-----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, OltWQF91rM6B34ggqxgvrx6R6llITI0tUrtK/hipEDNXYKIjfi2l30GrpSi/rKXs syYpbOFN386UVYahFed9ZQ== 0000950149-97-000500.txt : 19970307 0000950149-97-000500.hdr.sgml : 19970307 ACCESSION NUMBER: 0000950149-97-000500 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970306 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: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-05954 FILM NUMBER: 97551982 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 N-30D 1 SCHWAB MUNICIPAL MONEY FUND - SWEEP SHARES 1 SchwabFunds(R) Schwab Municipal Money Fund-Sweep Shares [Graphic - The Schwab Building, San Francisco, California] Annual Report December 31, 1996 2 Dear Shareholder, It's been an exciting year at SchwabFunds(R). With the support of [Photo of investors like you, the SchwabFunds Family(R) continues to rank Charles R. among the largest and fastest-growing mutual fund complexes in Schwab] the nation. In total, Charles Schwab Investment Management, Inc. (CSIM) manages over $40 billion in assets for approximately 2.5 million shareholders. Today CSIM offers investors 30 funds spanning a spectrum of financial markets and investing styles. You'll find in-depth information on the performance of your SchwabFunds investment in the following pages. SMART NEW WAYS TO DIVERSIFY YOUR PORTFOLIO Now more than ever, investors tell us they're looking for new ways to diversify their portfolios in order to manage risk and enhance return potential. But with literally thousands of mutual funds to choose from, analyzing and selecting funds can be an overwhelming task. That's why we've introduced the new Schwab OneSource Portfolios -- three "funds of funds" that span both U.S. and international markets. Each OneSource Portfolio is actively managed by an experienced portfolio manager who invests primarily in a variety of mutual funds from well-known fund families, monitors their performance and adjusts the portfolio mix in response to certain changes in the markets. So you can get diversification among different funds and investing styles. OPENING NEW CHANNELS OF COMMUNICATION If you're among the millions of people exploring the Internet, I encourage you to visit our Web site at WWW.SCHWAB.COM. There you'll find a wealth of online information about SchwabFunds as well as a wide range of investments and resources available from Schwab. You can access the latest mutual fund performance data, request a free fund prospectus, trade funds and more -- all from the comfort of your home or office, 24 hours a day. It's just one more way we're harnessing the latest technology to make investing easier and more convenient. Thank you for placing your trust in SchwabFunds. In the year ahead, we'll continue working to provide you with an expanding range of investment opportunities to meet your needs. /s/ Charles R. Schwab ---------------------------- Charles R. Schwab Cover: The Schwab Building, San Francisco, California 3 KEEP YOUR MONEY WORKING HARDER! ---------------------------------- USE THIS ENVELOPE TO EASILY ADD TO YOUR SCHWAB MONEY FUND. CHARLES SCHWAB 4 TAKE ADVANTAGE OF THIS OPPORTUNITY TO ADD TO YOUR SCHWAB MONEY FUND INVESTMENT. Your Schwab Money Fund earns money market returns and gives you direct access to many investment opportunities available through Schwab. By funding your account now, you'll be able to quickly respond to changing market conditions with just a phone call to your Schwab representative. And you keep every dollar working for you. SO DON'T DELAY. USE THIS CONVENIENT SCHWAB MONEYFUNDER TO SEND YOUR CHECK TODAY! - -------------------------------------------------------------------------------- PLEASE DETACH HERE. SCHWAB MONEYFUNDER - ------------------ Please enclose your check and this completed MoneyFunder slip in the attached postage-paid envelope. [ ][ ][ ][ ]-[ ][ ][ ][ ] - -------------------------------------- SCHWAB ACCOUNT NUMBER Name $ - -------------------------------------- Amount of Investment* [ ] Check here if you would like more Schwab MoneyFunders for future use. * MINIMUM INITIAL INVESTMENT $1,000; SUBSEQUENT MINIMUM $100, CUSTODIAN & IRA ACCOUNTS $1. An investment constitutes the purchase of shares in the money fund you have previously chosen as the primary fund for your brokerage account. ---------------------------------------- (LIFT HERE FOR MORE INFORMATION) ---------------------------------------- SMF Member SIPC (C) 1996 Charles Schwab & Co., Inc. 1280-3 (7/96) Printed on recycled paper. 5 CharlesSchwab JUST FOLLOW THESE EASY STEPS TO INVEST IN YOUR SCHWAB MONEY FUND: 1. Fill out the Schwab MoneyFunder slip completely, This envelope must including your name, account number and the amount be preceded or of your check. Please use one slip for each accompanied by a account. current Schwab Money Fund prospectus. An 2. Make your check payable to CHARLES SCHWAB & CO., investment in a fund is INC., and enclose your check with the completed neither insured nor slip in this postage-paid envelope. guaranteed by the U.S. Government. There can 3. Then just drop your Schwab MoneyFunder in the be no assurance that a mail today--and start putting your money to work! fund will be able to If you have any questions, don't hesitate to call maintain a stable net 1-800-2 NO LOAD. asset value of $1.00 per share. 6 Attn: Dept. FP 333-7 -------------- NO POSTAGE NECESSARY IF MAILED IN THE UNITED STATES -------------- ------------------------------------- BUSINESS REPLY MAIL FIRST-CLASS MAIL PERMIT NO. 18125 [BAR CODE] SAN FRANCISCO, CA ------------------------------------- POSTAGE WILL BE PAID BY ADDRESSEE CHARLES SCHWAB & CO., INC. PO BOX 7783 SAN FRANCISCO CA 94120-9330 7 TABLE OF CONTENTS OVERVIEW ................................................................ 1 FUND SUMMARY ............................................................ 2 ECONOMIC HIGHLIGHTS ..................................................... 6 QUESTIONS TO THE PORTFOLIO MANAGEMENT TEAM .............................. 10 GLOSSARY OF TERMS ....................................................... 13 PORTFOLIO SUMMARY ....................................................... 14 FINANCIAL STATEMENTS AND NOTES .......................................... 15 RESULTS OF SPECIAL SHAREHOLDERS MEETING AND PROXY VOTE .................. 79
OVERVIEW We're pleased to report on the performance of your investment in the Schwab Municipal Money Fund -- Sweep Shares for the year ended December 31, 1996. During the year, these shares provided you with competitive current income exempt from federal regular income tax,(1) combined with capital stability and ready access to your money. The Schwab Municipal Money Fund-Sweep Shares seeks to maintain a stable $1 share price to protect your principal. As with all money funds, however, there can be no assurance that the Fund will be able to maintain a $1 net asset value per share. It's also important to understand that your investment is not insured or guaranteed by the U.S. government. THE SCHWAB MUNICIPAL MONEY FUND'S NAME WAS CHANGED FROM THE SCHWAB TAX-EXEMPT MONEY FUND ON JANUARY 2, 1997 TO REFLECT A CHANGE IN ITS INVESTMENT POLICY, AS EXPLAINED LATER IN THIS REPORT. 1 Income may be subject to state and local taxes and the federal Alternative Minimum Tax (AMT). 1 8 SCHWAB MUNICIPAL MONEY FUND-SWEEP SHARES SUMMARY (FORMERLY SCHWAB TAX-EXEMPT MONEY FUND-SWEEP SHARES) PERFORMANCE REVIEW The table below presents 7-day average yields at year end. Of course, money market fund yields fluctuate and past performance is no guarantee of future results. ================================================================================ 7-DAY AVERAGE YIELDS 2 (as of 12/31/96)
Simple Compound Compound Taxable Equivalent 3 - -------------------------------------------------------------------------------- 3.29% 3.34% 5.53% - --------------------------------------------------------------------------------
THE OPPORTUNITY FOR HIGHER YIELDS, AFTER TAXES If you're in a high tax bracket, the federal tax-exempt* income which may be paid by the Schwab Municipal Money Fund-Sweep Shares can provide you with higher yields than taxable money funds on a taxable equivalent basis. Here's how the compound taxable equivalent yield of these sweep shares compared with the average compound yield for First Tier taxable money funds on December 31, 1996 for shareholders in the highest 1996 tax bracket: - -------------------------------------------------------------------------------- Your Sweep Shares' 7-day compound taxable equivalent yield 2,3 5.53% Average 7-day compound yield for fully taxable money funds 4 4.93% ----- YOUR YIELD ADVANTAGE, AFTER TAXES: 0.60% - --------------------------------------------------------------------------------
*Income may be subject to the federal Alternative Minimum Tax (AMT). 2 A portion of the Fund's fees were waived or reimbursed during the reporting period. Without the waivers or reimbursements, the Schwab Municipal Money Fund-Sweep Shares' 7-day simple yield would have been 3.02%, the 7-day compound yield would have been 3.07% and the 7-day compound taxable equivalent yield would have been 5.08% at December 31, 1996. 3 Taxable equivalent yield assumes a 1996 maximum federal regular income tax rate of 39.60%. 4 Source: IBC Financial Data's average 7-day compound yield for the 270 funds in the First Tier category of Taxable Money Funds, as of December 31, 1996. Past performance is no guarantee of future results. 2 9 The following is a pie chart illustrating the portfolio composition of the Schwab Municipal Money Fund as of December 31, 1996. SCHWAB MUNICIPAL MONEY FUND PORTFOLIO COMPOSITION - DECEMBER 31, 1996 [Pie Chart] Variable Rate Obligations 60% Tax-Exempt Commercial Paper 15% Put Bonds 7% Anticipation Notes 10% Other 3% Variable Rate Tender Option Bonds/Partnerships 5%
PORTFOLIO COMPOSITION The chart above illustrates the composition of the Fund's portfolio as of December 31, 1996. In addition, you'll find a complete listing of the securities in the Fund's portfolio on December 31, 1996 later in this report. The Schwab Municipal Money Fund invests in a diversified portfolio of short-term, high-quality municipal securities. To minimize credit risk, the Fund primarily has invested in securities rated in the top rating category (known as "First Tier") assigned by the requisite number of nationally recognized statistical rating organizations (NRSROs), or securities of equivalent credit quality, if unrated. 3 10 GROWTH IN FUND ASSETS AND SHAREHOLDERS The table below illustrates the growth in the Schwab Municipal Money Fund-Sweep Shares' total net assets and number of shareholders during the 12-month reporting period.
12/31/96 12/31/95 CHANGE - -------------------------------------------------------------------------------- TOTAL NET ASSETS (000s) $3,868,919 $3,403,837 +14% - -------------------------------------------------------------------------------- SHAREHOLDER ACCOUNTS 136,996 122,141 +12% - --------------------------------------------------------------------------------
SELECTING A MONEY FUND The Schwab sweep money funds can be linked to your Schwab account to keep all of your money invested and working for you. With this special "sweep" feature, a balance of $100 or more in your account can be automatically invested, or "swept" on a regular basis into the Sweep Shares you select, where it will be available to settle trades and cover other day-to-day transactions. It can be a smart, convenient way to manage your short-term cash. The most appropriate sweep money fund for you will depend upon such factors as your attitudes toward risk and return, your income tax bracket, and how much money you normally keep in a money fund. We offer both taxable and tax-advantaged choices to meet your individual needs. - - The Schwab Money Market Fund invests in high-quality commercial paper, certificates of deposit and other types of investments. - - The Schwab Government Money Fund invests exclusively in obligations issued or guaranteed by the U.S. government, its agencies and instrumentalities. 4 11 - - The Schwab U.S. Treasury Money Fund invests exclusively in U.S. Treasury notes, bills or other direct obligations of the U.S. government, and pays income free from state and local taxes in the vast majority of states. - - If you're in a high tax bracket, one of our tax-advantaged municipal money funds may provide you with higher returns after taxes. The Schwab Municipal Money Fund-Sweep Shares invests in municipal obligations that generate income free from federal regular income tax.* And for investors in California and New York, Schwab offers Sweep Shares which provide additional state and local tax advantages.* Consult your tax advisor for specific guidance on your own tax situation before investing. If you consistently maintain high money fund balances, you may wish to consider investing your longer-term cash reserves in one of our Value Advantage Investments(R). These money funds offer potentially higher yields than our sweep funds, but they do not include sweep features. * Income may be subject to the federal Alternative Minimum Tax (AMT). 5 12 The following is a bar graph which illustrates the Quarterly % change in GDP for each quarter from the first quarter 1990 through the fourth quarter 1996. ECONOMIC HIGHLIGHTS 1996 GROWTH CONTINUES THE SIXTH YEAR OF ECONOMIC EXPANSION REAL GDP GROWTH RATE (QUARTERLY % CHANGE, ANNUAL RATE) Real Gross Domestic Product Chain Weighted Percent change from preceeding quarter, seasonally adjusted at annual rates Source: Bloomberg
CHART 9 Real GDP Q1 1990 4.1% Q2 1990 1.3% Q3 1990 -1.9% Q4 1990 -4.1% Q1 1991 -2.2% Q2 1991 1.7% Q3 1991 1.0% Q4 1991 1.0% Q1 1992 4.7% Q2 1992 2.5% Q3 1992 3.0% Q4 1992 4.3% Q1 1993 -0.1% Q2 1993 1.9% Q3 1993 2.3% Q4 1993 4.8% Q1 1994 2.5% Q2 1994 4.9% Q3 1994 3.5% Q4 1994 3.0% Q1 1995 0.4% Q2 1995 0.7% Q3 1995 3.8% Q4 1995 0.3% Q1 1996 2.0% Q2 1996 4.7% Q3 1996 2.1% Q4 1996 4.7%
Source: Bloomberg L.P. - - The GDP growth rate for 1996 was 3.4%. This growth rate represents a significant improvement from the relatively weak 1.3% overall rate in 1995 and in particular, the 0.3% fourth quarter 1995 rate, which caused concern over the possibility of a recession early in 1996. - - The 1996 second and fourth quarter growth rates of 4.7% resulted in sentiment focusing on the apparent strength of the economy and its potential impact on future inflation and Federal Reserve Board (Fed) policy. - - At the time of this writing, the economy appears to be on track for moderate growth, continuing the six year expansion which began in 1991. 6 13 The following is a line graph which illustrates the monthly unemployment rate from January 1990 through December 1996. U.S. UNEMPLOYMENT RATE US Unemployment Rate Source: Bloomberg
Unemployment Rate Jan-90 5.3% Feb-90 5.3% Mar-90 5.2% Apr-90 5.4% May-90 5.3% Jun-90 5.1% Jul-90 5.4% Aug-90 5.6% Sep-90 5.7% Oct-90 5.8% Nov-90 6.0% Dec-90 6.2% Jan-91 6.3% Feb-91 6.5% Mar-91 6.8% Apr-91 6.6% May-91 6.8% Jun-91 6.8% Jul-91 6.7% Aug-91 6.8% Sep-91 6.8% Oct-91 6.9% Nov-91 6.9% Dec-91 7.1% Jan-92 7.1% Feb-92 7.3% Mar-92 7.3% Apr-92 7.3% May-92 7.4% Jun-92 7.7% Jul-92 7.6% Aug-92 7.6% Sep-92 7.5% Oct-92 7.4% Nov-92 7.3% Dec-92 7.3% Jan-93 7.1% Feb-93 7.0% Mar-93 7.0% Apr-93 7.0% May-93 6.9% Jun-93 6.9% Jul-93 6.8% Aug-93 6.7% Sep-93 6.7% Oct-93 6.7% Nov-93 6.5% Dec-93 6.4% Jan-94 6.7% Feb-94 6.6% Mar-94 6.5% Apr-94 6.4% May-94 6.0% Jun-94 6.0% Jul-94 6.1% Aug-94 6.1% Sep-94 5.9% Oct-94 5.6% Nov-94 5.6% Dec-94 5.4% Jan-95 5.6% Feb-95 5.4% Mar-95 5.8% Apr-95 5.7% May-95 5.7% Jun-95 5.6% Jul-95 5.7% Aug-95 5.3% Sep-95 5.6% Oct-95 5.5% Nov-95 5.6% Dec-95 5.6% Jan-96 5.8% Feb-96 5.5% Mar-96 5.6% Apr-96 5.4% May-96 5.6% Jun-96 5.3% Jul-96 5.4% Aug-96 5.1% Sep-96 5.2% Oct-96 5.2% Nov-96 5.3% Dec-96 5.3%
Source: Bloomberg L.P. - - The unemployment rate during 1996 remained near its lows for the decade, leading many economists to question whether such low levels can continue without generating inflationary pressures on wages and, ultimately, prices. - - Job creation slowed during the latter half of 1996, consistent with the slowing of the economy in the third quarter from the second quarter of 1996. 7 14 The following is a bar and line graph which illustrates the monthly consumer price index and the quarterly employment cost index from January 1990 through December 1996. MEASURES OF INFLATION Consumer Price Index - All Items YOY Employment Cost Index (includes both wages and salaries and benefits components) - - Quarterly Data Annualized Source: Bloomberg CHART 14
Monthly Quarterly Consumer Employment Price Cost Index - Index - YOY % YOY % Change Change Jan-90 5.2% 5.3% Feb-90 5.3% 5.3% Mar-90 5.2% 5.3% Apr-90 4.7% 5.4% May-90 4.4% 5.4% Jun-90 4.7% 5.4% Jul-90 4.8% 5.1% Aug-90 5.6% 5.1% Sep-90 6.2% 5.1% Oct-90 6.3% 4.8% Nov-90 6.3% 4.8% Dec-90 6.1% 4.8% Jan-91 5.7% 4.6% Feb-91 5.3% 4.6% Mar-91 4.9% 4.6% Apr-91 4.9% 4.5% May-91 5.0% 4.5% Jun-91 4.7% 4.5% Jul-91 4.4% 4.3% Aug-91 3.8% 4.3% Sep-91 3.4% 4.3% Oct-91 2.9% 4.2% Nov-91 3.0% 4.2% Dec-91 3.1% 4.2% Jan-92 2.6% 4.1% Feb-92 2.8% 4.1% Mar-92 3.2% 4.1% Apr-92 3.2% 3.5% May-92 3.0% 3.5% Jun-92 3.1% 3.5% Jul-92 3.2% 3.4% Aug-92 3.1% 3.4% Sep-92 3.0% 3.4% Oct-92 3.2% 3.5% Nov-92 3.0% 3.5% Dec-92 2.9% 3.5% Jan-93 3.3% 3.4% Feb-93 3.2% 3.4% Mar-93 3.1% 3.4% Apr-93 3.2% 3.6% May-93 3.2% 3.6% Jun-93 3.0% 3.6% Jul-93 2.8% 3.6% Aug-93 2.8% 3.6% Sep-93 2.7% 3.6% Oct-93 2.8% 3.4% Nov-93 2.7% 3.4% Dec-93 2.7% 3.4% Jan-94 2.5% 3.2% Feb-94 2.5% 3.2% Mar-94 2.5% 3.2% Apr-94 2.4% 3.1% May-94 2.3% 3.1% Jun-94 2.5% 3.1% Jul-94 2.8% 3.1% Aug-94 2.9% 3.1% Sep-94 3.0% 3.1% Oct-94 2.6% 3.0% Nov-94 2.7% 3.0% Dec-94 2.7% 3.0% Jan-95 2.8% 3.0% Feb-95 2.9% 3.0% Mar-95 2.9% 3.0% Apr-95 3.1% 3.0% May-95 3.2% 3.0% Jun-95 3.0% 3.0% Jul-95 2.8% 2.8% Aug-95 2.6% 2.8% Sep-95 2.5% 2.8% Oct-95 2.8% 2.8% Nov-95 2.6% 2.8% Dec-95 2.5% 2.8% Jan-96 2.7% 2.9% Feb-96 2.7% 2.9% Mar-96 2.8% 2.9% Apr-96 2.9% 2.9% May-96 2.9% 2.9% Jun-96 2.8% 2.9% Jul-96 3.0% 2.9% Aug-96 2.9% 2.9% Sep-96 3.0% 2.9% Oct-96 3.0% 3.0% Nov-96 3.3% 3.0% Dec-96 3.3% 3.0%
- -- Quarterly Employment Cost Index --- Monthly Consumer Price Index Source: Bloomberg L.P. - - Although trending slightly upward, both employment cost and CPI remained in check during 1996, reflecting continued low levels of inflation. - - CPI rose 3.3% in 1996, the highest annual rate since 1990. However, the core rate (which excludes the more volatile food and energy components) rose 2.6%, the lowest rate since 1965. - - The Fed has indicated it will maintain a posture of "heightened surveillance" and remain diligent in its effort to prevent increases in inflation. 8 15 The following is a line graph which illustrates the 90 day municipal commercial paper rates for each week in 1996. SHORT-TERM MUNICIPAL INTEREST RATES IN 1996 YIELDS 90-Day Municipal Commercial Paper January 2, 1996 - December 31, 1996
CHART 13 90-Day Municipal Commercial Paper Yield 1/3/96 3.30% 1/10/96 3.25% 1/17/96 3.20% 1/24/96 3.20% 1/31/96 3.35% 2/7/96 3.15% 2/14/96 3.20% 2/21/96 3.20% 2/28/96 3.20% 3/6/96 3.10% 3/13/96 3.30% 3/20/96 3.30% 3/27/96 3.35% 4/3/96 3.35% 4/10/96 3.50% 4/17/96 3.50% 4/24/96 3.65% 5/1/96 3.60% 5/8/96 3.65% 5/15/96 3.60% 5/22/96 3.55% 5/29/96 3.55% 6/5/96 3.40% 6/12/96 3.40% 6/19/96 3.55% 6/26/96 3.60% 7/3/96 3.35% 7/10/96 2.90% 7/17/96 3.00% 7/24/96 3.54% 7/31/96 3.54% 8/7/96 3.35% 8/14/96 3.42% 8/21/96 3.45% 8/28/96 3.44% 9/4/96 3.45% 9/11/96 3.23% 9/18/96 3.23% 9/25/96 3.59% 10/2/96 3.30% 10/9/96 3.32% 10/16/96 3.56% 10/23/96 3.56% 10/30/96 3.60% 11/6/96 3.32% 11/13/96 3.27% 11/20/96 3.50% 11/27/96 3.50% 12/4/96 3.50% 12/11/96 3.35% 12/18/96 3.46% 12/25/96 3.46%
- -- 90-Day Municipal Commercial Paper Source: Lehman Brothers, Inc. - - Short-term municipal interest rates displayed a moderate decline early in the year in response to fears of an economic recession, and then increased moderately during the middle of the year in response to concerns over excessive growth and its potential impact on future inflation. - - Short-term municipal rates exhibited moderate volatility, much of which was a result of the market's reaction to strong employment reports. - - Short-term municipal rates experienced their typical supply related dip in June. 9 16 QUESTIONS TO THE PORTFOLIO MANAGEMENT TEAM OF CHARLES SCHWAB INVESTMENT MANAGEMENT, INC. STEPHEN B. WARD - Senior Vice President of Charles Schwab and Co., Inc. and Chief Investment officer of Charles Schwab Investment Management, Inc. Mr. Ward has held this position since 1993. He joined CSIM in 1991 as a Vice President and Portfolio Manager. WALTER BEVERIDGE - Portfolio Manager of the Schwab Municipal Money Fund and Schwab California Municipal Money Fund since 1992 and the Schwab New York Municipal Money Fund since 1995. Mr. Beveridge joined CSIM as a Portfolio Manager in 1992. JACK GAZZOLA - Associate Portfolio Manager. Mr. Gazzola joined the Portfolio Management Team in 1992. Q. HOW HAS THE PORTFOLIO MANAGEMENT TEAM ADJUSTED THE FUND'S PORTFOLIO TO RESPOND TO CHANGES IN INTEREST RATES? A. During most of the one-year reporting period, interest rates exhibited no clear trend, amid uncertainty over inflationary pressures and ever-changing signals from the Fed over the direction of interest rates. The Fed adjusted interest rates only once during the period by lowering the Federal Funds rate from 5.50% to 5.25% on February 1, 1996. As a result, the Fund maintained a relatively neutral maturity policy, avoiding significant deviations from other funds with similar investment objectives. By employing a neutral maturity strategy and avoiding a bet on the level of future interest rates by significantly extending or shortening the portfolio, the portfolio management team was able to be more responsive to changes in interest rates and maintain the portfolio's competitive position. The Fund's average maturity was 50 days at both the beginning and the end of the reporting period. 10 17 Q. WHAT STANDARDS DOES THE PORTFOLIO MANAGEMENT TEAM USE IN SELECTING SECURITIES FOR THE FUND? A. Money market funds are required by law to hold high-quality securities in their portfolios. For the Schwab Municipal Money Fund, we have continued to take the additional step of only investing in what are referred to as First Tier securities. In general, a First Tier security provides certain maturity limits and carries the highest credit rating from the required number of nationally recognized statistical rating organizations (NRSROs). If unrated, a security must be deemed to be of comparable quality to a First Tier security according to guidelines approved by the Board of Trustees of The Charles Schwab Family of Funds. Certain securities owned by the Fund are insured or backed by a Letter of Credit issued by a First Tier financial institution. These arrangements are frequently referred to as "credit enhancements" because they provide incremental levels of creditworthiness in addition to the underlying strength of the primary issuer. The credit quality of the insurance companies and financial institutions providing credit enhancements are reviewed by Charles Schwab Investment Management, Inc. as a regular part of our thorough credit review procedures for all portfolio securities and issuers. Q. HOW DID THE RECENT PROXY VOTE AFFECT THE FUND'S INVESTMENT POLICIES AND STRATEGIES? A. Prior to the recent proxy vote, the Fund was limited in its ability to invest in securities which generated income subject to the federal Alternative Minimum Tax (AMT). The Fund was limited to investing no more than 20% of total assets in AMT investments. As a result of the affirmative proxy vote, the 20% limitation is eliminated and the Fund is allowed to increase its holdings of AMT investments beyond the 20% level. The successful proxy vote also resulted in the Fund's name change to replace the term "Tax-Exempt" with "Municipal" as of January 2, 1997. 11 18 AMT investments typically offer higher yields than other types of municipal securities with similar credit quality. Our research indicated that the majority of investors are not subject to the federal Alternative Minimum Tax and, as a result, are likely to benefit from the potentially higher yields. Although all shareholders may enjoy higher yields, for shareholders subject to the federal AMT, the policy change may result in a greater percentage of their income from the Fund being subject to AMT. More municipal and tax-free money market funds in the industry are purchasing AMT investments and the percentage of AMT investments in many other funds has grown in recent years. In light of these market trends, the Investment Manager and the Board of Trustees both felt this change was important to help enable the Funds to remain competitive now and in the future. Shareholders passed another proxy proposal which eliminated, reclassified or amended several of the Fund's fundamental policies and investment restrictions. These changes are intended to allow the Fund to act more quickly and efficiently to capitalize on future investment opportunities or changes in investment laws or regulations. The amendments in this final proposal did not result in any change to the investment objective or reduce the credit quality of the Fund. For the final tabulation of proxy votes, please refer to page 79. 12 19 GLOSSARY OF TERMS ALTERNATIVE MINIMUM TAX (AMT) A federal tax on income in addition to regular income taxes designed to ensure that very wealthy individuals and corporations pay at least some income tax each year. COMMERCIAL PAPER Short-term, interest-paying obligations with maturities ranging up to 270 days issued by banks, corporations, and other borrowers. CREDIT ENHANCEMENTS A bank letter of credit, purchase agreement, insurance, or line of credit that provides an additional level of creditworthiness for debt securities to supplement the financial strength of the issuer. DOLLAR-WEIGHTED AVERAGE MATURITY A measure of the average maturity of a mutual fund's entire portfolio, weighted by the value of its individual holdings. FEDERAL FUNDS RATE A key interest rate charged by banks when lending money to other banks overnight. FEDERAL RESERVE The central bank of the United States that establishes policies on bank reserves and regulations, determines the discount rate, and tightens or loosens the availability of credit. FIRST TIER SECURITY A security that matures within certain recognized limits and carries the top credit rating from the requisite number of NRSROs, or if unrated, is of comparable credit quality. HIGH-QUALITY SECURITY A security ranked in the highest two rating categories by a nationally recognized statistical rating organization (NRSRO), or if unrated, is of comparable credit quality. MATURITY The length of time before which the issuer of a debt security must repay the principal amount. NRSRO A nationally recognized statistical rating organization, such as Standard & Poor's or Moody's Investor Services, which evaluates and rates the credit quality of securities. REAL GDP The national Gross Domestic Product (GDP)--the total value of all goods and services produced in the U.S. over a specific period of time-- adjusted for the rate of inflation to allow meaningful year-to-year comparisons. TAXABLE EQUIVALENT YIELD The return you would have to realize on a fully taxable investment in order to equal a specified tax-exempt yield; this hypothetical yield varies according to your income tax bracket. YIELD The rate of return, usually dividend or interest payments, on an investment, expressed as a percentage of market price. 13 20 SCHWAB MUNICIPAL MONEY FUND (Formerly Schwab Tax-Exempt Money Fund) - ------------------------------------------------------------------------------ PORTFOLIO SUMMARY ASSET GROWTH
Total Total Percentage Net Assets Net Assets Growth Over as of 12/31/96 as of 12/31/95 Reporting (000s) (000s) Period - -------------------------------------------------------------------- $4,476,999 $3,564,519 26% - --------------------------------------------------------------------
AVERAGE YIELDS FOR THE PERIODS ENDED DECEMBER 31, 1996 SWEEP SHARES
Last Last Last Twelve Seven Days Three Months Months - -------------------------------------------------------------------- 3.29% 2.94% 2.88% - --------------------------------------------------------------------
VALUE ADVANTAGE SHARES
Last Last Last Twelve Seven Days Three Months Months - -------------------------------------------------------------------- 3.50% 3.15% 3.09% - --------------------------------------------------------------------
MATURITY SCHEDULE PERCENT OF TOTAL INVESTMENTS
Maturity Range 3/31/96 6/30/96 9/30/96 12/31/96 - -------------------------------------------------------------------- 0 - 15 Days 64.6% 65.9% 72.2% 67.7% 16 - 30 Days 0.5 1.5 4.4 1.1 31 - 60 Days 5.2 9.7 3.1 6.9 61 - 90 Days 9.7 3.5 2.9 2.4 91 - 120 Days 4.9 3.4 0.3 1.2 Over 120 Days 15.1 16.0 17.1 20.7 Weighted Average 48 Days 63 Days 53 Days 50 Days - --------------------------------------------------------------------
14 21 SCHWAB MUNICIPAL MONEY FUND - ------------------------------------------------------------------------------ SCHEDULE OF INVESTMENTS (in thousands) December 31, 1996
Par Value -------- ----------- VARIABLE RATE OBLIGATIONS--60.01%(a) ALABAMA--1.69% Alabama Housing Finance Authority Single Family Revenue Bonds (Collateralized Home Mortgage Revenue Program) Series 1996A-1/(Bayerische Landesbank Girozentrale Credit Agreement) 4.10%, 01/07/97 $12,400 $12,400 Alabama Housing Finance Authority Single Family Revenue Bonds (Collateralized Home Mortgage Revenue Program) Series 1996A-2/(Bayerische Landesbank Girozentrale Credit Agreement) 4.20%, 01/07/97 11,800 11,800 Birmingham, Alabama Unlimited General Obligation Refunding Bonds Series 1995/(First Alabama Bank LOC) 4.20%, 01/07/97 4,000 4,000 Citronelle, Alabama Industrial Development Board Pollution Control Revenue Refunding Bonds (AZKO Chemicals, Inc. Project)/(Wachovia Bank LOC) 4.15%, 01/07/97 1,100 1,100 Jefferson County, Alabama Sewer Revenue Warrants Series 1995A/(Bayerische Landesbank Girozentrale LOC) 4.25%, 01/07/97 12,500 12,500 Mobile County, Alabama Industrial Development Board Revenue Refunding Bonds (Ultraform Co. Project) Series 1995B/(Bayerische Landesbank Girozentrale LOC) 4.15%, 01/07/97 1,000 1,000 Mobile County, Alabama Industrial Development Board Pollution Control Revenue Refunding Bonds (Ultraform Co. Project) Series 1995A/(Bayerische Landesbank Girozentrale LOC) 4.15%, 01/07/97 7,480 7,480 Mobile, Alabama Industrial Development Board Pollution Control Revenue Bonds (Alabama Power Co. Project) Series 1993C 4.15%, 01/07/97 12,000 12,000 Montgomery, Alabama Special Care Facility Financing Authority Revenue Bonds (Baptist Medical Center VHA) Series 1985C/(AMBAC Insurance & FNB Chicago SBPA) 4.00%, 01/07/97 2,000 2,000 Montgomery, Alabama Special Care Facility Financing Authority Revenue Bonds (Baptist Medical Center VHA) Series 1985G/(AMBAC Insurance & FNB Chicago SBPA) 4.00%, 01/07/97 6,390 6,390
15 22 SCHWAB MUNICIPAL MONEY FUND - ------------------------------------------------------------------------------ SCHEDULE OF INVESTMENTS (in thousands) December 31, 1996
Par Value -------- ----------- Montgomery, Alabama Special Care Facility Financing Authority Revenue Bonds (Baptist Medical Center VHA) Series 1985H/(AMBAC Insurance & FNB Chicago SBPA) 4.00%, 01/07/97 $ 5,295 $ 5,295 Opelika, Alabama Industrial Development Board Revenue Bonds (Power Guard Project) Series 1994/(SouthTrust Bank of Alabama LOC) 4.35%, 01/07/97 2,850 2,850 ------ 78,815 ------ ARIZONA--1.26% Arizona Education Loan Marketing Corp. Revenue Bonds Series A/(MBIA Insurance & Fuji Bank SBPA) 4.35%, 01/07/97 12,305 12,305 Arizona Health Facilities Authority Adjustable Rate Notes (Arizona Volunteer Hospital Federation) Series 1985A/(FGIC Insurance) 4.25%, 01/07/97 2,945 2,945 Arizona Health Facilities Authority Adjustable Rate Notes (Arizona Volunteer Hospital Federation) Series 1985B/(FGIC Insurance) 4.25%, 01/07/97 3,840 3,840 Coconino County, Arizona Pollution Control Revenue Bonds (Tucson Electric Power Company) Series 1996B/(Societe Generale LOC) 4.15%, 01/07/97 10,700 10,700 Pima County, Arizona Industrial Development Authority Industrial Development Revenue Bonds (Tucson Electric Power Company)/(Bank of America LOC) 4.00%, 01/07/97 4,000 4,000 Pima County, Arizona Industrial Development Authority Industrial Development Revenue Bonds (Tucson Electric Power Company) Series 1982A/(Societe Generale LOC) 4.00%, 01/07/97 17,600 17,600 Yavapai County, Arizona Industrial Development Authority Revenue Bonds (First Health Care Corp. Project)/(Wachovia Bank LOC) 4.25%, 01/07/97 4,230 4,230 Yuma, Arizona Industrial Development Authority Multi Family Housing Revenue Bonds (El Encanto Apartments)Series A/(Citibank LOC) 4.15%, 01/07/97 3,000 3,000 ------ 58,620 ------
16 23 - ------------------------------------------------------------------------------
Par Value -------- ----------- ARKANSAS--1.45% Independence County, Arkansas Industrial Development Revenue Bonds (Townsends of Arkansas, Inc. Project)/(Rabobank Nederland N.V. LOC) 4.15%, 01/07/97 $ 2,000 $ 2,000 Little River County, Arkansas Solid Waste Disposal Revenue Bonds (Georgia Pacific Project)/(Sumitomo Bank LOC) 4.35%, 01/07/97 15,500 15,500 North Little Rock, Arkansas Health Facilities Board Revenue Bonds (Baptist Health) Series 1996B/ (Credit Suisse LOC)(d) 4.15%, 01/07/97 50,000 50,000 ------ 67,500 ------ CALIFORNIA--5.07% Alameda-Contra Costa, California School Financial Authority Certificates of Participation (Capital Improvement Finance Project)/(Canadian Imperial Bank of Commerce LOC) 3.75%, 01/07/97 18,570 18,570 Anaheim, California Certificates of Participation (Anaheim Memorial Hospital Assoc. Project)/(AMBAC Insurance & ABN Amro Bank N.V. SBPA) 3.90%, 01/07/97 3,700 3,700 California Education Facility Authority Revenue Refunding Bonds (Stanford University) Series 1996-14 3.70%, 01/07/97 4,775 4,775 California Health Facility Finance Authority Revenue Bonds (Catholic Healthcare Services) Series 1995C/ (MBIA Insurance) 4.00%, 01/07/97 6,700 6,700 California Health Facility Finance Authority Revenue Bonds (Catholic Healthcare West) Series 1988B/ (MBIA Insurance) 4.00%, 01/07/97 6,000 6,000 California Health Facility Finance Authority Revenue Bonds (Scripps Memorial Hospital) Series 1991A/ (MBIA Insurance & Morgan Guaranty Trust SBPA) 4.00%, 01/07/97 1,200 1,200 California Higher Education Loan Authority Student Loan Refunding Bonds Series E1/(SLMA LOC) 4.25%, 01/07/97 5,000 5,000 California Pollution Control Financing Authority Pollution Control Revenue Bonds (Shell Oil Co. Project) Series 1991B 5.00%, 01/01/97 6,600 6,600
17 24 SCHWAB MUNICIPAL MONEY FUND - ------------------------------------------------------------------------------ SCHEDULE OF INVESTMENTS (in thousands) December 31, 1996
Par Value -------- ----------- California Pollution Control Financing Authority Pollution Control Revenue Bonds (Southern California Edison) Series 1986D 4.70%, 01/01/97 $ 400 $ 400 California Pollution Control Financing Authority Resource Recovery Revenue Bonds (Burney Forest Project) Series 1988A/(Fleet Bank N.A. LOC) 4.80%, 01/01/97 1,300 1,300 California Pollution Control Financing Authority Revenue Bonds (Southern California Edison) Series 1986A 4.70%, 01/01/97 7,200 7,200 California Pollution Control Financing Authority Revenue Refunding Bonds (Pacific Gas & Electric) Series 1996F/(Banque Nationale de Paris LOC) 4.80%, 01/01/97 2,300 2,300 California State Variable Rate Revenue Anticipation Notes Series 1996C-3/(Multiple Credit Enhancements) 4.05%, 01/07/97 8,800 8,800 California State Variable Rate Revenue Anticipation Notes Series 1996C-1/(Multiple Credit Enhancements) 4.00%, 01/07/97 4,100 4,100 California State Variable Rate Revenue Anticipation Notes Series 1996C-2/(Multiple Credit Enhancements) 4.05%, 01/07/97 1,200 1,200 California Statewide Community Development Authority Certificates of Participation (Northern California Retired Officers Assoc.)/(Dresdner Bank AG LOC) 5.00%, 01/01/97 4,900 4,900 California Statewide Community Development Authority Revenue Bonds Certificates of Participation (Kaiser Foundation Hospitals) 4.00%, 01/07/97 5,000 5,000 Foothill Eastern Transportation Corridor Agency, California Toll Road Revenue Bonds Series 1995B/ (Morgan Guaranty Trust LOC) 4.00%, 01/07/97 2,000 2,000 Foothill Eastern Transportation Corridor Agency, California Toll Road Revenue Bonds Series 1995D/ (IBJ LOC) 4.10%, 01/07/97 24,100 24,100 Indio, California Multi-Family Redevelopment Bonds Refunding Housing Mortgages (Carreon Apartments) Series 1996A 4.00%, 01/07/97 3,950 3,950 Irvine Ranch Water District Consolidated Revenue Refunding Bonds Series 1993A/(Bank of America LOC) 4.85%, 01/01/97 600 600
18 25 - ------------------------------------------------------------------------------
Par Value -------- ----------- Irvine Ranch, California Water District Certificates of Participation Revenue Bonds Series 1988A/(Sumitomo Bank LOC) 4.85%, 01/01/97 $ 500 $ 500 Los Angeles County, California Metropolitan Transportation Authority Proposition C Second Senior Sales Tax Revenue Refunding Bonds Series A/(MBIA Insurance & Credit Locale de France SPA) 4.00%, 01/07/97 42,300 42,300 Los Angeles County, California Pension Revenue Refunding Obligation Bonds Series 1996A/(AMBAC Insurance & National Westminster Bank PLC SBPA) 3.90%, 01/07/97 3,900 3,900 Los Angeles, California Community Redevelopment Agency Certificates of Participation (Broadway Springs Center Project) Series 1987/(Bank of America LOC) 4.10%, 01/07/97 100 100 Northern California Power Agency Public Power Revenue Refunding Bonds (Geothermal Project 3A)/(AMBAC Insurance & Bank of Nova Scotia LOC) 3.85%, 01/07/97 100 100 Orange County, California Water District Certificates of Participation Series 1990B (National Westminster Bank PLC LOC) 4.75%, 01/01/97 8,800 8,800 Orange County, California Apartment Development Revenue Refunding Bonds (The Lakes Project #185) Series 1991A/(Citibank LOC) 4.15%, 01/07/97 800 800 Orange County, California Sanitation District Certificates of Participation Series 1990-92A/(National Westminster Bank PLC LOC) 5.00%, 01/01/97 1,000 1,000 Orange County, California Sanitation Districts No. 1-3, 5-7 & 11 Refunding Certificates of Participation Series 1992/(AMBAC Insurance & Barclays Bank SBPA) 4.00%, 01/07/97 2,700 2,700 Orange County, California Various Sanitation Districts Certificates of Participation (Capital Improvement Programs) Series 1990-92C/(FGIC Insurance & FGIC SPA) 4.85%, 01/01/97 1,500 1,500 Orange County, California Water District 1915 Improvement Bond Act Revenue Bonds (Irvine Coast Assessment District) Number 88-1/(Kredietbank & Societe Generale LOC) 4.85%, 01/01/97 17,700 17,700
19 26 SCHWAB MUNICIPAL MONEY FUND - ------------------------------------------------------------------------------ SCHEDULE OF INVESTMENTS (in thousands) December 31, 1996
Par Value -------- ----------- Riverside County, California Certificates of Participation (Riverside County Public Facility Project) Series 1985A/(Commerzbank AG & National Westminster Bank PLC LOC) 3.10%, 01/07/97 $ 3,800 $ 3,800 Riverside County, California Certificates of Participation (Riverside County Public Facility Project) Series 1985C/(Sanwa Bank LOC) 2.85%, 01/07/97 2,000 2,000 Riverside County, California Variable Rate Tax & Revenue Anticipation Notes Series 1996-1997/ (Toronto-Dominion Bank LOC) 3.90%, 01/07/97 9,600 9,600 San Francisco, California City & County Redevelopment Agency Multi-Family Revenue Bonds (Rincon Center Apartments) Series 1985B/(Citibank LOC) 3.00%, 01/07/97 1,955 1,955 Simi Valley, California Multi-Family Housing Certificates of Participation (Lincoln Wood Ranch Project)/(Sumitomo Bank LOC) 4.30%, 01/07/97 2,000 2,000 Southern California Public Power Authority Refunding Revenue Bonds (Palos Verdes Project) Series 1996B/ (AMBAC Insurance & Morgan Guaranty Trust SBPA) 3.90%, 01/07/97 1,800 1,800 Southern California Public Power Authority Revenue Refunding Bonds (Southdown Transmission Project) Series 1996B/(FSA Insurance & Morgan Guaranty Trust SBPA) 4.00%, 01/07/97 3,600 3,600 Southern California Public Power Authority Revenue Refunding Bonds (Transmission Project) Series 1991/(AMBAC Insurance & Swiss Bank LOC) 3.90%, 01/07/97 11,200 11,200 Western Riverside County, California Regional Wastewater Authority Revenue Bonds (Regulatory Wastewater Treatment)/(National Westminster Bank PLC LOC) 5.00%, 01/01/97 2,100 2,100 ------- 235,850 ------- COLORADO--4.59% Central City, Colorado Multi-Family Housing Revenue Bonds (Gold Mountain Apartment Project)/(PNC Bank, Kentucky LOC) 4.25%, 01/07/97 8,250 8,250 Colorado Health Facilities Authority Hospital Revenue Adjustable Rate Tender Securities (Dresdner Bank AG & Toronto-Dominion Bank SBPA) 4.15%, 01/07/97 5,000 5,000
20 27 - ------------------------------------------------------------------------------
Par Value -------- ----------- Colorado Health Facilities Authority Revenue Bonds (North Colorado Medical Center)/(Citibank LOC) 4.15%, 01/07/97 $10,100 $ 10,100 Colorado Health Facilities Authority Revenue Bonds (Sisters of Charity Health) Series B/(Dresdner Bank AG & Toronto-Dominion Bank LOC) 4.15%, 01/07/97 23,000 23,000 Colorado Student Obligation Bond Authority Student Loan Revenue Bonds (Colorado University) Series 1989A/(SLMA LOC) 4.10%, 01/07/97 6,100 6,100 Colorado Student Obligation Bond Authority Student Loan Revenue Bonds (Colorado University) Series 1990A/(SLMA LOC)(d) 4.10%, 01/07/97 23,810 23,810 Colorado Student Obligation Bond Authority Student Loan Revenue Bonds (Colorado University) Series 1993B/(SLMA LOC) 4.10%, 01/07/97 4,400 4,400 Colorado Student Obligation Bond Authority Student Loan Revenue Bonds (Colorado University) Series 1993C-2/(SLMA LOC) 4.00%, 01/07/97 2,200 2,200 Denver City & County, Colorado Airport System Revenue Bonds Series 1992D/(Morgan Guaranty Trust LOC) 4.40%, 01/07/97 48,900 48,900 Denver City & County, Colorado Airport System Revenue Bonds Series 1992E/(Bank of Tokyo-Mitsubishi LOC) 4.55%, 01/07/97 30,000 30,000 Denver City & County, Colorado Airport System Revenue Bonds Series 1992F/(Bank of Montreal LOC) 4.40%, 01/07/97 16,000 16,000 Denver City & County, Colorado Airport System Revenue Bonds Series 1992G/(Credit Local de France LOC) 4.40%, 01/07/97 20,000 20,000 Douglas County, Colorado Multi Family Housing Revenue Bonds (Autumn Chase Project)/(Citibank LOC) 4.10%, 01/07/97 9,300 9,300 Smith Creek Metropolitan District Revenue Bonds Series 1995/(NationsBank of Texas N.A. LOC) 4.05%, 01/07/97 6,300 6,300 ------- 213,360 ------- CONNECTICUT--0.23% Connecticut State Second Lien Special Tax Obligation Bonds Series 1990-1/(Commerzbank AG LOC) 4.00%, 01/07/97 10,800 10,800 -------
21 28 SCHWAB MUNICIPAL MONEY FUND - ------------------------------------------------------------------------------ SCHEDULE OF INVESTMENTS (in thousands) December 31, 1996
Par Value -------- ----------- DISTRICT OF COLUMBIA--0.09% District of Columbia Revenue Bonds Adjustable Convertible Extendable Securities (Georgetown University) Series 1988D/(Sanwa Bank SBPA) 4.10%, 01/07/97 $ 4,200 $ 4,200 ------ FLORIDA--0.77% Florida Housing Finance Agency Housing Revenue Bonds (Tiffany Club Project) Series 1996P/(NationsBank LOC) 4.45%, 01/07/97 2,875 2,875 Indian Trace, Florida Community Development District (Broward County Florida Basin 1 Water)/(MBIA Insurance & Swiss Bank SBPA) 3.85%, 01/07/97 5,565 5,565 Orange County, Florida Housing Finance Authority Multi-Family Housing Revenue Bonds (Rio Vista Project)/(First Union Bank of North Carolina LOC) 4.10%, 01/07/97 3,815 3,815 Orange County, Florida Housing Finance Authority Multi-Family Housing Revenue Bonds (Smokewood Project)/(Citibank LOC) 4.25%, 01/07/97 10,000 10,000 Palm Beach County, Florida Health Facilities Authority Revenue Refunding Bonds (Joseph L. Morse Geriatric Center)/(SunTrust Bank LOC) 4.20%, 01/07/97 11,905 11,905 Palm Beach County, Florida Housing Finance Authority Multi-Family Housing Revenue Bonds (Crystal II Project)/(Citibank LOC) 3.95%, 01/07/97 1,800 1,800 ------ 35,960 ------ GEORGIA--3.87% Albany-Dougherty Co. Hospital Authority Revenue Bonds (Phoebe Putney Memorial Hospital) Series 1996/(AMBAC Insurance) 4.30%, 01/07/97 6,400 6,400 Burke County, Georgia Development Authority Pollution Control Revenue Bonds (Oglethorpe Power Project) Series 1993A/(FGIC Insurance & Canadian Imperial Bank of Commerce SBPA) 4.00%, 01/07/97 10,340 10,340 Burke County, Georgia Development Authority Pollution Control Revenue Bonds (Oglethorpe Power Project) Series 1994A/(Credit Local de France SBPA & FGIC Insurance)(d) 4.00%, 01/07/97 23,100 23,100
22 29 - ------------------------------------------------------------------------------
Par Value -------- ----------- Cherokee County, Georgia Development Authority Industrial Development Revenue Bonds (Universal Alloy Project)/(Wachovia Bank LOC) 4.25%, 01/07/97 $ 5,500 $ 5,500 Cobb County, Georgia Housing Authority Multi-Family Housing Revenue Bonds (Walton Green Project)/ (Wachovia Bank LOC) 4.25%, 01/07/97 14,000 14,000 Cobb County, Georgia Housing Authority Multi-Family Housing Revenue Bonds (Williamstown Apartment Project)/(Wachovia Bank LOC) 4.25%, 01/07/97 2,000 2,000 Dekalb County, Georgia Development Authority Industrial Development Revenue Bonds (Park North Business Center Project)/(Wachovia Bank LOC) 4.15%, 01/07/97 5,140 5,140 Dekalb County, Georgia Development Authority Industrial Development Revenue Bonds (Siemens Energy, Inc. Project)/(Siemens A.G. Guaranty) 4.20%, 01/07/97 3,750 3,750 Dekalb County, Georgia Development Authority Revenue Bonds (American Cancer Society)/(Trust Company Bank LOC) 4.15%, 01/07/97 1,975 1,975 Dekalb County, Georgia Housing Authority Multi Family Housing Revenue Bonds (Wood Hills Apartment Project)/(Bank of Montreal LOC) 4.15%, 01/07/97 5,250 5,250 Dekalb, Georgia Private Hospital Authority Revenue Anticipation Certificates (Egleston Childs Hospital/Emory University) Series 1994A & B4/ (Trust Bank of Atlanta LOC) 3.70%, 01/07/97 7,000 7,000 Douglas County, Georgia Development Authority Industrial Development Revenue Bonds (Mima Inc. Project)/(Wachovia Bank LOC) 4.10%, 01/07/97 4,300 4,300 Fulton County, Georgia Development Authority Revenue Adjusting Bonds (Woodruff Arts Center)/(Wachovia Bank LOC) 4.15%, 01/07/97 22,500 22,500 Laurens County, Georgia Development Authority Solid Waste Disposal Revenue Bonds (Southeast Paper Co. Project)/(Wachovia Bank LOC) 4.25%, 01/07/97 25,000 25,000 Municipal Gas Authority of Georgia Gas Portfolio II Series 1996-4/(Credit Suisse LOC) 3.90%, 01/07/97 10,000 10,000
23 30 SCHWAB MUNICIPAL MONEY FUND - ------------------------------------------------------------------------------ SCHEDULE OF INVESTMENTS (in thousands) December 31, 1996
Par Value -------- ----------- Richmond County, Georgia Industrial Development Authority Revenue Bonds (BOK Group Project)/ (Wachovia Bank LOC) 4.15%, 01/07/97 $ 5,000 $ 5,000 Rockmart, Georgia Industrial Development Authority Revenue Bonds (CW Matthews Contracting)/(Wachovia Bank LOC) 4.25%, 01/07/97 2,000 2,000 Roswell, Georgia Housing Authority Multi Family Housing Revenue Bonds (Gables Realty Wood Crossing Project)/(Wachovia Bank LOC) 4.15%, 01/07/97 11,650 11,650 Savannah, Georgia Economic Development Authority Revenue Bonds (Home Depot Project)/(Trust Company Bank LOC) 4.20%, 01/07/97 5,000 5,000 Smyrna, Georgia Housing Authority Multi Family Housing Revenue Bonds (Walton Park LP Project)/(Wachovia Bank LOC) 4.25%, 01/07/97 8,000 8,000 Villa Rica, Georgia Industrial Development Revenue Bonds (Lowes Home Centers, Inc. Project)/(Wachovia Bank LOC) 4.15%, 01/07/97 800 800 Worth County, Georgia Industrial Development Authority Revenue Refunding Bonds (Seabrook Project) Series 1996B/(Sun Bank LOC) 4.25%, 01/07/97 1,400 1,400 ------- 180,105 ------- HAWAII--1.34% Hawaii State Department of Budget & Finance Special Purpose Mortgage Revenue Bonds (Adventist Health System West)/(Union Bank of California LOC) 4.05%, 01/07/97 3,100 3,100 Hawaii State Housing Finance & Development Corp. Multi Family Housing Revenue Bonds (Nani Mauna Loa Project) Series 1995A/(Citibank LOC) 4.25%, 01/07/97 3,900 3,900 Hawaii State Housing Finance & Development Corp. Multi Family Housing Revenue Bonds (Rental Housing System) Series 1990A/(IBJ LOC) 4.20%, 01/07/97 21,600 21,600 Hawaii State Housing Finance & Development Corp. Multi Family Housing Revenue Bonds (Rental Housing System) Series 1990B/(IBJ LOC) 4.20%, 01/07/97 19,400 19,400
24 31 - ------------------------------------------------------------------------------
Par Value -------- ----------- Honolulu, Hawaii City & County Multi Family Housing Revenue Bonds (Hale Kua Gardens Project) Series A/ (Bank of Tokyo-Mitsubishi LOC) 4.25%, 01/07/97 $ 5,120 $ 5,120 Honolulu, Hawaii City & County Multi Family Housing Revenue Bonds (Iolani Regents Project) Series 1990A/(Bank of Hawaii LOC) 4.35%, 01/07/97 9,225 9,225 ------ 62,345 ------ ILLINOIS--8.84% Aurora, Kane, & Dupage Counties, Illinois Industrial Development Revenue Bonds (North American Plastics Corp.)/(First of America Bank Illinois LOC) 4.45%, 01/07/97 5,400 5,400 Centralia, Illinois Industrial Development Authority Revenue Bonds (Hollywood Brands Project)/ (Wachovia Bank LOC) 4.15%, 01/07/97 4,500 4,500 Chicago, Illinois Industrial Development Revenue Bonds (Morse Automotive) Series 1995/(American National Bank & Trust LOC) 4.29%, 01/07/97 2,800 2,800 Chicago, Illinois O'Hare International Airport Revenue Bonds (General Airport Second Lien) Series 1994C/(Societe Generale LOC) 4.25%, 01/07/97 11,900 11,900 4.15%, 01/07/97 11,800 11,800 Chicago, Illinois O'Hare International Airport Revenue Bonds (General Airport Second Lien) Series A/(Westpac Banking Corp. LOC) 4.15%, 01/07/97 15,800 15,800 Chicago, Illinois O'Hare International Airport Revenue Bonds Adjustable Convertible Extendable Securities (General Airport Second Lien) Series B-1/(Sanwa Bank LOC) 4.20%, 01/07/97 9,800 9,800 Chicago, Illinois O'Hare International Airport Revenue Bonds Adjustable Convertible Extendable Securities (General Airport Second Lien) Series B-2/(Sanwa Bank LOC) 4.20%, 01/07/97 9,800 9,800 Illinois Development Finance Authority Hospital Revenue Bonds (Palos Community Hospital) Series 1994-1/(Credit Suisse SBPA) 4.15%, 01/07/97 33,700 33,700
25 32 SCHWAB MUNICIPAL MONEY FUND - ------------------------------------------------------------------------------ SCHEDULE OF INVESTMENTS (in thousands) December 31, 1996
Par Value -------- ----------- Illinois Development Finance Authority Hospital Revenue Bonds (Palos Community Hospital) Series 1994-2/(Credit Suisse SBPA) 4.15%, 01/07/97 $ 7,500 $ 7,500 Illinois Development Finance Authority Industrial Development Revenue Bonds (Chicago Corrugated Box Co.) Series 1996/(American National Bank & Trust Co. LOC) 4.29%, 01/07/97 1,500 1,500 Illinois Development Finance Authority Industrial Development Revenue Bonds (Knead Dough Baking Co.)/(Bank of America LOC) 4.25%, 01/07/97 8,240 8,240 Illinois Development Finance Authority Industrial Development Revenue Bonds (Molding Project)/ (Northern Trust LOC) 4.40%, 01/07/97 1,100 1,100 Illinois Development Finance Authority Industrial Development Revenue Bonds (Pekin Paperboard Co. LP) Series 1994/(Northern Trust LOC) 4.40%, 01/07/97 5,500 5,500 Illinois Development Finance Authority Industrial Development Revenue Bonds (SMF, Inc. Project) Series A 4.15%, 01/07/97 2,295 2,295 Illinois Development Finance Authority Presbyterian Home Lake Series 1996A/(Lasalle National Bank LOC) 4.20%, 01/07/97 21,000 21,000 Illinois Development Finance Authority Residential Rental Revenue Bonds (F.C. Harris Pavillion Project) Series 1994/(FNMA Collateral Investment Agreement) 4.10%, 01/07/97 1,000 1,000 Illinois Development Finance Authority Revenue Bonds (Rich Graphics Corp. Project) Series 1996/(American National Bank & Trust Co. LOC) 4.29%, 01/07/97 3,200 3,200 Illinois Development Finance Authority Revenue Bonds (Village Oak Park Residence)/(Firstar Bank, Milwaukee LOC) 4.30%, 01/07/97 2,260 2,260 Illinois Educational Facility Authority Revenue Bonds (Chicago Historical Society)/(Bank of Tokyo- Mitsubishi LOC) 4.20%, 01/07/97 8,200 8,200 Illinois Educational Facility Authority Revenue Bonds (Chicago Zoological Society, Brookfield Zoo) Series B/(Chase Bank LOC) 4.25%, 01/07/97 2,200 2,200
26 33 - ------------------------------------------------------------------------------
Par Value -------- ----------- Illinois Educational Facility Authority Revenue Bonds (Illinois Institute of Technology) Series 1990A/(Harris Trust & Savings Bank & Northern Trust LOC) 4.20%, 01/07/97 $11,100 $11,100 Illinois Educational Facility Authority Revenue Bonds (Northwestern University)/(FNB Chicago SBPA) 4.25%, 01/07/97 22,200 22,200 Illinois Health Facility Authority Revenue Bonds (Bensenville Home Society) Series 1989A/(American National Bank & Trust Co. LOC) 4.10%, 01/07/97 2,450 2,450 Illinois Health Facility Authority Revenue Bonds (Highland Park Hospital) Series 1991B/(Swiss Bank LOC) 4.00%, 01/07/97 11,000 11,000 Illinois Health Facility Authority Revenue Bonds (Hospital Sisters Services) Series E/(MBIA Insurance & Morgan Guaranty Trust SBPA) 4.15%, 01/07/97 4,300 4,300 Illinois Health Facility Authority Revenue Bonds (Ingalls Memorial Hospital) Series 1985C/(Lasalle National Bank LOC) 4.15%, 01/07/97 1,100 1,100 Illinois Health Facility Authority Revenue Bonds (Revolving Fund Pooled Loan) Series 1985C/(FNB Chicago LOC) 4.15%, 01/07/97 6,000 6,000 Illinois Health Facility Authority Revenue Bonds (Revolving Fund Pooled Loan) Series 1985D/(FNB Chicago LOC) 4.15%, 01/07/97 20,000 20,000 Illinois Health Facility Authority Revenue Bonds (Streeterville Corp.) Series A/(FNB Chicago LOC) 4.20%, 01/07/97 14,400 14,400 Illinois Health Facility Authority Revenue Bonds (Washington & Jane Smith Home) Series 1991/ (Comerica Bank LOC) 4.25%, 01/07/97 2,800 2,800 Illinois State Toll Highway Authority Revenue Bonds Series B/(MBIA Insurance & Societe Generale SBPA) 4.00%, 01/07/97 65,900 65,900 Kane County, Illinois Revenue Bonds (Glenwood School for Boys)/(Harris Trust & Savings Bank LOC) 4.20%, 01/07/97 9,000 9,000
27 34 SCHWAB MUNICIPAL MONEY FUND - ------------------------------------------------------------------------------ SCHEDULE OF INVESTMENTS (in thousands) December 31, 1996
Par Value -------- ----------- Lombard, Illinois Industrial Development Revenue Refunding Bonds (B & H Partnership Project)/ (Comerica Bank LOC) 4.38%, 01/07/97 $ 1,850 $ 1,850 McHenry County, Illinois Industrial Development Authority Revenue Refunding Bonds (Dean Foods Co.)/(Wachovia Bank LOC) 4.15%, 01/07/97 2,675 2,675 New Lenox, Illinois Industrial Development Revenue Bonds (Panduit Corp. Project)/(Commerzbank AG LOC) 4.35%, 01/07/97 4,400 4,400 Oak Forest, Illinois Revenue Bonds (Homewood Pool) Series 1989/(FNB Chicago LOC) 4.20%, 01/07/97 37,000 37,000 Rockford, Illinois Industrial Development Revenue Bonds (Industrial Welding Supply, Inc. Project)/(American National Bank & Trust Co. LOC) 4.29%, 01/07/97 2,000 2,000 Upper Illinois River Valley Development Authority Bonds (Exolon Esk Co.)/(Chase Manhattan LOC) 4.40%, 01/07/97 4,405 4,405 Wheeling, Illinois Manufacturing Refunding Revenue Bonds (Woodland Creek II) Series 1990/(FSA Insurance & Barclays Bank PLC SBPA) 4.20%, 01/07/97 17,655 17,655 Yorkville, Illinois Industrial Development Revenue Bonds (F.E. Wheaton & Co. Project) Series 1996/(American National Bank & Trust LOC) 4.29%, 01/07/97 1,600 1,600 ------- 411,330 ------- INDIANA--0.36% Crawfordsville, Indiana Industrial Development Revenue Bonds (National Service Industries Project)/(Wachovia Bank LOC) 4.15%, 01/07/97 4,000 4,000 Hammond, Indiana Economic Development Revenue Bonds (Lear Seating Corp. Project) Series 1994/(Chase Manhattan Bank LOC) 3.90%, 01/07/97 8,500 8,500 Indianapolis, Indiana Economic Development Authority Revenue Bonds (Herff-Jones, Inc. Project)/ (Wachovia Bank LOC) 4.40%, 01/07/97 4,100 4,100 ------- 16,600 -------
28 35 - ------------------------------------------------------------------------------
Par Value -------- ----------- IOWA--0.09% Iowa Higher Education Loan Authority Revenue Bonds (Adjustable Convertible Extendable Securities Education Loan Private College Facility)/(MBIA Insurance & Dai-Ichi Kangyo Bank SBPA) 4.10%, 01/07/97 $ 4,100 $ 4,100 ------ KANSAS--0.14% Kansas City, Kansas Industrial Revenue Bonds (Owen Industries, Inc. Project) Series 1987/(Sanwa Bank LOC) 4.40%, 01/07/97 1,800 1,800 Wichita, Kansas Airport Facilities Revenue Bonds (Flightsafety International, Inc.)/(Wachovia Bank LOC) 4.25%, 01/07/97 3,000 3,000 Wichita, Kansas Health Facilities Authority Revenue Bonds (CSJ Health System) Series XXV/(Sumitomo Bank LOC) 4.30%, 01/07/97 1,900 1,900 ------ 6,700 ------ KENTUCKY--1.30% Kentucky Higher Education Student Loan Corp. Revenue Bonds Series 1996A/(MBIA Insurance & Landesbank Hessen-Thuringen Girozentrale SBPA) 4.25%, 01/07/97 8,400 8,400 Lebanon, Kentucky Industrial Development Revenue Bonds (Wallace Computer Services, Inc.)/(Wachovia Bank LOC) 4.30%, 01/07/97 5,000 5,000 Mason County, Kentucky Pollution Control Finance Authority Revenue Bonds (East Kentucky Power Corp.) Series 1984B-1/(N.R.U.-C.F.C. Guaranty) 4.15%, 01/07/97 12,250 12,250 Mayfield, Kentucky Multi City Lease Revenue Bonds (League of Cities Funding Trust)/(PNC Bank LOC) 4.30%, 01/07/97 18,000 18,000 Maysville, Kentucky Industrial Building Revenue Bonds (Green Tokai Building)/(Bank of America LOC) 4.30%, 01/07/97 5,740 5,740 Murray, Kentucky Industrial Development Authority Revenue Bonds (Dean Foods Co.)/(Wachovia Bank LOC) 4.25%, 01/07/97 6,000 6,000 Owensboro, Kentucky Limited Obligation Revenue Bonds (Dart Polymers, Inc. Project) Series 1985A/(National Westminster Bank PLC LOC) 3.85%, 01/07/97 1,900 1,900
29 36 SCHWAB MUNICIPAL MONEY FUND - ------------------------------------------------------------------------------ SCHEDULE OF INVESTMENTS (in thousands) December 31, 1996
Par Value -------- ----------- Wilson County, Kentucky Industrial Development Board Revenue Bonds (Perma Pipe Project)/(Harris Trust & Savings Bank LOC) 4.40%, 01/01/97 $ 3,150 $ 3,150 ------- 60,440 ------- LOUISIANA--3.06% De Soto Parish, Louisiana Pollution Control Financing Authority Revenue Refunding Bonds (Central Louisiana Electric Co.) Series 1991A/(Swiss Bank LOC) 4.05%, 01/07/97 400 400 De Soto Parish, Louisiana Pollution Control Financing Authority Revenue Refunding Bonds (Central Louisiana Electric Co.) Series 1991B/(Swiss Bank LOC) 4.05%, 01/07/97 15,000 15,000 Louisiana Offshore Terminal Authority Deepwater Port Refunding Revenue Bonds/(Union Bank of Switzerland LOC) 4.10%, 01/07/97 21,720 21,720 Louisiana Public Facilities Authority Hospital Revenue Bonds (Willis Knighton Medical Project)/(AMBAC Insurance & Mellon Bank SBPA) 4.20%, 01/07/97 17,960 17,960 New Orleans, Louisiana Aviation Board Revenue Bonds (Passenger Facility Charge Projects) Series 1994/ (Banque Paribas & Canadian Imperial Bank of Commerce LOC) 4.40%, 01/07/97 6,300 6,300 New Orleans, Louisiana Aviation Board Revenue Bonds Series B/(MBIA Insurance & IBJ SBPA) 4.10%, 01/07/97 72,820 72,820 Rapides Parish, Louisiana Industrial Development Board Pollution Control Revenue Refunding Bonds (Central Louisiana Electric Co.) Series 1991/(Swiss Bank LOC) 4.05%, 01/07/97 8,150 8,150 ------- 142,350 ------- MAINE--0.22% Regional Waste System, Inc. Maine Solid Waste Resource Recovery Revenue Bonds Series 1993M/(Midland Bank PLC LOC) 4.15%, 01/07/97 4,590 4,590 Regional Waste System, Inc. Maine Solid Waste Resource Recovery Revenue Bonds Series 1995O/(Midland Bank PLC LOC) 4.15%, 01/07/97 5,500 5,500 ------- 10,090 -------
30 37 - ------------------------------------------------------------------------------
Par Value -------- ----------- MARYLAND--2.28% Baltimore, Maryland Industrial Development Authority Revenue Bonds (City of Baltimore Capital Acquisition Program) Series 1986/(Dai-Ichi Kangyo Bank LOC) 4.35%, 01/07/97 $52,400 $ 52,400 Maryland State Health & Higher Education Facility Authority Pooled Revenue Bonds (Kennedy Krieger) Series 1993D/(FNB Maryland LOC) 4.25%, 01/07/97 2,000 2,000 Maryland State Health & Higher Education Facility Authority Revenue Bonds (Pooled Loan Program) Series 1985A/(FNB Chicago LOC) 4.20%, 01/07/97 9,700 9,700 Maryland State Health & Higher Education Facility Authority Revenue Bonds (Pooled Loan Program) Series 1985B/(FNB Chicago LOC) 4.25%, 01/07/97 16,100 16,100 Montgomery County, Maryland Housing Opportunity Commission Housing Revenue Bonds (Draper Lane) Series 1991I/(FGIC Insurance & Barclays Bank PLC SBPA) 4.20%, 01/07/97 16,500 16,500 Northeast Maryland Waste Disposal Authority Resource Recovery Revenue Bonds (Hartford County)/(AMBAC Insurance & Credit Local de France SBPA) 4.00%, 01/07/97 9,600 9,600 ------- 106,300 ------- MASSACHUSETTS--0.02% Massachusetts Health and Education Facility Authority Capital Assets Program Series 1985D/(MBIA Insurance & Credit Suisse SBPA) 4.90%, 01/07/97 500 500 Massachusetts State Industrial Finance Agency Resource Recovery Revenue Refunding Bonds (Ogden Haverhill Project) Series 1992A/(Union Bank of Switzerland LOC) 3.90%, 01/07/97 500 500 ------- 1,000 ------- MICHIGAN--0.21% Grand Rapids Economic Development Corporation Series 1991-A (Amway Hotel Corp. Project)/(ABN-Amro Bank N.V. LOC) 3.95%, 01/07/97 6,225 6,225
31 38 SCHWAB MUNICIPAL MONEY FUND - ------------------------------------------------------------------------------ SCHEDULE OF INVESTMENTS (in thousands) December 31, 1996
Par Value -------- ----------- Michigan State Strategic Fund Limited Obligation Revenue Bonds (Dean Foods Co. Project)/(Wachovia Bank LOC) 4.25%, 01/07/97 $ 3,500 $ 3,500 ------ 9,725 ------ MINNESOTA--1.28% Bloomington, Minnesota Port Authority Special Tax Revenue Bonds (Mall of America Project) Series 1996B/(Credit Local de France SBPA) 4.20%, 01/07/97 6,000 6,000 Bloomington, Minnesota Port Authority Tax Increment Revenue Refunding Bonds (Mall of America) Series 1995A/(Credit Local de France SBPA & FSA Insurance) 4.20%, 01/07/97 25,000 25,000 Hennepin County, Minnesota Unlimited General Obligation Notes Series 1996C 4.30%, 01/07/97 5,750 5,750 Hennepin County, Minnesota General Obligation Bonds Series 1995C 4.15%, 01/07/97 3,500 3,500 Minnesota Agriculture & Economic Development Revenue Bonds (Evangelical Lutheran Project)/(Rabobank Nederland N.V. LOC) 4.20%, 01/07/97 5,500 5,500 St. Paul, Minnesota Housing Redevelopment Authority Multi Family Housing Development Bonds (Multi City Joint Rental Housing Program) Series 1985A/(FHLB Des Moines LOC) 4.25%, 01/07/97 13,900 13,900 ------ 59,650 ------ MISSISSIPPI--0.15% Mississippi Business Financial Corp. Industrial Development Revenue Bonds (Omega Motion) Series 1996/(Wachovia Bank LOC) 4.25%, 01/07/97 6,800 6,800 ------ MISSOURI--0.80% Independence, Missouri Industrial Development Authority Revenue Bonds (Resthaven Project)/(Credit Local de France LOC) 4.15%, 01/07/97 9,640 9,640 Mexico, Missouri Industrial Development Authority Revenue Bonds (ABP Midwest Manufacturing Project) Series 1995/(Royal Bank of Scotland LOC) 4.30%, 01/07/97 7,300 7,300
32 39 - ------------------------------------------------------------------------------
Par Value -------- ----------- Missouri State Development Finance Board Industrial Development Revenue Bonds (H.R. Williams Mill Supply Project) Series 1995/(Union Bank of Switzerland LOC) 4.30%, 01/07/97 $ 3,100 $ 3,100 Missouri State Health & Education Facilities Authority Revenue Bonds (Barnes Hospital Project)/(Morgan Guaranty Trust LOC) 4.00%, 01/07/97 6,400 6,400 St. Charles, Missouri Industrial Development Authority Revenue Bonds (Land Development Co. Project)/(Commerce Bank of St. Louis LOC) 3.70%, 01/07/97 3,850 3,850 St. Charles, Missouri Industrial Development Authority Revenue Refunding Bonds (Casalon Apartments Project)/(Citibank LOC) 4.25%, 01/07/97 3,100 3,100 Washington, Missouri Industrial Development Authority Revenue Bonds (Pauwels Transformer Project)/(Generale Bank LOC) 4.40%, 01/07/97 3,900 3,900 ------ 37,290 ------ MONTANA--0.29% Forsyth, Montana Pollution Control Financing Authority Revenue Bonds (Portland General Electric Coal Stripping Project) Series 1983B/(Swiss Bank LOC) 4.15%, 01/07/97 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) 4.20%, 01/07/97 6,995 6,995 ------ 13,495 ------ NEVADA--0.80% Clark County, Nevada Airport Improvement Revenue Refunding Bonds Series 1993A/(MBIA Insurance & National Westminster Bank PLC LOC)(d) 4.00%, 01/07/97 32,931 32,931 Nevada Housing Division Multi Family Housing Revenue Bonds Series 1989A/(FNMA LOC) 4.25%, 01/07/97 4,100 4,100 ------ 37,031 ------
33 40 SCHWAB MUNICIPAL MONEY FUND - ------------------------------------------------------------------------------ SCHEDULE OF INVESTMENTS (in thousands) December 31, 1996
Par Value -------- ----------- NEW HAMPSHIRE--0.17% New Hampshire Higher Education & Health Facilities Authority Revenue Bonds (VHA New England, Inc.) Series 1985B/(AMBAC Insurance & FNB Chicago SBPA) 4.00%, 01/07/97 $ 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) 4.20%, 01/07/97 7,000 7,000 ------ 8,000 ------ NEW JERSEY--0.13% New Jersey State Turnpike Authority Revenue Bonds Series 1991D/(FGIC Insurance & Societe Generale SBPA) 3.75%, 01/07/97 6,000 6,000 ------ NEW MEXICO--0.44% Albuquerque, New Mexico Airport Revenue Bonds Subordinated Lien Series 1996A/(Bayerische Landesbank Girozentrale LOC) 4.10%, 01/07/97 4,500 4,500 Albuquerque, New Mexico Gross Receipts Lodgers Tax Adjustable Rate Tender Revenue Bonds Series 1994/ (Canadian Imperial Bank of Commerce LOC) 4.10%, 01/07/97 700 700 Belen, New Mexico Industrial Development Revenue Bonds (Solo Cup, Inc. Project)/(Wachovia Bank LOC) 4.25%, 01/07/97 3,250 3,250 New Mexico State Highway Commercial Revenue Subordinate Lien Bonds Series 1996/(Canadian Imperial Bank of Commerce LOC) 3.70%, 01/07/97 12,000 12,000 ------ 20,450 ------ NEW YORK--1.64% Nassau County, New York Industrial Development Agency Civic Facilities Revenue Bonds (Cold Spring Harbor Laboratory Project)/(Morgan Guaranty Trust LOC) 4.90%, 01/01/97 4,100 4,100 New York City, New York General Obligation Bonds Series 1993 Subseries A-5/(Kredietbank LOC) 5.00%, 01/01/97 2,115 2,115 New York City, New York General Obligation Bonds Series 1993 Subseries A-8/(Morgan Guaranty Trust LOC) 5.00%, 01/01/97 15 15
34 41 - ------------------------------------------------------------------------------
Par Value -------- ----------- New York City, New York General Obligation Bonds Series 1994 Subseries A-9/(Morgan Guaranty Trust LOC) 4.05%, 01/07/97 $2,310 $2,310 New York City, New York General Obligation Bonds Series 1994 Subseries B-2/(Bank Austria AG SBPA & MBIA Insurance) 5.00%, 01/01/97 400 400 New York City, New York General Obligation Bonds Series 1995 Subseries B-10/(Union Bank of Switzerland LOC) 4.05%, 01/07/97 3,900 3,900 New York City, New York General Obligation Bonds Series 1995 Subseries B-8/(Bayerishe Landesbank Girozentrale LOC) 4.05%, 01/07/97 2,700 2,700 New York City, New York Housing Development Corp. Multi Family Housing Mortgage Revenue Bonds (Tribeca Towers Project) Series 1994a/(FNMA Collateral Investment Agreement) 4.05%, 01/07/97 4,800 4,800 New York City, New York Housing Development Corp. Special Obligation Revenue Bonds (East 96th Street Project) Series 1990A/(Bank of Tokyo-Mitsubishi LOC) 4.00%, 01/07/97 9,200 9,200 New York State Dormitory Authority Revenue Bonds (Masonic Hall Asylum)/(AMBAC Insurance & Credit Local de France LOC) 3.80%, 01/07/97 1,700 1,700 New York State Energy Research & Development Authority Electric Facilities Revenue Bonds (Long Island Lighting Co. Project)/(Toronto-Dominion Bank LOC) 4.00%, 01/07/97 500 500 New York State Energy Research & Development Authority Electric Facilities Revenue Bonds (Long Island Lighting Co. Project) Series 1993A/ (Toronto-Dominion Bank LOC) 4.05%, 01/07/97 100 100 New York State Energy Research & Development Authority Electric Facilities Revenue Bonds (Long Island Lighting Co. Project) Series 1994A/(Union Bank of Switzerland LOC) 4.00%, 01/07/97 3,000 3,000 New York State Energy Research & Development Authority Pollution Control Refunding Revenue Bonds (Orange & Rockland Utilities, Inc. Project) Series 1994A/(Societe Generale SBPA & FGIC Insurance) 3.80%, 01/07/97 2,100 2,100
35 42 SCHWAB MUNICIPAL MONEY FUND - ------------------------------------------------------------------------------ SCHEDULE OF INVESTMENTS (in thousands) December 31, 1996
Par Value -------- ----------- New York State Energy Research & Development Authority Pollution Control Revenue Refunding Bonds (Niagara Mohawk Power Project) Series 1985A/ (Toronto-Dominion Bank LOC) 4.70%, 01/01/97 $ 100 $ 100 New York State Job Development Authority Special Purpose Bonds Series A-1 Thru A-25/(State of New York Guaranty & Sumitomo Bank LOC) 5.00%, 01/01/97 700 700 New York State Local Government Assistance Corp. Revenue Bonds Series 1993A/(Credit Suisse & Union Bank of Switzerland LOC) 3.75%, 01/07/97 3,000 3,000 New York State Local Government Assistance Corp. Revenue Bonds Series 1994B/(Credit Suisse LOC) 4.00%, 01/07/97 15,100 15,100 New York State Local Government Assistance Corp. Revenue Bonds Series 1995F/(Toronto-Dominion Bank LOC) 4.00%, 01/07/97 7,300 7,300 New York State Local Government Assistance Corp. Revenue Bonds Series 1995G/(National Westminster Bank PLC LOC) 3.85%, 01/07/97 4,300 4,300 Triborough Bridge & Tunnel Authority, New York Special Obligation Bridge Revenue Bonds Series 1994/(FGIC SPA & FGIC Insurance) 4.00%, 01/07/97 6,400 6,400 Yonkers, New York Industrial Development Authority Civic Facilities Revenue Bonds (Consumers Union Facility Project)/(AMBAC Insurance & Credit Local de France SBPA) 3.90%, 01/07/97 2,500 2,500 ------ 76,340 ------ NORTH CAROLINA--1.76% North Carolina Medical Care Community Hospital Revenue Bonds (Moses H. Cone Memorial Hospital Project) 4.15%, 01/07/97 23,000 23,000 North Carolina Medical Care Community Hospital Revenue Bonds (Pooled Equipment Finance Project)/ (MBIA Insurance & Banque Paribas SBPA) 3.35%, 01/07/97 600 600 Wake County, North Carolina Industrial Facility & Pollution Control Financing Authority Revenue Bonds (Carolina Power & Light) Series 1985B/(Sumitomo Bank LOC) 4.20%, 01/07/97 2,900 2,900
36 43 - ------------------------------------------------------------------------------
Par Value -------- ----------- Wake County, North Carolina Industrial Facility & Pollution Control Financing Authority Revenue Bonds (Carolina Power & Light) Series 1985C/ (Sumitomo Bank LOC) 4.20%, 01/07/97 $55,050 $55,050 Wake County, North Carolina Pollution Control Revenue Bonds (Carolina Power & Light)/(Sumitomo Bank LOC) 5.05%, 01/01/97 400 400 ------ 81,950 ------ NORTH DAKOTA--0.43% 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) 4.15%, 01/07/97 8,010 8,010 Richland County, North Dakota Industrial Development Revenue Bonds (Minn-Dak Farmers Co-Op) Series 1986B/(Norwest Bank LOC) 4.40%, 01/07/97 1,000 1,000 Richland County, North Dakota Solid Waste Disposal Revenue Bonds (Minn-Dak Farmers Co-Op) Series 1996A/(Norwest Bank LOC) 4.40%, 01/07/97 11,000 11,000 ------ 20,010 ------ OHIO--0.56% Columbus, Ohio Electric System Revenue Bonds Series 1984/(Union Bank of Switzerland LOC) 3.35%, 01/07/97 6,580 6,580 Columbus, Ohio General Obligation Bonds Series 1995-1/(Westdeutsche Landesbank SBPA) 4.00%, 01/07/97 14,800 14,800 Ohio Air Quality Development Authority Revenue Bonds (JMG Funding, LP) Series 1994A/(Societe Generale LOC) 4.15%, 01/07/97 2,900 2,900 Ohio Housing Finance Agency Multi-Family Housing Revenue Bonds (Kenwood Congregate Retirement Community) Series 1985/(Morgan Guaranty Trust LOC) 3.50%, 01/07/97 2,000 2,000 ------ 26,280 ------
37 44 SCHWAB MUNICIPAL MONEY FUND - ------------------------------------------------------------------------------ SCHEDULE OF INVESTMENTS (in thousands) December 31, 1996
Par Value -------- ----------- OKLAHOMA--0.66% Muldrow, Oklahoma Public Works Authority Industrial Development Revenue Bonds (Oklahoma Foods Project)/(Rabobank Nederland N.V. LOC) 4.20%, 01/07/97 $ 6,300 $ 6,300 Oklahoma City, Oklahoma Industrial & Cultural Facilities Revenue Bonds (Oklahoma Christian College)/(Sumitomo Bank LOC) 4.38%, 01/02/97 9,000 9,000 Oklahoma Development Financing Authority Revenue Bonds (Shawnee Funding Ltd)/(Bank of Nova Scotia LOC) 4.25%, 01/07/97 4,000 4,000 Oklahoma State Student Loan Authority Student Loan Revenue Bonds Series 1996A/(SLMA LOC) 4.15%, 01/01/97 10,000 10,000 Tulsa, Oklahoma Industrial Development Authority Revenue Bonds (Hillcrest Medical Center) Series 1988/(Bank of Tokyo-Mitsubishi LOC) 4.15%, 01/07/97 670 670 Tulsa, Oklahoma Industrial Development Authority Revenue Bonds (Thomas & Betts Project) Series 1991/(Wachovia Bank LOC) 4.25%, 01/07/97 700 700 ------ 30,670 ------ OREGON--1.13% Medford, Oregon Hospital Facility Authority Revenue Bonds (Rogue Valley Manor Project) Series 1985/ (Banque Paribas LOC) 4.45%, 01/07/97 7,700 7,700 Oregon State Economic Development Commission Economic & Industrial Development Revenue Bonds/ (Wachovia Bank LOC) 4.15%, 01/07/97 4,100 4,100 Oregon State General Obligation Notes Series 1973F/ (Bank of Tokyo-Mitsubishi LOC) 4.00%, 01/07/97 11,185 11,185 Oregon State General Obligation Notes Series 1973H/ (Bank of Tokyo-Mitsubishi LOC) 4.00%, 01/07/97 24,700 24,700
38 45 - ------------------------------------------------------------------------------
Par Value -------- ----------- Port of Portland, Oregon Industrial Development Revenue Bonds (Schnitzer Steel Project)/(Comerica Bank LOC) 3.15%, 01/07/97 $5,000 $5,000 ------ 52,685 ------ PENNSYLVANIA--2.39% Emmaus, Pennsylvania General Authority Revenue Bonds (FSA Insurance & Credit Suisse SBPA) 5.00%, 01/07/97 40,000 40,000 Montgomery County, Pennsylvania Industrial Development Authority Revenue Bonds (Seton Medical Supply Co. Project)/(Banque Paribas LOC) 3.50%, 01/07/97 5,500 5,500 Pennsylvania Energy Development Authority Revenue Bonds (B & W Ebensberg Project) Series 1986/(Swiss Bank LOC) 4.10%, 01/07/97 2,050 2,050 Pennsylvania Higher Education Assistance Student Loan Adjustable Rate Tender Revenue Bonds/(SLMA LOC) 4.25%, 01/07/97 8,500 8,500 Quakertown, Pennsylvania Hospital Authority Revenue Bonds (Hospital Pooled Financing Group) Series 1985/(PNC Bank LOC) 4.15%, 01/07/97 15,000 15,000 Quakertown, Pennsylvania General Authority Revenue Pooled Bonds Financing Program Series 1996A/(PNC Bank LOC) 3.15%, 01/07/97 17,200 17,200 Sayre, Pennsylvania Health Care Facilities Authority Revenue Bonds (VHA Capital Finance Revenue) Series 1985B/(AMBAC Insurance & FNB Chicago SBPA) 4.00%, 01/07/97 6,700 6,700 Sayre, Pennsylvania Health Care Facilities Authority Revenue Bonds (VHA Capital Finance Revenue) Series 1985F/(AMBAC Insurance & FNB Chicago SBPA) 4.00%, 01/07/97 4,100 4,100 Washington County, Pennsylvania Higher Education Authority Revenue Bonds (Pooled Equipment Lease)/ (Sanwa Bank LOC) 4.15%, 01/07/97 12,100 12,100 ------- 111,150 -------
39 46 SCHWAB MUNICIPAL MONEY FUND - ------------------------------------------------------------------------------ SCHEDULE OF INVESTMENTS (in thousands) December 31, 1996
Par Value -------- ----------- RHODE ISLAND--0.04% Rhode Island Student Loan Authority Higher Education Revenue Bonds Series 1995-1/(National Westminster Bank PLC LOC) 4.15%, 01/07/97 $ 2,000 $ 2,000 ------ SOUTH CAROLINA--0.62% Dorchester County, South Carolina Pollution Control Revenue Bonds (BOC Group Inc.)/(Wachovia Bank LOC) 4.15%, 01/07/97 2,000 2,000 Greenville County, South Carolina Industrial Development Revenue Bonds (Quality Thermoforming Project)/(South Carolina National Bank LOC) 4.25%, 01/07/97 1,100 1,100 South Carolina Economic Development Authority Hospital Facility Revenue Bonds (Sanders Brothers Construction)/(Wachovia Bank LOC) 4.25%, 01/07/97 3,500 3,500 South Carolina Jobs Economic Development Authority Economic Development Revenue Bonds (Electric City Printing Project)/(Wachovia Bank of North Carolina LOC) 4.25%, 01/07/97 3,200 3,200 South Carolina Jobs Economic Development Authority Hospital Facilities Revenue Bonds (Baptist Health Care System)/(Credit Local de France LOC) 4.00%, 01/07/97 10,600 10,600 South Carolina Jobs Economic Development Authority Industrial Development Revenue Bonds (Ado Corp. Project)/(South Carolina National Bank LOC) 4.25%, 01/07/97 400 400 South Carolina State Port Authority Revenue Bonds (Junior Lien)/(South Carolina National Bank Line of Credit) 4.20%, 01/07/97 3,300 3,300 Spartanburg County, South Carolina Industrial Development Authority Revenue Bonds (Bemis, Inc.)/ (Wachovia Bank LOC) 4.15%, 01/07/97 4,750 4,750 ------ 28,850 ------
40 47 - ------------------------------------------------------------------------------
Par Value -------- ----------- SOUTH DAKOTA--0.34% South Dakota State Health & Education Facilities Authority Revenue Bonds (McKenna Hospital) Series 1994/(Banque Paribas SBPA & MBIA Insurance) 4.20%, 01/07/97 $16,000 $16,000 ------ TENNESSEE--2.36% Chattanooga, Tennessee Health Education & Housing Facility Board Revenue Bonds (Baylor School Project)/(Sun Bank LOC) 4.15%, 01/07/97 1,700 1,700 Metropolitan Nashville & Davidson County, Tennessee Health & Education Facility Board Revenue Bonds Series A/(FGIC Insurance & Barclays Bank PLC Line of Credit) 4.15%, 01/07/97 1,200 1,200 Metropolitan Nashville & Davidson County, Tennessee Industrial Development Multi Family Housing Revenue Bonds (Arbor Crest Apartments) Series 1985B/(Wachovia Bank LOC) 4.15%, 01/07/97 4,000 4,000 Metropolitan Nashville & Davidson County, Tennessee Industrial Development Multi Family Housing Revenue Bonds (Arbor Knoll Apartments) Series 1985A/(Wachovia Bank LOC) 4.15%, 01/07/97 1,000 1,000 Metropolitan Nashville & Davidson County, Tennessee Industrial Development Multi Family Housing Revenue Bonds (Western Hills Apartments)/ (Sumitomo Bank LOC) 4.50%, 01/07/97 7,035 7,035 Montgomery County, Tennessee Public Building Authority Pooled Financing Revenue County Loans/ (NationsBank LOC) 4.30%, 01/07/97 25,000 25,000 Sevier County, Tennessee Public Building Authority Local Government Public Improvement Bonds Series 1995C-1/(AMBAC Insurance & Kredietbank SBPA) 4.15%, 01/07/97 4,000 4,000 Sevier County, Tennessee Public Building Authority Local Government Public Improvement Bonds Series 1995C-2/(AMBAC Insurance & Kredietbank SBPA) 4.15%, 01/07/97 4,600 4,600
41 48 SCHWAB MUNICIPAL MONEY FUND - ------------------------------------------------------------------------------ SCHEDULE OF INVESTMENTS (in thousands) December 31, 1996
Par Value -------- ----------- Sevier County, Tennessee Public Building Authority Local Government Public Improvement Bonds Series 1995E-3/(AMBAC Insurance & Kredietbank SBPA) 4.15%, 01/07/97 $ 3,000 $ 3,000 Sevier County, Tennessee Public Building Authority Local Government Public Improvement Bonds Series 1996A-2/(AMBAC Insurance & Kredeitbank SBPA) 4.15%, 01/07/97 7,000 7,000 Sevier County, Tennessee Public Building Authority Local Government Public Improvement Bonds Series 1996C-3/(AMBAC Insurance & Kredietbank SBPA)(d) 4.15%, 01/07/97 10,000 10,000 Sevier County, Tennessee Public Building Authority Local Government Public Improvement Bonds Series 1996D-1/(AMBAC Insurance & Kredietbank SBPA) 4.15%, 01/07/97 3,430 3,430 Sevier County, Tennessee Public Building Authority Local Government Public Improvement Bonds Series 1996E-1/(AMBAC Insurance & Kredietbank SBPA) 4.15%, 01/07/97 7,150 7,150 Sevier County, Tennessee Public Building Authority Local Government Public Improvement Bonds Series 1996E-4/(AMBAC Insurance & Kredietbank SBPA) 4.15%, 01/07/97 3,000 3,000 Sevier County, Tennessee Public Building Authority Local Government Public Improvement Bonds Series 1996E-5/(AMBAC Insurance & Kredietbank SBPA) 4.15%, 01/07/97 1,750 1,750 Sevier County, Tennessee Public Building Authority Local Government Public Improvement Bonds Series 1996F-1/(AMBAC Insurance & Kredietbank SBPA)(d) 4.15%, 01/07/97 9,000 9,000 Sevier County, Tennessee Public Building Authority Local Government Public Improvement Bonds Series 1996F-2/(AMBAC Insurance & Kredietbank SBPA)(d) 4.15%, 01/07/97 9,000 9,000 Sevier County, Tennessee Public Building Authority Local Government Public Improvement Bonds Series 1996G/(AMBAC Insurance & Kredietbank SBPA) 4.15%, 01/07/97 7,000 7,000 Sevier County, Tennessee Public Building Authority Local Government Public Improvement Bonds Series II-C/(AMBAC Insurance & Kredietbank SBPA) 3.00%, 01/07/97 1,100 1,100 ------- 109,965 -------
42 49 - ------------------------------------------------------------------------------
Par Value -------- ----------- TEXAS -- 4.97% Amarillo, Texas Health Facilities Corp. Hospital Revenue Bonds (High Plains Baptist Hospital) Series 1985/(Banque Paribas LOC) 4.35%, 01/07/97 $ 9,300 $ 9,300 Bexar County, Texas Health Facilities Development Corp. Revenue Bonds (Chandler Memorial Home Project) Series 1995/(Banc One LOC) 4.20%, 01/07/97 5,170 5,170 Capital, Texas Industrial Development Corp. Revenue Bonds (National Service Industries Project)/ (Wachovia Bank LOC) 4.15%, 01/07/97 4,950 4,950 Central Waco, Texas Development Corp. Industrial Development Revenue Bonds (H.E. Butt Grocery)/ (Texas Commerce Bank LOC) 4.15%, 01/07/97 3,330 3,330 Collin County, Texas Housing Finance Corp. Multi Family Housing Revenue Bonds (Huntington Apts.)/(Fleet Bank, N.A. LOC) 4.26%, 01/07/97 6,150 6,150 Euless, Texas Industrial Development Authority Revenue Bonds (Ferguson Enterprises, Inc.)/ (Wachovia Bank LOC) 4.25%, 01/07/97 4,850 4,850 Hays, Texas Memorial Health Facilities Development Corp. Hospital Revenue Bonds (Central Texas Medical Center Project) Series 1990A/(Swiss Bank LOC) 4.20%, 01/07/97 8,800 8,800 Hays, Texas Memorial Health Facilities Development Corp. Hospital Revenue Bonds (Central Texas Medical Center Project) Series 1990B/(Swiss Bank LOC) 4.20%, 01/07/97 15,800 15,800 Lavaca-Navidad River Authority, Texas Water Supply System Contract Revenue Bonds (Formosa Plastics Corp. Project)/(Canadian Imperial Bank of Commerce LOC) 4.30%, 01/07/97 13,900 13,900 Lower Neches Valley Authority, Texas Industrial Development Corp. Pollution Control Revenue Bonds (Mobil Corp. Neches River Treatment Project) Series 1994 4.15%, 01/07/97 12,000 12,000 Midlothian, Texas Industrial Development Corp. Pollution Control Revenue Bonds (Box-Crow Co. Project)/(Union Bank of Switzerland LOC) 4.50%, 01/07/97 1,400 1,400
43 50 SCHWAB MUNICIPAL MONEY FUND - ------------------------------------------------------------------------------ SCHEDULE OF INVESTMENTS (in thousands) December 31, 1996
Par Value -------- ----------- North Texas Higher Education Authority Inc. Texas Student Loan Revenue Bonds Series 1987/(Credit Communal de Belgique LOC) 4.10%, 01/07/97 $20,000 $20,000 North Texas Higher Education Authority Inc. Texas Student Loan Revenue Refunding Bonds Series 1996B/ (AMBAC Insurance & SLMA SBPA) 4.25%, 01/07/97 4,000 4,000 North Texas Higher Education Authority Inc. Texas Student Loan Revenue Refunding Bonds Series 1996D/ (AMBAC Insurance & SLMA SBPA) 4.25%, 01/07/97 4,000 4,000 Panhandle Plains, Texas Higher Education Loan Authority Student Loan Revenue Bonds Series 1992A/ (SLMA LOC) 4.10%, 01/07/97 9,800 9,800 Panhandle Plains, Texas Higher Education Loan Authority Student Loan Revenue Bonds Series 1993A/ (SLMA LOC) 4.10%, 01/07/97 4,500 4,500 Panhandle Plains, Texas Higher Education Loan Authority Student Loan Revenue Bonds Series 1995A/ (SLMA LOC) 4.10%, 01/07/97 5,000 5,000 Port Authority of Corpus Christi, Texas Neuces County Marine Terminal Revenue Bonds (Reynolds Metals Co.)/(Barclays Bank PLC LOC) 4.60%, 01/07/97 3,100 3,100 Robertson County, Texas Industrial Development Corp. Industrial Development Revenue Bonds (Sanderson Farms Project) Series 1995/(Harris Trust & Savings Bank LOC) 4.30%, 01/07/97 4,300 4,300 Silsbee, Texas Health Facilities Development Revenue Bonds (Silsbee Doctor's Hospital)/(Citibank LOC) 4.25%, 01/07/97 2,500 2,500 Texas Health Facilities Development Corp. Adjustable Convertible Extendable Securities Revenue Bonds (North Texas Pooled Health) Series 1985B/(Banque Paribas LOC) 4.35%, 01/07/97 19,900 19,900 Texas Small Business Industrial Development Corp. Industrial Development Revenue Bonds (Texas Public Facility Capital Access)/(Credit Suisse & National Westminster Bank PLC LOC) 4.15%, 01/07/97 41,795 41,795
44 51 - ------------------------------------------------------------------------------
Par Value -------- ----------- Texas State Revenue Refunding Bonds (Veterans Housing Assistance Fund) Series 1995 4.00%, 01/07/97 $23,600 $ 23,600 Trinity River Authority, Texas Pollution Control Revenue Bonds (Lafarge Corp. Project)/(Banque Nationale de Paris LOC) 4.20%, 01/07/97 3,100 3,100 ------- 231,245 ------- VERMONT--0.09% Vermont Education & Health Buildings Financing Agency Revenue Bonds (VHA New England) Series 1985G/(AMBAC Insurance & FNB Chicago SBPA) 4.00%, 01/07/97 4,240 4,240 ------- VIRGINIA--0.28% King George County, Virginia Industrial Development Authority Solid Waste Disposal Facility (Garnet of Virginia Project) Series 1996/(Morgan Guaranty Trust LOC) 4.20%, 01/07/97 3,700 3,700 Lynchburg, Virginia Industrial Development Authority Hospital Facility Revenue Bonds (First Mortgage VHA/Mid-Atlantic States, Inc.) Series 1985A/ (AMBAC Insurance & Mellon Bank SBPA) 4.00%, 01/07/97 500 500 Lynchburg, Virginia Industrial Development Authority Hospital Facility Revenue Bonds (First Mortgage VHA/Mid-Atlantic States, Inc.) Series 1985B/ (AMBAC Insurance & Mellon Bank SBPA) 4.00%, 01/07/97 400 400 Lynchburg, Virginia Industrial Development Authority Hospital Facility Revenue Bonds (First Mortgage VHA/Mid-Atlantic States, Inc.) Series 1985C/ (AMBAC Insurance & Mellon Bank SBPA) 4.00%, 01/07/97 600 600 Lynchburg, Virginia Industrial Development Authority Hospital Facility Revenue Bonds (First Mortgage VHA/Mid-Atlantic States, Inc.) Series 1985F/ (AMBAC Insurance & Mellon Bank SBPA) 4.00%, 01/07/97 5,600 5,600 Virginia Small Business Finance Authority Industrial Development Revenue Bonds (Dong Sung America)/ (First Union National Bank of North Carolina LOC) 4.10%, 01/07/97 2,380 2,380 ------- 13,180 -------
45 52 SCHWAB MUNICIPAL MONEY FUND - ------------------------------------------------------------------------------ SCHEDULE OF INVESTMENTS (in thousands) December 31, 1996
Par Value -------- ----------- WASHINGTON--1.08% Pierce County, Washington Economic Development Bonds (McFarland Cascade Project)/(U.S. Bank of Washington LOC) 4.60%, 01/07/97 $ 2,000 $ 2,000 Port of Kalama,Washington Public Corp. Port Facility Revenue (Con Agra, Inc. Project)/(Morgan Guaranty Trust LOC) 4.00%, 01/07/97 6,100 6,100 Snohomish County, Washington Public Utilities District #1 Electric Revenue Bonds (Generation Systems)/(MBIA Insurance & IBJ SBPA) 4.00%, 01/07/97 20,000 20,000 Spokane County, Washington Industrial Development Corp. Revenue Bonds (Metal Sales Manufacturing Corp.)/(Star Bank LOC) 4.30%, 01/07/97 3,150 3,150 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) 4.15%, 01/07/97 12,600 12,600 Washington State Housing Finance Commission Multi Family Mortgage Revenue Bonds (Canyon Lake II Project) Series 1993A/(U.S. Bank of Washington LOC) 4.20%, 01/07/97 4,565 4,565 Washington State Housing Finance Commission Multi Family Mortgage Revenue Bonds (Canyon Lake II Project) Series 1994/(U.S. Bank of Washington LOC) 5.00%, 01/01/97 735 735 Washington State Housing Finance Commission Non-Profit Housing Revenue Bonds (Snohomish YMCA)/ (U.S. Bank of Washington LOC) 4.75%, 01/01/97 1,000 1,000 ------ 50,150 ------ WEST VIRGINIA--0.05% West Virginia State Hospital Finance Authority Hospital Revenue Bonds (St. Joseph's Hospital Project) Series 1987/(Bank of Tokyo-Mitsubishi LOC) 4.15%, 01/07/97 2,100 2,100 ------ WISCONSIN--0.66% Chilton, Wisconsin Industrial Development Revenue Bonds (Kaytee Products Inc. Project) Series 1995/(Bank One Milwaukee LOC) 4.30%, 01/07/97 1,675 1,675
46 53 - ------------------------------------------------------------------------------
Par Value -------- ----------- Fairwater, Wisconsin Industrial Development Revenue Bonds (Dean Foods Co. Project) Series 1990/ (Wachovia Bank LOC) 4.15%, 01/07/97 $ 1,450 $ 1,450 Lac Du Flambeau Band of Lake Superior, Wisconsin Special Obligation Revenue Bonds (Simpson Electric Co. Project) Series 1985/(Barclays Bank PLC LOC) 4.15%, 01/07/97 6,100 6,100 Milwaukee, Wisconsin Redevelopment Authority Industrial Development Revenue Bonds (Field Container Corp. LP) Series 1994/(Northern Trust LOC) 4.40%, 01/07/97 5,000 5,000 Prentice, Wisconsin Industrial Development Refunding Revenue Bonds (Blount, Inc.) Series 1992/(Morgan Guaranty Trust LOC) 4.15%, 01/07/97 2,025 2,025 Sheboygan, Wisconsin Pollution Control Financing Authority Revenue Bonds (Wisconsin Power & Light Co.) 4.60%, 01/07/97 1,000 1,000 Wisconsin State Health & Education Facilities Authority Revenue Bonds (Sinai Samaritan) Series 1994A/(Marshall & Ilsley Bank LOC) 4.20%, 01/07/97 13,415 13,415 --------- 30,665 --------- WYOMING--0.01% Lincoln County, Wyoming Pollution Control Financing Authority Revenue Bonds (Exxon Corp. Project) Series 1987B 5.10%, 01/01/97 500 500 --------- TOTAL VARIABLE RATE OBLIGATIONS (Cost $2,792,885) 2,792,886 --------- TAX-EXEMPT COMMERCIAL PAPER--14.74%(b) ARIZONA--1.60% Maricopa County, Arizona Pollution Control Financing Authority Pollution Control Revenue Bonds (Southern California Edison Palos Verdes Project) Series 1985B 3.70%, 01/16/97 5,600 5,600 Maricopa County, Arizona Pollution Control Financing Authority Pollution Control Revenue Bonds (Southern California Edison Palos Verdes Project) Series 1985C 3.70%, 01/16/97 4,500 4,500 3.60%, 02/18/97 4,000 4,000 3.50%, 04/07/97 11,750 11,750
47 54 SCHWAB MUNICIPAL MONEY FUND - ------------------------------------------------------------------------------ SCHEDULE OF INVESTMENTS (in thousands) December 31, 1996
Par Value -------- ----------- Maricopa County, Arizona Pollution Control Financing Authority Pollution Control Revenue Bonds (Southern California Edison Palos Verdes Project) Series 1985D 3.45%, 02/20/97 $ 7,550 $ 7,550 Maricopa County, Arizona Pollution Control Financing Authority Pollution Control Revenue Bonds (Southern California Edison Palos Verdes Project) Series 1985E 3.45%, 02/20/97 12,030 12,030 Maricopa County, Arizona Pollution Control Financing Authority Pollution Control Revenue Bonds (Southern California Edison Palos Verdes Project) Series 1985G 3.70%, 01/16/97 4,000 4,000 3.50%, 04/07/97 6,100 6,100 Salt River Project, Arizona Agricultural Improvement Program Commercial Paper/(Multiple Credit Enhancements) 3.45%, 02/20/97 7,000 7,000 3.45%, 03/06/97 12,050 12,050 ------ 74,580 ------ CALIFORNIA--0.28% Orange County, California Local Transportation Authority Sales Tax Revenue Commercial Paper/ (IBJ/LOC) 3.60%, 01/10/97 13,200 13,200 ------ COLORADO--1.00% Denver, Colorado City & County Airport System Revenue Bonds Series 1990/(Sanwa Bank LOC) 3.80%, 01/08/97 3,000 3,000 3.80%, 01/08/97 7,520 7,520 Platte River Power Authority, Colorado Adjustable Tender Electric Revenue Subordinate Lien Commercial Paper Bonds Series S-1/(Morgan Guaranty Trust SBPA) 3.70%, 02/10/97 17,400 17,400 3.55%, 03/06/97 3,000 3,000 3.50%, 04/07/97 15,500 15,500 ------ 46,420 ------ GEORGIA--1.28% Burke County, Georgia Development Authority Pollution Control Revenue Bonds (Oglethorpe Power Project) Series A/(Credit Suisse LOC) 3.65%, 01/14/97 21,000 21,000 3.70%, 01/16/97 14,400 14,400 3.50%, 03/05/97 12,100 12,100 3.55%, 03/06/97 11,850 11,850 ------ 59,350 ------
48 55 - ------------------------------------------------------------------------------
Par Value -------- ----------- KANSAS--0.15% Burlington, Kansas Pollution Control Revenue Bonds (Kansas Power & Light Co. Project) Series 1987A/ (Toronto-Dominion Bank LOC) 3.50%, 04/07/97 $ 1,800 $ 1,800 Burlington, Kansas Pollution Control Revenue Bonds (Kansas Power & Light Co. Project) Series 1987B/ (Deutsche Bank LOC) 3.70%, 01/16/97 1,200 1,200 3.70%, 02/10/97 2,200 2,200 3.55%, 03/06/97 2,000 2,000 ------- 7,200 ------- KENTUCKY--0.05% Pendleton County, Kentucky Multi County Lease Revenue Bonds (Kentucky Association of Counties Lease Program) Series 1989/(Commonwealth Bank of Australia LOC) 3.50%, 03/05/97 2,300 2,300 ------- LOUISIANA--2.02% Louisiana State Adjustable Tender General Obligation Refunding Bonds Series 1991A/(Credit Local de France LOC) 3.70%, 01/16/97 4,690 4,690 3.70%, 02/10/97 13,950 13,950 3.50%, 04/07/97 4,275 4,275 Louisiana State Pollution Control Revenue Refunding Bonds (St. James Parish/Texaco Project) Series 1988B 3.50%, 01/09/97 70,930 70,930 ------- 93,845 ------- MICHIGAN--2.36% Michigan State Building Authority Commercial Paper Note Series 1/(Canadian Imperial Bank of Commerce LOC) 3.50%, 05/01/97 110,000 110,000 ------- MINNESOTA--0.61% Rochester, Minnesota Health Care Facility Revenue Bonds (Mayo Foundation/Mayo Medical Center) Series 1988E/(Credit Suisse SBPA) 3.70%, 01/16/97 7,300 7,300 Rochester, Minnesota Health Care Facility Revenue Bonds (Mayo Foundation/Mayo Medical Center) Series 1988F/(Credit Suisse SBPA) 3.70%, 01/16/97 2,100 2,100 3.60%, 01/16/97 800 800 3.50%, 04/07/97 3,700 3,700
49 56 SCHWAB MUNICIPAL MONEY FUND - ------------------------------------------------------------------------------ SCHEDULE OF INVESTMENTS (in thousands) December 31, 1996
Par Value -------- ----------- Rochester, Minnesota Health Care Facility Revenue Bonds (Mayo Foundation/Mayo Medical Center) Series 1992A 3.50%, 04/07/97 $ 1,000 $ 1,000 Rochester, Minnesota Health Care Facility Revenue Bonds (Mayo Foundation/Mayo Medical Center) Series 1992B 3.70%, 01/16/97 2,100 2,100 Rochester, Minnesota Health Care Facility Revenue Bonds (Mayo Foundation/Mayo Medical Center) Series 1992C 3.70%, 01/16/97 4,300 4,300 3.55%, 03/06/97 7,200 7,200 ------ 28,500 ------ NEW YORK--0.06% New York State Power Authority Tax-Exempt Commercial Paper Program 3.40%, 02/26/97 3,000 3,000 ------ NORTH CAROLINA--1.84% North Carolina Eastern Municipal Power Agency Power System Revenue Bonds/(Canadian Imperial Bank of Commerce LOC) 3.50%, 02/10/97 40,000 40,000 North Carolina Eastern Municipal Power Agency Power System Revenue Bonds Series B/(Morgan Guaranty Trust & Union Bank of Switzerland LOC) 3.55%, 02/18/97 45,435 45,435 ------ 85,435 ------ OHIO--0.18% Ohio State Water Development Authority Pollution Control Facilities Revenue Bonds (Cleveland Illuminating Project)/(FGIC Insurance) 3.50%, 03/05/97 8,400 8,400 ------ TEXAS--3.06% Austin, Travis, & Williams Counties, Texas Utility Systems Tax-Exempt Commercial Paper Notes Series 1993A/(Morgan Guaranty Trust LOC) 3.60%, 01/15/97 15,000 15,000 Houston, Texas Water & Sewer Commercial Paper Notes Series A/(Swiss Bank & West Deutsche Landesbank Revolving Credit Agreement) 3.55%, 02/13/97 20,000 20,000 3.50%, 03/06/97 30,000 30,000
50 57 - ------------------------------------------------------------------------------
Par Value -------- ----------- Lower Colorado River Authority Tax-Exempt Commercial Paper Series D/(Morgan Guaranty Trust Revolving Credit Agreement) 3.45%, 02/27/97 $10,000 $ 10,000 3.45%, 03/12/97 11,600 11,600 Texas Municipal Power Agency Commercial Paper Notes/(Multiple Credit Enhancements) 3.50%, 01/31/97 49,025 49,025 3.45%, 02/20/97 6,075 6,075 ------- 141,700 ------- VIRGINIA--0.21% Chesterfield County, Virginia Pollution Control Revenue Bonds Series 1987B (Virginia Electric Power Co.) 3.45%, 02/20/97 5,000 5,000 Louisa, Virginia Industrial Development Authority Pollution Control Revenue Bonds 3.45%, 02/20/97 5,000 5,000 ------- 10,000 ------- WYOMING--0.04% Gillette County, Wyoming Pollution Control Revenue Bonds (PacifiCorp Project)/(Deutsche Bank LOC) 3.55%, 02/07/97 1,800 1,800 ------- TOTAL TAX-EXEMPT COMMERCIAL PAPER 685,730 (Cost $685,730) ------- TAX AND REVENUE ANTICIPATION NOTES--6.87%(b) CALIFORNIA--3.57% California School Cash Reserve Program Authority Pooled Tax & Revenue Anticipation Notes Series 1996-97/(Multiple Credit Enhancements) 3.85%, 07/02/97 77,455 77,790 Cupertino, California Unified School District Tax & Revenue Anticipation Notes Series 1996-97 3.80%, 07/01/97 6,500 6,518 Fresno, California Tax & Revenue Anticipation Notes Series 1996-97 3.94%, 08/14/97 17,000 17,056 Los Angeles County, California Unified School District Tax & Revenue Anticipation Notes Series 1996-97 3.84%, 06/30/97 1,500 1,505
51 58 SCHWAB MUNICIPAL MONEY FUND - ------------------------------------------------------------------------------ SCHEDULE OF INVESTMENTS (in thousands) December 31, 1996
Par Value -------- ----------- Los Angeles, California Tax & Revenue Anticipation Notes Series 1996-97 3.92%, 06/19/97 $ 4,000 $ 4,010 3.90%, 06/19/97 10,000 10,027 3.90%, 06/19/97 10,000 10,027 3.87%, 06/19/97 7,000 7,020 3.83%, 06/19/97 10,000 10,030 Martinez, California Unified School District Tax & Revenue Anticipation Notes Series 1996-97 3.80%, 07/01/97 3,300 3,309 Mountain View/Los Altos, California Unified High School District Tax & Revenue Anticipation Notes Series 1996-97 3.80%, 07/02/97 2,500 2,508 Mountain View, California School District Tax & Revenue Anticipation Notes Series 1996-97 3.80%, 07/02/97 2,000 2,007 San Francisco, California City & County Unified School District Tax & Revenue Anticipation Notes Series 1996-97 3.98%, 07/24/97 5,000 5,014 San Lorenzo, California Unified School District Tax & Revenue Anticipation Notes Series 1996-97 3.80%, 07/01/97 4,800 4,813 Sunnyvale, California Elementary School District Tax & Revenue Anticipation Notes Series 1996-97 3.80%, 07/01/97 4,500 4,515 ------- 166,149 ------- KANSAS--0.33% Topeka, Kansas Temporary Notes Series 1996-1997B 3.87%, 07/02/97 13,810 13,851 Wichita, Kansas Temporary Notes Series 1996B 3.85%, 11/20/97 1,325 1,330 ------- 15,181 ------- PENNSYLVANIA--0.10% Berks County, Pennsylvania Tax & Revenue Anticipation Notes Series 1997A/(Mellon Bank LOC) 3.65%, 12/31/97 4,600 4,632 ------- PUERTO RICO -- 1.08% Puerto Rico Commonwealth Tax & Revenue Anticipation Notes Series 1996A 3.43%, 07/30/97 50,000 50,161 -------
52 59 - ------------------------------------------------------------------------------
Par Value -------- ----------- TEXAS--1.79% Texas State Tax & Revenue Anticipation Notes Series 1996-97 3.92%, 08/29/97 $17,180 $ 17,270 3.91%, 08/29/97 60,000 60,318 3.80%, 08/29/97 5,800 5,834 ------- 83,422 ------- TOTAL TAX AND REVENUE ANTICIPATION NOTES (Cost $319,545) 319,545 ------- MANDATORY PUT BONDS--5.91%(b) CALIFORNIA--0.40% California Higher Education Loan Authority Student Loan Revenue Bonds Series 1987A/(National Westminster Bank PLC LOC) 3.95%, 07/01/97 2,500 2,500 California Higher Education Loan Authority Student Loan Revenue Bonds Series 1987B/(SLMA LOC) 3.95%, 07/01/97 5,000 5,000 California Higher Education Loan Authority Student Loan Revenue Bonds Series 1995E-5/(SLMA LOC) 3.75%, 06/01/97 11,000 11,000 ------- 18,500 ------- FLORIDA--0.08% Orange County, Florida Industrial Development Authority Revenue Bonds (General Accident Insurance Co. of America Project) 3.64%, 06/01/97 3,500 3,500 ------- ILLINOIS--1.10% Chicago, Illinois General Obligation Tender Notes Series 1996/(Landesbank Hessen-Thuringen Girozentrale LOC) 3.10%, 02/04/97 51,000 51,000 ------- KENTUCKY--0.05% Calvert City, Kentucky Industrial Development Revenue Refunding Bonds (SKW Alloys Lease Rent) Series 87/(Bayerische Vereinsbank LOC) 3.90%, 04/01/97 2,235 2,235 -------
53 60 SCHWAB MUNICIPAL MONEY FUND - ------------------------------------------------------------------------------ SCHEDULE OF INVESTMENTS (in thousands) December 31, 1996
Par Value -------- ----------- SOUTH DAKOTA--0.49% South Dakota Housing Development Authority Home Ownership Mortgage Series 1996E 3.75%, 11/13/97 $23,000 $ 23,000 ------- TENNESSEE--0.10% Metropolitan Nashville & Davidson County, Tennessee Industrial Development Board Revenue Bonds (General Accident Insurance) Series 1986 3.75%, 05/01/97 4,700 4,700 ------- TEXAS--3.27% Greater East Texas Higher Education Authority Student Loan Revenue Bonds Series 1992A/(SLMA LOC) 4.05%, 09/01/97 17,000 17,000 Greater East Texas Higher Education Authority Student Loan Revenue Bonds Series 1992B-1/(SLMA LOC) 4.05%, 07/01/97 14,000 14,000 Greater East Texas Higher Education Authority Student Loan Revenue Bonds Series 1992B-2/(SLMA LOC) 4.15%, 09/01/97 6,000 6,000 Greater East Texas Higher Education Authority Student Loan Revenue Bonds Series 1993A/(SLMA LOC) 3.85%, 05/01/97 48,150 48,150 Greater East Texas Higher Education Authority Student Loan Revenue Bonds Series 1993B-2/(SLMA LOC) 3.85%, 06/01/97 6,500 6,500 Greater East Texas Higher Education Authority Student Loan Revenue Bonds Series 1993B-3/(SLMA LOC) 3.70%, 04/01/07 11,000 11,000 Greater East Texas Higher Education Authority Student Loan Revenue Bonds Series 1993B-6/(SLMA LOC) 3.85%, 05/01/97 40,000 40,000 Greater East Texas Higher Education Authority Student Loan Revenue Bonds Series 1995B/(SLMA LOC) 4.05%, 07/01/97 10,000 10,000 ------- 152,650 ------- UTAH--0.22% Utah County, Utah Environmental Improvement Revenue Bonds (USX Corp. Project)/(Wachovia Bank LOC) 3.65%, 03/03/97 10,100 10,100 -------
54 61 - ------------------------------------------------------------------------------
Par Value -------- ----------- WASHINGTON--0.20% Washington State Housing Finance Commission Multi Family Mortgage Revenue Bonds Series 1A-S/(FGIC Insurance) 3.80%, 06/02/97 $9,270 $ 9,270 ------- TOTAL MANDATORY PUT BONDS 274,955 (Cost $274,955) ------- VARIABLE RATE TENDER OPTION BOND PARTNERSHIPS--2.86%(a)(c) CONNECTICUT--0.16% Connecticut State General Obligation General Purpose Public Improvement Tender Option Bond Partnership Series 1991A (BTP-151)/(Bankers Trust Tender Option) 4.20%, 01/07/97 7,365 7,365 ------- GEORGIA--0.33% Georgia State Public Improvement General Obligation Tender Option Bond Partnership Series 1993B & 1993C (BTP-135)/(Bankers Trust Tender Option) 4.20%, 01/07/97 3,865 3,865 Georgia State Public Improvement General Obligation Tender Option Bond Partnership Series 1993B & 1993C (BTP-140)/(Bankers Trust Tender Option) 4.20%, 01/07/97 4,575 4,575 Georgia State Public Improvement General Obligation Tender Option Bond Partnership Series 1994B (BTP-148)/(Bankers Trust Tender Option) 4.20%, 01/07/97 7,100 7,100 ------- 15,540 ------- ILLINOIS--0.33% Chicago, Illinois Metropolitan Water Reclamation District Greater Chicago General Obligation Tender Option Bond Partnership (Cook County) (BTP-71)/ (Automated Data Processing, Inc. Tender Option) 4.30%, 01/07/97 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) 4.35%, 01/07/97 5,365 5,365 ------- 15,235 -------
55 62 SCHWAB MUNICIPAL MONEY FUND - ------------------------------------------------------------------------------ SCHEDULE OF INVESTMENTS (in thousands) December 31, 1996
Par Value -------- ----------- MARYLAND--0.08% 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) 4.35%, 01/07/97 $ 3,621 $ 3,621 ------ MINNESOTA--0.10% Minnesota State Various Purpose General Obligation Sports Health Club Tax Tender Option Bond Partnership (BTP-65)/(Automated Data Processing, Inc. Tender Option & Escrowed to Maturity with Government Securities) 4.30%, 01/07/97 4,455 4,455 ------ SOUTH CAROLINA--0.12% South Carolina State Capital Improvement Revenue Refunding Tender Option Bond Partnership (BTP-147)/(Bankers Trust Tender Option) 4.15%, 01/07/97 5,370 5,370 ------ TEXAS--0.76% Regents of the University of Texas Permanent University Fund Tender Option Bond Partnership Series 1992A (BTP-143)/(Escrowed to Maturity with Government Securities, Permanent University Fund Guaranty & Bankers Trust Tender Option) 4.20%, 01/07/97 10,685 10,685 Texas State General Obligation General Purpose Public Improvement Tender Option Bond Partnership Series 1993B (BTP-116)/(Bankers Trust Tender Option) 4.20%, 01/07/97 10,170 10,170 Texas State Public Finance Authority General Obligation Tender Option Bond Partnership Series 1994 (BTP-127)/(Bankers Trust Tender Option) 4.20%, 01/07/97 14,980 14,980 ------ 35,835 ------ VIRGINIA--0.28% Chesterfield County, Virginia General Obligation Public Improvement & Refunding Tender Option Bond Partnership Series 1991 (BTP-136)/(Bankers Trust Tender Option) 4.20%, 01/07/97 6,025 6,025
56 63 - ------------------------------------------------------------------------------
Par Value -------- ----------- Fairfax County, Virginia Public Improvement General Obligation Tender Option Bond Partnership Series 1991A (BTP-131)/(Bankers Trust Tender Option & Escrowed to Maturity with Government Securities) 4.20%, 01/07/97 $7,146 $ 7,146 ------- 13,171 ------- WASHINGTON--0.40% King County, Washington Unlimited Tax General Obligation Tender Option Bond Partnership Series 1993C (BTP-56)/(Automated Data Processing, Inc. Tender Option) 4.32%, 01/07/97 6,365 6,365 Washington State General Obligation Tender Option Bond Partnership Series 1990B (BTP-152)/(Bankers Trust Tender Option) 4.20%, 01/07/97 5,655 5,655 Washington State Public Power Supply System Nuclear Project Number 2 Revenue Refunding Tender Option Bond Partnership Series 1993B (BTP-137)/(Bankers Trust Tender Option) 4.25%, 01/07/97 6,685 6,684 ------- 18,704 ------- WISCONSIN--0.30% Wisconsin State Public Improvement General Obligation Tender Option Bond Partnership (BTP-62)/(Automated Data Processing, Inc. Tender Option & Escrowed to Maturity with Government Securities) 4.30%, 01/07/97 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) 4.20%, 01/07/97 9,480 9,480 ------- 13,980 ------- TOTAL VARIABLE RATE TENDER OPTION BOND PARTNERSHIPS (Cost $133,276) 133,276 ------- REVENUE ANTICIPATION NOTES--1.82%(b) FLORIDA--0.17% Orange County, Florida School District Revenue Anticipation Notes Series 1996A 3.60%, 04/15/97 8,000 8,014 -------
57 64 SCHWAB MUNICIPAL MONEY FUND - ------------------------------------------------------------------------------ SCHEDULE OF INVESTMENTS (in thousands) December 31, 1996
Par Value -------- ----------- NEW YORK--1.65% New York City, New York Revenue Anticipation Notes Series 1996B/(Multiple Credit Enhancements) 3.80%, 06/30/97 $25,000 $25,084 3.77%, 06/30/97 50,000 50,176 Rockland County, New York Revenue Anticipation Notes Series 1996 3.73%, 05/16/97 1,300 1,302 ------ 76,562 ------ TOTAL REVENUE ANTICIPATION NOTES 84,576 (Cost $84,576) ------ VARIABLE RATE TENDER OPTION BONDS--1.80%(a) GEORGIA--0.34% Georgia State Public Improvement General Obligation Tender Option Bonds Series 1995B (Citi-157)/(Citibank Tender Option) 4.15%, 01/07/97 16,000 16,000 ------ NEVADA--0.54% Nevada State General Obligation Tender Option Bonds (Colorado River Community Project) Series 1994 (Citi-143)/(Citibank Tender Option) 4.33%, 01/07/97 25,000 25,000 ------ TEXAS--0.26% Harris County, Texas Toll Road Sub-Lien Highway Tender Option Bonds (Citi-138)/(Citibank Tender Option) 4.31%, 01/07/97 7,000 7,000 Harris County, Texas Toll Road Sub-Lien Highway Tender Option Bonds (Citi-139)/(Citibank Tender Option) 4.31%, 01/07/97 5,000 5,000 ------ 12,000 ------ WASHINGTON--0.66% King County, Washington Department of Metropolitan Services Limited Tax General Obligation Tender Option Bonds Series 1994A (Citi-136)/(Citibank Tender Option) 4.20%, 01/07/97 15,570 15,570 King County, Washington Department of Metropolitan Services Limited Tax General Obligation Tender Option Bonds Series 1994A (Citi-137)/(Citibank Tender Option) 4.20%, 01/07/97 10,000 10,000
58 65 - ------------------------------------------------------------------------------
Par Value -------- ----------- Washington State Public Power Supply System Nuclear Project Number 2 Revenue Tender Option Bonds Series 1990C (Citi-145)/(Citibank Tender Option, FGIC Insurance & Escrowed to Maturity with Government Securities) 4.20%, 01/07/97 $ 5,000 $ 5,000 ------ 30,570 ------ TOTAL VARIABLE RATE TENDER OPTION BONDS (Cost $83,570) 83,570 ------ BOND ANTICIPATION NOTES--1.64%(b) NEW JERSEY--1.64% Atlantic City, New Jersey Bond Anticipation Notes Series 1996-97 3.70%, 11/11/97 30,000 30,136 East Brunswick Township, New Jersey Bond Anticipation Notes Series 1996-97 3.67%, 05/23/97 14,885 14,917 Hackensack, New Jersey Bond Anticipation Notes Series 1996-97 3.50%, 12/18/97 6,178 6,207 Mahwah Township, New Jersey School District Bond Anticipation Notes 4.00%, 07/25/97 4,225 4,231 Rockaway Township, New Jersey Bond Anticipation Notes 4.00%, 07/30/97 1,910 1,916 Rockaway Township, New Jersey Special Assessment Bond Anticipation Notes Series 1996-97 4.00%, 07/30/97 5,439 5,454 West Orange, New Jersey Bond Anticipation Notes Series 1996-97 3.47%, 01/13/97 3,951 3,952 Westwood, New Jersey Bond Anticipation Notes Series 1996-97 3.80%, 08/19/97 9,700 9,726 ------ TOTAL BOND ANTICIPATION NOTES (Cost $76,539) 76,539 ------ OPTIONAL PUT BONDS--1.45%(b) ILLINOIS -- 0.11% Chicago, Illinois O'Hare International Airport Revenue Bonds (General Airport Second Lien) Series B/(Westpac Banking Corp. LOC) 4.15%, 01/01/97 5,000 5,000 ------
59 66 SCHWAB MUNICIPAL MONEY FUND - ------------------------------------------------------------------------------ SCHEDULE OF INVESTMENTS (in thousands) December 31, 1996
Par Value -------- ----------- MISSOURI--1.28% Missouri State Environmental Improvement & Energy Resources Authority Pollution Control Revenue Bonds (Union Electric Co.) Series 1985A/(Swiss Bank LOC) 3.65%, 06/01/97 $31,000 $31,000 Missouri State Environmental Improvement & Energy Resources Authority Pollution Control Revenue Bonds (Union Electric Co.) Series 1985B/(Union Bank of Switzerland LOC) 3.65%, 06/01/97 28,500 28,500 ------ 59,500 ------ NEW HAMPSHIRE--0.06% New Hampshire Higher Education & Health Facilities Authority Revenue Bonds (Dartmouth College) Series 1985A-G 3.80%, 06/01/97 2,980 2,980 ------ TOTAL OPTIONAL PUT BONDS (Cost $67,480) 67,480 ------ REVENUE BONDS--1.42%(b) ARKANSAS--0.04% Jonesboro, Arkansas Sales & Use Tax Revenue Bonds Series 1996/(FSA Insurance) 3.80%, 05/01/97 2,000 2,000 ------ FLORIDA--0.07% Hillsborough County, Florida School Board Tax Revenue Bonds/(AMBAC Insurance) 3.50%, 10/01/97 3,350 3,387 ------ INDIANA--0.26% Indiana State Transportation Financing Authority Highway Revenue Bonds Series A/(AMBAC Insurance) 3.80%, 06/01/97 1,000 1,002 Indiana University Student Fee Revenue Bonds Series J 3.50%, 08/01/97 800 802 Indianapolis, Indiana Local Public Import Bond Bank Notes Series 1996E/(American International Group Investment Agreement) 3.53%, 07/10/97 10,000 10,030 ------ 11,834 ------
60 67 - ------------------------------------------------------------------------------
Par Value -------- ----------- KENTUCKY--0.02% University of Kentucky University Revenue Bonds (Consolidated Education Building) Series 1987J/ (Escrowed to Maturity with Government Securities) 3.55%, 05/01/97 $1,000 $1,028 ----- LOUISIANA--0.08% Louisiana Stadium & Exposition District Hotel Occupancy Tax Revenue Bonds Series 1996/(FGIC Insurance) 3.64%, 07/01/97 685 687 Louisiana State Recovery District Sales Tax Revenue Refunding Bonds/(MBIA Insurance) 3.08%, 07/01/97 3,000 3,025 ----- 3,712 ----- MASSACHUSETTS--0.15% Massachusetts State Water Pollution Abatement Treatment Loan Program Series 1996A 3.52%, 08/01/97 7,020 7,079 ----- MONTANA--0.03% Montana State Housing Finance Authority Facilities Revenue Bonds (Benefits Health Care Project) Series 1996/(AMBAC Insurance) 3.89%, 09/01/97 1,550 1,556 ----- NEW MEXICO--0.12% New Mexico State Severance Tax Revenue Bonds Series 1996A 3.75%, 07/01/97 1,987 2,003 Santa Fe, New Mexico Single Family Mortgage Revenue Bonds Series 1995B-1/(FGIC Investment Agreement) 3.70%, 06/29/97 3,500 3,500 ----- 5,503 ----- NEW YORK--0.20% New York State Dormitory Authority Revenue Bonds (City University) Series 1987A/(Escrowed to Maturity with Government Securities) 3.60%, 07/01/97 3,595 3,745 New York State Urban Development Corp. Senior Lien Revenue Bonds 3.60%, 07/01/97 5,555 5,591 ----- 9,336 -----
61 68 SCHWAB MUNICIPAL MONEY FUND - ------------------------------------------------------------------------------ SCHEDULE OF INVESTMENTS (in thousands) December 31, 1996
Par Value -------- ----------- OHIO--0.09% Ohio State Building Authority State Facilities (DAS Data Control Project) Series 1988A/(Escrowed to Maturity with Government Securities) 3.49%, 10/01/97 $4,000 $ 4,204 ------ OREGON--0.11% Oregon State Housing & Community Services Department Mortgage Revenue Bonds (Single Family Mortgage Program) Series 1996C/(Escrowed to Maturity with Government Securities) 3.85%, 05/15/97 5,000 5,000 ------ SOUTH CAROLINA--0.10% South Carolina State Education Assistance Authority Revenue Refunding Bonds Student Loan Senior Lien Series 1993A1 3.66%, 09/01/97 4,490 4,506 ------ SOUTH DAKOTA--0.02% Sioux Falls Sales Tax Revenue Bonds Series 1996A/ (AMBAC Insurance) 3.70%, 11/15/97 445 445 Sioux Falls Sales Tax Revenue Bonds Series 1996B/ (AMBAC Insurance) 3.70%, 11/15/97 570 570 ------ 1,015 ------ TEXAS--0.03% Burlington, Texas Waterworks & Sewer Revenue Refunding Bonds Series 1989A/(AMBAC Insurance) 3.67%, 06/01/97 1,345 1,362 ------ WASHINGTON--0.10% Washington State Public Power Supply System Nuclear Facility #2 Revenue Bonds/(Escrowed to Maturity with Government Securities) 3.95%, 07/01/97 4,250 4,445 ------ TOTAL REVENUE BONDS (Cost $65,967) 65,967 ------
62 69 - ------------------------------------------------------------------------------
Par Value -------- ----------- GENERAL OBLIGATIONS--1.31%(b) ALASKA--0.02% Valdez, Alaska Unlimited General Obligation Bonds Series 1990/(MBIA Insurance) 3.70%, 01/01/97 $1,000 $1,000 ----- COLORADO--0.03% Southern Suburban Park & Recreation District, Colorado Unlimited General Obligation Bonds Series 1996/(FGIC Insurance) 3.70%, 12/15/97 1,210 1,218 ----- DELAWARE--0.03% Wilmington, Delaware General Obligation Bonds Series 1992A/(MBIA Insurance) 3.85%, 07/01/97 1,500 1,508 ----- HAWAII--0.02% Hawaii State Unlimited General Obligation Bonds Series 1992BZ 3.65%, 10/01/97 1,000 1,013 ----- IDAHO--0.02% Ada & Canyon Counties, Idaho Joint School District #2 Meridan Unlimited General Obligation Bonds Series 1996 3.60%, 07/30/97 1,000 1,005 ----- ILLINOIS--0.04% Chicago Park District Limited Tax General Obligation Bonds/(MBIA Insurance) 3.60%, 01/01/98 1,000 1,004 Cook County, Illinois High School District #205 Thornton Township/(FGIC Insurance & Escrowed to Maturity with Government Securities) 2.90%, 06/01/97 1,000 1,007 ----- 2,011 ----- KANSAS--0.02% Overland Park, Kansas Temporary Notes Unlimited General Obligation Bonds Series 1996B 3.68%, 04/01/97 1,100 1,100 -----
63 70 SCHWAB MUNICIPAL MONEY FUND - ------------------------------------------------------------------------------ SCHEDULE OF INVESTMENTS (in thousands) December 31, 1996
Par Value -------- ----------- LOUISIANA--0.12% Louisiana State Unlimited Tax General Obligation Bonds/(MBIA Insurance) 3.45%, 05/15/97 $5,390 $5,441 ----- MASSACHUSETTS--0.09% Massachusetts State General Obligation Consolidated Lien Bonds Series 1989D/(MBIA Insurance) 3.50%, 10/01/97 1,000 1,024 Massachusetts Unlimited Tax General Obligation Bonds/(FGIC Insurance) 3.40%, 06/01/97 3,205 3,263 ----- 4,287 ----- NEVADA--0.03% Clark County, Nevada School District General Obligation Bonds Series 1991A/(MBIA Insurance) 3.45%, 06/01/97 1,500 1,518 ----- NEW JERSEY--0.06% Newark, New Jersey Unlimited General Obligation Bonds Series 1996/(FSA Insurance) 3.60%, 10/01/97 2,760 2,778 ----- NEW MEXICO--0.11% Albuquerque, New Mexico Municipal School District 12 Unlimited General Obligation Bonds 3.50%, 08/01/97 5,000 5,085 ----- NEW YORK--0.02% Monroe County, New York Unlimited Tax Public Improvement General Obligation Bonds 3.54%, 03/01/97 1,000 1,002 ----- OHIO--0.10% Ohio State Higher Education Facility Community Revenue Series 1987A/(AMBAC Insurance) 3.53%, 05/01/97 2,400 2,422 Ohio State Natural Resource Capital Facilities General Obligation Bonds Series 1995B 3.60%, 10/01/97 2,300 2,310 ----- 4,732 -----
64 71 - ------------------------------------------------------------------------------
Par Value -------- ----------- OKLAHOMA--0.08% Oklahoma City, Oklahoma Unlimited General Obligation Bonds Series 1993 3.65%, 08/01/97 $3,485 $3,611 ----- OREGON--0.07% Oregon State Veterans Welfare Unlimited Tax General Obligation Bonds/(MBIA Insurance) 3.35%, 03/01/97 3,300 3,320 ----- PENNSYLVANIA--0.02% Pittsburgh, Pennsylvania General Obligation Bonds Series A/(AMBAC Insurance) 3.52%, 09/01/97 1,000 1,003 ----- SOUTH CAROLINA--0.17% South Carolina State Capital Improvement Unlimited General Obligation Bonds Series 1992B 3.50%, 03/01/97 4,500 4,520 South Carolina State General Obligation Bonds Series U 3.41%, 02/01/97 1,715 1,721 York County, South Carolina School District #3 (Rock Hill) Series 1996A/(FSA Insurance) 3.80%, 03/01/97 1,370 1,377 ----- 7,618 ----- TENNESSEE--0.02% Shelby County, Tennessee Public Improvement General Obligation Bonds Series 1989A/(Escrowed to Maturity with Government Securities) 3.45%, 08/01/97 1,020 1,050 ----- TEXAS--0.04% Houston, Texas Limited Tax General Obligation Bonds 3.35%, 03/01/97 2,000 2,007 ----- WASHINGTON--0.14% Washington State General Obligation Bonds Series R-1992-C 3.60%, 09/01/97 2,500 2,521 Washington State Motor Vehicle Fuel Tax General Obligation Bonds Series R-1992-D 3.60%, 09/01/97 3,315 3,343 ----- 5,864 -----
65 72 SCHWAB MUNICIPAL MONEY FUND - ------------------------------------------------------------------------------ SCHEDULE OF INVESTMENTS (in thousands) December 31, 1996
Par Value -------- ----------- WISCONSIN--0.06% Wisconsin State Unlimited General Obligation Bonds Series 1989 3.52%, 05/01/97 $1,000 $ 1,011 Wisconsin State Unlimited General Obligation Bonds Series 1989C-1/(Escrowed to Maturity with Government Securities) 3.65%, 05/01/97 250 255 Wisconsin State Unlimited General Obligation Bonds Series 1989C-2/(Escrowed to Maturity with Government Securities) 3.60%, 05/01/97 1,395 1,424 --------- 2,690 --------- TOTAL GENERAL OBLIGATIONS (Cost $60,861) 60,861 --------- TAX ANTICIPATION NOTES--0.15%(b) NEW YORK--0.15% New York City Tax Anticipation Notes Series 1996 3.45%, 02/12/97 6,900 6,908 --------- TOTAL TAX ANTICIPATION NOTES (Cost $6,908) 6,908 --------- CERTIFICATES OF PARTICIPATION--0.02%(b) TEXAS--0.02% Houston, Texas Water Conveyance System Contract Certificates of Participation Series E/(AMBAC Insurance) 3.55%, 12/15/97 1,000 1,017 --------- TOTAL CERTIFICATES OF PARTICIPATION (Cost $1,018) 1,017 --------- TOTAL INVESTMENTS--100% (Cost $4,653,310) $4,653,310 =========
66 73 - ------------------------------------------------------------------------------ NOTES TO SCHEDULE 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 as of the report date. 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 Fund 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 Municipal Money Fund. Any resale by the Fund must be in an exempt transaction, normally to a qualified institutional buyer. At December 31, 1996, the aggregate value of private placement securities held by the Fund was $133,276,000 which represented 2.98% of net assets. All of these private placement investments 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. 67 74 SCHWAB MUNICIPAL MONEY FUND - ------------------------------------------------------------------------------ NOTES TO SCHEDULE OF INVESTMENTS (continued) December 31, 1996
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 IBJ Industrial Bank of Japan 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. 68 75 - ------------------------------------------------------------------------------ STATEMENT OF ASSETS AND LIABILITIES (in thousands) December 31, 1996 ASSETS Investments, at value (Cost: $4,653,310) $4,653,310 Cash 170 Interest receivable 29,665 Receivable for Fund shares sold 9,889 Prepaid expenses 159 ---------- Total assets 4,693,193 ---------- LIABILITIES Payable for: Dividends 16,779 Investments purchased 194,494 Fund shares redeemed 3,931 Investment advisory and administration fee 154 Transfer agency and shareholder service fees 283 Other 553 ---------- Total liabilities 216,194 ---------- Net assets applicable to outstanding shares $4,476,999 ========== NET ASSETS CONSIST OF: Paid-in-capital $4,479,324 Accumulated net realized loss on investments sold (2,325) ---------- $4,476,999 ========== PRICING OF SHARES $0.00001 par value (unlimited shares authorized) Outstanding Sweep Shares 3,871,203 Outstanding Value Advantage Shares 608,121 ---------- 4,479,324 Net asset value, offering and redemption price per each Sweep and Value Advantage Share $1.00
See accompanying Notes to Financial Statements. 69 76 SCHWAB MUNICIPAL MONEY FUND - ------------------------------------------------------------------------------ STATEMENT OF OPERATIONS (in thousands) Year ended December 31, 1996 Interest income $142,454 -------- Expenses: Investment advisory and administration fee 16,768 Transfer agency and shareholder service fees: Sweep Shares 16,364 Value Advantage Shares 952 Custodian fees 447 Registration fees 549 Professional fees 83 Shareholder reports 248 Trustees' fees 22 Insurance and other expenses 76 -------- 35,509 Less: expenses reduced (see Note 4) (9,796) -------- Total expenses incurred by Fund 25,713 -------- Net investment income 116,741 Net realized loss on investments sold (477) -------- Increase in net assets resulting from operations $116,264 ========
See accompanying Notes to Financial Statements. 70 77 - ------------------------------------------------------------------------------ STATEMENTS OF CHANGES IN NET ASSETS (in thousands)
YEAR ENDED DECEMBER 31, 1996 1995 ------------ ----------- Operations: Net investment income $ 116,741 $ 105,737 Net realized loss on investments sold (477) (21) ------------ ----------- Increase in net assets resulting from operations 116,264 105,716 ------------ ----------- Dividends to shareholders from net investment income: Sweep Shares (104,911) (104,288) Value Advantage Shares (11,830) (1,449) ------------ ----------- Total dividends to shareholders (116,741) (105,737) ------------ ----------- Capital share transactions (at $1.00 per share): Proceeds from shares sold 13,705,095 10,148,323 Net asset value of shares issued in reinvestment of dividends 112,199 100,567 Less payments for shares redeemed (12,904,337) (9,700,301) ------------ ----------- Increase in net assets from capital share transactions 912,957 548,589 ------------ ----------- Total increase in net assets 912,480 548,568 Net assets: Beginning of period 3,564,519 3,015,951 ------------ ----------- End of period $ 4,476,999 $ 3,564,519 ============ ===========
See accompanying Notes to Financial Statements. 71 78 SCHWAB MUNICIPAL MONEY FUND - ------------------------------------------------------------------------------ NOTES TO FINANCIAL STATEMENTS Year ended December 31, 1996 1. DESCRIPTION OF THE FUND The Schwab Municipal Money Fund (the "Fund"), formerly known as the Schwab Tax-Exempt Money Fund, is a series of The Charles Schwab Family of Funds (the "Trust"), a no-load, open-end investment management company organized as a Massachusetts business trust on October 20, 1989 and registered under the Investment Company Act of 1940, as amended. The Fund offers multiple classes of shares -- the Sweep Shares ("Sweep Shares") and Value Advantage Shares ("Value Advantage Shares"). Both classes represent interests in the same portfolio of investments of the 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 Fund, the Trust also offers -- the Schwab Money Market Fund, Schwab Government Money Fund, Schwab U.S. Treasury Money Fund, Schwab California Municipal Money Fund, Schwab New York Municipal Money Fund, Schwab Value Advantage Money Fund(R), Schwab Institutional Advantage Money Fund(R) and Schwab Retirement Money Fund(R). The assets of each series are segregated and accounted for separately. 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, interest income and realized gains (losses) -- Security transactions are accounted for on a trade date basis (date the order to buy or sell is executed). Interest income is accrued daily and includes amortization of premium on investments. Realized gains and losses from 72 79 - ------------------------------------------------------------------------------ security transactions are determined on an identified cost basis. Income and realized gains (losses) are allocated daily to each class of shares based on the value of settled shares outstanding of each respective class. Dividends to shareholders -- The Fund declares a daily dividend, equal to its net investment income for that day, payable monthly. Dividends paid by the 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. Expenses -- Expenses arising in connection with the Fund are charged directly to the Fund. Expenses common to all series of the Trust are generally allocated to each series in proportion to their relative net assets. Expenses attributable to both classes of shares are allocated daily to each class 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. Federal income taxes -- It is the 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. The Fund is considered a separate entity for tax purposes. 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, the Fund pays an annual fee, payable monthly, of 0.46% of the first $1 billion of average daily net assets, 0.41% of the next $1 billion, and 0.40% of such assets in excess of $2 billion. The Investment Manager has reduced a portion of its fee for the year ended December 31, 1996 (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 0.45% and 0.25% of 73 80 SCHWAB MUNICIPAL MONEY FUND - ------------------------------------------------------------------------------ NOTES TO FINANCIAL STATEMENTS Year ended December 31, 1996 average daily net assets of the Sweep Shares and Value Advantage Shares, respectively. Schwab has reduced a portion of its fees for the year ended December 31, 1996 (see Note 4). Officers and trustees -- Certain officers and trustees of the Trust are also officers and/or directors of the Investment Manager and/or Schwab. During the year ended December 31, 1996, 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 Fund incurred fees of $22,000 related to the Trust's unaffiliated trustees. 4. EXPENSES REDUCED BY THE INVESTMENT MANAGER AND SCHWAB The Investment Manager and Schwab reduced a portion of their fees in order to limit the Fund's ratio of operating expenses to average net assets. For the year ended December 31, 1996, the total of such fees reduced by the Investment Manager and Schwab was $8,734,000 and $1,062,000, respectively (see Note 7). 5. INVESTMENT TRANSACTIONS Purchases, sales and maturities of investment securities during the year ended December 31, 1996, aggregated (in thousands) $9,595,595 and $8,526,966, respectively. 74 81 - ------------------------------------------------------------------------------ 6. CAPITAL SHARE TRANSACTIONS The 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 Fund. Transactions in capital shares (at $1.00 per share) were as follows (in thousands):
Year ended December 31, 1996 1995* ------------ ----------- Proceeds from shares sold: Sweep Shares $ 12,710,212 $ 9,911,852 Value Advantage Shares 994,883 236,471 ------------ ----------- Total 13,705,095 10,148,323 Net asset value of shares issued in reinvestment of dividends: Sweep Shares 102,508 99,813 Value Advantage Shares 9,691 754 ------------ ----------- Total 112,199 100,567 Less payments for shares redeemed: Sweep Shares (12,347,201) (9,623,759) Value Advantage Shares (557,136) (76,542) ------------ ----------- Total (12,904,337) (9,700,301) Total increase in net assets from capital share transactions $ 912,957 $ 548,589 ============ ===========
- --------------- * The Value Advantage Shares commenced operations on July 7, 1995. 75 82 SCHWAB MUNICIPAL MONEY FUND - ------------------------------------------------------------------------------ NOTES TO FINANCIAL STATEMENTS Year ended December 31, 1996 7. FINANCIAL HIGHLIGHTS For a share outstanding throughout each period:
Sweep Shares -------------------------------------------------------------- For the year ended December 31, 1996 1995 1994 1993 1992 -------------------------------------------------------------- Net asset value at beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 Income from investment operations - --------------------------------- Net investment income 0.03 0.03 0.02 0.02 0.03 Net realized and unrealized gain (loss) on investments -- -- -- -- -- ---------- ---------- ---------- ---------- ---------- Total from investment operations 0.03 0.03 0.02 0.02 0.03 Less distributions - ------------------ Dividends from net investment income (0.03) (0.03) (0.02) (0.02) (0.03) Distributions from realized gain on investments -- -- -- -- -- ---------- ---------- ---------- ---------- ---------- Total distributions (0.03) (0.03) (0.02) (0.02) (0.03) ---------- ---------- ---------- ---------- ---------- Net asset value at end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ========== ========== ========== ========== ========== Total return 2.92% 3.30% 2.32% 1.93% 2.49% - ------------ Ratios/Supplemental data - ------------------------ Net assets, end of period (000s) $3,868,919 $3,403,837 $3,015,951 $2,423,317 $1,744,903 Ratio of expenses to average net assets+ 0.66% 0.66% 0.65% 0.63% 0.63% Ratio of net investment income to average net assets+ 2.89% 3.25% 2.31% 1.92% 2.45%
- --------------- + The information contained in the above table is based on actual expenses for the periods, after giving effect to the portion of expenses reduced and absorbed by the Investment Manager and Schwab. Had these expenses not been reduced and absorbed, the Fund's expense and net investment income ratios would have been: Ratio of expenses to average net assets 0.90% 0.91% 0.91% 0.93% 0.94% Ratio of net investment income to average net assets 2.65% 3.00% 2.05% 1.62% 2.14%
76 83 - ------------------------------------------------------------------------------ 7. FINANCIAL HIGHLIGHTS (continued)
Value Advantage Shares ----------------------------- Year ended Period ended December 31, December 31, 1996 1995 1 ------------------------ Net asset value at beginning of period $ 1.00 $ 1.00 Income from investment operations - -------------------------------------- Net investment income 0.03 0.02 Net realized and unrealized gain (loss) on investments -- -- -------- -------- Total from investment operations 0.03 0.02 Less distributions - ------------------ Dividends from net investment income (.03) (0.02) Distributions from realized gain on investments -- -- -------- -------- Total distributions (.03) (0.02) -------- -------- Net asset value at end of period $ 1.00 $ 1.00 ======== ======== Total return (not annualized) 3.14% 1.68% - ------------ Ratios/Supplemental data - ------------------------ Net assets, end of period (000s) $608,080 $160,682 Ratio of expenses to average net assets + 0.45% 0.45%* Ratio of net investment income to average net assets + 3.10% 3.50%*
- --------------- + The information contained in the above table is based on actual expenses for the periods, after giving effect to the portion of expenses reduced and absorbed by the Investment Manager and Schwab. Had these expenses not been reduced and absorbed, the Fund's expense and net investment income ratios would have been: Ratio of expenses to average net assets 0.75% 0.95%* Ratio of net investment income to average net assets 2.80% 3.00%*
1 Period from July 7, 1995 (commencement of operations) to December 31, 1995. * Annualized 77 84 - ------------------------------------------------------------------------------ To the Board of Trustees and Shareholders of the Schwab Municipal Money Fund (Formerly Schwab Tax-Exempt Money Fund) In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and 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 Municipal Money Fund (one of the series constituting The Charles Schwab Family of Funds, hereafter referred to as the "Trust") at December 31, 1996, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each period 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 audit 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, 1996 by correspondence with the custodian and brokers, provide a reasonable basis for the opinion expressed above. PRICE WATERHOUSE LLP San Francisco, California January 31, 1997 78 85 SCHWAB MUNICIPAL MONEY FUND (Formerly Schwab Tax-Exempt Money Fund) - ------------------------------------------------------------------------------ PROXY VOTING RESULTS A special meeting of the shareholders of Schwab Municipal Money Fund Sweep and Value Advantage Shares was held on December 16, 1996. The results of votes taken among shareholders on proposals before them are listed below. PROPOSAL 1 Election of Trustees.
Number of Number of Shares Voted For Shares Withheld ---------------- --------------- Charles R. Schwab 2,177,586,545 68,868,932 Donald F. Dorward 2,175,977,763 70,477,714 Robert G. Holmes 2,176,986,628 69,468,849 William J. Klipp 2,177,033,619 69,421,858 Timothy F. McCarthy 2,178,397,232 68,058,245 Donald R. Stephens 2,178,457,737 67,997,740 Michael W. Wilsey 2,177,900,523 68,554,954
PROPOSAL 2 To approve amending the Fund's investment policy concerning Alternative Minimum Tax (AMT) investments.
# of Shares Voted % of Shares Voted --------------------- --------------------- For 1,882,452,437 83.80% Against 210,979,970 9.39% Abstain 153,023,066 6.81% ------------------ -------------- TOTAL 2,246,455,473 100.00% ================== ==============
PROPOSAL 3.1 To approve changes to restrictions regarding borrowing and lending.
# of Shares Voted % of Shares Voted --------------------- --------------------- For 1,856,614,183 82.65% Against 243,842,343 10.85% Abstain 145,998,947 6.50% ------------------ -------------- TOTAL 2,246,455,473 100.00% ================== ==============
PROPOSAL 3.2 To approve changes to restrictions regarding issuance of senior securities.
# of Shares Voted % of Shares Voted --------------------- --------------------- For 1,858,198,226 82.72% Against 241,828,457 10.76% Abstain 146,428,790 6.52% ------------------ -------------- TOTAL 2,246,455,473 100.00% ================== ==============
79 86 SCHWAB MUNICIPAL MONEY FUND - ------------------------------------------------------------------------------ PROXY VOTING RESULTS (continued) PROPOSAL 3.3 To approve change in restriction regarding compliance with the diversification requirements of the 1940 Act.
# of Shares Voted % of Shares Voted --------------------- --------------------- For 1,871,120,255 83.29% Against 227,582,153 10.13% Abstain 147,753,065 6.58% ------------------ -------------- TOTAL 2,246,455,473 100.00% ================== ==============
PROPOSAL 3.4 To approve change in restriction regarding investment in Industrial Development Revenue Bonds issued by "unseasoned issuers".
# of Shares Voted % of Shares Voted --------------------- --------------------- For 1,851,480,835 82.42% Against 248,281,611 11.05% Abstain 146,693,027 6.53% ------------------ -------------- TOTAL 2,246,455,473 100.00% ================== ==============
PROPOSAL 3.5 To approve change in restriction regarding investment in "restricted securities".
# of Shares Voted % of Shares Voted --------------------- --------------------- For 1,856,080,332 82.62% Against 243,484,598 10.84% Abstain 146,890,543 6.54% ------------------ -------------- TOTAL 2,246,455,473 100.00% ================== ==============
PROPOSAL 3.6 To approve change in restriction regarding investment in shares of other investment companies.
# of Shares Voted % of Shares Voted --------------------- --------------------- For 1,867,452,496 83.13% Against 232,233,285 10.34% Abstain 146,769,692 6.53% ------------------ -------------- TOTAL 2,246,455,473 100.00% ================== ==============
80 87 SCHWABFUNDS FAMILY(R) The SchwabFunds Family includes a variety of funds to help meet your investment needs. You can diversify your portfolio in a single step with our asset allocation funds. Or you can customize your portfolio with a combination of our stock funds as well as our taxable and tax-advantaged bond and money funds. SCHWAB ASSET ALLOCATION FUNDS Schwab Asset Director(R) -- High Growth Fund Schwab Asset Director -- Balanced Growth Fund Schwab Asset Director -- Conservative Growth Fund Schwab OneSource Portfolios -- Growth Allocation Schwab OneSource Portfolios -- Balanced Allocation SCHWAB STOCK FUNDS Schwab 1000 Fund(R) Schwab S&P 500 Fund Schwab Analytics Fund(TM) Schwab Small-Cap Index Fund(R) Schwab International Index Fund(R) Schwab OneSource Portfolios -- International SCHWAB BOND FUNDS Schwab Government Bond Funds -- Long-Term and Short/Intermediate Schwab Tax-Free Bond Funds -- Long-Term and Short/Intermediate Schwab California Tax-Free Bond Funds -- Long-Term and Short/Intermediate SCHWAB MONEY MARKET FUNDS Schwab offers an array of money market funds* that seek high current income with safety and liquidity. Choose from taxable or tax-advantaged alternatives. Many can be linked to your Schwab account to "sweep" cash balances automatically when you're between investments. Or, for your larger cash reserves, choose one of our Value Advantage Investments(R). Please call 1-800-2 NO-LOAD for a free prospectus and brochure for any of the SchwabFunds(R). Each prospectus provides more complete information, including charges and expenses. Please read it carefully before investing. This report must be preceded or accompanied by a current prospectus. * Investments in money market funds are neither insured nor guaranteed by the U.S. government, and there is no assurance that the funds will be able to maintain a stable share price of $1. 88 ============== BULK RATE U.S. POSTAGE PAID CHARLES SCHWAB ============== SCHWABFUNDS FAMILY(R) [LOGO] 101 Montgomery Street San Francisco, California 94104 INVESTMENT ADVISOR Charles Schwab Investment Management, Inc. 101 Montgomery Street, San Francisco, CA 94104 DISTRIBUTOR Charles Schwab & Co., Inc. 101 Montgomery Street, San Francisco, CA 94104 This report is not authorized for distribution to prospective investors unless preceded or accompanied by a current prospectus. (C)1997 Charles Schwab & Co., Inc. All rights reserved. Member SIPC/NYSE. TF4500R(2/97) CRS 11011 Printed on recycled paper. -----END PRIVACY-ENHANCED MESSAGE-----