-----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, Jd+wrcyFqHoYP0wd7umthp+KJ1mR8MIoRewr3p4lgPa6ua+dM/t7+BqOagALRdSf Y4URb11m8tLGs438IgzmIw== 0000950149-97-000011.txt : 19970106 0000950149-97-000011.hdr.sgml : 19970106 ACCESSION NUMBER: 0000950149-97-000011 CONFORMED SUBMISSION TYPE: 497 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 19970103 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: 497 SEC ACT: 1933 Act SEC FILE NUMBER: 033-31894 FILM NUMBER: 97500541 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 497 1 DEF.SAI -SCHWAB MONEY FUNDS: VALUE ADVANTAGE SHARE 1 STATEMENT OF ADDITIONAL INFORMATION THE CHARLES SCHWAB FAMILY OF FUNDS THE SCHWAB MONEY FUNDS: VALUE ADVANTAGE SHARES SCHWAB MUNICIPAL MONEY FUND-VALUE ADVANTAGE SHARES(TM) SCHWAB CALIFORNIA MUNICIPAL MONEY FUND-VALUE ADVANTAGE SHARES(TM) SCHWAB NEW YORK MUNICIPAL MONEY FUND-VALUE ADVANTAGE SHARES(TM) APRIL 1, 1996, AS AMENDED JANUARY 2, 1997 This Statement of Additional Information is not a prospectus. It should be read in conjunction with the Prospectus dated April 1, 1996, as amended January 2, 1997 (and as may be amended further from time to time), for the Value Advantage Shares of the Schwab Municipal Money Fund (formerly known as Schwab Tax-Exempt Money Fund), Schwab California Municipal Money Fund (formerly known as Schwab California Tax-Exempt Money Fund), and Schwab New York Municipal Money Fund (formerly known as Schwab New York Tax-Exempt Money Fund), each a "Fund" and collectively, the "Funds", three separately managed investment portfolios of The Charles Schwab Family of Funds (the "Trust"). This Statement of Additional Information relates to the Value Advantage Shares of the Funds. To obtain a copy of the Prospectus, please contact Charles Schwab & Co., Inc. ("Schwab") at 800-2 NO-LOAD, 24 hours a day, or 101 Montgomery Street, San Francisco, California 94104. TDD users may contact Schwab at 800-345-2550, 24 hours a day. The Prospectus is also available electronically by using our World Wide Web address: http://www.schwab.com. SCHWABFunds(R) 800-2 NO-LOAD (800-266-5623) TABLE OF CONTENTS
Page ---- MUNICIPAL SECURITIES........................................................... 2 INVESTMENT RESTRICTIONS........................................................ 8 MANAGEMENT OF THE TRUST........................................................ 13 PORTFOLIO TRANSACTIONS AND TURNOVER............................................ 21 DISTRIBUTIONS AND TAXES........................................................ 22 SHARE PRICE CALCULATION........................................................ 27 HOW THE FUNDS REPORT PERFORMANCE............................................... 28 GENERAL INFORMATION............................................................ 31 PURCHASE AND REDEMPTION OF SHARES.............................................. 36 OTHER INFORMATION.............................................................. 36 APPENDIX - RATINGS OF INVESTMENT SECURITIES.................................... 37 FINANCIAL STATEMENTS........................................................... F-1
2 MUNICIPAL SECURITIES "Municipal Securities" are debt securities issued by a state, its political subdivisions, agencies, authorities and corporations. Municipal Securities issued by or on behalf of the State of California, its subdivisions, agencies or authorities are referred to herein as "California Municipal Securities." Municipal Securities issued by or on behalf of the State of New York, its subdivisions, agencies or instrumentalities are referred to herein as "New York Municipal Securities." Municipal Securities that the Funds may purchase include, without limitation, debt obligations issued to obtain funds for various public purposes, including the construction of a wide range of public facilities such as airports, bridges, highways, housing, hospitals, mass transportation, public utilities, schools, streets, and water and sewer works. Other public purposes for which Municipal Securities may be issued include refunding outstanding obligations, obtaining funds for general operating expenses and obtaining funds to loan to other public institutions and facilities. Municipal Securities include securities issued to finance various private activities, including certain types of private activity bonds ("industrial development bonds" under prior law). These securities may be issued by or on behalf of public authorities to obtain funds to provide certain privately owned or operated facilities. The Funds may not be desirable investments for "substantial users" of facilities financed by private activity bonds or industrial development bonds or for "related persons" of substantial users for whom dividends attributable to interest on such bonds may not be tax-exempt. Shareholders should consult their own tax advisers regarding the potential effect on them (if any) of any investment in these Funds. Municipal Securities are generally classified as "general obligation" or "revenue." General obligation securities are secured by the issuer's pledge of its full credit and taxing power for the payment of principal and interest. Revenue securities are payable only from the revenues derived from a particular facility or class of facilities or, in some cases, from the proceeds of a special excise or other specific revenue source. Private activity bonds and industrial development bonds that are Municipal Securities are in most cases revenue bonds and generally do not constitute the pledge of the credit of the issuer of such bonds. Municipal notes are instruments issued by or on behalf of governments and political sub-divisions thereof. Examples include: tax anticipation notes ("TANS"), which are short-term debt instruments issued by a municipality or state to finance working capital needs of the issuer in anticipation of receiving taxes on a future date; revenue anticipation notes ("RANS"), which are short-term debt instruments issued by a municipality or state to provide cash prior to receipt of expected non-tax revenues from a specific source; bond anticipation notes ("BANS"), which are short-term debt instruments issued by a municipality or state that will be paid off with the proceeds of an upcoming bond issue; and tax revenue anticipation notes ("TRANS"), which are short-term debt instruments issued by a municipality or state to finance working 2 3 capital needs in anticipation of receiving taxes or other revenues. Construction loan notes are instruments insured by the Federal Housing Administration with permanent financing by "Fannie Mae" (the Federal National Mortgage Association) or "Ginnie Mae" (the Government National Mortgage Association) at the end of the project construction period. Tax-free commercial paper is an unsecured promissory obligation issued or guaranteed by a municipal issuer. The Funds may purchase other Municipal Securities similar to the foregoing, which are or may become available, including securities issued to pre-refund other outstanding obligations of municipal issuers. Taxable municipal securities are municipal securities the interest on which is not exempt from federal income tax. Taxable municipal securities may include "private activity bonds" that are issued by or on behalf of states or political subdivisions thereof to finance privately-owned or operated facilities for business and manufacturing, housing, sports, and pollution control and to finance facilities for charitable institutions. The payment of the principal and interest on private activity bonds is not backed by a pledge of tax revenues, and is dependent solely on the ability of the facility's user to meet its financial obligations. Taxable municipal securities also may include remarketed certificates of participation. The federal bankruptcy statutes relating to the adjustments of debts of political subdivisions and authorities of states of the United States provide that, in certain circumstances, such subdivisions or authorities may be authorized to initiate bankruptcy proceedings without prior notice to or consent of creditors, which proceedings could result in material adverse changes in the rights of holders of obligations issued by such subdivisions or authorities. RISK FACTORS Schwab California Municipal Money Fund and Schwab New York Municipal Money Fund's concentration in securities issued by a single state and its political subdivisions provides a greater level of risk than does a fund that is diversified across numerous states and municipal entities. The ability of a single state and its municipalities to meet their obligations will depend on the availability of tax and other revenues, economic, political, and demographic conditions within the state, and the underlying fiscal condition of the state and its municipalities. CALIFORNIA MUNICIPAL SECURITIES In addition to general economic pressures which affect the State of California's ability to raise revenues to meet its financial obligations, certain California constitutional amendments, legislative measures, executive orders, administrative regulations and voter initiatives could also result in the adverse effects described below. The following information is only a brief summary, is not a complete description and is based on information drawn from official statements and prospectuses relating to securities offerings of the State of California that have come to the attention of the Trust and were available before the date of this Statement of Additional Information. The Trust has not independently verified the accuracy and completeness of the information contained in those statements and prospectuses. 3 4 As used in this section, "California Municipal Securities" include issues that are secured by a direct payment obligation of the State and obligations of issuers that rely in whole or in part on State revenues for payment of their obligations. Part of the State's General Fund surplus is distributed to counties, cities and their various taxing entities; whether and to what extent a portion of the State's General Fund will be distributed in the future to them is unclear. Overview. From mid-1990 to late 1993, the State suffered a recession with the worst economic, fiscal and budget conditions since the 1930's. Construction, manufacturing (especially aerospace), exports and financial services, among other industries, were severely affected. Job losses were the worst of any post-war recession. The recession seriously affected State tax revenues and caused an increase in expenditures for health and welfare programs. As a result, the State experienced recurring budget deficits. The State Controller reports that expenditures exceeded revenues for four of the five fiscal years ending with 1991-92. Revenues and expenditures were essentially equal in 1992-93. The State General Fund ended the 1993-94 fiscal year with an estimated accumulated deficit of about $1.8 billion. A further consequence of the large budget imbalances has been that the State depleted its available cash resources and has had to use a series of external borrowings to meet its cash needs. As a result of the deterioration in the State's budget and cash situation, the State's credit ratings were reduced. Since October 1992, all three major nationally recognized statistical rating organizations have lowered the State's general obligation bond rating from the highest ranking of "AAA" to "A" by S&P, "A1" by Moody's Investors Service ("Moody's") and "A+" by Fitch Investors Service, Inc. ("Fitch"). However, since the start of 1994, California's economy has been on a steady recovery. Employment grew significantly in 1994 and 1995, especially in export-related industries, business services, electronics, entertainment and tourism. Fitch recognized this rebound by raising the State's rating from "A" to "A+" on February 26, 1996. State Appropriations Limit. Subject to certain exceptions, the State is subject to an annual appropriations limit, imposed by its Constitution, on "proceeds of taxes." Various expenditures, including but not limited to debt service on certain bonds and appropriations for qualified capital outlay projects, are not included in the appropriations limit. 1995-96 FISCAL YEAR Revenues. The 1995-96 Budget Act projected General Fund revenues and transfers of $44.1 billion, a 3.5% increase from the prior year, and Special Fund revenues of $12.7 billion. Expenditures. The 1995-96 Budget Act included General Fund expenditures of $43.4 billion, and Special Fund expenditures of $13.0 billion. The California Department of Finance projected that, after repaying the last of the budget deficit carried over from prior fiscal years, there would be a positive balance of $28 million in the budget reserve on June 30, 1996. The Governor's proposed budget for the 1996-97 fiscal year, released on 4 5 January 10, 1996, updated the projections for the 1995-96 fiscal year; revenues and transfers are estimated to be $45 billion and expenditures to be $44.2 billion. As a result, the budget reserve was projected to have a positive balance of about $50 million on June 30, 1996, with available cash (after payment of all obligations due) of about $2.2 billion. 1996-97 FISCAL YEAR The Governor's proposed budget for 1996-97 projected General Fund revenues and transfers of about $45.6 billion and requested total General Fund appropriations of about $45.2 billion, which would leave a budget reserve of about $400 million on June 30, 1997. The Governor's proposed budget renewed a proposal, which had been rejected by the Legislature in 1995, for a 15% cut in personal and corporate tax rates, phased in over a three-year period. On the assumption that the proposed tax rate cut would be enacted, the Governor's proposed budget shows a reduction in revenues of about $600 million for 1996-97. The Governor's proposed budget also projects external cash flow borrowing of up to $3.2 billion to mature by June 30, 1997. The foregoing discussions of the 1995-96 Budget and the proposed 1996-97 Budget are based upon the Budget Act for 1995-96 and the Governor's proposed 1996-97 Budget, respectively, and should not be construed as a statement of fact. The assumptions used to construct a budget, which include estimates and projections of revenues and expenditures, may be affected by numerous factors, including future economic conditions in the State and the nation. There can be no assurances that any estimates will be achieved. ISSUES AFFECTING LOCAL GOVERNMENTS AND SPECIAL DISTRICTS Proposition 13. Certain California Municipal Securities may be obligations of issuers that rely in whole or in part on ad valorem real property taxes as a source of revenue. In 1978, California voters approved Proposition 13, which limits ad valorem taxes on real property and restricts the ability of taxing entities to increase property tax and other revenues. With certain exceptions, the maximum ad valorem tax on real property is limited to 1% of the property's full cash value to be collected by the counties and apportioned according to law. One exception is for debt service on bonded indebtedness if approved by two-thirds of the votes cast by voters voting on the proposition. The full cash value may be: adjusted annually to reflect inflation at a rate not to exceed 2% per year, or reduction in the consumer price index or comparable local data; reduced in the event of declining property value caused by substantial damage, destruction or other factors; or adjusted when there is a "change in ownership" or "new construction." The State, in response to the significant reduction in local property tax revenues as a result of the passage of Proposition 13, enacted legislation to provide local governments with increased expenditures from the General Fund. This post-Proposition 13 fiscal relief has ended. Proposition 62. This initiative, approved by voters in 1986, placed further restrictions on the ability of local governments to raise taxes and allocate approved tax receipts. Although some 5 6 decisions of the California Courts of Appeal held that parts of Proposition 62 were unconstitutional, the California Supreme Court recently upheld Proposition 62's requirement that special taxes be approved by a two-thirds vote of the voters voting in an election on the issue. This recent decision may invalidate other taxes that have been imposed by local governments in California and make it more difficult for them to raise taxes. Propositions 98 and 111. These initiatives changed the State appropriations limit and State funding of public education below the university level by guaranteeing K-14 schools a minimum share of General Fund revenues. The initiatives require that the State establish a prudent state reserve fund for public education. Appropriations Limit. Local governments are also subject to annual appropriations limits. If a local government's revenues in any year exceed the amount permitted to be spent, the excess must be returned to the public through a revision of tax rates or fee schedules over the subsequent two years. Conclusion. The effect of these constitutional and statutory changes and of budget developments on the ability of California issuers to pay interest and principal on their obligations remains unclear, and may depend on whether a particular bond is a general obligation or limited obligation bond (limited obligation bonds being generally less affected). There is no assurance that any California issuer will make full or timely payments of principal or interest or remain solvent; for example, in December 1994, Orange County filed for bankruptcy. California Municipal Money Fund's concentration in California Municipal Securities provides a greater level of risk than a fund that is diversified across numerous states and municipal entities. ADDITIONAL ISSUES Mortgages and Deeds of Trust. The California Municipal Money Fund may invest in issues which are secured in whole or in part by a mortgage or deed of trust on real property. California law limits the remedies of a creditor secured by a mortgage or deed of trust, which may result in delays in the flow of revenues to an issuer. Lease Financings. Some local governments and districts finance certain activities through lease arrangements. It is uncertain whether such lease financings are debt that require voter approval. Seismic Risk. It is impossible to predict the time, magnitude or location of a major earthquake or its effect on the California economy. In January 1994, a major earthquake struck Los Angeles, causing significant damage to structures and facilities in four counties. Another earthquake could create a major dislocation of the California economy. NEW YORK MUNICIPAL SECURITIES The State of New York has experienced fiscal problems for several years as a result of negligible growth, increased human service needs and the lingering recession that hit the State harder than others. Although the State enjoyed good growth throughout the early to mid-1980's, unemployment continues to be a problem. The State's economy is highly developed and diverse, with a large emphasis in service, trade, financial services and real estate; however, 6 7 extensive job losses in each of these areas has placed a burden on the State to maintain employment, company development and a stable tax base. The State has a large accumulated deficit, as reflected in its financial results. The overall wealth of the State's population, as reflected by its per capita income, offers a positive credit enhancement, and is among the highest in the nation. The debt per capita, though, is also among the highest and poses a large burden on State residents. The importance of New York City to the State's economy is also an important consideration, since it represents a significant portion of the overall economy of the State. The City has struggled to maintain fiscal stability, and any major changes to the financial condition of the City would ultimately have an effect on the State. The overall financial condition of the State can be illustrated by the changes of its debt rating during the last several years of financial difficulties: Moody's downgraded the State's general obligation long-term debt from A1 to A in 1990 and S&P downgraded it from A to A- in early 1992. The State also carries a rating of A+ from Fitch. The short-term rating assigned by S&P of A1 is within that NRSRO's two highest rating categories. Moody's rating on New York City general obligation bonds is Baa1, while S&P rates them BBB+. Schwab New York Municipal Money Fund's concentration in securities issued by the State of New York and its political subdivisions provides a greater level of risk than a fund which is diversified across numerous states and municipal entities. The ability of the State of New York or its municipalities to meet their obligations will depend on the availability of tax and other revenues; economic, political and demographic conditions within the State; and the underlying fiscal condition of the State and its municipalities. OTHER ISSUES Repurchase Agreements. If the seller of a repurchase agreement becomes bankrupt or otherwise defaults, a Fund might incur expenses in enforcing its rights and could experience losses, including a decline in the value of the underlying securities and a loss of income. Therefore, a Fund will enter in repurchase agreements only with banks and other recognized financial institutions that the Investment Manger deems creditworthy. 7 8 INVESTMENT RESTRICTIONS EXCEPT AS OTHERWISE NOTED, THE RESTRICTIONS BELOW ARE FUNDAMENTAL AND CANNOT BE CHANGED WITHOUT APPROVAL OF THE HOLDERS OF A MAJORITY OF THE OUTSTANDING VOTING SECURITIES (AS DEFINED IN THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED, HEREINAFTER THE "1940 ACT") OF THE FUND TO WHICH THEY APPLY. THE FUNDS: (1) May not purchase securities or make investments other than in accordance with investment objectives and policies. (2) May not purchase securities (other than securities of the U.S. Government, its agencies or instrumentalities) if as a result of such purchase 25% or more of its total assets would be invested in any industry (although securities issued by governments or political subdivisions of governments are not considered to be securities subject to this industry concentration restriction) or in any one state (although the limitation as to investments in a state or its political subdivision shall not apply to Schwab California Municipal Money Fund or Schwab New York Municipal Money Fund), nor may it enter into a repurchase agreement if more than 10% of its net assets would be subject to repurchase agreements maturing in more than 7-days. (3) May not purchase or retain securities of an issuer if any of the officers, trustees or directors of the Trust or its Investment Manager individually own beneficially more than 1/2 of 1% of the securities of such issuer and together own more than 5% of the securities of such issuer. (4) May not invest in commodities or commodity futures contracts or in real estate, except that each Fund may invest in Municipal Securities secured by real estate or interests therein. (5) May not invest for the purpose of exercising control or management of another issuer. (6) May not invest in interests in oil, gas or other mineral exploration or development programs, although it may invest in Municipal Securities of issuers which invest in or sponsor such programs. (7) May not underwrite securities issued by others, except to the extent it may be deemed to be an underwriter, under the federal securities laws, in connection with the disposition of securities from its investment portfolio. (8) May lend or borrow money to the extent permitted by the Investment Company Act of 1940 or the rules or regulations thereunder, as such statute, rules or regulations may be amended from time to time. (9) May pledge, mortgage or hypothecate any of its assets to the extent permitted by the Investment Company Act of 1940 or the rules or regulations thereunder, as such statute, rules or regulations may be amended from time to time. 8 9 (10) May issue senior securities to the extent permitted by the Investment Company Act of 1940 or the rules or regulations thereunder, as such statute, rules or regulations may be amended from time to time. (11) May purchase securities of any issuer only when consistent with the maintenance of its respective status as a diversified company (in the case of Schwab Municipal Money Fund) or non-diversified company (in the case of Schwab California Municipal Money Fund and Schwab New York Municipal Money Fund) under the Investment Company Act of 1940 or the rules or regulations thereunder, as such statute, rules or regulations may be amended from time to time. The following restrictions are non-fundamental, and may be changed by the Board of Trustees: Each Fund may not: (1) Purchase securities of any issuer (other than obligations of, or guaranteed by, the U.S. Government, its agencies or instrumentalities) if, as a result, more than 5% of the value of its assets would be invested in the securities of that issuer, except that, with respect to Schwab California Municipal Money Fund and Schwab New York Municipal Money Fund, provided no more than 25% of the Fund's total assets would be invested in the securities of a single issuer, up to 50% of the value of the Fund's assets may be invested without regard to this 5% limitation. For purposes of this limitation, the Fund will regard the entity which has the primary responsibility for the payment of interest and principal as the issuer. (2) Invest more than 5% of its total assets in securities restricted as to disposition under the federal securities laws, although this limitation shall be 10% with respect to Schwab California Municipal Money Fund and Schwab New York Municipal Money Fund. (3) Purchase securities of other investment companies, except in connection with a merger, consolidation, reorganization or acquisition of assets.(1) (4) Make loans to others (except through the purchase of debt obligations or repurchase agreements in accordance with its investment objective and policies). (5) Borrow money, except from banks for temporary purposes (but not for the purpose of purchasing investments), and then only in an amount not to exceed one-third of the value of its total assets (including the amount borrowed) in order to meet redemption requests which otherwise might result in the untimely disposition of securities; or pledge its securities or receivables or transfer or assign or otherwise encumber them in an amount to exceed 10% of the Fund's net assets to secure borrowings. Reverse repurchase agreements entered into by the Fund are permitted within the limitations of this paragraph. No such Fund will purchase securities or - -------------------- (1) See the description of the Trustees' deferred compensation plan under "Management of the Trust" in this Statement of Additional Information for an exception to this investment restriction. 9 10 make investments while reverse repurchase agreements or borrowings are outstanding. (6) Write, purchase or sell puts, calls or combinations thereof, although it may purchase Municipal Securities subject to standby commitments, variable rate demand notes or repurchase agreements in accordance with its investment objective and policies. (7) Make short sales of securities or purchase securities on margin, except to obtain such short-term credits as may be necessary for the clearance of transactions. (8) Issue senior securities as defined in the 1940 Act. Except for fundamental restriction (3) and non-fundamental restriction (5), if a percentage restriction is adhered to at the time of investment, a later increase in percentage resulting from a change in values or net assets will not be considered a violation. None of the Funds has a present intention of borrowing during the coming year and, in any event, each Fund would limit borrowings as required by the restrictions previously stated. Each Fund will only purchase securities that present minimal credit risks and which are First Tier or Second Tier Securities (otherwise referred to as "Eligible Securities")*. An Eligible Security is: (1) a security with a remaining maturity of 397 days or less: (a) that is rated by the requisite nationally recognized statistical rating organizations ("NRSROs") designated by the Securities and Exchange Commission (the "SEC") (currently Moody's, S&P, Duff and Phelps Credit Rating Co., Fitch, Thomson Bankwatch, and, with respect to debt issued by banks, bank holding companies, United Kingdom building societies, broker-dealers and broker-dealers' parent companies, and bank-supported debt, IBCA Limited and its affiliate, IBCA, Inc.) in one of the two highest rating categories for short-term debt obligations (two NRSROs are required but one rating suffices if only one NRSRO rates the security), or (b) that itself was unrated by any NRSRO, but was issued by an issuer that has outstanding a class of short-term debt obligations (or any security within that class) meeting the requirements of subparagraph 1(a) above that is of comparable priority and security; (2) a security that at the time of issuance was a long-term security but has a remaining maturity of 397 days or less and (a) whose issuer received a rating within one of the two highest rating categories from the requisite NRSROs for short-term debt obligations with respect to a class of short-term debt obligations (or any security within that class) that is now comparable in priority and security with the subject security; or (b) that has long-term ratings from the requisite NRSROs that are in one of the two highest categories; or (3) a security not rated by an NRSRO but deemed by the Investment Manager, pursuant to guidelines adopted by the Board of Trustees, to be of comparable quality to securities described in (1) and (2) above and to represent minimal credit risks. * See the description of the Trustees' deferred compensation plan under "Management of the Trust" in this Statement of Additional Information for an exception to this investment restriction. 10 11 A First Tier Security is any Eligible Security that carries (or other relevant securities issued by its issuer carry) top NRSRO ratings from at least two NRSROs (a single top rating suffices if only one NRSRO rates the security) or has been determined by the Investment Manager, pursuant to guidelines adopted by the Board of Trustees, to be of comparable quality to such a security. A Second Tier Security is any other Eligible Security. 1940 ACT LIMITATIONS Fundamental investment restrictions (8), (9), (10) and (11) permit the Funds to engage in certain investment practices and purchase securities to the extent permitted by, or consistent with, the 1940 Act. Relevant limitations of the 1940 Act are described below. Each Fund is also subject to more restrictive non-fundamental investment restrictions. Non-fundamental investment restrictions may be changed by the Board of Trustees. The Board of Trustees has no current intention of changing any non-fundamental investment restrictions. Shareholders would be notified prior to any change in non-fundamental investment restrictions. Fundamental investment restriction (8). The 1940 Act presently limits a Fund's ability to borrow more than one-third of the value of its total assets. The positions of the SEC staff on the ability of a mutual fund to borrow have evolved in recent years with the development of new investment practices, such as reverse repurchase agreements. Fundamental investment restriction (8) allows each Fund the ability to consider engaging in new investment practices to the extent permitted by the 1940 Act as interpretations of the 1940 Act are further developed. Borrowing by a Fund is a form of leveraging of its portfolio which will expose it to certain risks. Leveraging will exaggerate the effect of any increase or decrease in the value of portfolio securities on Fund's net asset value, and money borrowed will be subject to interest costs (which may include commitment fees and/or the cost of maintaining minimum average balances) which may or may not exceed the interest received from the securities purchased with borrowed funds. The 1940 Act also restricts the ability of any mutual fund to lend. Under the 1940 Act a Fund may only make loans if expressly permitted to do so by the Fund's investment policies; and may not make loans to persons who control or are under common control with the Fund. Thus, the 1940 Act effectively prohibits a Fund from making loans to certain persons where conflicts of interest or undue influence are most likely present. The Funds' may, however, make other loans which if made would expose shareholders to certain additional risks. Fundamental investment restriction (9). The 1940 Act, and in particular certain liquidity restrictions, limit a Fund's ability to pledge, mortgage or hypothecate its assets. To the extent that pledged assets are encumbered for more than seven days such assets would be considered illiquid and, therefore, each Fund's use of such techniques would be limited to 10% of net assets. Additionally, under the 1940 Act, a Fund is limited to pledging, mortgaging or hypothecating no more than one-third of its assets. 11 12 Fundamental investment restriction (10). The ability of a mutual fund to issue senior securities, which has evolved somewhat in recent years, is severely circumscribed by complex regulatory constraints under the 1940 Act, restricting, for instance, the amount, timing, and form of senior securities that may be issued. In addition, portfolio management techniques involving the issuance of senior securities, such as the purchase of securities on margin, short sales, or writing puts on portfolio securities, are all techniques that involve the leveraging of a portfolio and would not be consistent with the current SEC rules governing money market funds. Fundamental investment restriction (11). Under Section 5(b) of the 1940 Act, an investment company is diversified if, as to 75% of its total assets, no more than 5% of the value of its total assets is invested in the securities of a single issuer and no more than 10% of the issuer's voting securities is held by the investment company. As non-diversified Funds, Schwab California Municipal Money Fund and Schwab New York Municipal Money Fund are not subject to this diversification requirement. However, each of the Funds, including Schwab California Municipal Money Fund and Schwab New York Municipal Money Fund, is subject to the "per issuer" diversification requirements of the Code. Under the Code, the 5% "per issuer" limit is applied only to 50% of a Fund's total assets (not 75% of total assets as under the 1940 Act). 12 13 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:
POSITION WITH NAME/DATE OF BIRTH THE TRUST PRINCIPAL OCCUPATION - ------------------ --------- -------------------- CHARLES R. SCHWAB* Chairman and Trustee Chairman, Chief Executive Officer and Director, The July 29, 1937 Charles Schwab Corporation; Chairman and Director, Charles Schwab & Co., Inc. and Charles Schwab Investment Management, Inc.; Chairman and Director, The Charles Schwab Trust Company; Chairman and Director (current board positions), and Chairman (officer position) until December 1995, Mayer & Schweitzer, Inc. (a securities brokerage subsidiary of The Charles Schwab Corporation); Director, The Gap, Inc. (a clothing retailer), Transamerica Corporation (a financial services organization), AirTouch Communications (a telecommunications company) and Siebel Systems (a software company). TIMOTHY F. McCARTHY** President and Trustee Executive Vice President - Mutual Funds, Charles September 19, 1951 Schwab & Co., Inc.; Executive Vice President-President, Financial Products and International Group, The Charles Schwab Corporation; Chief Executive Officer, Charles Schwab Investment Management, Inc.; President, Chief Financial Officer and Director, Charles Schwab Limited; Director, Mayer & Schweitzer. From 1994 to 1995, Mr. McCarthy was Chief Executive Officer, Jardine Fleming Unit Trusts Ltd.;
*Mr. Schwab is an "interested person" of the Trust. **Mr. McCarthy is an "interested person" of the Trust. 13 14
POSITION WITH NAME/DATE OF BIRTH THE TRUST PRINCIPAL OCCUPATION - ------------------ --------- -------------------- Executive Director, Jardine Fleming Holdings Ltd.; Chairman, Jardine Fleming Taiwan Securities Ltd.; and Director of JF India and Fleming Flagship, Europe. Prior to 1994, he was President of Fidelity Investments Advisor Group, a division of Fidelity Investments in Boston. DONALD F. DORWARD Trustee President and Chief Executive Officer, Dorward & September 23, 1931 Associates (advertising and marketing/consulting). ROBERT G. HOLMES Trustee Chairman, Chief Executive Officer and Director, May 15, 1931 Semloh Financial, Inc. Semloh Financial is an international financial services and investment advisory firm. DONALD R. STEPHENS Trustee Managing Partner, D.R. Stephens & Co. (investment June 28, 1938 banking). Prior to 1995, Mr. Stephens was Chairman and Chief Executive Officer of North American Trust (a real estate investment trust). Prior to 1992, Mr. Stephens was Chairman and Chief Executive Officer of the Bank of San Francisco. MICHAEL W. WILSEY Trustee Chairman, Chief Executive Officer and Director, August 18, 1943 Wilsey Bennett, Inc. (truck and air transportation, real estate investment and management, and investments).
14 15
POSITION WITH NAME/DATE OF BIRTH THE TRUST PRINCIPAL OCCUPATION - ------------------ --------- -------------------- TAI-CHIN TUNG Treasurer and Vice President - Finance, Charles Schwab & Co., March 7, 1951 Principal Inc.; Controller, Charles Schwab Investment Financial Officer Management, Inc. From 1994 to 1996, Ms. Tung was Controller for Robertson Stephens Investment Management, Inc. From 1993 to 1994, she was Vice President of Fund Accounting, Capital Research and Management Co. Prior to 1993, Ms. Tung was Senior Vice President of the Sierra Funds and Chief Operating Officer of Great Western Financial Securities. WILLIAM J. KLIPP* Executive Vice Executive Vice President-SchwabFunds(R), Charles December 9, 1955 President, Chief Schwab & Co., Inc.; President and Chief Operating Operating Officer and Officer, Charles Schwab Investment Management, Inc. Trustee Prior to 1993, Mr. Klipp was Treasurer of Charles Schwab & Co., Inc. and Mayer & Schweitzer, Inc. STEPHEN B. WARD Senior Vice President Senior Vice President and Chief Investment Officer, April 5, 1955 and Chief Investment Charles Schwab Investment Management, Inc. Officer FRANCES COLE Secretary Vice President, Chief Counsel, Chief Compliance September 9, 1955 Officer and Assistant Corporate Secretary, Charles Schwab Investment Management, Inc.
*Mr. Klipp is an "interested person" of the Trust. 15 16
POSITION WITH NAME/DATE OF BIRTH THE TRUST PRINCIPAL OCCUPATION - ------------------ --------- -------------------- DAVID H. LUI Assistant Secretary Vice President and Senior Counsel, Charles Schwab October 14, 1960 Investment Management, Inc. From 1991 to 1992, he was Assistant Secretary for the Franklin Group of Mutual Funds and Assistant Corporate Counsel of Franklin Resources, Inc. CHRISTINA M. PERRINO Assistant Secretary Vice President and Senior Counsel, Charles Schwab June 16, 1961 Investment Management, Inc. Prior to 1994, she was Counsel and Assistant Secretary for North American Security Life Insurance Company and Secretary for North American Funds. KAREN L. SEAMAN Assistant Secretary Corporate Counsel, Charles Schwab Investment February 27, 1968 Management, Inc. From October, 1994 to July 1996, Ms. Seaman was Attorney for Franklin Resources, Inc. Prior to 1994, Ms. Seaman was an attorney for The Benham Group.
Each of the above-referenced Officers and/or Trustees also serves in the same capacity as described for the Trust, Schwab Investments, Schwab Capital Trust and Schwab Annuity Portfolios. The address of each individual listed above is 101 Montgomery Street, San Francisco, California 94104. COMPENSATION TABLE(1)
Pension or Retirement Benefits Estimated Accrued as Part Annual Benefits of Fund Upon Total Aggregate Expenses from Retirement from Compensation Name of Person, Compensation the Fund the Fund from the Fund Position from the Trust Complex(2) Complex(2) Complex(2) - --------------- -------------- ------------------- ---------------- ------------- Charles R. Schwab, 0 N/A N/A 0 Chairman and Trustee Elizabeth G. Sawi(3), 0 N/A N/A 0 President and Trustee
16 17 COMPENSATION TABLE(1)
Pension or Estimated Retirement Benefits Annual Benefits Accrued as Part of Upon Total Aggregate Fund Expenses from Retirement from Compensation Name of Person, Compensation the Fund the Fund from the Fund Position from the Trust Complex(2) Complex(2) Complex(2) - --------------- -------------- ------------------- ---------------- ------------- Timothy F. McCarthy(4), 0 N/A N/A 0 President and Trustee William J. Klipp, 0 N/A N/A 0 Executive Vice President, Chief Operating Officer and Trustee Donald F. Dorward, 38,500 N/A N/A 73,000 Trustee Robert G. Holmes, 38,500 N/A N/A 73,000 Trustee Donald R. Stephens, 38,500 N/A N/A 73,000 Trustee Michael W. Wilsey, 38,500 N/A N/A 73,000 Trustee
(1) Figures are for the Trust's fiscal year ended December 31, 1995. (2) "Fund Complex" comprises all 22 funds of the Trust, Schwab Investments, Schwab Capital Trust and Schwab Annuity Portfolios. (3) Ms. Sawi served as President and Trustee until October 1995. (4) Mr. McCarthy became President and Trustee in October 1995. -------------------------------------------------------- TRUSTEE DEFERRED COMPENSATION PLAN Pursuant to exemptive relief received by the Trust from the SEC, the Trust may enter into deferred fee arrangements (the "Fee Deferral Plan" or the "Plan") with the Trust's Trustees who are not "interested persons" of any of the Funds of the Trust (the "Independent Trustees" or the "Trustees"). As of the date of this Statement of Additional Information, none of the Independent Trustees has elected to 17 18 participate in the Fee Deferral Plan. In the event an Independent Trustee does elect to participate in the Plan, the Plan would operate as described below. Under the Plan, deferred Trustee's fees will be credited to a book reserve account established by the Trust (the "Deferred Fee Account"), as of the date such fees would have been paid to such Trustee. The value of the Deferred Fee Account as of any date will be equal to the value the Account would have had as of that date if the amounts credited to the Account had been invested and reinvested in the securities of the SchwabFund or SchwabFunds(R) selected by the participating Trustee (the "Selected SchwabFund Securities"). SchwabFunds include the series or classes of beneficial interest of the Trust, Schwab Investments and Schwab Capital Trust. Pursuant to the exemptive relief granted to the Trust, each Fund will purchase and maintain the Selected SchwabFund Securities in an amount equal to the deemed investments in that Fund of the Deferred Fee Accounts of the Independent Trustees. The exemptive relief granted to the Trust permits the Funds and the Trustees to purchase the Selected SchwabFund Securities, which transactions would otherwise be limited or prohibited by the investment policies and/or restrictions of the Funds. See "Investment Restrictions." INVESTMENT MANAGER The Investment Manager, a wholly-owned subsidiary of The Charles Schwab Corporation, serves as the Funds' investment adviser and administrator pursuant to two separate yet otherwise substantially similar Investment Advisory and Administration Agreements (the "Advisory Agreements") between it and the Trust. The Investment Manager is registered as an investment adviser under the Investment Advisers Act of 1940, as amended, and currently provides investment management services to the SchwabFunds Family(R), a family of 26 mutual funds with over $42 billion in assets as of December 15, 1996. The Investment Manager is an affiliate of Schwab; the Trust's distributor; and the shareholder services and transfer agent. Each Advisory Agreement will continue in effect for one-year terms for each Fund to which it relates, subject to annual approval by: (1) the Trust's Board of Trustees or (2) a vote of a majority (as defined in the 1940 Act) of the outstanding voting securities of a Fund. In either event, the continuance must also be approved by a majority of the Trust's Board of Trustees who are not parties to the Agreement or interested persons (as defined in the 1940 Act) of any such party by vote cast in person at a meeting called for the purpose of voting on such approval. Each Advisory Agreement may be terminated at any time upon 60 days' notice by either party, or by a majority vote of the outstanding shares of a Fund, and will terminate automatically upon assignment. Pursuant to an Advisory Agreement dated June 15, 1994, as may be amended from time to time, the Investment Manager is entitled to receive an annual fee, payable monthly, of 0.46% of the Schwab Municipal Fund's average daily net assets not in excess of $1 billion, 0.41% of such net assets over $1 billion 18 19 but not in excess of $2 billion, and 0.40% of such net assets over $2 billion. For the fiscal year ended December 31, 1993, 1994, and 1995 the investment advisory fees paid by the Schwab Municipal Money Fund were $3,494,000 (fees were reduced by $5,424,000), $5,421,000 (fees were reduced by $6,646,000), and $6,482,000 (fees were reduced by $7,237,000), respectively. Pursuant to a separate Advisory Agreement dated June 15, 1994, as may be amended from time to time, the Investment Manager is entitled to receive an annual fee, payable monthly, of 0.46% of each of Schwab California Municipal Money Fund and Schwab New York Municipal Money Fund Fund's average daily net assets not in excess of $1 billion, 0.41% of such net assets over $1 billion but not in excess of $2 billion, and 0.40% of such net assets over $2 billion. For the fiscal year ended December 31, 1993, 1994, and 1995, the investment advisory fees paid by the Schwab California Municipal Money Fund were $1,437,000 (fees were reduced by $2,450,000), $2,254,000 (fees were reduced by $3,274,000) and $2,748,000 (fees were reduced by $3,703,000), respectively. For the Schwab New York Municipal Money Fund for the period from February 27, 1995 (commencement of operations) to the period ended December 31, 1995, the investment advisory fees paid was $464,000 (fees were reduced by $277,000). EXPENSES The Trust pays the expenses of its operations, including: the fees and expenses of independent accountants, counsel and the custodian; the cost of reports and notices to shareholders; the cost of calculating net asset value; registration fees; the fees and expenses of qualifying the Trust and its shares for distribution under federal and state securities laws; and membership dues in the Investment Company Institute or any similar organization. The Trust's expenses generally are allocated among the Funds on the basis of relative net assets at the time the expense is incurred, except that expenses directly attributable to a particular Fund or class of a Fund are charged to that Fund or class, respectively. DISTRIBUTOR Pursuant to a Distribution Agreement, Schwab is the principal underwriter for shares of the Trust and is the Trust's agent for the purpose of the continuous offering of the Funds' shares. Each Fund pays the cost of the prospectuses and shareholder reports to be prepared and delivered to existing shareholders. Schwab pays such costs when the described materials are used in connection with the offering of shares to prospective investors and for supplementary sales literature and advertising. Schwab receives no fee under the Distribution Agreement. Terms of continuation, termination and assignment under the Distribution Agreement are identical to those described above with respect to the Advisory Agreements. 19 20 CUSTODIAN AND FUND ACCOUNTANT PNC Bank, National Association, at the Airport Business Center, 200 Stevens Drive, Suite 440, Lester, Pennsylvania 19113, serves as Custodian for the Trust. PFPC, Inc., at 400 Bellevue Parkway Wilmington, Delaware 19809, serves as Fund Accountant for the Trust. ACCOUNTANTS AND REPORTS TO SHAREHOLDERS The Trust's independent accountants, Price Waterhouse LLP, audit and report on the annual financial statements of each series of the Trust and review certain regulatory reports and each Fund's federal income tax return. Price Waterhouse LLP also performs other professional accounting, auditing, tax and advisory services when the Trust engages it to do so. Shareholders will be sent audited annual and unaudited semi-annual financial statements. The address of Price Waterhouse LLP is 555 California Street, San Francisco, California 94104. LEGAL COUNSEL Ropes & Gray, One Franklin Square, 1301 K Street, N.W., Suite 800 East, Washington, D.C. 20005, is counsel to the Trust. 20 21 PORTFOLIO TRANSACTIONS AND TURNOVER PORTFOLIO TRANSACTIONS Portfolio transactions are undertaken principally to: pursue the objective of each Fund in relation to movements in the general level of interest rates; invest money obtained from the sale of Fund shares; reinvest proceeds from maturing portfolio securities; and meet redemptions of Fund shares. Portfolio transactions may increase or decrease the yield of a Fund depending upon management's ability to correctly time and execute them. The Investment Manager, in effecting purchases and sales of portfolio securities for the account of each Fund, seeks to obtain best price and execution. Subject to the supervision of the Board of Trustees, the Investment Manager will generally select brokers and dealers for the Funds primarily on the basis of the quality and reliability of brokerage services, including execution capability and financial responsibility. When the execution and price offered by two or more broker-dealers are comparable, the Investment Manager may, in its discretion, utilize the services of broker-dealers that provide it with investment information and other research resources. Such resources may also be used by the Investment Manager when providing advisory services to other investment advisory clients, including mutual funds. The Trust expects that purchases and sales of portfolio securities will usually be principal transactions. Securities will normally be purchased directly from the issuer or from an underwriter or market maker for the securities. Purchases from underwriters will include a commission or concession paid by the issuer to the underwriter, and purchases from dealers serving as market makers will include the spread between the bid and asked prices. The investment decisions for each Fund are reached independently from those for other accounts managed by the Investment Manager. Such other accounts may also make investments in instruments or securities at the same time as a Fund. When two or more accounts managed by the Investment Manager have funds available for investment in similar instruments, available instruments are allocated as to amount in a manner considered equitable to each account. In some cases this procedure may affect the size or price of the position obtainable for a Fund. However, it is the opinion of the Board of Trustees that the benefits conferred by the Investment Manager outweigh any disadvantages that may arise from exposure to simultaneous transactions. PORTFOLIO TURNOVER Because securities with maturities of less than one year are excluded from required portfolio turnover rate calculations, each Fund's portfolio turnover rate for reporting purposes is expected to be zero. 21 22 DISTRIBUTIONS AND TAXES DISTRIBUTIONS On each day that the net asset value per share of the Value Advantage Shares of a Fund is determined ("Business Day"), such Shares' net investment income will be declared as of the close of trading on the New York Stock Exchange (normally 4:00 p.m. Eastern time) as a daily dividend to shareholders of record as of the last calculation of net asset value prior to the declaration. For the Value Advantage Shares of each Fund, Shareholders will receive dividends in additional shares unless they elect to receive cash. Dividends will normally be reinvested monthly in full and fractional Value Advantage Shares of the Fund at the net asset value on the 15th day of each month, if a Business Day, otherwise on the next Business Day. If cash payment is requested, checks will normally be mailed on the Business Day following the reinvestment date. Each Fund will pay shareholders, who redeem all of their shares, all dividends accrued to the time of the redemption within 7 days. Each Fund calculates its dividends based on its daily net investment income. For this purpose, the net investment income of the Value Advantage Shares of a Fund consists of: (1) accrued interest income, plus or minus amortized discount or premium, allocated to the Value Advantage Shares of that Fund minus (2) accrued expenses allocated to the Value Advantage Shares of that Fund. If a Fund realizes any capital gains, they will be distributed at least once during the year as determined by the Board of Trustees. Any realized capital losses to the extent not offset by realized capital gains will be carried forward. It is not anticipated that a Fund will realize any long-term capital gains. Expenses of the Trust are accrued each day. Should the net asset value of the Value Advantage Share of a Fund deviate significantly from market value, the Board of Trustees could decide to value the investments at market value and any unrealized gains and losses could affect the amount of the Fund's distributions to holders of Value Advantage Shares. FEDERAL INCOME TAXES It is each Fund's policy to qualify for taxation as a "regulated investment company" by meeting the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). By following this policy, each Fund expects to eliminate or reduce to a nominal amount the federal income tax to which it is subject. In order to qualify as a regulated investment company, each of the Funds must, among other things, (1) derive at least 90% of its gross income from dividends, interest, payments with respect to securities loans and gains from the sale or other disposition of stocks, securities, foreign currencies or other income (including gains from options, futures or forward contracts) derived with respect to its business of investing in stocks, securities or currencies; (2) derive less 22 23 than 30% of its gross income from gains from the sale or other disposition of certain assets (including stocks and securities) held for less than three months; and (3) diversify its holdings so that at the end of each quarter of its taxable year (i) at least 50% of the market value of the Fund's total assets is represented by cash or cash items, U.S. Government securities, securities of other regulated investment companies and other securities limited, in respect of any one issuer, to a value not greater than 5% of the value of the Fund's total assets and 10% of the outstanding voting securities of such issuer, and (ii) not more than 25% of the value of its assets is invested in the securities of any one issuer (other than U.S. Government securities or securities of any other regulated investment company) or of two or more issuers that the Fund controls, within the meaning of the Code, and that are engaged in the same, similar or related trades or businesses. These requirements may restrict the degree to which a Fund may engage in short-term trading and certain hedging transactions and may limit the range of a Fund's investments. If a Fund qualifies as a regulated investment company, it will not be subject to federal income tax on the part of its net investment income and net realized capital gains, if any, which it distributes to shareholders, provided that the Fund meets certain minimum distribution requirements. To comply with these requirements, a Fund must distribute at least (a) 90% of its "investment company taxable income" (as that term is defined in the Code) and (b) 90% of the excess of its tax-exempt interest income over certain deductions attributable to that income (with certain exceptions), for its taxable year. Each Fund intends to make sufficient distributions to shareholders to meet these requirements. If a Fund fails to distribute in a calendar year (regardless of whether it has a non-calendar taxable year) substantially all of its (i) ordinary income for such year; and (ii) capital gain net income for the year ending October 31 (or later if the Fund is permitted so to elect and so elects), plus any retained amount from the prior year, the Fund will be subject to a nondeductible 4% excise tax on the undistributed amounts. Each Fund intends generally to make distributions sufficient to avoid imposition of this excise tax. Any distributions declared by the Funds in October, November or December to shareholders of record during those months and paid during the following January are treated, for tax purposes, as if they were received by each shareholder on December 31 of the year declared. A Fund may adjust its schedule for the reinvestment of distributions for the month of December to assist in complying with the reporting and minimum distribution requirements of the Code. The Funds do not expect to realize any significant amount of long-term capital gain. However, any distributions of long-term capital gain will be taxable to the shareholders as long-term capital gain, regardless of how long a shareholder has held the Fund's shares. If a shareholder disposes of shares at a loss before holding such shares for longer than six months, the loss will be treated as a long-term capital loss to the extent the shareholder received a capital gain dividend on the shares. 23 24 A Fund will be required in certain cases to withhold and remit to the U.S. Treasury 31% of taxable dividends paid to any shareholder who (1) fails to provide a correct taxpayer identification number certified under penalty of perjury; (2) is subject to withholding by the Internal Revenue Service for failure to properly report all payments of interest or dividends; or (3) fails to provide a certified statement that he or she is not subject to "backup withholding." This "backup withholding" is not an additional tax and any amounts withheld may be credited against the shareholder's ultimate U.S. tax liability. The Funds may engage in investment techniques that may alter the timing and character of the Funds' income. The Funds may be restricted in their use of these techniques by rules relating to their qualification as regulated investment companies. The foregoing discussion relates only to federal income tax law as applicable to U.S. citizens or residents. Foreign shareholders (i.e., nonresident alien individuals and foreign corporations, partnerships, trusts and estates) are generally subject to U.S. withholding tax at the rate of 30% (or a lower tax treaty rate) on distributions derived from net investment income and short-term capital gains. Distributions to foreign shareholders of long-term capital gains and any gains from the sale or other disposition of shares of the Funds are generally not subject to U.S. taxation, unless the recipient is an individual who meets the Code's definition of "resident alien." Different tax consequences may result if the foreign shareholder is engaged in a trade or business within the United States. In addition, the tax consequences to a foreign shareholder entitled to claim the benefits of a tax treaty may be different than those described above. Distributions by a Fund also may be subject to state, local and foreign taxes, and its treatment under applicable tax laws may differ from the federal income tax treatment. The Code permits a regulated investment company that invests at least 50% of its assets at the close of each quarter in Municipal Securities to pass through to its investors, on a tax-exempt basis, net Municipal Securities interest income. An exempt-interest dividend is any dividend or part thereof (other than a capital gain dividend) paid by any Fund and designated as an exempt-interest dividend in a written notice mailed to shareholders after the close of such Fund's taxable year, but not to exceed in the aggregate the net Municipal Securities interest income received by each such Fund during the taxable year. The percentage of the total dividends paid for any taxable year that qualified as exempt-interest dividends will be the same for all shareholders receiving dividends from each Fund during such year, regardless of the period for which the Shares were held. If for any taxable year any Fund does not qualify for the special federal tax treatment afforded regulated investment companies, all of its taxable income will be subject to federal tax at regular corporate rates (without any deduction for distributions to its shareholders) when distributed, and Municipal Securities interest income, although not taxed to the Funds, would be taxable to shareholders. 24 25 A shareholder should consult his or her own tax adviser with respect to whether exempt-interest dividends would be excludable from gross income if the shareholder were treated as a "substantial user" of facilities financed by an obligation held by a Fund or a "related person" to such user under the Code. Any loss on the sale or exchange of any share held for six months or less will be disallowed to the extent of the amount of the exempt-interest dividend received with respect to such share. The U.S. Treasury Department is authorized to issue regulations reducing the period to not less than 31 days for certain regulated investment companies, but no such regulations have been issued as of the date of this Statement of Additional Information. All or part of interest on indebtedness incurred or continued by a shareholder to purchase or carry shares of a Fund will not be deductible by the shareholder. The portion of interest that is not deductible is equal to the total interest paid or accrued on the indebtedness multiplied by the percentage of that Fund's total distributions (excluding distributions of the excess of net long-term capital gains over net short-term capital losses) paid to the shareholder that are exempt-interest dividends. Under rules used by the Internal Revenue Service, the purchase of shares of a Fund may be considered to have been made with borrowed funds even though such funds are not directly traceable to the purchase of the shares. The discussion of federal income taxation presented above summarizes only some of the important federal tax considerations generally affecting purchasers of Fund shares. No attempt has been made to present a detailed explanation of the federal income tax treatment of a Fund and its shareholders, and the discussion is not intended as a substitute for careful tax planning. Accordingly, prospective investors (particularly those not residing or domiciled in the United States) should consult their own tax advisers regarding the consequences of investing in a Fund. STATE TAXES With respect to Schwab California Municipal Money Fund, if, at the close of each quarter of its taxable year, at least 50% of the value of the total assets of the Fund consists of obligations the interest on which is exempt from California personal income taxation under the Constitution or laws of California or of the United States when held by an individual ("California Exempt Obligations"), then the Fund will be qualified to pay dividends exempt from State of California personal income tax to its non-corporate shareholders (hereinafter referred to as "California exempt-interest dividends"). Schwab California Municipal Money Fund intends to qualify under the above requirement so that it can pay California exempt-interest dividends. If Schwab California Municipal Money Fund fails to so qualify, no part of its dividends will be exempt from State of California personal income tax. With respect to Schwab New York Municipal Money Fund, there is no analogous requirement, so all dividends representing interest on New York Municipal Securities that is exempt from New York personal income taxation will be exempt from New York State and 25 26 municipal income taxes in the hands of non-corporate shareholders ("New York exempt-interest dividends"). Not later than 60 days after the close of its taxable year, Schwab California and New York Municipal Money Funds will notify each shareholder of the portion of the dividends paid by it to the shareholder with respect to such taxable year which is exempt from State of California personal income tax or New York personal income tax, respectively. The total amount of California exempt-interest dividends paid by Schwab California Municipal Money Fund to all of its shareholders with respect to any taxable year cannot exceed the amount of interest received by the Fund during such year on California Exempt Obligations, less any expenses or expenditures (including any expenditures attributable to the acquisition of additional securities for Schwab California Municipal Money Fund) that are allocable to such interest. Dividends paid by Schwab California Municipal Money Fund in excess of this limitation will be treated as ordinary dividends subject to State of California personal income tax at ordinary rates. For purposes of this limitation, expenses or other expenditures paid during any year generally will be allocable with funds attributable to interest received by the Fund from California Exempt Obligations for such year in the same ratio as such interest from California Exempt Obligations for such year bears to the total gross income earned by the Fund for the year. The effect of this accounting convention is that amounts of interest from California Exempt Obligations received by Schwab California Municipal Money Fund that would otherwise be available for distribution as California exempt-interest dividends will be reduced by the expenses and expenditures be allocable from such amounts. To the extent, if any, dividends paid to shareholders by Schwab California Municipal Money Fund or New York Municipal Money Fund are derived from long-term and short-term capital gains, such dividends will not constitute California or New York exempt-interest dividends. Rules similar to those regarding the treatment of such dividends for federal income tax purposes are also applicable for State of California and New York personal income tax purposes. Moreover, interest on indebtedness incurred by a shareholder to purchase or carry shares of Schwab California Municipal Money Fund or New York Municipal Money Fund is not deductible for state personal income tax purposes if the Fund distributes California or New York exempt-interest dividends to the shareholder during his or her taxable year. The foregoing is a summary of only some of the important state personal income tax considerations generally affecting Schwab California Municipal and New York Municipal Money Funds and their shareholders. No attempt is made to present a detailed explanation of the state personal income tax treatment of Schwab California Municipal and New York Municipal Money Funds or their shareholders, and this discussion is not intended as a substitute for careful planning. Further, it should be noted that the portion of Schwab California Municipal and New York Municipal Money Funds' dividends constituting California or New York exempt-interest dividends, respectively, is excludable from 26 27 income for State of California or State of New York personal income tax purposes only. Any dividends paid to shareholders of the Funds subject to state franchise or corporate income tax will be taxed as ordinary dividends to such shareholders, notwithstanding that all or a portion of such dividends is exempt from state personal income tax. Accordingly, potential investors in the Schwab California Municipal Money Fund or New York Municipal Money Fund, including, in particular, corporate investors which may be subject to California or New York franchise or corporate income tax, should consult their tax advisers with respect to the application of such tax to the receipt of dividends from the Funds and as to their own state tax situation, in general. SHARE PRICE CALCULATION Each Fund values its portfolio instruments at amortized cost, which means they are valued at their acquisition cost, as adjusted for amortization of premium or discount, rather than at current market value. Calculations are made to compare the value of a Fund's investments at amortized cost with market values. Market valuations are obtained by using actual quotations provided by market makers, estimates of market value, or values obtained from yield data relating to classes of money market instruments published by reputable sources at the mean between the bid and asked prices for the instruments. The amortized cost method of valuation seeks to maintain a stable $1.00 per share net asset value even where there are fluctuations in interest rates that affect the value of portfolio instruments. Accordingly, this method of valuation can in certain circumstances lead to a dilution of a shareholder's interest. If a deviation of 1/2 of 1% or more were to occur between the net asset value per share calculated by reference to market values and a Fund's $1.00 per share net asset value for its Value Advantage Shares, or if there were any other deviation that the Board of Trustees of the Trust believed would result in a material dilution to shareholders or purchasers, the Board of Trustees would promptly consider what action, if any, should be initiated. If the net asset value per share for a Fund's Value Advantage Shares (computed using market values) declined, or were expected to decline, below $1.00 (computed using amortized 27 28 cost), the Board of Trustees might temporarily reduce or suspend dividend payments in an effort to maintain the net asset value at $1.00 per share for a Fund's Value Advantage Shares. As a result of such reduction or suspension of dividends or other action by the Board of Trustees, an investor would receive less income during a given period than if such a reduction or suspension had not taken place. Such action could result in investors receiving no dividend for the period during which they hold their shares and receiving, upon redemption, a price per share lower than that which they paid. On the other hand, if a Fund's net asset value per share for its Value Advantage Shares (computed using market values) were to increase, or were anticipated to increase above $1.00 (computed using amortized cost), the Board of Trustees might supplement dividends in an effort to maintain the net asset value at $1.00 per share for its Value Advantage Shares. HOW THE FUNDS REPORT PERFORMANCE The historical performance of the Value Advantage Shares of each Fund may be shown in the form of total return, yield, effective yield, taxable equivalent yield and taxable equivalent effective yield. These measures of performance are described below. TOTAL RETURN Standardized Total Return. Average annual total return for a period is determined by calculating the actual dollar amount of investment return on a $1,000 investment in a Fund made at the beginning of the period, then calculating the average annual compounded rate of return that would produce the same investment return on the $1,000 over the same period. In computing average annual total return, a Fund assumes the reinvestment of all distributions at net asset value on applicable reinvestment dates. Nonstandardized Total Return. Nonstandardized total return for a Fund differs from standardized total return in that it relates to periods other than the period for standardized total return and/or that it represents aggregate (rather than average) total return. 28 29 In addition, an after-tax total return for each Fund may be calculated by taking that Fund's standardized or non-standardized total return and subtracting applicable federal taxes from the portions of each Fund's total return attributable to capital gains distributions and ordinary income. This after-tax total return may be compared to that of other mutual funds with similar investment objectives as reported by independent sources. Each Fund also may report the percentage of that Fund's standardized or non-standardized total return which would be paid to taxes annually (at the applicable federal personal income and capital gains tax rates) before redemption of Fund shares. This proportion may be compared to that of other mutual funds with similar investment objectives as reported by independent sources. A Fund may also advertise its cumulative total return since inception. This number is calculated using the same formula that is used for average annual total return except that, rather than calculating the total return based on a one-year period, cumulative total return is calculated from inception to the date specified. YIELD A Fund's yield refers to the net investment income generated by a hypothetical investment in the Value Advantage Shares of a Fund over a specific 7-day period. This net investment income is then annualized, which means that the net investment income generated during the 7-day period is assumed to be generated in each 7-day period over an annual period, and is shown as a percentage of the investment. EFFECTIVE YIELD A Fund's effective yield is calculated similarly, but the net investment income earned by the investment is assumed to be compounded weekly when annualized. The effective yield will be slightly higher than the yield due to this compounding effect. TAXABLE EQUIVALENT YIELD AND TAXABLE EQUIVALENT EFFECTIVE YIELD The taxable equivalent yield of the Value Advantage Shares of the Schwab Municipal Money Fund is computed by dividing that portion of the Value Advantage Shares' yield (computed as described above) that is tax-exempt by an amount equal to one minus the stated federal income tax rate (normally assumed to be the maximum applicable marginal tax bracket rate) and adding the result to that portion, if any, of the yield of the Value Advantage Shares that is not tax-exempt. The taxable equivalent yield of the Value Advantage Shares of the Schwab California Municipal Money Fund is calculated by dividing that portion of the Value Advantage Shares' yield (computed as described above) which is tax-exempt by an amount equal to one minus the stated combined State of California and federal income tax rate (normally assumed to be the maximum federal marginal rate of 39.6% and the California marginal rate of 9.3%, although other rates may be used at times), and adding the result to that 29 30 portion, if any, of the Value Advantage Shares' yield that is not tax-exempt. The taxable equivalent yield of the Value Advantage Shares of Schwab New York Municipal Money Fund is calculated by dividing that portion of the Value Advantage Shares' yield (computed as described above) which is tax-exempt by an amount equal to one minus the stated combined New York municipal, State of New York and federal income tax rate (normally assumed to be the maximum federal marginal rate of 39.6%, the State of New York marginal rate of 7.125% and the New York municipal marginal rate of 3.91%, although other rates may be used at times), and adding the result to that portion, if any, of the Value Advantage Shares' yield that is not tax-exempt. Taxable equivalent effective yields are computed in the same manner as taxable equivalent yields, except that effective yield is substituted for yield in the calculation. In calculating taxable equivalent yields and effective yields, Schwab Municipal Money Fund generally assumes an effective tax rate of 39.6%, Schwab California Municipal Money Fund generally assumes an effective tax rate (combining the federal 39.6% rate and the California 9.30% rate, and assuming the taxpayer deducts California state taxes paid) of 45.22%, and Schwab New York Municipal Money Fund generally assumes an effective tax rate (combining the federal 39.6% rate, the New York state 7.125%, rate and the New York municipal 3.91%, rate, and assuming the taxpayer deducts New York state and municipal taxes paid) of 46.27%. Investors in Schwab New York Municipal Money Fund should understand that, under legislation enacted in New York State and New York City, the maximum effective tax rate for 1997 will be 45.79%. The effective tax rates used in determining such yields do not reflect the tax costs resulting from the full or partial loss of the benefits of personal exemptions, itemized deductions and California exemption credits that may result from the receipt of additional taxable income by taxpayers with adjusted gross incomes exceeding $117,950 ($58,975 for married filing separate returns) in 1996. Actual taxable equivalent yields and taxable equivalent effective yields may be higher for taxpayers subject to the loss of these benefits than the rates reported by the Funds. TAX-EXEMPT VERSUS TAXABLE YIELD Investors may want to determine which investment, tax-exempt or taxable, will provide a higher after-tax return. To determine the taxable equivalent yield or taxable equivalent effective yield, simply divide the yield or effective yield of the Value Advantage Shares of a Fund by 1 minus your marginal federal tax rate (or combined state and federal tax rate in the case of Schwab California Municipal Money Fund, or combined municipal, state, and federal tax rate in the case of Schwab New York Municipal Money Fund). Note, however, that as discussed above, full or partial loss by certain investors of the described federal tax benefits could cause the resulting figure to understate the after-tax return produced by the Value Advantage Shares of the Fund in question. Performance information for each of the Funds for the 7-day period ended December 31, 1995 is presented below. 30 31 The taxable equivalent yield and taxable equivalent effective yield figures are based, in the case of Schwab Municipal Money Fund, upon an assumed 1995 effective tax rate of 39.6%; in the case of Schwab California Municipal Money Fund, upon an assumed effective tax rate of 46.24%; and in the case of Schwab New York Municipal Money Fund, upon an assumed effective tax rate of 46.88%. The yields below are based on the maximum rates in effect for 1995. Tax rates in effect for 1996 are different. See the discussion above relating to federal, State of California and State of New York tax rates.
Taxable Taxable Equivalent Yield Effective Yield Equivalent Yield Effective Yield ----- --------------- ---------------- --------------- Schwab Municipal Money Fund-Value 4.17% 4.26% 6.90% 7.05% Advantage Shares Schwab California Municipal Money 3.99% 4.06% 7.42% 7.55% Fund-Value Advantage Shares Schwab New York Municipal Money 4.07% 4.16% 7.66% 7.83% Fund-Value Advantage Shares
GENERAL INFORMATION The Trust generally is not required to hold shareholder meetings. However, as provided in its Agreement and Declaration of Trust and Bylaws, shareholder meetings will be held in connection with the following matters: (1) election or removal of Trustees if a meeting is requested in writing by a shareholder or shareholders who beneficially own(s) 10% or more of the 31 32 Trust's shares; (2) adoption of any contract for which shareholder approval is required by the 1940 Act; (3) any termination of the Trust to the extent and as provided in the Declaration of Trust; (4) any amendment of the Declaration of Trust (other than amendments changing the name of the Trust or any of its investment portfolios, supplying any omission, curing any ambiguity or curing, correcting or supplementing any defective or inconsistent provision thereof); (5) determination of whether a court action, proceeding or claim should or should not be brought or maintained derivatively or as a class action on behalf of the Trust or the shareholders, to the same extent as the stockholders of a Massachusetts business corporation; and (6) such additional matters as may be required by law, the Declaration of Trust, the Bylaws or any registration of the Trust with the SEC or any state or as the Board of Trustees may consider desirable. The shareholders also would vote upon changes to a Fund's fundamental investment objective, policies or restrictions. Each Trustee serves until the next meeting of shareholders, if any, called for the purpose of electing Trustees and until the election and qualification of his or her successor or until death, resignation, retirement or removal by a majority vote of the shares entitled to vote (as described below) or of a majority of the Trustees. In accordance with the 1940 Act, (i) the Trust will hold a shareholder meeting for the election of Trustees when less than a majority of the Trustees have been elected by shareholders and (ii) if, as a result of a vacancy in the Board of Trustees, less than two-thirds of the Trustees have been elected by the shareholders, that vacancy will be filled by a vote of the shareholders. Upon the written request of ten or more shareholders who have been such for at least six months and who hold shares constituting at least 1% of the Trust's outstanding shares stating that they wish to communicate with the other shareholders for the purpose of obtaining signatures necessary to demand a meeting to consider removal of one or more Trustees, the Trust has undertaken to disseminate appropriate materials at the expense of the requesting shareholders. The Bylaws provide that a majority of shares entitled to vote shall be a quorum for the transaction of business at a shareholders' meeting, except that where any provision of law, of the Declaration of Trust or of the Bylaws permits or requires that (i) holders of any series shall vote as a series, then a majority of the aggregate number of shares of that series entitled to vote shall be necessary to constitute a quorum for the transaction of business by that series, or (ii) holders of any class shall vote as a class, then a majority of the aggregate number of shares of that class entitled to vote shall be necessary to constitute a quorum for the transaction of business by that class. Any lesser number shall be sufficient for adjournments. Any adjourned session or sessions may be held, within a reasonable time after the date set for the original meeting, without 32 33 the necessity of further notice. The Declaration of Trust specifically authorizes the Board of Trustees to terminate the Trust (or any of its investment portfolios) by notice to the shareholders without shareholder approval. Under Massachusetts law, shareholders of a Massachusetts business trust could, under certain circumstances, be held personally liable for the Trust's obligations. The Declaration of Trust, however, disclaims shareholder liability for the Trust's acts or obligations and requires that notice of such disclaimer be given in each agreement, obligation or instrument entered into or executed by the Trust or the Trustees. In addition, the Declaration of Trust provides for indemnification out of the property of an investment portfolio in which a shareholder owns or owned shares for all losses and expenses of such shareholder or former shareholder if he or she is held personally liable for the obligations of the Trust solely by reason of being or having been a shareholder. Moreover, the Trust will be covered by insurance which the Trustees consider adequate to cover foreseeable tort claims. Thus, the risk of a shareholder incurring financial loss on account of shareholder liability is considered remote because it is limited to circumstances in which a disclaimer is inoperative and the Trust itself is unable to meet its obligations. For further information, please refer to the registration statement and exhibits for the Trust on file with the SEC in Washington, D.C. and available upon payment of a copying fee. The statements in the Prospectus and this Statement of Additional Information concerning the contents of contracts or other documents, copies of which are filed as exhibits to the registration statement, are qualified by reference to such contracts or documents. PRINCIPAL HOLDERS OF SECURITIES As of March 15, 1996, the following persons directly or beneficially owned 5% or more of each Fund's Value Advantage Shares: Walter R. Koepp (EX) and EST E. H. Shumway, 15717 Larch Way Lynnwood, WA 98037 at 5.98% for the Schwab Municipal Money Fund-Value Advantage Shares(TM); Louis A. Simpson, P.O. Box 1487, Rancho Santa Fe, CA 92067 at 7.68% for the Schwab California Municipal Money Fund-Value Advantage Shares(TM); Victoria Shaw, 14 East 90th Street, New York, NY 10128 at 10.49%, PEI Partnership Architects, 257 Park Avenue South, New York, NY 10010 at 6.43%, and Patricia Meehan, 18 Heather Lane, Miller Place, NY 11764 at 12.29% for the Schwab New York Municipal Money Fund-Value Advantage Shares(TM). As of March 22, 1996, the officers and Trustees of the Trust, as a group, owned of record or beneficially less than 1% of the outstanding voting securities of the remaining series of the Trust. ACCESS TO SCHWAB'S MUTUAL FUND ONESOURCE(R) SERVICE With Schwab's Mutual Fund OneSource Service ("OneSource"), a shareholder can invest in over 575 mutual 33 34 funds from many fund companies, subject to the following. Schwab's standard transaction fee will be charged on each redemption of fund shares held for 90 days or less to discourage short-term trading. Mutual fund shares held for more than 90 days are exempt from the short-term redemption policy and may be sold without penalty. Up to 15 short-term redemption of fund shares per calendar year are permitted. If you exceed this number, you will no longer be able to buy or sell fund shares without paying a transaction fee. As a courtesy, we will notify you in advance if your short-term redemptions are nearing the point where all of your future trades will be subject to transaction fees. Schwab reserves the right to modify OneSource's terms and conditions at any time. For more information, a shareholder should contact his or her Schwab office during its regular business hours or call 800-2 NO-LOAD, 24 hours a day. 34 35 SCHWABFUNDS(R) -------------- SchwabFunds offers a variety of series and classes of shares of beneficial interest to help you with your investment needs. EQUITY FUNDS Schwab 1000 Fund(R)(1) Schwab International Index Fund(R)(2) Schwab Small-Cap Index Fund(R)(2) Schwab Asset Director(R)-High Growth Fund(2) Schwab Asset Director(R)-Balanced Growth Fund(2) Schwab Asset Director(R)-Conservative Growth Fund(2) Schwab S&P 500 Fund-Investor Shares(2) Schwab S&P 500 Fund-e.Shares(TM)(2),(3) Schwab Analytics Fund(TM)(2) Schwab OneSource Portfolios-International Schwab OneSource Portfolios-Growth Allocation Schwab OneSource Portfolios-Balanced Allocation FIXED INCOME FUNDS(1) Schwab Short/Intermediate Government Bond Fund Schwab Long-Term Government Bond Fund Schwab Short/Intermediate Tax-Free Bond Fund Schwab Long-Term Tax-Free Bond Fund Schwab California Short/Intermediate Tax-Free Bond Fund(4) Schwab California Long-Term Tax-Free Bond Fund(4) MONEY MARKET FUNDS(5) Schwab Money Market Fund Schwab Government Money Fund Schwab U.S. Treasury Money Fund Schwab Value Advantage Money Fund(R) Schwab Municipal Money Fund-Sweep Shares Schwab Municipal Money Fund-Value Advantage Shares(TM) Schwab California Municipal Money Fund-Sweep Shares Schwab California Municipal Money Fund-Value Advantage Shares(TM) Schwab Retirement Money Fund(R)(6) Schwab Institutional Advantage Money Fund(R)(6) Schwab New York Municipal Money Fund-Sweep Shares Schwab New York Municipal Money Fund-Value Advantage Shares(TM) (1) The Schwab 1000 Fund and all fixed income funds are separate investment portfolios of Schwab Investments. (2) The Funds are separate investment portfolios or classes of shares of Schwab Capital Trust. (3) Available only through SchwabLink(TM). (4) Available only to California residents and residents of selected other states. (5) All listed money market funds are separate investment portfolios of the Trust. (6) Designed for institutional investors only. 35 36 PURCHASE AND REDEMPTION OF SHARES The minimum initial investment for the Value Advantage Shares of each Fund is $25,000 and subsequent investments of $5,000 or more may be made. These minimum requirements may be changed at any time and are not applicable to certain types of investors. The Trust may waive the minimums for purchases by Trustees, Directors, officers or employees of the Trust, Schwab or the Investment Manager. The Trust has made an election with the SEC to pay in cash all redemptions requested by any shareholder of record limited in amount during any 90-day period to the lesser of $250,000 or 1% of its net assets at the beginning of such period. This election is irrevocable without the SEC's prior approval. Redemption requests in excess of the stated limits may be paid, in whole or in part, in investment securities or in cash, as the Trust's Board of Trustees may deem advisable; however, payment will be made wholly in cash unless the Board of Trustees believes that economic or market conditions exist that would make such a practice detrimental to the best interests of the Fund. If redemption proceeds are paid in investment securities, such securities will be valued as set forth in the Prospectus of the Fund affected under "Share Price Calculation" and a redeeming shareholder would normally incur brokerage expenses if he or she converted the securities to cash. OTHER INFORMATION The Prospectus of the Funds and this Statement of Additional Information do not contain all the information included in the Registration Statement filed with the SEC under the Securities Act of 1933, as amended, with respect to the securities offered by the Prospectus. Certain portions of the Registration Statement have been omitted from the Prospectus and this Statement of Additional Information pursuant to the rules and regulations of the SEC. The Registration Statement including the exhibits filed therewith may be examined at the office of the SEC in Washington, D.C. Statements contained in the Prospectus or in this Statement of Additional Information as to the contents of any contract or other document referred to are not necessarily complete, and, in each instance, reference is made to the copy of such contract or other document filed as an exhibit to the Registration Statement of which the Prospectus and this Statement of Additional Information form a part, each such statement being qualified in all respects by such reference. THIS STATEMENT OF ADDITIONAL INFORMATION DOES NOT CONSTITUTE AN OFFERING BY THE TRUST, ANY SERIES THEREOF, OR BY THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT BE LAWFULLY MADE. 36 37 APPENDIX - RATINGS OF INVESTMENT SECURITIES COMMERCIAL PAPER MOODY'S INVESTORS SERVICE Prime-1 is the highest commercial paper rating assigned by Moody's. Issuers (or related supporting institutions) of commercial paper with this rating are considered to have a superior ability to repay short-term promissory obligations. Issuers (or related supporting institutions) of securities rated Prime-2 are viewed as having a strong capacity to repay short-term promissory obligations. This capacity will normally be evidenced by many of the characteristics of issuers whose commercial paper is rated Prime-1 but to a lesser degree. STANDARD & POOR'S CORPORATION An S&P A-1 commercial paper rating indicates a strong degree of safety regarding timely payment of principal and interest. Issues determined to possess overwhelming safety characteristics are denoted A-1+. Capacity for timely payment on commercial paper rated A-2 is satisfactory, but the relative degree of safety is not as high as for issues designated A-1. DUFF & PHELPS CREDIT RATING CO. Duff-1 is the highest commercial paper rating assigned by Duff & Phelps Credit Rating Co. ("Duff"). Three gradations exist within this rating category: a Duff-1+ rating indicates the highest certainty of timely payment (issuer short-term liquidity is found to be outstanding and safety is deemed to be just below that of risk-free short-term U.S. Treasury obligations), a Duff-1 rating signifies a very high certainty of timely payment (issuer liquidity is determined to be excellent and risk factors are considered minor) and a Duff-1 rating denotes high certainty of timely payment (issuer liquidity factors are strong and risk is very small). A Duff-2 rating indicates a good certainty of timely payment; liquidity factors and company fundamentals are sound and risk factors are small. FITCH INVESTORS SERVICE, INC. F-1+ is the highest category, and indicates the strongest degree of assurance for timely payment. Issues rated F-1 reflect an assurance of timely payment only slightly less than issues rated F-1+. Issues assigned an F-2 rating have a satisfactory degree of assurance for timely payment, but the margin of safety is not as great as for issues in the first two rating categories. 37 38 SHORT-TERM NOTES AND VARIABLE RATE DEMAND OBLIGATIONS MOODY'S INVESTORS SERVICE Short-term notes/variable rate demand obligations bearing the designations MIG-1/VMIG-1 are considered to be of the best quality, enjoying strong protection from established cash flows, superior liquidity support or demonstrated broad-based access to the market for refinancing. Obligations rated MIG-2/VMIG-2 are of high quality and enjoy ample margins of protection although not as large as those of the top rated securities. STANDARD & POOR'S CORPORATION An S&P SP-1 rating indicates that the subject securities' issuer has a very strong capacity to pay principal and interest. Issues determined to possess very strong safety characteristics are given a plus (+) designation. S&P's determination that an issuer has a satisfactory capacity to pay principal and interest is denoted by an SP-2 rating. IBCA Obligations supported by the highest capacity for timely repayment are rated A1+. An A1 rating indicates that the obligation is supported by a very strong capacity for timely repayment. Obligations rated A2 are supported by a good capacity for timely repayment, although adverse changes in business, economic, or financial conditions may affect this capacity. BONDS MOODY'S INVESTORS SERVICE Moody's rates the bonds it judges to be of the best quality Aaa. These bonds carry the smallest degree of investment risk and are generally referred to as "gilt edge." Interest payments are protected by a large or extraordinarily stable margin and principal is secure. While the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of these issues. Bonds carrying an Aa designation are deemed to be of high quality by all standards. Together with Aaa rated bonds, they comprise what are generally known as high grade bonds. Aa bonds are rated lower than the best bonds because they may enjoy relatively lower margins of protection, fluctuations of protective elements may be of greater amplitude or there may be other factors present which make them appear to be subject to somewhat greater long-term risks. 38 39 STANDARD & POOR'S CORPORATION AAA is the highest rating assigned by S&P to a bond and indicates the issuer's extremely strong capacity to pay interest and repay principal. An AA rating denotes a bond whose issuer has a very strong capacity to pay interest and repay principal and differs from an AAA rating only in small degree. DUFF & PHELPS CREDIT RATING CO. Duff confers an AAA designation to bonds of issuers with the highest credit quality. The risk factors associated with these bonds are negligible, being only slightly more than for risk-free U.S. Treasury debt. AA rated bonds are of high credit quality and have strong protection factors. The risks associated with them are modest but may vary slightly from time to time because of economic conditions. COMMERCIAL PAPER, SHORT-TERM OBLIGATIONS AND DEPOSIT OBLIGATIONS ISSUED BY BANKS THOMSON BANKWATCH (TBW) TBW-1 is the highest category and indicates the degree of safety regarding timely repayment of principal and interest is very high. TBW-2 is the second highest category and while the degree of safety regarding timely repayment of principal and interest is strong, the relative degree of safety is not as high as for issues rated TBW-1. 39 40 SchwabFunds(R) 1 - -------------------------------------------------------------------------------- SCHWAB TAX-EXEMPT MONEY FUND SCHEDULE OF INVESTMENTS (in thousands) December 31, 1995 - --------------------------------------------------------------------------------
Par Value ------- ---------- VARIABLE RATE OBLIGATIONS--57.8%(a) ALABAMA--2.0% Alabama Housing Finance Authority Single Family Housing Revenue Bonds Collateralized Home Mortgage Program Series 1995C-1/ (Bayerische Landesbank Girozentrale LOC) 5.05%, 01/07/96 $10,400 $10,400 Citronelle, Alabama Industrial Development Board Pollution Control Revenue Refunding Bonds (AZKO Chemicals, Inc. Project)/ (Wachovia Bank LOC) 5.15%, 01/07/96 1,100 1,100 Jefferson County, Alabama Sewer Revenue Warrants Series 1995A/ (Bayerische Landesbank Girozentrale LOC) 5.20%, 01/07/96 12,500 12,500 Mobile County, Alabama Industrial Development Board Revenue Bonds (Ultraform Co. Project) Series B/ (Bayerische Landesbank Girozentrale LOC) 5.00%, 01/07/96 1,000 1,000 Mobile County, Alabama Industrial Development Board Pollution Control Revenue Refunding Bonds (Ultraform Co. Project) Series A/ (Bayerische Landesbank Girozentrale LOC) 5.00%, 01/07/96 7,480 7,480 Mobile, Alabama Industrial Development Board Pollution Control Revenue Refunding Bonds (Alabama Power Co. Project) Series 1993C 5.15%, 01/07/96 12,000 12,000 Montgomery, Alabama Special Care Facility Financing Authority Revenue Bonds (Baptist Medical Center VHA) Series 1985C/ (AMBAC Insurance & FNB Chicago SBPA) 5.00%, 01/07/96 2,000 2,000 Montgomery, Alabama Special Care Facility Financing Authority Revenue Bonds (Baptist Medical Center VHA) Series 1985F/ (AMBAC Insurance & FNB Chicago SBPA) 5.00%, 01/07/96 9,000 9,000 Montgomery, Alabama Special Care Facility Financing Authority Revenue Bonds (Baptist Medical Center VHA) Series 1985G/ (AMBAC Insurance & FNB Chicago SBPA) 5.00%, 01/07/96 6,390 6,390 Montgomery, Alabama Special Care Facility Financing Authority Revenue Bonds (Baptist Medical Center VHA) Series 1985H/ (AMBAC Insurance & FNB Chicago SBPA) 5.00%, 01/07/96 5,295 5,295 Opelika, Alabama Industrial Development Board Revenue Bonds (Power Guard Project) Series 1994/(SouthTrust Bank of Alabama LOC) 5.35%, 01/07/96 3,100 3,100 ------ 70,265 ------ ALASKA--0.0% Alaska Industrial Development Authority Flexible Demand Revenue Bonds (Advanced Health Systems)/(Citibank LOC) 5.35%, 01/07/96 600 600 ------ ARIZONA--0.5% Arizona Educational Loan Marketing Corp. Revenue Bonds Series A/ (MBIA Insurance & Fuji Bank SBPA) 5.45%, 01/07/96 10,000 10,000 Yavapai County, Arizona Industrial Development Authority Revenue Bonds (First Health Care Corp. Project)/ (Wachovia Bank LOC) 5.15%, 01/07/96 4,230 4,230
F-1 41 SchwabFunds(R) 2 - -------------------------------------------------------------------------------- SCHWAB TAX-EXEMPT MONEY FUND SCHEDULE OF INVESTMENTS (in thousands) December 31, 1995 - --------------------------------------------------------------------------------
Par Value ------- ---------- Yuma, Arizona Industrial Development Authority Multi Family Housing Revenue Bonds (El Encanto Apartments) Series A/(Citibank LOC) 5.20%, 01/07/96 $3,000 $ 3,000 Yuma, Arizona Industrial Development Authority Multi Family Housing Revenue Bonds (El Encanto Apartments) Series B/(Citibank LOC) 5.50%, 01/07/96 275 275 ------ 17,505 ------ CALIFORNIA--1.4% California Higher Education Loan Authority Student Loan Refunding Bonds Series E1/(SLMA LOC) 5.25%, 01/07/96 5,000 5,000 California Pollution Control Financing Authority Pollution Control Revenue Bonds (Southern California Edison) Series 1986B 5.40%, 01/01/96 100 100 California Pollution Control Financing Authority Pollution Control Revenue Bonds (Southern California Edison) Series 1986C 5.40%, 01/01/96 200 200 California Statewide Community Development Corp. Industrial Development Revenue Bonds (Packaging Innovation DZ Industries, Inc.) Series 1994A-2/ (Bank of Tokyo LOC) 5.35%, 01/07/96 585 585 Irvine Ranch, California Water District Consolidated Revenue Refunding Bonds Series 1985A-2/ (Sumitomo Bank LOC) 5.90%, 01/01/96 8,900 8,900 Irvine Ranch, California Water District Consolidated Revenue Refunding Bonds Series A/(Industrial Bank of Japan LOC) 6.10%, 01/01/96 100 100 Los Angeles County, California Metropolitan Transportation Authority Sales Tax Revenue Refunding Bonds Proposition C Second Senior Series A/ (MBIA Insurance & Industrial Bank of Japan SBPA) 5.00%, 01/07/96 300 300 Orange County, California Various Sanitation Districts Certificates of Participation Capital Improvement Programs Series 1990-92C/ (FGIC Insurance) 6.00%, 01/01/96 200 200 Orange County, California Water District Certificates of Participation (Sanitation Districts #1,2,3)/ (AMBAC Insurance & Industrial Bank of Japan SBPA) 5.05%, 01/07/96 19,500 19,500 Simi Valley, California Multi Family Housing Certificates of Participation (Lincoln Wood Ranch Project)/ (Sumitomo Bank LOC) 5.05%, 01/07/96 5,600 5,600 Southern California Public Power Authority Transmission Project Revenue Bonds (Southern Transmission Project) Series 1991/ (AMBAC Insurance & Swiss Bank LOC) 4.75%, 01/07/96 9,700 9,700 ------ 50,185 ------ COLORADO--4.2% Colorado Health Facilities Authority Revenue Bonds (Sisters of Charity Health) Series B/(Multiple Credit Enhancements) 5.05%, 01/07/96 23,300 23,300 Colorado Student Obligation Bond Authority Student Loan Revenue Bonds (Colorado University) Series 1990A/ (SLMA LOC) 5.20%, 01/07/96 10,790 10,790 Colorado Student Obligation Bond Authority Student Loan Revenue Bonds (Colorado University) Series 1993B/ (SLMA LOC) 5.20%, 01/07/96 2,100 2,100 Colorado Student Obligation Bond Authority Student Loan Revenue Bonds (Colorado University) Series 1993C-2/ (SLMA LOC) 5.05%, 01/07/96 2,200 2,200 Denver, Colorado City and County Airport System Revenue Bonds Series 1992D/(Morgan Guaranty Trust LOC) 5.30%, 01/07/96 48,400 48,400
F-2 42 SchwabFunds(R) 3 - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Par Value ------- ---------- Denver, Colorado City and County Airport System Revenue Bonds Series 1992E/ (Bank of Tokyo LOC) 5.50%, 01/07/96 $30,000 $ 30,000 Denver, Colorado City and County Airport System Revenue Bonds Series 1992F/ (Bank of Montreal LOC) 5.30%, 01/07/96 16,000 16,000 Denver, Colorado City and County Airport System Revenue Bonds Series 1992G/(Credit Local de France LOC) 5.30%, 01/07/96 8,500 8,500 Douglas County, Colorado Multi Family Housing Revenue Bonds (Autumn Chase Project)/ (Citibank LOC) 5.25%, 01/07/96 9,300 9,300 ------- 150,590 ------- CONNECTICUT--1.0% Connecticut State General Obligation Economic Recovery Bonds Series 1991B/(Multiple Credit Enhancements) 5.10%, 01/07/96 11,700 11,700 Connecticut State Special Assessment Unemployment Compensation Advance Fund Revenue Bonds Series 1993B/(Multiple Credit Enhancements) 5.40%, 01/07/96 15,900 15,900 Connecticut State Special Tax Obligation Bonds (Second Lien Transportation Information) Series 1990-1/ (Industrial Bank of Japan LOC) 5.10%, 01/07/96 5,800 5,800 ------- 33,400 ------- DISTRICT OF COLUMBIA--0.1% District of Columbia Revenue Bonds Adjustable Convertible Extendable Securities (Georgetown University) Series 1988D/ (Sanwa Bank LOC) 5.65%, 01/07/96 4,200 4,200 ------- FLORIDA--1.1% Brevard County, Florida Housing Finance Authority Multi Family Housing Revenue Bonds (Palm Place Project)/ (Chemical Bank LOC) 5.05%, 01/07/96 5,000 5,000 Dade County, Florida Solid Waste Industrial Development Revenue Bonds (Montenay-Dade, Ltd. Project)/ (Banque Paribas LOC) 5.10%, 01/07/96 1,280 1,280 Hillsborough County, Florida Industrial Development Authority Revenue Bonds (Seaboard Tampa Terminals) Series 1986A/ (Barclays Bank LOC) 5.00%, 01/07/96 5,500 5,500 Indian Trace, Florida Community Development District (Water & Sewer Special Assessment Basin 1 Water)/ (MBIA Insurance & Swiss Bank SBPA) 4.90%, 01/07/96 2,500 2,500 Orange County, Florida Housing Finance Authority Multi Family Housing Revenue Bonds (Rio Vista Project)/ (First Union Bank of North Carolina LOC) 5.20%, 01/07/96 3,865 3,865 Orange County, Florida Housing Finance Authority Multi Family Housing Revenue Bonds (Smokewood Project)/ (Citibank LOC) 5.25%, 01/07/96 10,000 10,000 Palm Beach County, Florida Health Facilities Authority Revenue Refunding Bonds (Joseph L. Morse Geriatric Center)/ (Sun Bank LOC) 5.20%, 01/07/96 9,800 9,800 Palm Beach County, Florida Housing Finance Authority Multi Family Housing Revenue Bonds (Crystal II Project)/ (Citibank LOC) 5.15%, 01/07/96 2,850 2,850 ------ 40,795 ------ GEORGIA--3.1% Burke County, Georgia Development Authority Pollution Control Revenue Bonds (Oglethorpe Power Corp. Project) Series 1993A/ (FGIC Insurance & Industrial Bank of Japan SBPA) 5.15%, 01/07/96 15,300 15,300
F-3 43 SchwabFunds(R) 4 - -------------------------------------------------------------------------------- SCHWAB TAX-EXEMPT MONEY FUND SCHEDULE OF INVESTMENTS (in thousands) December 31, 1995 - --------------------------------------------------------------------------------
Par Value ------- ---------- Burke County, Georgia Development Authority Pollution Control Revenue Bonds (Oglethorpe Power Corp. Project) Series 1994A/ (FGIC Insurance & Credit Local de France SBPA) 5.15%, 01/07/96 $24,000 $24,000 Cobb County, Georgia Housing Authority Multi Family Housing Revenue Bonds (Walton Green Project)/ (Wachovia Bank LOC) 5.25%, 01/07/96 14,000 14,000 Cobb County, Georgia Housing Authority Multi Family Housing Revenue Bonds (Williamstown Apartment Project)/ (Wachovia Bank LOC) 5.20%, 01/07/96 2,000 2,000 Dekalb County, Georgia Development Authority Industrial Development Revenue Bonds (Siemens Energy, Inc. Project)/ (Siemens AG Guaranty) 5.20%, 01/07/96 3,750 3,750 Dekalb County, Georgia Housing Authority Multi Family Housing Revenue Bonds (Wood Hills Apartment Project)/ (Bank of Montreal LOC) 5.15%, 01/07/96 5,250 5,250 Douglas County, Georgia Development Authority Industrial Development Revenue Bonds (Mima Inc. Project)/ (Wachovia Bank LOC) 5.10%, 01/07/96 4,300 4,300 Laurens County, Georgia Development Authority Solid Waste Disposal Revenue Bonds (Southeast Paper Co. Project)/ (Wachovia Bank LOC) 5.25%, 01/07/96 25,000 25,000 Richmond County, Georgia Industrial Development Authority Revenue Bonds (Bok Group Project)/ (Wachovia Bank LOC) 5.15%, 01/07/96 5,000 5,000 Rockmart, Georgia Development Authority Industrial Development Revenue Bonds (CW Matthews Contracting)/ (Wachovia Bank LOC) 5.25%, 01/07/96 2,500 2,500 Smyrna, Georgia Housing Authority Multi Family Housing Revenue Bonds (Walton Park LP)/ (Wachovia Bank LOC) 5.25%, 01/07/96 8,000 8,000 Villa Rica, Georgia Industrial Development Revenue Bonds (Lowes Home Centers, Inc. Project)/ (Wachovia Bank LOC) 5.15%, 01/07/96 1,200 1,200 ------- 110,300 ------- HAWAII--1.6% Hawaii State Department of Budget and Finance Special Purpose Mortgage Revenue Bonds (Adventist Health System West)/ (Bank of California LOC) 5.15%, 01/07/96 3,100 3,100 Hawaii State Housing Finance & Development Corp. Multi-Family Housing Revenue Bonds (Nani Mauna Loa Project) Series 1995A/ (Citibank LOC) 4.00%, 01/07/96 4,350 4,350 Hawaii State Housing Finance & Development Corp. Revenue Bonds (Rental Housing System) Series 1990A/ (Industrial Bank of Japan LOC) 5.20%, 01/07/96 17,100 17,100 Hawaii State Housing Finance & Development Corp. Revenue Bonds (Rental Housing System) Series 1990B/(Industrial Bank of Japan LOC) 5.20%, 01/07/96 19,600 19,600 Honolulu, Hawaii City and County Multi Family Housing Revenue Bonds (HaleKa Gardens Project) Series A/ (Bank of Tokyo LOC) 5.70%, 01/07/96 5,256 5,256
F-4 44 SchwabFunds(R) 5 - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Par Value ------- ---------- Honolulu, Hawaii City and County Multi Family Housing Revenue Bonds (Lolani Regents Project) Series 1990A/ (Bank of Hawaii LOC) 5.55%, 01/07/96 $ 9,300 $ 9,300 ------ 58,706 ------ ILLINOIS--10.2% Centralia, Illinois Industrial Development Authority Revenue Bonds (Consolidated Foods Corp./Hollywood Brands, Inc. Project)/ (Wachovia Bank LOC) 5.15%, 01/07/96 4,500 4,500 Chicago, Illinois General Obligation Bonds Series 1985/ (Sanwa Bank LOC) 5.45%, 01/07/96 14,440 14,440 Chicago, Illinois General Obligation Bonds Series 1992B/ (Canadian Imperial Bank of Commerce LOC) 5.10%, 01/07/96 10,400 10,400 Chicago, Illinois Industrial Development Revenue Bonds (Morse Automotive)/ Series 1995 (American National Bank & Trust Co. LOC) 5.25%, 01/07/96 3,000 3,000 Chicago, Illinois O'Hare International Airport Revenue Bonds (Adjustable Convertible Extendable Securities General Airport Second Lien) Series B-1/ (Sanwa Bank LOC) 5.40%, 01/07/96 10,000 10,000 Chicago, Illinois O'Hare International Airport Revenue Bonds (Adjustable Convertible Extendable Securities General Airport Second Lien) Series B-2/ (Sanwa Bank LOC) 5.40%, 01/07/96 10,000 10,000 Chicago, Illinois O'Hare International Airport Revenue Bonds (General Airport Second Lien) Series 1994C/ (Societe Generale LOC) 5.15%, 01/07/96 16,100 16,100 Chicago, Illinois O'Hare International Airport Revenue Bonds (General Airport Second Lien) Series A/(Westpac Banking Corp. LOC) 5.10%, 01/07/96 13,100 13,100 Illinois Development Finance Authority Hospital Revenue Bonds (Palos Community Hospital) Series 1994/ (Credit Suisse SBPA) 5.20%, 01/07/96 37,700 37,700 Illinois Development Finance Authority Industrial Development Revenue Bonds (Knead Dough Baking Co.)/ (Bank of America LOC) 5.35%, 01/07/96 8,870 8,870 Illinois Development Finance Authority Industrial Development Revenue Bonds (Marriott Corp. Deerfield Project)/ (National Westminster Bank LOC) 5.15%, 01/07/96 1,300 1,300 Illinois Development Finance Authority Industrial Development Revenue Bonds (Rerkin Paperboard Co. LP) Series 1994/ (Northern Trust LOC) 5.40%, 01/07/96 5,500 5,500 Illinois Development Finance Authority Revenue Residential Rental Revenue Bonds (F.C. Harris Pavillion Project) Series 1994/(FNMA LOC) 5.15%, 01/07/96 3,000 3,000 Illinois Development Finance Authority Revenue Residential Rental Revenue Bonds (River Oak)/ (Swiss Bank LOC) 5.20%, 01/07/96 3,790 3,790 Illinois Educational Facility Authority Revenue Bonds (Chicago Zoological Society Brookfield Zoo) Series B/ (Chemical Bank LOC) 5.25%, 01/07/96 2,000 2,000 Illinois Educational Facility Authority Revenue Bonds (Chicago Historical Society)/ (Mitsubishi Bank LOC) 5.35%, 01/07/96 8,300 8,300
F-5 45 SchwabFunds(R) 6 - -------------------------------------------------------------------------------- SCHWAB TAX-EXEMPT MONEY FUND SCHEDULE OF INVESTMENTS (in thousands) December 31, 1995 - --------------------------------------------------------------------------------
Par Value ------- ---------- Illinois Educational Facility Authority Revenue Bonds (Illinois Institute of Technology) Series 1990A/ (Northern Trust LOC) 5.05%, 01/07/96 $11,300 $11,300 Illinois Educational Facility Authority Revenue Bonds (Northwestern University)/ (FNB Chicago LOC) 5.15%, 01/07/96 22,200 22,200 Illinois Educational Facility Authority Revenue Bonds (University Pooled Financing Program) Series 1985/ (FGIC Insurance & Sakura Bank SBPA) 5.95%, 01/07/96 17,325 17,325 Illinois Health Facility Authority Revenue Bonds (Franciscan Village Project) Series 1989A/ (Commonwealth Bank of Australia LOC) 5.20%, 01/07/96 2,000 2,000 Illinois Health Facility Authority Revenue Bonds (Hospital Sisters Services) Series E/(MBIA Insurance & Morgan Guaranty SBPA) 5.00%, 01/07/96 4,300 4,300 Illinois Health Facility Authority Revenue Bonds (Ingalls Memorial Hospital) Series 1985C/(LaSalle National Bank LOC) 5.60%, 01/07/96 1,100 1,100 Illinois Health Facility Authority Revenue Bonds (Streeterville Corp.) Series A/ (FNB Chicago LOC) 5.10%, 01/07/96 14,400 14,400 Illinois Health Facility Authority Revenue Bonds (Washington & Jane Smith Home) Series 1991/ (Comerica Bank LOC) 5.20%, 01/07/96 2,800 2,800 Illinois Health Facility Authority Revenue Bonds Revolving Fund Pooled Loan Series 1985C/ (FNB Chicago LOC) 5.20%, 01/07/96 6,000 6,000 Illinois Health Facility Authority Revenue Bonds Revolving Fund Pooled Loan Series 1985D/ (FNB Chicago LOC) 5.20%, 01/07/96 20,000 20,000 Illinois State Toll Highway Authority Revenue Bonds Series B/(MBIA Insurance & Societe Generale SBPA) 5.05%, 01/07/96 63,400 63,400 Kane County, Illinois Revenue Bonds (Glenwood School for Boys)/(Harris Trust & Savings Bank LOC) 5.10%, 01/07/96 9,000 9,000 Lombard, Illinois Industrial Development Revenue Refunding Bonds (B & H Partnership Project)/ (Comerica Bank LOC) 5.38%, 01/07/96 1,500 1,500 McHenry County, Illinois Industrial Development Authority Revenue Refunding Bonds (Dean Foods Co. Project)/ (Wachovia Bank LOC) 5.15%, 01/07/96 2,675 2,675 Oak Forest, Illinois Revenue Bonds (Homewood Pool) Series 1989/ (FNB Chicago LOC) 5.15%, 01/07/96 37,000 37,000 ------- 367,000 ------- INDIANA--0.4% Crawfordsville, Indiana Industrial Development Revenue Bonds (National Service Industries, Inc. Project)/ (Wachovia Bank LOC) 5.15%, 01/07/96 2,000 2,000 Hammond, Indiana Adjustable Rate Economic Development Revenue Bonds (Lear Seating Corp. Project) Series 1994/ (Chemical Bank LOC) 4.25%, 01/07/96 5,750 5,750 Indiana Health Facility Financing Authority Hospital Adjustable Convertible Extentable Securities Revenue Bonds (Methodist Hospital) Series C/ (Credit Suisse SBPA) 5.15%, 01/07/96 4,100 4,100 Indianapolis, Indiana Economic Development Authority Revenue Bonds (Herff-Jones, Inc. Project)/ (Wachovia Bank LOC) 5.25%, 01/07/96 4,100 4,100 ------- 15,950 -------
F-6 46 SchwabFunds(R) 7 - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Par Value ------- ---------- IOWA--0.2% Iowa Higher Education Loan Authority Revenue Bonds Adjustable Convertible Extendable Securities Education Loan (Private College Facility)/ (MBIA Insurance & Dai-Ichi Kangyo Bank SBPA) 5.50%, 01/07/96 $ 4,100 $ 4,100 Iowa Housing Finance Authority Multi Family Housing Revenue Bonds (Small Business Loan Project) Series 1985A/ (FHLB of Des Moines LOC) 5.30%, 01/07/96 2,100 2,100 Iowa State Financing Authority Solid Waste Disposal Revenue Bonds (Cedar River Paper Project) Series 1995A/ (Swiss Bank LOC) 6.10%, 01/01/96 1,000 1,000 ------ 7,200 ------ KANSAS--0.2% Kansas City, Kansas Industrial Revenue Bonds (Owen Industries, Inc. Project) Series 1987/ (Sanwa Bank LOC) 5.45%, 01/07/96 2,400 2,400 Wichita, Kansas Airport Facilities Revenue Bonds (Flightsafety International, Inc.)/ (Wachovia Bank LOC) 5.25%, 01/07/96 3,000 3,000 Wichita, Kansas Health Facilities Revenue Authority (CSJ Health System) Series XXV/ (Sumitomo Bank LOC) 5.30%, 01/07/96 1,900 1,900 ------ 7,300 ------ KENTUCKY--0.7% Lebanon, Kentucky Industrial Development Revenue Bonds (Wallace Computer Services, Inc.)/ (Wachovia Bank LOC) 5.25%, 01/07/96 5,000 5,000 Mason County, Kentucky Pollution Control Financing Authority Pollution Control Revenue Bonds (East Kentucky Power Corp.) Series 1984B-1/ (N.R.U.--C.F.C. Guaranty) 4.65%, 01/07/96 10,600 10,600 Murray, Kentucky Industrial Development Authority Revenue Bonds (Dean Foods Co.)/ (Wachovia Bank LOC) 5.15%, 01/07/96 5,000 5,000 Owensboro, Kentucky Limited Obligation Revenue Bonds (Dart Polymers, Inc. Project) Series 1985A/ (National Westminster Bank LOC) 4.05%, 01/07/96 1,900 1,900 Wilson County, Kentucky Industrial Development Board Revenue Bonds (Perma Pipe I North Carolina Project)/ (Harris Trust & Savings Bank LOC) 5.50%, 01/07/96 3,150 3,150 ------ 25,650 ------ LOUISIANA--3.5% De Soto Parish, Louisiana Pollution Control Financing Authority Pollution Control Revenue Refunding Bonds (Central Louisiana Electric Co.) Series 1991A/ (Swiss Bank LOC) 5.05%, 01/07/96 400 400 De Soto Parish, Louisiana Pollution Control Financing Authority Pollution Control Revenue Refunding Bonds (Central Louisiana Electric Co.) Series 1991B/ (Swiss Bank LOC) 5.05%, 01/07/96 15,000 15,000 East Baton Rouge Parish, Louisiana Pollution Control Revenue Refunding Bonds (Exxon Corp.) Series 1989 5.90%, 01/01/96 1,900 1,900 Louisiana Public Facilities Authority Hospital Revenue Bonds (Willis Knighton Medical Project)/ (AMBAC Insurance & Mellon Bank SBPA) 5.00%, 01/07/96 15,300 15,300 New Orleans, Louisiana Aviation Board Revenue Bonds (Passenger Facility Charge Projects)/ (Banque Paribas & Canadian Imperial Bank of Commerce LOC) 5.50%, 01/07/96 7,000 7,000
F-7 47 SchwabFunds(R) 8 - -------------------------------------------------------------------------------- SCHWAB TAX-EXEMPT MONEY FUND SCHEDULE OF INVESTMENTS (in thousands) December 31, 1995 - --------------------------------------------------------------------------------
Par Value ------- ---------- New Orleans, Louisiana Aviation Board Revenue Bonds Series B/ (MBIA Insurance & Industrial Bank of Japan SBPA) 4.95%, 01/07/96 $73,020 $ 73,020 New Orleans, Louisiana Exhibition Hall Authority Special Tax Revenue Bonds (Hotel Occupancy Project) Series B/ (Sanwa Bank LOC) 5.50%, 01/07/96 1,300 1,300 New Orleans, Louisiana Exhibition Hall Authority Special Tax Revenue Bonds Series 1989B/ (Sanwa Bank LOC) 5.50%, 01/07/96 3,800 3,800 Rapides Parish, Louisiana Industrial Development Board Pollution Control Revenue Refunding Bonds (Central Louisiana Electric Co.) Series 1991/ (Swiss Bank LOC) 5.05%, 01/07/96 8,150 8,150 ------- 125,870 ------- MARYLAND--2.5% Baltimore, Maryland Industrial Development Authority Revenue Bonds (City of Baltimore Capital Acquisition Program) Series 1986/(Dai-Ichi Kangyo Bank LOC) 5.35%, 01/07/96 52,400 52,400 Maryland State Health and Higher Educational Facility Authority Pooled Revenue Bonds (Kennedy Kreiger) Series 1993D/ (FNB Maryland LOC) 5.10%, 01/07/96 2,000 2,000 Maryland State Health and Higher Educational Facility Authority Pooled Revenue Bonds (Pooled Loan Program) Series A/ (Dai-Ichi Kangyo Bank LOC & FNB Chicago SBPA) 5.00%, 01/07/96 9,700 9,700 Montgomery County, Maryland Housing Opportunity Commission Housing Revenue Bonds (Draper Lane) Series 1991I/ (FGIC Insurance & Sumitomo Bank SBPA) 5.30%, 01/07/96 16,500 16,500 Northeast Maryland Waste Disposal Authority Resource Recovery Bonds (Hartford County)/ (AMBAC Insurance & Credit Local de France LOC) 5.05%, 01/07/96 9,600 9,600 ------ 90,200 ------ MICHIGAN--0.1% Grand Rapids, Michigan Water Supply Variable Rate Revenue Bonds/ (FGIC Insurance & Societe Generale SBPA) 5.90%, 01/07/96 1,000 1,000 Michigan State Strategic Fund Limited Obligation Revenue Bonds (Dean Foods Co. Project)/ (Wachovia Bank LOC) 5.25%, 01/07/96 3,500 3,500 ------ 4,500 ------ MINNESOTA--0.9% Bloomington, Minnesota Port Authority Tax Increment Revenue Refunding Bonds (Mall of America) Series 1995A/ (Credit Local de France SBPA & FSA Insurance) 5.20%, 01/07/96 7,000 7,000 St. Paul, Minnesota Housing Redevelopment Authority Rental Multi Family Housing Development Bonds Multi City Series 1985A/ (FHLB Des Moines LOC) 5.30%, 01/07/96 19,900 19,900 ------ 26,900 ------ MISSISSIPPI--0.4% Jackson County, Mississippi Pollution Control Revenue Bonds (Chevron U.S.A. Inc. Project) 5.90%, 01/07/96 14,700 14,700 ------ MISSOURI--1.0% Independence, Missouri Industrial Development Authority Revenue Bonds (Resthaven Project)/ (Credit Local de France LOC) 5.20%, 01/07/96 9,640 9,640
F-8 48 SchwabFunds(R) 9 - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Par Value ------- ---------- Industrial Development Authority of Mexico, Missouri Revenue Bonds (ABP Midwest Manufacturing Co. Project) Series 1995/ (Royal Bank of Scotland LOC) 5.25%, 01/07/96 $7,600 $ 7,600 Missouri State Development Finance Board Industrial Development Revenue Bonds (H.R. Williams Mill Supply Project) Series 1995/ (Union Bank of Switzerland LOC) 5.30%, 01/07/96 3,100 3,100 Missouri State Health and Educational Facilities Authority Health Facilities Revenue Bonds (Sisters of Mercy) Series 1988A/(Multiple Credit Enhancements) 5.10%, 01/07/96 3,200 3,200 Missouri State Health and Educational Facilities Authority Health Facilities Revenue Bonds (Sisters of Mercy) Series 1992B/ (Toronto-Dominion Bank SBPA) 5.10%, 01/07/96 3,400 3,400 Missouri State Health and Educational Facilities Authority Health Facilities Revenue Bonds (St. Anthony Medical Center)/ (Mitsubishi Bank SBPA) 5.60%, 01/07/96 900 900 St. Charles, Missouri Industrial Development Authority Variable Rate Demand Revenue Refunding Bonds (Casalon Apartments Project)/ (Citibank LOC) 5.25%, 01/07/96 3,100 3,100 Washington, Missouri Industrial Development Authority Revenue Bonds (Pauwels Transformer Project)/ (Generale Bank LOC) 5.40%, 01/07/96 4,000 4,000 ------ 34,940 ------ MONTANA--0.4% Forsyth, Montana Pollution Control Financing Authority Pollution Control Revenue Bonds (Portland General Electric Coal Stripping Project) Series 1983B/ (Swiss Bank LOC) 5.00%, 01/07/96 6,500 6,500 Montana State Health Facility Authority Revenue Bonds (Health Care Pooled Loan Program) Series 1985A/ (FGIC Insurance & Norwest Bank of Minnesota SBPA) 5.15%, 01/07/96 7,195 7,195 ------ 13,695 ------ NEVADA--1.6% Clark County, Nevada Airport Improvement Revenue Refunding Bonds Series 1993A/ (MBIA Insurance & Industrial Bank of Japan SBPA) 5.15%, 01/07/96 55,350 55,350 Clark County, Nevada Industrial Development Revenue Bonds (Cogeneration Project No. 2)/(Swiss Bank LOC) 6.15%, 01/07/96 2,700 2,700 ------ 58,050 ------ NEW HAMPSHIRE--0.2% New Hampshire Higher Education and Health Facilities Authority Revenue Bonds (VHA New England, Inc.) Series 1985B/ (AMBAC Insurance & FNB Chicago SBPA) 5.00%, 01/07/96 1,000 1,000 New Hampshire State Housing Finance Authority Multi Family Housing Revenue Bonds (Fairways Project) Series 1994-1/ (General Electric Capital Corp. LOC) 5.20%, 01/07/96 7,000 7,000 ------ 8,000 ------ NEW JERSEY--0.1% New Jersey Turnpike Authority Revenue Bonds Series 1991D/ (FGIC Insurance & Societe General LOC) 4.80%, 01/07/96 3,000 3,000 ------
F-9 49 SchwabFunds(R) 10 - -------------------------------------------------------------------------------- SCHWAB TAX-EXEMPT MONEY FUND SCHEDULE OF INVESTMENTS (in thousands) December 31, 1995 - --------------------------------------------------------------------------------
Par Value ------- ---------- NEW MEXICO--0.1% Albuquerque, New Mexico Gross Receipts Lodgers Tax Revenue Adjustable Rate Tender Revenue Bonds Series 1994/ (Canadian Imperial Bank of Commerce LOC) 5.15%, 01/07/96 $ 1,300 $ 1,300 Belen, New Mexico Industrial Development Revenue Bonds (Solo Cup, Inc. Project)/ (Wachovia Bank LOC) 5.25%, 01/07/96 3,250 3,250 ------ 4,550 ------ NEW YORK--3.2% Babylon, New York Variable Rate General Obligation Bonds Series B/(Bank of Nova Scotia SBPA & AMBAC Insurance) 4.90%, 01/07/96 3,500 3,500 New York City, New York General Obligation Bonds Series 1993 Subseries A-8B/ (Sanwa Bank LOC) 5.95%, 01/07/96 715 715 New York City, New York General Obligation Bonds Series 1994B Subseries B-2/ (MBIA Insurance & Bank Austria AG SBPA) 5.90%, 01/01/96 400 400 New York City, New York General Obligation Bonds Series 1994B Subseries B-3/ (MBIA Insurance & Bank of Nova Scotia SBPA) 5.90%, 01/01/96 1,000 1,000 New York City, New York Housing Development Corp. Variable Rate Demand Special Obligation Revenue Bonds (East 96th Street Project) Series 1990A/ (Mitsubishi Bank LOC) 5.10%, 01/07/96 11,900 11,900 New York City, New York Municipal Water Finance Authority Water & Sewer System Revenue Bonds Series 1994G/ (FGIC Insurance & FGIC SPA) 5.90%, 01/07/96 9,000 9,000 New York City, New York Trust for Cultural Resources Revenue Bonds (Solomon R. Guggenheim Project) Series 1990B/ (Swiss Bank LOC) 5.90%, 01/01/96 100 100 New York City, New York Variable Rate General Obligation Bonds Series 1995B Subseries B-10/(Union Bank of Switzerland LOC) 5.00%, 01/07/96 7,500 7,500 New York City, New York Variable Rate General Obligation Bonds Series 1995B1 Subseries B-8/ (Mitsubishi Bank LOC) 5.35%, 01/07/96 2,000 2,000 New York Local Government Assistance Corp. Public Improvement Revenue Bonds Series 1993A/ (Multiple Credit Enhancements) 4.95%, 01/07/96 9,500 9,500 New York Local Government Assistance Corp. Public Improvement Revenue Bonds Series 1994B/ (Credit Suisse & Swiss Bank LOC) 4.95%, 01/07/96 1,000 1,000 New York Local Government Assistance Corp. Public Improvement Revenue Bonds Series 1995F/ (Toronto-Dominion Bank LOC) 5.05%, 01/07/96 12,700 12,700 New York Municipal Water Finance Authority Water & Sewer System Revenue Bonds Series 1994C/ (FGIC Insurance & FGIC SPA) 5.90%, 01/01/96 5,500 5,500 New York State Dormitory Authority Revenue Bonds (Masonic Hall Asylum)/ (AMBAC Insurance & Credit Local de France SBPA) 4.90%, 01/07/96 3,100 3,100 New York State Energy Research & Development Authority Electric Facilities Revenue Bonds (Long Island Lighting Co. Project) Series 1993A/ (Toronto-Dominion Bank LOC) 5.00%, 01/07/96 1,000 1,000
F-10 50 SchwabFunds(R) 11 - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Par Value ------- ---------- New York State Energy Research & Development Authority Pollution Control Refunding Revenue Bonds (Orange & Rockland Utilities, Inc. Project) Series 1994A/ (FGIC Insurance & Societe Generale SBPA) 4.90%, 01/07/96 $10,700 $ 10,700 New York State Energy Research & Development Authority Pollution Control Revenue Bonds (Central Hudson Gas & Electric Corp. Project) Series 1985A/ (Morgan Guaranty Trust LOC) 5.00%, 01/07/96 5,700 5,700 New York State Energy Research & Development Authority Pollution Control Revenue Refunding Bonds Series B/(Union Bank of Switzerland LOC) 6.00%, 01/01/96 1,400 1,400 New York State Local Government Assistance Corp. Variable Rate Revenue Bonds Series 1995G/(National Westminster Bank LOC) 4.90%, 01/07/96 14,000 14,000 Triborough Bridge and Tunnel Authority, New York Special Obligation Bridge Revenue Bonds Series 1994/ (FGIC Insurance & FGIC SPA) 4.90%, 01/07/96 11,000 11,000 Yonkers, New York Industrial Development Authority Revenue Bonds Consumers Union Facility/ (AMBAC Insurance & Credit Local de France SBPA) 4.95%, 01/07/96 1,400 1,400 ------- 113,115 ------- NORTH CAROLINA--1.7% Charlotte, North Carolina Airport Revenue Refunding Bonds Series 1993A/ (MBIA Insurance & Industrial Bank of Japan SBPA) 5.15%, 01/07/96 6,400 6,400 Haywood County, North Carolina Industrial Development Facilities and Pollution Control Financing Authority Revenue Bonds (Solid Waste--Champion International Corp.)/ (Bank Austria AG LOC) 4.95%, 01/07/96 2,200 2,200 North Carolina Medical Care Community Hospital Revenue Bonds (Pooled Equipment Finance Project)/(MBIA Insurance & Banque Paribas SBPA) 5.05%, 01/07/96 11,300 11,300 North Carolina Medical Care Community Hospital Revenue Bonds Adjustable Convertible Extendable Securities (Pooled Financial Project)/ (MBIA Insurance & Sakura Bank SPA) 5.05%, 01/07/96 1,810 1,810 North Carolina Medical Care Community Hospital Revenue Pooled Finance Bonds/(Dai-Ichi Kangyo Bank LOC) 5.90%, 01/07/96 5,800 5,800 Wake County, North Carolina Industrial Facility and Pollution Control Financing Authority Revenue Bonds (Carolina Power & Light) Series 1985B/ (Sumitomo Bank LOC) 5.50%, 01/07/96 2,900 2,900 Wake County, North Carolina Industrial Facility and Pollution Control Financing Authority Revenue Bonds (Carolina Power & Light) Series 1985C/ (Sumitomo Bank LOC) 5.50%, 01/07/96 29,400 29,400 ------ 59,810 ------ NORTH DAKOTA--0.2% Mercer County, North Dakota National Rural Utility Pollution Control Revenue Bonds (Basin Electric Power Cooperative Antelope Project) Series 1984C/ (N.R.U.--C.F.C. Guaranty) 4.65%, 01/07/96 7,150 7,150 ------ OHIO--1.0% Columbus, Ohio Electric System Revenue Bonds Series 1984/(Dai-Ichi Kangyo Bank LOC) 3.90%, 01/07/96 6,880 6,880
F-11 51 SchwabFunds(R) 12 - -------------------------------------------------------------------------------- SCHWAB TAX-EXEMPT MONEY FUND SCHEDULE OF INVESTMENTS (in thousands) December 31, 1995 - --------------------------------------------------------------------------------
Par Value ------- ---------- Columbus, Ohio General Obligation Bonds Series 1995-1/ (Westdeutsche Landesbank LOC) 4.90%, 01/07/96 $ 6,000 $ 6,000 Dayton, Ohio Special Facilities Revenue Refunding Bonds (Emery Air Freight) Series 1993F/ (ABN-AMRO Bank LOC) 5.31%, 01/07/96 8,000 8,000 Ohio Air Quality Development Authority Revenue Bonds (JMG Funding, LP) Series 1994A/ (Societe Generale LOC) 5.00%, 01/07/96 12,000 12,000 Ohio Housing Finance Agency Multi Family Housing Revenue Bonds (Kenwood Congregate Retirement Community) Series 1985/(Morgan Guaranty Trust LOC) 3.90%, 01/07/96 2,000 2,000 ------ 34,880 ------ OKLAHOMA--0.0% Tulsa, Oklahoma Industrial Development Authority Hospital Revenue Bonds (Hillcrest Medical Center) Series 1988/ (Mitsubishi Bank LOC) 5.00%, 01/07/96 685 685 Tulsa, Oklahoma Industrial Development Authority Revenue Bonds (Thomas & Betts Project) Series 1991/ (Wachovia Bank LOC) 5.25%, 01/07/96 300 300 ------ 985 ------ OREGON--1.3% Medford, Oregon Hospital Facility Authority (Rogue Valley Manor Project) Series 1985/ (Banque Paribas LOC) 5.20%, 01/07/96 7,700 7,700 Oregon State Economic Development Commission Economic and Industrial Development Revenue Bonds/(Wachovia Bank LOC) 5.15%, 01/07/96 4,100 4,100 Oregon State General Obligation Notes Series 1973F/ (Mitsubishi Bank LOC) 5.15%, 01/07/96 11,185 11,185 Oregon State General Obligation Notes Series 1973H/ (Bank of Tokyo LOC) 5.25%, 01/07/96 18,100 18,100 Port of Portland, Oregon Industrial Development Revenue Bonds (Schnitzer Steel Project)/ (Comerica Bank LOC) 5.30%, 01/07/96 5,000 5,000 ------ 46,085 ------ PENNSYLVANIA--1.4% Montgomery County, Pennsylvania Industrial Development Authority Revenue Bonds (Seton Medical Supply Co. Project)/ (Banque Paribas LOC) 5.25%, 01/07/96 5,500 5,500 Pennsylvania Higher Education Assistance Agency Student Loan Revenue Bonds Series 1995A/ (SLMA LOC) 5.25%, 01/07/96 17,000 17,000 Sayre, Pennsylvania Health Care Facilities Authority (VHA Capital Finance Revenue) Series 1985B/ (AMBAC Insurance & FNB Chicago SBPA) 5.00%, 01/07/96 4,365 4,365 Sayre, Pennsylvania Health Care Facilities Authority (VHA Capital Finance Revenue) Series 1985F/ (AMBAC Insurance & FNB Chicago SBPA) 5.00%, 01/07/96 4,100 4,100 Sayre, Pennsylvania Health Care Facilities Authority (VHA Capital Finance Revenue) Series 1985J/ (AMBAC Insurance & FNB Chicago SBPA) 5.00%, 01/07/96 9,800 9,800 Washington County, Pennsylvania Authority Revenue Bonds Higher Education Pooled Equipment Lease/ (Sanwa Bank LOC) 5.35%, 01/07/96 9,400 9,400 ------ 50,165 ------ RHODE ISLAND--0.1% Rhode Island State Student Loan Authority Higher Education Revenue Bonds Series 1995-1/(National Westminster Bank LOC) 5.30%, 01/07/96 2,000 2,000 ------
F-12 52 SchwabFunds(R) 13 - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Par Value ------- ---------- SOUTH CAROLINA--0.4% Greenville County, South Carolina Industrial Development Revenue Bonds (Quality Thermoforming Project)/ (South Carolina National Bank LOC) 5.25%, 01/07/96 $1,200 $ 1,200 South Carolina Jobs Economic Development Authority Hospital Facilities Revenue Bonds (Baptist Health Care System)/ (Credit Local de France LOC) 5.05%, 01/07/96 6,900 6,900 South Carolina Jobs Economic Development Authority Industrial Development Revenue Bonds (Ado Corp. Project)/(South Carolina National Bank LOC) 5.25%, 01/07/96 800 800 Spartanburg County, South Carolina Industrial Development Authority Revenue Bonds (Bemis, Inc.)/ (Wachovia Bank LOC) 5.15%, 01/07/96 4,750 4,750 ------ 13,650 ------ SOUTH DAKOTA--0.3% Rapid City, South Dakota Industrial Development Revenue Corp. (Property Associates Project)/ (Lloyds Bank LOC) 5.15%, 01/07/96 6,025 6,025 South Dakota State Health & Educational Facilities Authority Revenue Bonds (McKenna Hospital) Series 1994/ (MBIA Insurance & Banque Paribas SBPA) 5.20%, 01/07/96 5,000 5,000 ------ 11,025 ------ TENNESSEE--0.2% Metropolitan Nashville and Davidson County, Tennessee Health and Education Facility Board Revenue Bonds Series A/ (FGIC Insurance & Barclays Bank LOC) 5.00%, 01/07/96 1,300 1,300 Metropolitan Nashville and Davidson County, Tennessee Industrial Development Revenue Bonds (Multi-Family Housing--Western)/ (Sumitomo Bank LOC) 5.60%, 01/07/96 7,035 7,035 ------ 8,335 ------ TEXAS--7.9% Amarillo, Texas Health Facilities Corp. Hospital Revenue Bonds (High Plains Baptist Hospital) Series 1985/ (Banque Paribas LOC) 5.20%, 01/07/96 9,300 9,300 Bexar County, Texas Health Facilities Development Corp. Revenue Bonds (Chandler Memorial Home Project) Series 1995/ (Bank One LOC) 5.20%, 01/07/96 5,170 5,170 Capital Industrial Development Corp., Texas Industrial Development Revenue Refunding Bonds (National Service Industries, Inc. Project)/ (Wachovia Bank LOC) 5.15%, 01/07/96 3,950 3,950 Euless, Texas Industrial Development Authority Revenue Bonds (Ferguson Enterprises, Inc.)/ (Wachovia Bank LOC) 5.15%, 01/07/96 4,850 4,850 Greater East Texas Higher Education Authority Student Loan Revenue Bonds Series 1988A/ (AMBAC Insurance & Citibank SBPA) 5.25%, 01/07/96 18,300 18,300 Greater East Texas Higher Education Authority Student Loan Revenue Bonds Series 1992A/ (SLMA LOC) 5.10%, 01/07/96 16,000 16,000 Greater East Texas Higher Education Authority Student Loan Revenue Bonds Series 1993A/ (SLMA LOC) 5.25%, 01/07/96 48,150 48,150 Greater East Texas Higher Education Authority Student Loan Revenue Bonds Series 1993B-1/ (SLMA LOC) 5.25%, 01/07/96 11,000 11,000
F-13 53 SchwabFunds(R) 14 - -------------------------------------------------------------------------------- SCHWAB TAX-EXEMPT MONEY FUND SCHEDULE OF INVESTMENTS (in thousands) December 31, 1995 - --------------------------------------------------------------------------------
Par Value ------- ---------- Greater East Texas Higher Education Authority Student Loan Revenue Bonds Series 1995B/ (SLMA LOC) 5.00%, 01/07/96 $30,000 $30,000 Hays, Texas Memorial Health Facilities Development Corp. Hospital Revenue Bonds AHS/Sunbelt (Central Texas Medical Center Project) Series 1990A/ (Swiss Bank LOC) 5.10%, 01/07/96 9,000 9,000 Hays, Texas Memorial Health Facilities Development Corp. Hospital Revenue Bonds AHS/Sunbelt (Central Texas Medical Center Project) Series 1990B/ (Swiss Bank LOC) 5.10%, 01/07/96 16,300 16,300 Lavaca-Navidad River Authority, Texas Water Supply System Contract Revenue Bonds (Formosa Plastics Corp. Project)/ (Canadian Imperial Bank of Commerce LOC) 5.30%, 01/07/96 9,900 9,900 Lower Neches Valley Authority, Texas Industrial Development Corp. Pollution Control Revenue Bonds (Mobil Corp. Neches River Treatment Project) Series 1994 5.00%, 01/07/96 12,000 12,000 Midlothian, Texas Industrial Development Corp. Pollution Control Revenue Bonds (Box-Crow Co. Project)/(Union Bank of Switzerland LOC) 5.80%, 01/07/96 1,400 1,400 Panhandle Plains, Texas Higher Education Authority, Inc. Student Loan Revenue Bonds Series 1992A/ (SLMA LOC) 5.20%, 01/07/96 2,300 2,300 Panhandle Plains, Texas Higher Education Authority, Inc. Student Loan Revenue Bonds Series 1995A/ (SLMA LOC) 5.20%, 01/07/96 10,400 10,400 Port Authority of Corpus Christi, Texas Nueces County Marine Terminal Revenue Bonds (Reynolds Metals Co.)/ (Barclays Bank LOC) 5.25%, 01/07/96 3,100 3,100 Robertson County, Texas Industrial Development Corp. Variable Rate Revenue Bonds (Sanderson Farms Project) Series 1995/ (Harris Trust & Savings Bank LOC) 5.20%, 01/07/96 4,300 4,300 Texas Health Facilities Development Corp. Adjustable Convertible Extendable Securities Revenue Bonds (North Texas Pooled Health) Series 1985B/ (Banque Paribas LOC) 5.05%, 01/07/96 11,000 11,000 Texas Small Business Industrial Development Corp. Revenue Bonds (Texas Public Facility Capital Access)/ (Multiple Credit Enhancements) 5.20%, 01/07/96 41,795 41,795 Texas State Revenue Refunding Bonds (Veterans Housing Assistance Fund) Series 1995 5.05%, 01/07/96 13,000 13,000 Trinity River Authority, Texas Pollution Control Revenue Bonds (Lafarge Corp. Project)/(Banque Nationale de Paris LOC) 5.20%, 01/07/96 3,100 3,100 ------- 284,315 ------- VERMONT--0.1% Vermont Education and Health Buildings Financing Agency Revenue Bonds (VHA New England) Series 1985G/ (AMBAC Insurance & FNB Chicago SBPA) 5.00%, 01/07/96 4,240 4,240 -------
F-14 54 SchwabFunds(R) 15 - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Par Value ------- ---------- VIRGINIA--0.4% Lynchburg, Virginia Industrial Development Authority Hospital Facility Revenue Bonds (First Mortgage VHA Mid-Atlantic States, Inc.) Series 1985A/ (AMBAC Insurance & Mellon Bank SBPA) 5.00%, 01/07/96 $ 500 $ 500 Lynchburg, Virginia Industrial Development Authority Hospital Facility Revenue Bonds (First Mortgage VHA Mid-Atlantic States, Inc.) Series 1985B/ (AMBAC Insurance & Mellon Bank SBPA) 5.00%, 01/07/96 400 400 Lynchburg, Virginia Industrial Development Authority Hospital Facility Revenue Bonds (First Mortgage VHA Mid-Atlantic States, Inc.) Series 1985C/ (AMBAC Insurance & Mellon Bank SBPA) 5.00%, 01/07/96 600 600 Lynchburg, Virginia Industrial Development Authority Hospital Facility Revenue Bonds (First Mortgage VHA Mid-Atlantic States, Inc.) Series 1985F/ (AMBAC Insurance & Mellon Bank SBPA) 5.00%, 01/07/96 5,600 5,600 Lynchburg, Virginia Industrial Development Authority Hospital Facility Revenue Bonds (First Mortgage VHA Mid-Atlantic States, Inc.) Series 1985G/ (AMBAC Insurance & Mellon Bank SBPA) 5.00%, 01/07/96 8,100 8,100 ------ 15,200 ------ WASHINGTON--1.0% Snohomish County, Washington Public Utilities District #1 Electric Revenue Bonds (Generation Systems)/ (MBIA Insurance & Industrial Bank of Japan SBPA) 5.15%, 01/07/96 20,000 20,000 Washington State Health Care Facilities Authority Revenue Refunding Bonds (Sisters of St. Joseph of Peace) Series 1993/ (MBIA Insurance & U.S. Bank of Washington SBPA) 5.20%, 01/07/96 12,700 12,700 Washington State Housing Finance Commission Multi Family Mortgage Revenue Bonds (Canyon Lake) Series 1993A/ (U.S. Bank of Washington LOC) 5.40%, 01/07/96 4,565 4,565 ------ 37,265 ------ WEST VIRGINIA--0.3% West Virginia State Hospital Finance Authority Hospital Revenue Bonds (St. Joseph's Hospital Project) Series 1987/ (Mitsubishi Bank LOC) 5.20%, 01/07/96 2,200 2,200 West Virginia State Hospital Finance Authority Hospital Revenue Bonds (VHA Mid Atlantic States, Inc.) Series 1985H/ (AMBAC Insurance & FNB Chicago SBPA) 5.00%, 01/07/96 8,600 8,600 ------ 10,800 ------ WISCONSIN--0.8% Chilton, Wisconsin Industrial Development Revenue Refunding Bonds (Kaytee Products, Inc. Project) Series 1995/(Bank One Milwaukee LOC) 5.35%, 01/07/96 1,865 1,865 Fairwater, Wisconsin Industrial Development Revenue Bonds (Dean Foods Co. Project) Series 1990/ (Wachovia Bank LOC) 5.15%, 01/07/96 1,450 1,450 Lac Du Flambeau Band of Lake Superior Chippewa Indians, Wisconsin Special Obligation Bonds (Simpson Electric) Series 1985/ (Barclays Bank LOC) 5.25%, 01/07/96 6,300 6,300
F-15 55 SchwabFunds(R) 16 - -------------------------------------------------------------------------------- SCHWAB TAX-EXEMPT MONEY FUND SCHEDULE OF INVESTMENTS (in thousands) December 31, 1995 - --------------------------------------------------------------------------------
Par Value ------- ---------- Milwaukee, Wisconsin Redevelopment Authority Industrial Development Revenue Bonds (Field Container Corp. LP) Series 1994/ (Northern Trust LOC) 5.40%, 01/07/96 $ 5,000 $ 5,000 Sheboygan, Wisconsin Pollution Control Financing Authority Pollution Control Revenue Bonds (Wisconsin Power & Light Co.) 5.25%, 01/07/96 1,000 1,000 Wisconsin State Health and Education Facilities Authority Revenue Bonds (Sinai Samaritan) Series 1994A/(Marshall & Ilsley Bank LOC) 5.20%, 01/07/96 13,755 13,755 --------- 29,370 --------- TOTAL VARIABLE RATE OBLIGATIONS (Cost $2,072,441) 2,072,441 --------- VARIABLE RATE TENDER OPTION BONDS--2.5%(a) GEORGIA--0.6% Georgia State Public Improvement General Obligation Tender Option Bonds Series 1995B (Citi-157)/ (Citibank Tender Option) 5.25%, 01/07/96 16,000 16,000 Metropolitan Atlanta Rapid Transit Authority, Georgia Sales Tax Revenue Tender Option Bonds Series M (BT-69)/ (AMBAC Insurance & Bankers Trust Tender Option) 4.44%, 01/07/96 5,280 5,280 -------- 21,280 -------- NEVADA--0.7% Nevada State General Obligation Tender Option Bonds (Colorado River Community) Series 1994 (Citi-143)/ (Citibank Tender Option) 5.30%, 01/07/96 25,000 25,000 -------- TEXAS--0.3% Harris County, Texas Toll Road Sub-Lien Highway Tender Option Bonds (Citi-138)/ (Citibank Tender Option) 5.30%, 01/07/96 7,000 7,000 Harris County, Texas Toll Road Sub-Lien Highway Tender Option Bonds (Citi-139)/ (Citibank Tender Option) 5.30%, 01/07/96 5,000 5,000 ------ 12,000 ------ WASHINGTON--0.9% King County, Washington Limited Tax General Obligation Water & Sewer Tender Option Bonds Series 1994A (Citi-136)/ (Citibank Tender Option) 5.30%, 01/07/96 15,570 15,570 King County, Washington Limited Tax General Obligation Water & Sewer Tender Option Bonds Series 1994A (Citi-137)/ (Citibank Tender Option) 5.30%, 01/07/96 10,000 10,000 Washington State Public Power Supply System Nuclear Project Number 2 Revenue Tender Option Bonds Series 1990C (Citi-145)/ (FGIC Insurance, Escrowed to Maturity with Government Securities & Citibank Tender Option) 5.30%, 01/07/96 5,000 5,000 ------ 30,570 ------ TOTAL VARIABLE RATE TENDER OPTION BONDS (Cost $88,850) 88,850 ------ VARIABLE RATE TENDER OPTION BOND PARTNERSHIPS--3.9%(a)(c) CONNECTICUT--0.2% Connecticut State General Obligation General Purpose Public Improvement Tender Option Bond Partnership Series 1991A (BTP-151)/ (Bankers Trust Tender Option) 5.20%, 01/07/96 7,365 7,365 ------ GEORGIA--0.4% Georgia State Public Improvement General Obligation Tender Option Bond Partnership Series 1993B & 1993C (BTP-135)/(Bankers Trust Tender Option) 5.20%, 01/07/96 3,865 3,865
F-16 56 SchwabFunds(R) 17 - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Par Value ------- ---------- Georgia State Public Improvement General Obligation Tender Option Bond Partnership Series 1993B & 1993C (BTP-140)/(Bankers Trust Tender Option) 5.20%, 01/07/96 $4,575 $ 4,575 Georgia State Public Improvement General Obligation Tender Option Bond Partnership Series 1994B (BTP-148)/ (Bankers Trust Tender Option) 5.20%, 01/07/96 7,100 7,100 ------ 15,540 ------ ILLINOIS--0.4% Chicago, Illinois Metropolitan Water Reclamation District Greater Chicago General Obligation Tender Option Bond Partnership (Cook County) (BTP-71)/ (Automated Data Processing, Inc. Tender Option) 4.99%, 01/07/96 9,870 9,870 Chicago, Illinois School Finance Authority General Obligation School Finance Tender Option Bond Partnership (BTP-70)/ (MBIA Insurance & Automated Data Processing, Inc. Tender Option) 4.66%, 01/07/96 5,365 5,365 ------ 15,235 ------ MARYLAND--0.1% Baltimore County, Maryland General Obligation Consolidated Public Improvement Tender Option Bond Partnership Series 1991 (BTP-132)/ (Bankers Trust Tender Option & Escrowed to Maturity with Government Securities) 5.20%, 01/07/96 3,621 3,621 ------ MINNESOTA--0.1% Minnesota State Various Purpose Sports Health Club Tax Tender Option Bond Partnership (BTP-65)/(Automated Data Processing, Inc. Tender Option & Escrowed to Maturity with Government Securities) 4.28%, 01/07/96 4,455 4,455 ------ SOUTH CAROLINA--0.2% South Carolina State Capital Improvement Revenue Refunding Tender Option Bond Partnership (BTP-147)/(Bankers Trust Tender Option) 5.20%, 01/07/96 5,370 5,370 ------ TEXAS--1.0% Regents of the University of Texas Permanent University Fund Revenue Tender Option Bond Partnership Series 1992A (BTP-143)/ (Permanent University Fund Guaranty, Bankers Trust Tender Option & Escrowed to Maturity with Government Securities) 5.20%, 01/07/96 10,685 10,685 Texas State General Obligation General Purpose Public Improvement Tender Option Bond Partnership Series 1993B/(BTP-116) (Bankers Trust Tender Option) 4.69%, 01/07/96 10,170 10,170 Texas State Public Finance Authority General Obligation Tender Option Bond Partnership Series 1994 (BTP-127)/ (Bankers Trust Tender Option) 5.20%, 01/07/96 14,980 14,980 ------ 35,835 ------ VIRGINIA--0.4% Chesterfield County, Virginia General Obligation Public Improvement and Refunding Tender Option Bond Partnership Series 1991 (BTP-136)/ (Bankers Trust Tender Option) 5.20%, 01/07/96 6,025 6,025 Fairfax County, Virginia Public Improvement General Obligation Tender Option Bond Partnership Series 1991A (BTP-131)/ (Bankers Trust Tender Option) 5.20%, 01/07/96 7,146 7,146 ------ 13,171 ------
F-17 57 SchwabFunds(R) 18 - -------------------------------------------------------------------------------- SCHWAB TAX-EXEMPT MONEY FUND SCHEDULE OF INVESTMENTS (in thousands) December 31, 1995 - --------------------------------------------------------------------------------
Par Value ------- ---------- WASHINGTON--0.7% King County, Washington Unlimited Tax General Obligation Tender Option Bond Partnership Series 1993C (BTP-56)/ (Automated Data Processing, Inc. Tender Option) 4.15%, 01/07/96 $6,365 $ 6,365 Washington State General Obligation Tender Option Bond Partnership Series 1990 (BTP-152)/ (Bankers Trust Tender Option) 5.20%, 01/07/96 5,655 5,655 Washington State Public Power Supply System Nuclear Project Number 2 Revenue Refunding Tender Option Bond Partnership Series 1990C (BTP-130)/ (Bankers Trust Tender Option) 5.25%, 01/07/96 5,740 5,740 Washington State Public Power Supply System Nuclear Project Number 2 Revenue Refunding Tender Option Bond Partnership Series 1993B (BTP-137)/ (Bankers Trust Tender Option) 5.25%, 01/07/96 6,685 6,685 ------- 24,445 ------- WISCONSIN--0.4% Wisconsin State Public Improvement General Obligation Tender Option Bond Partnership (BTP-62)/(Automated Data Processing, Inc. Tender Option & Escrowed to Maturity with Government Securities) 4.25%, 01/07/96 4,500 4,500 Wisconsin State Public Improvement General Obligation Tender Option Bond Partnership Series 1992A (BTP-142)/ (Bankers Trust Tender Option & Escrowed to Maturity with Government Securities) 5.20%, 01/07/96 9,480 9,480 ------- 13,980 ------- TOTAL VARIABLE RATE TENDER OPTION BOND PARTNERSHIPS (Cost $139,017) 139,017 ------- CERTIFICATES OF PARTICIPATION--2.1%(b) CALIFORNIA--2.1% San Jose, California Certificates of Participation (Convention Center Project)/ (Escrowed to Maturity with Government Securities) 3.73%, 09/01/96 72,315 75,662 ------ TOTAL CERTIFICATES OF PARTICIPATION (Cost $75,662) 75,662 ------ GENERAL OBLIGATIONS--4.5%(b) ALASKA--0.3% Anchorage, Alaska Unlimited General Obligation Bonds Series 1986/ (FGIC Insurance & Escrowed to Maturity with Government Securities) 3.72%, 06/01/96 8,600 8,924 Valdez, Alaska Unlimited General Obligation Bonds Series 1990/ (MBIA Insurance) 3.70%, 01/01/97 1,000 1,028 ------ 9,952 ------ ARKANSAS--0.1% Arkansas State Unlimited General Obligation Bonds (College Savings) 3.32%, 06/01/96 1,975 1,977 ------ CONNECTICUT--0.0% Connecticut State General Obligation Bonds Series 1992B 5.20%, 05/15/96 1,000 1,004 ------ DELAWARE--0.1% Delaware State General Obligation Bonds Series 1994A 3.47%, 03/01/96 2,240 2,243 Delaware State General Obligation Bonds Series B/ (Escrowed to Maturity with Government Securities) 3.65%, 07/01/96 3,000 3,108 ------ 5,351 ------ FLORIDA--0.2% Dade County, Florida School District General Obligation Bonds/(MBIA Insurance) 3.70%, 08/01/96 5,450 5,548 Florida State Board of Education Capital Outlay General Obligation Bonds 3.65%, 06/01/96 2,000 2,012 ------ 7,560 ------
F-18 58 SchwabFunds(R) 19 - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Par Value ------- ---------- GEORGIA--0.3% Chatham County, Georgia School District Unlimited General Obligation Bonds Series 1995B/ (FGIC Insurance) 3.65%, 08/01/96 $ 1,160 $ 1,170 Clayton County, Georgia School District Unlimited General Obligation Bonds/ (Escrowed to Maturity with Government Securities) 3.70%, 10/01/96 1,335 1,370 Gwinnett County, Georgia School District General Obligation Bonds Series 1995A 3.78%, 02/01/96 7,035 7,043 ------ 9,583 ------ HAWAII--0.1% Honolulu, Hawaii City and County Refunding and Improvement General Obligation Bonds Series 1993B 3.65%, 10/01/96 2,000 2,004 ------ ILLINOIS--0.0% Du Page, Illinois Water Commission General Obligation Bonds/ (Escrowed to Maturity with Government Securities) 3.70%, 03/01/96 1,000 1,026 ------ KANSAS--0.7% Wichita, Kansas General Obligation Bonds Renewal and Improvement Temporary Notes Series 186 3.65%, 02/29/96 24,600 24,614 ------ MASSACHUSETTS--0.3% Massachusetts State Dedicated Income Tax Unlimited Tax General Obligation Bonds Series 1990A/ (FGIC Insurance) 4.30%, 06/01/96 5,000 5,059 Massachusetts State General Obligation Bonds Series 1986/ (Escrowed to Maturity with Government Securities) 3.72%, 10/01/96 3,170 3,310 Massachusetts State General Obligation Bonds Series 1990A/ (MBIA Insurance) 3.63%, 06/01/96 3,000 3,044 ------ 11,413 ------ MINNESOTA--0.6% Minneapolis, Minnesota Special School District General Obligation Bonds 3.73%, 02/01/96 5,500 5,506 Minnesota State General Obligation Bonds/ (Escrowed to Maturity with Government Securities) 3.89%, 08/01/96 9,500 9,668 Minnesota State General Obligation Bonds Series 1995 3.70%, 08/01/96 5,400 5,455 Minnesota State Unlimited General Obligation Bonds Series 1993 3.70%, 08/01/96 1,000 1,007 ------ 21,636 ------ NEW MEXICO--0.1% Albuquerque, New Mexico Municipal School District Number 12 General Obligation Bonds 3.60%, 08/01/96 1,700 1,705 New Mexico State Capital Projects General Obligation Bonds 3.75%, 08/01/96 2,000 2,000 ------ 3,705 ------ OHIO--0.1% Columbus, Ohio Limited Tax General Obligation Bonds Series 1993A 3.40%, 07/01/96 4,945 4,951 ------ SOUTH CAROLINA--0.2% South Carolina State Capital Improvement General Obligation Bonds Series 1995B-1 3.70%, 08/01/96 6,400 6,474 ------ TENNESSEE--0.0% Tennessee State General Obligation Bonds Series 1995A 4.25%, 03/01/96 1,000 1,001 ------ TEXAS--0.3% Amarillo, Texas Independent School District Unlimited General Obligation Bonds/ (Escrowed to Maturity with Government Securities) 3.72%, 08/01/96 1,000 1,027 Dallas County, Texas Hospital District Refunding General Obligation Bonds 4.05%, 02/15/96 1,500 1,502
F-19 59 SchwabFunds(R) 20 - -------------------------------------------------------------------------------- SCHWAB TAX-EXEMPT MONEY FUND SCHEDULE OF INVESTMENTS (in thousands) December 31, 1995 - --------------------------------------------------------------------------------
Par Value ------- ---------- Dallas, Texas Equipment Acquisition Contractual Obligation General Obligation Bonds 3.73%, 02/15/96 $ 3,405 $ 3,407 Dallas, Texas Limited General Obligation Bonds Series 1995 3.75%, 02/15/96 2,750 2,757 Houston, Texas General Obligation Bonds Series C 3.73%, 04/01/96 1,430 1,436 Tarrant County, Texas Limited General Obligation Bonds 3.68%, 07/15/96 1,000 1,029 ------ 11,158 ------ VIRGINIA--0.1% Fairfax County, Virginia Unlimited General Obligation Bonds Series 1989A/ (Escrowed to Maturity with Government Securities) 3.50%, 06/01/96 1,000 1,028 Fairfax County, Virginia Unlimited General Obligation Bonds Series 1989B/ (Escrowed to Maturity with Government Securities) 3.75%, 11/01/96 1,320 1,359 ------ 2,387 ------ WASHINGTON--0.8% Washington State General Obligation Bonds Series 1986D/ (Escrowed to Maturity with Government Securities) 3.85%, 09/01/96 13,200 13,554 Washington State General Obligation Bonds Series 1990A 3.60%, 02/01/96 2,000 2,004 Washington State General Obligation Bonds Series R-1992-C 3.70%, 09/01/96 1,850 1,863 Washington State Motor Vehicles Fuel Tax Series 1995B 3.68%, 06/01/96 1,495 1,503 Washington State Motor Vehicles Fuel Tax Unlimited General Obligation Bonds Series 1986E/ (Escrowed to Maturity with Government Securities) 3.65%, 09/01/96 1,000 1,028 Washington State Unlimited General Obligation Bonds Series R-1994-A 3.60%, 08/01/96 4,000 4,002 Washington State Unlimited General Obligation Bonds Series R-1996-B 3.62%, 04/01/96 4,005 4,008 ------- 27,962 ------- WISCONSIN--0.2% Milwaukee, Wisconsin Metropolitan Sewer District Unlimited Tax General Obligation Bonds Series 1987A 3.70%, 09/01/96 1,000 1,011 Milwaukee, Wisconsin Public Improvement Unlimited General Obligation Bonds Series 1995CA 3.28%, 06/15/96 1,000 1,004 Wisconsin State General Obligation Bonds Series 1995A 3.65%, 05/01/96 2,410 2,432 Wisconsin State Unlimited General Obligation Bonds Series 1992 3.70%, 05/01/96 3,000 3,012 ------- 7,459 ------- TOTAL GENERAL OBLIGATIONS (Cost $161,217) 161,217 ------- MANDATORY PUT BONDS--3.1%(b) CALIFORNIA--0.5% California Higher Educational Loan Authority, Inc. Student Loan Revenue Bonds Series 1992B/ (SLMA LOC) 3.90%, 07/01/96 5,000 5,000 California Higher Educational Loan Authority, Inc. Student Loan Revenue Bonds Series 1995E-5/ (SLMA LOC) 4.25%, 06/01/96 11,700 11,700 ------- 16,700 ------- FLORIDA--0.1% Orange County, Florida Industrial Development Authority Revenue Bonds (General Accident Insurance Co. of America Project) 4.28%, 06/01/96 3,500 3,500 -------
F-20 60 SchwabFunds(R) 21 - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Par Value ------- ---------- ILLINOIS--0.6% Chicago, Illinois General Obligation Tender Notes 3.65%, 05/01/96 $22,600 $22,600 ------ INDIANA--0.2% Indiana State Housing Finance Authority Single Family Mortgage Housing Revenue Bonds Series 1994C 4.00%, 07/01/96 3,500 3,500 Indiana State Housing Finance Authority Single Family Mortgage Housing Revenue Bonds Series 1994D 3.90%, 07/01/96 4,700 4,700 ------ 8,200 ------ KENTUCKY--0.1% Calvert City, Kentucky Industrial Development Revenue Refunding Bonds (SKW Alloys, Inc. Lease Rent) Series 87/ (Bayerische Vereinsbank LOC) 4.00%, 04/01/96 2,220 2,220 ------ OREGON--0.3% Klamath Falls, Oregon Electric Revenue Bonds (Salt Caves Hydro Electric) Series 1986E/ (Escrowed to Maturity with Government Securities) 4.40%, 05/01/96 10,000 10,000 ------ TEXAS--0.8% Greater East Texas Higher Education Student Loan Authority Student Loan Revenue Bonds Series 1992B/ (SLMA LOC) 3.90%, 07/01/96 14,000 14,000 Greater East Texas Higher Education Student Loan Authority Student Loan Revenue Bonds Series 1993B-2/ (SLMA LOC) 4.10%, 06/01/96 6,500 6,500 Greater East Texas Higher Education Student Loan Authority Student Loan Revenue Bonds Series 1995B/ (SLMA LOC) 3.90%, 07/01/96 10,000 10,000 ------ 30,500 ------ VIRGINIA--0.3% Harrisonburg, Virginia Redevelopment and Housing Authority Multi Family Housing Revenue Bonds (Rolling Brook Village Apts.) Series 1985A/ (Guardian Savings & Loan Assoc. LOC) 5.10%, 02/01/96 10,000 10,000 ------- WASHINGTON--0.2% Washington State Housing Finance Committee Adjustable Single Family Mandatory Put Bonds Series 1995-1A-S 4.10%, 06/01/96 5,785 5,785 ------- TOTAL MANDATORY PUT BONDS (Cost $109,505) 109,505 ------- OPTIONAL PUT BONDS--2.3%(b) IDAHO--0.3% Custer County, Idaho Pollution Control Revenue Bonds (Amoco Project) Series 1983 3.80%, 04/01/96 11,500 11,500 ------- MISSOURI--1.7% Missouri State Environmental Improvement and Energy Resources Authority Pollution Control Revenue Bonds (Union Electric Co.) Series 1985A/ (Swiss Bank LOC) 4.00%, 06/01/96 31,000 31,000 Missouri State Environmental Improvement and Energy Resources Authority Pollution Control Revenue Bonds (Union Electric Co.) Series 1985B/ (Union Bank of Switzerland LOC) 4.00%, 06/01/96 28,500 28,500 ------- 59,500 ------- NEW HAMPSHIRE--0.1% New Hampshire Higher Education and Health Facilities Authority Revenue Bonds (Dartmouth College) Series 1985A-G 4.10%, 06/01/96 3,000 3,000 -------
F-21 61 SchwabFunds(R) 22 - -------------------------------------------------------------------------------- SCHWAB TAX-EXEMPT MONEY FUND SCHEDULE OF INVESTMENTS (in thousands) December 31, 1995 - --------------------------------------------------------------------------------
Par Value ------- ---------- TEXAS--0.1% Yoakum County, Texas Industrial Development Authority Pollution Control Revenue Bonds (Amoco Project) 3.75%, 05/01/96 $ 5,265 $ 5,265 ------ WYOMING--0.1% Carbon County, Wyoming Pollution Control Revenue Bonds (Amoco Project) Series 1985 3.75%, 05/01/96 4,800 4,800 ------ TOTAL OPTIONAL PUT BONDS (Cost $84,065) 84,065 ------ REVENUE ANTICIPATION NOTES--0.6%(b) ILLINOIS--0.4% Illinois State Revenue Anticipation Notes Series 1995-April, 1996 3.70%, 04/12/96 15,000 15,033 ------ OHIO--0.1% Cleveland, Ohio City School District Special Obligation Revenue Anticipation Notes/ (AMBAC Insurance) 3.60%, 06/01/96 3,000 3,007 ------ WISCONSIN--0.1% Milwaukee, Wisconsin Revenue Anticipation Notes Series A 4.20%, 02/22/96 5,000 5,009 ------ TOTAL REVENUE ANTICIPATION NOTES (Cost $23,049) 23,049 ------ REVENUE BONDS--4.0%(b) ALASKA--0.3% Anchorage, Alaska Electric Utilities Revenue Bonds (Secondary Lien) Series 1986A/ (MBIA Insurance & Escrowed to Maturity with Government Securities) 3.70%, 06/01/96 8,770 9,083 ------ ARIZONA--0.5% Arizona State Transportation Board Excise Tax Revenue Bonds (Maricopa County Regulatory Area) Series A/ (AMBAC Insurance) 3.80%, 07/01/96 12,910 12,953 Arizona State Transportation Board Excise Tax Revenue Bonds (Maricopa County Regulatory Area) Series B/ (AMBAC Insurance) 3.80%, 07/01/96 2,470 2,478 Arizona State University Revenue Bonds Series 1988/ (AMBAC Insurance & Escrowed to Maturity with Government Securities) 3.80%, 07/01/96 1,795 1,860 ------ 17,291 ------ CALIFORNIA--0.2% Los Angeles County, California Transportation Commission Sales Tax Revenue Refunding Bonds Series A/(Escrowed to Maturity with Government Securities) 3.65%, 07/01/96 1,000 1,039 Southern California Public Power Authority Transmission Revenue Bonds (Southern Transmission Project)/ (Escrowed to Maturity with Government Securities) 3.80%, 07/01/96 5,015 5,262 ------ 6,301 ------ FLORIDA--0.1% Florida State Municipal Power Agency Revenue Refunding Bonds (St. Lucie Project)/ (Escrowed to Maturity with Government Securities) 3.65%, 10/01/96 1,000 1,044 Jacksonville, Florida Electric Authority Revenue Bonds Series 1988-3A/ (Escrowed to Maturity with Government Securities) 3.73%, 10/01/96 2,030 2,118 ------ 3,162 ------ HAWAII--0.1% Hawaii State Department of Budget and Finance Special Purpose Mortgage Revenue Bonds (Kapiolani Medical Center for Women and Children)/ (Escrowed to Maturity with Government Securities) 3.73%, 07/01/96 3,900 4,051 ------
F-22 62 SchwabFunds(R) 23 - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Par Value ------- ---------- ILLINOIS--0.2% Chicago, Illinois Waterworks Revenue Refunding Bonds/ (Escrowed to Maturity with Government Securities) 3.65%, 11/01/96 $1,000 $ 1,037 Illinois State Sales Tax Revenue Bonds Series 1986B/ (Escrowed to Maturity with Government Securities) 4.00%, 06/15/96 5,500 5,698 Illinois State Toll Highway Authority Priority Revenue Bonds/ (Escrowed to Maturity with Government Securities) 4.00%, 01/01/96 1,000 1,020 ------ 7,755 ------ INDIANA--0.1% Purdue University, Indiana University Student Fee Revenue Bonds Series 1993J 3.65%, 07/01/96 4,800 4,812 ------ KENTUCKY--0.3% Kentucky State Turnpike Authority Economic Development Road Revenue Bonds Series 1986A/ (Escrowed to Maturity with Government Securities) 3.65%, 07/01/96 1,000 1,040 3.70%, 07/01/96 1,350 1,402 3.80%, 07/01/96 8,600 8,923 ------ 11,365 ------ MARYLAND--0.1% Maryland Department of Transportation Consolidated Transportation Revenue Refunding Bonds Series 1991 3.80%, 09/01/96 1,200 1,215 Washington, Maryland Suburban Sanitation District (Maryland Sewer Disposal) Revenue Bonds 3.65%, 06/01/96 600 609 ------ 1,824 ------ MINNESOTA--0.1% Southern Minnesota Municipal Power Agency Power Supply System Revenue Bonds/ (MBIA Insurance & Escrowed to Maturity with Government Securities) 3.44%, 01/01/96 1,000 1,020 University of Minnesota Refunding Revenue Bonds Series A/ (Escrowed to Maturity with Government Securities) 3.50%, 02/01/96 3,925 4,017 ----- 5,037 ----- NEW MEXICO--0.2% New Mexico State Severence Tax Revenue Bonds Series 1995B 3.80%, 07/01/96 3,110 3,136 New Mexico State Severence Tax Revenue Refunding Bonds Series 1992B (d) 3.50%, 07/01/96 1,000 1,008 Santa Fe, New Mexico Single Family Mortgage Revenue Bonds (FNMA/GNMA Mortgage Backed Securities Project) Series 1995B/ (FGIC Insurance) 4.00%, 11/15/96 3,000 3,000 ----- 7,144 ----- NEW YORK--0.2% Metropolitan Transportation Authority, New York Revenue Bonds Series 1986F/(Escrowed to Maturity with Government Securities) 3.70%, 07/01/96 8,445 8,799 ----- NORTH DAKOTA--0.0% Fargo, North Dakota Sales Tax Revenue Refunding Bonds/ (AMBAC Insurance) 3.85%, 07/01/96 710 714 ----- PENNSYLVANIA--0.2% Pennsylvania State Turnpike Commission Revenue Bonds Series 1986A/ (Escrowed to Maturity with Government Securities) 3.67%, 12/01/96 6,865 7,254 ----- RHODE ISLAND--0.0% Rhode Island Depositors Economic Protection Corp. Special Obligation Revenue Bonds Series A/ (MBIA Insurance & Escrowed to Maturity with Government Securities) 3.90%, 08/01/96 1,400 1,454 -----
F-23 63 SchwabFunds(R) 24 - -------------------------------------------------------------------------------- SCHWAB TAX-EXEMPT MONEY FUND SCHEDULE OF INVESTMENTS (in thousands) December 31, 1995 - --------------------------------------------------------------------------------
Par Value ------- ---------- SOUTH CAROLINA--0.1% South Carolina State Public Service Authority Expansion Revenue Refunding Bonds/ (Escrowed to Maturity with Government Securities) 3.80%, 07/01/96 $ 2,695 $ 2,829 ------ TEXAS--1.2% Harris County, Texas Hospital District Mortgage Revenue Bonds/ (Escrowed to Maturity with Government Securities) 3.52%, 04/01/96 23,000 23,734 Houston, Texas Water & Sewer System Revenue Exchange Prior Lien Revenue Bonds Series 1986A/ (Escrowed to Maturity with Government Securities) 3.65%, 12/01/96 300 315 San Antonio, Texas Electric & Gas Revenue Refunding Bonds Series 1986A/ (Escrowed to Maturity with Government Securities) 4.25%, 02/01/96 2,150 2,190 San Antonio, Texas Electric & Gas Revenue Refunding Bonds Series 1985B/ (Escrowed to Maturity with Government Securities) 3.70%, 02/01/96 10,000 10,198 San Antonio, Texas Electric & Gas Revenue Refunding Bonds Series 1991A 4.25%, 02/01/96 3,000 3,004 Trinity River Authority, Texas Regional Wastewater System Revenue Refunding Bonds Series A/ (AMBAC Insurance) 3.80%, 08/01/96 1,500 1,504 University of Texas Constitutional Appropriation Revenue Bonds Series 1995(d) 3.50%, 08/15/96 1,115 1,118 ------ 42,063 ------ VIRGINIA--0.0% Henrico County, Virginia Water & Sewer Revenue Refunding Bonds Series 1986/ (Escrowed to Maturity with Government Securities) 3.70%, 05/01/96 1,055 1,090 ------ WASHINGTON--0.0% Seattle, Washington Municipal Metropolitan Seattle Sewer Revenue Bonds Series 1988R2/ (Escrowed to Maturity with Government Securities) 3.70%, 01/01/96 750 765 ------- WISCONSIN--0.1% Wisconsin State Clean Water Revenue Bonds Series 1991-1 3.70%, 06/01/96 1,690 1,704 ------- TOTAL REVENUE BONDS (Cost $144,497) 144,497 ------- TAX ANTICIPATION NOTES--0.8%(b) NEW YORK--0.2% New York City, New York Tax Anticipation Notes Series 1995-1996A 3.60%, 02/15/96 4,500 4,505 South Huntington, New York Unified School District Tax Anticipation Notes Series 1995-1996 3.64%, 06/28/96 3,850 3,861 ------- 8,366 ------- OREGON--0.4% Lane County, Oregon Tax Anticipation Notes Series 1995-1996 3.88%, 06/28/96 3,500 3,510 Multnomah County, Oregon School District Number 1J Portland Tax Anticipation Notes 3.65%, 05/30/96 10,500 10,546 ------- 14,056 ------- SOUTH CAROLINA--0.2% Charleston County, South Carolina School District Tax Anticipation Notes Series 1995-1996 3.75%, 04/15/96 8,300 8,317 ------- TOTAL TAX ANTICIPATION NOTES (Cost $30,739) 30,739 ------- TAX AND REVENUE ANTICIPATION NOTES--6.0%(b) CALIFORNIA--3.6% California School Cash Reserve Program Authority Pooled Tax and Revenue Anticipation Notes Series 1995A/ (MBIA Insurance) 3.75%, 07/03/96 56,500 56,774
F-24 64 SchwabFunds(R) 25 - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Par Value ------- ---------- Fullerton, California Joint Unified High School District Tax and Revenue Anticipation Notes Series 1995-1996 3.80%, 11/14/96 $ 3,725 $ 3,747 Kern County, California High School District Tax and Revenue Anticipation Notes Series 1995-1996 4.05%, 09/19/96 20,000 20,096 Los Angeles County, California Tax and Revenue Anticipation Notes Series 1995-96/(Multiple Credit Enhancements) 3.83%, 07/01/96 1,500 1,505 3.68%, 07/01/96 1,200 1,204 Pleasanton, California Unified School District Tax and Revenue Anticipation Notes Series 1995-1996 4.00%, 07/05/96 4,030 4,045 San Francisco, California Unified School District Tax and Revenue Anticipation Notes Series 1995-96 3.89%, 07/25/96 10,000 10,033 San Joaquin County, California Tax and Revenue Anticipation Notes Series 1995-1996 3.97%, 10/15/96 30,000 30,121 ------- 127,525 ------- IOWA--0.7% Iowa School Corp. Warrant Certificates Iowa School Cash Anticipation Program Series 1995A/(Capital Guaranty Insurance) 3.85%, 06/28/96 25,000 25,106 ------- TEXAS--1.4% Texas State Tax and Revenue Anticipation Notes Series 1995-1996A 4.05%, 08/30/96 24,000 24,107 3.95%, 08/30/96 8,190 8,232 3.94%, 08/30/96 1,000 1,005 3.90%, 08/30/96 3,000 3,016 3.73%, 08/30/96 13,000 13,080 ------- 49,440 ------- WISCONSIN--0.3% Kenosha, Wisconsin Tax and Revenue Anticipation Notes 3.78%, 06/28/96 4,500 4,510 Wisconsin State Operating Tax and Revenue Anticipation Notes 3.50%, 06/17/96 5,000 5,021 ------- 9,531 ------- TOTAL TAX AND REVENUE ANTICIPATION NOTES (Cost $211,602) 211,602 ------- TAX-EXEMPT COMMERCIAL PAPER--12.4%(b) ARIZONA--1.5% Maricopa County, Arizona Pollution Control Financing Authority Pollution Control Revenue Bonds (Southern California Edison Co. Palo Verde Project) Series 1985B 3.80%, 02/12/96 6,450 6,450 3.85%, 02/26/96 5,000 5,000 Maricopa County, Arizona Pollution Control Financing Authority Pollution Control Revenue Bonds (Southern California Edison Co. Palo Verde Project) Series 1985C 3.85%, 02/08/96 6,250 6,250 3.50%, 02/08/96 5,500 5,500 3.80%, 02/12/96 3,100 3,100 3.75%, 02/14/96 6,450 6,450 Maricopa County, Arizona Pollution Control Financing Authority Pollution Control Revenue Bonds (Southern California Edison Co. Palo Verde Project) Series 1985G 3.85%, 02/26/96 4,000 4,000 Salt River, Arizona Agricultural Improvement Program/(Multiple Credit Enhancements) 3.75%, 01/12/96 15,200 15,200 ------- 51,950 ------- COLORADO--1.1% Denver, Colorado City and County Airport System Revenue Bonds (Denver International Airport) Series 1990B/ (Sumitomo Bank LOC) 4.05%, 02/15/96 7,520 7,520
F-25 65 SchwabFunds(R) 26 - -------------------------------------------------------------------------------- SCHWAB TAX-EXEMPT MONEY FUND SCHEDULE OF INVESTMENTS (in thousands) December 31, 1995 - --------------------------------------------------------------------------------
Par Value ------- ---------- Denver, Colorado City and County Airport System Revenue Bonds (Denver International Airport) Series 1990C/ (Sumitomo Bank LOC) 4.00%, 02/08/96 $15,000 $15,000 Platte River, Colorado Power Authority Adjustable Tender Electric Secondary Lien Bonds Series S-1/ (Morgan Guaranty Trust LOC) 3.75%, 02/07/96 1,800 1,800 3.75%, 02/08/96 15,000 15,000 ------ 39,320 ------ GEORGIA--1.5% Burke County, Georgia Development Authority Pollution Control Revenue Bonds (Oglethorpe Power Project) 1st Series 1989/ (Credit Suisse LOC) 3.85%, 02/08/96 4,300 4,300 3.80%, 02/08/96 2,700 2,700 3.45%, 02/08/96 1,400 1,400 3.75%, 02/15/96 7,500 7,500 3.75%, 02/26/96 2,000 2,000 3.75%, 02/27/96 11,500 11,500 3.70%, 02/27/96 22,700 22,700 ------ 52,100 ------ KANSAS--0.4% Burlington, Kansas Pollution Control Revenue Refunding Bonds (Kansas City Power & Light) Series 1987A/ (Toronto-Dominion Bank LOC) 3.75%, 02/15/96 12,150 12,150 Burlington, Kansas Pollution Control Revenue Refunding Bonds (Kansas City Power & Light) Series 1987B/ (Deutsche Bank LOC) 3.80%, 02/07/96 2,200 2,200 ------ 14,350 ------ KENTUCKY--0.1% Pendleton County, Kentucky Multiple County Lease Revenue Bonds (Kentucky Association of Counties Lease Program) Series 1989/ (Commonwealth Bank of Australia LOC) 3.70%, 02/08/96 2,300 2,300 ------ LOUISIANA--2.0% Louisiana State Adjustable Tender General Obligation Refunding Bonds Series 1991A/(Credit Local de France & Fuji Bank LOC) 3.85%, 02/08/96 4,275 4,275 3.80%, 02/13/96 2,500 2,500 3.75%, 02/14/96 4,745 4,745 3.80%, 02/26/96 11,000 11,000 Louisiana State Pollution Control Revenue Refunding Bonds (St. James Parish/Texaco Project) Series 1988B 3.65%, 02/09/96 48,900 48,900 Louisiana State Pollution Control Revenue Refunding Bonds (St. James Parish/Texaco Project) Series 1988C 3.65%, 02/09/96 1,000 1,000 ------ 72,420 ------ MASSACHUSETTS--0.3% Massachusetts Water Resource Authority Commercial Paper Series 1995/(Morgan Guaranty Trust LOC) 3.75%, 02/22/96 9,400 9,400 ------ MICHIGAN--0.9% Michigan State Building Authority Commercial Paper Notes Series 1/ (Canadian Imperial Bank of Commerce LOC) 4.10%, 01/16/96 33,600 33,600 ------ MINNESOTA--0.2% Rochester, Minnesota Adjustable Tender Health Care Facility Revenue Bonds (Mayo Foundation/ Mayo Medical Center) Series 1988E/ (Credit Suisse SBPA) 3.70%, 02/14/96 3,100 3,100 Rochester, Minnesota Adjustable Tender Health Care Facility Revenue Bonds (Mayo Foundation/ Mayo Medical Center) Series 1992A 3.75%, 02/15/96 3,000 3,000 Rochester, Minnesota Adjustable Tender Health Care Facility Revenue Bonds (Mayo Foundation/ Mayo Medical Center) Series 1992C 3.45%, 03/07/96 1,550 1,550 ------ 7,650 ------
F-26 66 SchwabFunds(R) 27 - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Par Value ------- ---------- NEW YORK--0.1% New York City, New York Municipal Water Finance Authority Tax-Exempt Commercial Paper/ (Credit Suisse LOC) 3.75%, 02/08/96 $ 5,000 $ 5,000 ------ NORTH CAROLINA--1.7% North Carolina Eastern Municipal Power Agency Power System Revenue Bonds Series 1988B/ (Union Bank of Switzerland & Morgan Guaranty Trust LOC) 3.70%, 02/07/96 20,500 20,500 3.75%, 02/26/96 5,400 5,400 North Carolina Eastern Municipal Power Agency Tax-Exempt Commercial Paper/(Industrial Bank of Japan LOC) 3.80%, 02/07/96 24,321 24,321 3.60%, 02/08/96 9,824 9,824 3.55%, 02/08/96 2,500 2,500 ------ 62,545 ------ TEXAS--2.6% Lower Colorado River Authority Tax-Exempt Commercial Paper Series B/(Morgan Guaranty Trust Revolving Credit Agreement 3.80%, 02/14/96 15,800 15,800 Texas Municipal Power Agency Commercial Paper/(Bank of America, Canadian Imperial Bank of Commerce & Morgan Guaranty Trust Revolving Credit Agreement) 3.80%, 01/11/96 49,025 49,025 Texas State Tax-Exempt Commercial Paper Series 1995 3.35%, 08/12/96 30,000 30,000 ---------- 94,825 ---------- TOTAL TAX-EXEMPT COMMERCIAL PAPER (Cost $445,460) 445,460 ---------- TOTAL INVESTMENTS--100.0% (Cost $3,586,104) $3,586,104 ==========
See accompanying Notes to Schedules of Investments. F-27 67 SchwabFunds(R) 28 - -------------------------------------------------------------------------------- SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND SCHEDULE OF INVESTMENTS (in thousands) December 31, 1995 - --------------------------------------------------------------------------------
Par Value ------- ---------- VARIABLE RATE OBLIGATIONS--52.2%(a) ABAG Finance Authority for Nonprofit Organizations Certificates of Participation (Lucile Salter Packard Project)/(AMBAC Insurance & Industrial Bank of Japan LOC) 5.00%, 01/07/96 $ 4,000 $ 4,000 Alameda County, California Industrial Development Authority Industrial Revenue Bonds (Aitchison Family Project) Series 1993A/ (Wells Fargo Bank LOC) 5.45%, 01/07/96 2,920 2,920 Alameda County, California Industrial Development Authority Industrial Revenue Bonds (Scientific Technology Project) Series 1994A/(Banque Nationale de Paris LOC) 5.45%, 01/07/96 3,000 3,000 Anaheim, California Certificates of Participation (Anaheim Memorial Hospital Assoc. Project)/ (AMBAC Insurance & Industrial Bank of Japan SBPA) 5.30%, 01/07/96 26,820 26,820 Anaheim, California Certificates of Participation (Police Facility Financing Project)/(AMBAC Insurance & Industrial Bank of Japan SBPA) 5.25%, 01/07/96 1,550 1,550 Anaheim, California Housing Authority Multi Family Housing Revenue Bonds (Heritage Village Apartments Project) Series 1992A/(Multiple Credit Enhancements) 4.70%, 01/07/96 3,385 3,385 Big Bear Lake, California Industrial Development Revenue Certificates of Participation (Southwest Gas Corp. Project) Series A/(Union Bank of Switzerland LOC) 5.05%, 01/07/96 12,500 12,500 California Educational Facilities Authority Revenue Bonds (California Institute of Technology) Series 1994 4.60%, 01/07/96 16,300 16,300 California Health Facilities Financing Authority Revenue Bonds (Adventist Health System-- Sutter Health) Series 1991A/ (Toronto-Dominion Bank LOC) 4.85%, 01/07/96 1,000 1,000 California Health Facilities Financing Authority Revenue Bonds (Childrens Hospital Project) Series 1991/ (MBIA Insurance & Swiss Bank SBPA) 4.75%, 01/07/96 9,900 9,900 California Health Facilities Financing Authority Revenue Bonds (Huntington Memorial Hospital) Series 1985/ (Morgan Guaranty Trust LOC) 4.90%, 01/07/96 9,600 9,600 California Health Facilities Financing Authority Revenue Bonds (Kaiser Permanente Project) Series 1993A 4.90%, 01/07/96 8,200 8,200 California Health Facilities Financing Authority Revenue Bonds (Kaiser Permanente Project) Series 1993B 4.90%, 01/07/96 1,600 1,600 California Health Facilities Financing Authority Revenue Bonds (Saint Joseph's Hospital) Series 1985B 5.90%, 01/01/96 1,000 1,000 California Health Facilities Financing Authority Revenue Bonds (Scripps Memorial Hospital) Series 1985B/ (MBIA Insurance & Morgan Guaranty Trust SBPA) 4.95%, 01/07/96 15,120 15,120 California Health Facilities Financing Authority Revenue Bonds (Scripps Memorial Hospital) Series 1991A/ (MBIA Insurance & Morgan Guaranty Trust SBPA) 4.95%, 01/07/96 1,100 1,100 California Health Facilities Financing Authority Revenue Bonds (Scripps Memorial Hospital) Series 1991B/ (MBIA Insurance & Swiss Bank SBPA) 4.75%, 01/07/96 13,900 13,900
F-28 68 SchwabFunds(R) 29 - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Par Value ------- ---------- California Health Facilities Financing Authority Revenue Bonds (St. Francis Hospital) Series 1995F/ (MBIA Insurance & Rabobank Nederland N.V. SBPA) 4.85%, 01/07/96 $30,000 $30,000 California Health Facilities Financing Authority Revenue Bonds Pooled Loan Program Series 1985B/ (FGIC Insurance & FGIC SPA) 4.95%, 01/07/96 2,000 2,000 California Pollution Control Financing Authority Pollution Control Revenue Bonds (Burney Forest Products Project) Series 1988A/(National Westminster Bank LOC) 5.95%, 01/01/96 1,000 1,000 California Pollution Control Financing Authority Pollution Control Revenue Bonds (Burney Forest Products Project) Series 1989A/(National Westminster Bank LOC) 5.95%, 01/01/96 200 200 California Pollution Control Financing Authority Pollution Control Revenue Bonds (Reynolds Metals Co. Project) Series 1985/ (National Westminster Bank LOC) 5.10%, 01/07/96 1,300 1,300 California Pollution Control Financing Authority Pollution Control Revenue Bonds (Southdown, Inc. Project) Series B/(Societe Generale LOC) 4.20%, 01/08/96 3,900 3,900 California Pollution Control Financing Authority Pollution Control Revenue Bonds (Southern California Edison) Series 1986A 5.40%, 01/01/96 6,700 6,700 California Pollution Control Financing Authority Pollution Control Revenue Bonds (Southern California Edison) Series 1986C 5.40%, 01/01/96 100 100 California Pollution Control Financing Authority Pollution Control Revenue Bonds (Southern California Edison) Series 1986D 5.40%, 01/01/96 1,300 1,300 California Pollution Control Financing Authority Resource Recovery Revenue Bonds (Sanger Project) Series 1990A/ (Credit Suisse LOC) 5.05%, 01/07/96 9,200 9,200 California Pollution Control Financing Authority Solid Waste Disposal Revenue Bonds (Athens Disposal Company Project) Series 1995A/ (Wells Fargo Bank LOC) 5.20%, 01/07/96 10,000 10,000 California Pollution Control Financing Authority Solid Waste Disposal Revenue Bonds (Burrtec Waste Industries Project) Series 1995A/ (Union Bank LOC) 5.25%, 01/07/96 4,000 4,000 California Pollution Control Financing Authority Solid Waste Disposal Revenue Bonds (Colmac Energy Project) Series 1990A/ (Swiss Bank LOC) 5.05%, 01/07/96 12,900 12,900 California Pollution Control Financing Authority Solid Waste Disposal Revenue Bonds (Colmac Energy Project) Series 1990B/ (Swiss Bank LOC) 5.05%, 01/07/96 8,900 8,900 California Pollution Control Financing Authority Solid Waste Disposal Revenue Bonds (Colmac Energy Project) Series 1990C/ (Swiss Bank LOC) 5.05%, 01/07/96 10,000 10,000 California Pollution Control Financing Authority Solid Waste Disposal Revenue Bonds (Contra Costa Services) Series 1995A/ (Bank of America LOC) 5.15%, 01/07/96 4,500 4,500 California Pollution Control Financing Authority Solid Waste Disposal Revenue Bonds (Shell Oil Co. Martinez Project) Series 1994A 6.05%, 01/01/96 1,000 1,000 California Pollution Control Financing Authority Solid Waste Disposal Revenue Bonds (Taormina Industries Project) Series 1994B/(Sanwa Bank LOC) 5.40%, 01/07/96 11,000 11,000
F-29 69 SchwabFunds(R) 30 - -------------------------------------------------------------------------------- SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND SCHEDULE OF INVESTMENTS (in thousands) December 31, 1995 - --------------------------------------------------------------------------------
Par Value ------- ---------- California Statewide Community Development Authority Apartment Development Revenue Bonds Series 1995-A3/ (FNMA LOC) 4.90%, 01/07/96 $10,000 $10,000 California Statewide Community Development Authority Hospital Revenue Bonds Certificates of Participation (Sutter Health Obligation Group)/ (AMBAC Insurance & Industrial Bank of Japan SBPA) 5.90%, 01/01/96 1,100 1,100 California Statewide Community Development Authority Revenue Bonds Certificates of Participation (Kaiser Foundation Hospitals) 4.90%, 01/07/96 10,000 10,000 California Statewide Community Development Corp. Industrial Development Revenue Bonds (13th I Associates Project)/ (Union Bank LOC) 5.30%, 01/07/96 5,540 5,540 California Statewide Community Development Corp. Industrial Development Revenue Bonds (ARM Inc. Project) Series 1994A/ (Bank of Tokyo LOC) 5.35%, 01/07/96 675 675 California Statewide Community Development Corp. Industrial Development Revenue Bonds (Aerostar Properties Project)/ (Union Bank LOC) 5.40%, 01/07/96 5,095 5,095 California Statewide Community Development Corp. Industrial Development Revenue Bonds (Agricultural Products Inc. Project)/ (Union Bank LOC) 5.55%, 01/07/96 1,440 1,440 California Statewide Community Development Corp. Industrial Development Revenue Bonds (Development Industries) Series 1994A/ (Bank of Tokyo LOC) 5.35%, 01/07/96 1,640 1,640 California Statewide Community Development Corp. Industrial Development Revenue Bonds (Industrial Dynamics Co. Project)/ (Union Bank LOC) 5.55%, 01/07/96 5,190 5,190 California Statewide Community Development Corp. Industrial Development Revenue Bonds (Lorber Industries of California Project)/ (Union Bank LOC) 5.55%, 01/07/96 1,050 1,050 California Statewide Community Development Corp. Industrial Development Revenue Bonds (Pacific Handy Cutter Products Project)/ (Union Bank LOC) 5.55%, 01/07/96 1,210 1,210 California Statewide Community Development Corp. Industrial Development Revenue Bonds (Pacific Scientific Project) Series 1989/ (Bank of California LOC) 5.25%, 01/07/96 5,125 5,125 California Statewide Community Development Corp. Industrial Development Revenue Bonds (Packaging Innovation Project) Series 1994A/ (Bank of Tokyo LOC) 5.35%, 01/07/96 2,440 2,440 California Statewide Community Development Corp. Industrial Development Revenue Bonds (The Diamond Foods Project) Series 1991/ (Union Bank LOC) 5.55%, 01/07/96 1,465 1,465 California Statewide Community Development Corp. Industrial Development Revenue Bonds (Z-Nix Co., Inc. Project)/(Union Bank LOC) 5.55%, 01/07/96 920 920 California Statewide Community Development Corp. Revenue Bonds (ORA Real Estate Project) Series 1995D/ (Union Bank LOC) 5.35%, 01/07/96 3,000 3,000
F-30 70 SchwabFunds(R) 31 - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Par Value ------- ---------- Carlsbad, California Multi Family Housing Revenue Refunding Bonds Certificates of Participation (La Costa Apartment Project) Series 1993A/ (Bank of America LOC) 4.80%, 01/07/96 $ 4,920 $ 4,920 Concord, California Multi Family Housing Mortgage Revenue Bonds (Bel Air Apartments Project) Series 1986A/ (Bank of America LOC) 5.00%, 01/07/96 3,000 3,000 Contra Costa, California Multi Family Housing Mortgage Revenue Bonds (El Cerrito Project) Series A/ (Bank of America LOC) 5.00%, 01/07/96 980 980 Contra Costa, California Transportation Authority Sales Tax Revenue Bonds Series 1993A/ (FGIC Insurance & FGIC SPA) 4.90%, 01/07/96 30,300 30,300 Duarte, California Redevelopment Agency Certificates of Participation (Johnson Duarte Partners Project) Series 1984B/ (Bank of America LOC) 4.90%, 01/07/96 1,600 1,600 Duarte, California Redevelopment Agency Certificates of Participation (Piken Duarte Partners Project) Series 1984A/ (Bank of America LOC) 4.90%, 01/07/96 4,250 4,250 Emeryville, California Redevelopment Agency Multi Family Housing Revenue Bonds (Emery Bay Apartments II Project) Series 1991A/ (Bank of America LOC) 4.90%, 01/07/96 6,000 6,000 Encinitas, California Multi Family Housing Revenue Refunding Bonds (Torrey Pines Project) Series A/ (Bank of America LOC) 4.80%, 01/07/96 8,100 8,100 Foothill Eastern Transportation Corridor Agency, California Toll Road Revenue Bonds Series 1995D/ (Industrial Bank of Japan LOC) 5.00%, 01/07/96 1,000 1,000 Fremont, California Multi Family Housing Revenue Refunding Certificates of Participation (Amber Court Apartments Project) Series 1990A/ (Bank of Tokyo LOC) 5.30%, 01/07/96 10,380 10,380 Fresno, California Multi Family Mortgage Revenue Bonds (Oak Cornelia Apartments Project) Series 1985A/(First Interstate Bank of California LOC) 5.10%, 01/07/96 25,265 25,265 Glenn, California Industrial Development Authority Revenue Bonds (Land 'O Lakes Project)/ (Sanwa Bank LOC) 5.60%, 01/07/96 1,900 1,900 Grand Terrace, California Community Redevelopment Agency Multi Family Housing Revenue Bonds (Mount Vernon Villas Project) Series 1985A/ (Industrial Bank of Japan LOC) 5.20%, 01/07/96 1,865 1,865 Irvine Ranch, California Water District Consolidated District Numbers 102,103,105,106 Revenue Refunding Bonds/ (Commerzbank AG LOC) 5.90%, 01/01/96 4,300 4,300 Irvine Ranch, California Water District Consolidated District Numbers 105,250,290 Revenue Refunding Bonds Series 1991/(National Westminster Bank LOC) 5.90%, 01/01/96 1,200 1,200 Irvine Ranch, California Water District Consolidated Revenue Refunding Bonds Series 1985A-2/ (Sumitomo Bank LOC) 5.90%, 01/01/96 100 100 Irvine Ranch, California Water District Consolidated Revenue Refunding Bonds Series 1985A-3/ (Sumitomo Bank LOC) 5.90%, 01/01/96 1,400 1,400 Irvine Ranch, California Water District Consolidated Revenue Refunding Bonds Series 1985B-1/ (Sumitomo Bank LOC) 6.10%, 01/01/96 100 100
F-31 71 SchwabFunds(R) 32 - -------------------------------------------------------------------------------- SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND SCHEDULE OF INVESTMENTS (in thousands) December 31, 1995 - --------------------------------------------------------------------------------
Par Value ------- ---------- Irvine Ranch, California Water District Consolidated Revenue Refunding Bonds Series 1993A/ (Bank of America LOC) 6.00%, 01/01/96 $1,200 $1,200 Irvine, California Improvement Bond Act 1915 Revenue Bonds (Special Assessment District No. 94-15)/(Dai-Ichi Kangyo Bank LOC) 5.90%, 01/01/96 500 500 Kern County, California Certificates of Participation (Kern Public Facilities Project) Series A/ (Sanwa Bank LOC) 4.85%, 01/07/96 200 200 Lancaster, California Redevelopment Agency Multi Family Revenue Bonds (Woodcreek Garden Apartments Project) Series 1985J/ (Bank of Tokyo LOC) 5.10%, 01/07/96 8,400 8,400 Livermore, California Multi Family Housing Revenue Refunding Bonds (Arbors Apartment Project) Series 1991A/ (Bank of Tokyo LOC) 5.30%, 01/07/96 9,255 9,255 Livermore, California Multi Family Housing Revenue Refunding Bonds (Diablo Vista Apartments Project) Series 1990A/ (Union Bank LOC) 5.30%, 01/07/96 6,950 6,950 Los Angeles County, California Certificates of Participation Adjustable Convertible Extendable Securities (Los Angeles County Museum of Art Project) Series 1985A/ (Bank of America LOC) 4.85%, 01/07/96 3,800 3,800 Los Angeles County, California Certificates of Participation Adjustable Convertible Extendable Securities (Los Angeles County Museum of Art Project) Series 1985B/ (Bank of America LOC) 4.85%, 01/07/96 3,500 3,500 Los Angeles County, California Metropolitan Transportation Authority General Revenue Bonds (Union Station Project) Series 1985A/ (FSA Insurance & Societe Generale SBPA) 4.75%, 01/07/96 33,100 33,100 Los Angeles County, California Multi Family Mortgage Revenue Refunding Bonds (Casden Community Complex) Series 1991C/ (FHLB LOC) 4.80%, 01/07/96 3,200 3,200 Los Angeles County, California Multi Family Mortgage Revenue Refunding Bonds (Valencia Village Project) Series 1984C/ (Industrial Bank of Japan LOC) 5.35%, 01/07/96 900 900 Los Angeles County, California Transportation Commission Sales Tax Revenue Refunding Bonds Series 1992A/ (FGIC Insurance & Industrial Bank of Japan SBPA) 5.10%, 01/07/96 9,700 9,700 Los Angeles, California Community Redevelopment Agency Certificates of Participation (Baldwin Hills Public Parking Project) Series B/ (Wells Fargo Bank LOC) 4.85%, 01/07/96 10,700 10,700 Los Angeles, California Community Redevelopment Agency Certificates of Participation (Broadway Springs Center Project) Series 1987/ (Bank of America LOC) 4.90%, 01/07/96 10,900 10,900 Los Angeles, California Multi Family Housing Revenue Bonds (Poinsettia Apartments Project) Series 1989A/ (Dai-Ichi Kangyo Bank LOC) 5.35%, 01/07/96 9,600 9,600 Marin County, California Housing Authority Multi Family Housing Revenue Bonds (Crest Marin II Apartments Project) Series 1989A/ (Dai-Ichi Kangyo Bank LOC) 5.45%, 01/07/96 7,200 7,200
F-32 72 SchwabFunds(R) 33 - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Par Value ------- ---------- Modesto, California High School District and Modesto City School District Certificates of Participation (Capital Facilities Project) Series 1991/ (Mitsubishi Bank LOC) 5.00%, 01/07/96 $3,700 $3,700 Monterey County, California Financing Authority Revenue Bonds (Reclamation & Distribution Projects)/ (Dai-Ichi Kangyo Bank LOC) 5.30%, 01/07/96 5,000 5,000 Moorpark, California Multi Family Housing Revenue Refunding Bonds (Le Club Apartments Project) Series A/(Citibank LOC) 4.80%, 01/07/96 6,000 6,000 Oakland, California Economic Development Revenue Refunding Bonds (Leamington Hotel Project) Series 1994A/ (First Interstate Bank of California LOC) 4.90%, 01/07/96 4,250 4,250 Oakland, California Health Facilities Revenue Bonds Certificates of Participation (Children's Hospital Project) Series 1988A/ (Banque Nationale de Paris LOC) 4.95%, 01/07/96 3,300 3,300 Ontario, California Redevelopment Agency Multi Family Housing Revenue Refunding Bonds Series 1991A/ (FHLB LOC) 4.80%, 01/07/96 4,492 4,492 Orange County, California Apartment Development Revenue Refunding Bonds (Jess L. Frost Project) Series 1985B/ (Wells Fargo Bank LOC) 5.40%, 01/07/96 8,200 8,200 Orange County, California Certificates of Participation (Florence Crittenton Services Project) Series 1990/ (Swiss Bank LOC) 5.00%, 01/07/96 6,900 6,900 Orange County, California Municipal Water District Water Facilities Corp. Certificates of Participation/ (Barclays Bank & National Westminster Bank LOC) 5.20%, 01/07/96 31,225 31,225 Orange County, California Various Sanitation Districts Certificates of Participation (Capital Improvement Programs) Series 1990-92C/ (FGIC Insurance & FGIC SPA) 6.00%, 01/01/96 7,800 7,800 Orange County, California Various Sanitation Districts Certificates of Participation Series 1990-92A/ (National Westminster Bank LOC) 5.90%, 01/01/96 12,500 12,500 Orange County, California Water District Certificates of Participation Sanitation Districts #1,2,3/ (AMBAC Insurance & Industrial Bank of Japan SBPA) 5.05%, 01/07/96 11,600 11,600 Panama Buena Vista, California Unified School District Certificates of Participation (1994 Capital Improvement Financing Project)/(Bank of California LOC) 5.45%, 01/07/96 4,000 4,000 Riverside County, California Certificates of Participation (Riverside County Public Facility Project) Series 1985A/ (Sanwa Bank LOC) 4.80%, 01/07/96 8,800 8,800 Riverside County, California Certificates of Participation (Riverside County Public Facility Project) Series 1985B/ (Sanwa Bank LOC) 5.00%, 01/07/96 100 100 Riverside County, California Certificates of Participation (Riverside County Public Facility Project) Series 1985C/ (Sanwa Bank LOC) 5.00%, 01/07/96 5,600 5,600
F-33 73 SchwabFunds(R) 34 - -------------------------------------------------------------------------------- SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND SCHEDULE OF INVESTMENTS (in thousands) December 31, 1995 - --------------------------------------------------------------------------------
Par Value ------- ---------- Riverside County, California Housing Authority Multi Family Housing Revenue Bonds (Briarwood Apartment Project) Series 1985C/ (FHLB LOC) 5.15%, 01/07/96 $ 4,500 $ 4,500 Riverside County, California Industrial Development Authority Revenue Bonds (Cryogenic Project) Series 1989B-1/ (Rabobank Nederland N.V. LOC) 5.05%, 01/07/96 4,100 4,100 Sacramento County, California Certificates of Participation (Administration Center & Court House Project)/(Union Bank of Switzerland LOC) 4.75%, 01/07/96 28,200 28,200 Salinas, California Apartment Development Multi Family Housing Revenue Bonds (Mariner Villa Project) Series 1985B/ (Bank of America LOC) 4.80%, 01/07/96 2,725 2,725 San Bernardino County, California Certificates of Participation (Glen Helen Blockbuster Project) Series 1994C/ (Mitsubishi Bank LOC) 5.50%, 01/07/96 7,255 7,255 San Bernardino County, California Multi Family Housing Revenue Bonds (Western Properties Project IV) Series 1985/ (Bank of America LOC) 4.55%, 01/07/96 1,100 1,100 San Francisco, California City and County Redevelopment Agency Multi Family Revenue Bonds (Fillmore Center Project) Series A-1/ (Citibank LOC) 5.30%, 01/07/96 26,500 26,500 San Francisco, California City and County Redevelopment Agency Multi Family Revenue Bonds (Fillmore Center Project) Series A-2/ (Citibank LOC) 5.30%, 01/07/96 3,750 3,750 San Francisco, California City and County Redevelopment Agency Multi Family Revenue Bonds (Fillmore Center Project) Series B-2/ (Bank of Nova Scotia LOC) 5.15%, 01/07/96 13,100 13,100 San Francisco, California City and County Redevelopment Agency Multi Family Revenue Bonds (Rincon Center Apartments) Series 1985B/ (Citibank LOC) 5.30%, 01/07/96 5,705 5,705 San Francisco, California Housing Authority Multi Family Housing Revenue Bonds (737 Post Project) Series 1985D/ (Banque Nationale de Paris LOC) 4.95%, 01/07/96 16,800 16,800 San Jose/Santa Clara, California Water Financing Authority Sewer Revenue Bonds Series B/ (AMBAC Insurance & Bank of Nova Scotia LOC) 4.75%, 01/07/96 7,600 7,600 San Mateo County, California Certificates of Participation (Capital Projects) Series 1985B/ (Swiss Bank LOC) 4.75%, 01/07/96 3,145 3,145 Santa Clara County, California El Camino Hospital District Hospital Facility Authority Revenue Bonds (Valley Medical Center Project) Series 1985A/(National Westminster Bank LOC) 4.85%, 01/07/96 7,900 7,900 Santa Clara County, California El Camino Hospital District Hospital Facility Authority Revenue Bonds (Valley Medical Center Project) Series 1985B/(National Westminster Bank LOC) 4.85%, 01/07/96 8,100 8,100 Santa Clara, California Electric Revenue Bonds Series 1985A/(National Westminster Bank LOC) 4.90%, 01/07/96 13,300 13,300 Santa Clara, California Electric Revenue Bonds Series 1985B/(National Westminster Bank LOC) 4.90%, 01/07/96 12,100 12,100 Santa Clara, California Electric Revenue Bonds Series 1985C/(National Westminster Bank LOC) 4.90%, 01/07/96 8,800 8,800
F-34 74 SchwabFunds(R) 35 - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Par Value ------- ---------- Santa Cruz County, California Housing Authority Multi Family Housing Revenue Bonds (Paloma del Mar Apartments Project) Series 1992A/ (Bank of Tokyo LOC) 5.20%, 01/07/96 $ 7,700 $ 7,700 Simi Valley, California Multi Family Housing Certificates of Participation (Lincoln Wood Ranch Project)/ (Sumitomo Bank LOC) 5.30%, 01/07/96 5,600 5,600 South San Francisco, California Multi Family Revenue Bonds (Magnolia Plaza Apartments Project) Series A/ (Wells Fargo Bank LOC) 5.35%, 01/07/96 4,500 4,500 Southern California Public Power Authority Transmission Revenue Bonds (Southern Transmission Project) Series 1991/ (AMBAC Insurance & Swiss Bank SBPA) 4.75%, 01/07/96 21,000 21,000 Vallejo, California Commercial Development Revenue Bonds (Vallejo Center Association Project) Series 1994A/ (Bank of Tokyo LOC) 5.35%, 01/07/96 900 900 Victor, California Elementary School District Certificates of Participation (School Construction Financing Project)/(National Westminster Bank LOC) 5.30%, 01/07/96 4,000 4,000 Visalia, California Public Building Authority Certificates of Participation (Convention Center Expansion Project) Series 1991/ (Bank of California LOC) 5.35%, 01/07/96 1,000 1,000 ------- TOTAL VARIABLE RATE OBLIGATIONS (Cost $874,397) 874,397 ------- VARIABLE RATE TENDER OPTION BONDS--0.2%(A) Southern California Rapid Transit District, California Certificates of Participation Short Mode Tender Option Bonds (BT-9)/ (MBIA Insurance & Bankers Trust Tender Option) 3.00%, 01/07/96 4,200 4,200 ------ TOTAL VARIABLE RATE TENDER OPTION BONDS (Cost $4,200) 4,200 ------ VARIABLE RATE TENDER OPTION BOND PARTNERSHIPS--5.4%(a)(c) California State Department of Water Resources Revenue Bonds (Central Valley Project) Series J3 Tender Option Bond Partnership (BTP-141)/ (Bankers Trust Tender Option) 5.15%, 01/07/96 5,155 5,155 California State Revenue Anticipation Warrants Series 1994C Tender Option Bond Partnership (BTP-150)/(Multiple Credit Enhancements & Bankers Trust Tender Option) 5.30%, 01/07/96 10,000 10,000 California State Revenue Anticipation Warrants Series C Tender Option Bond Partnership (BTP-96)/(Multiple Credit Enhancements & Bankers Trust Tender Option) 5.30%, 01/07/96 18,465 18,465 Los Angeles County, California Transportation Commission Sales Tax Revenue Tender Option Bond Partnership (BTP-146)/(Bankers Trust Tender Option & Escrowed to Maturity with Government Securities) 5.15%, 01/07/96 23,078 23,078 Los Angeles, California Department of Water & Power Electric Plant Revenue Refunding Bonds Series 1994 Tender Option Bond Partnership (BTP-68)/(Automatic Data Processing, Inc. Tender Option) 4.37%, 01/07/96 5,195 5,195
F-35 75 SchwabFunds(R) 36 - -------------------------------------------------------------------------------- SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND SCHEDULE OF INVESTMENTS (in thousands) December 31, 1995 - --------------------------------------------------------------------------------
Par Value ------- ---------- Metropolitan Water District of Southern California Waterworks General Obligation Revenue Refunding Bonds Series 1993A1 and 1993A2 Tender Option Bond Partnership (BTP-115)/ (Bankers Trust Tender Option) 5.15%, 01/07/96 $10,145 $10,145 San Diego County, California Regional Transportation Commission Sales Tax Tender Option Bonds Partnership (BTP-135)/ (FGIC Insurance & Bankers Trust Tender Option) 3.00%, 01/07/96 2,000 2,000 Southern California Public Power Authority Power Project Class A Tender Option Bond Partnership (BTP-90)/ (MBIA Insurance & Bankers Trust Tender Option) 3.00%, 01/07/96 8,290 8,290 Southern California Rapid Transit District Certificates of Participation (Workers Compensation Funding Program) Tender Option Bond Partnership (BTP-163)/ (MBIA Insurance & Bankers Trust Tender Option) 3.00%, 01/07/96 8,710 8,710 ------ TOTAL VARIABLE RATE TENDER OPTION BOND PARTNERSHIPS (Cost $91,038) 91,038 ------ CERTIFICATES OF PARTICIPATION--2.0%(b) Desert Sands, California Unified School District Certificates of Participation (Measure O Project) Series B/ (Escrowed to Maturity with Government Securities) 2.60%, 03/01/96 10,000 10,257 San Jose, California Certificates of Participation (Convention Center Project)/ (Escrowed to Maturity with Government Securities) 3.73%, 09/01/96 12,500 13,080 San Mateo, California Redevelopment Agency Certificates of Participation Revenue Refunding Bonds (Bridge and Water Pumping Station)/ (Escrowed to Maturity with Government Securities) 3.67%, 08/01/96 9,305 9,721 ------ TOTAL CERTIFICATES OF PARTICIPATION (Cost $33,058) 33,058 ------ REVENUE ANTICIPATION WARRANTS--2.2%(b) California State Revenue Anticipation Warrants Series C/(FGIC Insurance) 4.61%, 04/25/96 35,900 36,099 ------ TOTAL REVENUE ANTICIPATION WARRANTS (Cost $36,099) 36,099 ------ REVENUE BONDS--0.3%(b) Santa Clara Valley Water District, California Revenue Refunding Bonds/ (Escrowed to Maturity with Government Securities) 3.55%, 06/01/96 1,000 1,009 Southern California Public Power Authority Revenue Bonds (Southern California Public Power Transmission Project)/ (Escrowed to Maturity with Government Securities) 3.50%, 07/01/96 3,575 3,756 ------ TOTAL REVENUE BONDS (Cost $4,765) 4,765 ------ SPECIAL TAX BONDS--0.1%(b) South Poway, California Community Facility District No. 1 Special Tax (Pomerado Business Park) Series 1985A/ (Escrowed to Maturity with Government Securities) 3.80%, 03/02/96 1,000 1,039 ------ TOTAL SPECIAL TAX BONDS (Cost $1,039) 1,039 ------
F-36 76 SchwabFunds(R) 37 - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Par Value ------- ---------- TAX AND REVENUE ANTICIPATION NOTES--17.3%(b) Berkeley, California Tax and Revenue Anticipation Notes Series 1995-1996 3.95%, 07/17/96 $10,500 $10,543 California School Cash Reserve Program Authority Pooled Tax and Revenue Anticipation Notes Series 1995A/ (MBIA Insurance) 3.95%, 07/03/96 2,800 2,811 3.86%, 07/03/96 25,000 25,102 3.85%, 07/03/96 225 226 3.75%, 07/03/96 40,000 40,194 Desert Sands, California Unified School District Tax and Revenue Anticipation Notes Series 1995-96 4.00%, 07/05/96 10,000 10,024 East Side Unified High School District Santa Clara County California Tax and Revenue Anticipation Notes 4.00%, 10/10/96 8,000 8,030 Elk Grove, California Unified School District Tax and Revenue Anticipation Notes Series 1995-96 4.00%, 07/31/96 10,400 10,429 Fremont, California Unified School District Tax and Revenue Anticipation Notes Series 1995-96 3.95%, 07/11/96 13,000 13,034 Fresno, California Tax and Revenue Anticipation Notes Series 1995-96 4.00%, 06/28/96 19,900 19,947 Livermore, California Tax and Revenue Anticipation Notes Series 1995-96 4.00%, 07/10/96 4,600 4,612 Los Angeles County, California Tax and Revenue Anticipation Notes Series 1995-96/(Multiple Credit Enhancements) 3.87%, 07/01/96 7,260 7,281 3.82%, 07/01/96 10,000 10,031 3.80%, 07/01/96 1,000 1,003 3.70%, 07/01/96 5,000 5,018 3.68%, 07/01/96 10,000 10,037 Marin County, California Tax and Revenue Anticipation Notes Series 1995-96 3.85%, 07/03/96 37,000 37,161 Mountain View, California School District Tax and Revenue Anticipation Notes Series 1995-96 4.00%, 07/05/96 2,000 2,005 Mountain View/Los Altos, California Unified High School District Tax and Revenue Anticipation Notes Series 1995-96 4.00%, 07/05/96 4,200 4,210 Oxnard, California Unified High School District (Ventura County) Tax and Revenue Anticipation Notes Series 1995-96 3.90%, 10/11/96 5,500 5,535 San Diego County, California Tax and Revenue Anticipation Notes 3.76%, 09/30/96 2,000 2,011 San Francisco, California Unified School District Tax and Revenue Anticipation Notes Series 1995-96 3.89%, 07/25/96 40,000 40,131 Santa Rosa, California High School District Tax and Revenue Anticipation Notes Series 1995-96 3.95%, 09/27/96 10,000 10,057 Sutter County, California Office of Education Tax and Revenue Anticipation Notes Series 1995-96 4.05%, 09/14/96 10,000 10,030 ------- TOTAL TAX AND REVENUE ANTICIPATION NOTES (Cost $289,462) 289,462 ------- TAX-EXEMPT COMMERCIAL PAPER--20.3%(b) California Pollution Control Financing Authority Pollution Control Revenue Bonds (Pacific Gas & Electric) Series 1988A/ (Swiss Bank LOC) 3.75%, 01/11/96 6,200 6,200 3.75%, 02/07/96 5,000 5,000 3.65%, 02/08/96 3,975 3,975 California Pollution Control Financing Authority Pollution Control Revenue Bonds (Pacific Gas & Electric) Series 1988B/ (Sumitomo Bank LOC) 3.65%, 02/08/96 58,700 58,700 3.60%, 03/07/96 17,600 17,600
F-37 77 SchwabFunds(R) 38 - -------------------------------------------------------------------------------- SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND SCHEDULE OF INVESTMENTS (in thousands) December 31, 1995 - --------------------------------------------------------------------------------
Par Value ------- ---------- California Pollution Control Financing Authority Pollution Control Revenue Bonds (Pacific Gas & Electric) Series 1988C/ (Credit Suisse LOC) 3.70%, 01/10/96 $ 5,500 $ 5,500 3.75%, 02/07/96 1,000 1,000 3.70%, 02/07/96 6,800 6,800 California Pollution Control Financing Authority Pollution Control Revenue Bonds (Pacific Gas & Electric) Series 1988D/ (Bank of Tokyo LOC) 3.95%, 01/10/96 4,350 4,350 3.60%, 02/08/96 3,495 3,495 California Pollution Control Financing Authority Pollution Control Revenue Bonds (Pacific Gas & Electric) Series 1988F/ (Banque Nationale de Paris LOC) 4.25%, 01/09/96 10,000 10,000 California Pollution Control Financing Authority Pollution Control Revenue Bonds (Southern California Edison) Series 1985A 3.65%, 02/07/96 900 900 3.65%, 02/08/96 12,000 12,000 California Pollution Control Financing Authority Pollution Control Revenue Bonds (Southern California Edison) Series 1985B 3.65%, 02/07/96 800 800 3.65%, 02/08/96 14,000 14,000 California Pollution Control Financing Authority Solid Waste Disposal Revenue Bonds (Thermal Energy Development LP) Series 1988A/(National Westminster Bank LOC) 3.55%, 02/08/96 35,000 35,000 East Bay Municipal Utility District, California (Wastewater Systems) Tax-Exempt Commercial Paper/(National Westminster Bank LOC) 3.65%, 01/12/96 10,700 10,700 Long Beach, California Harbor Revenue Commercial Paper Notes Series 1994A/(Multiple Credit Enhancements) 3.50%, 02/06/96 20,000 20,000 3.45%, 02/09/96 4,000 4,000 Los Angeles County, California Department of Water and Power Electric Plant Short Term Revenue Bonds 3.65%, 01/12/96 7,000 7,000 Los Angeles County, California Transportation Commission Second Subordinate Sales Tax Revenue Bonds Series A/(Multiple Credit Enhancements) 3.75%, 01/11/96 6,100 6,100 Los Angeles, California Wastewater System Tax- Exempt Commercial Paper 3.65%, 01/12/96 10,000 10,000 Metropolitan Water District of Southern California Tax-Exempt Commercial Paper 3.75%, 02/21/96 10,000 10,000 Orange County, California Local Transportation Authority Sales Tax Revenue Commercial Paper Notes/ (Industrial Bank of Japan LOC) 3.75%, 01/11/96 8,000 8,000 3.70%, 01/11/96 3,000 3,000 3.65%, 02/08/96 52,200 52,200 Sacramento, California Municipal Utility District Tax-Exempt Commercial Paper Series I/ (Bank of America & Morgan Guaranty Trust LOC) 3.75%, 02/08/96 2,133 2,133 West and Central Basin Financing Authority West Basin Municipal Water District Tax-Exempt Commercial Paper Notes/ (Toronto-Dominion Bank LOC) 3.75%, 01/24/96 7,500 7,500 3.50%, 02/09/96 14,000 14,000 -------- TOTAL TAX-EXEMPT COMMERCIAL PAPER (Cost $339,953) 339,953 ------- TOTAL INVESTMENTS--100.0% (Cost $1,674,011) $1,674,011 =========
See accompanying Notes to Schedules of Investments. F-38 78 SchwabFunds(R) 39 - -------------------------------------------------------------------------------- SCHWAB NEW YORK TAX-EXEMPT MONEY FUND SCHEDULE OF INVESTMENTS (in thousands) December 31, 1995 - --------------------------------------------------------------------------------
Par Value ------ -------- VARIABLE RATE OBLIGATIONS--59.9%(a) Albany, New York Industrial Development Agency Adjustable Revenue Bonds (Newkirk Products, Inc.) Series 1995A/ (Fleet Bank of New York LOC) 5.15%, 01/04/96 $1,000 $1,000 Babylon, New York Variable Rate General Obligation Bonds Series B/(Bank of Nova Scotia SBPA & AMBAC Insurance) 4.90%, 01/07/96 2,000 2,000 Cortland County, New York Industrial Development Agency Revenue Bonds (General Signal Corp. Project) Series 1983/ (Wachovia Bank LOC) 4.85%, 01/07/96 1,750 1,750 Erie County, New York Water Authority Revenue Bonds Series 1993B/ Industrial Bank of Japan SBPA & AMBAC Insurance) 5.10%, 01/07/96 1,400 1,400 Franklin County, New York Industrial Development Agency Revenue Bonds (Kes Chateaugay LP Project) Series A/ (Bank of Tokyo LOC) 5.20%, 01/07/96 3,000 3,000 Geneva, New York Industrial Development Agency Civic Facility Revenue Bonds (Colleges of The Seneca) Series 1993A/ (Sumitomo Bank LOC) 5.10%, 01/07/96 2,500 2,500 Monroe County, New York Industrial Development Agency Revenue Bonds (ENBI Corp. Lease Rent Project) Series 1988/ (ABN-AMRO Bank LOC) 4.95%, 01/07/96 2,000 2,000 New Rochelle, New York Industrial Development Authority Revenue Bonds (Chas Sadek Import Corp.)/ (Bank of New York LOC) 5.15%, 01/07/96 5,500 5,500 New York City, New York General Obligation Bonds Series 1992B/ (FGIC Insurance) 5.00%, 01/01/96 100 100 New York City, New York General Obligation Bonds Series 1993 Subseries A-8B/ (Sanwa Bank LOC) 5.95%, 01/01/96 385 385 New York City, New York General Obligation Bonds Series 1993 Subseries B-4/(Union Bank of Switzerland LOC) 5.00%, 01/01/96 1,000 1,000 New York City, New York General Obligation Bonds Series 1994 Subseries B-4/(Union Bank of Switzerland LOC) 5.00%, 01/07/96 700 700 New York City, New York General Obligation Bonds Series 1994B Subseries B-4/ (MBIA Insurance & National Westminster Bank SBPA) 5.90%, 01/01/96 100 100 New York City, New York General Obligation Bonds Series 1995B Subseries B-2/ (Bank Austria AG SBPA & MBIA Insurance) 5.90%, 01/01/96 1,900 1,900 New York City, New York Housing Development Corp. Mortgage Revenue Multi Family Housing Revenue Bonds (Columbus Gardens Project) Series 1993A/ (Citibank LOC) 4.75%, 01/07/96 3,500 3,500 New York City, New York Housing Development Corp. Variable Rate Demand Special Obligation Revenue Bonds (East 96th Street Project) Series 1990A/ (Mitsubishi Bank LOC) 5.10%, 01/07/96 9,700 9,700 New York City, New York Industrial Development Agency Floating Rate Revenue Bonds (White Plains Auto)/ (Societe Generale LOC) 5.15%, 01/07/96 300 300
F-39 79 SchwabFunds(R) 40 - -------------------------------------------------------------------------------- SCHWAB NEW YORK TAX-EXEMPT MONEY FUND SCHEDULE OF INVESTMENTS (in thousands) December 31, 1995 - --------------------------------------------------------------------------------
Par Value ------ -------- New York City, New York Municipal Water Finance Authority Water & Sewer System Revenue Bonds Series 1994C/ (FGIC Insurance) 5.90%, 01/01/96 $1,200 $1,200 New York City, New York Municipal Water Finance Authority Water & Sewer System Revenue Bonds Series 1994G/ (FGIC SPA & FGIC Insurance) 5.90%, 01/01/96 2,100 2,100 New York City, New York Municipal Water Finance Authority Water and Sewer System Revenue Bonds Series 1995A/ (FGIC Insurance) 5.50%, 01/01/96 2,000 2,000 New York City, New York Various Rate General Obligation Bonds Series 1995B1 Subseries B-8/ (Mitsubishi Bank LOC) 5.35%, 01/07/96 700 700 New York State Dormitory Authority Revenue Bonds (Masonic Hall Asylum)/ (AMBAC Insurance & Credit Local de France SBPA) 4.90%, 01/07/96 7,000 7,000 New York State Energy Research & Development Authority Electric Facilities Adjustable Rate Revenue Bonds (Long Island Lighting Co. Project) Series 1993A/ (Toronto-Dominion Bank LOC) 5.00%, 01/07/96 2,000 2,000 New York State Energy Research & Development Authority Electric Facilities Adjustable Rate Revenue Bonds (Long Island Lighting Co. Project) Series 1993B/ (Toronto-Dominion Bank LOC) 5.05%, 01/07/96 6,000 6,000 New York State Energy Research & Development Authority Pollution Control Refunding Revenue Bonds (Orange & Rockland Utilities, Inc. Project) Series 1994A/ (FGIC Insurance & Societe Generale SBPA) 4.90%, 01/07/96 9,100 9,100 New York State Energy Research & Development Authority Pollution Control Refunding Revenue Bonds/ (Union Bank of Switzerland LOC) 5.30%, 01/07/96 1,900 1,900 New York State Energy Research & Development Authority Pollution Control Revenue Bonds (Central Hudson Gas & Electric Corp. Project) Series 1985A/ (J. P. Morgan Delaware LOC) 5.00%, 01/07/96 4,300 4,300 New York State Housing Finance Agency Revenue Bonds (East 84th Street Project) Series 1995A/ (Fleet Bank of New York LOC) 5.10%, 01/07/96 5,000 5,000 New York State Housing Finance Agency Variable Rate Housing Revenue Bonds (Hospital Special Surgery Staff) Series 1985A/ (Sakura Bank LOC) 4.70%, 01/07/96 6,700 6,700 New York State Housing Finance Agency Variable Rate Multi Family Housing Revenue Bonds (Normandie Court II) Series 1987A/ (Bankers Trust Co. LOC) 4.95%, 01/07/96 2,900 2,900 New York State Housing Finance Agency Variable Rate Revenue Bonds (Mount Sinai School of Medicine) Series 1984A/ (Sanwa Bank LOC) 4.70%, 01/07/96 5,900 5,900 New York State Local Government Assistance Corp. Revenue Bonds Series 1994B/ (Credit Suisse & Swiss Bank LOC) 4.95%, 01/07/96 6,900 6,900 New York State Local Government Assistance Corp. Revenue Bonds Series 1995F/(Toronto- Dominion Bank LOC) 5.05%, 01/07/96 1,900 1,900 New York State Local Government Assistance Corp. Revenue Bonds Series 1995G/(National Westminster Bank LOC) 4.90%, 01/07/96 1,100 1,100
F-40 80 SchwabFunds(R) 41 - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Par Value ------ -------- Niagara County, New York Industrial Development Agency Revenue Bonds (Allegheny Ludlum Steel Company) Series 1984/ (PNC Bank LOC) 5.00%, 01/07/96 $3,500 $3,500 Niagara Falls, New York Bridge Commission Revenue Bonds Series 1993A/ (FGIC Insurance & Industrial Bank of Japan SBPA) 5.10%, 01/07/96 3,400 3,400 Port Authority, New York and New Jersey Special Obligation Revenue Bonds Series 1993/ (Deutsche Bank LOC) 5.10%, 01/07/96 4,000 4,000 Puerto Rico--Puerto Rico Government Development Bank Revenue Refunding Bonds Series 1985/ (Credit Suisse LOC) 4.50%, 01/07/96 5,000 5,000 Schenectady, New York Industrial Development Agency Industrial Development Revenue Bonds (Fortitech Holding Corp. Project) Series A/ (Fleet Bank of New York LOC) 5.15%, 01/07/96 1,500 1,500 St. Lawrence County, New York Industrial Development Agency Environmental Improvement Revenue Bonds (Reynolds Metals Project) Series 1995/ (Royal Bank of Canada LOC) 5.00%, 01/07/96 4,000 4,000 Triborough Bridge and Tunnel Authority, New York Special Obligation Bridge Revenue Bonds Series 1994/ (FGIC SPA & FGIC Insurance) 4.90%, 01/07/96 2,700 2,700 Yonkers, New York Industrial Development Agency Civic Facilities Revenue Bonds (Consumers Union Facility Project) Series 1989/ (Industrial Bank of Japan LOC) 5.30%, 01/07/96 1,500 1,500 Yonkers, New York Industrial Development Agency Civic Facilities Revenue Bonds (Consumers Union Facility Project) Series 1991/ (Industrial Bank of Japan LOC) 5.30%, 01/07/96 700 700 Yonkers, New York Industrial Development Agency Civic Facilities Revenue Bonds (Consumers Union Facility Project) Series 1994/ (AMBAC Insurance & Credit Local de France SBPA) 4.95%, 01/07/96 1,100 1,100 ------- TOTAL VARIABLE RATE OBLIGATIONS (Cost $130,935) 130,935 ------- VARIABLE RATE TENDER OPTION BONDS--1.9%(a) New York City, New York General Obligation Bonds (Citi-1I)/(AMBAC Insurance, Escrowed to Maturity with Government Securities & Citibank Tender Option) 5.29%, 01/07/96 4,100 4,100 ------- TOTAL VARIABLE RATE TENDER OPTION BONDS (Cost $4,100) 4,100 ------- VARIABLE RATE TENDER OPTION BOND PARTNERSHIPS--2.5%(a)(c) New York State Dormitory Authority, New York University Insured Revenue Bonds (BTP-26)/(Automatic Data Processing, Inc. Tender Option & MBIA Insurance) 4.11%, 01/07/96 5,375 5,375 ------- TOTAL VARIABLE RATE TENDER OPTION BOND PARTNERSHIPS (Cost $5,375) 5,375 ------- BOND ANTICIPATION NOTES--8.1%(b) Broome County, New York Bond Anticipation Notes Series 1995-96 4.33%, 04/19/96 3,812 3,819 3.77%, 04/19/96 3,000 3,010 Dutchess County, New York Bond Anticipation Notes Series 1995-96 3.75%, 08/02/96 2,825 2,833 Rochester, New York General Obligation Bond Anticipation Notes Series 1995I 3.80%, 10/31/96 5,000 5,018 Schenectady, New York General Obligation Bond Anticipation Notes Series 1995 4.63%, 02/16/96 3,068 3,070 ------- TOTAL BOND ANTICIPATION NOTES (Cost $17,750) 17,750 -------
F-41 81 SchwabFunds(R) 42 - -------------------------------------------------------------------------------- SCHWAB NEW YORK TAX-EXEMPT MONEY FUND SCHEDULE OF INVESTMENTS (in thousands) December 31, 1995 - --------------------------------------------------------------------------------
Par Value ------ -------- GENERAL OBLIGATIONS--0.8%(b) Buffalo, New York General Obligation Revenue Bonds/ (MBIA Insurance) 3.50%, 12/01/96 $1,824 $ 1,832 ------ TOTAL GENERAL OBLIGATIONS (Cost $1,832) 1,832 ------ REVENUE BONDS--4.9%(b) New York State Power Authority Revenue and General Purpose Bonds Series 1993C 3.32%, 01/01/97 1,600 1,600 New York State Urban Development Corp. Correctional Facilities Revenue Bonds/ (Escrowed to Maturity with Government Securities) 4.80%, 01/01/96 7,000 7,140 Triborough Bridge and Tunnel Authority, New York General Purpose Revenue Bonds Series 1986-1/ (Escrowed to Maturity with Government Securities) 4.07%, 01/01/96 1,000 1,020 Triborough Bridge and Tunnel Authority, New York General Purpose Revenue Bonds Series I/(Escrowed to Maturity with Government Securities) 4.45%, 01/01/96 1,000 1,020 ------ TOTAL REVENUE BONDS (Cost $10,780) 10,780 ------ TAX ANTICIPATION NOTES--15.3%(b) East Hampton, New York Unified Free School District Tax Anticipation Notes Series 1995-1996 3.76%, 06/28/96 5,000 5,004 Half Hollow Hills Huntington- Babylon, New York Centralized School District Suffolk County Tax and Revenue Anticipation Notes 3.70%, 06/28/96 5,800 5,815 New York City, New York Tax Anticipation Notes Series 1995-1996A 3.80%, 02/15/96 3,000 3,003 3.70%, 02/15/96 5,000 5,005 South Huntington, New York Unified Free School District Tax Anticipation Notes Series 1995-1996 3.78%, 06/28/96 5,000 5,010 3.60%, 06/28/96 2,500 2,508 West Islip, New York Unified Free School District General Obligation Tax Anticipation Notes Series 1995 4.00%, 06/27/96 5,000 5,018 3.40%, 06/27/96 2,000 2,013 ------- TOTAL TAX ANTICIPATION NOTES (Cost $33,376) 33,376 ------- TAX-EXEMPT COMMERCIAL PAPER--6.6%(b) New York City, New York General Obligation Bonds Fiscal 1994 Series H-4/ (AMBAC Insurance & Kredietbank, N.V. SBPA) 3.75%, 02/15/96 1,500 1,500 New York City, New York Municipal Water Finance Authority/ (Credit Suisse LOC) 3.75%, 02/08/96 7,000 7,000 New York State Dormitory Authority Revenue Bonds (Memorial Sloan Kettering Project) Series 1989C/ (Chemical Bank LOC) 3.75%, 02/08/96 6,000 6,000 ------- TOTAL TAX-EXEMPT COMMERCIAL PAPER (Cost $14,500) 14,500 ------- TOTAL INVESTMENTS--100.0% (Cost $218,648) $218,648 =======
See accompanying Notes to Financial Statements. F-42 82 SchwabFunds(R) 43 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- NOTES TO SCHEDULES OF INVESTMENTS. For each security, cost (for financial reporting and federal income tax purposes) and carrying value are the same. (a) Variable rate securities. Interest rates vary periodically based on current market rates. Rates shown are the effective rates on December 31, 1995. Dates shown represent the latter of the demand date or next interest rate change date, which is considered the maturity date for financial reporting purposes. For variable rate securities without demand features, the next interest reset date is shown. (b) Interest rates represent effective yield to put or call date at time of purchase. (c) Certain securities purchased by the Funds are private placement securities exempt from registration by Section 4(2) of the Securities Act of 1933. These securities generally are issued to institutional investors, such as the Schwab Tax-Exempt Money Fund, the Schwab California Tax-Exempt Money Fund and the Schwab New York Tax-Exempt Money Fund. Any resale by the Funds must be in an exempt transaction, normally to a qualified institutional buyer. At December 31, 1995, the aggregate value of private placement securities held by the Schwab Tax-Exempt Money Fund, the Schwab California Tax-Exempt Money Fund and the Schwab New York Tax-Exempt Money Fund were $139,017,000, $91,038,000 and $5,375,000, respectively, which represented 3.90%, 5.40% and 2.44%, respectively, of the net assets of each Fund. All of these private placement securities were determined by the Investment Manager to be liquid in accordance with procedures adopted by the Board of Trustees. (d) Security traded on a delayed-delivery basis. Payment and delivery is scheduled for a future time, generally within two weeks of entering into the transaction. The transaction is subject to market fluctuation and to the risk that the value may be more or less than the purchase price when the transaction was initiated. The Fund has set aside sufficient investment securities as collateral for securities purchased on a delayed-delivery basis. Abbreviations ------------------- AMBAC AMBAC Indemnity Corporation FGIC Financial Guaranty Insurance Company FHLB Federal Home Loan Bank FNB First National Bank FNMA Federal National Mortgage Association FSA Financial Security Assurance GNMA Government National Mortgage Association LOC Letter of Credit MBIA Municipal Bond Investors Assurance Corporation N.R.U.-C.F.C. National Rural Utilities Cooperative Financing Corporation SBPA Standby Purchase Agreement SLMA Student Loan Marketing Association SPA Securities Purchase Agreement
See accompanying Notes to Financial Statements. F-43 83 SchwabFunds(R) 44 - -------------------------------------------------------------------------------- SCHWAB TAX-EXEMPT MONEY FUND, SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND & SCHWAB NEW YORK TAX-EXEMPT MONEY FUND STATEMENTS OF ASSETS AND LIABILITIES (in thousands) December 31, 1995 - --------------------------------------------------------------------------------
Schwab Schwab Schwab California New York Tax-Exempt Tax-Exempt Tax-Exempt Money Money Money Fund Fund Fund ----------- ----------- ----------- ASSETS Investments, at value (Cost: $3,586,104, $1,674,011 and $218,648, respectively) $3,586,104 $1,674,011 $ 218,648 Cash 166 38 39 Interest receivable 30,491 14,817 2,232 Receivable for fund shares sold 2,940 4,914 250 Receivable from adviser -- -- 4 Deferred organization costs -- -- 23 Prepaid expenses 551 162 3 ---------- ---------- -------- Total assets 3,620,252 1,693,942 221,199 ---------- ---------- -------- LIABILITIES Payable for: Dividends 15,284 6,832 899 Fund shares redeemed 670 485 120 Investments purchased 37,735 -- -- Investment advisory and administration fee 603 267 37 Transfer agency and shareholder service fees 1,157 536 68 Other 284 119 69 ---------- ---------- -------- Total liabilities 55,733 8,239 1,193 ---------- ---------- -------- Net assets applicable to outstanding shares $3,564,519 $1,685,703 $ 220,006 ========== ========== ======== NET ASSETS CONSIST OF: Capital paid in $3,566,367 $1,686,367 $ 220,012 Accumulated net realized loss on investments sold (1,848) (664) (6) ---------- ---------- -------- $3,564,519 $1,685,703 $ 220,006 ========== ========== ======== THE PRICING OF SHARES 3,405,684, 1,578,359 and 204,869, respectively, outstanding Sweep Shares and 160,683, 108,008 and 15,143, respectively, outstanding Value Advantage Shares, $0.00001 par value (unlimited shares authorized) 3,566,367 1,686,367 220,012 Net asset value, offering and redemption price per each Sweep Share and Value Advantage Share $1.00 $1.00 $1.00
See accompanying Notes to Financial Statements. F-44 84 SchwabFunds(R) 45 - -------------------------------------------------------------------------------- SCHWAB TAX-EXEMPT MONEY FUND, SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND & SCHWAB NEW YORK TAX-EXEMPT MONEY FUND STATEMENTS OF OPERATIONS (in thousands) For the year ended December 31, 1995 - --------------------------------------------------------------------------------
Schwab Schwab Schwab California New York Tax-Exempt Tax-Exempt Tax-Exempt Money Money Money Fund Fund Fund* ----------- ----------- ----------- Interest income $ 127,090 $55,134 $ 6,178 -------- ------- ------ Expenses: Investment advisory and administration fee 13,694 6,445 741 Transfer agency and shareholder service fees: Sweep Shares 14,432 6,469 708 Value Advantage Shares 103 31 9 Custodian fees 380 244 60 Registration fees 400 207 120 Professional fees 187 103 26 Shareholder reports 296 64 28 Trustees' fees 21 9 1 Amortization of deferred organization costs and other prepaid expenses 76 50 4 Insurance and other expenses 139 75 4 -------- ------- ------ 29,728 13,697 1,701 Less expenses reduced and absorbed (8,375) (4,297) (690) -------- ------- ------ Total expenses incurred by Fund 21,353 9,400 1,011 -------- ------- ------ Net investment income 105,737 45,734 5,167 Net realized gain (loss) on investments sold (21) 8 (6) -------- ------- ------ Increase in net assets resulting from operations $ 105,716 $45,742 $ 5,161 ======== ======= ======
* For the period February 27, 1995 (commencement of operations) to December 31, 1995. See accompanying Notes to Financial Statements. F-45 85 SchwabFunds(R) 46 - -------------------------------------------------------------------------------- SCHWAB TAX-EXEMPT MONEY FUND, SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND & SCHWAB NEW YORK TAX-EXEMPT MONEY FUND STATEMENTS OF CHANGES IN NET ASSETS (in thousands) - --------------------------------------------------------------------------------
Schwab Schwab Schwab California New York Tax-Exempt Tax-Exempt Tax-Exempt Money Fund Money Fund Money Fund -------------------------- -------------------------- ------------ For the period ended \-------------For the year ended December 31,------------\ December 31, 1995 1994 1995 1994 1995* ----------- ----------- ----------- ----------- ------------ Operations: Net investment income $ 105,737 $ 65,678 $ 45,734 $ 27,608 $ 5,167 Net realized gain (loss) on investments sold (21) (1,586) 8 (600) (6) ---------- ----------- ----------- ----------- ----------- Increase in net assets resulting from operations 105,716 64,092 45,742 27,008 5,161 ---------- ----------- ----------- ----------- ----------- Dividends to shareholders from net investment income: Sweep Shares (104,288) (65,678) (45,302) (27,608) (5,046) Value Advantage Shares (1,449) -- (432) -- (121) ---------- ----------- ----------- ----------- ----------- Total dividends to shareholders (105,737) (65,678) (45,734) (27,608) (5,167) ---------- ----------- ----------- ----------- ----------- Capital share transactions (dollar amounts and number of shares are the same): Proceeds from shares sold 10,148,323 8,184,151 4,383,313 3,435,641 692,976 Net asset value of shares issued in reinvestment of dividends 100,567 57,664 43,226 24,116 4,181 Less payments for shares redeemed (9,700,301) (7,647,595) (4,034,727) (3,227,316) (477,145) ---------- ----------- ----------- ----------- ----------- Increase in net assets from capital share transactions 548,589 594,220 391,812 232,441 220,012 ---------- ----------- ----------- ----------- ----------- Total increase in net assets 548,568 592,634 391,820 231,841 220,006 Net Assets: Beginning of period 3,015,951 2,423,317 1,293,883 1,062,042 -- ---------- ----------- ----------- ----------- ----------- End of period $ 3,564,519 $ 3,015,951 $ 1,685,703 $ 1,293,883 $ 220,006 ========== =========== =========== =========== ===========
* For the period February 27, 1995 (commencement of operations) to December 31, 1995. See accompanying Notes to Financial Statements. F-46 86 SchwabFunds(R) 47 - -------------------------------------------------------------------------------- SCHWAB TAX-EXEMPT MONEY FUND, SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND & SCHWAB NEW YORK TAX-EXEMPT MONEY FUND NOTES TO FINANCIAL STATEMENTS For the year ended December 31, 1995 - -------------------------------------------------------------------------------- 1. DESCRIPTION OF THE FUND The Schwab Tax-Exempt Money Fund, the Schwab California Tax-Exempt Money Fund and the Schwab New York Tax-Exempt Money Fund (the "Funds") are series of The Charles Schwab Family of Funds (the "Trust"), an open-end, management investment company organized as a Massachusetts business trust on October 20, 1989 and registered under the Investment Company Act of 1940, as amended. The Schwab New York Tax-Exempt Money Fund commenced operations on February 27, 1995. The Board of Trustees of the Trust adopted a multiple class plan for the Funds on May 9, 1995. Commencing July 7, 1995, with respect to the Schwab Tax-Exempt Money Fund and Schwab New York Tax-Exempt Money Fund and October 3, 1995, with respect to the Schwab California Tax-Exempt Money Fund, the Funds began offering more than one class of shares. Pursuant to the plan, the existing shares were redesignated as Sweep Shares ("Sweep Shares"), and a new class of shares was added -- the Value Advantage Shares ("Value Advantage Shares"). Both classes represent interests in the same portfolio of investments of the respective Fund and are substantially the same in all respects except that the classes are subject to different transfer agency and shareholder service fees (see Note 3), investment minimums and certain other expenses. In addition to the three Funds described above, the Trust also offers -- the Schwab Money Market Fund, the Schwab Government Money Fund, the Schwab U.S. Treasury Money Fund, the Schwab Value Advantage Money Fund(R), the Schwab Institutional Advantage Money Fund(TM) and the Schwab Retirement Money Fund(R). The assets of each series are segregated and accounted for separately. The Schwab Tax-Exempt Money Fund invests in a diversified portfolio of short-term high quality municipal securities. The Schwab California Tax-Exempt Money Fund, which is not "diversified" within the meaning of the Investment Company Act of 1940, as amended, invests in a portfolio of debt obligations issued by or on behalf of California and other states, territories and possessions of the United States and the District of Columbia and their political subdivisions, agencies and instrumentalities that generate interest exempt from federal income tax and State of California personal income tax. The Schwab New York Tax-Exempt Money Fund, which is not "diversified" within the meaning of the Investment Company Act of 1940, as amended, invests in a portfolio of debt obligations issued by or on behalf of New York and other states, territories and possessions of the United States and the District of Columbia and their political subdivisions, agencies and instrumentalities that generate interest exempt from federal income tax and State of New York and New York municipal personal income tax. F-47 87 SchwabFunds(R) 48 - -------------------------------------------------------------------------------- SCHWAB TAX-EXEMPT MONEY FUND, SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND & SCHWAB NEW YORK TAX-EXEMPT MONEY FUND NOTES TO FINANCIAL STATEMENTS For the year ended December 31, 1995 - -------------------------------------------------------------------------------- 2. SIGNIFICANT ACCOUNTING POLICIES The following significant accounting policies are in conformity with generally accepted accounting principles for investment companies. The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. Security valuation -- Investments are stated at amortized cost which approximates market value. Security transactions -- Security transactions are accounted for on a trade date basis (date the order to buy or sell is executed). Dividends to shareholders -- Each Fund declares a daily dividend, equal to its net investment income for that day, payable monthly. Dividends paid by a Fund with respect to each class of shares are calculated in the same manner, at the same time, and will be in the same amount except for the effect of expenses that may be applied differently, as described below. Deferred organization costs -- Costs incurred in connection with the organization of the Funds and their initial registration with the Securities and Exchange Commission and with various states are amortized on a straight-line basis over a five-year period from each Fund's commencement of operations. Expenses -- Expenses arising in connection with a Fund are charged directly to that Fund. Expenses common to all series of the Trust are allocated to each series in proportion to their relative net assets. Expenses attributable to both classes of shares of a Fund are allocated daily to each class of that Fund based on the value of settled shares outstanding of each respective class. Transfer agency, shareholder service fees and certain other expenses which are class specific, are calculated daily at the class level. Interest income and realized gains (losses) -- Interest income is recorded on the accrual basis and includes amortization of premium on investments. Realized gains and losses from security transactions are determined on an identified cost basis. Income and realized gains (losses) are allocated daily to each class of shares of a Fund based on the value of settled shares outstanding of each respective class. Federal income taxes -- It is each Fund's policy to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its net investment income and realized net capital gains, if any, to shareholders. Therefore, no federal income tax provision is required. Each Fund is considered a separate entity for tax purposes. F-48 88 SchwabFunds(R) 49 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 3. TRANSACTIONS WITH AFFILIATES Investment advisory and administration agreements -- The Trust has investment advisory and administration agreements with Charles Schwab Investment Management, Inc. (the "Investment Manager"). For advisory services and facilities furnished, each Fund pays an annual fee, payable monthly, of .46% of the first $1 billion of average daily net assets, .41% of such assets over $1 billion, and .40% of such assets in excess of $2 billion. Under these agreements, the Schwab Tax-Exempt Money Fund, the Schwab California Tax-Exempt Money Fund and the Schwab New York Tax-Exempt Money Fund incurred investment advisory and administration fees of $13,694,000, $6,445,000, and $741,000, respectively, for the period ended December 31, 1995, before the Investment Manager reduced its fee (see Note 4). Transfer agency and shareholder service agreements -- The Trust has transfer agency and shareholder service agreements with Charles Schwab & Co., Inc. ("Schwab"). For services provided under these agreements, Schwab receives an annual fee, payable monthly, of .45% and .25% of each Fund's average daily net assets of the Sweep Shares and Value Advantage Shares, respectively. For the period ended December 31, 1995, the Schwab Tax-Exempt Money Fund, the Schwab California Tax-Exempt Money Fund and the Schwab New York Tax-Exempt Money Fund incurred transfer agency and shareholder service fees of $14,432,000, $6,469,000 and $708,000, respectively, for the Sweep Shares and $103,000, $31,000, and $9,000, respectively, for the Value Advantage Shares, before Schwab reduced its fees (see Note 4). Officers and trustees -- Certain officers and trustees of the Trust are also officers or directors of the Investment Manager and/or Schwab. During the period ended December 31, 1995, the Trust made no direct payments to its officers or trustees who are "interested persons" within the meaning of the Investment Company Act of 1940, as amended. The Schwab Tax-Exempt Money Fund, the Schwab California Tax-Exempt Money Fund and the Schwab New York Tax-Exempt Money Fund incurred fees of $21,000, $9,000 and $1,000, respectively, related to the Trust's unaffiliated trustees. 4. EXPENSES REDUCED AND ABSORBED BY THE INVESTMENT MANAGER AND SCHWAB The Investment Manager and Schwab reduced a portion of their fees and absorbed certain expenses in order to limit the ratio of operating expenses to average net assets for each Fund. For the period ended December 31, 1995, the total of such fees reduced and absorbed by the Investment Manager was $7,229,000, $3,707,000 and $302,000 for the Schwab Tax-Exempt Money Fund, the Schwab California Tax-Exempt Money Fund and the Schwab New York Tax-Exempt Money Fund, respectively, and the total of such fees reduced by Schwab was $1,146,000, $590,000 and $388,000 for the Schwab Tax-Exempt Money Fund, the Schwab California Tax-Exempt Money Fund and the Schwab New York Tax-Exempt Money Fund, respectively. F-49 89 SchwabFunds(R) 50 - -------------------------------------------------------------------------------- SCHWAB TAX-EXEMPT MONEY FUND, SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND & SCHWAB NEW YORK TAX-EXEMPT MONEY FUND NOTES TO FINANCIAL STATEMENTS For the year ended December 31, 1995 - -------------------------------------------------------------------------------- 5. INVESTMENT TRANSACTIONS Purchases, sales and maturities of investment securities during the period ended December 31, 1995, were as follows (in thousands):
Schwab Schwab Schwab California New York Tax-Exempt Tax-Exempt Tax-Exempt Money Fund Money Fund Money Fund ---------- ---------- ---------- Purchases $6,419,657 $3,297,957 $527,752 Proceeds of sales and maturities $5,869,911 $2,925,680 $308,751
6. CAPITAL SHARE TRANSACTIONS Each Fund offers two classes of shares: Sweep Shares and Value Advantage Shares. Shares of each class represent interests in the same portfolio of investments of the respective Fund. Transactions in capital shares were as follows (in thousands):
Schwab Schwab New Schwab California York Tax-Exempt Tax-Exempt Tax-Exempt Money Fund Money Fund Money Fund -------------------------- -------------------------- ------------- Period ended \----------------Year ended December 31,----------------\ December 31, 1995 1 1994 1995 2 1994 1995 3 ----------- ----------- ----------- ----------- ------------- Proceeds from shares sold: Sweep Shares $ 9,911,852 $ 8,184,151 $ 4,257,465 $ 3,435,641 $ 671,692 Value Advantage Shares 236,471 -- 125,848 -- 21,284 ----------- ----------- ----------- ----------- --------- Total proceeds from shares sold 10,148,323 8,184,151 4,383,313 3,435,641 692,976 Net asset value of shares issued in reinvestment of dividends: Sweep Shares 99,813 57,664 43,152 24,116 4,126 Value Advantage Shares 754 -- 74 -- 55 ----------- ----------- ----------- ----------- --------- Total net asset value of shares issued in reinvestment of dividends 100,567 57,664 43,226 24,116 4,181 Less payments for shares redeemed: Sweep Shares (9,623,759) (7,647,595) (4,016,813) (3,227,316) (470,949) Value Advantage Shares (76,542) -- (17,914) -- (6,196) ----------- ----------- ----------- ----------- --------- Total payments for shares redeemed (9,700,301) (7,647,595) (4,034,727) (3,227,316) (477,145) ----------- ----------- ----------- ----------- --------- Total increase in net assets from capital share transactions $ 548,589 $ 594,220 $ 391,812 $ 232,441 $ 220,012 ----------- ----------- ----------- ----------- ---------
1 The Value Advantage Shares commenced operations on July 7, 1995. 2 The Value Advantage Shares commenced operations on October 3, 1995. 3 The Value Advantage Shares commenced operations on July 7, 1995 and the Sweep Shares commenced operations on February 27, 1995. F-50 90 SchwabFunds(R) 51 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 7. FINANCIAL HIGHLIGHTS Per share income and capital changes for a share outstanding throughout the period:
Schwab Tax-Exempt Money Fund --------------------------------------------------------------------------------- Value Advantage Shares Sweep Shares ------------ ------------------------------------------------------------------ For the period ended December 31, \-----------------For the year ended December 31,----------------\ 1995(1) 1995 1994 1993 1992 1991 ---------- ------------------------------------------------------------------ Net asset value at beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 Income from investment - ---------------------- operations ---------- Net investment income .02 .03 .02 .02 .03 .04 Net realized and unrealized gain (loss) on investments -- -- -- -- -- -- -------- ---------- ---------- ---------- ---------- ---------- Total from investment operations .02 .03 .02 .02 .03 .04 Less distributions - ------------------ Dividends from net investment income (.02) (.03) (.02) (.02) (.03) (.04) Distributions from realized gain on investments -- -- -- -- -- -- -------- ---------- ---------- ---------- ---------- ---------- Total distributions (.02) (.03) (.02) (.02) (.03) (.04) -------- ---------- ---------- ---------- ---------- ---------- Net asset value at end of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 ======== ========== ========== ========== ========== ========== Total return (%) 1.68 3.30 2.32 1.93 2.49 4.01 - ---------------- Ratios/Supplemental data - ------------------------ Net assets, end of period (000s) $160,682 $3,403,837 $3,015,951 $2,423,317 $1,744,903 $1,359,121 Ratio of expenses to average net assets (%) .45* .66 .65 .63 .63 .63 Ratio of net investment income to average net assets (%) 3.50* 3.25 2.31 1.92 2.45 3.91
The Investment Manager and Schwab have reduced a portion of their fees and absorbed certain expenses in order to limit the Schwab Tax-Exempt Money Fund's ratio of operating expenses to average net assets. Had these fees and expenses not been reduced and absorbed, with respect to the Value Advantage Shares, the ratio of expenses to average net assets and the ratio of net investment income to average net assets for the period ended December 31, 1995 would have been .95%* and 3.00%* respectively. With respect to the Sweep Shares, the ratio of expenses to average net assets for the periods ended December 31, 1995, 1994, 1993, 1992, and 1991 would have been .91%, .91%, .93%, .94% and .95%, respectively, and the ratio of net investment income to average net assets would have been 3.00%, 2.05%, 1.62%, 2.14%, and 3.59%, respectively. (1) For the period July 7, 1995 (commencement of operations) to December 31, 1995. * Annualized F-51 91 SchwabFunds(R) 52 - -------------------------------------------------------------------------------- SCHWAB TAX-EXEMPT MONEY FUND, SCHWAB CALIFORNIA TAX-EXEMPT MONEY FUND & SCHWAB NEW YORK TAX-EXEMPT MONEY FUND NOTES TO FINANCIAL STATEMENTS For the year ended December 31, 1995 - --------------------------------------------------------------------------------
Schwab California Tax-Exempt Money Fund ------------------------------------------------------------------------- Value Advantage Shares Sweep Shares ------------ -------------------------------------------------------------- For the period ended December 31, \---------------For the year ended December 31,--------------\ 1995 1 1995 1994 1993 1992 1991 ---------- -------------------------------------------------------------- Net asset value at beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 Income from investment - ---------------------- operations ---------- Net investment income .01 .03 .02 .02 .02 .04 Net realized and unrealized gain (loss) on investments -- -- -- -- -- -- -------- ---------- ---------- ---------- -------- -------- Total from investment operations .01 .03 .02 .02 .02 .04 Less distributions - ------------------ Dividends from net investment income (.01) (.03) (.02) (.02) (.02) (.04) Distributions from realized gain on investments -- -- -- -- -- -- -------- ---------- ---------- ---------- -------- -------- Total distributions (.01) (.03) (.02) (.02) (.02) (.04) -------- ---------- ---------- ---------- -------- -------- Net asset value at end of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 -------- ---------- ---------- ---------- -------- -------- Total return (%) .84 3.20 2.26 1.91 2.35 3.77 - ---------------- Ratios/Supplemental data - ------------------------ Net assets, end of period (000s) $108,008 $1,577,695 $1,293,883 $1,062,042 $691,176 $494,214 Ratio of expenses to average net assets (%) .45* .65 .64 .63 .63 .61 Ratio of net investment income to average net assets (%) 3.48* 3.15 2.25 1.89 2.31 3.70
The Investment Manager and Schwab have reduced a portion of their fees and absorbed certain expenses in order to limit the Schwab California Tax-Exempt Money Fund's ratio of operating expenses to average net assets. Had these fees and expenses not been reduced and absorbed, with respect to the Value Advantage Shares, the ratio of expenses to average net assets and the ratio of net investment income to average net assets for the period ended December 31, 1995 would have been 1.04%* and 2.89%* respectively. With respect to the Sweep Shares, the ratio of expenses to average net assets for the periods ended December 31, 1995, 1994, 1993, 1992, and 1991 would have been .94%, .94%, .96%, .97%, and .98%, respectively, and the ratio of net investment income to average net assets would have been 2.86%, 1.95%, 1.56%, 1.97%, and 3.33%, respectively. 1 For the period October 3, 1995 (commencement of operations) to December 31, 1995. * Annualized F-52 92 SchwabFunds(R) 53 - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Schwab New York Tax-Exempt Money Fund --------------------------------------------- Value Advantage Shares Sweep Shares -------------------- -------------------- For the period For the period ended ended December 31, 1995 1 December 31, 1995 2 -------------------- -------------------- Net asset value at beginning of period $1.00 $1.00 Income from investment operations - -------------------------------- Net investment income .02 .03 Net realized and unrealized gain (loss) on investments -- -- ------- -------- Total from investment operations .02 .03 Less distributions - ----------------- Dividends from net investment income (.02) (.03) Distributions from realized gain on investments -- -- ------- -------- Total distributions (.02) (.03) ------- -------- Net asset value at end of period $1.00 $1.00 ======= ======== Total return (%) 1.62 2.75 - ---------------- Ratios/Supplemental data - ------------------------ Net assets, end of period (000s) $ 15,143 $204,863 Ratio of expenses to average net assets (%) .45* .63* Ratio of net investment income to average net assets (%) 3.42* 3.20*
The Investment Manager and Schwab have reduced a portion of their fees and absorbed certain expenses in order to limit the Schwab New York Tax-Exempt Money Fund's ratio of operating expenses to average net assets. Had these fees and expenses not been reduced and absorbed, with respect to the Value Advantage Shares, the ratio of expenses to average net assets and the ratio of net investment income to average net assets for the period ended December 31, 1995 would have been 1.81%* and 2.06%* respectively. With respect to the Sweep Shares, the ratio of expenses to average net assets and the ratio of net investment income to average net assets for the period ended December 31, 1995 would have been 1.04%* and 2.79%*, respectively. 1 For the period July 7, 1995 (commencement of operations) to December 31, 1995. 2 For the period February 27, 1995 (commencement of operations) to December 31, 1995. * Annualized F-53 93 SchwabFunds(R) 54 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- To the Board of Trustees and Shareholders of the Schwab Tax-Exempt Money Fund, the Schwab California Tax-Exempt Money Fund and the Schwab New York Tax-Exempt Money Fund In our opinion, the accompanying statements of assets and liabilities, including the schedules of investments, the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the Schwab Tax-Exempt Money Fund, the Schwab California Tax-Exempt Money Fund and the Schwab New York Tax-Exempt Money Fund (three series constituting part of The Charles Schwab Family of Funds, hereafter referred to as the "Trust") at December 31, 1995, and the results of each of their operations, the changes in each of their net assets and the financial highlights for the periods presented, in conformity with generally accepted accounting principles. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Trust's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with generally accepted auditing standards which require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 1995 by correspondence with the custodian and brokers, provide a reasonable basis for the opinion expressed above. /s/ PRICE WATERHOUSE LLP PRICE WATERHOUSE LLP San Francisco, California January 31, 1996 F-54 -----END PRIVACY-ENHANCED MESSAGE-----