NOTES TO FINANCIAL STATEMENTS
For the year ended December 31, 1995
Deferred organization costs -- Costs incurred in connection with the organization of the Fund and its initial
registration with the Securities and Exchange Commission and with various states are amortized on a straight-line
basis over a five-year period from the Fund's commencement of operations.
Expenses -- Expenses arising in connection with the Fund are charged directly to the Fund. Expenses common to
all series of the Trust are allocated to each series in proportion to their relative net assets. Expenses attributable to
both classes of shares 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.
Interest income and realized gains (losses) -- Interest income is recorded on the accrual basis and includes
amortization of premium on investments. Realized gains and losses from security transactions are determined on
an identified cost basis. Income and realized gains (losses) are allocated daily to each class of shares based on
the value of settled shares outstanding of each respective class.
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 .46% of the first $1 billion of
average daily net assets, .41