit 13(d) PURCHASE AGREEMENT The Charles Schwab Family of Funds (the "Trust"), a Massachusetts business trust, and Charles Schwab & Co., Inc. ("Schwab"), a California corporation, hereby agree on the 8th day of November, 1994 as follows: 1. The Trust hereby offers and Schwab hereby purchases 1000 units of beneficial interest of Series J of the Trust representing interests in the series of shares known as the Schwab New York Tax-Exempt Money Fund (such 1000 units of beneficial interest being hereafter collectively known as "Shares") at a price of $1.00 per Share. Schwab hereby acknowledges purchase of the Shares and the Trust hereby acknowledges receipt from Schwab of funds in the amount of $1,000 in full payment for the Shares. It is further agreed that no certificate for the Shares will be issued by the Trust. 2. Schwab represents and warrants to the Trust that the Shares are being acquired for investment purposes and not with a view to the distribution thereof. 3. The name "The Charles Schwab Family of Funds" refers to the Trust and its Trustees, representatives or agents acting under a Declaration of Trust dated as of October 20, 1989. The obligations of the Trust entered into in the name of or on behalf of the Trust by any of the Trust's Trustees, representatives or agents are not made individually, but in each such individual's Trust capacity, and are not binding upon any of the Trustees, shareholders or representatives or agents of the Trust personally, but bind only the assets of the Trust belonging to such series for the enforcement of any claims against the Trust. Any amount owed by the Trust with respect to an obligation arising out of this Agreement shall be paid only out of the assets and property of the Schwab New York Tax-Exempt Money Fund, a series of shares of beneficial interest of the Trust. 2 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed on the day and year first written above. Attest: THE CHARLES SCHWAB FAMILY OF FUNDS /s/ Ana S. Canillas By: /s/ William J. Klipp - --------------------------- ------------------------------- Name: William J. Klipp Title: Senior Vice President and Chief Operating Officer Attest: CHARLES SCHWAB & CO., INC. /s/ Ana S. Canillas By: /s/ Elizabeth G. Sawi - --------------------------- ------------------------------- Name: Elizabeth G. Sawi Title: Executive Vice President EX-13.(E) 29 PURCHASE AGREEMENT 1 Exhibit 13(e) PURCHASE AGREEMENT The Charles Schwab Family of Funds (the "Trust"), a Massachusetts business trust, and Charles Schwab & Co., Inc. ("Schwab"), a California corporation, hereby agree as follows: 1. The Trust hereby offers and Schwab hereby purchases 1,000 units of beneficial interest of the Value Advantage Shares of the series of shares known as the Schwab Tax-Exempt Money Fund (such 1,000 units of beneficial interest being hereafter collectively known as "Shares") at a price of $1.00 per Share. Schwab hereby acknowledges purchase of the Shares and the Trust hereby acknowledges receipt from Schwab of funds in the amount of $1,000 for the Shares of the Trust in full payment for the Shares. It is further agreed that no certificate for the Shares will be issued by the Trust. 2. Schwab represents and warrants to the Trust that the Shares are being acquired for investment purposes and not with a view of the distribution thereof. 3. The names "The Charles Schwab Family of Funds" and "Trustees of The Charles Schwab Family of Funds" refer, respectively, to the Trust created and the Trustees as Trustees but not individually or personally, acting from time to time under an Agreement and Declaration of Trust dated as of October 20, 1989, as amended and restated on May 9, 1995, to which reference is hereby made and a copy of which is on file at the Office of the Secretary of State of the Commonwealth of Massachusetts and elsewhere as required by law, and to any and all amendments thereto so filed or hereafter filed. The obligations of "The Charles Schwab Family of Funds" entered into in the name or on behalf thereof by any of the Trustees, representatives or agents are not made individually, but only in such capacities, and are not binding upon any of the Trustees, Shareholders or representatives of the Trust personally, but bind only the assets of the Trust, and all persons dealing with any series of Shares of the Trust must look solely to the assets of the Trust belonging to such series for the enforcement of any claims against the Trust. IN WITNESS WHEREOF, the parties hereto have executed the Agreement as of the 5th day of June 1995. THE CHARLES SCHWAB FAMILY OF FUNDS By: /s/ William J. Klipp ----------------------------------------- Name: William J. Klipp Title: Senior Vice President, Chief Operating Officer and Trustee CHARLES SCHWAB & CO., INC. By: /s/ Elizabeth G. Sawi ----------------------------------------- Name: Elizabeth G. Sawi Title: Executive Vice President EX-13.(F) 30 PURCHASE AGREEMENT 1 Exhibit 13(f) PURCHASE AGREEMENT The Charles Schwab Family of Funds (the "Trust"), a Massachusetts business trust, and Charles Schwab & Co., Inc. ("Schwab"), a California corporation, hereby agree as follows: 1. The Trust hereby offers and Schwab hereby purchases 1,000 units of beneficial interest of the Value Advantage Shares of the series of shares known as the Schwab California Tax-Exempt Money Fund (such 1,000 units of beneficial interest being hereafter collectively known as "Shares") at a price of $1.00 per Share. Schwab hereby acknowledges purchase of the Shares and the Trust hereby acknowledges receipt from Schwab of funds in the amount of $1,000 for the Shares of the Trust in full payment for the Shares. It is further agreed that no certificate for the Shares will be issued by the Trust. 2. Schwab represents and warrants to the Trust that the Shares are being acquired for investment purposes and not with a view of the distribution thereof. 3. The names "The Charles Schwab Family of Funds" and "Trustees of The Charles Schwab Family of Funds" refer, respectively, to the Trust created and the Trustees as Trustees but not individually or personally, acting from time to time under an Agreement and Declaration of Trust dated as of October 20, 1989, as amended and restated on May 9, 1995, to which reference is hereby made and a copy of which is no file at the Office of the Secretary of State of the Commonwealth of Massachusetts and elsewhere as required by law, and to any and all amendments thereto so filed or hereafter filed. The obligations of "The Charles Schwab Family of Funds" entered into in the name or on behalf thereof by any of the Trustees, representatives or agents are not made individually, but only in such capacities, and are not binding upon any of the Trustees, Shareholders or representatives of the Trust personally, but bind only the assets of the Trust, and all persons dealing with any series of Shares of the Trust must look solely to the assets of the Trust belonging to such series for the enforcement of any claims against the Trust. IN WITNESS WHEREOF, the parties hereto have executed the Agreement as of the 5th day of June 1995. THE CHARLES SCHWAB FAMILY OF FUNDS By: /s/ William J. Klipp --------------------------------------- Name: William J. Klipp Title: Senior Vice President, Chief Operating Officer and Trustee CHARLES SCHWAB & CO., INC. By: /s/ Elizabeth G. Sawi --------------------------------------- Name: Elizabeth G. Sawi Title: Executive Vice President EX-13.(G) 31 PURCHASE AGREEMENT 1 Exhibit 13(g) PURCHASE AGREEMENT The Charles Schwab Family of Funds (the "Trust"), a Massachusetts business trust, and Charles Schwab & Co., Inc. ("Schwab"), a California corporation, hereby agree as follows: 1. The Trust hereby offers and Schwab hereby purchases 1,000 units of beneficial interest of the Value Advantage Shares of the series of shares known as the Schwab New York Tax-Exempt Money Fund (such 1,000 units of beneficial interest being hereafter collectively known as "Shares") at a price of $1.00 per Share. Schwab hereby acknowledges purchase of the Shares and the Trust hereby acknowledges receipt from Schwab of funds in the amount of $1,000 for the Shares of the Trust in full payment for the Shares. It is further agreed that no certificate for the Shares will be issued by the Trust. 2. Schwab represents and warrants to the Trust that the Shares are being acquired for investment purposes and not with a view of the distribution thereof. 3. The names "The Charles Schwab Family of Funds" and "Trustees of The Charles Schwab Family of Funds" refer, respectively, to the Trust created and the Trustees as Trustees but not individually or personally, acting from time to time under an Agreement and Declaration of Trust dated as of October 20, 1989, as amended and restated on May 9, 1995, to which reference is hereby made and a copy of which is on file at the Office of the Secretary of State of the Commonwealth of Massachusetts and elsewhere as required by law, and to any and all amendments thereto so filed or hereafter filed. The obligations of "The Charles Schwab Family of Funds" entered into in the name or on behalf thereof by any of the Trustees, representatives or agents are not made individually, but only in such capacities, and are not binding upon any of the Trustees, Shareholders or representatives of the Trust personally, but bind only the assets of the Trust, and all persons dealing with any series of Shares of the Trust must look solely to the assets of the Trust belonging to such series for the enforcement of any claims against the Trust. IN WITNESS WHEREOF, the parties hereto have executed the Agreement as of the 5th day of June 1995. THE CHARLES SCHWAB FAMILY OF FUNDS By: /s/ William J. Klipp --------------------------------------- Name: William J. Klipp Title: Senior Vice President, Chief Operating Officer and Trustee CHARLES SCHWAB & CO., INC. By: /s/ Elizabeth G. Sawi --------------------------------------- Name: Elizabeth G. Sawi Title: Executive Vice President -2- EX-13.(I) 32 PURCHASE AGREEMENT 1 Exhibit (13)(i) PURCHASE AGREEMENT The Charles Schwab Family of Funds (the "Trust"), a Massachusetts business trust, and Charles Schwab & Co., Inc. ("Schwab"), a California corporation, hereby agree as follows: 1. The Trust hereby offers and Schwab hereby purchases 1000 units of beneficial interest of the Sweep Shares of the series of shares known as the Schwab New Jersey Municipal Money Fund (such 1000 units of beneficial interest being hereafter collectively known as "Shares") at a price of $1.00 per Share. Schwab hereby acknowledges purchase of the Shares and the Trust hereby acknowledges receipt from Schwab of funds in the amount of $1,000 for the Shares of the Trust in full payment for the Shares. It is further agreed that no certificate for the Shares will be issued by the Trust. 2. Schwab represents and warrants to the Trust that the Shares are being acquired for investment purposes and not with a view of the distribution thereof. 3. The names "The Charles Schwab Family of Funds" and "Trustees of The Charles Schwab Family of Funds" refer, respectively, to the Trust created and the Trustees as Trustees but not individually or personally, acting from time to time under an Agreement and Declaration of Trust dated as of October 20, 1989, as amended and restated on May 9, 1995, to which reference is hereby made and a copy of which is on file at the Office of the Secretary of State of the Commonwealth of Massachusetts and elsewhere as required by law, and to any and all amendments thereto so filed or hereafter filed. The obligations of "The Charles Schwab Family of Funds" entered into in the name or on behalf thereof by any of the Trustees, representatives or agents are not made individually, but only in such capacities, and are not binding upon any of the Trustees, Shareholders or representatives of the Trust personally, but bind only the assets of the Trust, and all persons dealing with any series of Shares of the Trust must look solely to the assets of the Trust belonging to such series for the enforcement of any claims against the Trust. IN WITNESS WHEREOF, the parties hereto have executed the Agreement as of the 30th day of January 1998. Attest: THE CHARLES SCHWAB FAMILY OF FUNDS By: /s/ William J. Klipp - ---------------------- ------------------------------------ Name: William J. Klipp Title: Executive Vice President and Chief Operating Officer Attest: CHARLES SCHWAB & CO., INC. By: /s/ Colleen M. Hummer - ---------------------- ------------------------------------ Name: Colleen M. Hummer Title: Senior vice President 1 EX-13.(J) 33 PURCHASE AGREEMENT 1 Exhibit (13)(j) PURCHASE AGREEMENT The Charles Schwab Family of Funds (the "Trust"), a Massachusetts business trust, and Charles Schwab & Co., Inc. ("Schwab"), a California corporation, hereby agree as follows: 1. The Trust hereby offers and Schwab hereby purchases 10000 units of beneficial interest of the Sweep Shares of the series of shares known as the Schwab Pennsylvania Municipal Money Fund (such 1000 units of beneficial interest being hereafter collectively known as "Shares") at a price of $1.00 per Share. Schwab hereby acknowledges purchase of the Shares and the Trust hereby acknowledges receipt from Schwab of funds in the amount of $1000 for the Shares of the Trust in full payment for the Shares. It is further agreed that no certificate for the Shares will be issued by the Trust. 2. Schwab represents and warrants to the Trust that the Shares are being acquired for investment purposes and not with a view of the distribution thereof. 3. The names "The Charles Schwab Family of Funds" and "Trustees of The Charles Schwab Family of Funds" refer, respectively, to the Trust created and the Trustees as Trustees but not individually or personally, acting from time to time under an Agreement and Declaration of Trust dated as of October 20, 1989, as amended and restated on May 9, 1995, to which reference is hereby made and a copy of which is on file at the Office of the Secretary of State of the Commonwealth of Massachusetts and elsewhere as required by law, and to any and all amendments thereto so filed or hereafter filed. The obligations of "The Charles Schwab Family of Funds" entered into in the name or on behalf thereof by any of the Trustees, representatives or agents are not made individually, but only in such capacities, and are not binding upon any of the Trustees, Shareholders or representatives of the Trust personally, but bind only the assets of the Trust, and all persons dealing with any series of Shares of the Trust must look solely to the assets of the Trust belonging to such series for the enforcement of any claims against the Trust. IN WITNESS WHEREOF, the parties hereto have executed the Agreement as of the 30th day of January, 1998. Attest: THE CHARLES SCHWAB FAMILY OF FUNDS By: /s/ William J. Klipp - ---------------------- ------------------------------------ Name: William J. Klipp Title: Executive Vice President and Chief Operating Officer Attest: CHARLES SCHWAB & CO., INC. By: /s/ Colleen M. Hummer - ---------------------- ------------------------------------ Name: Colleen M. Hummer Title: Senior vice President EX-13.(K) 34 FORM OF PURCHASE AGREEMENT 1 FORM OF PURCHASE AGREEMENT The Charles Schwab Family of Funds (the "Trust"), a Massachusetts business trust, and Charles Schwab & Co., Inc. ("Schwab"), a California corporation, hereby agree as follows: 1. The Trust hereby offers and Schwab hereby purchases units of beneficial interest of the Sweep Shares of the series of shares known as the Schwab Florida Municipal Money Fund (such units of beneficial interest being hereafter collectively known as "Shares") at a price of $1.00 per Share. Schwab hereby acknowledges purchase of the Shares and the Trust hereby acknowledges receipt from Schwab of funds in the amount of $ for the Shares of the Trust in full payment for the Shares. It is further agreed that no certificate for the Shares will be issued by the Trust. 2. Schwab represents and warrants to the Trust that the Shares are being acquired for investment purposes and not with a view of the distribution thereof. 3. The names "The Charles Schwab Family of Funds" and "Trustees of The Charles Schwab Family of Funds" refer, respectively, to the Trust created and the Trustees as Trustees but not individually or personally, acting from time to time under an Agreement and Declaration of Trust dated as of October 20, 1989, as amended and restated on May 9, 1995, to which reference is hereby made and a copy of which is on file at the Office of the Secretary of State of the Commonwealth of Massachusetts and elsewhere as required by law, and to any and all amendments thereto so filed or hereafter filed. The obligations of "The Charles Schwab Family of Funds" entered into in the name or on behalf thereof by any of the Trustees, representatives or agents are not made individually, but only in such capacities, and are not binding upon any of the Trustees, Shareholders or representatives of the Trust personally, but bind only the assets of the Trust, and all persons dealing with any series of Shares of the Trust must look solely to the assets of the Trust belonging to such series for the enforcement of any claims against the Trust. 2 IN WITNESS WHEREOF, the parties hereto have executed the Agreement as of the day of ________, 1998. Attest: THE CHARLES SCHWAB FAMILY OF FUNDS By: Name: Title: Attest: CHARLES SCHWAB & CO., INC. By: Name: Title: EX-17.(A) 35 FDS FOR SCHWAB MONEY MARKET FUND 1 Exhibit (17)(a) [ARTICLE] 6 [CIK] 0000857156 [NAME] SCHWAB FAMILY OF FUNDS [SERIES] [NUMBER] 1 [NAME] SCHWAB MONEY MARKET FUND [MULTIPLIER] 1,000 [PERIOD-TYPE] 12-MOS [FISCAL-YEAR-END] DEC-31-1996 [PERIOD-START] JAN-01-1996 [PERIOD-END] DEC-31-1996 [INVESTMENTS-AT-COST] 18099442 [INVESTMENTS-AT-VALUE] 18099442 [RECEIVABLES] 95770 [ASSETS-OTHER] 246 [OTHER-ITEMS-ASSETS] 0 [TOTAL-ASSETS] 18195458 [PAYABLE-FOR-SECURITIES] 0 [SENIOR-LONG-TERM-DEBT] 0 [OTHER-ITEMS-LIABILITIES] 111787 [TOTAL-LIABILITIES] 111787 [SENIOR-EQUITY] 0 [PAID-IN-CAPITAL-COMMON] 18084007 [SHARES-COMMON-STOCK] 18084007 [SHARES-COMMON-PRIOR] 14010737 [ACCUMULATED-NII-CURRENT] 0 [OVERDISTRIBUTION-NII] 0 [ACCUMULATED-NET-GAINS] (336) [OVERDISTRIBUTION-GAINS] 0 [ACCUM-APPREC-OR-DEPREC] 0 [NET-ASSETS] 18083671 [DIVIDEND-INCOME] 0 [INTEREST-INCOME] 885054 [OTHER-INCOME] 0 [EXPENSES-NET] 119663 [NET-INVESTMENT-INCOME] 765391 [REALIZED-GAINS-CURRENT] 14 [APPREC-INCREASE-CURRENT] 0 [NET-CHANGE-FROM-OPS] 765405 [EQUALIZATION] 0 [DISTRIBUTIONS-OF-INCOME] 765391 [DISTRIBUTIONS-OF-GAINS] 0 [DISTRIBUTIONS-OTHER] 0 [NUMBER-OF-SHARES-SOLD] 50575596 [NUMBER-OF-SHARES-REDEEMED] 47235885 [SHARES-REINVESTED] 733559 [NET-CHANGE-IN-ASSETS] 4073270 [ACCUMULATED-NII-PRIOR] 0 [ACCUMULATED-GAINS-PRIOR] (350) [OVERDISTRIB-NII-PRIOR] 0 [OVERDIST-NET-GAINS-PRIOR] 0 [GROSS-ADVISORY-FEES] 65520 [INTEREST-EXPENSE] 0 [GROSS-EXPENSE] 142188 [AVERAGE-NET-ASSETS] 15955087 [PER-SHARE-NAV-BEGIN] 1.00 [PER-SHARE-NII] 0.05 [PER-SHARE-GAIN-APPREC] 0 [PER-SHARE-DIVIDEND] 0.05 [PER-SHARE-DISTRIBUTIONS] 0 [RETURNS-OF-CAPITAL] 0 [PER-SHARE-NAV-END] 1.00 [EXPENSE-RATIO] 0.75 [AVG-DEBT-OUTSTANDING] 0 [AVG-DEBT-PER-SHARE] 0
EX-17.(B) 36 FDS FOR SCHWAB GOVERNMENT MONEY FUND 1 Exhibit (17)(b) [ARTICLE] 6 [CIK] 0000857156 [NAME] SCHWAB FAMILY OF FUNDS [SERIES] [NUMBER] 2 [NAME] SCHWAB GOVERNMENT MONEY FUND [MULTIPLIER] 1,000 [PERIOD-TYPE] 12-MOS [FISCAL-YEAR-END] DEC-31-1996 [PERIOD-START] JAN-01-1996 [PERIOD-END] DEC-31-1996 [INVESTMENTS-AT-COST] 1985431 [INVESTMENTS-AT-VALUE] 1985431 [RECEIVABLES] 13777 [ASSETS-OTHER] 52 [OTHER-ITEMS-ASSETS] 0 [TOTAL-ASSETS] 1999260 [PAYABLE-FOR-SECURITIES] 0 [SENIOR-LONG-TERM-DEBT] 0 [OTHER-ITEMS-LIABILITIES] 12398 [TOTAL-LIABILITIES] 12398 [SENIOR-EQUITY] 0 [PAID-IN-CAPITAL-COMMON] 1987318 [SHARES-COMMON-STOCK] 1987318 [SHARES-COMMON-PRIOR] 1884838 [ACCUMULATED-NII-CURRENT] 0 [OVERDISTRIBUTION-NII] 0 [ACCUMULATED-NET-GAINS] (456) [OVERDISTRIBUTION-GAINS] 0 [ACCUM-APPREC-OR-DEPREC] 0 [NET-ASSETS] 1986862 [DIVIDEND-INCOME] 0 [INTEREST-INCOME] 107152 [OTHER-INCOME] 0 [EXPENSES-NET] 14666 [NET-INVESTMENT-INCOME] 92486 [REALIZED-GAINS-CURRENT] (187) [APPREC-INCREASE-CURRENT] 0 [NET-CHANGE-FROM-OPS] 92299 [EQUALIZATION] 0 [DISTRIBUTIONS-OF-INCOME] 92486 [DISTRIBUTIONS-OF-GAINS] 0 [DISTRIBUTIONS-OTHER] 0 [NUMBER-OF-SHARES-SOLD] 4805031 [NUMBER-OF-SHARES-REDEEMED] 4793775 [SHARES-REINVESTED] 91224 [NET-CHANGE-IN-ASSETS] 102293 [ACCUMULATED-NII-PRIOR] 0 [ACCUMULATED-GAINS-PRIOR] (269) [OVERDISTRIB-NII-PRIOR] 0 [OVERDIST-NET-GAINS-PRIOR] 0 [GROSS-ADVISORY-FEES] 8518 [INTEREST-EXPENSE] 0 [GROSS-EXPENSE] 17931 [AVERAGE-NET-ASSETS] 1955610 [PER-SHARE-NAV-BEGIN] 1.00 [PER-SHARE-NII] 0.04 [PER-SHARE-GAIN-APPREC] 0 [PER-SHARE-DIVIDEND] 0.04 [PER-SHARE-DISTRIBUTIONS] 0 [RETURNS-OF-CAPITAL] 0 [PER-SHARE-NAV-END] 1.00 [EXPENSE-RATIO] 0.74 [AVG-DEBT-OUTSTANDING] 0 [AVG-DEBT-PER-SHARE] 0
EX-17.(C) 37 FDS FOR SCHWAB MUNICIPAL MONEY FUND-SWEEP SHARES 1 Exhibit (17)(c) [ARTICLE] 6 [CIK] 0000857156 [NAME] SCHWAB FAMILY OF FUNDS [SERIES] [NUMBER] 3 [NAME] SCHWAB MUNICIPAL MONEY FUND-SWEEP SHARES [MULTIPLIER] 1,000 [PERIOD-TYPE] 12-MOS [FISCAL-YEAR-END] DEC-31-1996 [PERIOD-START] JAN-31-1996 [PERIOD-END] DEC-31-1996 [INVESTMENTS-AT-COST] 4653310 [INVESTMENTS-AT-VALUE] 4653310 [RECEIVABLES] 39554 [ASSETS-OTHER] 329 [OTHER-ITEMS-ASSETS] 0 [TOTAL-ASSETS] 4693193 [PAYABLE-FOR-SECURITIES] 194494 [SENIOR-LONG-TERM-DEBT] 0 [OTHER-ITEMS-LIABILITIES] 21700 [TOTAL-LIABILITIES] 216194 [SENIOR-EQUITY] 0 [PAID-IN-CAPITAL-COMMON] 3871203 [SHARES-COMMON-STOCK] 3871203 [SHARES-COMMON-PRIOR] 3405684 [ACCUMULATED-NII-CURRENT] 0 [OVERDISTRIBUTION-NII] 0 [ACCUMULATED-NET-GAINS] (2325) [OVERDISTRIBUTION-GAINS] 0 [ACCUM-APPREC-OR-DEPREC] 0 [NET-ASSETS] 3868878 [DIVIDEND-INCOME] 0 [INTEREST-INCOME] 128912 [OTHER-INCOME] 0 [EXPENSES-NET] 24000 [NET-INVESTMENT-INCOME] 104911 [REALIZED-GAINS-CURRENT] (477) [APPREC-INCREASE-CURRENT] 0 [NET-CHANGE-FROM-OPS] 104434 [EQUALIZATION] 0 [DISTRIBUTIONS-OF-INCOME] 104911 [DISTRIBUTIONS-OF-GAINS] 0 [DISTRIBUTIONS-OTHER] 0 [NUMBER-OF-SHARES-SOLD] 12710212 [NUMBER-OF-SHARES-REDEEMED] 12347201 [SHARES-REINVESTED] 102508 [NET-CHANGE-IN-ASSETS] 465042 [ACCUMULATED-NII-PRIOR] 0 [ACCUMULATED-GAINS-PRIOR] (1847) [OVERDISTRIB-NII-PRIOR] 0 [OVERDIST-NET-GAINS-PRIOR] 0 [GROSS-ADVISORY-FEES] 15180 [INTEREST-EXPENSE] 0 [GROSS-EXPENSE] 32633 [AVERAGE-NET-ASSETS] 3636389 [PER-SHARE-NAV-BEGIN] 1.00 [PER-SHARE-NII] 0.03 [PER-SHARE-GAIN-APPREC] 0 [PER-SHARE-DIVIDEND] 0.03 [PER-SHARE-DISTRIBUTIONS] 0 [RETURNS-OF-CAPITAL] 0 [PER-SHARE-NAV-END] 1.00 [EXPENSE-RATIO] 0.66 [AVG-DEBT-OUTSTANDING] 0 [AVG-DEBT-PER-SHARE] 0
EX-17.(D) 38 FDS FOR SCHWAB MUNICIPAL MONEY FUND-VA.ADV.SHARES 1 Exhibit (17)(d) [ARTICLE] 6 [CIK] 0000857156 [NAME] SCHWAB FAMILY OF FUNDS [SERIES] [NUMBER] 4 [NAME] SCHWAB MUNICIPAL MONEY FUND-VALUE ADVANTAGE SHARES [MULTIPLIER] 1,000 [PERIOD-TYPE] 12-MOS [FISCAL-YEAR-END] DEC-31-1996 [PERIOD-START] JAN-01-1996 [PERIOD-END] DEC-31-1996 [INVESTMENTS-AT-COST] 4653310 [INVESTMENTS-AT-VALUE] 4653310 [RECEIVABLES] 39554 [ASSETS-OTHER] 329 [OTHER-ITEMS-ASSETS] 0 [TOTAL-ASSETS] 4693193 [PAYABLE-FOR-SECURITIES] 194494 [SENIOR-LONG-TERM-DEBT] 0 [OTHER-ITEMS-LIABILITIES] 21700 [TOTAL-LIABILITIES] 216194 [SENIOR-EQUITY] 0 [PAID-IN-CAPITAL-COMMON] 608121 [SHARES-COMMON-STOCK] 608121 [SHARES-COMMON-PRIOR] 160683 [ACCUMULATED-NII-CURRENT] 0 [OVERDISTRIBUTION-NII] 0 [ACCUMULATED-NET-GAINS] 0 [OVERDISTRIBUTION-GAINS] 0 [ACCUM-APPREC-OR-DEPREC] 0 [NET-ASSETS] 608121 [DIVIDEND-INCOME] 0 [INTEREST-INCOME] 13542 [OTHER-INCOME] 0 [EXPENSES-NET] 1713 [NET-INVESTMENT-INCOME] 11830 [REALIZED-GAINS-CURRENT] (40) [APPREC-INCREASE-CURRENT] 0 [NET-CHANGE-FROM-OPS] 11790 [EQUALIZATION] 0 [DISTRIBUTIONS-OF-INCOME] 11830 [DISTRIBUTIONS-OF-GAINS] 0 [DISTRIBUTIONS-OTHER] 0 [NUMBER-OF-SHARES-SOLD] 994884 [NUMBER-OF-SHARES-REDEEMED] 557136 [SHARES-REINVESTED] 9691 [NET-CHANGE-IN-ASSETS] 447438 [ACCUMULATED-NII-PRIOR] 0 [ACCUMULATED-GAINS-PRIOR] 0 [OVERDISTRIB-NII-PRIOR] 0 [OVERDIST-NET-GAINS-PRIOR] 0 [GROSS-ADVISORY-FEES] 1588 [INTEREST-EXPENSE] 0 [GROSS-EXPENSE] 2871 [AVERAGE-NET-ASSETS] 380638 [PER-SHARE-NAV-BEGIN] 1.00 [PER-SHARE-NII] 0.03 [PER-SHARE-GAIN-APPREC] 0 [PER-SHARE-DIVIDEND] 0.03 [PER-SHARE-DISTRIBUTIONS] 0 [RETURNS-OF-CAPITAL] 0 [PER-SHARE-NAV-END] 1.00 [EXPENSE-RATIO] 0.45 [AVG-DEBT-OUTSTANDING] 0 [AVG-DEBT-PER-SHARE] 0
EX-17.(E) 39 FDS FOR SCHWAB CA MUNICIPAL MONEY FUND-SWEEP SHRS 1 Exhibit (17)(e) [ARTICLE] 6 [CIK] 0000857156 [NAME] SCHWAB FAMILY OF FUNDS [SERIES] [NUMBER] 5 [NAME] SCHWAB CALIFORNIA MUNICIPAL MONEY FUND-SWEEP SHARES [MULTIPLIER] 1,000 [PERIOD-TYPE] 12-MOS [FISCAL-YEAR-END] DEC-31-1996 [PERIOD-START] JAN-01-1996 [PERIOD-END] DEC-31-1996 [INVESTMENTS-AT-COST] 2318941 [INVESTMENTS-AT-VALUE] 2318941 [RECEIVABLES] 19905 [ASSETS-OTHER] 158 [OTHER-ITEMS-ASSETS] 0 [TOTAL-ASSETS] 2339004 [PAYABLE-FOR-SECURITIES] 1300 [SENIOR-LONG-TERM-DEBT] 0 [OTHER-ITEMS-LIABILITIES] 14106 [TOTAL-LIABILITIES] 15406 [SENIOR-EQUITY] 0 [PAID-IN-CAPITAL-COMMON] 1816835 [SHARES-COMMON-STOCK] 1816835 [SHARES-COMMON-PRIOR] 1578359 [ACCUMULATED-NII-CURRENT] 0 [OVERDISTRIBUTION-NII] 0 [ACCUMULATED-NET-GAINS] (732) [OVERDISTRIBUTION-GAINS] 0 [ACCUM-APPREC-OR-DEPREC] 0 [NET-ASSETS] 1816103 [DIVIDEND-INCOME] 0 [INTEREST-INCOME] 56750 [OTHER-INCOME] 0 [EXPENSES-NET] 10800 [NET-INVESTMENT-INCOME] 45951 [REALIZED-GAINS-CURRENT] (68) [APPREC-INCREASE-CURRENT] 0 [NET-CHANGE-FROM-OPS] 45893 [EQUALIZATION] 0 [DISTRIBUTIONS-OF-INCOME] 45951 [DISTRIBUTIONS-OF-GAINS] 0 [DISTRIBUTIONS-OTHER] 0 [NUMBER-OF-SHARES-SOLD] 5448674 [NUMBER-OF-SHARES-REDEEMED] 5255105 [SHARES-REINVESTED] 44907 [NET-CHANGE-IN-ASSETS] 238407 [ACCUMULATED-NII-PRIOR] 0 [ACCUMULATED-GAINS-PRIOR] (664) [OVERDISTRIB-NII-PRIOR] 0 [OVERDIST-NET-GAINS-PRIOR] 0 [GROSS-ADVISORY-FEES] 7231 [INTEREST-EXPENSE] 0 [GROSS-EXPENSE] 15264 [AVERAGE-NET-ASSETS] 1661488 [PER-SHARE-NAV-BEGIN] 1.00 [PER-SHARE-NII] 0.03 [PER-SHARE-GAIN-APPREC] 0 [PER-SHARE-DIVIDEND] 0.03 [PER-SHARE-DISTRIBUTIONS] 0 [RETURNS-OF-CAPITAL] 0 [PER-SHARE-NAV-END] 1.00 [EXPENSE-RATIO] 0.65 [AVG-DEBT-OUTSTANDING] 0 [AVG-DEBT-PER-SHARE] 0
EX-17.(F) 40 FDS FOR SCHWAB CA MUNI MONEY FUND-VAL ADV SHARES 1 Exhibit (17)(f) [ARTICLE] 6 [CIK] 0000857156 [NAME] SCHWAB FAMILY OF FUNDS [SERIES] [NUMBER] 6 [NAME] SCHWAB CALIFORNIA MUNICIPAL MONEY FUND-VALUE ADVANTAGE SHARES [MULTIPLIER] 1,000 [PERIOD-TYPE] 12-MOS [FISCAL-YEAR-END] DEC-31-1996 [PERIOD-START] JAN-01-1996 [PERIOD-END] DEC-31-1996 [INVESTMENTS-AT-COST] 2318941 [INVESTMENTS-AT-VALUE] 2318941 [RECEIVABLES] 19905 [ASSETS-OTHER] 158 [OTHER-ITEMS-ASSETS] 0 [TOTAL-ASSETS] 2339004 [PAYABLE-FOR-SECURITIES] 1300 [SENIOR-LONG-TERM-DEBT] 0 [OTHER-ITEMS-LIABILITIES] 14106 [TOTAL-LIABILITIES] 15406 [SENIOR-EQUITY] 0 [PAID-IN-CAPITAL-COMMON] 507495 [SHARES-COMMON-STOCK] 507495 [SHARES-COMMON-PRIOR] 108008 [ACCUMULATED-NII-CURRENT] 0 [OVERDISTRIBUTION-NII] 0 [ACCUMULATED-NET-GAINS] 0 [OVERDISTRIBUTION-GAINS] 0 [ACCUM-APPREC-OR-DEPREC] 0 [NET-ASSETS] 507495 [DIVIDEND-INCOME] 0 [INTEREST-INCOME] 10469 [OTHER-INCOME] 0 [EXPENSES-NET] 1372 [NET-INVESTMENT-INCOME] 9096 [REALIZED-GAINS-CURRENT] 0 [APPREC-INCREASE-CURRENT] 0 [NET-CHANGE-FROM-OPS] 9086 [EQUALIZATION] 0 [DISTRIBUTIONS-OF-INCOME] 9096 [DISTRIBUTIONS-OF-GAINS] 0 [DISTRIBUTIONS-OTHER] 0 [NUMBER-OF-SHARES-SOLD] 782260 [NUMBER-OF-SHARES-REDEEMED] 389977 [SHARES-REINVESTED] 7206 [NET-CHANGE-IN-ASSETS] 399488 [ACCUMULATED-NII-PRIOR] 0 [ACCUMULATED-GAINS-PRIOR] 0 [OVERDISTRIB-NII-PRIOR] 0 [OVERDIST-NET-GAINS-PRIOR] 0 [GROSS-ADVISORY-FEES] 1325 [INTEREST-EXPENSE] 0 [GROSS-EXPENSE] 2349 [AVERAGE-NET-ASSETS] 304915 [PER-SHARE-NAV-BEGIN] 1.00 [PER-SHARE-NII] 0.03 [PER-SHARE-GAIN-APPREC] 0 [PER-SHARE-DIVIDEND] 0.03 [PER-SHARE-DISTRIBUTIONS] 0 [RETURNS-OF-CAPITAL] 0 [PER-SHARE-NAV-END] 1.00 [EXPENSE-RATIO] 0.45 [AVG-DEBT-OUTSTANDING] 0 [AVG-DEBT-PER-SHARE] 0
EX-17.(G) 41 FDS FOR SCHWAB US TREASURY MONEY FUND 1 Exhibit (17)(g) [ARTICLE] 6 [CIK] 0000857156 [NAME] SCHWAB FAMILY OF FUNDS [SERIES] [NUMBER] 7 [NAME] SCHWAB U.S. TREASURY MONEY FUND [MULTIPLIER] 1,000 [PERIOD-TYPE] 12-MOS [FISCAL-YEAR-END] DEC-31-1996 [PERIOD-START] JAN-01-1996 [PERIOD-END] DEC-31-1996 [INVESTMENTS-AT-COST] 1403749 [INVESTMENTS-AT-VALUE] 1403749 [RECEIVABLES] 26251 [ASSETS-OTHER] 38 [OTHER-ITEMS-ASSETS] 0 [TOTAL-ASSETS] 1430038 [PAYABLE-FOR-SECURITIES] 0 [SENIOR-LONG-TERM-DEBT] 0 [OTHER-ITEMS-LIABILITIES] 8366 [TOTAL-LIABILITIES] 8366 [SENIOR-EQUITY] 0 [PAID-IN-CAPITAL-COMMON] 1421929 [SHARES-COMMON-STOCK] 1421929 [SHARES-COMMON-PRIOR] 1193821 [ACCUMULATED-NII-CURRENT] 0 [OVERDISTRIBUTION-NII] 0 [ACCUMULATED-NET-GAINS] (257) [OVERDISTRIBUTION-GAINS] 0 [ACCUM-APPREC-OR-DEPREC] 0 [NET-ASSETS] 1421672 [DIVIDEND-INCOME] 0 [INTEREST-INCOME] 67729 [OTHER-INCOME] 0 [EXPENSES-NET] 8279 [NET-INVESTMENT-INCOME] 59450 [REALIZED-GAINS-CURRENT] (125) [APPREC-INCREASE-CURRENT] 0 [NET-CHANGE-FROM-OPS] 59325 [EQUALIZATION] 0 [DISTRIBUTIONS-OF-INCOME] 59325 [DISTRIBUTIONS-OF-GAINS] 0 [DISTRIBUTIONS-OTHER] 0 [NUMBER-OF-SHARES-SOLD] 3744370 [NUMBER-OF-SHARES-REDEEMED] 3572884 [SHARES-REINVESTED] 56622 [NET-CHANGE-IN-ASSETS] 227983 [ACCUMULATED-NII-PRIOR] 0 [ACCUMULATED-GAINS-PRIOR] (132) [OVERDISTRIB-NII-PRIOR] 0 [OVERDIST-NET-GAINS-PRIOR] 0 [GROSS-ADVISORY-FEES] 5722 [INTEREST-EXPENSE] 0 [GROSS-EXPENSE] 11937 [AVERAGE-NET-ASSETS] 1273735 [PER-SHARE-NAV-BEGIN] 1.00 [PER-SHARE-NII] 0.03 [PER-SHARE-GAIN-APPREC] 0 [PER-SHARE-DIVIDEND] 0.03 [PER-SHARE-DISTRIBUTIONS] 0 [RETURNS-OF-CAPITAL] 0 [PER-SHARE-NAV-END] 1.00 [EXPENSE-RATIO] 0.73 [AVG-DEBT-OUTSTANDING] 0 [AVG-DEBT-PER-SHARE] 0
EX-17.(H) 42 FDS FOR SCHWAB VALUE ADVANTAGE MONEY FUND-INV SHRS 1 Exhibit (17)(h) [ARTICLE] 6 [CIK] 0000857156 [NAME] SCHWAB FAMILY OF FUNDS [SERIES] [NUMBER] 8 [NAME] SCHWAB VALUE ADVANTAGE MONEY FUND [MULTIPLIER] 1,000 [PERIOD-TYPE] 12-MOS [FISCAL-YEAR-END] DEC-31-1996 [PERIOD-START] JAN-01-1996 [PERIOD-END] DEC-31-1996 [INVESTMENTS-AT-COST] 10511689 [INVESTMENTS-AT-VALUE] 10511689 [RECEIVABLES] 135460 [ASSETS-OTHER] 162 [OTHER-ITEMS-ASSETS] 0 [TOTAL-ASSETS] 10647311 [PAYABLE-FOR-SECURITIES] 0 [SENIOR-LONG-TERM-DEBT] 0 [OTHER-ITEMS-LIABILITIES] 170774 [TOTAL-LIABILITIES] 170774 [SENIOR-EQUITY] 0 [PAID-IN-CAPITAL-COMMON] 10476662 [SHARES-COMMON-STOCK] 10476662 [SHARES-COMMON-PRIOR] 6924021 [ACCUMULATED-NII-CURRENT] 0 [OVERDISTRIBUTION-NII] 0 [ACCUMULATED-NET-GAINS] (125) [OVERDISTRIBUTION-GAINS] 0 [ACCUM-APPREC-OR-DEPREC] 0 [NET-ASSETS] 10476537 [DIVIDEND-INCOME] 0 [INTEREST-INCOME] 485244 [OTHER-INCOME] 0 [EXPENSES-NET] 35048 [NET-INVESTMENT-INCOME] 450196 [REALIZED-GAINS-CURRENT] 6 [APPREC-INCREASE-CURRENT] 0 [NET-CHANGE-FROM-OPS] 450202 [EQUALIZATION] 0 [DISTRIBUTIONS-OF-INCOME] 450196 [DISTRIBUTIONS-OF-GAINS] 0 [DISTRIBUTIONS-OTHER] 0 [NUMBER-OF-SHARES-SOLD] 14542131 [NUMBER-OF-SHARES-REDEEMED] 11395029 [SHARES-REINVESTED] 405539 [NET-CHANGE-IN-ASSETS] 3552647 [ACCUMULATED-NII-PRIOR] 0 [ACCUMULATED-GAINS-PRIOR] (131) [OVERDISTRIB-NII-PRIOR] 0 [OVERDIST-NET-GAINS-PRIOR] 0 [GROSS-ADVISORY-FEES] 36748 [INTEREST-EXPENSE] 0 [GROSS-EXPENSE] 61188 [AVERAGE-NET-ASSETS] 8761913 [PER-SHARE-NAV-BEGIN] 1.00 [PER-SHARE-NII] 0.05 [PER-SHARE-GAIN-APPREC] 0 [PER-SHARE-DIVIDEND] 0.05 [PER-SHARE-DISTRIBUTIONS] 0 [RETURNS-OF-CAPITAL] 0 [PER-SHARE-NAV-END] 1.00 [EXPENSE-RATIO] 0.40 [AVG-DEBT-OUTSTANDING] 0 [AVG-DEBT-PER-SHARE] 0
EX-17.(I) 43 FDS FOR SCHWAB INSTITUTIONAL ADVANTAGE MONEY FUND 1 Exhibit (17)(i) [ARTICLE] 6 [CIK] 0000857156 [NAME] SCHWAB FAMILY OF FUNDS [SERIES] [NUMBER] 9 [NAME] SCHWAB INSTITUTIONAL MONEY FUND [MULTIPLIER] 1,000 [PERIOD-TYPE] 12-MOS [FISCAL-YEAR-END] DEC-31-1996 [PERIOD-START] JAN-01-1996 [PERIOD-END] DEC-31-1996 [INVESTMENTS-AT-COST] 153678 [INVESTMENTS-AT-VALUE] 153678 [RECEIVABLES] 2227 [ASSETS-OTHER] 34 [OTHER-ITEMS-ASSETS] 0 [TOTAL-ASSETS] 155939 [PAYABLE-FOR-SECURITIES] 0 [SENIOR-LONG-TERM-DEBT] 0 [OTHER-ITEMS-LIABILITIES] 16918 [TOTAL-LIABILITIES] 16918 [SENIOR-EQUITY] 0 [PAID-IN-CAPITAL-COMMON] 139024 [SHARES-COMMON-STOCK] 139024 [SHARES-COMMON-PRIOR] 80747 [ACCUMULATED-NII-CURRENT] 0 [OVERDISTRIBUTION-NII] 0 [ACCUMULATED-NET-GAINS] (3) [OVERDISTRIBUTION-GAINS] 0 [ACCUM-APPREC-OR-DEPREC] 0 [NET-ASSETS] 139021 [DIVIDEND-INCOME] 0 [INTEREST-INCOME] 6218 [OTHER-INCOME] 0 [EXPENSES-NET] 562 [NET-INVESTMENT-INCOME] 5656 [REALIZED-GAINS-CURRENT] (2) [APPREC-INCREASE-CURRENT] 0 [NET-CHANGE-FROM-OPS] 5654 [EQUALIZATION] 0 [DISTRIBUTIONS-OF-INCOME] 5656 [DISTRIBUTIONS-OF-GAINS] 0 [DISTRIBUTIONS-OTHER] 0 [NUMBER-OF-SHARES-SOLD] 369135 [NUMBER-OF-SHARES-REDEEMED] 315013 [SHARES-REINVESTED] 4155 [NET-CHANGE-IN-ASSETS] 58275 [ACCUMULATED-NII-PRIOR] 0 [ACCUMULATED-GAINS-PRIOR] (1) [OVERDISTRIB-NII-PRIOR] 0 [OVERDIST-NET-GAINS-PRIOR] 0 [GROSS-ADVISORY-FEES] 517 [INTEREST-EXPENSE] 0 [GROSS-EXPENSE] 991 [AVERAGE-NET-ASSETS] 112391 [PER-SHARE-NAV-BEGIN] 1.00 [PER-SHARE-NII] 0.05 [PER-SHARE-GAIN-APPREC] 0 [PER-SHARE-DIVIDEND] 0.05 [PER-SHARE-DISTRIBUTIONS] 0 [RETURNS-OF-CAPITAL] 0 [PER-SHARE-NAV-END] 1.00 [EXPENSE-RATIO] 0.50 [AVG-DEBT-OUTSTANDING] 0 [AVG-DEBT-PER-SHARE] 0
EX-17.(J) 44 FDS FOR SCHWAB RETIREMENT MONEY FUND 1 Exhibit (17)(j) [ARTICLE] 6 [CIK] 0000857156 [NAME] SCHWAB FAMILY OF FUNDS [SERIES] [NUMBER] 10 [NAME] SCHWAB RETIREMENT MONEY FUND [MULTIPLIER] 1,000 [PERIOD-TYPE] 12-MOS [FISCAL-YEAR-END] DEC-31-1996 [PERIOD-START] JAN-01-1996 [PERIOD-END] DEC-31-1996 [INVESTMENTS-AT-COST] 130261 [INVESTMENTS-AT-VALUE] 130261 [RECEIVABLES] 7702 [ASSETS-OTHER] 37 [OTHER-ITEMS-ASSETS] 0 [TOTAL-ASSETS] 138000 [PAYABLE-FOR-SECURITIES] 0 [SENIOR-LONG-TERM-DEBT] 0 [OTHER-ITEMS-LIABILITIES] 1681 [TOTAL-LIABILITIES] 1681 [SENIOR-EQUITY] 0 [PAID-IN-CAPITAL-COMMON] 136320 [SHARES-COMMON-STOCK] 136320 [SHARES-COMMON-PRIOR] 98992 [ACCUMULATED-NII-CURRENT] 0 [OVERDISTRIBUTION-NII] 0 [ACCUMULATED-NET-GAINS] (1) [OVERDISTRIBUTION-GAINS] 0 [ACCUM-APPREC-OR-DEPREC] 0 [NET-ASSETS] 136319 [DIVIDEND-INCOME] 0 [INTEREST-INCOME] 6238 [OTHER-INCOME] 0 [EXPENSES-NET] 819 [NET-INVESTMENT-INCOME] 5419 [REALIZED-GAINS-CURRENT] (1) [APPREC-INCREASE-CURRENT] 0 [NET-CHANGE-FROM-OPS] 5418 [EQUALIZATION] 0 [DISTRIBUTIONS-OF-INCOME] 5418 [DISTRIBUTIONS-OF-GAINS] 0 [DISTRIBUTIONS-OTHER] 0 [NUMBER-OF-SHARES-SOLD] 166968 [NUMBER-OF-SHARES-REDEEMED] 134926 [SHARES-REINVESTED] 5286 [NET-CHANGE-IN-ASSETS] 37327 [ACCUMULATED-NII-PRIOR] 0 [ACCUMULATED-GAINS-PRIOR] 0 [OVERDISTRIB-NII-PRIOR] 0 [OVERDIST-NET-GAINS-PRIOR] 0 [GROSS-ADVISORY-FEES] 516 [INTEREST-EXPENSE] 0 [GROSS-EXPENSE] 978 [AVERAGE-NET-ASSETS] 112262 [PER-SHARE-NAV-BEGIN] 1.00 [PER-SHARE-NII] 0.05 [PER-SHARE-GAIN-APPREC] 0 [PER-SHARE-DIVIDEND] 0.05 [PER-SHARE-DISTRIBUTIONS] 0 [RETURNS-OF-CAPITAL] 0 [PER-SHARE-NAV-END] 1.00 [EXPENSE-RATIO] 0.73 [AVG-DEBT-OUTSTANDING] 0 [AVG-DEBT-PER-SHARE] 0
EX-17.(K) 45 FDS FOR SCHWAB NY MUNICIPAL MONEY FUND-SWEEP SHRS 1 Exhibit (17)(k) [ARTICLE] 6 [CIK] 0000857156 [NAME] SCHWAB FAMILY OF FUNDS [SERIES] [NUMBER] 11 [NAME] SCHWAB NEW YORK MUNICIPAL MONEY FUND-SWEEP SHARES [MULTIPLIER] 1,000 [PERIOD-TYPE] 12-MOS [FISCAL-YEAR-END] DEC-31-1996 [PERIOD-START] JAN-01-1996 [PERIOD-END] DEC-31-1996 [INVESTMENTS-AT-COST] 336332 [INVESTMENTS-AT-VALUE] 336332 [RECEIVABLES] 3738 [ASSETS-OTHER] 83 [OTHER-ITEMS-ASSETS] 0 [TOTAL-ASSETS] 340153 [PAYABLE-FOR-SECURITIES] 0 [SENIOR-LONG-TERM-DEBT] 0 [OTHER-ITEMS-LIABILITIES] 2858 [TOTAL-LIABILITIES] 2858 [SENIOR-EQUITY] 0 [PAID-IN-CAPITAL-COMMON] 270625 [SHARES-COMMON-STOCK] 270625 [SHARES-COMMON-PRIOR] 204869 [ACCUMULATED-NII-CURRENT] 0 [OVERDISTRIBUTION-NII] 0 [ACCUMULATED-NET-GAINS] (15) [OVERDISTRIBUTION-GAINS] 0 [ACCUM-APPREC-OR-DEPREC] 0 [NET-ASSETS] 270610 [DIVIDEND-INCOME] 0 [INTEREST-INCOME] 7953 [OTHER-INCOME] 0 [EXPENSES-NET] 1615 [NET-INVESTMENT-INCOME] 6338 [REALIZED-GAINS-CURRENT] 0 [APPREC-INCREASE-CURRENT] 0 [NET-CHANGE-FROM-OPS] 6330 [EQUALIZATION] 0 [DISTRIBUTIONS-OF-INCOME] 6338 [DISTRIBUTIONS-OF-GAINS] 0 [DISTRIBUTIONS-OTHER] 0 [NUMBER-OF-SHARES-SOLD] 868824 [NUMBER-OF-SHARES-REDEEMED] 809149 [SHARES-REINVESTED] 6081 [NET-CHANGE-IN-ASSETS] 65748 [ACCUMULATED-NII-PRIOR] 0 [ACCUMULATED-GAINS-PRIOR] (6) [OVERDISTRIB-NII-PRIOR] 0 [OVERDIST-NET-GAINS-PRIOR] 0 [GROSS-ADVISORY-FEES] 1076 [INTEREST-EXPENSE] 0 [GROSS-EXPENSE] 1613 [AVERAGE-NET-ASSETS] 234009 [PER-SHARE-NAV-BEGIN] 1.00 [PER-SHARE-NII] 0.03 [PER-SHARE-GAIN-APPREC] 0 [PER-SHARE-DIVIDEND] 0.03 [PER-SHARE-DISTRIBUTIONS] 0 [RETURNS-OF-CAPITAL] 0 [PER-SHARE-NAV-END] 1.00 [EXPENSE-RATIO] 0.69 [AVG-DEBT-OUTSTANDING] 0 [AVG-DEBT-PER-SHARE] 0
EX-17.(L) 46 FDS FOR SCHWAB NY MUNI MONEY FUND-VAL ADV SHARES 1 Exhibit (17)(l) [ARTICLE] 6 [CIK] 0000857156 [NAME] SCHWAB FAMILY OF FUNDS [SERIES] [NUMBER] 12 [NAME] SCHWAB NEW YORK MUNICIPAL MONEY FUND-VALUE ADVANTAGE SHARES [MULTIPLIER] 1,000 [PERIOD-TYPE] 12-MOS [FISCAL-YEAR-END] DEC-31-1996 [PERIOD-START] JAN-01-1996 [PERIOD-END] DEC-31-1996 [INVESTMENTS-AT-COST] 336332 [INVESTMENTS-AT-VALUE] 336332 [RECEIVABLES] 3738 [ASSETS-OTHER] 83 [OTHER-ITEMS-ASSETS] 0 [TOTAL-ASSETS] 340153 [PAYABLE-FOR-SECURITIES] 0 [SENIOR-LONG-TERM-DEBT] 0 [OTHER-ITEMS-LIABILITIES] 2858 [TOTAL-LIABILITIES] 2858 [SENIOR-EQUITY] 0 [PAID-IN-CAPITAL-COMMON] 66685 [SHARES-COMMON-STOCK] 66685 [SHARES-COMMON-PRIOR] 0 [ACCUMULATED-NII-CURRENT] 0 [OVERDISTRIBUTION-NII] 0 [ACCUMULATED-NET-GAINS] 0 [OVERDISTRIBUTION-GAINS] 0 [ACCUM-APPREC-OR-DEPREC] 0 [NET-ASSETS] 66685 [DIVIDEND-INCOME] 0 [INTEREST-INCOME] 1152 [OTHER-INCOME] 0 [EXPENSES-NET] 151 [NET-INVESTMENT-INCOME] 1001 [REALIZED-GAINS-CURRENT] 0 [APPREC-INCREASE-CURRENT] 0 [NET-CHANGE-FROM-OPS] 1000 [EQUALIZATION] 0 [DISTRIBUTIONS-OF-INCOME] 1001 [DISTRIBUTIONS-OF-GAINS] 0 [DISTRIBUTIONS-OTHER] 0 [NUMBER-OF-SHARES-SOLD] 110557 [NUMBER-OF-SHARES-REDEEMED] 59789 [SHARES-REINVESTED] 773 [NET-CHANGE-IN-ASSETS] 54542 [ACCUMULATED-NII-PRIOR] 0 [ACCUMULATED-GAINS-PRIOR] 0 [OVERDISTRIB-NII-PRIOR] 0 [OVERDIST-NET-GAINS-PRIOR] 0 [GROSS-ADVISORY-FEES] 155 [INTEREST-EXPENSE] 0 [GROSS-EXPENSE] 340 [AVERAGE-NET-ASSETS] 33619 [PER-SHARE-NAV-BEGIN] 1.00 [PER-SHARE-NII] 0.03 [PER-SHARE-GAIN-APPREC] 0 [PER-SHARE-DIVIDEND] 0.03 [PER-SHARE-DISTRIBUTIONS] 0 [RETURNS-OF-CAPITAL] 0 [PER-SHARE-NAV-END] 1.00 [EXPENSE-RATIO] 0.69 [AVG-DEBT-OUTSTANDING] 0 [AVG-DEBT-PER-SHARE] 0
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