-----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, IXXBJchJG9EdMvzbQ9j7mjX0Tbw/vCRY0XrumwWvJOjt2BwUi+RWOn3UQuJGimkW lh2JT+pd8DLvpfOx5AcTmg== 0000950149-96-000198.txt : 19960311 0000950149-96-000198.hdr.sgml : 19960311 ACCESSION NUMBER: 0000950149-96-000198 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960308 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: 96533071 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 3 IN 1 MONEY MARKET FUND ANNUAL REPORT 1 SCHWABFUNDS(R) [SCHWAB LOGO] SCHWAB MONEY MARKET FUND --------- SCHWAB GOVERNMENT MONEY FUND --------- SCHWAB U.S. TREASURY MONEY FUND [PHOTO OF THE SCHWAB BUILDING, SAN FRANCISCO, CALIFORNIA] ANNUAL REPORT DECEMBER 31, 1995 2 Dear Shareholder, [Photo of The SchwabFunds Family(R) is celebrating tremendous Charles growth as a mutual fund complex. By placing your trust R. Schwab] in SchwabFunds(R), you've helped total assets under management grow by $8 billion in 1995 to reach over $31 billion. With over $31 billion in assets under management, SchwabFunds ranks in the top 6% of all mutual fund complexes. We believe much of this success can be traced to the Schwab commitment to serve the needs of the Fund shareholders, a commitment demonstrated by the entire SchwabFunds staff and, in particular, by our experienced team of portfolio managers. The 20 professionals who make up our growing portfolio management team are devoted to monitoring the financial markets for you. Through a careful and disciplined selection of securities, the portfolio managers strive to construct optimal portfolios that provide shareholders with competitive returns that meet their investment goals. And shareholders continue to signal their trust in 175 years of combined experience behind our SchwabFunds portfolio management by keeping their money invested in SchwabFunds. We believe an important part of serving your needs is keeping you informed about your investments. For example, we added the question and answer section of this report, developed by our portfolio managers to address what they feel were the most pressing questions we've heard from shareholders over the period. It is one way we hope to keep communication open between you and the people managing your investments. The SchwabFunds Family has grown to include a selection of funds that meets the "core" needs of investors. SchwabFunds offers a solution to investors who want the convenience and competitive costs of a no-load mutual fund family. The 19 no-load funds available to retail investors, including the new Schwab Asset Director(R) Funds, offer diversification of the U.S. and international equity markets, both taxable and tax-free bonds and a variety of money market investments. With this level of diversification, you may use SchwabFunds to create an efficient, well-rounded portfolio. Or you may use them to serve as building blocks to an overall investment program that includes more specialized investments. I invite you to learn more about the SchwabFunds Family. To receive a brochure and prospectus for the SchwabFunds, please call our toll-free number, 1-800-2 NO-LOAD, or visit any one of our more than 200 Schwab offices. A Schwab representative will be happy to provide you with a prospectus that includes more complete information on the Funds, including charges and expenses. Please read it carefully before investing. I'd like to extend my personal gratitude for your trust in the SchwabFunds Family as it continues to grow. You should feel confident that the outstanding efforts of all those who are part of the SchwabFunds organization will continue going forward. And we expect these efforts to help us to meet even higher standards of excellence in the years ahead. /s/ Charles R. Schwab Charles R. Schwab Chairman Cover: The Schwab Building, San Francisco, California 3 COMMENT FROM THE INVESTMENT ADVISER We're pleased to report to you on the performance of your investment in the Schwab Money Funds for the year ended December 31, 1995. This report covers three Funds: - Schwab Money Market Fund - Schwab Government Money Fund - Schwab U.S. Treasury Money Fund During the year, all three Schwab Money Funds provided you with competitive money market fund returns, combined with capital stability and ready access to your money. ASSET GROWTH The Schwab Money Market and U.S. Treasury Funds experienced strong asset growth in 1995, with substantial numbers of shareholders contributing additional assets. At December 31, 1995, the Schwab Money Market Fund's total net assets had grown 25% to over $14 billion; and the Schwab U.S. Treasury Money Fund's total net assets had risen 48% to over $1.1 billion. In addition, by year end, the Schwab Government Money Fund had over $1.8 billion in total net assets. We believe these figures reflect investors' continuing need for competitive returns on their short-term cash balances without sacrificing safety and liquidity. PERFORMANCE REVIEW The table below presents each Fund's 7-day average yield at year end. Of course, money market fund yields fluctuate and past performance is no guarantee of future results.
========================================================================= 7-DAY AVERAGE YIELDS 1 (As of December 31, 1995) Simple Compound - ------------------------------------------------------------------------- Schwab Money Market Fund 5.11% 5.24% - ------------------------------------------------------------------------- Schwab Government Money Fund 4.99% 5.11% - ------------------------------------------------------------------------- Schwab U.S. Treasury Money Fund 4.89% 5.01% =========================================================================
A KEY GOAL: PRESERVING YOUR INVESTMENT If you're like most money market fund investors, preserving the value of your investment probably ranks among your foremost concerns. Toward that end, the Schwab Money Funds are managed with capital stability as a fundamental objective. All three Funds seek to maintain a stable $1 share price to protect your principal. As with all money market funds, however, there can be no assurance that each Fund will be able to maintain a $1 net asset value. It's also important to understand that your investment is neither insured nor guaranteed by the U.S. government. 1 A portion of each Fund's fees were waived or reimbursed during the reporting period. For the Schwab Money Market Fund, without the waivers or reimbursements, the 7-day simple yield would have been 4.98% and the 7-day compound yield would have been 5.10% at December 31, 1995. For the Schwab Government Money Fund, without the waivers or reimbursements, the 7-day simple yield would have been 4.82% and the 7-day compound yield would have been 4.94% at December 31, 1995. For the Schwab U.S. Treasury Money Fund, without the waivers or reimbursements, the 7-day simple yield would have been 4.56% and the 7-day compound yield would have been 4.66% at December 31, 1995. 4 PROFESSIONALLY MANAGED, HIGH-QUALITY PORTFOLIOS The Schwab Money Funds invest in diversified portfolios of high-quality, short-term securities. To minimize credit risk, the Funds have only invested in securities rated in the top rating category (known as "First Tier") assigned by nationally recognized statistical rating organizations (NRSROs), or securities of equivalent credit quality if unrated. Additionally, we maintain strict credit quality standards for the Funds' holdings and actively manage portfolio maturity to help protect and enhance your returns. The charts below illustrate each Fund's portfolio composition on December 31, 1995. In addition, you'll find a complete listing of the securities in the Funds' portfolios at year end later in this report. SCHWAB MONEY MARKET FUND PORTFOLIO COMPOSITION - DECEMBER 31, 1995 [PORTFOLIO COMPOSITION PIE CHART] Commercial Paper 56% Certificates of Deposit 30% Bank Notes 4% Variable Rate Notes 7% Other 3% The Schwab Money Market Fund invests in bank certificates of deposit, time deposits, bankers' acceptances, highly-rated commercial paper and notes, other highly-rated corporate obligations, as well as U.S. Treasury securities and other obligations or securities guaranteed by the U.S. or Canadian governments, their agencies and instrumentalities and repurchase agreements involving obligations suitable for investment in these categories. SCHWAB GOVERNMENT MONEY FUND PORTFOLIO COMPOSITION - DECEMBER 31, 1995 [PORTFOLIO COMPOSITION PIE CHART] Repurchase Agreements 48% U.S. Treasury Notes 1% Agency Variable Rate Notes 18% Agency Coupon Notes 21% Agency Discount Notes 12% The Schwab Government Money Fund invests exclusively in U.S. Treasury bills, notes, bonds and other obligations issued or guaranteed by the United States government, its agencies, or instrumentalities, as well as repurchase agreements covering such obligations. 5 SCHWAB U.S. TREASURY MONEY FUND PORTFOLIO COMPOSITION - DECEMBER 31, 1995 [PORTFOLIO COMPOSITION PIE CHART] U.S. Treasury Notes 70% U.S. Treasury Bills 30% The Schwab U.S. Treasury Money Fund has invested exclusively in U.S. Treasury bills and U.S. Treasury notes. To enhance your understanding of each Schwab Money Fund's performance in 1995, the portfolio management team discusses key economic trends and their impact on the Funds in the following section. If you want more information on the Funds, or any mutual fund in the SchwabFunds Family(R), contact your local Schwab office or call 1-800-2 NO-LOAD. LOOKING FORWARD IN 1996 The Schwab Money Funds provided you with competitive money market yields in 1995. Going forward, we believe that each Fund will continue to offer the opportunity to earn competitive returns, combined with safety and liquidity. Thank you for placing your trust in SchwabFunds(R). We value your confidence, and we will strive to continue to meet your investment needs in the future. CHARLES SCHWAB INVESTMENT MANAGEMENT, INC. - -------------------------------------------------------------------------------- EFFECTIVE CASH MANAGEMENT The Schwab 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, balances of $100 or more in your account can be automatically invested on a regular basis in the sweep shares you've selected and can be used to cover your day-to-day transactions, such as settling trades. It's an easy, convenient way to put your short-term cash reserves to work, giving you the opportunity to earn competitive returns, while remaining available to you on demand. For more information, call 1-800-2 NO-LOAD. - -------------------------------------------------------------------------------- 6 QUESTIONS TO THE PORTFOLIO MANAGEMENT TEAM OF CHARLES SCHWAB INVESTMENT MANAGEMENT, INC. Stephen B. Ward - Senior Vice President and Chief Investment Officer Linda Klingman - Portfolio Manager Schwab Money Market Fund Andrea Regan - Portfolio Manager Schwab Government Money Fund and Schwab U.S. Treasury Money Fund Q. WHAT WAS THE GENERAL ECONOMIC CLIMATE DURING 1995? A. The economic expansion slowed in 1995 to an annual rate of 1.4% through the end of the third quarter, compared to the impressive 3.7% growth rate of the Real Gross Domestic Product (GDP) during 1994. 1 This slowing of the economy can largely be attributed to the series of increases in the federal funds rate implemented by the Federal Reserve Bank (known as the Fed) throughout 1994 and early 1995. The Fed raised its federal funds rate target from 3.0% at the beginning of 1994 to a high of 6.0% in February 1995. By increasing the target on the federal funds rate, the Fed hoped to head off the inflationary impact of a rapidly growing economy by slowing the rate of growth without putting the economy into a recession. Following three 0.25% reductions in July and December of 1995, and January of 1996, the federal funds rate target stood at 5.25% at the end of January 1996. The economic data currently suggests that the Fed's actions have achieved the desired effect, as inflation has stabilized and the U.S. has entered into a period of moderate economic growth. Several key economic indicators, such as industrial production, capacity utilization, new home sales, and retail sales have fallen from their high 1994 levels, indicating that economic activity in many sectors has slowed. Although the unemployment rate has remained low at 5.6% for 1995, non-farm payroll growth slowed quite dramatically throughout the year. In light of the economic data and the positive inflation outlook, the Fed lowered the federal funds rate, or eased monetary policy, twice in 1995 and once in January 1996. Q. HOW HAVE RECENT POLITICAL EVENTS IMPACTED SHORT-TERM INTEREST RATES? A. One of the most significant news stories of 1995 was the uncertainty surrounding the federal budget and debt ceiling negotiations between Congress and the Clinton Administration and the resulting government shutdowns. While these events have taken center stage in the national spotlight, the issues relating to the deficit ceiling itself have had a relatively minor impact to date on the financial markets. As of this writing, short-term interest rates have declined largely as a result of weaker economic growth, lower inflation, and the market's expectations that a balanced budget deal may be achieved. The Fed already has lowered the federal funds rate a total of 0.50% in 1995 and 0.25% in January 1996; a balanced budget compromise could give the Fed incentive to lower interest rates even further, an action which is widely anticipated by market participants. 1 All Gross Domestic Product (GDP) statistics used in this report are based on the Commerce Department's new chain-weighted calculation methodology. As a result, these statistics may differ from those in previous SchwabFunds shareholder reports, which used the prior fixed-weight methodology. During 1996, the Commerce Department will revise all GDP growth rate reporting to a chain-weighted basis. 7 As shown in the chart below, short-term interest rates declined steadily throughout 1995. The primary reason for the decline has been the two 1995 reductions in the federal funds target rate and anticipation of further reductions in the future. INTEREST RATES DECREASED IN 1995 YIELDS 90-Day Commercial Paper and 3-Month Treasury Bills January 6, 1995 - December 29, 1995 [Line graph comparing 90-Day Commercial Paper and 3-Month Treasury Bills.]
Taxable 90 Day CP 3 Month T-Bill 1/6/95 6.27 5.907 1/13/95 6.07 5.687 1/20/95 6.2 5.896 1/27/95 6.24 5.907 2/3/95 6.19 5.948 2/10/95 6.14 5.969 2/17/95 6.13 5.854 2/24/95 6.12 5.867 3/3/95 6.14 5.892 3/10/95 6.2 5.933 3/17/95 6.14 5.902 3/24/95 6.13 5.839 3/31/95 6.19 5.871 4/7/95 6.12 5.85 4/14/95 6.12 5.745 4/21/95 6.07 5.777 4/28/95 6.11 5.86 5/5/95 6.08 5.756 5/12/95 6.09 5.86 5/19/95 6.06 5.86 5/26/95 6.02 5.828 6/2/95 5.87 5.568 6/9/95 5.98 5.756 6/16/95 5.97 5.641 6/23/95 5.9 5.511 6/30/95 5.97 5.573 7/7/95 5.860 5.589 7/14/95 5.730 5.548 7/21/95 5.770 5.584 7/28/95 5.800 5.589 8/4/95 5.800 5.578 8/11/95 5.810 5.555 8/18/95 5.790 5.584 8/25/95 5.820 5.558 9/1/95 5.790 5.458 9/8/95 5.760 5.487 9/15/95 5.720 5.451 9/22/95 5.700 5.366 9/29/95 5.760 5.421 10/6/95 5.810 5.452 10/13/95 5.820 5.450 10/20/95 5.800 5.424 10/27/95 5.820 5.398 11/3/95 5.790 5.473 11/10/95 5.750 5.530 11/17/95 5.740 5.537 11/24/95 5.720 5.508 12/1/95 5.720 5.492 12/8/95 5.670 5.484 12/15/95 5.650 5.417 12/22/95 5.610 5.156 12/29/95 5.610 5.022
90-Day Commercial Paper 3-Month Treasury Bills Increase or Decrease in Federal Funds Rate Source: Bloomberg L.P. Note: Treasury Bills are guaranteed by the U.S. government and, if held to maturity, offer both a fixed rate of return and fixed principal value. Past performance does not indicate future results. Q. WHAT ACTIONS DID THE INVESTMENT MANAGER TAKE ON BEHALF OF THE FUNDS TO RESPOND TO CHANGES IN THE INTEREST RATE ENVIRONMENT? A. In response to the softer economic environment and expectations of federal funds rate reductions, the dollar-weighted average maturity of each Fund was lengthened during 1995. In general, in a declining interest rate environment, extending a fund's dollar-weighted average maturity helps minimize the impact of having to reinvest money at lower market rates as securities held in a fund's portfolio mature. For example, from December 31, 1994 to December 31, 1995, the average maturity of the Schwab Money Market Fund increased from 37 days to 60 days; the Schwab Government Money Fund's average maturity increased from 41 days to 55 days; and the average maturity of the Schwab U.S. Treasury Money Fund increased from 59 days to 80 days. Although each Fund's yield has decreased recently in response to the decline in market interest rates, this strategy of lengthening maturities was successful in delaying these declines. 8 Q. WHAT STANDARDS ARE USED IN SELECTING SECURITIES FOR THE FUNDS' PORTFOLIOS? A. The Federal government requires money market funds to hold high-quality securities in their portfolios. For the Schwab Money Funds, we have continued to take the additional step of investing only in what are referred to as "First Tier" securities. In general, a First Tier security is one that matures within certain recognized limits and carries the top rating from the requisite number of NRSROs, or is deemed to be of comparable quality by the Trust's Board of Trustees, if unrated. To increase the overall credit of each Fund's portfolio, we also selectively purchase securities which are insured or backed by a letter of credit from First Tier financial institutions. These arrangements are frequently referred to as "credit enhancements" because they provide an additional level of creditworthiness in addition to the financial strength of the underlying issuer. The Investment Manager's thorough credit review of each Fund's securities includes ongoing review of the issuer as well as any insurance company or financial institution providing a credit enhancement to the security. Banks which provide enhancements on securities we purchase include First Tier banks in countries such as the U.S., Japan and the United Kingdom. There continues to be a considerable amount of news coverage concerning the health of the Japanese economy in general and Japanese banks in particular. Over the last year, we have increased the frequency of our visits to Japan to call on Japanese financial institutions and Japanese government agencies. As a result of these trips and our continuous monitoring of the economic situation in Japan, we continue to refine our policies regarding investment in these securities. The banks we have selected are First Tier and represent some of the highest-quality Japanese institutions. With respect to credit enhancements, we feel these Japanese banks, as well as certain other international institutions, represent excellent opportunities to maintain the overall credit quality of the portfolios. 9 SchwabFunds(R) - -------------------------------------------------------------------------------- SCHWAB MONEY MARKET FUND, SCHWAB GOVERNMENT MONEY FUND & SCHWAB U.S. TREASURY MONEY FUND PORTFOLIO SUMMARY - -------------------------------------------------------------------------------- ASSET CHANGE
Total Total Percentage Net Assets Net Assets Change Over as of 12/31/95 as of 12/31/94 Reporting (000s) (000s) Period - -------------------------------------------------------------------------------------- Schwab Money Market Fund $ 14,010,387 $ 11,227,305 25% Schwab Government Money Fund 1,884,569 1,897,328 (1) Schwab U.S. Treasury Money Fund 1,193,689 803,871 48 - --------------------------------------------------------------------------------------
AVERAGE YIELDS FOR THE PERIODS ENDED DECEMBER 31, 1995
Last Last Last Seven Days Three Months Twelve Months - -------------------------------------------------------------------------------------- Schwab Money Market Fund 5.11% 5.12% 5.28% Schwab Government Money Fund 4.99 5.05 5.21 Schwab U.S. Treasury Money Fund 4.89 4.92 5.12 - --------------------------------------------------------------------------------------
MATURITY SCHEDULE PERCENT OF TOTAL INVESTMENTS
Schwab Money Market Fund Maturity Range 3/31/95 6/30/95 9/30/95 12/31/95 - ----------------------------------------------------------------- 0 - 15 Days 26.4% 16.7% 20.1% 19.4% 16 - 30 Days 13.3 17.2 18.1 18.2 31 - 60 Days 27.8 24.8 25.9 26.6 61 - 90 Days 25.2 18.2 21.9 12.8 91 - 120 Days 2.5 6.9 6.2 4.9 Over 120 Days 4.8 16.2 7.8 18.1 Weighted Average 46 Days 64 Days 55 Days 60 Days - -----------------------------------------------------------------
Schwab Government Money Fund Maturity Range 3/31/95 6/30/95 9/30/95 12/31/95 - ----------------------------------------------------------------- 0 - 15 Days 50.1% 47.0% 57.6% 64.1% 16 - 30 Days 4.3 4.2 8.8 3.9 31 - 60 Days 14.2 14.3 6.4 5.6 61 - 90 Days 16.8 17.0 8.0 7.7 91 - 120 Days 3.2 7.8 1.5 0.8 Over 120 Days 11.4 9.7 17.7 17.9 Weighted Average 47 Days 53 Days 58 Days 55 Days - -----------------------------------------------------------------
Schwab U.S. Treasury Money Fund Maturity Range 3/31/95 6/30/95 9/30/95 12/31/95 - ----------------------------------------------------------------- 0 - 15 Days 5.6% 3.6% 12.5% 10.0% 16 - 30 Days 22.1 8.9 11.3 2.7 31 - 60 Days 34.0 40.9 36.5 45.1 61 - 90 Days 15.9 18.8 6.9 11.1 91 - 120 Days 5.6 8.1 6.0 5.1 Over 120 Days 16.8 19.7 26.8 26.0 Weighted Average 57 Days 77 Days 72 Days 80 Days - -----------------------------------------------------------------
PORTFOLIO QUALITY--SCHWAB MONEY MARKET FUND
Percent of SEC Tier Net Assets Rating 12/31/95 ----------------------- Tier 1 99.70% Tier 2 0.00 Other* 0.30 -----------------------
* Security issued by Orange County currently rated below Tier 2 See Footnote 7 to the accompanying Financial Statements for further discussion. 10 SchwabFunds(R) 1 - -------------------------------------------------------------------------------- SCHWAB MONEY MARKET FUND SCHEDULE OF INVESTMENTS (in thousands) December 31, 1995 - --------------------------------------------------------------------------------
Par Value -------- ----------- CORPORATE OBLIGATIONS--55.9%(a) ASSET BACKED SECURITIES--9.2% Apreco, Inc. 5.67%, 03/07/96 $20,000 $19,795 Asset Securitization Cooperative Corp. 5.83%, 02/01/96 25,000 24,875 Beta Finance, Inc. 5.78%, 02/05/96 26,500 26,355 5.60%, 05/24/96 25,000 24,455 Broadway Capital Corp. 5.86%, 01/08/96 80,000 79,910 5.92%, 01/12/96 30,179 30,125 5.97%, 02/20/96 10,000 9,918 CXC Inc. 5.71%, 02/29/96 61,000 60,435 Corporate Asset Funding Corp. 5.77%, 02/05/96 17,000 16,906 Corporate Receivables Corp. 5.74%, 02/23/96 28,100 27,866 ESC Securitization, Inc. 5.79%, 01/24/96 25,000 24,909 5.79%, 01/25/96 15,000 14,943 5.79%, 01/26/96 15,000 14,941 5.77%, 02/08/96 25,000 24,850 5.76%, 02/21/96 16,000 15,871 5.58%, 03/21/96 44,000 43,462 Enterprise Funding Corp. 5.81%, 01/09/96 49,041 48,979 5.83%, 01/22/96 26,067 25,980 5.82%, 01/24/96 18,251 18,184 5.84%, 02/02/96 23,804 23,682 5.78%, 02/14/96 12,681 12,593 5.78%, 02/15/96 20,289 20,144 5.75%, 02/23/96 18,649 18,493 5.70%, 03/14/96 21,518 21,273 5.70%, 03/19/96 25,072 24,767 5.58%, 03/20/96 19,705 19,467 5.74%, 05/16/96 10,295 10,078 Eureka Securitization, Inc. 5.78%, 02/15/96 17,000 16,879 5.62%, 03/13/96 50,000 49,445 5.71%, 03/18/96 25,000 24,699 Falcon Asset Securitization Corp. 5.77%, 02/06/96 25,750 25,604 First Deposit Master Trust Series 1993-3 5.71%, 03/06/96 30,000 29,695 5.58%, 03/21/96 10,118 9,994 Preferred Receivables Corp. 5.84%, 02/08/96 36,825 36,600 5.76%, 02/12/96 34,375 34,148 Ranger Funding Corp. 5.84%, 01/08/96 21,000 20,977 5.81%, 01/09/96 20,000 19,975 5.81%, 01/10/96 11,000 10,984 5.78%, 02/13/96 10,000 9,932 5.76%, 02/22/96 15,000 14,877 5.62%, 03/04/96 14,500 14,359 5.62%, 03/15/96 10,000 9,886 5.58%, 03/19/96 10,000 9,881 Receivables Capital Corp. 5.84%, 01/10/96 42,886 42,824 5.81%, 01/26/96 38,463 38,310 5.81%, 02/01/96 40,097 39,899 5.79%, 02/21/96 31,677 31,421 Sheffield Receivables Corp. 5.81%, 01/08/96 16,000 15,982 Special Purpose Accounts Receivable Cooperative Corp. 5.78%, 02/13/96 18,000 17,877 WCP Funding, Inc. 5.79%, 01/22/96 15,000 14,950 5.76%, 02/16/96 25,000 24,819 5.75%, 02/16/96 10,000 9,928 5.70%, 03/18/96 15,800 15,610 --------- 1,292,811 --------- AUTOMOTIVE--3.5% Ford Credit Europe PLC 5.81%, 02/05/96 25,000 24,861 5.79%, 02/05/96 25,000 24,861 5.76%, 02/14/96 50,000 49,654 5.76%, 02/15/96 41,200 40,908 General Motors Acceptance Corp. 5.82%, 02/09/96 100,000 99,381 5.82%, 02/14/96 30,000 29,790 5.62%, 03/19/96 9,000 8,892 5.72%, 04/22/96 99,000 97,284 5.72%, 05/01/96 70,000 68,691 Renault Credit International SA Banque 5.83%, 02/15/96 49,600 49,244 -------- 493,566 -------- BANKING--AUSTRALIA--1.2% ANZ (Delaware), Inc. 5.79%, 02/05/96 28,350 28,193 5.55%, 05/10/96 25,000 24,511 5.56%, 05/13/96 25,000 24,498 Westpac Capital Corp. 5.79%, 05/01/96 50,000 49,054 5.54%, 06/12/96 50,000 48,780 -------- 175,036 -------- BANKING--BELGIUM--1.2% Generale Bank, Inc. 5.67%, 01/10/96 129,000 128,822 5.74%, 03/12/96 20,000 19,780 5.80%, 04/03/96 25,000 24,636 -------- 173,238 -------- BANKING--CANADA--4.1% Bank of Montreal 5.79%, 01/11/96 53,000 52,916 5.81%, 01/29/96 132,000 131,413 Bank of Nova Scotia 5.75%, 01/19/96 65,000 64,817 5.75%, 01/24/96 50,000 49,820 5.81%, 02/01/96 50,000 49,754 5.82%, 02/02/96 90,000 89,542 5.81%, 02/02/96 84,000 83,573 Toronto-Dominion Holdings 5.51%, 07/10/96 60,000 58,303 -------- 580,138 --------
11 SchwabFunds(R) 2 - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Par Value -------- ----------- BANKING--DENMARK--0.2% Den Danske Corp. 5.80%, 04/10/96 $ 30,000 $ 29,530 ------- BANKING--DOMESTIC BANK HOLDING COMPANY--2.2% Bankers Trust New York Corp. 5.77%, 02/12/96 25,000 24,834 NationsBank Corp. 5.80%, 01/22/96 67,000 66,777 5.69%, 01/23/96 75,000 74,744 5.80%, 02/08/96 100,000 99,400 5.80%, 02/09/96 20,000 19,877 5.55%, 05/21/96 30,000 29,364 ------- 314,996 ------- BANKING--GERMANY--0.4% Banco Boavista S.A./ (Bayerische Vereinsbank AG LOC) 5.81%, 01/19/96 10,000 9,971 Kredietbank N.A. Finance Corp. 5.78%, 01/08/96 18,500 18,480 5.78%, 01/17/96 30,000 29,925 ------- 58,376 ------- BANKING--ITALY--0.5% Cariplo Finance, Inc. 5.76%, 02/15/96 25,000 24,823 5.77%, 02/20/96 40,000 39,684 ------- 64,507 ------- BANKING--JAPAN--0.9% Bancal Tri-State Corp./ (Mitsubishi Bank Keepwell Agreement) 5.86%, 02/22/96 25,000 24,792 5.81%, 03/15/96 40,000 39,531 Deerfield Capital Corp./ (Sumitomo Bank Ltd. LOC) 6.15%, 01/05/96 38,800 38,774 Ridge Capital II/(Dai-Ichi Kangyo Bank Ltd. LOC) 6.15%, 01/05/96 14,550 14,540 Stellar Capital Corp./ (Bank of Tokyo Liquidity Agreement) 6.01%, 02/26/96 12,873 12,754 ------- 130,391 ------- BANKING--UNITED KINGDOM--2.0% Bank of Scotland Treasury Services 5.53%, 06/11/96 55,000 53,668 Cheltenham & Gloucester PLC 5.80%, 01/29/96 50,000 49,778 5.79%, 02/01/96 30,000 29,852 5.77%, 02/07/96 40,000 39,766 Yorkshire Building Society 5.81%, 02/05/96 25,000 24,861 5.77%, 02/13/96 30,000 29,796 5.69%, 03/13/96 25,000 24,720 5.60%, 05/29/96 25,000 24,436 ------- 276,877 ------- COMPUTER AND OFFICE EQUIPMENT--0.2% CSC Enterprises 5.80%, 01/19/96 29,000 28,917 ------- FINANCE (COMMERCIAL)--8.8% CIT Group Holdings, Inc. 5.76%, 02/14/96 63,000 62,563 5.77%, 02/16/96 50,000 49,637 General Electric Capital Corp. 5.76%, 02/13/96 100,000 99,322 5.69%, 03/28/96 63,000 62,150 5.70%, 04/03/96 43,000 42,379 5.55%, 05/02/96 25,000 24,540 5.59%, 05/06/96 156,000 153,019 5.62%, 05/07/96 64,000 62,763 5.51%, 06/12/96 36,000 35,126 5.52%, 06/14/96 60,000 58,526 5.53%, 07/26/96 50,000 48,465 General Electric Capital Services 5.76%, 02/12/96 50,000 49,669 5.76%, 02/13/96 50,000 49,661 5.76%, 02/15/96 54,000 53,617 5.74%, 03/06/96 64,000 63,355 5.70%, 04/03/96 50,000 49,278 5.61%, 05/03/96 25,000 24,532 5.59%, 05/07/96 50,000 49,037 5.58%, 05/08/96 23,000 22,554 5.52%, 06/13/96 75,000 73,169 Transamerica Finance Corp. 5.74%, 02/22/96 50,000 49,591 5.74%, 02/23/96 50,000 49,583 --------- 1,232,536 --------- FINANCE (CONSUMER)--4.0% American Express Credit Corp. 5.81%, 03/01/96 47,000 46,556 5.75%, 03/08/96 45,000 44,532 5.60%, 05/09/96 43,000 42,157 5.58%, 05/15/96 28,000 27,428 5.57%, 05/15/96 50,000 48,978 5.50%, 06/06/96 39,000 38,090 5.50%, 06/10/96 40,000 39,043 Associates Corp. of North America 5.65%, 05/09/96 122,000 119,587 Household Finance Corp. 5.80%, 01/25/96 17,000 16,935 Sears Roebuck Acceptance Corp. 5.82%, 01/10/96 50,000 49,928 5.82%, 01/11/96 34,000 33,946 5.79%, 02/14/96 30,000 29,791 5.79%, 02/16/96 30,000 29,781 -------- 566,752 -------- GOVERNMENT LOCALITY--FOREIGN--0.7% New South Wales Treasury Corp. 5.81%, 01/10/96 19,000 18,973 5.80%, 01/30/96 76,000 75,650 -------- 94,623 --------
12 SchwabFunds(R) 3 - -------------------------------------------------------------------------------- SCHWAB MONEY MARKET FUND SCHEDULE OF INVESTMENTS (in thousands) December 31, 1995 - --------------------------------------------------------------------------------
Par Value -------- ----------- MINING AND MINERAL RESOURCES--0.2% BHP Finance (U.S.A.), Inc. 5.79%, 02/22/96 $ 15,000 $ 14,877 5.76%, 02/23/96 10,000 9,917 ------- 24,794 ------- MISCELLANEOUS MANUFACTURING--2.4% Hanson Finance (U.K.) PLC 5.82%, 01/12/96 32,000 31,944 5.80%, 01/12/96 60,500 60,394 5.81%, 01/19/96 60,000 59,829 5.80%, 01/19/96 32,000 31,909 5.84%, 02/01/96 115,000 114,434 5.75%, 02/29/96 35,000 34,675 5.58%, 03/21/96 10,000 9,878 ------- 343,063 ------- MORTGAGE BANKING--0.5% Fleet Mortgage Group, Inc. 5.86%, 01/26/96 25,000 24,900 5.81%, 02/22/96 23,000 22,810 5.66%, 03/06/96 25,000 24,747 ------- 72,457 ------- PERSONAL CARE PRODUCTS--0.4% Colgate-Palmolive Co. 5.80%, 01/22/96 52,000 51,827 ------- PHARMACEUTICALS--0.5% Glaxo Wellcome PLC 5.79%, 01/17/96 50,000 49,873 5.79%, 01/18/96 22,000 21,941 ------- 71,814 ------- SECURITIES BROKERAGE-DEALER--12.3% BT Securities Corp. 5.84%, 01/25/96 18,000 17,931 5.77%, 02/16/96 20,000 19,855 Bear Stearns Companies, Inc. 5.79%, 02/07/96 65,000 64,619 CS First Boston, Inc. 5.79%, 01/08/96 30,000 29,967 5.82%, 02/05/96 30,000 29,833 Dean Witter Discover 5.79%, 01/19/96 30,000 29,915 5.79%, 02/08/96 23,000 22,862 5.79%, 02/16/96 25,000 24,818 Goldman Sachs Group, LP 5.82%, 01/11/96 100,000 99,841 5.83%, 01/17/96 120,000 119,694 5.83%, 01/18/96 50,000 49,865 5.75%, 01/24/96 50,000 49,820 5.80%, 03/08/96 123,000 121,704 5.77%, 03/21/96 24,000 23,700 5.77%, 03/22/96 44,000 43,443 5.72%, 04/08/96 50,000 49,238 5.72%, 04/09/96 100,000 98,460 Lehman Brothers Holdings, Inc. 5.74%, 03/15/96 25,000 24,710 5.64%, 03/27/96 16,000 15,787 Morgan Stanley Group, Inc. 5.83%, 01/08/96 30,000 29,966 5.83%, 01/09/96 42,000 41,946 5.83%, 01/10/96 50,000 49,928 5.78%, 02/06/96 183,000 181,957 5.78%, 02/07/96 50,000 49,707 5.79%, 02/08/96 70,000 69,579 5.79%, 02/09/96 15,000 14,907 5.79%, 02/12/96 75,000 74,501 5.89%, 02/13/96 35,000 34,761 Nomura Holdings America, Inc. 5.92%, 01/03/96 13,000 12,996 5.92%, 01/04/96 39,000 38,981 5.85%, 01/11/96 15,000 14,976 5.88%, 01/12/96 5,000 4,991 5.86%, 01/18/96 20,000 19,946 5.86%, 01/22/96 9,000 8,970 Paine Webber Group, Inc. 5.95%, 01/03/96 15,000 14,995 5.95%, 01/05/96 35,000 34,977 Salomon, Inc. 6.15%, 01/02/96 16,902 16,899 6.02%, 02/14/96 40,000 39,710 6.02%, 02/15/96 40,000 39,704 --------- 1,730,459 --------- STUDENT LOANS--0.5% Student Loan Corp. 5.77%, 02/16/96 25,000 24,819 5.76%, 02/16/96 25,000 24,819 -------- 49,638 -------- TOTAL CORPORATE OBLIGATIONS (Cost $7,856,346) 7,856,346 --------- VARIABLE RATE OBLIGATIONS--6.8%(b) ASSET BACKED SECURITIES--0.2% Advanta Credit Card Master Trust 5.87%, 01/07/96 24,000 24,000 -------- BANKING--DOMESTIC BANK HOLDING COMPANY--0.5% Bankers Trust New York Corp. 6.13%, 01/02/96 75,000 75,000 -------- BANKING--DOMESTIC--0.1% 6700 Cherry Avenue Partners Variable Rate Demand Bonds Series 1993/ (Wells Fargo Bank LOC) 6.35%, 01/07/96 10,500 10,500 -------- BANKING--FRANCE--1.0% New Jersey Economic Development Authority Taxable Adjustable Rate Money Market Securities (GE Aerospace Camden Development Project) Series A/(Banque Nationale de Paris LOC) 5.86%, 01/07/96 28,700 28,700
13 SchwabFunds(R) 4 - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Par Value -------- ----------- New Jersey Economic Development Authority Taxable Adjustable Rate Money Market Securities (GE Aerospace Camden Development Project) Series B/(Banque Nationale de Paris LOC) 5.86%, 01/07/96 $10,000 $ 10,000 The City of New York, General Obligation Bonds, Fiscal 1995 Series F-8/ (Societe Generale LOC) 6.00%, 01/07/96 51,000 51,000 The City of New York, General Obligation Bonds, Fiscal 1996 Series A-2/ (Societe Generale LOC) 6.00%, 01/07/96 52,500 52,500 ------- 142,200 ------- BANKING--GERMANY--0.2% General Obligation Refunding Bonds of the County of Hudson Variable Rate Demand Obligations Taxable Series 1995/ (Landesbank Hessen-Thuringen Girozentrale LOC) 6.05%, 01/07/96 22,540 22,540 ------- BANKING--JAPAN--0.1% Baldwin Park Redevelopment Agency 1993 Refunding Revenue Bonds (Baldwin Park Hotel Project)/ (Sumitomo Bank LOC) 6.07%, 01/09/96 14,700 14,700 Town of Islip Industrial Development Agency 1992 Taxable Adjustable Rate Industrial Development Revenue Bonds (Nussdorf Associates/Quality King Distributors, Inc. Facility)/ (Bank of Tokyo LOC) 5.84%, 01/07/96 6,275 6,275 ------- 20,975 ------- BANKING--NETHERLANDS--0.2% New Jersey Economic Development Authority Adjustable Rate Lease Revenue Taxable Bonds (Barnes & Noble, Inc. Distribution and Freight Consolidation Center Project) Series 1995A/ (Rabobank Nederland N.V. LOC) 5.86%, 01/07/96 21,700 21,700 New Jersey Economic Development Authority Adjustable Rate Lease Revenue Taxable Bonds (Barnes & Noble, Inc. Distribution and Freight Consolidation Center Project) Series 1995B/ (Rabobank Nederland N.V. LOC) 5.86%, 01/07/96 10,000 10,000 ------- 31,700 ------- CITY OR COUNTY GENERAL OBLIGATIONS--0.3% Orange County, California Taxable Notes Series 1994-1995 (d) 5.97%, 06/30/96 41,500 41,500 ------- EDUCATION--0.3% Development Authority of Dekalb County Taxable Variable Rate Revenue Bonds (Emory University Project) Series 1995B 6.05%, 01/07/96 36,415 36,415 ------- INSURANCE--0.7% Commonwealth Life Insurance Co. 6.03%, 01/01/96 100,000 100,000 ------- MONOLINE INSURANCE--0.3% Baptist Health Systems of South Florida, Inc. Taxable Variable Rate Direct Note Obligations Series 1995A/ (MBIA Insurance) 6.05%, 01/07/96 13,000 13,000 Baptist Health Systems of South Florida, Inc. Taxable Variable Rate Direct Note Obligations Series 1995B/ (MBIA Insurance) 6.05%, 01/07/96 19,000 19,000
14 SchwabFunds(R) 5 - -------------------------------------------------------------------------------- SCHWAB MONEY MARKET FUND SCHEDULE OF INVESTMENTS (in thousands) December 31, 1995 - --------------------------------------------------------------------------------
Par Value -------- ----------- New Orleans Aviation Board Taxable Refunding Bonds Series 1993A/ (MBIA Insurance) 6.01%, 01/07/96 $ 3,800 $ 3,800 ------- 35,800 ------- SECURITIES BROKERAGE-DEALER--2.9% Bear Stearns Companies, Inc. 6.03%, 01/04/96 125,000 125,000 5.99%, 01/08/96 50,000 50,000 5.99%, 02/01/96 100,000 100,000 5.91%, 03/21/96 30,000 30,000 Lehman Brothers Holdings, Inc. 5.90%, 01/30/96 100,000 100,000 ------- 405,000 ------- TOTAL VARIABLE RATE OBLIGATIONS (Cost $945,630) 945,630 ------- AGENCY OBLIGATIONS--1.6% COUPON NOTES--1.6% Federal National Mortgage Assoc. 5.50%, 06/12/96 56,000 55,959 5.62%, 07/02/96 72,000 71,956 5.91%, 08/19/96 100,000 100,156 ------- TOTAL AGENCY OBLIGATIONS (Cost $228,071) 228,071 ------- BANK NOTES--4.0% BANKING--DOMESTIC--4.0% Bank of America Illinois 5.80%, 01/09/96 95,000 95,000 FCC National Bank 5.52%, 06/06/96 50,000 50,000 5.52%, 06/07/96 50,000 50,000 First of America--Indiana 5.80%, 01/09/96 21,000 21,000 Mellon Bank N.A. 5.80%, 04/02/96 100,000 100,000 5.80%, 10/17/96 30,000 29,987 NationsBank, N.A. (Carolinas) 5.54%, 06/04/96 50,000 50,000 5.54%, 06/06/96 50,000 50,000 PNC Bank, N.A. 5.58%, 05/24/96 15,000 15,016 Sea First--Seattle 5.80%, 01/11/96 50,000 50,000 5.80%, 01/12/96 50,000 50,000 ------- TOTAL BANK NOTES (Cost $561,003) 561,003 ------- CERTIFICATES OF DEPOSIT--29.8% BANKING--CANADA--3.0% Bank of Montreal 5.84%, 01/05/96 25,000 25,000 5.79%, 01/11/96 25,000 25,000 5.80%, 01/31/96 50,000 50,000 Canadian Imperial Bank of Commerce 5.81%, 01/24/96 57,000 57,000 5.81%, 01/26/96 125,000 125,000 5.81%, 01/31/96 140,000 140,000 ------- 422,000 ------- BANKING--DOMESTIC--0.5% MBNA America Bank N.A. 5.75%, 04/10/96 33,000 33,000 5.63%, 04/16/96 10,000 10,000 5.62%, 04/19/96 25,000 25,000 ------- 68,000 ------- BANKING--FRANCE--4.5% Banque Nationale de Paris 5.80%, 02/08/96 10,000 10,010 5.58%, 05/07/96 10,000 10,002 5.55%, 05/10/96 18,750 18,749 5.54%, 06/13/96 20,000 20,001 5.47%, 09/16/96 90,000 90,116 Societe Generale 5.84%, 01/18/96 137,000 137,001 5.80%, 01/25/96 145,000 145,000 5.84%, 03/05/96 60,000 60,004 5.74%, 03/07/96 60,000 60,014 5.84%, 03/14/96 25,000 25,002 5.85%, 03/20/96 20,000 20,000 5.78%, 04/17/96 35,000 35,060 ------- 630,959 ------- BANKING--GERMANY--2.3% Commerzbank AG 5.79%, 01/16/96 25,000 25,000 5.79%, 01/17/96 50,000 50,000 Deutsche Bank 5.79%, 01/23/96 125,000 125,000 5.79%, 01/30/96 125,000 125,000 ------- 325,000 ------- BANKING--JAPAN--13.6% Dai-Ichi Kangyo Bank, Ltd. 6.12%, 01/12/96 30,000 30,000 6.10%, 01/12/96 40,000 40,000 6.22%, 01/18/96 22,000 22,000 6.22%, 01/19/96 25,000 25,000 6.30%, 01/22/96 18,000 18,000 6.42%, 01/23/96 50,000 49,996 6.42%, 01/24/96 25,000 25,000 6.42%, 01/25/96 25,000 25,000 6.42%, 01/26/96 25,000 25,000 6.02%, 02/09/96 27,000 27,004 6.02%, 02/12/96 20,000 20,003 5.88%, 02/21/96 50,000 49,996 5.86%, 03/20/96 32,000 31,997
15 SchwabFunds(R) 6 - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Par Value -------- ----------- Industrial Bank of Japan, Ltd. 6.25%, 01/02/96 $ 69,000 $ 69,000 6.23%, 01/03/96 70,000 70,000 6.25%, 01/04/96 75,000 75,000 6.15%, 01/04/96 52,000 52,000 6.14%, 01/05/96 33,000 33,000 Mitsubishi Bank, Ltd. 6.15%, 01/02/96 50,000 50,000 6.14%, 01/02/96 25,000 25,000 6.14%, 01/03/96 25,000 25,000 5.82%, 03/01/96 49,000 49,013 5.84%, 03/05/96 25,000 25,001 5.82%, 03/06/96 12,000 12,001 5.88%, 03/08/96 40,000 39,994 5.83%, 03/12/96 39,000 38,998 5.80%, 03/12/96 50,000 50,001 5.83%, 03/14/96 60,000 60,001 5.83%, 03/19/96 60,000 60,000 5.83%, 03/20/96 55,000 55,000 Sanwa Bank, Ltd. 6.02%, 02/05/96 10,000 10,001 6.17%, 02/20/96 39,000 39,000 6.15%, 02/20/96 94,000 94,003 6.22%, 02/21/96 72,000 72,001 5.92%, 02/29/96 50,000 50,004 5.82%, 04/15/96 20,000 19,999 5.81%, 04/23/96 50,000 50,002 Sumitomo Bank, Ltd. 6.26%, 01/02/96 35,000 35,000 6.18%, 01/03/96 25,000 25,000 6.38%, 01/05/96 48,000 48,000 6.18%, 01/09/96 25,000 25,000 6.25%, 01/30/96 50,000 50,000 6.25%, 01/31/96 50,000 50,000 5.80%, 02/27/96 50,000 50,001 5.70%, 03/19/96 55,000 55,001 5.70%, 03/20/96 60,000 60,001 --------- 1,911,018 --------- BANKING--NETHERLANDS--1.9% ABN-AMRO Bank N.V. 5.83%, 02/21/96 37,000 36,995 5.57%, 05/08/96 15,000 14,998 5.75%, 06/04/96 25,000 24,978 5.78%, 06/05/96 17,000 16,983 5.75%, 06/05/96 120,000 119,892 5.58%, 06/05/96 58,000 57,988 -------- 271,834 -------- BANKING--SWITZERLAND--0.7% Union Bank of Switzerland 5.55%, 05/03/96 100,000 100,003 -------- BANKING--UNITED KINGDOM--3.3% Abbey National PLC 5.80%, 01/16/96 146,000 145,996 5.56%, 05/13/96 25,000 24,997 5.53%, 06/14/96 100,000 100,004 5.58%, 06/21/96 70,000 70,020 Bank of Scotland 5.54%, 06/10/96 25,000 24,996 5.51%, 06/11/96 50,000 50,002 National Westminster Bank PLC 5.72%, 02/06/96 16,000 16,000 5.70%, 04/09/96 25,000 25,001 -------- 457,016 -------- TOTAL CERTIFICATES OF DEPOSIT (Cost $4,185,830) 4,185,830 --------- REMARKETED CERTIFICATES--0.6% ASSET BACKED SECURITIES--0.6% Black & Decker RECOP Trust 5.73%, 03/13/96 36,592 36,591 5.62%, 03/26/96 15,000 15,000 Circuit City RECOP Trust 5.75%, 03/04/96 27,000 27,000 -------- TOTAL REMARKETED CERTIFICATES (Cost $78,591) 78,591 -------- Maturity -------- REPURCHASE AGREEMENT--1.3%(c) Salomon Brothers, Inc. 5.92% Issue Date 12/29/95 Due 01/02/96 Collateralized By: FHLMC: $47,069 Par; 6.00% Due 11/01/98 FNMA: $42,421 Par; 7.00% Due 05/01/08 FNMA: $42,404 Par; 9.00% Due 04/01/25 FNMA: $42,917 Par; 9.00% Due 03/01/25 FHLMC: $11,137 Par; 6.00% Due 09/01/23 FHLMC: $1,280 Par; 11.25% Due 02/15/15 FHLMC: $35,066 Par; 9.00% Due 03/01/25 185,122 185,000 -------- TOTAL REPURCHASE AGREEMENT (Cost $185,000) 185,000 -------- TOTAL INVESTMENTS--100.0% (Cost $14,040,471) $14,040,471 ===========
See accompanying Notes to Schedules of Investments. 16 SchwabFunds(R) 7 - -------------------------------------------------------------------------------- SCHWAB GOVERNMENT MONEY FUND SCHEDULE OF INVESTMENTS (in thousands) December 31, 1995 - --------------------------------------------------------------------------------
Par Value -------- ---------- VARIABLE RATE OBLIGATIONS--17.6%(b) Federal Home Loan Bank 5.75%, 02/14/96 $ 20,000 $ 20,000 5.51%, 03/08/96 10,000 9,996 5.47%, 03/08/96 20,000 19,994 Student Loan Marketing Assoc. 5.50%, 01/02/96 29,010 29,038 5.45%, 01/02/96 9,165 9,185 5.43%, 01/02/96 21,675 21,702 5.40%, 01/02/96 125,330 125,299 5.27%, 01/02/96 25,000 25,002 5.26%, 01/02/96 40,000 40,000 5.23%, 01/02/96 30,000 30,000 ------- TOTAL VARIABLE RATE OBLIGATIONS (Cost $330,216) 330,216 ------- AGENCY OBLIGATIONS--33.1% COUPON NOTES--21.5% Federal Farm Credit Bank 5.88%, 09/03/96 25,000 25,004 Federal Home Loan Bank 7.15%, 01/26/96 28,950 28,955 6.91%, 02/21/96 26,000 26,035 6.11%, 05/17/96 25,000 25,027 8.25%, 05/27/96 9,040 9,125 7.81%, 07/17/96 11,240 11,353 Federal National Mortgage Assoc. 9.20%, 01/10/96 16,155 16,165 6.46%, 03/27/96 45,000 45,071 6.27%, 04/03/96 15,000 15,010 5.59%, 07/01/96 13,085 13,066 5.62%, 07/02/96 25,000 24,984 8.00%, 07/10/96 19,980 20,191 5.91%, 08/19/96 25,000 25,039 5.64%, 09/09/96 30,000 29,980 5.60%, 09/20/96 20,000 19,981 5.50%, 09/23/96 10,000 9,981 5.68%, 10/07/96 40,000 39,988 5.37%, 12/18/96 20,000 19,990 ------- 404,945 ------- DISCOUNT NOTES--11.6% Federal Farm Credit Bank 5.49%, 02/05/96 15,000 14,920 5.75%, 02/06/96 17,425 17,328 Federal Home Loan Bank 5.74%, 02/05/96 12,000 11,935 5.39%, 03/22/96 11,000 10,868 5.39%, 03/27/96 9,600 9,478 Federal Home Loan Mortgage Corp. 5.56%, 01/05/96 930 929 5.70%, 01/16/96 45,025 44,919 5.89%, 02/01/96 15,000 14,927 5.42%, 03/07/96 15,000 14,853 5.41%, 03/18/96 34,575 34,180 Federal National Mortgage Assoc. 5.34%, 09/24/96 20,000 19,239 5.38%, 10/30/96 25,000 23,918 ------- 217,494 ------- TOTAL AGENCY OBLIGATIONS (Cost $622,439) 622,439 ------- U.S. TREASURY OBLIGATIONS--1.0% U.S. Treasury Notes 4.25%, 05/15/96 $20,000 $ 19,888 ------- TOTAL U.S. TREASURY OBLIGATIONS (Cost $19,888) 19,888 ------- Maturity -------- REPURCHASE AGREEMENTS--48.3%(c) CS First Boston Corp. 5.72% Issue Date 12/05/95 Last Put Date 12/31/95 Due 01/07/96 Collateralized By: FHLMC: $40,765 Par; 6.50% Due 04/15/08 FHLMC: $12,000 Par; 6.50% Due 02/15/24 FNMA: $1,195 Par; 6.00% Due 11/25/97 35,790 35,603 Donaldson, Lufkin & Jenrette Securities Corp. 5.70% Issue Date 12/14/95 Last Put Date 12/31/95 Due 01/07/96 Collateralized By: FNMA: $29,580 Par; 6.07% Due 10/25/17 26,478 26,378 Donaldson, Lufkin & Jenrette Securities Corp. 5.75% Issue Date 10/02/95 Last Put Date 12/27/95 Due 01/03/96 Collateralized By: FHLMC: $32,345 Par; 6.58% Due 12/15/23 FHLMC: $24,740 Par; 6.10% Due 12/15/23 50,743 50,000 Donaldson, Lufkin & Jenrette Securities Corp. 5.75% Issue Date 10/04/95 Last Put Date 12/28/95 Due 01/04/96 Collateralized By: FNMA: $23,795 Par; 6.25% Due 06/25/20 FNMA: $16,600 Par; 6.10% Due 12/25/13 FHLMC: $22,000 Par; 9.50% Due 04/15/20 FNMA: $10,000 Par; 6.53% Due 03/25/24 55,000 54,204
17 SchwabFunds(R) 8 - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Maturity Value -------- ---------- Donaldson, Lufkin & Jenrette Securities Corp. 5.75% Issue Date 10/12/95 Last Put Date 12/31/95 Due 01/07/96 Collateralized By: FNMA: $46,270 Par; 6.50% Due 11/25/17 FNMA: $6,425 Par; 6.50% Due 05/25/21 $41,011 $40,449 Donaldson, Lufkin & Jenrette Securities Corp. 5.75% Issue Date 10/17/95 Last Put Date 12/31/95 Due 01/07/96 Collateralized By: FHLMC: $21,865 Par; 5.75% Due 07/25/20 FNMA: $14,725 Par; 6.52% Due 03/25/24 FNMA: $390 Par; 6.50% Due 09/25/20 31,018 30,617 Donaldson, Lufkin & Jenrette Securities Corp. 5.75% Issue Date 10/18/95 Last Put Date 12/31/95 Due 01/07/96 Collateralized By: FNMA: $23,975 Par; 5.75% Due 09/25/16 21,976 21,695 Donaldson, Lufkin & Jenrette Securities Corp. 5.75% Issue Date 10/23/95 Last Put Date 12/31/95 Due 01/07/96 Collateralized By: FNMA: $23,395 Par; 7.18% Due 02/25/22 22,595 22,324 Donaldson, Lufkin & Jenrette Securities Corp. 5.75% Issue Date 12/15/95 Last Put Date 12/31/95 Due 01/07/96 Collateralized By: FNMA: $27,500 Par; 6.50% Due 07/25/18 FNMA: $8,885 Par; 6.50% Due 07/25/23 34,725 34,598 Donaldson, Lufkin & Jenrette Securities Corp. 5.76% Issue Date 10/25/95 Last Put Date 12/31/95 Due 01/07/96 Collateralized By: FHLMC: $21,555 Par; 5.75% Due 07/25/20 FHLMC: $31,425 Par; 7.00% Due 02/15/22 30,043 29,691 Donaldson, Lufkin & Jenrette Securities Corp. 5.78% Issue Date 11/22/95 Last Put Date 12/31/95 Due 01/07/96 Collateralized By: FHLMC: $22,945 Par; 6.83% Due 02/15/21 22,708 22,542 Donaldson, Lufkin & Jenrette Securities Corp. 5.81% Issue Date 11/16/95 Last Put Date 12/31/95 Due 01/07/96 Collateralized By: FHLMC: $30,000 Par; 6.50% Due 08/15/08 FNMA: $14,365 Par; 5.00% Due 12/25/12 36,627 36,322 Donaldson, Lufkin & Jenrette Securities Corp. 5.81% Issue Date 12/04/95 Last Put Date 12/31/95 Due 01/07/96 Collateralized By: FHLMC: $68,455 Par; 6.49% Due 03/15/24 64,258 63,907 Fuji Securities, Inc. 5.75% Issue Date 11/01/95 Due 01/08/96 Collateralized By: U.S. Treasury Notes: $27,370 Par; 9.13% Due 05/15/99 U.S. Treasury Notes: $200 Par; 6.00% Due 06/30/96 30,326 30,000 Lehman Government Securities, Inc. 5.75% Issue Date 10/03/95 Last Put Date 12/26/95 Due 01/02/96 Collateralized By: FHLMC: $29,600 Par; 5.85% Due 10/15/02 FNMA: $24,057 Par; 8.00% Due 06/01/07 FHLMC: $22,200 Par; 5.50% Due 11/01/00 FHLMC: $769 Par; 6.00% Due 05/15/08 57,350 56,528 Lehman Government Securities, Inc. 5.75% Issue Date 12/11/95 Last Put Date 12/31/95 Due 01/07/96 Collateralized By: FHLMC: $13,763 Par; 6.00% Due 08/15/07 FHLMC: $14,794 Par; 5.82% Due 08/15/23 FNMA: $16,570 Par; 6.00% Due 11/25/19 FNMA: $10,000 Par; 6.50% Due 04/25/23 FHLMC: $505 Par; 6.00% Due 05/15/08 44,264 44,074
18 SchwabFunds(R) 9 - -------------------------------------------------------------------------------- SCHWAB GOVERNMENT MONEY FUND SCHEDULE OF INVESTMENTS (in thousands) December 31, 1995 - --------------------------------------------------------------------------------
Maturity Value -------- ---------- Lehman Government Securities, Inc. 5.76% Issue Date 10/24/95 Last Put Date 12/31/95 Due 01/07/96 Collateralized By: FHLMC: $18,753 Par; 6.46% Due 09/15/07 FNMA: $9,358 Par; 7.09% Due 10/25/23 FNMA: $18,270 Par; 6.24% Due 08/25/19 FHLMC: $20 Par; 6.50% Due 10/15/08 FHLMC: $938 Par; 6.00% Due 05/15/08 $35,436 $35,016 Lehman Government Securities, Inc. 5.76% Issue Date 10/26/95 Last Put Date 12/31/95 Due 01/07/96 Collateralized By: FHLMC: $12,139 Par; 6.25% Due 11/15/08 FHLMC: $9,033 Par; 6.50% Due 01/15/02 FNMA: $13,187 Par; 7.00% Due 11/01/08 FHLMC: $600 Par; 6.00% Due 05/15/08 27,368 27,052 Lehman Government Securities, Inc. 5.80% Issue Date 12/08/95 Last Put Date 12/31/95 Due 01/07/96 Collateralized By: FHLMC: $8,777 Par; 7.50% Due 11/15/21 FNMA: $13,332 Par; 6.30% Due 04/25/17 FHLMC: $12,321 Par; 7.50% Due 05/01/09 FNMA: $15,000 Par; 8.50% Due 01/01/08 FHLMC: $9,919 Par; 6.50% Due 10/01/99 44,743 44,528 Lehman Government Securities, Inc. 5.81% Issue Date 12/06/95 Last Put Date 12/31/95 Due 01/07/96 Collateralized By: FNMA: $10,341 Par; 6.47% Due 03/25/24 FHLMC: $4,664 Par; 6.53% Due 11/15/21 FNMA: $21,000 Par; 7.00% Due 08/25/23 FHLMC: $500 Par; 6.00% Due 05/15/08 34,305 34,129 Lehman Government Securities, Inc. 5.82% Issue Date 12/13/95 Last Put Date 12/31/95 Due 01/07/96 Collateralized By: FHLMC: $45,760 Par; 6.70% Due 01/15/22 FHLMC: $19,450 Par; 7.00% Due 01/15/23 FNMA: $10,750 Par; 6.24% Due 01/25/24 33,809 33,673 Salomon Brothers, Inc. 5.75% Issue Date 11/27/95 Last Put Date 12/31/95 Due 01/07/96 Collateralized By: FNMA: $34,664 Par; 7.00% Due 12/01/99 FHLMC: $4,142 Par; 6.00% Due 11/15/07 U.S. Treasury Notes: $144 Par; 11.25% Due 02/15/15 22,976 22,827 Salomon Brothers, Inc. 5.80% Issue Date 11/17/95 Last Put Date 12/31/95 Due 01/07/96 Collateralized By: FHLMC: $17,100 Par; 5.00% Due 09/15/20 FNMA: $32,900 Par; 7.50% Due 06/01/09 FNMA: $38,485 Par; 8.00% Due 06/01/07 61,075 60,577 Salomon Brothers, Inc. 5.84% Issue Date 11/30/95 Last Put Date 12/29/95 Due 01/05/96 Collateralized By: FHLMC: $25,201 Par; 8.00% Due 08/01/25 FNMA: $50,000 Par; 8.00% Due 06/01/07 FNMA: $3,921 Par; 7.00% Due 12/01/99 U.S. Treasury Notes: $210 Par; 11.25% Due 02/15/15 50,776 50,481 -------- TOTAL REPURCHASE AGREEMENTS (Cost $907,215) 907,215 -------- TOTAL INVESTMENTS--100.0% (Cost $1,879,758) $1,879,758 ==========
See accompanying Notes to Schedules of Investments. 19 SchwabFunds(R) 10 - -------------------------------------------------------------------------------- SCHWAB U.S. TREASURY MONEY FUND SCHEDULE OF INVESTMENTS (in thousands) December 31, 1995 - --------------------------------------------------------------------------------
Par Value -------- ---------- U.S. TREASURY OBLIGATIONS--100.0% U.S. Treasury Bills 5.37%-5.51%, 01/11/96 $ 18,275 $ 18,248 5.34%-5.60%, 01/18/96 12,115 12,084 5.46%, 01/25/96 20,000 19,928 5.58%, 02/01/96 15,000 14,930 5.39%-5.50%, 02/08/96 119,465 118,786 5.38%-5.43%, 02/15/96 5,355 5,319 5.39%-5.42%, 02/22/96 33,670 33,410 5.02%-5.52%, 03/07/96 119,935 118,764 5.49%, 03/14/96 1,525 1,508 5.02%, 03/28/96 11,960 11,817 U.S. Treasury Notes 9.25%, 01/15/96 100,000 100,129 4.00%-7.50%, 01/31/96 78,505 78,462 4.63%-8.88%, 02/15/96 174,250 174,369 4.63%, 02/29/96 108,705 108,543 7.75%, 03/31/96 40,000 40,198 9.38%, 04/15/96 20,000 20,198 5.50%-7.63%, 04/30/96 100,000 100,296 7.38%, 05/15/96 50,000 50,341 5.88%, 05/31/96 54,290 54,385 7.88%, 07/15/96 25,000 25,313 6.13%, 07/31/96 25,000 25,097 6.50%, 09/30/96 23,775 23,980 6.88%, 10/31/96 28,000 28,351 -------- TOTAL U.S. TREASURY OBLIGATIONS (Cost $1,184,456) 1,184,456 --------- TOTAL INVESTMENTS--100.0% (Cost $1,184,456) $1,184,456 ==========
NOTES TO SCHEDULES OF INVESTMENTS. Yields shown are effective yields at the time of purchase, except for variable rate securities which are described below and Treasury and Agency notes which reflect the coupon rate of the security. Yields for each type of security are stated according to the market convention for that security type. For each security, cost (for financial reporting and federal income tax purposes) and carrying value are the same. (a) Certain securities purchased by the Schwab Money Market 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 Money Market Fund. Any resale by the Fund must be in an exempt transaction, normally to a qualified institutional buyer. At December 31, 1995, the aggregate value of private placement securities held by the Schwab Money Market Fund was $2,002,545,000 which represented 14.29% of net assets. Of this total, $1,723,954,000 or 12.30% of net assets, was determined by the Investment Manager to be liquid in accordance with a resolution adopted by the Board of Trustees relating to Rule 144A, promulgated under the Securities Act of 1933. (b) Variable rate securities. Interest rates vary periodically based on current market rates. Rates shown are the effective rates on December 31, 1995. Dates shown represent the latter of the demand date or next interest rate change date, which is considered the maturity date for financial reporting purposes. For variable rate securities without demand features, the next interest reset date is shown. (Continued on next page) 20 SchwabFunds(R) 11 - -------------------------------------------------------------------------------- SCHWAB MONEY MARKET FUND, SCHWAB GOVERNMENT MONEY FUND & SCHWAB U.S. TREASURY MONEY FUND SCHEDULE OF INVESTMENTS (in thousands) December 31, 1995 - -------------------------------------------------------------------------------- NOTES TO SCHEDULES OF INVESTMENTS. (CONTINUED) (c) Due dates shown for repurchase agreements represent either the final maturity date or put date, which is considered the maturity date for financial reporting purposes. (d) With respect to this security, as of December 31, 1995, the Schwab Money Market Fund was the beneficiary under a $10,375,000 irrevocable letter of credit issued by Bank of America National Trust and Savings Association which allows the Fund to make a demand for partial payment of the security's principal amount under certain conditions upon maturity or disposition of the security by the Fund. The letter of credit, which expires on August 1, 1996, does not provide complete credit support, and therefore, the Fund continues to be exposed to some risk of loss of principal of the security. The Charles Schwab Corporation has agreed to reimburse the bank for any payments made by the bank to the Fund under this letter of credit. See Note 7 to the Financial Statements for further discussion.
Abbreviations ------------- FHLMC Federal Home Loan Mortgage Corporation FNMA Federal National Mortgage Association LOC Letter of Credit MBIA Municipal Bond Investors Assurance Corporation RECOP Remarketed Certificates of Participation
See accompanying Notes to Financial Statements. 21 SchwabFunds(R) 12 - -------------------------------------------------------------------------------- SCHWAB MONEY MARKET FUND, SCHWAB GOVERNMENT MONEY FUND & SCHWAB U.S. TREASURY MONEY FUND STATEMENTS OF ASSETS AND LIABILITIES (in thousands) December 31, 1995 - --------------------------------------------------------------------------------
Schwab Schwab Schwab Money Government U.S. Treasury Market Money Money Fund Fund Fund ----------- ---------- ------------- ASSETS Investments, at value (Cost: $14,040,471, $1,879,758 and $1,184,456, respectively) $14,040,471 $1,879,758 $ 1,184,456 Cash -- 24 2 Interest receivable 67,867 18,397 17,149 Deferred organization costs -- -- 11 Prepaid expenses 2,426 80 39 ----------- ---------- ---------- Total assets 14,110,764 1,898,259 1,201,657 ----------- ---------- ---------- LIABILITIES Payable for: Dividends 90,867 12,349 7,248 Investment advisory and administration fee 3,450 471 188 Transfer agency and shareholder service fees 4,962 693 387 Other 1,098 177 145 ----------- ---------- ---------- Total liabilities 100,377 13,690 7,968 ----------- ---------- ---------- Net assets applicable to outstanding shares $14,010,387 $1,884,569 $ 1,193,689 =========== ========== ========== NET ASSETS CONSIST OF: Capital paid in $14,010,737 $1,884,838 $ 1,193,821 Accumulated net realized loss on investments sold (350) (269) (132) ----------- ---------- ---------- $14,010,387 $1,884,569 $ 1,193,689 =========== ========== ========== THE PRICING OF SHARES Outstanding shares, $0.00001 par value (unlimited shares authorized) 14,010,737 1,884,838 1,193,821 Net asset value, offering and redemption price per share $1.00 $1.00 $1.00
See accompanying Notes to Financial Statements. 22 SchwabFunds(R) 13 - -------------------------------------------------------------------------------- SCHWAB MONEY MARKET FUND, SCHWAB GOVERNMENT MONEY FUND & SCHWAB U.S. TREASURY MONEY FUND STATEMENTS OF OPERATIONS (in thousands) For the year ended December 31, 1995 - --------------------------------------------------------------------------------
Schwab Schwab Schwab Money Government U.S. Treasury Market Money Money Fund Fund Fund -------- ---------- ------------- Interest income $760,926 $113,106 $57,635 -------- -------- ------- Expenses: Investment advisory and administration fee 52,254 8,280 4,575 Transfer agency and shareholder service fees 56,873 8,540 4,502 Custodian fees 886 262 206 Registration fees 1,185 88 221 Professional fees 359 52 26 Shareholder reports 1,275 205 82 Trustees' fees 78 12 5 Amortization of deferred organization costs and other prepaid expenses 120 3 14 Insurance and other expenses 390 59 22 -------- -------- ------- 113,420 17,501 9,653 Less expenses reduced (18,632) (3,268) (3,150) -------- -------- ------- Total expenses incurred by Fund 94,788 14,233 6,503 -------- -------- ------- Net investment income 666,138 98,873 51,132 Net realized gain (loss) on investments sold 4 (162) (60) -------- -------- ------- Increase in net assets resulting from operations $666,142 $ 98,711 $51,072 ======== ======== =======
See accompanying Notes to Financial Statements. 23 SchwabFunds(R) 14 - -------------------------------------------------------------------------------- SCHWAB MONEY MARKET FUND, SCHWAB GOVERNMENT MONEY FUND & SCHWAB U.S. TREASURY MONEY FUND STATEMENTS OF CHANGES IN NET ASSETS (in thousands) - --------------------------------------------------------------------------------
Schwab Money Schwab Government Schwab U.S. Treasury Market Fund Money Fund Money Fund --------------------------- ------------------------- ------------------------- \------------------------- For the year ended December 31, -----------------------\ 1995 1994 1995 1994 1995 1994 ------------ ------------ ----------- ----------- ----------- ----------- Operations: Net investment income $ 666,138 $ 371,652 $ 98,873 $ 68,248 $ 51,132 $ 19,233 Net realized gain (loss) on investments sold 4 (124) (162) (23) (60) (45) ------------ ------------ ----------- ----------- ----------- ----------- Increase in net assets resulting from operations 666,142 371,528 98,711 68,225 51,072 19,188 ------------ ------------ ----------- ----------- ----------- ----------- Dividends to shareholders from net investment income (666,138) (371,652) (98,873) (68,248) (51,132) (19,233) ------------ ------------ ----------- ----------- ----------- ----------- Capital share transactions (dollar amounts and number of shares are the same): Proceeds from shares sold 35,277,474 27,194,342 4,120,476 4,092,811 2,979,266 1,791,760 Net asset value of shares issued in reinvestment of dividends 630,347 323,920 95,940 61,588 46,352 15,433 Less payments for shares redeemed (33,124,743) (24,455,432) (4,229,013) (4,001,651) (2,635,740) (1,381,420) ------------ ------------ ----------- ----------- ----------- ----------- Increase (decrease) in net assets from capital share transactions 2,783,078 3,062,830 (12,597) 152,748 389,878 425,773 ------------ ------------ ----------- ----------- ----------- ----------- Total increase (decrease) in net assets 2,783,082 3,062,706 (12,759) 152,725 389,818 425,728 ------------ ------------ ----------- ----------- ----------- ----------- Net Assets: Beginning of period 11,227,305 8,164,599 1,897,328 1,744,603 803,871 378,143 ------------ ------------ ----------- ----------- ----------- ----------- End of period $ 14,010,387 $ 11,227,305 $ 1,884,569 $ 1,897,328 $ 1,193,689 $ 803,871 ============ ============ =========== =========== =========== ===========
See accompanying Notes to Financial Statements. 24 SchwabFunds(R) 15 - -------------------------------------------------------------------------------- SCHWAB MONEY MARKET FUND, SCHWAB GOVERNMENT MONEY FUND & SCHWAB U.S. TREASURY MONEY FUND NOTES TO FINANCIAL STATEMENTS For the year ended December 31, 1995 - -------------------------------------------------------------------------------- 1. DESCRIPTION OF THE FUNDS The Schwab Money Market Fund, the Schwab Government Money Fund and the Schwab U.S. Treasury Money Fund (the "Funds") are series of The Charles Schwab Family of Funds (the "Trust"), an open-end, management investment company organized as a Massachusetts business trust on October 20, 1989 and registered under the Investment Company Act of 1940, as amended. In addition to the three funds described above, the Trust also offers -- the Schwab Tax-Exempt Money Fund (Sweep and Value Advantage Shares), the Schwab California Tax-Exempt Money Fund (Sweep and Value Advantage Shares), the Schwab New York Tax-Exempt Money Fund (Sweep and Value Advantage Shares), the Schwab Value Advantage Money Fund(R), the Schwab Institutional Advantage Money Fund(TM) and the Schwab Retirement Money Fund(R). The assets of each series are segregated and accounted for separately. The Schwab Money Market Fund invests primarily in a diversified portfolio of short-term obligations of major banks and corporations. The Schwab Government Money Fund invests exclusively in a diversified portfolio of obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities and repurchase agreements thereon. The Schwab U.S. Treasury Money Fund invests solely in United States Treasury notes, bills and other direct obligations of the United States Treasury, backed by the full faith and credit of the United States Government. 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 and interest income -- Security transactions are accounted for on a trade date basis (date the order to buy or sell is executed). Interest income is recorded on the accrual basis and includes amortization of premium and accretion of discount on investments. Realized gains and losses from security transactions are determined on an identified cost basis. Repurchase agreements -- Repurchase agreements are fully collateralized by U.S. Treasury or government agency securities. All collateral is held by the Funds' custodian and is monitored daily to ensure that its market value at least equals the repurchase price under the agreement. Dividends to shareholders -- Each Fund declares a daily dividend, equal to its net investment income for that day, payable monthly. Deferred organization costs -- Costs incurred in connection with the organization of the Funds and their initial registration with the Securities and Exchange Commission and with various states are amortized on a straight-line basis over a five-year period from each Fund's commencement of operations. 25 SchwabFunds(R) 16 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Expenses -- Expenses arising in connection with a Fund are charged directly to that Fund. Expenses common to all series of the Trust are allocated to each series in proportion to their relative net assets. Federal income taxes -- It is each Fund's policy to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all net investment income and realized net capital gains, if any, to shareholders. Therefore, no federal income tax provision is required. Each Fund is considered a separate entity for tax purposes. 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 Schwab Money Market Fund pays an annual fee, payable monthly, of .46% of the first $2 billion of average daily net assets, .45% of such assets over $2 billion, and .40% of such assets in excess of $3 billion. For advisory services and facilities furnished, the Schwab Government Money Fund and the Schwab U.S. Treasury Money Fund each pay an annual fee, payable monthly, of .46% of the first $1 billion of each Fund's average daily net assets, .41% of such assets over $1 billion, and .40% of such assets in excess of $2 billion. Under these agreements, the Schwab Money Market Fund, the Schwab Government Money Fund and the Schwab U.S. Treasury Money Fund incurred investment advisory and administration fees of $52,254,000, $8,280,000 and $4,575,000, respectively, for the year ended December 31, 1995, before the Investment Manager reduced its fee (see Note 4). Transfer agency and shareholder service agreements -- The Trust has transfer agency and shareholder service agreements with Charles Schwab & Co., Inc. ("Schwab"). For services provided under these agreements, Schwab receives an annual fee, payable monthly, of .45% of each Fund's average daily net assets. For the year ended December 31, 1995, the Schwab Money Market Fund, the Schwab Government Money Fund and the Schwab U.S. Treasury Money Fund incurred transfer agency and shareholder service fees of $56,873,000, $8,540,000 and $4,502,000, respectively, before Schwab reduced its fees (see Note 4). Officers and trustees -- Certain officers and trustees of the Trust are also officers or directors of the Investment Manager and/or Schwab. During the year ended December 31, 1995, the Trust made no direct payments to its officers or trustees who are "interested persons" within the meaning of the Investment Company Act of 1940, as amended. The Schwab Money Market Fund, the Schwab Government Money Fund and the Schwab U.S. Treasury Money Fund incurred fees of $78,000, $12,000 and $5,000, respectively, 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 ratio of operating expenses to average net assets for each Fund. For the year ended December 31, 1995, the total of such fees reduced by the Investment Manager was $15,603,000, $2,777,000 and $2,674,000 for the Schwab Money Market Fund, the Schwab Government Money Fund and the Schwab U.S. Treasury Money Fund, respectively, and the total of such fees reduced by Schwab was $3,029,000, $491,000 and $476,000 for the Schwab Money Market Fund, the 26 SchwabFunds(R) 17 - -------------------------------------------------------------------------------- SCHWAB MONEY MARKET FUND, SCHWAB GOVERNMENT MONEY FUND & SCHWAB U.S. TREASURY MONEY FUND NOTES TO FINANCIAL STATEMENTS For the year ended December 31, 1995 - -------------------------------------------------------------------------------- Schwab Government Money Fund and the Schwab U.S. Treasury Money Fund, respectively. 5. INVESTMENT TRANSACTIONS Purchases, sales and maturities of investment securities during the year ended December 31, 1995, were as follows (in thousands):
Schwab Schwab Money Schwab Government U.S. Treasury Market Fund Money Fund Money Fund ------------ ----------------- ------------- Purchases $54,457,921 $10,324,703 $ 4,666,466 Proceeds of sales and maturities $51,703,327 $10,338,043 $ 4,283,007
6. FINANCIAL HIGHLIGHTS Per share income and capital changes for a share outstanding throughout the period:
Schwab Money Market Fund ---------------------------------------------------------------- \--------------- For the year ended December 31, --------------\ 1995 1994 1993 1992 1991 ---------------------------------------------------------------- Net asset value at beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 Income from investment operations - --------------------------------- Net investment income .05 .04 .03 .03 .06 Net realized and unrealized gain (loss) on investments -- -- -- -- -- ----------- ----------- ---------- ---------- ---------- Total from investment operations .05 .04 .03 .03 .06 Less distributions - ------------------ Dividends from net investment income (.05) (.04) (.03) (.03) (.06) Distributions from realized gain on investments -- -- -- -- -- ----------- ----------- ---------- ---------- ---------- Total distributions (.05) (.04) (.03) (.03) (.06) ----------- ----------- ---------- ---------- ---------- Net asset value at end of period $1.00 $1.00 $1.00 $1.00 $1.00 =========== =========== ========== ========== ========== Total return (%) 5.41 3.68 2.67 3.48 5.70 - ---------------- Ratios/Supplemental data - ------------------------ Net assets, end of period (000s) $14,010,387 $11,227,305 $8,164,599 $6,134,167 $4,866,584 Ratio of expenses to average net assets (%) .75 .74 .73 .70 .78 Ratio of net investment income to average net assets (%) 5.27 3.68 2.64 3.40 5.52
The Investment Manager and Schwab have reduced a portion of their fees and absorbed certain expenses in order to limit each Fund's ratio of operating expenses to average net assets. Had these fees and expenses not been reduced and absorbed, the ratio of expenses to average net assets for the Schwab Money Market Fund for the periods ended December 31, 1995, 1994, 1993, 1992 and 1991 would have been .90%, .90%, .91%, .92% and .94%, respectively, and the ratio of net investment income to average net assets would have been 5.12%, 3.52%, 2.46%, 3.18% and 5.36%, respectively. 27 SchwabFunds(R) 18 - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Schwab Government Money Fund -------------------------------------------------------------- \-------------- For the year ended December 31, -------------\ 1995 1994 1993 1992 1991 -------------------------------------------------------------- Net asset value at beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 Income from investment operations - --------------------------------- Net investment income .05 .04 .03 .03 .05 Net realized and unrealized gain (loss) on investments -- -- -- -- -- ---------- ---------- ---------- ---------- ---------- Total from investment operations .05 .04 .03 .03 .05 Less distributions - ------------------ Dividends from net investment income (.05) (.04) (.03) (.03) (.05) Distributions from realized gain on investments -- -- -- -- -- ---------- ---------- ---------- ---------- ---------- Total distributions (.05) (.04) (.03) (.03) (.05) ---------- ---------- ---------- ---------- ---------- Net asset value at end of period $1.00 $1.00 $1.00 $1.00 $1.00 ========== ========== ========== ========== ========== Total return (%) 5.34 3.62 2.66 3.42 5.53 - ---------------- Ratios/Supplemental data - ------------------------ Net assets, end of period (000s) $1,884,569 $1,897,328 $1,744,603 $1,592,793 $1,458,705 Ratio of expenses to average net assets (%) .75 .74 .73 .72 .70 Ratio of net investment income to average net assets (%) 5.21 3.56 2.63 3.36 5.38
The Investment Manager and Schwab have reduced a portion of their fees and absorbed certain expenses in order to limit each Fund's ratio of operating expenses to average net assets. Had these fees and expenses not been reduced and absorbed, the ratio of expenses to average net assets for the Schwab Government Money Fund for the periods ended December 31, 1995, 1994, 1993, 1992 and 1991 would have been .92%, .92%, .93%, .94% and .95%, respectively, and the ratio of net investment income to average net assets would have been 5.04%, 3.38%, 2.43%, 3.14% and 5.13%, respectively. 28 SchwabFunds(R) 19 - -------------------------------------------------------------------------------- SCHWAB MONEY MARKET FUND, SCHWAB GOVERNMENT MONEY FUND & SCHWAB U.S. TREASURY MONEY FUND NOTES TO FINANCIAL STATEMENTS For the year ended December 31, 1995 - --------------------------------------------------------------------------------
Schwab U.S. Treasury Money Fund ------------------------------------------------------------------ For the period \------ For the year ended December 31, ------\ ended December 31, 1995 1994 1993 1992 1991 1 ------------------------------------------------------------------ Net asset value at beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 Income from investment operations - --------------------------------- Net investment income .05 .04 .03 .03 .01 Net realized and unrealized gain (loss) on investments -- -- -- -- -- ---------- -------- -------- -------- ------- Total from investment operations .05 .04 .03 .03 .01 Less distributions - ------------------ Dividends from net investment income (.05) (.04) (.03) (.03) (.01) Distributions from realized gain on investments -- -- -- -- -- ---------- -------- -------- -------- ------- Total distributions (.05) (.04) (.03) (.03) (.01) ---------- -------- -------- -------- ------- Net asset value at end of period $1.00 $1.00 $1.00 $1.00 $1.00 ========== ======== ======== ======== ======= Total return (%) 5.25 3.52 2.54 3.26 .68 - ---------------- Ratios/Supplemental data - ------------------------ Net assets, end of period (000s) $1,193,689 $803,871 $378,143 $178,895 $16,906' Ratio of expenses to average net assets (%) .65 .65 .65 .59 .24* Ratio of net investment income to average net assets (%) 5.11 3.60 2.50 2.91 4.11*
The Investment Manager and Schwab have reduced a portion of their fees and absorbed certain expenses in order to limit each Fund's ratio of operating expenses to average net assets. Had these fees and expenses not been reduced and absorbed, the ratio of expenses to average net assets for the Schwab U.S. Treasury Money Fund for the periods ended December 31, 1995, 1994, 1993, 1992 and 1991 would have been .96%, 1.00%, 1.05%, 1.15% and 4.11%*, respectively, and the ratio of net investment income to average net assets would have been 4.80%, 3.25%, 2.10%, 2.35% and .24%*, respectively. 1 For the period November 6, 1991 (commencement of operations) to December 31, 1991. * Annualized 29 SchwabFunds(R) 20 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 7. COMMITMENTS AND CONTINGENCIES On December 6, 1994, Orange County, California and the investment pool maintained by Orange County filed for protection under Chapter 9 of the federal Bankruptcy Code. At December 31, 1995, the Schwab Money Market Fund had 0.30% of its net assets, or $41,500,000, in a security issued directly by Orange County. Prior to this security's original maturity date, the terms of this security were revised to extend the maturity to June 30, 1996, increase the security's interest rate and revise the interest payment schedule to require partial payments of interest prior to June 30, 1996 with a final payment of interest together with principal on June 30, 1996. As of December 31, 1995, the Schwab Money Market Fund was the beneficiary under a $10,375,000 irrevocable letter of credit issued by Bank of America National Trust and Savings Association which permits the Fund to make a demand for partial payment under certain conditions upon maturity or disposition of the Orange County security. This letter of credit does not provide complete credit support, and therefore, the Fund continues to be exposed to some risk of loss of principal of the Orange County security. The Charles Schwab Corporation has agreed to reimburse the bank for any payments made by the bank to the Fund under this letter of credit. The letter of credit has not been needed to maintain the Fund's net asset value of $1.00 per share. 30 SchwabFunds(R) 21 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- To the Board of Trustees and Shareholders of the Schwab Money Market Fund, the Schwab Government Money Fund and the Schwab U.S. Treasury Money Fund In our opinion, the accompanying statements of assets and liabilities, including the schedules 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 Money Market Fund, the Schwab Government Money Fund and the Schwab U.S. Treasury Money Fund (three series constituting part of The Charles Schwab Family of Funds, hereafter referred to as the "Trust") at December 31, 1995, the results of each of their operations for the year then ended, the changes in each of their net assets for each of the two years in the period then ended and the financial highlights for each of the periods presented, in conformity with generally accepted accounting principles. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Trust's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with generally accepted auditing standards which require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 1995 by correspondence with the custodian, provide a reasonable basis for the opinion expressed above. PRICE WATERHOUSE LLP San Francisco, California January 31, 1996 31 SCHWABFUNDS FAMILY(R) The SchwabFunds Family includes a variety of funds to help meet your investment needs. You can diversify your portfolio with one investment in any of the three Asset Director(R) Funds, or choose several different equity markets with our three equity index funds. You can also select from different maturities with our bond fund choices, and take advantage of an array of money market funds. SCHWAB ASSET DIRECTOR FUNDS - - HIGH GROWTH FUND seeks to provide high capital growth with less volatility than an all-stock portfolio. This Fund has the largest stock component and offers the highest risk and return potential. - - BALANCED GROWTH FUND seeks to provide maximum total return, including capital growth and income. This Fund invests in a more balanced mix of stocks and bonds and offers moderate risk and return potential. - - CONSERVATIVE GROWTH FUND seeks to provide income with growth potential. This Fund has the smallest stock component, which is designed to help offset inflation, and generally keeps the majority of its assets invested in bonds. It offers the lowest risk and return potential. SCHWAB INDEX FUNDS - - SCHWAB 1000 FUND(R) is designed to match the total return of the Schwab 1000 Index(R), comprised of the largest 1,000 publicly traded U.S. companies--the stocks of which represent about 85% of the total market capitalization of the U.S. stock market. 1 - - SCHWAB SMALL-CAP INDEX FUND(R) is designed to track the total return of the Schwab Small-Cap Index(R), which tracks the performance of small- capitalization companies. The Schwab Small-Cap Index is comprised of the second 1,000 largest publicly traded companies in the U.S. 1 - - SCHWAB INTERNATIONAL INDEX FUND(TM) is designed to track the total return of the Schwab International Index(R), comprised of 350 of the largest companies, based on market capitalization, in foreign countries with developed securities markets. 2 SCHWAB BOND FUNDS - - SCHWAB GOVERNMENT BOND FUNDS include two Funds designed to offer high current yields with the credit safety of U.S. government securities. The income level you are seeking and your tolerance for fluctuation in share price should determine your selection of either our Short/Intermediate Fund or our Long-Term Fund. 3 - - SCHWAB TAX-FREE BOND FUNDS help investors take advantage of one of the last remaining tax breaks: tax-free municipal bonds. We offer a national Short/Intermediate Fund and a Long-Term Fund, both of which pay monthly income free from federal personal income tax. 4,5 - - SCHWAB CALIFORNIA TAX-FREE BOND FUNDS give California taxpayers two different opportunities to earn double tax-free income--free from both federal and California state personal income taxes. 5 SCHWAB MONEY FUNDS Schwab offers an array of money funds that seek high current income with safety and liquidity. Choose from taxable or tax-exempt 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.(TM) 6 We will be happy to provide you with a free prospectus and brochure on any of the SchwabFunds(R). EACH PROSPECTUS PROVIDES MORE COMPLETE INFORMATION, INCLUDING CHARGES AND EXPENSES. PLEASE READ IT CAREFULLY BEFORE INVESTING. 1-800-2 NO-LOAD (1-800-266-5623) 1 The Schwab 1000 Index and the Schwab Small-Cap Index consist of publicly traded companies ranked by market capitalization. These indices do not include privately held companies, investment companies and companies incorporated outside of the United States. 2 The Schwab International Index is comprised of publicly traded companies ranked by market capitalization in countries with developed securities markets. Currently invested in 15 countries, the Index does not include privately held companies, investment companies or companies from the United States. 3 Investors in the Schwab Government Bond Funds may experience a decline in share price due to prepayment of obligations held by the Funds. 4 Income may be subject to state and local taxes. 5 Income may be subject to the Alternative Minimum Tax (AMT). Capital appreciation from discounted bonds may be subject to state and federal income tax. 6 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. 32 -------------- BULK RATE U.S. POSTAGE PAID CHARLES SCHWAB -------------- [SCHWABFUNDS FAMILY(R) LOGO] 101 MONTGOMERY STREET SAN FRANCISCO, CALIFORNIA 94104 INVESTMENT ADVISER 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)1996 Charles Schwab & Co., Inc. All rights reserved. Member SIPC/NYCE. TF3958(2/96) CRS 10209 Printed on recycled paper. -----END PRIVACY-ENHANCED MESSAGE-----