-----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, SEL9G1U+5xJtjZI0AofCwReRDaq0lCdpnLht94VMkT48JiFOAectPYXUaME8/fn1 aIlFIBHTjt/IJpAPbt2xJw== 0000950134-05-022254.txt : 20051128 0000950134-05-022254.hdr.sgml : 20051128 20051128141659 ACCESSION NUMBER: 0000950134-05-022254 CONFORMED SUBMISSION TYPE: 497 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 20051128 DATE AS OF CHANGE: 20051128 EFFECTIVENESS DATE: 20051128 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SCHWAB CHARLES FAMILY OF FUNDS CENTRAL INDEX KEY: 0000857156 IRS NUMBER: 000000000 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 497 SEC ACT: 1933 Act SEC FILE NUMBER: 033-31894 FILM NUMBER: 051228060 BUSINESS ADDRESS: STREET 1: 101 MONTGOMERY ST CITY: SAN FRANCISCO STATE: CA ZIP: 94104 BUSINESS PHONE: 415-627-7000 MAIL ADDRESS: STREET 1: 101 MONTGOMERY ST CITY: SAN FRANCISCO STATE: CA ZIP: 94104 497 1 f14445e497.txt 497 SCHWAB MONEY FUNDS SWEEP INVESTMENTS(R) SCHWAB FUNDS LOGO Prospectus April 30, 2005 As Amended November 28, 2005 - Schwab Money Market Fund TM - Schwab Government Money Fund TM - Schwab U.S. Treasury Money Fund TM As with all mutual funds, the Securities and Exchange Commission (SEC) has not approved these securities or passed on whether the information in this prospectus is adequate and accurate. Anyone who indicates otherwise is committing a federal crime. [CHARLES SCHWAB LOGO] SCHWAB MONEY FUNDS SWEEP INVESTMENTS(R) ABOUT THE FUNDS Schwab Money Market Fund TM.............................. 2 Schwab Government Money Fund TM.......................... 6 Schwab U.S. Treasury Money Fund TM....................... 10 Fund management.......................................... 14 INVESTING IN THE FUNDS Buying/selling shares.................................... 16 Selling/exchanging shares................................ 17 Transaction policies..................................... 18 Dividends and taxes...................................... 19
ABOUT THE FUNDS The Schwab Money Funds seek to provide competitive current yields while offering the liquidity, stability and convenience traditionally associated with money market mutual funds. All of the funds invest exclusively in money market investments. The Schwab Money Market Fund TM has greater investment risk but higher yield potential than the Schwab Government Money Fund TM, which in turn has greater investment risk but potentially higher yields than the Schwab U.S. Treasury Money Fund TM. This last fund offers the highest degree of safety but the lowest potential yield of the Schwab Money Funds. The funds are designed for use as Sweep Investments TM, in conjunction with certain Schwab accounts. Customers who qualify can designate one of these funds as their account's sweep fund. SCHWAB MONEY MARKET FUND TM TICKER SYMBOL: SWMXX - -------------------------------------------------------------------------------- THE FUND'S GOAL IS TO SEEK THE HIGHEST CURRENT INCOME CONSISTENT WITH STABILITY OF CAPITAL AND LIQUIDITY. MONEY FUND REGULATIONS Money market funds in the United States are subject to rules that are designed to help them maintain a stable share price: - - Credit quality: money funds must invest exclusively in high-quality securities (generally those that are in the top two tiers of credit quality). - - Diversification: requirements for diversification limit the fund's exposure to any given issuer. - - Maturity: money funds must maintain a dollar-weighted average portfolio maturity of no more than 90 days, and cannot invest in any security whose effective maturity is longer than 397 days (approximately 13 months). - -------------------------------------------------------------------------------- STRATEGY TO PURSUE ITS GOAL, THE FUND INVESTS IN HIGH-QUALITY SHORT-TERM MONEY MARKET INVESTMENTS ISSUED BY U.S. AND FOREIGN ISSUERS, SUCH AS: - - commercial paper, including asset-backed commercial paper and promissory notes - - certificates of deposit and time deposits - - variable- and floating-rate debt securities - - bank notes and bankers' acceptances - - repurchase agreements - - obligations that are issued by the U.S. government, its agencies or instrumentalities, including obligations that are not guaranteed by the U.S. Treasury, such as those issued by Fannie Mae, Freddie Mac, and Sallie Mae (U.S. government securities) All of these investments will be denominated in U.S. dollars, including those that are issued by foreign issuers. In choosing securities, the fund's manager seeks to maximize current income within the limits of the fund's credit, maturity and diversification policies. Some of these policies may be stricter than the federal regulations that apply to all money funds. The investment adviser's credit research department analyzes and monitors the securities that the fund owns or is considering buying. The manager may adjust the fund's holdings or its average maturity based on actual or anticipated changes in interest rates or credit quality. To preserve its investors' capital, the fund seeks to maintain a stable $1 share price. A description of the fund's policies and procedures with respect to the disclosure of the fund's portfolio securities is available in the fund's Statement of Additional Information. 2 This fund is designed for investors interested in competitive money market returns. RISKS INTEREST RATES RISE AND FALL OVER TIME. As with any investment whose yield reflects current interest rates, the fund's yield will change over time. During periods when interest rates are low, the fund's yield (and total return) also will be low. YOUR INVESTMENT IS NOT A BANK DEPOSIT. An investment in the fund is not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency. Although the fund seeks to preserve the value of your investment at $1 per share, it is possible to lose money by investing in the fund. THE FUND COULD LOSE MONEY OR UNDERPERFORM AS A RESULT OF DEFAULT. Although the risk of default generally is considered unlikely (even among foreign investments, which carry additional risks), any default on the part of a portfolio investment could cause the fund's share price or yield to fall. The additional risks of foreign investments are due to reasons ranging from a lack of issuer information to the risk of political uncertainties. Many of the U.S. government securities that the fund invests in are not backed by the full faith and credit of the United States government, which means they are neither issued nor guaranteed by the U.S. Treasury. Issuers of securities such as Fannie Mae, Freddie Mac, the Student Loan Marketing Association (SLMA or Sallie Mae) and the Federal Home Loan Bank (FHLB) maintain limited lines of credit with the U.S. Treasury. Other securities, such as obligations issued by the Federal Farm Credit Banks Funding Corporation (FFCB), are supported solely by the credit of the issuer. There can be no assurance that the U.S. government will provide financial support to securities of its agencies and instrumentalities if it is not obligated to do so under law. Also, any government guarantees on securities the fund owns do not extend to shares of the fund itself. THE MANAGER'S MATURITY DECISIONS ALSO WILL AFFECT THE FUND'S YIELD, and in unusual circumstances potentially could affect its share price. To the extent that the manager anticipates interest rate trends imprecisely, the fund's yield at times could lag those of other money market funds. The fund's emphasis on quality and stability also could cause it to underperform other money funds, particularly those that take greater maturity and credit risks. THE FUND IS NOT DESIGNED TO OFFER CAPITAL APPRECIATION. In exchange for their emphasis on stability and liquidity, money market investments may offer lower long-term performance than stock or bond investments. 3 PERFORMANCE Below are a chart and table showing how the fund's performance has varied from year to year and how it averages out over time. These figures assume that all distributions were reinvested. Keep in mind that future performance may differ from past performance. ANNUAL TOTAL RETURNS (%) as of 12/31 [BAR CHART] 5.41 4.91 5.04 4.99 4.64 5.84 3.73 1.23 0.50 0.68 95 96 97 98 99 00 01 02 03 04 BEST QUARTER: 1.51% Q4 2000 WORST QUARTER: 0.09% Q4 2003
AVERAGE ANNUAL TOTAL RETURNS (%) as of 12/31/04
1 year 5 years 10 years - ------------------------------------------------------------------------------- FUND 0.68 2.38 3.68
FUND FEES AND EXPENSES The following table describes what you could expect to pay as a fund investor. "Shareholder fees" are charged to you directly by the fund. "Annual operating expenses" are paid out of fund assets, so their effect is included in total return. FEE TABLE (%) SHAREHOLDER FEES - -------------------------------------------------------------------------------- None ANNUAL OPERATING EXPENSES (% of average net assets) - -------------------------------------------------------------------------------- Management fees 0.31 Distribution (12b-1) fees None Other expenses 0.47 ------- Total annual operating expenses 0.78 Expense reduction (0.04) ------- NET OPERATING EXPENSES* 0.74 -------
* Schwab and the investment adviser have agreed to limit the fund's "net operating expenses" (excluding interest, taxes and certain non-routine expenses) to 0.74% through 4/30/06. Designed to help you compare expenses, this example uses the same assumptions as other mutual fund prospectuses: a $10,000 investment, 5% return each year and that the fund's operating expenses remain the same. The one-year figure is based on net operating expenses. The expenses would be the same whether you stayed in the fund or sold your shares at the end of each period. Your actual costs may be higher or lower. EXPENSES ON A $10,000 INVESTMENT
1 year 3 years 5 years 10 years - --------------------------------------------------------------------------------- $76 $245 $429 $962
Visit www.schwab.com/schwabfunds or call toll-free 1-800-435-4000 for a current seven-day yield. 4 Schwab Money Market Fund(TM) FINANCIAL HIGHLIGHTS This section provides further details about the fund's financial history for the past five years. Certain information reflects financial results for a single fund share. "Total return" shows the percentage that an investor in the fund would have earned or lost during a given period, assuming all distributions were reinvested. The fund's registered independent accountants, PricewaterhouseCoopers LLP, audited these figures. Their full report is included in the fund's annual report (see back cover).
1/1/04- 1/1/03- 1/1/02- 1/1/01- 1/1/00- 12/31/04 12/31/03 12/31/02 12/31/01 12/31/00 PER-SHARE DATA ($) - ------------------------------------------------------------------------------------------------------------- Net asset value at beginning of period 1.00 1.00 1.00 1.00 1.00 ----------------------------------------------------------------- Income from investment operations: Net investment income 0.01 0.01 0.01 0.04 0.06 ----------------------------------------------------------------- Less distributions: Dividends from net investment income (0.01) (0.01) (0.01) (0.04) (0.06) ----------------------------------------------------------------- Net asset value at end of period 1.00 1.00 1.00 1.00 1.00 ----------------------------------------------------------------- Total return (%) 0.68 0.50 1.23 3.73 5.84 RATIOS/SUPPLEMENTAL DATA (%) - ------------------------------------------------------------------------------------------------------------- Ratio to average net assets: Net operating expenses 0.75 0.75 0.75 0.75 0.76 1 Gross operating expenses 0.78 0.78 0.78 0.79 0.81 Net investment income 0.67 0.50 1.22 3.63 5.70 Net assets, end of period ($ X 1,000,000) 44,023 49,079 51,063 49,116 41,823
1 The ratio of net operating expenses would have been 0.75% if certain non-routine expenses (proxy fees) had not been included. 5 SCHWAB GOVERNMENT MONEY FUND TM TICKER SYMBOL: SWGXX - -------------------------------------------------------------------------------- THE FUND'S GOAL IS TO SEEK THE HIGHEST CURRENT INCOME CONSISTENT WITH STABILITY OF CAPITAL AND LIQUIDITY. MONEY FUND REGULATIONS Money market funds in the United States are subject to rules that are designed to help them maintain a stable share price: - - Credit quality: money funds must invest exclusively in high-quality securities (generally those that are in the top two tiers of credit quality). - - Diversification: requirements for diversification limit the fund's exposure to any given issuer. - - Maturity: money funds must maintain a dollar-weighted average portfolio maturity of no more than 90 days, and cannot invest in any security whose effective maturity is longer than 397 days (approximately 13 months). - -------------------------------------------------------------------------------- STRATEGY TO PURSUE ITS GOAL, THE FUND INVESTS IN U.S. GOVERNMENT SECURITIES, SUCH AS: - - U.S. Treasury bills, notes and bonds - - other obligations that are issued by the U.S. government, its agencies or instrumentalities, including obligations that are not guaranteed by the U.S. Treasury, such as those issued by Fannie Mae, Freddie Mac and Sallie Mae - - repurchase agreements Under normal circumstances, the fund will invest at least 80% of its net assets in U.S. government securities including repurchase agreements; typically, the actual percentage is considerably higher. The fund will notify its shareholders at least 60 days before changing this policy. In choosing securities, the fund's manager seeks to maximize current income within the limits of the fund's credit, maturity and diversification policies. Some of these policies may be stricter than the federal regulations that apply to all money funds. The investment adviser's credit research department analyzes and monitors the securities that the fund owns or is considering buying. The manager may adjust the fund's holdings or its average maturity based on actual or anticipated changes in interest rates or credit quality. To preserve its investors' capital, the fund seeks to maintain a stable $1 share price. A description of the fund's policies and procedures with respect to the disclosure of the fund's portfolio securities is available in the fund's Statement of Additional Information. 6 This fund is designed for investors looking for competitive money market returns provided by a portfolio of U.S. government securities. RISKS INTEREST RATES RISE AND FALL OVER TIME. As with any investment whose yield reflects current interest rates, the fund's yield will change over time. During periods when interest rates are low, the fund's yield (and total return) also will be low. YOUR INVESTMENT IS NOT A BANK DEPOSIT. An investment in the fund is not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency. Although the fund seeks to preserve the value of your investment at $1 per share, it is possible to lose money by investing in the fund. THE FUND COULD LOSE MONEY OR UNDERPERFORM AS A RESULT OF DEFAULT. Many of the U.S. government securities that the fund invests in are not backed by the full faith and credit of the United States government, which means they are neither issued nor guaranteed by the U.S. Treasury. Issuers of securities such as Fannie Mae, Freddie Mac, the Student Loan Marketing Association (SLMA or Sallie Mae) and the Federal Home Loan Bank (FHLB) maintain limited lines of credit with the U.S. Treasury. Other securities, such as obligations issued by the Federal Farm Credit Banks Funding Corporation (FFCB), are supported solely by the credit of the issuer. There can be no assurance that the U.S. government will provide financial support to securities of its agencies and instrumentalities if it is not obligated to do so under law. Also, any government guarantees on securities the fund owns do not extend to shares of the fund itself. Although the risk of default with U.S. government securities is considered unlikely, any default on the part of a portfolio investment could cause the fund's share price or yield to fall. THE MANAGER'S MATURITY DECISIONS ALSO WILL AFFECT THE FUND'S YIELD, and in unusual circumstances potentially could affect its share price. To the extent that the manager anticipates interest rate trends imprecisely, the fund's yield at times could lag those of other money market funds. The fund's emphasis on quality and stability also could cause it to underperform other money funds, particularly those that take greater maturity and credit risks. THE FUND IS NOT DESIGNED TO OFFER CAPITAL APPRECIATION. In exchange for their emphasis on stability and liquidity, money market investments may offer lower long-term performance than stock or bond investments. 7 PERFORMANCE Below are a chart and table showing how the fund's performance has varied from year to year and how it averages out over time. These figures assume that all distributions were reinvested. Keep in mind that future performance may differ from past performance. ANNUAL TOTAL RETURNS (%) as of 12/31 [BAR CHART] 5.34 4.83 4.95 4.88 4.50 5.69 3.63 1.20 0.48 0.65 95 96 97 98 99 00 01 02 03 04 BEST QUARTER: 1.48% Q4 2000 WORST QUARTER: 0.09% Q2 2004
AVERAGE ANNUAL TOTAL RETURNS (%) as of 12/31/04
1 year 5 years 10 years - ------------------------------------------------------------------------------- FUND 0.65 2.31 3.60
FUND FEES AND EXPENSES The following table describes what you could expect to pay as a fund investor. "Shareholder fees" are charged to you directly by the fund. "Annual operating expenses" are paid out of fund assets, so their effect is included in total return. FEE TABLE (%) SHAREHOLDER FEES - -------------------------------------------------------------------------------- None ANNUAL OPERATING EXPENSES (% of average net assets) - -------------------------------------------------------------------------------- Management fees 0.36 Distribution (12b-1) fees None Other expenses 0.47 ------- Total annual operating expenses 0.83 Expense reduction (0.08) ------- NET OPERATING EXPENSES* 0.75 -------
* Schwab and the investment adviser have agreed to limit the fund's "net operating expenses" (excluding interest, taxes and certain non-routine expenses) to 0.75% through 4/29/06. Designed to help you compare expenses, this example uses the same assumptions as other mutual fund prospectuses: a $10,000 investment, 5% return each year and that the fund's operating expenses remain the same. The one-year figure is based on net operating expenses. The expenses would be the same whether you stayed in the fund or sold your shares at the end of each period. Your actual costs may be higher or lower. EXPENSES ON A $10,000 INVESTMENT
1 year 3 years 5 years 10 years - --------------------------------------------------------------------------------- $77 $257 $453 $1,018
Visit www.schwab.com/schwabfunds or call toll-free 1-800-435-4000 for a current seven-day yield. 8 Schwab Government Money Fund(TM) FINANCIAL HIGHLIGHTS This section provides further details about the fund's financial history for the past five years. Certain information reflects financial results for a single fund share. "Total return" shows the percentage that an investor in the fund would have earned or lost during a given period, assuming all distributions were reinvested. The fund's registered independent accountants, PricewaterhouseCoopers LLP, audited these figures. Their full report is included in the fund's annual report (see back cover).
1/1/04- 1/1/03- 1/1/02- 1/1/01- 1/1/00- 12/31/04 12/31/03 12/31/02 12/31/01 12/31/00 PER-SHARE DATA ($) - ------------------------------------------------------------------------------------------------------------- Net asset value at beginning of period 1.00 1.00 1.00 1.00 1.00 ----------------------------------------------------------------- Income from investment operations: Net investment income 0.01 0.00 1 0.01 0.04 0.06 ----------------------------------------------------------------- Less distributions: Dividends from net investment income (0.01) (0.00) 1 (0.01) (0.04) (0.06) ----------------------------------------------------------------- Net asset value at end of period 1.00 1.00 1.00 1.00 1.00 ----------------------------------------------------------------- Total return (%) 0.65 0.48 1.20 3.63 5.69 RATIOS/SUPPLEMENTAL DATA (%) - ------------------------------------------------------------------------------------------------------------- Ratios to average net assets: Net operating expenses 0.75 0.75 0.75 0.75 0.76 2 Gross operating expenses 0.83 0.83 0.83 0.84 0.85 Net investment income 0.64 0.49 1.19 3.52 5.54 Net assets, end of period ($ X 1,000,000) 2,535 2,838 3,092 3,054 2,509
1 Per-share amount was less than $0.01. 2 The ratio of net operating expenses would have been 0.75% if certain non-routine expenses (proxy fees) had not been included. 9 SCHWAB U.S. TREASURY MONEY FUND TM TICKER SYMBOL: SWUXX - -------------------------------------------------------------------------------- THE FUND'S GOAL IS TO SEEK THE HIGHEST CURRENT INCOME CONSISTENT WITH STABILITY OF CAPITAL AND LIQUIDITY. MONEY FUND REGULATIONS Money market funds in the United States are subject to rules that are designed to help them maintain a stable share price: - - Credit quality: money funds must invest exclusively in high-quality securities (generally those that are in the top two tiers of credit quality). - - Diversification: requirements for diversification limit the fund's exposure to any given issuer. - - Maturity: money funds must maintain a dollar-weighted average portfolio maturity of no more than 90 days, and cannot invest in any security whose effective maturity is longer than 397 days (approximately 13 months). - -------------------------------------------------------------------------------- STRATEGY TO PURSUE ITS GOAL, THE FUND TYPICALLY INVESTS EXCLUSIVELY IN SECURITIES BACKED BY THE FULL FAITH AND CREDIT OF THE U.S. GOVERNMENT. Under normal circumstances, the fund will invest at least 80% of its net assets in U.S. Treasury securities; including bills, notes, and bonds. The fund will notify its shareholders at least 60 days before changing this policy. The full faith and credit backing is the strongest backing offered by the U.S. government, and traditionally is considered by investors to be the highest degree of safety as far as the payment of principal and interest. In choosing securities, the fund's manager seeks to maximize current income within the limits of the fund's credit, maturity and diversification policies. By limiting its portfolio to full faith and credit U.S. government investments, the fund seeks to provide maximum safety as to its assets. The fund is distinct from certain other types of government money funds in that, for tax and credit quality reasons, it does not invest in repurchase agreements. The manager may adjust the fund's average maturity based on current and anticipated changes in interest rates. To preserve its investors' capital, the fund seeks to maintain a stable $1 share price. Because the income from U.S. Treasury securities is exempt from state and local income taxes, the fund generally expects that the dividends it pays will be exempt from those taxes as well. (Dividends still will be subject to federal income tax.) However, during unusual market conditions, the fund may make investments that are not exempt from state and local income taxes as a temporary defensive measure. When the fund engages in such activities, it may not achieve its investment goal. A description of the fund's policies and procedures with respect to the disclosure of the fund's portfolio securities is available in the fund's Statement of Additional Information. 10 With substantially all of its portfolio of securities backed by the full faith and credit of the U.S. government, this fund is designed to provide investors with the highest degree of safety of all the Schwab Money Funds, as well as current money market returns. RISKS INTEREST RATES RISE AND FALL OVER TIME. As with any investment whose yield reflects current interest rates, the fund's yield will change over time. During periods when interest rates are low, the fund's yield (and total return) also will be low. YOUR INVESTMENT IS NOT A BANK DEPOSIT. An investment in the fund is not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency. Although the fund seeks to preserve the value of your investment at $1 per share, it is possible to lose money by investing in the fund. THE FUND COULD LOSE MONEY OR UNDERPERFORM AS A RESULT OF DEFAULT. Government guarantees on securities the fund owns do not extend to the shares of the fund itself. Although the risk of default with U.S. Treasury securities is considered extremely unlikely, any default on the part of a portfolio investment could cause the fund's share price or yield to fall. THE MANAGER'S MATURITY DECISIONS ALSO WILL AFFECT THE FUND'S YIELD, and in unusual circumstances potentially could affect its share price. To the extent that the manager anticipates interest rate trends imprecisely, the fund's yield at times could lag those of other money market funds. The fund's emphasis on quality and stability also could cause it to underperform other money funds, particularly those that take greater maturity and credit risks. THE FUND IS NOT DESIGNED TO OFFER CAPITAL APPRECIATION. In exchange for their emphasis on stability and liquidity, money market investments may offer lower long-term performance than stock or bond investments. 11 PERFORMANCE Below are a chart and table showing how the fund's performance has varied from year to year and how it averages out over time. These figures assume that all distributions were reinvested. Keep in mind that future performance may differ from past performance. ANNUAL TOTAL RETURNS (%) as of 12/31 [BAR CHART] 5.25 4.77 4.85 4.69 4.25 5.40 3.61 1.15 0.49 0.62 95 96 97 98 99 00 01 02 03 04 BEST QUARTER: 1.42% Q4 2000 WORST QUARTER: 0.09% Q1 2004
AVERAGE ANNUAL TOTAL RETURNS (%) as of 12/31/04
1 year 5 years 10 years - ------------------------------------------------------------------------------- FUND 0.62 2.24 3.49
FUND FEES AND EXPENSES The following table describes what you could expect to pay as a fund investor. "Shareholder fees" are charged to you directly by the fund. "Annual operating expenses" are paid out of fund assets, so their effect is included in total return. FEE TABLE (%) SHAREHOLDER FEES - -------------------------------------------------------------------------------- None ANNUAL OPERATING EXPENSES (% of average net assets) - -------------------------------------------------------------------------------- Management fees 0.36 Distribution (12b-1) fees None Other expenses 0.46 ------- Total annual operating expenses 0.82 Expense reduction (0.17) ------- NET OPERATING EXPENSES* 0.65 -------
* Schwab and the investment adviser have agreed to limit the fund's "net operating expenses" (excluding interest, taxes and certain non-routine expenses) to 0.65% through 4/29/06. Designed to help you compare expenses, this example uses the same assumptions as other mutual fund prospectuses: a $10,000 investment, 5% return each year and that the fund's operating expenses remain the same. The one-year figure is based on net operating expenses. The expenses would be the same whether you stayed in the fund or sold your shares at the end of each period. Your actual costs may be higher or lower. EXPENSES ON A $10,000 INVESTMENT
1 year 3 years 5 years 10 years - --------------------------------------------------------------------------------- $66 $245 $438 $998
Visit www.schwab.com/schwabfunds or call toll-free 1-800-435-4000 for a current seven-day yield. 12 Schwab U.S. Treasury Money Fund(TM) FINANCIAL HIGHLIGHTS This section provides further details about the fund's financial history for the past five years. Certain information reflects financial results for a single fund share. "Total return" shows the percentage that an investor in the fund would have earned or lost during a given period, assuming all distributions were reinvested. The fund's registered independent accountants, PricewaterhouseCoopers LLP, audited these figures. Their full report is included in the fund's annual report (see back cover).
1/1/04- 1/1/03- 1/1/02- 1/1/01- 1/1/00- 12/31/04 12/31/03 12/31/02 12/31/01 12/31/00 PER-SHARE DATA ($) - ------------------------------------------------------------------------------------------------------------- Net asset value at beginning of period 1.00 1.00 1.00 1.00 1.00 ----------------------------------------------------------------- Income from investment operations: Net investment income 0.01 0.00 1 0.01 0.04 0.05 ----------------------------------------------------------------- Less distributions: Dividends from net investment income (0.01) (0.00) 1 (0.01) (0.04) (0.05) ----------------------------------------------------------------- Net asset value at end of period 1.00 1.00 1.00 1.00 1.00 ----------------------------------------------------------------- Total return (%) 0.62 0.49 1.15 3.61 5.40 RATIOS/SUPPLEMENTAL DATA (%) - ------------------------------------------------------------------------------------------------------------- Ratio to average net assets: Net operating expenses 0.65 0.65 0.65 0.65 0.66 2 Gross operating expenses 0.82 0.82 0.82 0.84 0.85 Net investment income 0.61 0.49 1.15 3.44 5.27 Net assets, end of period ($ X 1,000,000) 3,811 4,046 4,323 4,042 2,750
1 Per-share amount was less than $0.01. 2 The ratio of net operating expenses would have been 0.65% if certain non-routine expenses (proxy fees) had not been included. 13 FUND MANAGEMENT The funds' investment adviser, Charles Schwab Investment Management, Inc., has nearly $140 billion under management. The investment adviser for the funds is Charles Schwab Investment Management, Inc., 101 Montgomery Street, San Francisco, CA 94104. Founded in 1989, the firm today serves as investment adviser for all of the Schwab Funds(R). The firm manages assets for more than six million shareholder accounts. (All figures on this page are as of 12/31/04). As the investment adviser, the firm oversees the asset management and administration of the Schwab Money Funds. As compensation for these services, the firm receives a management fee from each fund. For the 12 months ended 12/31/04, these fees were 0.28% for the Schwab Money Market Fund TM, 0.28% for the Schwab Government Money Fund TM and 0.18% for the Schwab U.S. Treasury Money Fund TM. These figures, which are expressed as a percentage of each fund's average daily net assets, represent the actual amounts paid, including the effects of reductions. 14 INVESTING IN THE FUNDS As a Schwab Funds(R) investor, you have a number of ways to do business with us. On the following pages, you will find information on buying, selling and exchanging shares. Helpful information on taxes is included as well. 15 BUYING/SELLING SHARES The information on these pages outlines how Schwab investors can place "good orders," which are orders made in accordance with the funds' policies, to buy, sell and exchange shares of the funds. These funds are designed for use in conjunction with certain Schwab accounts, subject to the eligibility terms and conditions of your account agreement, as amended from time to time. When you designate one of these funds as the sweep fund on your Schwab account, your uninvested cash balances will be invested in the fund according to the terms and conditions of your sweep account agreement. Similarly, when you use your account to purchase other investments or make payments, shares of your sweep fund will be sold to cover these transactions according to the terms and conditions of your account agreement. For more information on Schwab accounts, call 1-800-435-4000 or visit www.schwab.com. 16 Investing in the funds - -------------------------------------------------------------------------------- WHEN PLACING ORDERS Please note that orders to buy, sell or exchange become irrevocable at the time you mail them. - -------------------------------------------------------------------------------- SELLING/EXCHANGING SHARES WHEN SELLING OR EXCHANGING SHARES, PLEASE BE AWARE OF THE FOLLOWING POLICIES: - - A fund may take up to seven days to pay sale proceeds. - - If you are selling shares that were recently purchased by check, the proceeds may be delayed until the check for purchase clears; this may take up to 15 days from the date of purchase. - - The funds reserve the right to honor redemptions in liquid portfolio securities instead of cash when your redemptions over a 90-day period exceed $250,000 or 1% of a fund's assets, whichever is less. A shareholder may incur transaction expenses in converting these securities in cash. - - Exchange orders are limited to other Schwab Sweep Investments and must meet the minimum investment and other requirements for the fund and share class into which you are exchanging. - - You must obtain and read the prospectus for the fund into which you are exchanging prior to placing your order. You are automatically entitled to initiate transactions by telephone. The funds and Schwab employ procedures to confirm the authenticity of telephone instructions. If the funds and Schwab follow these procedures, they will not be responsible for any losses or costs incurred by following telephone instructions that they reasonably believe to be genuine. 17 - -------------------------------------------------------------------------------- THE FUNDS AND SCHWAB RESERVE CERTAIN RIGHTS, INCLUDING THE FOLLOWING: - - To automatically redeem your shares if the account they are held in is closed for any reason or your balance falls below the minimum for a fund as a result of selling or exchanging your shares. - - To materially modify or terminate the exchange privilege upon 60 days' written notice to shareholders. - - To change or waive a fund's investment minimums. - - To suspend the right to sell shares back to a fund, and delay sending proceeds, during times when trading on the NYSE is restricted or halted, or otherwise as permitted by the SEC. - - To withdraw or suspend any part of the offering made by this prospectus. - -------------------------------------------------------------------------------- TRANSACTION POLICIES THE FUNDS ARE OPEN FOR BUSINESS EACH DAY THAT BOTH THE NEW YORK STOCK EXCHANGE (NYSE) AND THE FEDERAL RESERVE BANK OF NEW YORK (THE FED) ARE OPEN. The funds reserve the right to open for business on days the NYSE is closed but the Fed is open. The funds calculate their share prices each business day, as of the close of the NYSE (generally 4 p.m. Eastern time). A fund's share price is its net asset value per share, or NAV, which is the fund's net assets divided by the number of its shares outstanding. The funds seek to maintain a stable NAV of $1. Orders that are received in good order are executed at the next NAV to be calculated. Orders to buy shares that are accepted no later than 10 a.m. Eastern time generally receive that day's dividend. Orders to buy that are accepted after 10 a.m. Eastern time generally will receive the next business day's dividend. Orders to sell or exchange shares that are accepted no later than 10 a.m. Eastern time generally don't receive that day's dividend, but those accepted after 10 a.m. generally do. The funds value their investment holdings on the basis of amortized cost (cost plus any discount, or minus any premium, accrued since purchase). Most money market funds use this method to calculate NAV. POLICY REGARDING SHORT-TERM OR EXCESSIVE TRADING Each fund's Board of Trustees has adopted policies and procedures with respect to frequent purchases and redemptions of fund shares. However, the funds are money market funds and seek to provide shareholders current income, liquidity, and a stable net asset value of $1.00 per share. In addition, the funds are designed to serve as a short-term cash equivalent investment for shareholders and, therefore, expect shareholders to engage in frequent purchases and redemptions. Because of the inherently liquid nature of the funds' investments, and money market instruments in general, and the funds' intended purpose to serve as a short-term investment vehicle for shareholders, these funds do not monitor or limit shareholder purchases and redemptions of fund shares. However, the funds' policies and procedures do provide each fund with the right to reject any purchase or exchange orders by any investor for any reason, including orders which appear to be associated with market timing activities. THE FUNDS AND SCHWAB RESERVE CERTAIN RIGHTS REGARDING TRANSACTION POLICIES, AS DETAILED IN THE ADJACENT COLUMN. 18 Investing in the funds DIVIDENDS AND TAXES ANY INVESTMENT IN THE FUNDS TYPICALLY INVOLVES SEVERAL TAX CONSIDERATIONS. The information below is meant as a general summary for U.S. citizens and residents. Because each person's tax situation is different, you should consult your tax advisor about the tax implications of your investment in a fund. You also can visit the Internal Revenue Service web site at www.irs.gov. AS A SHAREHOLDER, YOU ARE ENTITLED TO YOUR SHARE OF THE DIVIDENDS YOUR FUND EARNS. Each fund distributes to its shareholders substantially all of its net investment income. Each fund declares a dividend every business day, based on its determination of its net investment income. Sweep money funds may pay their dividends in cash or fund shares to shareholders' Schwab accounts on the 15th of each month (or next business day if the 15th is not a business day), except that in December dividends are paid on the last business day of the month. If your daily dividend is less than $0.01, you may not receive a dividend payment. The funds do not expect to distribute any capital gains. UNLESS YOU ARE INVESTING THROUGH AN IRA, 401(K) OR OTHER TAX-ADVANTAGED RETIREMENT ACCOUNT, YOUR FUND DIVIDENDS GENERALLY HAVE TAX CONSEQUENCES. Each fund's net investment income is distributed as dividends and is taxable as ordinary income. Dividends paid by the U.S. Treasury Money Fund are subject to federal income tax but typically are exempt from any state and local personal income taxes. Income dividends generally are taxable in the tax year in which they are declared, whether you reinvest them or take them in cash. The sale or exchange of your fund shares may have tax consequences to you if you do not hold your shares in a tax-advantaged account, but no capital gain or loss to a shareholder is anticipated because the funds seek to maintain a stable $1 share price. AT THE BEGINNING OF EVERY YEAR, THE FUNDS PROVIDE SHAREHOLDERS WITH INFORMATION DETAILING THE TAX STATUS OF ANY DIVIDENDS A FUND DECLARED DURING THE PREVIOUS CALENDAR YEAR. Schwab customers also receive information on dividends and transactions in their monthly account statements. 19 NOTES NOTES TO LEARN MORE This prospectus contains important information on the funds and should be read and kept for reference. You also can obtain more information from the following sources. ANNUAL AND SEMI-ANNUAL REPORTS, which are mailed to current fund investors, discuss recent performance and fund holdings. The STATEMENT OF ADDITIONAL INFORMATION (SAI) includes a more detailed discussion of investment policies and the risks associated with various investments. The SAI is incorporated by reference into the prospectus, making it legally part of the prospectus. For a free copy of any of these documents or to request other information or ask questions about the funds, call Schwab Funds(R) at 1-800-435-4000. In addition, you may visit Schwab Funds' web site at www.schwab.com/schwabfunds for a free copy of a prospectus, SAI or an annual or semi-annual report. The SAI, the funds' annual and semi-annual reports and other related materials are available from the EDGAR Database on the SEC's web site (http://www.sec.gov). You can obtain copies of this information, after paying a duplicating fee, by sending a request by e-mail to publicinfo@sec.gov or by writing the Public Reference Section of the SEC, Washington, D.C. 20549-0102. You can also review and copy information about the funds, including the funds' SAI, at the SEC's Public Reference Room in Washington, D.C. Call 1-202-942-8090 for information on the operation of the SEC's Public Reference Room. SEC FILE NUMBER Schwab Money Funds Sweep Investments(R) 811-5954
REG13850FLD-07 SCHWAB MONEY FUNDS SWEEP INVESTMENTS(R) PROSPECTUS April 30, 2005 As Amended November 28, 2005 [CHARLES SCHWAB LOGO] -----END PRIVACY-ENHANCED MESSAGE-----