N-CSR 1 f95873nvcsr.txt CHARLES SCHWAB FAMILY OF FUNDS FORM N-CSR UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number: 811-5954 The Charles Schwab Family of Funds ----------------------------------------------- (Exact name of registrant as specified in charter) 101 Montgomery Street, San Francisco, California 94104 ------------------------------------------------------------------- (Address of principal executive offices) (Zip code) Randall W. Merk The Charles Schwab Family of Funds 101 Montgomery Street, San Francisco, California 94104 ----------------------------------------------------------- (Name and address of agent for service) Registrant's telephone number, including area code: (415) 627-7000 Date of fiscal year end: December 31 Date of reporting period: January 1, 2003 - December 31, 2003 ITEM 1: REPORT(S) TO SHAREHOLDERS. SCHWAB MUNICIPAL MONEY FUND ANNUAL REPORT December 31, 2003 [CHARLES SCHWAB LOGO] IN THIS REPORT Schwab Municipal Money Fund Sweep Shares: SWXXX Value Advantage Shares: SWTXX Select Shares(R): SWLXX Institutional Shares: SWOXX Management's Discussion ............................................... 2 The president of SchwabFunds(R) and the fund's manager take a look at the factors that shaped fund performance during the report period. Performance and Fund Facts ......... 4 Financial Statements .................................................. 5 Financial Notes ....................................................... 52 Fund Trustees ......................................................... 56 Glossary .............................................................. 59 Fund investment adviser: Charles Schwab Investment Management, Inc. (CSIM). Distributor and transfer agent: Charles Schwab & Co., Inc. (Schwab). [PHOTO OF CHARLES R. SCHWAB] Charles R. Schwab Chairman FROM THE CHAIRMAN In 1989, we founded SchwabFunds(R) on the belief that mutual funds represent an important tool for investors. Money funds, for example, are especially well-suited for the cash portion of your portfolio when you are seeking capital preservation or liquidity. Over the past few years, mutual funds have faced a number of challenges, affecting both their performance and investor perception. Yet recently we have seen signs of positive change. The economy and the stock market have shown increasing strength. And while much remains to be done within the fund industry, the industry has been moving quickly to assess and improve its operations and its investor safeguards. As a firm, we continue to change as well. Our capabilities are evolving in ways that allow us to offer investors more choices and better ways to do business with us. I'm enthusiastic about these changes because they're designed to offer benefits for our fund shareholders. One thing that hasn't changed is my belief in mutual funds. Mutual funds still offer all the features that have made them so popular: diversification, liquidity, convenience, low investment minimums, and professional management. For individual investors especially, I believe mutual funds continue to be one of the most cost-effective investment vehicles available. To date, millions of Americans have successfully relied on mutual funds as an important way to invest for retirement security, their children's education, and other financial goals. We remain optimistic that mutual funds will continue to do the same for millions more Americans in the years to come. Sincerely, /s/ Charles R. Schwab MANAGEMENT'S DISCUSSION for the year ended December 31, 2003 [PHOTO OF RANDALL W. MERK] RANDALL W. MERK is President and CEO of Charles Schwab Investment Management, Inc. and is president of each of the funds covered in this report. He joined the firm in August 2002, bringing with him 24 years of experience in the asset management industry. Dear Shareholder: In today's current low-interest-rate environment, it's tempting to ask whether money funds still have a place in an investment portfolio. It's a fair question, but I'd suggest the answer is not as obvious as it may seem. Money funds are designed to offer several potential benefits. If you're like many investors, your asset allocation calls for a portion of your portfolio to be in cash. If the purpose of that allocation is to offer capital preservation or liquidity, or to help reduce the impact of market volatility on your portfolio, then money funds probably still make sense for you, regardless of the yield environment. Here at SchwabFunds(R), we're proud of our seasoned fund managers and their ability to work as a team. Our managers have an average of over 16 years of experience in the investment management industry. I'm also proud to say that we're in the process of building on that experience: by expanding our selection of mutual funds, adding new share classes, and offering new, competitively priced alternatives. Thirty years ago, Charles Schwab founded his firm with a vision to create the most useful and ethical financial services firm in the world. We live by that philosophy every day. Your investment in SchwabFunds is an indication of the trust you place in us. As the managers of your money, we have a special obligation to live up to that trust. I have enjoyed the opportunity to respond to several shareholder inquiries, and I hope you'll let us know how we're doing. I want to thank you for investing with us and want to assure you that we strive relentlessly to operate our business with the highest ethical standards and an unwavering commitment to serve you, our SchwabFunds shareholders. Sincerely, /s/ Randall W. Merk 2 Schwab Municipal Money Fund [PHOTO OF WALTER BEVERIDGE] WALTER BEVERIDGE, a portfolio manager, is responsible for day-to-day management of the fund. Prior to joining the firm in 1992, he worked for nearly ten years in asset management. THE INVESTMENT ENVIRONMENT AND THE FUND DURING 2003, THE U.S. ECONOMY BEGAN TO GATHER STRENGTH, ESPECIALLY DURING THE SECOND HALF OF THE YEAR. In the months before the war in Iraq (which began in March 2003), the economy remained in a holding pattern, as businesses and investors adopted a wait-and-see stance. Once the combat phase drew to an end, America began to pay more attention to the economy, which by year-end appeared to be recovering. SEEKING ADDITIONAL PROTECTION AGAINST THE RISK OF DEFLATION, THE FEDERAL RESERVE (THE FED) CUT SHORT-TERM INTEREST RATES BY 0.25% IN JUNE. This brought the Fed funds target rate to a 45-year low of 1.00%. Short-term interest rates began plummeting in May in anticipation of the Fed's rate cut but quickly began a modest recovery and ended the year somewhat above their mid-year lows. Nevertheless, money fund yields remained close to historically low levels. THROUGHOUT THE REPORT PERIOD, SHORT-TERM MUNICIPAL YIELDS REMAINED ATTRACTIVELY VALUED RELATIVE TO SHORT-TERM TAXABLE YIELDS. During the year, the ratio of short-term muni yields to taxables averaged 82%, and at times exceeded 95%. We attribute this situation to the unusually large quantity of municipal money market debt that was issued during 2003. In order to attract buyers for these securities, municipal issuers needed to offer higher yields than they otherwise might have. MOST STATES APPEARED TO BE ADDRESSING THE REVENUE SHORTFALLS THEY HAVE FACED AS A RESULT OF A WEAK U.S. ECONOMY. Most states that began 2003 with significant budget shortfalls (such as California, New York and New Jersey) have passed budgets that include spending cuts and onetime revenue or financing solutions in order to balance their budgets. Drawing on the extensive research of our credit department, we were able to identify securities in several states, particularly California, that offered attractive yields and appeared to be solid credits. These helped increase the fund's yield. Nothing in this report represents a recommendation of a security by the investment adviser. Manager views and portfolio holdings may have changed since the report date. Schwab Municipal Money Fund 3 MANAGEMENT'S DISCUSSION continued PERFORMANCE AND FUND FACTS as of 12/31/03 SEVEN-DAY YIELDS The seven-day yields are calculated using standard SEC formulas. The effective yields include the effect of reinvesting daily dividends. Please remember that money market fund yields fluctuate, and that past performance is not an indication of future results.
SWEEP VALUE ADVANTAGE SELECT INSTITUTIONAL SHARES SHARES SHARES(R) SHARES ------------------------------------------------------------------------------------------------------------------ SEVEN-DAY YIELD 1 0.54% 0.75% 0.85% 0.96% ------------------------------------------------------------------------------------------------------------------ SEVEN-DAY YIELD - NO WAIVER 2 0.38% 0.62% 0.62% 0.62% ------------------------------------------------------------------------------------------------------------------ SEVEN-DAY EFFECTIVE YIELD 0.54% 0.75% 0.85% 0.96% ------------------------------------------------------------------------------------------------------------------ SEVEN-DAY TAXABLE-EQUIVALENT 0.83% 1.15% 1.31% 1.48% EFFECTIVE YIELD 3 ------------------------------------------------------------------------------------------------------------------
STATISTICS Money funds must maintain a dollar-weighted average maturity of no longer than 90 days, and cannot invest in any security whose effective maturity is longer than 397 days (approximately 13 months). ----------------------------------------------------------------- WEIGHTED AVERAGE MATURITY 56 days ----------------------------------------------------------------- CREDIT QUALITY OF HOLDINGS % of portfolio 100% Tier 1 ----------------------------------------------------------------- CREDIT-ENHANCED SECURITIES % of portfolio 71% -----------------------------------------------------------------
An investment in a money fund is neither insured nor guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency. Although money funds seek to preserve the value of your investment at $1 per share, it is possible to lose money by investing in a money fund. Portfolio holdings may have changed since the report date. 1 Fund expenses have been partially absorbed by CSIM and Schwab. 2 Yield if fund expenses had not been partially absorbed by CSIM and Schwab. 3 Taxable-equivalent effective yield assumes a 2003 maximum federal regular income tax rate of 35.00%. Investment income may be subject to the Alternative Minimum Tax. 4 Schwab Municipal Money Fund FINANCIAL STATEMENTS FINANCIAL HIGHLIGHTS
1/1/03- 1/1/02- 1/1/01- 1/1/00- 1/1/99- SWEEP SHARES 12/31/03 12/31/02 12/31/01 12/31/00 12/31/99 ------------------------------------------------------------------------------------------------------------------------------------ PER-SHARE DATA ($) ------------------------------------------------------------------------------------------------------------------------------------ Net asset value at beginning of period 1.00 1.00 1.00 1.00 1.00 --------------------------------------------------------------------------------------- Income from investment operations: Net investment income (0.00) 1 0.01 0.02 0.03 0.03 --------------------------------------------------------------------------------------- Less distributions: Dividends from net investment income (0.00) 1 (0.01) (0.02) (0.03) (0.03) --------------------------------------------------------------------------------------- Net asset value at end of period 1.00 1.00 1.00 1.00 1.00 --------------------------------------------------------------------------------------- Total return (%) 0.46 0.91 2.23 3.53 2.70 RATIOS/SUPPLEMENTAL DATA (%) ------------------------------------------------------------------------------------------------------------------------------------ Ratios to average net assets: Net operating expenses 0.66 0.66 0.66 0.67 2 0.66 Gross operating expenses 0.81 0.82 0.83 0.84 0.85 Net investment income 0.46 0.90 2.21 3.47 2.67 Net assets, end of period ($ x 1,000,000) 7,494 7,435 7,265 6,780 6,090
1/1/03- 1/1/02- 1/1/01- 1/1/00- 1/1/99- VALUE ADVANTAGE SHARES 12/31/03 12/31/02 12/31/01 12/31/00 12/31/99 ------------------------------------------------------------------------------------------------------------------------------------ PER-SHARE DATA ($) ------------------------------------------------------------------------------------------------------------------------------------ Net asset value at beginning of period 1.00 1.00 1.00 1.00 1.00 --------------------------------------------------------------------------------------- Income from investment operations: Net investment income 0.01 0.01 0.02 0.04 0.03 --------------------------------------------------------------------------------------- Less distributions: Dividends from net investment income (0.01) (0.01) (0.02) (0.04) (0.03) --------------------------------------------------------------------------------------- Net asset value at end of period 1.00 1.00 1.00 1.00 1.00 --------------------------------------------------------------------------------------- Total return (%) 0.68 1.12 2.45 3.75 2.91 RATIOS/SUPPLEMENTAL DATA (%) ------------------------------------------------------------------------------------------------------------------------------------ Ratios to average net assets: Net operating expenses 0.45 0.45 0.45 0.46 3 0.45 Gross operating expenses 0.58 0.59 0.61 0.64 0.65 Net investment income 0.68 1.11 2.35 3.70 2.89 Net assets, end of period ($ x 1,000,000) 3,901 4,480 3,778 2,919 2,270
1 Per-share amount was less than $0.01. 2 The ratio of net operating expenses would have been 0.66% if certain non-routine expenses (proxy fees) had not been included. 3 The ratio of net operating expenses would have been 0.45% if certain non-routine expenses (proxy fees) had not been included. See financial notes. 5 SCHWAB MUNICIPAL MONEY FUND
6/2/03 1 - SELECT SHARES(R) 12/31/03 ------------------------------------------------------------------------------------------------------------------------------------ PER-SHARE DATA ($) ------------------------------------------------------------------------------------------------------------------------------------ Net asset value at beginning of period 1.00 --------------------------------------------------------------------------------------- Income from investment operations: Net investment income (0.00) 2 --------------------------------------------------------------------------------------- Less distributions: Dividends from net investment income (0.00) 2 --------------------------------------------------------------------------------------- Net asset value at end of period 1.00 --------------------------------------------------------------------------------------- Total return (%) 0.39 3 RATIOS/SUPPLEMENTAL DATA (%) ------------------------------------------------------------------------------------------------------------------------------------ Ratios to average net assets: Net operating expenses 0.35 4 Gross operating expenses 0.58 4 Net investment income 0.68 4 Net assets, end of period ($ x 1,000,000) 474
6/2/03 1 - INSTITUTIONAL SHARES 12/31/03 ------------------------------------------------------------------------------------------------------------------------------------ PER-SHARE DATA ($) ------------------------------------------------------------------------------------------------------------------------------------ Net asset value at beginning of period 1.00 --------------------------------------------------------------------------------------- Income from investment operations: Net investment income (0.00) 2 --------------------------------------------------------------------------------------- Less distributions: Dividends from net investment income (0.00) 2 --------------------------------------------------------------------------------------- Net asset value at end of period 1.00 --------------------------------------------------------------------------------------- Total return (%) 0.45 3 RATIOS/SUPPLEMENTAL DATA (%) ------------------------------------------------------------------------------------------------------------------------------------ Ratios to average net assets: Net operating expenses 0.24 4 Gross operating expenses 0.58 4 Net investment income 0.80 4 Net assets, end of period ($ x 1,000,000) 718
1 Commencement of operations. 2 Per-share amount was less than $0.01. 3 Not annualized. 4 Annualized. 6 See financial notes. SCHWAB MUNICIPAL MONEY FUND PORTFOLIO HOLDINGS as of December 31, 2003 This section shows all the securities in the fund's portfolio and their market value, as of the report date. We use the symbols below to designate certain characteristics: + Credit-enhanced security ~ Liquidity-enhanced security @ Variable-rate security For fixed-rate obligations, the rate shown is the effective yield at the time of purchase. For variable-rate obligations, the rate shown is the rate as of the report date. For variable-rate obligations with scheduled maturities greater than 397 days, the maturity shown is the later of the next interest rate change date or demand date. For variable-rate obligations with scheduled maturities less than 397 days, the maturity shown is the earlier of the next interest rate change date or demand date. For variable-rate obligations without demand features, the maturity shown is the next interest rate change date.
COST VALUE HOLDINGS BY CATEGORY ($x1,000) ($x1,000) -------------------------------------------------------------------------------- 98.6% MUNICIPAL SECURITIES 12,414,710 12,414,710 -------------------------------------------------------------------------------- 98.6% TOTAL INVESTMENTS 12,414,710 12,414,710 1.4% OTHER ASSETS AND LIABILITIES 172,169 -------------------------------------------------------------------------------- 100.0% NET ASSETS 12,586,879
ISSUER SECURITY TYPE, PROJECT, SERIES, FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) MUNICIPAL SECURITIES 98.6% of Net Assets ALABAMA 0.8% ALABAMA IDA +@ IDRB (Scientific Utilization) Series 1996 1.50%, 01/07/04 2,160 2,160 BIRMINGHAM SPECIAL CARE FACILITIES FINANCING AUTH +@ Health Care Facility RB (Eastern Health System) Series 2003A 1.24%, 01/07/04 36,500 36,500 CITRONELLE IDB +@ Pollution Control Refunding RB (AKZO Chemicals) Series 1992 1.30%, 01/07/04 2,600 2,600 DAPHNE UTILITIES BOARD +~@ Water, Gas & Sewer Refunding RB Series 2000 1.27%, 01/07/04 8,540 8,540 DECATUR IDB @ Exempt Facilities Refunding RB (Nucor Steel Decatur) Series 2003A 1.17%, 01/07/04 17,000 17,000 DOTHAN IDB +@ IDRB (Baxley Blowpipe) Series 1997 1.43%, 01/07/04 300 300 FT PAYNE IDA +@ IDRB (Charleston Hosiery) Series 1997 1.40%, 01/07/04 1,200 1,200 HEADLAND +@ IDRB (Golden Peanut Co) Series 1999 1.38%, 01/07/04 1,585 1,585 HOOVER BOARD OF EDUCATION +~@ Capital Outlay TAN Series 2001 TOB Series 2001-16 1.21%, 01/07/04 9,860 9,860 INDIAN SPRINGS VILLAGE +@ RB (Joseph Bruno Montessori Academy) Series 1999 1.25%, 01/07/04 1,320 1,320 SCOTTSBORO +@ School Warrants Series 1997 1.25%, 01/07/04 3,870 3,870 STEVENSON IDB +@ Environmental Improvement RB (Mead Corp) Series 1997 1.13%, 01/07/04 17,300 17,300 TUSCALOOSA CNTY +@ IDRB (Knight Specialties) Series 1998 1.30%, 01/07/04 990 990 ----------- 103,225
See financial notes. 7 SCHWAB MUNICIPAL MONEY FUND PORTFOLIO HOLDINGS continued
ISSUER SECURITY TYPE, PROJECT, SERIES, FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) ALASKA 0.4% ALASKA HFC +~@ General Mortgage RB Series 1999A TOB Series 1999D 1.21%, 01/07/04 21,805 21,805 ~@ General Mortgage RB Series 2002A TOB Series 197 1.30%, 01/07/04 5,995 5,995 @ Housing Development Bonds Series 2000A 1.25%, 01/07/04 18,715 18,715 VALDEZ @ Marine Terminal Refunding RB (BP Pipelines) Series 2003C 1.30%, 01/02/04 800 800 ----------- 47,315 ARIZONA 0.5% ARIZONA EDUCATIONAL LOAN MARKETING CORP +~@ Educational Loan RB Series 1990A 1.22%, 01/07/04 12,905 12,905 +@ Educational Loan RB Series 1991A 1.20%, 01/07/04 3,000 3,000 ARIZONA HEALTH FACILITIES AUTH +~@ Hospital RB (Northern Arizona Healthcare System) Series 1996B 1.25%, 01/07/04 7,250 7,250 +~@ RB (Arizona Voluntary Hospital Federation Pooled Loan Program) Series 1985A 1.25%, 01/07/04 13,300 13,300 +~@ RB (Arizona Voluntary Hospital Federation Pooled Loan Program) Series 1985B 1.25%, 01/07/04 9,330 9,330 CHANDLER IDA +@ IDRB (South Bay Circuits) Series 1999A 1.45%, 01/07/04 1,300 1,300 PHOENIX CIVIC IMPROVEMENT CORP +@ Subordinated Excise Tax RB (Airport Improvements) Series 1995 1.14%, 01/07/04 1,000 1,000 YAVAPAI CNTY IDA +~@ Hospital RB (Yavapai Regional Medical Center) Series 1997B 1.25%, 01/07/04 14,350 14,350 ----------- 62,435 ARKANSAS 0.1% ARKANSAS DEVELOPMENT FINANCE AUTH +@ IDRB (C&C Holding Co) Series 1998 1.40%, 01/07/04 995 995 INDEPENDENCE CNTY +@ IDRB (Ideal Baking Co) Series 1997 1.40%, 01/07/04 2,800 2,800 +@ IDRB (Townsends) Series 1996 1.30%, 01/07/04 9,000 9,000 ----------- 12,795 CALIFORNIA 5.0% ACCESS LOANS FOR LEARNING STUDENT LOAN CORP +@ Student Loan Program RB Series II-A1 1.30%, 01/07/04 35,000 35,000 +@ Student Loan Program RB Series II-A2 1.30%, 01/07/04 20,000 20,000 +@ Student Loan Program RB Series II-A3 1.30%, 01/07/04 23,700 23,700 CALIFORNIA + 2003-04 Fixed Rate RAN Subseries A-1 1.07%, 06/23/04 45,000 45,198 + 2003-04 Fixed Rate RAN Subseries A-2 1.07%, 06/23/04 78,400 78,745
8 See financial notes. SCHWAB MUNICIPAL MONEY FUND
ISSUER SECURITY TYPE, PROJECT, SERIES, FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) + 2003-04 Fixed Rate RAN Subseries A-3 1.07%, 06/23/04 35,000 35,154 + 2003-04 Fixed Rate RAN Subseries A-4 1.07%, 06/23/04 30,000 30,132 + 2003-04 Fixed Rate RAN Subseries A-6 1.07%, 06/23/04 25,000 25,110 CALIFORNIA DEPT OF WATER RESOURCES +@ Power Supply RB Series 2002B-1 1.27%, 01/02/04 5,500 5,500 +@ Power Supply RB Series 2002B-2 1.33%, 01/02/04 19,850 19,850 +@ Power Supply RB Series 2002B-5 1.26%, 01/02/04 3,600 3,600 +@ Power Supply RB Series 2002C-17 1.25%, 01/07/04 1,700 1,700 +~@ Power Supply RB Series 2002C-7 1.27%, 01/07/04 47,700 47,700 CALIFORNIA HFA +~@ Home Mortgage RB 2001 Series J 1.19%, 01/02/04 6,620 6,620 +~@ Home Mortgage RB 2002 Series B 1.38%, 01/02/04 5,000 5,000 +~@ Home Mortgage RB 2002 Series J 1.19%, 01/02/04 12,000 12,000 ~@ S/F Mortgage RB Draw Down Series 2003B TOB Series PT-843 1.37%, 01/07/04 7,870 7,870 CALIFORNIA POLLUTION CONTROL FINANCE AUTH +@ Solid Waste Disposal Refunding RB (Waste Management) Series 2002A 1.29%, 01/07/04 500 500 CALIFORNIA SCHOOL CASH RESERVE PROGRAM AUTH + 2003 Pool Bonds Series A 0.90%, 07/06/04 38,870 39,087 CHELA FINANCIAL +@ Student Loan RB Series 1987C 0.95%, 07/01/04 71,000 71,000 +@ Student Loan Senior Lien Refunding RB Series 1992 A-4 1.15%, 04/01/04 10,725 10,725 LOS ANGELES 2003-04 TRAN 0.95%, 06/30/04 25,000 25,129 LOS ANGELES CNTY 2003-04 TRAN Series A 1.08%, 06/30/04 13,000 13,058 METROPOLITAN WATER DISTRICT OF SOUTHERN CALIFORNA ~@ Water RB Series B-4 1.03%, 01/07/04 3,600 3,600 SACRAMENTO CNTY 2003-2004 TRAN Series A 0.95%, 07/30/04 25,000 25,150 SOUTHERN CALIFORNIA HOME FINANCING AUTH ~@ S/F Mortgage RB Draw Down Series 2002 TOB Series PT-629 1.33%, 01/07/04 38,640 38,640 ----------- 629,768 COLORADO 2.6% ARAPAHOE CNTY +@ Refunding IDRB (Denver Jetcenter) Series 1997 1.25%, 01/30/04 3,500 3,500 ARVADA +~@ Water Enterprise RB Series 2001 1.20%, 02/02/04 4,200 4,200 COLORADO HOUSING & FINANCE AUTH +@ Economic Development RB (Pemracs) Series 2000A 1.40%, 01/07/04 3,715 3,715
See financial notes. 9 SCHWAB MUNICIPAL MONEY FUND PORTFOLIO HOLDINGS continued
ISSUER SECURITY TYPE, PROJECT, SERIES, FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) S/F Mortgage Class I Bonds Series 2003C4 1.18%, 11/01/04 5,000 5,000 S/F Mortgage Class I Bonds Series 2003C5 1.13%, 11/01/04 13,000 13,000 ~@ S/F Program Senior Bonds Series 1995D TOB Series 1999M 1.38%, 01/07/04 3,120 3,120 COLORADO STUDENT LOAN AUTH +~@ Senior Lien Student Loan RB Series 1999A-2 1.15%, 01/07/04 28,400 28,400 +~@ Senior Lien Student Loan RB Series 1999A-3 1.15%, 01/07/04 29,800 29,800 +~@ Student Loan Program Senior Bonds Series 1990A 1.18%, 01/07/04 14,400 14,400 +~@ Student Loan RB Series 1989A 1.15%, 01/07/04 49,400 49,400 DENVER CITY & CNTY +@ Airport System RB Series 1992F 1.22%, 01/07/04 18,250 18,250 +@ Airport System RB Series 1992G 1.22%, 01/07/04 18,725 18,725 +~@ Airport System Refunding RB Series 2000B 1.33%, 01/07/04 10,000 10,000 +~@ Airport System Refunding RB Series 2000C 1.22%, 01/07/04 50,000 50,000 + Airport System Refunding RB Series 2001A 1.10%, 11/15/04 9,550 9,893 +~@ Refunding COP (Wellington E. Webb Municipal Office Building) Series 2003 C-3 1.17%, 01/07/04 20,000 20,000 LOWRY ECONOMIC DEVELOPMENT AUTH +@ IDRB Series 2002B 1.15%, 01/07/04 14,140 14,140 +@ Refunding RB Series 2002A 1.15%, 01/07/04 11,360 11,360 REGIONAL TRANSPORTATION DISTRICT + Subordinate Lien Sales Tax Revenue TECP Series 2001A 1.05%, 02/05/04 7,500 7,500 SMITH CREEK +@ RB Series 1997 1.30%, 01/07/04 2,250 2,250 WESTMINSTER ECONOMIC DEVELOPMENT AUTH +@ Tax Increment RB (Westminster Plaza) Series 1997A 1.45%, 01/07/04 6,430 6,430 ----------- 323,083 CONNECTICUT 0.0% CONNECTICUT HEALTH & EDUCATIONAL FACILITIES AUTH @ RB (Yale University) Series X-2 1.15%, 01/07/04 5,000 5,000 DELAWARE 0.7% DELAWARE ECONOMIC DEVELOPMENT AUTH +~@ RB (Hospital Billing & Collection Service) Series 1985 1.14%, 01/07/04 22,820 22,820 +~@ RB (Hospital Billing & Collection Service) Series 1985C 1.14%, 01/07/04 14,855 14,855 NEW CASTLE CNTY +@ Airport Facility RB (Flightsafety International) Series 2002 1.33%, 01/07/04 16,600 16,600 SUSSEX CNTY +@ IDRB (Perdue-Agrirecycle) Series 2000 1.30%, 01/07/04 5,300 5,300 +@ RB (Baywood) Series 1997A 1.40%, 01/07/04 2,400 2,400 WILMINGTON +@ RB (Delaware Art Museum) Series 2003 1.15%, 01/07/04 21,800 21,800 ----------- 83,775
10 See financial notes. SCHWAB MUNICIPAL MONEY FUND
ISSUER SECURITY TYPE, PROJECT, SERIES, FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) DISTRICT OF COLUMBIA 1.6% DISTRICT OF COLUMBIA +@ Enterprise Zone RB (Crowell & Moring) Series 2001 1.25%, 01/07/04 4,100 4,100 Fiscal Year 2004 GO TRAN 1.12%, 09/30/04 125,000 125,814 +~@ GO Bonds Series 2003D-1 1.06%, 01/07/04 22,900 22,900 +~@ GO Bonds Series 2003D-3 1.06%, 01/07/04 20,000 20,000 +~@ GO Refunding Bonds Series 1999B TOB Series PT-750 1.05%, 02/12/04 14,640 14,640 +~@ GO Refunding Bonds Series 1999B TOB Series PT-806 1.30%, 01/07/04 6,215 6,215 +@ RB (American Psychological Assn) Series 2003 1.30%, 01/07/04 2,770 2,770 +@ RB (Arnold & Porter) Series 1999 1.30%, 01/07/04 2,700 2,700 WASHINGTON DC METROPOLITAN AREA TRANSIT AUTH +~@ Gross Revenue Transit Refunding Bonds Series 2003 TOB Series 245 1.10%, 04/29/04 8,360 8,360 ----------- 207,499 FLORIDA 2.5% BREVARD CNTY SD RAN Series 2003 1.13%, 04/30/04 14,450 14,479 BROWARD CNTY SD GO Refunding Bonds Series 2002A 1.00%, 02/15/04 3,000 3,015 CHARLOTTE COUNTY HFA +@ M/F Housing RB Series 2000 (Murdock Circle Apartments Project) 1.20%, 01/07/04 25 25 GULF BREEZE +~@ Local Government Loan Program RB Series 1985B 1.22%, 01/07/04 1,545 1,545 +~@ Local Government Loan Program RB Series 1985C 1.22%, 01/07/04 29,215 29,215 +~@ Local Government Loan Program RB Series 1985E 1.15%, 01/07/04 3,505 3,505 HILLSBOROUGH CNTY + Capital Improvement Program TECP, Series B 1.00%, 01/15/04 3,500 3,500 1.05%, 02/10/04 3,000 3,000 JACKSONVILLE +@ Refunding IDRB (Pavillion Associates, Ltd.) Series 1996 1.10%, 01/07/04 260 260 JACKSONVILLE ELECTRIC AUTH ~@ Electric System RB Series Three 2000A TOB Series 2000FF 1.21%, 01/07/04 3,585 3,585 MIAMI-DADE CNTY + Aviation TECP (Miami International Airport) Series A 1.01%, 02/09/04 4,500 4,500 + Aviation TECP (Miami International Airport) Series B 1.05%, 01/07/04 10,117 10,117 ORANGE CNTY HFA +@ Housing Refunding RB (Highland Pointe Apts) Series 1998J 1.25%, 01/07/04 7,455 7,455 +@ M/F Housing RB (West Pointe Villas Apts) Series 2000F 1.25%, 01/07/04 5,750 5,750 +@ M/F Housing Refunding RB (Andover Place Apts) Series 1998F 1.25%, 01/07/04 7,770 7,770 +@ M/F Housing Refunding RB (Heather Glen Apts) Series 2001E 1.08%, 01/07/04 3,600 3,600
See financial notes. 11 SCHWAB MUNICIPAL MONEY FUND PORTFOLIO HOLDINGS continued
ISSUER SECURITY TYPE, PROJECT, SERIES, FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) ORLANDO & ORANGE CNTY EXPRESSWAY AUTH +~@ Expressway Refunding RB Series 2003 C-2 1.20%, 01/07/04 4,500 4,500 +~@ Expressway Refunding RB Series 2003 C-4 1.20%, 01/07/04 8,830 8,830 + Expressway Refunding RB Series 2003A 0.94%, 07/01/04 3,455 3,490 ORLANDO UTILITIES COMMISSION ~@ Water & Electric RB Series 2002B 1.10%, 01/07/04 67,800 67,800 PALM BEACH CNTY +@ Economic Development Refunding & Improvement RB (YMCA) Series 2003 1.15%, 01/07/04 13,700 13,700 +@ RB (Raymond F. Kravis Center for the Performing Arts) Series 2002 1.20%, 01/07/04 4,900 4,900 PALM BEACH CNTY SD +~@ COP Series 2002B 1.17%, 01/07/04 19,400 19,400 PASCO CNTY SCHOOL BOARD +~@ COP Series 1996 1.25%, 01/07/04 3,100 3,100 PINELLAS CNTY EDUCATIONAL FACILITIES AUTH +@ RB (Canterbury School) Series 2000 1.10%, 01/07/04 2,040 2,040 +@ RB (Shorecrest Preparatory School) Series 2001 1.10%, 01/07/04 1,000 1,000 PINELLAS CNTY IDA +@ RB (Pact) Series 2003 1.25%, 01/07/04 8,100 8,100 PINELLAS CNTY INDUSTRY COUNCIL +@ RB (Operation Par) Series 1999 1.20%, 01/07/04 5,055 5,055 POLK CNTY SCHOOL BOARD +~@ COP (Master Lease Program) Series 2003A 1.17%, 01/07/04 1,000 1,000 SANTA ROSA CNTY +@ Health Facilities RB (Baptist Hospital) Series 2003 1.25%, 01/07/04 7,905 7,905 SUNSHINE STATE GOVT FINANCE COMMISSION +~ TECP Series 1998A 0.95%, 02/09/04 13,975 13,975 +~ TECP Series C 0.95%, 02/09/04 7,595 7,595 TALLAHASSEE-LEON CNTY CIVIC CENTER AUTH +@ Capital Improvement RB Series 1998A 1.20%, 01/07/04 13,400 13,400 TAMPA +~@ Occupational License Tax Refunding Bonds Series 2002B 1.06%, 01/07/04 7,000 7,000 +@ RB (Tampa Preparatory School) Series 2000 1.10%, 01/07/04 11,000 11,000 TAMPA BAY WATER UTILITY +@ Utility System RB Series 2002 1.35%, 01/07/04 6,400 6,400 ----------- 311,511 GEORGIA 5.0% ATHENS-CLARK CNTY DEVELOPMENT AUTH +@ RB (University of Georgia Athletic Association) Series 2003 1.30%, 01/02/04 4,400 4,400 ATHENS-CLARK CNTY JOINT DEVELOPMENT AUTH +@ IDRB (Mayfield Dairy Farms) 1996 1.35%, 01/07/04 7,350 7,350
12 See financial notes. SCHWAB MUNICIPAL MONEY FUND
ISSUER SECURITY TYPE, PROJECT, SERIES, FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) ATLANTA +~@ Airport General Refunding RB Series 2000A TOB Series 2000-376 1.33%, 01/07/04 11,195 11,195 +~@ Airport General Refunding RB Series 2000C TOB Series PT-737 1.34%, 01/07/04 3,385 3,385 + Airport General Refunding RB Series 2003RF-A 0.89%, 01/01/04 15,895 15,895 +~@ Airport General Refunding RB Series 2003RF-B1 1.25%, 01/07/04 73,330 73,330 +~@ Airport General Refunding RB Series 2003RF-C2 1.20%, 01/07/04 16,710 16,710 +~@ Airport General Refunding RB Series 2003RF-D TOB Series PT-901 1.33%, 01/07/04 6,180 6,180 ATLANTA URBAN RESIDENTIAL FINANCE AUTH +@ M/F Housing RB (Brentwood Creek Apts ) Series 1999 1.30%, 01/07/04 4,525 4,525 +@ M/F Housing RB (Brentwood Meadows Apts ) Series 1999 1.30%, 01/07/04 2,935 2,935 +@ M/F Housing RB (Brentwood Village Apts ) Series 1999 1.30%, 01/07/04 5,940 5,940 +@ M/F Housing RB (Carver Redevelopment Phase III) Series 2001 1.25%, 01/07/04 3,500 3,500 +@ M/F Housing RB (Delmonte/ Brownlee Court), Series 2001A 1.30%, 01/07/04 4,600 4,600 +@ M/F Housing RB (M St Apts) Series 2003 1.33%, 01/07/04 7,000 7,000 +@ M/F Housing RB (Peaks at West Atlanta Apts) Series 2001 1.25%, 01/07/04 5,000 5,000 +@ M/F Senior Housing RB (Big Bethel Village) Series 2001 1.25%, 01/07/04 4,500 4,500 AUGUSTA HOUSING AUTH +@ M/F Housing RB (G-Hope) Series 2001 1.30%, 01/07/04 3,800 3,800 BARTOW CNTY +@ IDRB (Bartow Paving Co) Series 1998 1.40%, 01/07/04 2,000 2,000 +@ IDRB (CW Matthews Contracting Co) Series 1997 1.35%, 01/07/04 800 800 CARTERSVILLE DEVELOPMENT AUTH +@ IDRB (Cartersville Facilities) Series 1998 1.37%, 01/07/04 2,000 2,000 CHEROKEE CNTY +@ IDRB (Universal Alloy Corp) Series 1996 1.35%, 01/07/04 2,300 2,300 CLAYTON CNTY DEVELOPMENT AUTH +@ IDRB (Wilson Holdings) Series 1998 1.35%, 01/07/04 600 600 +@ Special Facilities RB (Delta Air Lines) Series 2000C 1.25%, 01/07/04 19,500 19,500 CLAYTON CNTY HOUSING AUTH +@ M/F Housing RB (Hyde Park Club Apts) Series 1997 1.25%, 01/07/04 12,195 12,195 COBB CNTY HOUSING AUTH +@ M/F Housing RB (Walton Green Apts) Series 1995 1.35%, 01/07/04 13,500 13,500 +@ M/F Housing RB (Woodchase Village Apt) Series 2003 1.33%, 01/07/04 4,000 4,000 +@ M/F Housing Refunding RB (Walton Park Apts) Series 2000 1.30%, 01/07/04 21,100 21,100
See financial notes. 13 SCHWAB MUNICIPAL MONEY FUND PORTFOLIO HOLDINGS continued
ISSUER SECURITY TYPE, PROJECT, SERIES, FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) COLUMBUS DEVELOPMENT AUTH +@ RB (Foundation Properties) Series 2000 1.30%, 01/07/04 3,900 3,900 +@ RB (Foundation Properties) Series 2002 1.30%, 01/07/04 11,500 11,500 COLUMBUS HOUSING AUTH +@ M/F Housing RB (Eagles Trace Apts) Series 2002 1.25%, 01/07/04 6,400 6,400 CRISP CNTY - CORDELE IDA +@ RB (Georgia Ductile) Series 2000 1.32%, 01/07/04 13,400 13,400 DALTON DEVELOPMENT AUTH +@ Revenue Certificates (Hamilton Health Care System) Series 2003B 1.25%, 01/07/04 10,750 10,750 DAWSON CNTY +@ IDRB (World Wide Mnfg) Series 1998 1.40%, 01/07/04 2,450 2,450 DEKALB CNTY DEVELOPMENT AUTH +@ RB (Arbor Montessori School) Series 1998 1.20%, 01/07/04 1,100 1,100 DEKALB CNY HOUSING AUTH +@ M/F Housing RB (Brittany Apts) Series 2001 1.30%, 01/07/04 8,000 8,000 +@ M/F Housing RB (Eagles Trace Apts) Series 1996 1.17%, 01/07/04 8,950 8,950 +@ M/F Housing RB (Mountain Crest Apts) Series 2002 1.25%, 01/07/04 7,915 7,915 +@ M/F Housing RB (Villas of Friendly Heights Apts) Series 2001 1.30%, 01/07/04 3,575 3,575 +@ M/F Housing RB (Wesley Club Apts) Series 2002 1.25%, 01/07/04 5,970 5,970 DOUGLAS CNTY IDA +@ IDRB (Blue Circle Aggregates) Series 1997 1.35%, 01/07/04 3,800 3,800 EFFINGHAM CNTY IDA +@ RB (TEMCOR) Series 2001 1.30%, 01/07/04 4,000 4,000 FAYETTE CNTY DEV AUTH +@ Educational Facilities RB (Catholic School Properties) Series 1999 1.25%, 01/07/04 10,100 10,100 FORSYTH CNTY DEV AUTH +@ Economic Development RB (Federal Road) Series 2001 1.25%, 01/07/04 7,000 7,000 FULTON CNTY BUILDING AUTH + Refunding RB (County Government & Health Facilities) Series 2002C 1.28%, 01/01/04 4,725 4,725 FULTON CNTY DEV AUTH +@ RB (Atlanta International School) Series 1997 1.20%, 01/07/04 2,600 2,600 +@ RB (Robert W. Woodruff Arts Center) Series 1993 1.25%, 01/07/04 10,000 10,000 +@ RB (Trinity School) Series 2001 1.20%, 01/07/04 7,000 7,000 GAINESVILLE REDEVELOPMENT AUTH +@ Educational Facilities RB (Riverside Military Academy) Series 1999 1.25%, 01/07/04 29,800 29,800 GEORGIA ~@ GO Bonds 2001B TOB Series PT-897R 1.25%, 01/07/04 10,575 10,575 ~@ GO Bonds Series 1998B TOB Series 981003 1.30%, 01/07/04 20,245 20,245 GORDON CNTY DEVELOPMENT AUTH +@ RB (Constantine Dyeing) Series 2001 1.25%, 01/07/04 4,150 4,150
14 See financial notes. SCHWAB MUNICIPAL MONEY FUND
ISSUER SECURITY TYPE, PROJECT, SERIES, FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) GWINNETT CNTY HOUSING AUTH +@ M/F Housing RB (Post Court) Series 1998 1.15%, 01/07/04 5,000 5,000 HART CNTY +@ IDRB (Awh Corp) Series 1999 1.35%, 01/07/04 4,300 4,300 +@ Refunding RB & IDRB (Dundee Mills) Series 1994 1.30%, 01/07/04 2,505 2,505 HOUSTON CNTY DEVELOPMENT AUTH +@ IDRB (Douglas Asphalt Co) Series 2000 1.30%, 01/07/04 2,100 2,100 JEFFERSON CNTY DEV AUTH +@ IDRB (Grove River Mills) Series 1997 1.40%, 01/07/04 2,100 2,100 LAURENS CNTY DEVELOPMENT AUTH +@ Solid Waste Disposal RB (Southeast Paper Mnfg Co) Series 1993 1.35%, 01/07/04 25,000 25,000 +@ Solid Waste Disposal RB (Southeast Paper Mnfg Co) Series 1997 1.35%, 01/07/04 26,000 26,000 LAWRENCEVILLE HOUSING AUTH +@ M/F Housing RB (Chatham Club Apts) Series 2002 1.40%, 01/07/04 7,700 7,700 LOWNDES CNTY DEVELOPMENT AUTH +@ M/F Housing RB (FMPH Valdosta Partnership) Series 1999 1.30%, 01/07/04 4,840 4,840 MACON-BIBB CNTY HOSPITAL AUTH +@ Revenue Anticipation Certificates (Medical Center of Central Georgia) Series 1998 1.20%, 01/07/04 4,000 4,000 MILLER CNTY DEVELOPMENT AUTH +@ IDRB (Birdsong Corp) Series 2000 1.30%, 01/07/04 2,700 2,700 PIKE CNTY DEVELOPMENT AUTH +@ IDRB (Southern Mills) Series 2003 1.40%, 01/07/04 4,000 4,000 ROSWELL HOUSING AUTH +@ M/F Housing Refunding RB (Wood Crossing) Series 1994 1.25%, 01/07/04 11,650 11,650 SAVANNAH ECONOMIC DEVELOPMENT AUTH +@ Exempt Facility RB (Georgia Kaolin Terminal) Series 1997 1.35%, 01/07/04 11,000 11,000 +@ Exempt Facility RB (Home Depot) Series 1995B 1.30%, 01/07/04 5,000 5,000 +@ First Mortgage RB (Marshes of Skidaway Island) Series 2003C 1.30%, 01/07/04 15,000 15,000 SAVANNAH HOUSING AUTH +@ M/F Housing RB (Indigo Pointe Apts) Series 2001A-1 1.30%, 01/07/04 3,500 3,500 +@ M/F Housing RB (Live Oak Plantation Apts) Series 2001A-1 1.30%, 01/07/04 2,500 2,500 SUMMERVILLE DEVELOPMENT AUTH +@ Exempt Facility RB (Image Industries) Series 1997 1.32%, 01/07/04 11,000 11,000 THOMASVILLE HOSPITAL AUTH +@ Revenue Anticipation Certificates (John D. Archbold Memorial Hospital) Series 2003 1.15%, 01/07/04 5,900 5,900 WALTON CNTY DEVELOPMENT AUTH +@ RB (Tucker Door & Trim Corp) Series 2000 1.40%, 01/07/04 2,600 2,600 WEBSTER CNTY IDA +@ IDRB (Tolleson Lumber Co) Series 1999 1.35%, 01/07/04 4,800 4,800
See financial notes. 15 SCHWAB MUNICIPAL MONEY FUND PORTFOLIO HOLDINGS continued
ISSUER SECURITY TYPE, PROJECT, SERIES, FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) WHITFIELD CNTY DEV AUTH +@ RB (Product Concepts Residential) Series 2001 1.25%, 01/07/04 720 720 WINDER-BARROW CNTY JOINT DEVELOPMENT AUTH +@ Solid Waste Disposal RB (Republic Services) Series 2002 1.25%, 01/07/04 6,000 6,000 WINDER-BARROW INDUSTRIAL BUILDING AUTH +@ IDRB (Progress Container Corp) Series 2000 1.30%, 01/07/04 2,795 2,795 WORTH CNTY +@ Refunding IDRB (Seabrook Peanut Co) Series 1996B 1.30%, 01/07/04 1,300 1,300 ------- 630,155 HAWAII 0.7% HAWAII +~@ Special Purpose Refunding RB Series 2000 (Hawaiian Electric Co) TOB Series PA-795R 1.33%, 01/07/04 9,095 9,095 HAWAII AIRPORTS SYSTEM +@ Airport System Refunding RB Series 2000B TOB Series PT-830 1.34%, 01/07/04 2,215 2,215 +@ Airport System Refunding RB Series 2003 1.00%, 07/01/04 25,000 25,124 HAWAII HOUSING FINANCE & DEVELOPMENT CORP ~@ S/F Mortgage Purchase RB TOB Series 1997I 1.38%, 01/07/04 5,340 5,340 HONOLULU CITY & COUNTY +~@ GO Bonds Series 2001C 1.18%, 12/02/04 33,300 33,300 +~@ GO Bonds Series 2003A TOB Series 237 1.30%, 01/07/04 14,995 14,995 ------ 90,069 IDAHO 0.0% IDAHO HFA +@ Housing RB (Assisted Living Concepts) Series 1997 1.40%, 01/07/04 3,190 3,190 IDAHO STATE UNIVERSITY FOUNDATION +@ RB Series 2001 (LE & Thelma E. Stephens Performing Arts Center) Series 2001 1.30%, 01/07/04 3,955 3,955 ------- 7,145 ILLINOIS 7.9% AURORA +@ M/F Housing Refunding RB (Apts of Fox Valley Villages) Series 1999A 1.20%, 01/07/04 9,445 9,445 CAROL STREAM +@ M/F Housing Refunding RB (St Charles Square) Series 1997 1.30%, 01/07/04 4,415 4,415 CHICAGO ~@ Collateralized S/F Mortgage RB Series 1999A TOB Series 1999N 1.38%, 01/07/04 4,425 4,425 + GO Tender Notes Series 2003 1.15%, 01/07/04 2,000 2,000 +~@ GO Bonds Series 2002B 1.28%, 01/07/04 20,000 20,000 + GO Refunding Bonds Series 2002A 1.19%, 01/01/04 5,180 5,180 +~@ GO Refunding Bonds Series 2003 B-1 1.23%, 01/07/04 43,000 43,000 +@ IDRB (Morse Automotive Corp) Series 1995 1.40%, 01/07/04 1,400 1,400
16 See financial notes. SCHWAB MUNICIPAL MONEY FUND
ISSUER SECURITY TYPE, PROJECT, SERIES, FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) +~@ Midway Airport RB Series 1998C TOB Series 981305 1.30%, 01/07/04 24,480 24,480 +@ RB (Homestart Program) Series 2000A 1.37%, 01/07/04 10,000 10,000 +@ Second Lien Water RB Series 2000 1.15%, 01/07/04 2,000 2,000 ~@ Senior Lien Water RB Series 2000 TOB Series 20001309 1.30%, 01/07/04 12,975 12,975 + Skyway Toll Bridge Refunding RB 0.87%, 01/01/04 5,000 5,100 CHICAGO BOARD OF EDUCATION +~@ Unlimited Tax GO Bonds Series 1997 TOB Series 2000-467x 1.29%, 01/07/04 7,120 7,120 CHICAGO O'HARE INTERNATIONAL AIRPORT +@ General Airport Second Lien RB Series 1988B 1.13%, 01/07/04 13,000 13,000 +@ General Airport Second Lien RB Series 1994B 1.25%, 01/07/04 41,484 41,484 +~@ General Airport Third Lien Refunding RB Series 2003 A-2 TOB Series 239 1.35%, 01/07/04 5,295 5,295 +~@ General Airport Third Lien Refunding RB Series 2003 B-2 TOB Series 368Z 1.33%, 01/07/04 10,800 10,800 +~@ Second Lien Passenger Facility Charge RB Series 2001A TOB Series 2001 B6 1.26%, 01/07/04 11,070 11,070 +~@ Second Lien Passenger Facility Charge RB Series 2001A TOB Series PT-755 1.34%, 01/07/04 6,315 6,315 +@ Special Facilities RB (O'Hare Tech Center II) Series 2002 1.35%, 01/07/04 15,500 15,500 +@ Special Facility Refunding RB (Lufthansa German Airlines) Series 2001 1.11%, 01/07/04 43,770 43,770 DUPAGE CNTY +@ RB (Morton Arboretum) Series 2003 1.21%, 01/07/04 10,000 10,000 EAST DUNDEE, KANE & COOK COUNTIES +@ IDRB (Otto Engineering) Series 1998 1.35%, 01/07/04 1,950 1,950 ELMHURST +@ IDRB (Elm Machining Corp) Series 1997 1.55%, 01/07/04 1,880 1,880 GILBERTS SPECIAL SERVICE AREA #10 +@ Special Tax Bonds (Timber Trails) Series 2001 1.20%, 01/07/04 2,360 2,360 HAMPSHIRE +@ IDRB (Poli-Film America) Series 1998A 1.40%, 01/07/04 4,000 4,000 ILLINOIS +~@ Civic Center Bonds Series 1991 TOB Series 2002N 1.33%, 01/07/04 2,940 2,940 +~@ GO Bonds Illinois First Series 2000 TOB Series 20001304 1.30%, 01/07/04 14,000 14,000 +~@ GO Bonds Illinois First Series 2000 TOB Series 2001-2 1.21%, 01/07/04 5,000 5,000 +~@ GO Bonds Illinois First Series 2002 TOB Series 20021305 1.30%, 01/07/04 14,125 14,125 GO Bonds Series 1994 0.83%, 08/01/04 3,860 4,049 ~@ GO Bonds Series 2003B 1.28%, 01/07/04 5,000 5,000 GO COP Series 2003 0.98%, 05/15/04 200,000 200,380
See financial notes. 17 SCHWAB MUNICIPAL MONEY FUND PORTFOLIO HOLDINGS continued
ISSUER SECURITY TYPE, PROJECT, SERIES, FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) ILLINOIS DEVELOPMENT FINANCE AUTH +@ Development RB (Korex Corp) Series 1990 1.40%, 01/07/04 4,000 4,000 +~@ Gas Supply Refunding RB Series 2003E (People's Gas) TOB Series 2003B 1.38%, 01/07/04 14,995 14,995 +@ IDRB (Arc-Tronics) Series 1999 1.20%, 01/07/04 2,190 2,190 +@ IDRB (Camcraft Inc) Series 1993 1.40%, 01/07/04 2,200 2,200 +@ IDRB (Plano Molding Co) Series 1990 1.35%, 01/07/04 4,300 4,300 +@ IDRB (Radiological Society of North America) Series 1997 1.35%, 01/07/04 3,730 3,730 +@ IDRB (Rich Graphics Corp) Series 1996 1.55%, 01/07/04 2,335 2,335 +@ IDRB (Roll Service Inc) Series 1998 1.20%, 01/07/04 2,230 2,230 +@ Qualified Residential Rental Bonds (River Oaks) Series 1989 1.20%, 01/07/04 32,000 32,000 +@ RB (Francis W. Parker School) Series 1999 1.12%, 01/07/04 2,500 2,500 +@ RB (Aurora Central Catholic High School) Series 1994 1.45%, 01/07/04 1,000 1,000 +@ RB (Carmel High School) Series 2003 1.20%, 01/07/04 3,200 3,200 +@ RB (Catholic Charities Housing Development Corp) Series 1993A 1.35%, 01/07/04 9,160 9,160 +@ RB (Catholic Charities Housing Development Corp) Series 1993B 1.35%, 01/07/04 910 910 +@ RB (Chicago Academy of Sciences) Series 1997 1.20%, 01/07/04 2,715 2,715 +@ RB (Chicago Academy of Sciences) Series 1998 1.20%, 01/07/04 5,700 5,700 +@ RB (Chicago Horticultural Society) Series 1999 1.20%, 01/07/04 18,000 18,000 +@ RB (Lake Forest Academy) Series 1994 1.20%, 01/07/04 4,000 4,000 +@ RB (Loyola Academy) Series 2001 1.20%, 01/07/04 10,000 10,000 +@ RB (McCormick Theological Seminary) Series 2001B 1.20%, 01/07/04 12,500 12,500 ~@ RB (Palos Community Hospital) Series 1998 1.21%, 01/07/04 10,000 10,000 +@ RB (Perspectives Charter School) Series 2003 1.26%, 01/07/04 5,500 5,500 +~@ RB (Presbyterian Home Lake Forest Place) Series 1996A 1.20%, 01/07/04 7,000 7,000 +@ RB (Presbyterian Homes Two Arbor Lane) Series 2001 1.20%, 01/07/04 9,000 9,000 +@ RB (Rest Haven Convalescent Home) Series 1997 1.22%, 01/07/04 4,100 4,100 +@ RB (Sacred Heart Schools) Series 2003 1.20%, 01/07/04 4,600 4,600 +@ RB (Slovak American Charitable Assn) Series 2000 1.20%, 01/07/04 7,870 7,870 +@ RB (St. Ignatius College Prep) Series 2002 1.20%, 01/07/04 2,500 2,500 +@ RB (St. Ignatius College) Series 1994 1.20%, 01/07/04 2,200 2,200 +@ RB (Wheaton Academy) Series 1998 1.20%, 01/07/04 9,000 9,000
18 See financial notes. SCHWAB MUNICIPAL MONEY FUND
ISSUER SECURITY TYPE, PROJECT, SERIES, FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) +@ Residential Rental RB (FC Harris Pavilion) Series 1994 1.12%, 01/07/04 5,000 5,000 +~@ Water Facilities Refunding RB (Illinois-American Water Co) Series 2002 1.40%, 01/07/04 5,000 5,000 ILLINOIS EDUCATION FACILITY AUTH +@ RB (Chicago Historical Society) Series 1989 1.15%, 01/07/04 7,900 7,900 +~@ RB (Shedd Aquarium) Series 1997 TOB Series 1997U 1.21%, 01/07/04 2,000 2,000 ILLINOIS HEALTH FACILITIES AUTH +@ RB (Bensenville Home Society) Series 1989A 1.13%, 01/07/04 2,125 2,125 +@ RB (Villa St. Benedict) Series 2003B 1.35%, 01/07/04 10,250 10,250 +@ RB (Washington & Jane Smith Home) Series 1991 1.20%, 01/07/04 2,800 2,800 ILLINOIS HOUSING DEVELOPMENT AUTH Homeowner Mortgage Revenue Notes Series 2000A-1 1.13%, 04/29/04 8,000 8,000 Homeowner Mortgage Revenue Notes Series 2003A-2 1.18%, 04/29/04 26,500 26,500 +@ M/F Mortgage Refunding RB (Hyde Park Tower Apts) Series 2000A 1.20%, 01/07/04 4,500 4,500 ILLINOIS STUDENT ASSISTANCE COMMISSION +@ Student Loan RB Series 1996A 1.17%, 01/07/04 7,600 7,600 LOMBARD +@ Refunding IDRB (B&H Partnership) Series 1995 1.65%, 01/07/04 1,850 1,850 METROPOLITAN PIER & EXPOSITION AUTH +~@ McCormick Place Expansion & Refunding Bonds Series 1999A-C TOB Series 20001305 1.30%, 01/07/04 9,790 9,790 + McCormick Place Expansion Refunding Bonds Series 1996A 1.15%, 12/15/04 5,000 5,229 +~@ McCormick Place Expansion Refunding Bonds Series 1998A TOB Series 981304 1.30%, 01/07/04 14,355 14,355 +~@ McCormick Place Expansion Refunding Bonds Series 2002B TOB Series 2002-A42 1.21%, 01/07/04 18,490 18,490 METROPOLITAN WATER RECLAMATION DISTRICT OF GREATER CHICAGO ~@ GO Bonds Unlimited Tax Series 2002 1.15%, 01/07/04 12,000 12,000 ~@ GO Refunding Bonds Unlimited Tax Series 2002A 1.07%, 01/07/04 28,200 28,200 OAK FOREST +@ RB (Homewood) Series 1989 1.25%, 01/07/04 10,000 10,000 ORLAND PARK +@ IDRB (Orland Properties) Series 1986A 1.35%, 01/07/04 790 790 PALATINE +@ Special Facility Limited Obligation RB (Little City for Community Development) Series 1998 1.20%, 01/07/04 4,000 4,000 REGIONAL TRANSPORTATION AUTH +~@ GO Refunding Bonds Series 1999 TOB Series 991302 1.30%, 01/07/04 12,055 12,055 +~@ GO Refunding Bonds TOB Series 991303 1.30%, 01/07/04 9,730 9,730
See financial notes. 19 SCHWAB MUNICIPAL MONEY FUND PORTFOLIO HOLDINGS continued
ISSUER SECURITY TYPE, PROJECT, SERIES, FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) RICHTON PARK +@ IDRB (Avatar Corp) Series 1997 1.40%, 01/07/04 1,900 1,900 ROCKFORD +@ IDRB (Ring Can Corp) Series 1998 1.30%, 01/07/04 1,500 1,500 +@ IDRB (Rockford Industrial Welding Supply) Series 1996 1.55%, 01/07/04 2,000 2,000 TINLEY PARK +@ IDRB (Beverly Mnfg Co) Series 1997A 1.53%, 01/07/04 2,165 2,165 UNIVERSITY OF ILLINOIS +~@ Auxiliary Facilities RB Series 1999A TOB Series 2000S 1.21%, 01/07/04 3,500 3,500 WILL-KANKAKEE REGIONAL DEVELOPMENT AUTH +@ IDRB Series 2002 (Toltec Steel Services) Series 2002 1.35%, 01/07/04 7,810 7,810 YORKVILLE +@ IDRB (FE Wheaton & Co) Series 1996 1.55%, 01/07/04 1,080 1,080 ------- 992,012 INDIANA 3.5% ELKHART CNTY +@ Economic Development RB (West Plains Apts) Series 1998A 1.25%, 01/07/04 1,900 1,900 GARY REDEVELOPMENT DISTRICT +@ Economic Growth RB Series 2001A 1.35%, 01/07/04 5,670 5,670 INDIANA BOND BANK + Advance Funding Program Notes Series 2003A 1.10%, 01/27/04 207,500 207,631 + Midyear Funding Program Notes Series 2003A 0.93%, 04/15/04 67,000 67,061 INDIANA DEVELOPMENT FINANCE AUTH +@ IDRB (Big Sky Park) Series 1999 1.35%, 01/07/04 5,400 5,400 +@ IDRB (Cives Corp) Series 1998 1.35%, 01/07/04 7,150 7,150 INDIANA HEALTH FACILITIES FINANCING AUTH +~@ Insured RB Series 1985A 1.15%, 01/07/04 20,900 20,900 RB (Ascension Health Credit Group) Series 2001A-2 0.98%, 07/02/04 45,000 45,000 INDIANA HFA +~@ S/F Mortgage RB Series 1998 D-2 TOB Series 1999A 1.38%, 01/07/04 9,995 9,995 +~@ S/F Mortgage RB Series 2000 B-2 TOB Series 2000P 1.40%, 01/07/04 6,795 6,795 INDIANA UNIVERSITY ~@ Facility RB Series 2000 1.18%, 01/07/04 5,061 5,061 INDIANAPOLIS +@ M/F Housing RB (Nora Pines Apts) Series 2001 1.30%, 01/07/04 6,000 6,000 +~@ Thermal Energy System RB Series 2001A TOB Series 20011402 1.30%, 01/07/04 9,900 9,900 INDIANAPOLIS LOCAL PUBLIC IMPROVEMENT BOND BANK +~@ Waterworks RB Series 2002A TOB Series 2001-784 1.29%, 01/07/04 8,000 8,000 MARION +@ Economic Development RB (Indiana Wesleyan Univ) Series 2000 1.15%, 01/07/04 7,500 7,500 ST JOSEPH CNTY +@ Economic Development RB (Corby Apts) Series 1997B 1.30%, 01/07/04 3,430 3,430
20 See financial notes. SCHWAB MUNICIPAL MONEY FUND
ISSUER SECURITY TYPE, PROJECT, SERIES, FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) +@ Economic Development RB (Pin Oaks Apts) Series 1997A 1.30%, 01/07/04 1,000 1,000 +@ Economic Development RB (Western Manor Apts) Series 1997C 1.30%, 01/07/04 2,130 2,130 ~@ Educational Facilities RB (Univ of Notre Dame) Series 1998 1.15%, 01/07/04 4,200 4,200 UNIVERSITY OF SOUTHERN INDIANA +~@ Auxiliary System RB Series 2001B 1.15%, 01/07/04 10,600 10,600 VIGO CNTY +@ Economic Development RB (Sisters of Providence) Series 2001 1.40%, 01/07/04 3,500 3,500 ------- 438,823 IOWA 1.1% IOWA TRAN Series 2003 1.05%, 06/29/04 78,000 78,362 IOWA HIGHER EDUCATION LOAN AUTH +@ Private College Facility RB (Graceland Univ) Series 2003 1.30%, 01/07/04 2,000 2,000 IOWA SCHOOL CORPORATIONS + Warrant Certificates 2003-2004 Series A 0.97%, 06/18/04 25,000 25,118 IOWA STUDENT LOAN LIQUIDITY CORP +~@ Student Loan RB Series 1988B 1.11%, 01/07/04 33,600 33,600 ------- 139,080 KANSAS 0.9% KANSAS DEPT OF TRANSPORTATION +~@ Highway RB Series 1999 TOB Series 991601 1.30%, 01/07/04 37,500 37,500 OLATHE GO Temporary Notes Series 2003A 1.09%, 06/01/04 39,540 39,607 WICHITA +@ Airport Facilities Refunding RB (Cessna Citation Service Center) 1997 Series III 1.20%, 01/07/04 11,245 11,245 +@ Airport Facility Refunding & Improvement RB (Flightsafety Intl) 1999 Series II 1.33%, 01/07/04 26,170 26,170 ------- 114,522 KENTUCKY 0.9% ELIZABETHTOWN +@ IDRB (ALTEC) Series 1997 1.20%, 01/07/04 3,000 3,000 JEFFERSON CNTY +@ M/F Housing Refunding RB Series 2002 (Camden Brookside Apts) Series 2002 1.30%, 01/07/04 8,900 8,900 +@ Sports Stadium RB (Univ of Louisville Athletic Assn) Series 1997 1.45%, 01/07/04 3,900 3,900 KENTUCKY HIGHER EDUCATION STUDENT LOAN CORP +~@ Insured Student Loan RB Series 1991E 1.15%, 01/07/04 12,600 12,600 +~@ Insured Student Loan RB Series 1996A 1.15%, 01/07/04 23,850 23,850 KENTUCKY HOUSING CORP. ~@ Housing RB Series 1998F TOB Series 1998W 1.38%, 01/07/04 19,320 19,320 ~@ Housing RB Series 1999H TOB Series 2000U 1.26%, 01/07/04 9,685 9,685 ~@ Housing RB Series 2002A TOB Series 2002 A31 1.38%, 01/07/04 5,640 5,640
See financial notes. 21 SCHWAB MUNICIPAL MONEY FUND PORTFOLIO HOLDINGS continued
ISSUER SECURITY TYPE, PROJECT, SERIES, FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) LOUISVILLE & JEFFERSON CNTY METROPOLITAN SEWER DISTRICT +~@ Sewage & Drainage System RB Series 1999A TOB Series 991701 1.30%, 01/07/04 6,115 6,115 LOUISVILLE & JEFFERSON CNTY REGIONAL AIRPORT AUTH @ Special Facilities RB (UPS) Series 1999C 1.26%, 01/02/04 10,100 10,100 RICHMOND +@ IDRB (Mikron) Series 1995 1.25%, 01/07/04 7,175 7,175 WICKLIFFE +@ Pollution Control & Solid Waste Disposal Refunding RB (Westvaco Corp) Series 2001 1.15%, 01/07/04 4,250 4,250 ------- 114,535 LOUISIANA 1.6% CALCASIEU PARISH IDB +@ Refunding IDRB (Weingarten Realty Investors) Series 1995 1.30%, 01/07/04 1,990 1,990 ERNEST N. MORIAL - NEW ORLEANS EXHIBIT HALL AUTH. +~@ Senior Subordinate Special Tax Bonds Series 2003A TOB Series 248 1.32%, 01/07/04 4,995 4,995 LAFAYETTE PARISH IDB @ Refunding IDRB (Westwood Village) Series 1995 1.30%, 01/07/04 3,735 3,735 LAFAYETTE PUBLIC POWER AUTH +~@ Electric Refunding RB Series 2003A&B TOB Series 246 1.30%, 01/07/04 5,310 5,310 LAKE CHARLES HARBOR & TERMINAL DISTRICT +@ Dock & Wharf RB (Conoco Inc) Series 2000 1.30%, 01/07/04 10,500 10,500 LOUISIANA OFFSHORE TERMINAL AUTH +@ Deepwater Port Refunding RB First State Series 1992A 1.20%, 01/07/04 10,000 10,000 +@ Deepwater Port Refunding RB Series 2003B 1.20%, 01/07/04 5,700 5,700 LOUISIANA PUBLIC FACILITY AUTH +@ IDRB (Kenner Hotel Partnership) Series 1985 1.26%, 01/02/04 4,450 4,450 +~@ Lease Purchase RB Series 2003 1.28%, 01/07/04 20,000 20,000 NEW ORLEANS Sewerage Service BAN Series 2003 1.12%, 08/01/04 50,000 50,254 NEW ORLEANS AVIATION BOARD +~@ Refunding Bonds Series 1993B 1.12%, 01/07/04 5,160 5,160 OUACHITA PARISH IDB +@ IDRB (Sulzer Escher Wyss) Series 1989 1.35%, 01/07/04 1,500 1,500 ST JAMES PARISH Pollution Control Refunding RB (Texaco) Ser 1988A 1.08%, 06/10/04 36,500 36,500 Pollution Control Refunding RB (Texaco) Series 1988B 1.08%, 06/10/04 44,030 44,030 ------- 204,124 MAINE 0.1% MAINE FINANCE AUTH +@ RB (Jackson Laboratory) Series 2002 1.32%, 01/07/04 5,900 5,900 MAINE HOUSING AUTH ~@ Mortgage Purchase Bonds Series 2002 F-2 TOB Series 193 1.35%, 01/07/04 5,020 5,020 ------- 10,920
22 See financial notes. SCHWAB MUNICIPAL MONEY FUND
ISSUER SECURITY TYPE, PROJECT, SERIES, FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) MARYLAND 0.9% BALTIMORE CNTY ~ Consolidated Public Improvement TECP Series 2002 0.90%, 01/09/04 20,000 20,000 HOWARD CNTY +@ M/F Housing Refunding RB (Sherwood Crossing Apts) Series 2003 1.25%, 01/07/04 10,000 10,000 MARYLAND COMMUNITY DEVELOPMENT ADMINISTRATION ~@ S/F Program Bonds 1995 Second Series TOB Series PA-634R 1.33%, 01/07/04 3,375 3,375 ~@ S/F Program Bonds 1999 Third Series TOB Series 1999G 1.38%, 01/07/04 32,335 32,335 MARYLAND ENERGY FINANCING ADMINISTRATION +@ Limited Obligation Local District Cooling Facilities RB (Comfort Link) Series 2001 1.25%, 01/07/04 10,000 10,000 MARYLAND HEALTH & HIGHER EDUCATIONAL FACILITIES AUTH +@ Pooled Loan Program RB Series D 1.25%, 01/07/04 32,505 32,505 MARYLAND STATE ECONOMIC DEVELOPMENT CORP +@ Economic Development RB (Hunter Douglas) Series 2000 1.30%, 01/07/04 3,400 3,400 +@ IDRB (Dixon Valve & Coupling Co) Series 1998 1.30%, 01/07/04 2,225 2,225 ------- 113,840 MASSACHUSETTS 2.9% ACUSHNET Unlimited Tax BAN Series 2003 0.98%, 08/13/04 23,000 23,108 AYER BAN Series 2003 0.89%, 06/24/04 5,000 5,013 CHICOPEE 2003 BAN 1.18%, 11/19/04 26,536 26,726 DOUGLAS BAN 2003 1.12%, 04/07/04 14,000 14,033 EVERETT BAN 2003 1.07%, 09/10/04 30,000 30,139 MASSACHUSETTS GO Bonds Consolidated Loan Series 1999C 1.10%, 09/01/04 1,900 1,949 +~@ GO Bonds Consolidated Loan Series 2001D TOB Series 2001-0 1.24%, 01/07/04 2,785 2,785 GO Bonds Consolidated Loan Series 2003B 0.98%, 08/01/04 27,000 27,159 ~@ GO Refunding Bonds Series 2001B 1.25%, 01/07/04 8,000 8,000 ~@ GO Refunding Bonds Series 2001C 1.25%, 01/07/04 12,400 12,400 +~@ Route 3 North Transportation Improvements Assoc Lease RB Series 2002B 1.06%, 01/07/04 2,200 2,200 MASSACHUSETTS BAY TRANSIT AUTH General Transportation System Refunding Bonds Series 1993A 1.11%, 03/01/04 1,000 1,007 +~@ General Transportation System Bonds Series 1999A TOB Series PT-1218 1.24%, 01/07/04 9,000 9,000 MASSACHUSETTS DEVELOPMENT FINANCE AGENCY +@ M/F Housing RB (Salem Heights Apts) Series 2003A 1.20%, 01/07/04 12,000 12,000
See financial notes. 23 SCHWAB MUNICIPAL MONEY FUND PORTFOLIO HOLDINGS continued
ISSUER SECURITY TYPE, PROJECT, SERIES, FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) +@ RB (Assumption College) Series 2002A 1.15%, 01/07/04 9,900 9,900 +~@ RB (Boston Univ) Series R-3 1.25%, 01/07/04 2,900 2,900 +@ RB (Brandon Residential Treatment Center) Series 2003 1.25%, 01/07/04 2,355 2,355 +@ RB (Dean College) Series 1999 1.30%, 01/07/04 2,900 2,900 +@ RB (FIBA Technologies) Series 2003 1.20%, 01/07/04 2,200 2,200 +@ RB (Judge Rotenberg Center) Series 2003 1.13%, 01/07/04 10,000 10,000 +~@ RB (Wentworth Institute of Technology) Series 2000 1.27%, 01/07/04 6,800 6,800 ~ TECP Program 3 0.95%, 01/21/04 2,750 2,750 MASSACHUSETTS HEALTH & EDUCATION FACILITIES AUTH +~@ RB (Baystate Medical Center) Series D TOB Series 2001-834 1.28%, 01/07/04 13,300 13,300 @ RB (MIT) Series 2001 J-1 1.15%, 01/07/04 29,700 29,700 ~@ RB (MIT) Series K TOB Series 2002D 1.24%, 01/07/04 1,510 1,510 @ RB (Williams College) Series I 1.10%, 04/01/04 20,400 20,400 +~@ RB (Capital Assets Program) Series 1985D 1.26%, 01/02/04 1,140 1,140 MASSACHUSETTS HFA +~@ Housing Bonds Series 2003F 1.10%, 01/07/04 10,100 10,100 S/F Housing Notes Series M 1.15%, 05/01/04 10,000 10,000 MASSACHUSETTS STATE IFA ~@ RB (Whitehead Institute For Biomedical Research) Series 1995 1.08%, 01/07/04 2,000 2,000 MASSACHUSETTS TURNPIKE AUTH +~@ Metropolitan Highway System Subordinate RB Series 1999A TOB Series 2000-335 1.23%, 01/07/04 10,000 10,000 MASSACHUSETTS WATER POLLUTION ABATEMENT TRUST ~@ RB (MWRA) Subordinate Series 1999A TOB Series 1999N 1.18%, 01/07/04 1,500 1,500 MEDFORD BAN 2003 1.10%, 09/10/04 7,000 7,043 1.15%, 09/10/04 15,000 15,087 OLD ROCHESTER REGIONAL SD Unlimited Tax BAN 2003 1.18%, 10/15/04 6,000 6,038 PEABODY BAN Series 2003 1.05%, 10/01/04 6,000 6,042 WOBURN BAN Series 2003 0.95%, 06/11/04 7,850 7,878 WORCESTER REGIONAL TRANSIT AUTH + RAN Series 2003 0.88%, 06/30/04 6,000 6,018 ------- 363,080 MICHIGAN 4.0% ALLEN PARK PUBLIC SCHOOLS ~@ Unlimited Tax School Building Bonds Series 2003 TOB Series 229 1.30%, 01/07/04 6,410 6,410 ANN ARBOR ECONOMIC DEVELOPMENT CORP +@ Limited Obligation Refunding RB (Glacier Hills) Series 2000B 1.33%, 01/07/04 9,015 9,015 +@ Limited Obligation RB (Glacier Hills) Series 2000A 1.33%, 01/07/04 12,985 12,985
24 See financial notes. SCHWAB MUNICIPAL MONEY FUND
ISSUER SECURITY TYPE, PROJECT, SERIES, FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) DETROIT +~@ Sewage Disposal System RB Series 1999A TOB Series 20012201 1.30%, 01/07/04 34,650 34,650 +~@ Sewage Disposal System Second Lien RB Series 2001B TOB Series 2002G 1.31%, 01/07/04 4,260 4,260 +~@ Water Supply System Refunding Senior Lien RB Series 2003D 1.15%, 01/07/04 11,900 11,900 DETROIT CITY SD +~@ School Building & Site Improvement Bonds Series 2001A TOB Series 2002H 1.31%, 01/07/04 4,620 4,620 GEORGETOWN ECONOMIC DEVELOPMENT CORP +@ Limited Obligation RB (Sunset Manor) Series 2000 1.33%, 01/07/04 9,030 9,030 GRAND RAPIDS ECONOMIC DEVELOPMENT CORP +@ Refunding RB (Amway Hotel Corp) Series 1991A 1.22%, 01/07/04 8,755 8,755 MACOMB CNTY HOSPITAL FINANCE AUTH +@ Hospital Refunding RB (Mt Clemens General Hospital) Series 2003 A-2 1.31%, 01/02/04 4,900 4,900 MICHIGAN BUILDING AUTH + TECP Series 4 1.05%, 02/12/04 64,445 64,445 MICHIGAN HOSPITAL FINANCING AUTH +@ Hospital Refunding & RB (Crittenton Hospital Medical Center) Series 2003A 1.31%, 01/02/04 7,900 7,900 +@ RB (Martin Luther Memorial Home) Series 1997 1.20%, 01/07/04 7,760 7,760 MICHIGAN HOUSING DEVELOPMENT AUTH +~@ S/F Mortgage RB Series 2001A TOB Series PT-556 1.33%, 01/07/04 3,630 3,630 @ S/F Mortgage RB Series 2002D 1.20%, 12/15/04 9,000 9,000 MICHIGAN MUNICIPAL BOND AUTH RAN Series 2003 B-1 1.02%, 08/20/04 32,000 32,197 MICHIGAN STRATEGIC FUND +@ Limited Obligation RB (Advance Plastics Corp) Series 1996 1.45%, 01/07/04 1,830 1,830 +@ Limited Obligation RB (American Cancer Society) Series 2000 1.30%, 01/07/04 4,445 4,445 +@ Limited Obligation RB (EPI Printers) Series 1997 1.45%, 01/07/04 960 960 +@ Limited Obligation RB (Mans) Series 1991 1.43%, 01/07/04 630 630 +@ Limited Obligation RB (Mans) Series 1998B 1.45%, 01/07/04 1,175 1,175 +@ Limited Obligation RB (Mechanics Uniform Rental Co) Series 1995 1.45%, 01/07/04 1,000 1,000 +@ Limited Obligation RB (Orchestra Place Renewal) Series 2000 1.33%, 01/07/04 15,000 15,000 +@ Limited Obligation RB (United Machining) Series 1998 1.45%, 01/07/04 4,000 4,000 +~@ Limited Obligation Refunding RB (Detroit Edison Co) Series 2003A TOB Series 240 1.35%, 01/07/04 5,995 5,995 MICHIGAN TRUNK LINE FUND +~@ State Trunk Line Fund Refunding Bonds Series 1998A TOB Series 1998-13 1.19%, 01/07/04 46,666 46,666
See financial notes. 25 SCHWAB MUNICIPAL MONEY FUND PORTFOLIO HOLDINGS continued
ISSUER SECURITY TYPE, PROJECT, SERIES, FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) OAKLAND CNTY +@ Limited Obligation RB (Husky Envelope Products) Series 1999 1.45%, 01/07/04 2,360 2,360 +@ Limited Obligation RB Series 2000 (Pontiac Vision 2000 Schools) Series 2000 1.30%, 01/07/04 9,400 9,400 WAYNE CNTY +~@ Airport RB (Detroit Metropolitan Wayne Cnty Airport) Junior Lien Series 2001 1.21%, 01/07/04 75,400 75,400 +~@ Airport RB (Detroit Metropolitan Wayne Cnty Airport) Series 2002A 1.11%, 01/07/04 57,400 57,400 +~@ Airport Refunding RB (Detroit Metropolitan Wayne Cnty Airport) Series 1996B 1.11%, 01/07/04 44,290 44,290 ------- 502,008 MINNESOTA 2.6% ANDOVER +@ Senior Housing Refunding RB (Presbyterian Homes) Series 2003 1.30%, 01/07/04 6,500 6,500 BLOOMINGTON PORT AUTH +~@ Special Tax Refunding RB (Mall of America) Series 1999B 1.30%, 01/07/04 9,300 9,300 DAKOTA CNTY COMMUNITY DEVELOPMENT AGENCY +@ M/F Housing RB (Brentwood Hills Apts) Series 2003A 1.42%, 01/02/04 10,000 10,000 +~@ S/F Mortgage RB Draw Down Series 2002 TOB Series PT-627 1.35%, 01/07/04 7,245 7,245 +@ S/F Mortgage Refunding RB Series 2003 1.05%, 08/01/04 10,000 10,000 EDEN PRAIRIE +@ M/F Housing RB (Eden Prairie Leased Housing Associates I) Series 2003A 1.35%, 01/07/04 6,000 6,000 HENNEPIN CNTY @ GO Refunding Bonds Series 1996C 1.25%, 01/07/04 2,050 2,050 HENNEPIN CNTY HOUSING & REDEVELOPMENT AUTH +@ M/F Housing RB (City Apts at Loring Park) Series 2001 1.40%, 01/07/04 2,600 2,600 +@ M/F Housing Refunding RB (Stone Arch Apts) Series 2002 1.35%, 01/07/04 2,800 2,800 MENDOTA HEIGHTS +@ Refunding IDRB (Dakota Business Plaza) Series 2000 1.60%, 01/07/04 2,300 2,300 MINNEAPOLIS +@ RB (Guthrie Theater) Series 2003A 1.27%, 01/07/04 18,000 18,000 MINNEAPOLIS-ST PAUL METROPOLITAN AIRPORTS COMMISSION +~@ Airport RB Series 2000B TOB Series PT-735 1.34%, 01/07/04 5,225 5,225 + Airport RB Series 2002B 1.35%, 01/01/04 2,875 2,875 + Subordinate Revenue TECP Series B 1.15%, 01/07/04 17,500 17,500 + 1.20%, 01/21/04 7,000 7,000 MINNESOTA COP Aid Anticipation Series 2003A 0.95%, 08/27/04 117,150 117,757 MINNESOTA AGRICULTURAL & ECONOMIC DEVELOPMENT BRD +@ RB (Evangelical Lutheran Good Samaritan Society) Series 1996 1.30%, 01/07/04 7,500 7,500
26 See financial notes. SCHWAB MUNICIPAL MONEY FUND
ISSUER SECURITY TYPE, PROJECT, SERIES, FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) MINNESOTA HFA @ Residential Housing Finance Bonds Series 2000M-1 1.20%, 12/23/04 10,000 10,000 ~@ Residential Housing Finance Bonds Series 2003B 1.27%, 01/07/04 4,300 4,300 @ Residential Housing Finance Bonds Series 2003F 1.00%, 07/22/04 33,840 33,840 MINNESOTA HIGHER EDUCATION FACILITIES AUTH +@ RB (Univ of St. Thomas) Series 4-O 1.15%, 01/07/04 9,700 9,700 +@ RB (Univ of St. Thomas) Series 5-I 1.15%, 01/07/04 3,900 3,900 ROCHESTER Health Care Facilities RB (Mayo Foundation) Series 1992B 1.05%, 02/10/04 9,100 9,100 Health Care Facilities RB (Mayo Foundation) Series 1992C 1.05%, 02/10/04 10,950 10,950 ~ Health Care Facilities RB (Mayo Foundation) Series 2000A 0.95%, 02/05/04 9,000 9,000 1.05%, 02/10/04 6,000 6,000 ST LOUIS PARK +@ M/F Housing RB (Park) Series 2002A 1.35%, 01/07/04 3,300 3,300 ------- 334,742 MISSISSIPPI 1.0% JACKSON CNTY @ Pollution Control Refunding RB (Chevron USA) Series 1992 1.30%, 01/02/04 8,650 8,650 @ Port Facility Refunding RB (Chevron USA) Series 1993 1.30%, 01/02/04 6,200 6,200 MISSISSIPPI ~@ GO Capital Improvements Bonds Series 2003E 1.20%, 01/07/04 55,595 55,595 ~@ GO Refunding Bonds Series 2001 TOB Series 20012401 1.30%, 01/07/04 14,880 14,880 MISSISSIPPI BUSINESS FINANCE CORP +@ IDRB (Electric Mills Wood Preserving) Series 1999 1.40%, 01/07/04 5,000 5,000 +@ IDRB (Omega Motion) Series 1996 1.35%, 01/07/04 4,500 4,500 +@ IDRB (VC Regional Assembly & Mnfg) Series 2003 1.15%, 01/07/04 8,110 8,110 MISSISSIPPI HOME CORP +~@ S/F Mortgage RB Series 1997C TOB Series 1997D 1.38%, 01/07/04 5,985 5,985 MISSISSIPPI HOSPITAL EQUIPMENT & FACILITIES AUTH +@ RB (Baptist Memorial Hospital) Series 2001 1.26%, 01/07/04 16,870 16,870 ------- 125,790 MISSOURI 0.1% CLAY CNTY IDA +@ IDRB (KS Salad Real Estate) Series 1999 1.42%, 01/07/04 1,800 1,800 MISSOURI DEVELOPMENT FINANCE BOARD +@ IDRB (Milbank Mnfg Co) Series 1997 1.40%, 01/07/04 3,000 3,000 MISSOURI HEALTH & EDUCATIONAL FACILITIES AUTH +@ Health Facilities RB (St Francis Medical Center) Series 1996A 1.32%, 01/02/04 3,960 3,960 ST LOUIS IDA +@ IDRB (Kessler Container) Series 1997A 1.35%, 01/07/04 2,100 2,100
See financial notes. 27 SCHWAB MUNICIPAL MONEY FUND PORTFOLIO HOLDINGS continued
ISSUER SECURITY TYPE, PROJECT, SERIES, FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) WASHINGTON IDA +@ IDRB (Pauwels Transformers) Series 1995 1.53%, 01/07/04 3,000 3,000 ------ 13,860 MONTANA 0.0% MONTANA HEALTH FACILITIES AUTH +~@ Health Care RB (Pooled Loan Program) Series 1985A 1.30%, 01/07/04 5,155 5,155 NEBRASKA 0.3% DODGE CNTY +@ IDRB (Oilgear Co) Series 1997 1.53%, 01/07/04 1,110 1,110 NEBRASKA INVESTMENT FINANCE AUTH ~@ S/F Housing RB Series 1998G TOB Series 1998X 1.38%, 01/07/04 10,735 10,735 ~@ S/F Housing RB Series 1999E TOB Series 2000O 1.26%, 01/07/04 2,055 2,055 STANTON CNTY +@ IDRB (Nucor Corp) Series 1996 1.17%, 01/07/04 19,300 19,300 ------- 33,200 NEVADA 1.5% CLARK CNTY +@ Airport System Subordinate Lien RB Series 1995 A-2 1.13%, 01/07/04 1,200 1,200 +@ Airport System Subordinate Lien RB, Series 1999B-1 1.11%, 01/07/04 50,760 50,760 +@ Economic Development RB (Univ. of Nevada, Las Vegas Foundation) Series 1999 1.30%, 01/07/04 470 470 +@ IDRB (Southwest Gas Corp) Series 2003A 1.25%, 01/07/04 12,500 12,500 CLARK CNTY SD +~@ GO (Limited Tax) Building Bonds Series 2001F TOB Series 2001-33 1.21%, 01/07/04 21,715 21,715 LAS VEGAS VALLEY WATER DISTRICT + GO Water Improvement & Refunding Bonds Series 2003A 1.00%, 06/01/04 4,540 4,596 NEVADA HOUSING DIVISION +@ Multi-Unit Housing Refunding RB (Oakmont) Series 2002 1.27%, 01/07/04 4,350 4,350 +@ Multi-unit Housing RB (Apache Pines Apts) Series 1999A 1.27%, 01/07/04 7,415 7,415 +@ Multi-unit Housing RB (Banbridge Apts) Series 2000A 1.27%, 01/07/04 3,960 3,960 +@ Multi-unit Housing RB (Bluffs Apts) Series 2002A 1.27%, 01/07/04 17,850 17,850 +@ Multi-unit Housing RB (City Center) Series 2000A 1.27%, 01/07/04 9,350 9,350 +@ Multi-unit Housing RB (Silver Pines Apts) Series 2002A 1.27%, 01/07/04 5,400 5,400 +@ Multi-unit Housing RB (Silver Terrace Apts) Series 2003A 1.27%, 01/07/04 5,150 5,150 +@ Multi-unit Housing RB (St Rose Seniors Apts) Series 2002A 1.27%, 01/07/04 14,770 14,770 +@ Multi-unit Housing RB Series 1989A 1.10%, 01/07/04 5,000 5,000 WASHOE CNTY +~@ GO Convention Center Refunding Bonds Series 2001A TOB Series 2001-24 1.21%, 01/07/04 21,000 21,000 ------- 185,486
28 See financial notes. SCHWAB MUNICIPAL MONEY FUND
ISSUER SECURITY TYPE, PROJECT, SERIES, FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) NEW HAMPSHIRE 0.5% NEW HAMPSHIRE BUSINESS FINANCE AUTH +@ Solid Waste Disposal RB (Lonza Biologics) Series 2003 1.32%, 01/07/04 30,000 30,000 NEW HAMPSHIRE HEALTH & EDUCATIONAL FACILITIES AUTH +~@ RB (Dartmouth-Hitchcock Obligated Group) Series 2001A 1.18%, 01/07/04 8,900 8,900 +@ RB (Riverwoods) Series 2003 1.20%, 01/07/04 8,850 8,850 NEW HAMPSHIRE HFA +~@ S/F Mortgage Acquisition RB Series 1997C TOB Series 1998G 1.38%, 01/07/04 2,995 2,995 +~@ S/F Mortgage Acquisition RB Series 1998B TOB Series 1998U 1.38%, 01/07/04 9,995 9,995 ----------- 60,740 NEW JERSEY 1.0% EAST BRUNSWICK TOWNSHIP BAN 1.10%, 02/27/04 16,985 17,009 NEW JERSEY TRAN Series Fiscal 2004A 1.03%, 06/25/04 95,000 95,442 NEW JERSEY HEALTH CARE FACILITIES FINANCING AUTH +~@ Refunding & RB (St Barnabas Health Care System) Series 1998B TOB Series PA-504 1.23%, 01/07/04 2,300 2,300 NEW JERSEY TURNPIKE AUTH +~@ Turnpike RB Series 2000A TOB Series 2000-3002 1.26%, 01/07/04 8,000 8,000 +~@ Turnpike RB Series 2003 C-1 1.12%, 01/07/04 600 600 ----------- 123,351 NEW MEXICO 0.8% NEW MEXICO ~@ 2003-04 TRAN Series 2003A TOB Series L48J 1.30%, 01/07/04 74,975 74,975 NEW MEXICO MORTGAGE FINANCE AUTH +~@ S/F Mortgage Program Bonds Draw Down Issue 2002-1 TOB Series PT-646 1.35%, 01/07/04 900 900 +~@ S/F Mortgage Program Bonds Draw Down Issue 2002-1 TOB Series PT-709 1.35%, 01/07/04 3,145 3,145 +~@ S/F Mortgage Program Bonds Draw Down Issue 2002-1 TOB Series PT-836 1.35%, 01/07/04 1,045 1,045 SANTA FE +@ Gross Receipts Tax Subordinate Lien Wastewater System RB Series 1997B 1.20%, 01/07/04 16,800 16,800 ----------- 96,865 NEW YORK 6.8% BUFFALO + RAN 2003-2004 A 1.08%, 07/29/04 12,000 12,114 DUTCHESS CNTY IDA +@ Civic Facility RB (Trinity-Pawling School Corp Civic Facility) Series 1998 1.20%, 01/07/04 1,725 1,725 LONG ISLAND POWER AUTH +~@ Electric System RB Series 1998A TOB Series 983205 1.26%, 01/07/04 10,970 10,970 +~@ Electric System Subordinated RB 1998 Series 7B 1.10%, 01/07/04 3,800 3,800 +@ Electric System Subordinated RB 2001 Series 3-A 1.10%, 01/07/04 4,500 4,500
See financial notes. 29 SCHWAB MUNICIPAL MONEY FUND PORTFOLIO HOLDINGS continued
ISSUER SECURITY TYPE, PROJECT, SERIES, FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) METROPOLITAN TRANSP AUTH +~@ Dedicated Tax Fund Bonds Series 2002B 1.18%, 01/07/04 4,000 4,000 NEW YORK CITY +~@ GO Bonds Fiscal 1998D TOB Series 1997C 1.17%, 01/07/04 17,825 17,825 +@ GO Bonds Fiscal 2003 Series C-3 1.12%, 01/07/04 34,300 34,300 +~@ GO Bonds Series 2004F TOB Series 251 1.21%, 01/07/04 50,000 50,000 +~@ GO Bonds, Fiscal 2002 Series A-6 1.30%, 01/02/04 8,000 8,000 NEW YORK CITY HOUSING DEVEL CORP +@ M/F Mortgage RB (2 Gold Street) 2003 Series A 1.12%, 01/07/04 5,000 5,000 +@ M/F Mortgage RB (Upper East), 2003 Series A 1.12%, 01/07/04 31,000 31,000 +@ M/F Rental Housing RB (1 Columbus Place Dev), 1998 Series A 1.10%, 01/07/04 40,000 40,000 +@ M/F Rental Housing RB (Sierra Dev) 2003 Series A 1.10%, 01/07/04 9,300 9,300 NEW YORK CITY IDA +@ Special Facility RB (1997 Korean Air Lines Project) Series 1997A 1.09%, 01/07/04 26,500 26,500 NEW YORK CITY MUNICIPAL WATER FINANCE AUTH +~@ Water & Sewer System RB Fiscal 1993C 1.27%, 01/02/04 4,400 4,400 +~@ Water & Sewer System RB Fiscal 1996B TOB Series 1998-158 1.26%, 01/07/04 9,995 9,995 +~@ Water & Sewer System RB Series 1995A 1.30%, 01/02/04 5,650 5,650 +~@ Water & Sewer System RB Series 2002 G TOB Series PA-1054 1.26%, 01/07/04 13,545 13,545 ~@ Water & Sewer System RB Series 2003 C-3 1.27%, 01/02/04 6,400 6,400 ~@ Water & Sewer System RB Series 2003 F-2 1.17%, 01/02/04 3,500 3,500 NEW YORK CITY TRANSITIONAL FINANCE AUTH BAN Fiscal 2003 Series 2 1.10%, 02/19/04 50,000 50,060 ~@ Future Tax Secured Bonds Fiscal 1999C TOB Series 1999B 1.17%, 01/07/04 14,775 14,775 ~@ Future Tax Secured Bonds Series 2001B 1.30%, 01/02/04 20,100 20,100 ~@ Future Tax Secured Bonds Series 2001C 1.12%, 01/07/04 8,150 8,150 ~@ Future Tax Secured Refunding Bonds Series 2003A TOB Series PT-1724 1.27%, 01/07/04 4,640 4,640 ~@ New York City Recovery Bonds Fiscal 2003 Series 2-A 1.30%, 01/02/04 9,200 9,200 ~@ New York City Recovery Bonds Fiscal 2003 Series 2-D 1.12%, 01/07/04 56,200 56,200 ~@ New York City Recovery Bonds Fiscal 2003 Series 2-F 1.27%, 01/02/04 2,750 2,750 ~@ New York City Recovery Bonds Fiscal 2003 Series 3-B 1.34%, 01/02/04 3,600 3,600 ~@ Recovery Bonds Fiscal 2003 Series 3H 1.28%, 01/02/04 2,400 2,400
30 See financial notes. SCHWAB MUNICIPAL MONEY FUND
ISSUER SECURITY TYPE, PROJECT, SERIES, FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) NEW YORK STATE DORMITORY AUTH +~@ State University Educational Facilities RB Series 2000B TOB Series 2000-15 1.12%, 06/23/04 20,000 20,000 NEW YORK STATE ENERGY RESEARCH DEV AUTH +~@ Gas Facilities RB Series 1996 (Brooklyn Union Gas Co. Project) TOB Series 2000-379 1.26%, 01/07/04 1,570 1,570 +~@ Pollution Control Refunding RB (Orange & Rockland Utilities) Series 1994A 1.04%, 01/07/04 19,000 19,000 NEW YORK STATE HFA +@ 101 West End Ave Housing RB Series 1998A 1.09%, 01/07/04 27,200 27,200 +@ 101 West End Ave Housing RB Series 1999A 1.09%, 01/07/04 40,050 40,050 +@ 150 East 44th St Housing RB 2000A 1.09%, 01/07/04 13,920 13,920 +@ 250 West 50th St Housing RB Series 1997A 1.15%, 01/07/04 37,000 37,000 +@ 345 East 94th St Housing RB Series 1998A 1.09%, 01/07/04 20,500 20,500 +@ 345 East 94th St Housing RB Series 1999A 1.09%, 01/07/04 7,300 7,300 +@ 350 West 43rd St Housing RB Series 2002A 1.12%, 01/07/04 12,500 12,500 +@ Service Contract Refunding RB Series 2003D 1.10%, 01/07/04 24,700 24,700 +@ Union Square South Housing RB Series 1996A 1.15%, 01/07/04 14,000 14,000 +@ W23rd St Housing RB Series 2002A 1.21%, 01/07/04 43,100 43,100 NEW YORK STATE LOCAL ASSISTANCE CORP +@ RB Series 1994B 1.08%, 01/07/04 15,000 15,000 NEW YORK STATE MORTGAGE AGENCY ~@ Homeowner Mortgage RB Series 77-A TOB Series 1999F 1.00%, 02/05/04 10,700 10,700 ~@ Homeowner Mortgage RB Series 79 TOB Series 1999H 1.25%, 01/07/04 14,995 14,995 ~@ S/F Mortgage RB Series 92 TOB Series 2000K 1.25%, 01/07/04 4,140 4,140 PORT AUTH OF NEW YORK & NEW JERSEY +~@ Special Project Bonds Series 6 JFK International Air Terminal Project TOB Series 2000-243 1.26%, 01/07/04 4,345 4,345 TRIBOROUGH BRIDGE & TUNNEL AUTH +~@ General Purpose RB Series 2001B 1.08%, 01/07/04 12,000 12,000 ~@ General Refunding RB Series 2002B TOB Series 194 1.26%, 01/07/04 9,995 9,995 +~@ Special Obligation Refunding Bonds Series 2000C 1.08%, 01/07/04 29,100 29,100 WESTCHESTER CNTY IDA +@ IDRB (Levister Redevelopment Co) Series 2001A 1.22%, 01/07/04 1,000 1,000 YONKERS IDA +~@ Civic Facility RB (Consumers Union Facility) Series 1994 1.12%, 01/07/04 460 460 ----------- 856,974 NORTH CAROLINA 2.2% BURKE CNTY +@ IDRB (Bauer Industries) Series 1994 1.40%, 01/07/04 2,455 2,455
See financial notes. 31 SCHWAB MUNICIPAL MONEY FUND PORTFOLIO HOLDINGS continued
ISSUER SECURITY TYPE, PROJECT, SERIES, FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) DURHAM HOUSING AUTH +@ M/F Housing RB (Pendleton Townhomes) Series 2001 1.25%, 01/07/04 5,490 5,490 FAYETTEVILLE +~@ Refunding RB Series 2003 1.09%, 01/07/04 34,600 34,600 FORSYTH CNTY +@ RB (Plymouth Printing Co) Series 1998 1.30%, 01/07/04 1,400 1,400 GATES CNTY INDUSTRIAL FACILITIES & POLLUTION CONTROL FINANCING AUTH +@ IDRB (Coxe-Lewis Corp) Series 1999 1.45%, 01/07/04 1,195 1,195 GUILFORD CNTY INDUSTRIAL FACILITIES & POLLUTION CONTROL FINANCING AUTH +@ IDRB (Metalcraft of Mayville SE Mnfg) Series 1997 1.35%, 01/07/04 1,500 1,500 +@ IDRB (Vitafoam Inc) Series 1999 1.35%, 01/07/04 5,000 5,000 HERTFORD CNTY INDUSTRIAL FACILITIES & POLLUTION CONTROL FINANCING AUTH @ IDRB (Nucor Corp) Series 2000A 1.23%, 01/07/04 17,500 17,500 1.30%, 01/07/04 26,500 26,500 JOHNSTON CNTY INDUSTRIAL FACILITIES & POLLUTION CONTROL FINANCING AUTH +@ IDRB (Flanders Corp) Series 1998 1.20%, 01/07/04 4,500 4,500 MECKLENBURG CNTY ~@ GO Bonds Series 2003B 1.15%, 01/07/04 10,000 10,000 NORTH CAROLINA ~@ GO Refunding Bonds Series 2002B 1.05%, 01/07/04 550 550 ~@ GO Refunding Bonds Series 2002E 1.10%, 01/07/04 33,800 33,800 NORTH CAROLINA CAPITAL FACILITIES FINANCE AGENCY +@ Capital Facilities RB (Durham Academy) Series 2001 1.25%, 01/07/04 23,400 23,400 NORTH CAROLINA EDUCATIONAL FACILITIES FINANCE AGENCY @ Educational Facilities RB (Davidson College) Series 2000B 1.25%, 01/07/04 19,000 19,000 +@ Educational Facilities RB (High Point Univ) Series 1997 1.25%, 01/07/04 4,610 4,610 +@ Educational Facilities RB (Queens College) Series 1999B 1.25%, 01/07/04 5,975 5,975 NORTH CAROLINA HFA ~@ Home Ownership RB Series 1A TOB Series 1998I 1.05%, 07/15/04 12,000 12,000 NORTH CAROLINA MEDICAL CARE COMMISSION +~@ Hospital RB (Pooled Equipment Finance) Series 1985 1.08%, 01/07/04 30,200 30,200 ROCKINGHAM CNTY INDUSTRIAL FACILITIES & POLLUTION CONTROL FINANCING AUTH +@ IDRB (McMichael Mills) Series 1997 1.35%, 01/07/04 1,600 1,600 ROWAN CNTY INDUSTRIAL FACILITIES & POLLUTION CONTROL FINANCING AUTH +@ IDRB (Taylor Clay Products) Series 1999 1.35%, 01/07/04 3,800 3,800 SAMPSON CNTY INDUSTRIAL FACILITIES & POLLUTION CONTROL FINANCING AUTH +@ IDRB (Crumpler Plastic Pipe) Series 1999 1.40%, 01/07/04 3,200 3,200
32 See financial notes. SCHWAB MUNICIPAL MONEY FUND
ISSUER SECURITY TYPE, PROJECT, SERIES, FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) UNION CNTY INDUSTRIAL FACILITIES & POLLUTION CONTROL FINANCING AUTH +@ RB (Rock-Tenn Converting Co) Series 1997 1.30%, 01/07/04 1,750 1,750 WAKE CNTY ~@ Public Improvement Bonds Series 2003B 1.09%, 04/01/04 8,000 8,013 WAKE CNTY HOUSING AUTH +@ M/F Housing RB (Walnut Ridge Apts) Series 2000 1.30%, 01/07/04 10,075 10,075 WILMINGTON HOUSING AUTH +@ M/F Housing RB (Garden Lakes Estates) Series 1999 1.30%, 01/07/04 7,140 7,140 ----------- 275,253 NORTH DAKOTA 0.1% RICHLAND CNTY +@ Solid Waste Disposal RB (Minn-Dak Farmers Coop) Series 1996A 1.55%, 01/07/04 8,080 8,080 +@ Solid Waste Disposal RB (Minn-Dak Farmers Coop) Series 1996B 1.55%, 01/07/04 740 740 ----------- 8,820 OHIO 1.6% CLEVELAND +@ Airport System RB Series 1997D 1.11%, 01/07/04 32,275 32,275 CLEVELAND-CUYAHOGA CNTY PORT AUTH +@ RB (Euclid/93rd Garage) Series 2003 1.15%, 01/07/04 25,000 25,000 CUYAHOGA CNTY +@ Economic Development RB (Hathaway Brown School) Series 1999 1.30%, 01/07/04 14,650 14,650 HAMILTON +~@ Electric System Refunding RB Series 2002A 1.20%, 01/07/04 26,050 26,050 HAMILTON CNTY +~@ Sales Tax Refunding & Improvement RB Subordinate Series 2002B Trust TOB Series 202 1.30%, 01/07/04 14,410 14,410 OHIO Major New State Infrastructure Project RB Series 2002-1 0.85%, 06/15/04 6,400 6,491 OHIO AIR QUALITY DEVELOPMENT AUTH +@ Air Quality Development RB (JMG Funding) Series 1994A 1.13%, 01/07/04 16,400 16,400 +@ Air Quality Development RB (JMG Funding) Series 1994B 1.20%, 01/07/04 14,400 14,400 OHIO HFA ~@ Residential Mortgage RB (MBS Program) Series 2000 A-1 TOB Series 2000AA 1.26%, 01/07/04 1,630 1,630 ~@ Residential Mortgage RB 2001C TOB Series 2001-I 1.35%, 01/07/04 6,780 6,780 OHIO HIGHER EDUCATIONAL FACILITY COMMISSION +@ Higher Educational Facility RB (Pooled Financing) Series 2003B 1.27%, 01/07/04 5,000 5,000 OHIO STATE UNIVERSITY General Receipts Bonds Series 2003C 0.95%, 03/11/04 23,000 23,000 PORT OF GREATER CINCINNATI DEVELOPMENT AUTH +@ RB (National Underground Railroad Freedom Center) Series 2003A 1.20%, 01/07/04 15,000 15,000 ----------- 201,086
See financial notes. 33 SCHWAB MUNICIPAL MONEY FUND PORTFOLIO HOLDINGS continued
ISSUER SECURITY TYPE, PROJECT, SERIES, FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) OKLAHOMA 1.1% BROKEN BOW ECONOMIC DEVELOPMENT AUTH +@ Solid Waste Disposal RB (JM Huber) Series 2003A 1.25%, 01/07/04 7,500 7,500 MULDROW PUBLIC WORKS AUTH +@ IDRB (OK Foods) Series 1995 1.40%, 01/07/04 5,500 5,500 OKLAHOMA CNTY INDUSTRIAL AUTH +@ RB (National Cowboy Hall of Fame) Series 1999 1.25%, 01/07/04 1,160 1,160 OKLAHOMA DEVELOPMENT FINANCE AUTH +@ RB (Shawnee Funding) Series 1996 1.30%, 01/07/04 3,100 3,100 OKLAHOMA HFA ~@ S/F Mortgage RB Series 1998B-2 & 2000C-2 TOB Series PT-360 1.33%, 01/07/04 4,450 4,450 OKLAHOMA STUDENT LOAN AUTH +~@ Student Loan Bonds & Notes Series 1996A 1.12%, 01/07/04 32,580 32,580 +~@ Student Loan Bonds & Notes Series 1997A 1.17%, 01/07/04 33,000 33,000 +~@ Student Loan Bonds & Notes Series 1998A 1.17%, 01/07/04 33,100 33,100 +~@ Student Loan Bonds & Notes Series 2000A-4 1.17%, 01/07/04 10,945 10,945 TULSA IDA +@ RB (YMCA) Series 1999 1.25%, 01/07/04 2,600 2,600 ----------- 133,935 OREGON 2.0% GILLIAM CNTY +@ Solid Waste Disposal RB (Waste Management) Series 2000A 1.20%, 01/07/04 10,000 10,000 OREGON +@ Economic Development RB (Kettle Foods) 1998 Series 196 1.25%, 01/07/04 4,970 4,970 Full Faith & Credit TAN Series 2003A 1.07%, 11/15/04 142,000 143,445 OREGON ECONOMIC DEVELOPMENT COMMISSION +@ Economic Development RB (Pendleton Flour Mills) 1997 Series 182 1.25%, 01/07/04 4,360 4,360 OREGON HEALTH, HOUSING, EDUCATIONAL & CULTURAL FACILITIES AUTH +@ RB (Quatama Crossing) Series 1998A 1.35%, 01/07/04 4,600 4,600 OREGON HOUSING & COMMUNITY SERVICES DEPT @ Mortgage RB (S/F Program) Series 2003O 1.25%, 01/06/05 40,000 40,000 @ Mortgage RB (S/F Program) Series 2003M 1.20%, 01/06/05 7,000 7,000 PORT OF PORTLAND +@ Special Obligation RB (Portland Bulk Terminals) Series 1996 1.30%, 01/07/04 28,000 28,000 +@ Special Obligation RB (Portland Bulk Terminals) Series 1999 1.30%, 01/07/04 4,500 4,500 PORTLAND +@ M/F Housing RB (Village of Lovejoy Fountain) Series 1997 1.25%, 01/07/04 8,500 8,500 ----------- 255,375 PENNSYLVANIA 7.0% ALLEGHENY CNTY HOSPITAL DEVELOPMENT AUTH +~@ Hospital RB Series 1993 (Magee-Womens Hospital) TOB Series PT-878 1.25%, 01/07/04 5,000 5,000
34 See financial notes. SCHWAB MUNICIPAL MONEY FUND
ISSUER SECURITY TYPE, PROJECT, SERIES, FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) CAMBRIA CNTY IDA +@ Resource Recovery RB (Cambria Cogen Co Project) Series 1998 A-1 1.20%, 01/07/04 74,250 74,250 +@ Resource Recovery RB (Cambria Cogen Co) Series 1998A-2 1.42%, 01/07/04 32,105 32,105 CENTRAL BUCKS SD +~@ GO Series 2000A 1.30%, 01/07/04 1,650 1,650 CHESTER CNTY HEALTH & EDUCATION FACILITIES AUTH +@ RB (Simpson Meadows Project) Series 2000 1.27%, 01/07/04 925 925 CLARION CNTY IDA +@ Energy Development RB (Piney Creek Project) 1990 Series 1.11%, 01/07/04 465 465 DAUPHIN CNTY GENERAL AUTH +~@ RB (Education & Health Loan) Series 1997 1.33%, 01/07/04 7,285 7,285 DELAWARE VALLEY REGIONAL FINANCE AUTH +~@ Local Government RB 1998A TOB Series 2001J 1.31%, 01/07/04 14,510 14,510 +~@ Local Government RB Series 1998A PT1651 1.29%, 01/07/04 9,000 9,000 EMMAUS GENERAL AUTH +~@ Bonds Series 1996 1.15%, 01/07/04 3,125 3,125 ERIE SD +~@ GO Bonds Series 2001A TOB Series 2001-5 1.05%, 05/07/04 15,845 15,845 HARRISBURG AUTH +~@ Water Refunding RB Series 2002B 1.35%, 01/07/04 2,500 2,500 +~@ Water Refunding RB Series 2003A 1.35%, 01/07/04 10,400 10,400 LANCASTER CNTY HOSPITAL AUTH +~@ Health Center RB (Masonic Homes) Series 2002 1.15%, 01/07/04 17,435 17,435 +@ Health Center RB (Brethren Village) Series 2000 1.30%, 01/07/04 4,100 4,100 LUZERNE CNTY IDA +@ RB 2003 Series (Methodist Homes Project) 1.17%, 01/07/04 2,100 2,100 MERCER CNTY +~@ GO Bonds Series 2001 TOB Series 2001-18 1.19%, 01/07/04 5,400 5,400 MONTGOMERY CNTY HIGHER EDUCATION & HEALTH AUTH +@ RB Series 2001 (Madlyn & Leonard Abramson Center For Jewish Life) 1.27%, 01/07/04 2,300 2,300 MONTGOMERY CNTY IDA + Pollution Control Refunding RB (Exelon Generation Co) Series 2002A 1.05%, 02/11/04 7,200 7,200 + Pollution Control Refunding RB (Peco Energy Co) Series 1994A 1.00%, 01/27/04 24,160 24,160 +@ School RB (Friends' Central School) Series 2002 1.26%, 01/07/04 5,200 5,200 MONTGOMERY CNTY REDEVELOPMENT AUTH +@ M/F Housing RB (Brookside Manor Apartments Project) Series 2001A 1.20%, 01/07/04 3,200 3,200 +@ M/F Housing RB (Kingswood Apts) Series 2001A 1.20%, 01/07/04 1,205 1,205 +@ M/F Housing Refunding RB (Glenmore Associates) Series 1995A 1.25%, 01/07/04 3,750 3,750
See financial notes. 35 SCHWAB MUNICIPAL MONEY FUND PORTFOLIO HOLDINGS continued
ISSUER SECURITY TYPE, PROJECT, SERIES, FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) NORTHHAMPTON CNTY +~@ County Agreement RB Series 2001 TOB Series 2002-2 1.12%, 06/02/04 6,995 6,995 +@ RB (Binney & Smith) Series 1997A 1.25%, 01/07/04 3,250 3,250 +@ RB (Binney & Smith) Series 1997B 1.25%, 01/07/04 840 840 PENNSYLVANIA +~@ GO Bonds First Series 1995 TOB Series 97C3801 1.30%, 01/07/04 1,000 1,000 ~@ GO Bonds First Series 2001 TOB Series 2001F 1.31%, 01/07/04 6,860 6,860 +~@ GO Bonds First Series 2003 PA-1112 1.25%, 01/07/04 9,770 9,770 +~@ GO Bonds Second Series 2002 TOB Series PA-1035R 1.25%, 01/07/04 10,000 10,000 PENNSYLVANIA CONVENTION CENTER AUTH +~@ RB Series 1989A TOB Series PT-1224 1.25%, 01/07/04 3,900 3,900 PENNSYLVANIA ECONOMIC DEVELOPMENT FINANCING AUTH +@ Exempt Facilities RB (Amtrak Project) Series 2001B 1.25%, 01/07/04 1,300 1,300 @ Exempt Facilities RB (Merck & Co. West Point Project) Series 2001 1.30%, 01/07/04 3,250 3,250 +@ Exempt Facilities RB (Reliant Energy Seward Project) Series 2001A 1.15%, 01/07/04 66,100 66,100 +@ Exempt Facilities RB (Reliant Energy Seward Project) Series 2002B 1.17%, 01/07/04 18,000 18,000 +@ Exempt Facilities RB (Reliant Energy Seward) Series 2002A 1.15%, 01/07/04 35,000 35,000 PENNSYLVANIA ENERGY DEVELOPMENT AUTH +@ Energy Development RB (B&W Ebensburg Project) Series 1986 1.11%, 01/07/04 20,140 20,140 +@ Energy Development RB (Piney Creek) Series 1986A 1.11%, 01/07/04 21,475 21,475 +@ Energy Development RB (Piney Creek) Series 1986C 1.11%, 01/07/04 4,155 4,155 PENNSYLVANIA HFA ~@ S/F Mortgage RB Series 1997-56C TOB Series PT-119A 1.25%, 01/07/04 250 250 ~@ S/F Mortgage RB Series 1999A TOB Series 1999-u 1.00%, 02/26/04 24,710 24,710 ~@ S/F Mortgage RB Series 2002-74B TOB Series PA-1055 1.28%, 01/07/04 3,895 3,895 ~@ S/F RB Series 1998-64 TOB Series 1998Y 1.12%, 03/25/04 495 495 PENNSYLVANIA HIGHER EDUCATION ASSISTANCE AGENCY +~@ Student Loan RB Series 2003 A-2 1.34%, 01/07/04 27,500 27,500 +~@ Student Loan RB Series 1988A 1.13%, 01/07/04 27,700 27,700 +~@ Student Loan RB Series 1988B 1.13%, 01/07/04 12,000 12,000 +~@ Student Loan RB Series 1994A 1.13%, 01/07/04 31,000 31,000 +~@ Student Loan RB Series 1997A 1.34%, 01/07/04 23,900 23,900 +~@ Student Loan RB Series 1999A 1.11%, 01/07/04 6,200 6,200 +~@ Student Loan RB Series 2000A 1.34%, 01/07/04 40,400 40,400 +~@ Student Loan RB Series 2001A 1.34%, 01/07/04 18,700 18,700 +~@ Student Loan RB Series 2003A-1 1.34%, 01/07/04 7,000 7,000
36 See financial notes. SCHWAB MUNICIPAL MONEY FUND
ISSUER SECURITY TYPE, PROJECT, SERIES, FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) PENNSYLVANIA PUBLIC SCHOOL BUILDING AUTH +~@ School RB (Parkland SD) Series 1999D 1.30%, 01/07/04 6,800 6,800 PENNSYLVANIA TURNPIKE COMM ~@ Turnpike RB Series 2001U 1.18%, 01/07/04 29,600 29,600 PHILADELPHIA +~@ Water & Wastewater RB Series 1997B 1.06%, 01/07/04 11,600 11,600 +~@ Water & Wastewater Refunding RB Series 2003 1.09%, 01/07/04 41,395 41,395 PHILADELPHIA GAS WORKS +~@ RB Third Series 2001 TOB Series PA-877 1.25%, 01/07/04 5,995 5,995 PHILADELPHIA HOSPITAL & HIGHER EDUCATION FACILITIES AUTH +@ RB (Wills Eye Hospital Project) Series 2000 1.25%, 01/07/04 5,200 5,200 PHILADELPHIA IDA +~@ Airport RB Series 1998A TOB Series 1998P2 1.05%, 08/05/04 12,710 12,710 +@ RB (City Line Holiday Inn) Series 1996 1.10%, 01/07/04 6,800 6,800 +@ RB (Girard Estate Aramark Tower) Series 2002 1.25%, 01/07/04 10,000 10,000 +@ RB (Girard Estate Facilities Leasing) Series 2001 1.25%, 01/07/04 13,500 13,500 QUAKERTOWN GENERAL AUTH +@ RB (Pooled Financing Program) Series 1996A 1.10%, 01/07/04 14,268 14,268 +@ RB (Pooled Financing Program) Series 1998A 1.10%, 01/07/04 1,705 1,705 QUAKERTOWN HOSPITAL AUTH +@ Hospital RB (HPS Group Pooled Financing Program) Series 1985 1.10%, 01/07/04 7,400 7,400 TEMPLE UNIVERSITY University Funding Obligations Series 2003 1.20%, 05/04/04 14,000 14,000 WASHINGTON CNTY LEASE AUTH +@ Municipal Facilities Lease RB (Reading II) Series 1985 A-1-B 1.15%, 01/07/04 7,600 7,600 WEST CORNWALL TWP MUNICIPAL AUTH +@ RB (Lebanon Valley Brethren Home) Series 1995 1.20%, 01/07/04 1,720 1,720 ----------- 879,188 RHODE ISLAND 0.7% RHODE ISLAND HOUSING & MORTGAGE FINANCE CORP ~@ Home Ownership Opportunity Bonds 1998 Series 29A TOB Series 1999E 1.38%, 01/07/04 19,020 19,020 RHODE ISLAND IDA +@ IDRB (Greystone of Lincoln) 2000 Series 1.65%, 01/07/04 1,900 1,900 RHODE ISLAND STUDENT LOAN AUTH +@ Student Loan Program RB 1995 Series 1 1.16%, 01/07/04 24,900 24,900 +@ Student Loan Program RB 1996 Series 1 1.05%, 06/01/04 19,000 19,000 +@ Student Loan Program RB 1996 Series 2 1.16%, 01/07/04 6,900 6,900 +@ Student Loan Program RB 1996 Series 3 1.16%, 01/07/04 20,400 20,400 ----------- 92,120
See financial notes. 37 SCHWAB MUNICIPAL MONEY FUND PORTFOLIO HOLDINGS continued
ISSUER SECURITY TYPE, PROJECT, SERIES, FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) SOUTH CAROLINA 1.2% BERKELEY CNTY SD +~@ School Building Bonds Series 2002 TOB Series 2002 A32 1.30%, 01/07/04 7,575 7,575 CHARLESTON WATERWORKS & SEWER SYSTEM ~@ Refunding & Capital Improvement RB Series 2003A 1.27%, 01/07/04 8,665 8,665 FLORENCE CNTY PUBLIC FACILITIES CORP. +~@ Refunding COP (Law Enforcement & Civic Centers) Series 2003 1.26%, 01/07/04 29,515 29,515 GREENVILLE IDA +@ IDRB (Stevens Aviation Technical Services) Series 1997 1.40%, 01/07/04 3,500 3,500 SOUTH CAROLINA ASSOCIATION OF GOVERNMENTAL ORGANIZATIONS COP Series 2003 1.05%, 04/14/04 20,000 20,025 SOUTH CAROLINA HOUSING & DEVELOPMENT AUTH +@ M/F Rental Housing RB (Ashley Apts) Series 1999 1.30%, 01/07/04 4,205 4,205 +@ M/F Rental Housing RB (Piedmont Manor Apts) Series 2000B-1 1.30%, 01/07/04 5,755 5,755 +@ M/F Rental Housing RB (Spartanburg Terrace Apts) Series 2000C-1 1.30%, 01/07/04 1,960 1,960 +@ M/F Rental Housing Refunding RB (Fairway Apts) Series 2001A 1.12%, 01/07/04 7,735 7,735 SOUTH CAROLINA JOBS ECONOMIC DEVELOPMENT AUTH +@ Economic Development RB (Holcim) Series 2003 1.55%, 01/07/04 6,250 6,250 +@ Economic Development RB (Thomas & Betts Corp) Series 1997 1.40%, 01/07/04 3,250 3,250 +@ Economic Development Refunding RB (Electric City Printing Co) Series 1994 1.40%, 01/07/04 1,800 1,800 +@ IDRB (Sanders Brothers Construction Co) Series 1996 1.40%, 01/07/04 1,050 1,050 SOUTH CAROLINA PUBLIC SERVICE AUTH ~ TECP 0.92%, 01/13/04 22,424 22,424 SOUTH CAROLINA TRANSPORTATION INFRASTRUCTURE BANK +~@ RB Series 1999A TOB Series 20004002 1.30%, 01/07/04 22,610 22,610 SPARTANBURG CNTY IDA +@ Refunding IDRB (Bemis Co) Series 1991 1.30%, 01/07/04 4,750 4,750 ----------- 151,069 SOUTH DAKOTA 0.3% SOUTH DAKOTA HDA ~@ Homeownership Mortgage Bonds Series 2003C-1 1.22%, 01/07/04 10,000 10,000 +@ M/F Housing RB (Harmony Heights) Series 2001 1.37%, 01/07/04 6,500 6,500 SOUTH DAKOTA HEALTH & EDUCATIONAL FACILITIES AUTH +~@ RB (McKenna Hospital) Series 1994 1.32%, 01/07/04 27,345 27,345 ----------- 43,845 TENNESSEE 2.9% BRISTOL HEALTH & EDUCATIONAL FACILITIES BOARD +@ RB (King College) Series 2001 1.25%, 01/07/04 7,250 7,250
38 See financial notes. SCHWAB MUNICIPAL MONEY FUND
ISSUER SECURITY TYPE, PROJECT, SERIES, FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) CARTER CNTY IDB +@ M/F Housing Refunding RB (Willow Run Apts) Series 1990 1.45%, 01/07/04 6,675 6,675 CHATTANOOGA HEALTH, EDUCATION & HOUSING FACILITIES BOARD +@ RB (Baylor School) Series 1996 1.20%, 01/07/04 2,035 2,035 CLARKSVILLE PUBLIC BUILD AUTH +@ Pooled Financing RB Series 2001 1.30%, 01/02/04 4,000 4,000 +@ Pooled Financing RB Series 2003 1.30%, 01/02/04 7,200 7,200 FRANKLIN CO IDB +@ IDRB (Hi-Tech) Series 1997 1.20%, 01/07/04 4,300 4,300 GRUNDY CNTY IDB +@ Limited Obligation RB (Toyo Seat USA Corp) Series 2001 1.55%, 01/07/04 4,255 4,255 HENDERSONVILLE IDB +@ Refunding IDRB (Betty Machine Co) Series 2001 1.25%, 01/07/04 5,000 5,000 HUNTINGDON IDB +@ IDRB (Associated Rubber Co) Series 1999 1.30%, 01/07/04 2,400 2,400 JACKSON ENERGY AUTH +~@ Gas System RB Series 2002 1.15%, 01/07/04 5,900 5,900 +~@ Water System RB Series 2002 1.15%, 01/07/04 4,800 4,800 JACKSON IDB +@ Solid Waste Facility Bonds (Ameristeel Corp) Series 1997 1.35%, 01/07/04 3,800 3,800 MCMINN CNTY IDA +@ Solid Waste Disposal Facilities RB (Bowater) Series 1999 1.35%, 01/07/04 13,500 13,500 METROPOLITAN GOVT OF NASHVILLE & DAVIDSON CNTY GO TECP 0.90%, 01/07/04 10,000 10,000 0.97%, 02/10/04 8,000 8,000 0.95%, 03/18/04 7,000 7,000 METROPOLITAN GOVT OF NASHVILLE & DAVIDSON CNTY HEALTH & EDUCATIONAL FACILITIES BOARD +@ RB (Ensworth School) Series 2002 1.15%, 01/07/04 10,000 10,000 METROPOLITAN GOVT OF NASHVILLE- DAVIDSON CNTY IDB +@ Educational Facilities Refunding RB (David Lipscomb Univ) Series 2003 1.15%, 01/07/04 8,700 8,700 +@ IDRB (Bindtech) Series 1997 1.35%, 01/07/04 3,050 3,050 +@ IDRB (Nashville Symphony Project) 1.25%, 01/07/04 3,100 3,100 +@ M/F Housing RB (Arbor Crest) 1985B 1.25%, 01/07/04 12,550 12,550 +@ M/F Housing RB (Arbor Knoll) 1985A 1.25%, 01/07/04 13,400 13,400 METROPOLITAN NASHVILLE AIRPORT AUTH +@ Passenger Facility Charge Refunding Bonds Series 2003 1.25%, 01/07/04 7,000 7,000 MONTGOMERY CNTY PUBLIC BUILDING AUTH +@ Pooled Financing RB (Tennessee Cnty Loan Pool) 1.30%, 01/02/04 50 50 NASHVILLE-DAVIDSON CNTY HEALTH & EDUCATIONAL FACILITIES BOARD @ RB (Ascension Health Credit Group) Series 2001 B-1 1.00%, 08/02/04 3,500 3,500
See financial notes. 39 SCHWAB MUNICIPAL MONEY FUND PORTFOLIO HOLDINGS continued
ISSUER SECURITY TYPE, PROJECT, SERIES, FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) SEVIER CNTY PUBLIC BUILDING AUTH +~@ Public Improvement Bonds 1995 Series C-1 1.26%, 01/07/04 3,165 3,165 +~@ Public Improvement Bonds 1996 Series D 1.26%, 01/07/04 1,165 1,165 +~@ Public Improvement Bonds 1996 Series E-4 1.26%, 01/07/04 2,515 2,515 +~@ Public Improvement Bonds 1996 Series E-5 1.26%, 01/07/04 1,390 1,390 +~@ Public Improvement Bonds 1996 Series F-1 1.26%, 01/07/04 8,850 8,850 +~@ Public Improvement Bonds 1996 Series F-2 1.26%, 01/07/04 6,310 6,310 +~@ Public Improvement Bonds 1996 Series G 1.26%, 01/07/04 5,475 5,475 +~@ Public Improvement Bonds 1996 Series II-C 1.26%, 01/07/04 855 855 +~@ Public Improvement Bonds 1998 Series III-C-1 1.26%, 01/07/04 8,530 8,530 SHELBY CNTY HEALTH, EDUCATION & HOUSING FACILITY BOARD +@ Educational Facilities RB (Rhodes College) Series 2000 1.25%, 01/07/04 9,700 9,700 +@ M/F Housing RB (TUP I) Series 1997A 1.27%, 01/07/04 5,000 5,000 + RB (Baptist Memorial Hospital) Series 2000 1.15%, 01/20/04 30,000 30,000 +@ RB (St. Benedict at Auburndale High School) Series 2003 1.28%, 01/07/04 5,000 5,000 TENNESSEE GO TECP Series A 0.95%, 02/06/04 10,000 10,000 1.05%, 04/08/04 20,000 20,000 TENNESSEE HOUSING DEVELOPMENT AGENCY ~@ Homeownership Program Bonds Series 2001-1C TOB Series 2001H 1.36%, 01/07/04 4,655 4,655 +~@ Mortgage Finance TOB Series K 1.38%, 01/07/04 1,510 1,510 VOLUNTEER STUDENT LOAN FUNDING CORP +@ Student Loan RB Series 1987 A-1 1.13%, 01/07/04 15,000 15,000 +@ Student Loan RB Series 1987 A-2 1.13%, 01/07/04 13,700 13,700 +@ Student Loan RB Series 1987 A-3 1.13%, 01/07/04 58,400 58,400 ----------- 368,685 TEXAS 12.0% AMARILLO HEALTH FACILITY CORP. +@ Health Facilities Refunding RB (Evangelical Lutheran Good Samaritan Society) Series 1997 1.35%, 01/07/04 3,155 3,155 +@ Hospital RB (Panhandle Pooled Health Care Loan) Series 1985 1.20%, 01/07/04 3,000 3,000 AUSTIN ~@ Public Improvement Bonds Series 2000 TOB Series 20004305 1.30%, 01/07/04 6,000 6,000 +~@ Water & Wastewater Refunding RB Series 2001A&B TOB Series 2001 A63 1.21%, 01/07/04 6,425 6,425 BEXAR CNTY HEALTH FACILITIES DEVELOPMENT CORP. +@ Health Care RB (Chandler Memorial Home) Series 1995 1.28%, 01/07/04 3,945 3,945
40 See financial notes. SCHWAB MUNICIPAL MONEY FUND
ISSUER SECURITY TYPE, PROJECT, SERIES, FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) BRAZOS RIVER AUTH +@ Pollution Control Refunding RB (TXU Electric Co) Series 2001D-1 1.25%, 01/07/04 14,500 14,500 CALHOUN CNTY NAVIGATION IDA +@ Solid Waste Disposal RB (Formosa Plastics Corp) Series 2001 1.35%, 01/07/04 19,800 19,800 CAPITAL HEALTH FACILITIES DEVELOPMENT CORP +@ Health Facilities Development RB (Island on Lake Travis) Series 1986 1.11%, 01/07/04 8,500 8,500 CAPITAL IDA CORP +@ Solid Waste Disposal RB (Texas Disposal Systems) Series 2001 1.35%, 01/07/04 4,300 4,300 COLLIN CNTY HFA +@ M/F Housing RB (Huntington Apts) Series 1996 1.33%, 01/07/04 6,150 6,150 DALLAS AREA RAPID TRANSIT +~@ Senior Lien Sales Tax RB Series 2001 TOB Series 20026005 1.30%, 01/07/04 16,130 16,130 DALLAS FORT WORTH INTERNATIONAL AIRPORT +~@ Dallas/Ft Worth International Airport Joint Improvement & Refunding RB Series 2002A PA-1061 1.34%, 01/07/04 8,995 8,995 +~@ Dallas/Ft Worth International Airport Joint Improvement RB Series 2003A PT-805 1.34%, 01/07/04 9,995 9,995 +~@ Dallas/Ft Worth International Airport Joint RB Series 2003A TOB Series 351 1.33%, 01/07/04 2,500 2,500 @ Refunding RB (United Parcel Service) Refunding RB Series 2002 1.26%, 01/02/04 5,250 5,250 DENTON UTILITY SYSTEM +~@ Utility System RB Series 2000A TOB Series 2000-369 1.29%, 01/07/04 5,230 5,230 EL PASO +~@ Water & Sewer Refunding RB Series 1998 TOB Series 1998I 1.38%, 01/07/04 11,535 11,535 EULESS IDA +@ RB (Ferguson Enterprises) Series 1985 1.30%, 01/07/04 4,950 4,950 GRAND PRAIRIE IDA +@ IDRB (NTA Leasing Co) Series 1994 1.27%, 01/07/04 1,515 1,515 GRAPEVINE IDA +@ Airport Improvement RB (Simuflite Training Int'l) Series 1983A 1.15%, 04/01/04 18,975 18,975 GREATER EAST TEXAS STUDENT LOAN CORP +@ Student Loan RB Series 1992B 1.30%, 01/07/04 30,200 30,200 1.03%, 07/01/04 14,000 14,000 +@ Student Loan RB Series 1995B 1.03%, 07/01/04 10,000 10,000 +@ Student Loan RB Series 1999B 1.30%, 01/07/04 6,500 6,500 +@ Student Loan Refunding RB Series 1993A 1.30%, 01/07/04 48,150 48,150 +@ Student Loan Refunding RB Series 1993B 1.30%, 01/07/04 7,000 7,000 +@ Student Loan Refunding RB Series 1995A 1.25%, 01/07/04 35,700 35,700 +@ Student Loan Refunding RB Series 1996A 1.30%, 01/07/04 56,000 56,000
See financial notes. 41 SCHWAB MUNICIPAL MONEY FUND PORTFOLIO HOLDINGS continued
ISSUER SECURITY TYPE, PROJECT, SERIES, FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) GULF COAST IDA +@ IDRB (Gruma Corp) Series 1994 1.22%, 01/07/04 6,440 6,440 GULF COAST WASTE DISPOSAL AUTH @ Environmental Facilities RB (ExxonMobil) Series 2001A 1.25%, 01/02/04 400 400 @ Environmental Facilities RB (ExxonMobil) Series 2001B 1.25%, 01/02/04 22,900 22,900 @ Solid Waste Disposal RB (Amoco Oil Co) Series 1991 1.05%, 04/01/04 4,600 4,600 +@ Solid Waste Disposal RB (Waste Management) Series 2003D 1.30%, 01/07/04 2,750 2,750 HARRIS CNTY +~@ Junior Lien Special RB (Rodeo) Series 2001C 1.27%, 01/07/04 2,000 2,000 HARRIS CNTY HEALTH FACILITY DEVELOPMENT CORP +~@ SCH Health Care System RB Series 1997B TOB Series 994301 1.30%, 01/07/04 14,850 14,850 HARRIS CNTY HFA +@ M/F Housing RB (Dominion Square Apts) Series 2000 1.38%, 01/07/04 2,895 2,895 HOUSTON ~@ Public Improvement Refunding Bonds Series 1998A TOB Series 984301 1.30%, 01/07/04 21,655 21,655 +~@ Water & Sewer System Junior Lien Refunding RB Series 2002A TOB Series 2002F 1.31%, 01/07/04 6,530 6,530 HOUSTON INDEPENDENT SD ~@ Limited Tax Schoolhouse & Refunding Bonds Series 2003 1.09%, 06/03/04 101,000 100,983 HOUSTON WATER AND SEWER SYSTEM ~ Water & Sewer System TECP Series A 0.95%, 02/04/04 12,500 12,500 0.95%, 02/05/04 46,000 46,000 JEWETT ECONOMIC DEVELOPMENT CORP @ IDRB (Nucor Corp) Series 2003 1.17%, 01/07/04 6,200 6,200 KATY INDEPENDENT SD +~@ Unlimited Tax School Building Bonds Series 2000A TOB Series 20014301 1.30%, 01/07/04 10,145 10,145 LAVACA-NAVIDAD RIVER AUTH +@ Water Supply System Contract RB (Formosa Plastics Corp) Series 1990 1.25%, 01/07/04 13,600 13,600 LOWER COLORADO RIVER AUTH +~@ Refunding RB Series 1999A TOB Series 20004301 1.30%, 01/07/04 10,770 10,770 LOWER NECHES RIVER AUTH @ Exempt Facilities Refunding RB (Exxon Mobil) Series 2001B 1.25%, 01/02/04 10,000 10,000 LOWER NECHES VALLEY AUTH @ Pollution Control RB (Chevron USA) Series 1987 0.92%, 02/17/04 4,500 4,500 LUBBOCK EDUCATIONAL FACILITIES AUTH +@ RB (Lubbock Christian Univ) Series 1999 1.30%, 01/07/04 6,300 6,300 MANSFIELD IDA +@ IDRB (Southern Champion Tray) Series 1999 1.30%, 01/07/04 2,200 2,200 MATAGORDA CNTY NAVIGATION DISTRICT # 1 +~@ Refunding RB (Houston Lighting & Power Co) TOB Series 2001-A44 1.35%, 01/07/04 19,385 19,385
42 See financial notes. SCHWAB MUNICIPAL MONEY FUND
ISSUER SECURITY TYPE, PROJECT, SERIES, FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) NORTH TEXAS HIGHER EDUCATION AUTH +@ Student Loan RB Series 1987 1.15%, 01/07/04 87,750 87,750 +~@ Student Loan RB Series 1996C 1.15%, 01/07/04 5,600 5,600 +@ Student Loan RB Series 1998 1.15%, 01/07/04 9,000 9,000 +@ Student Loan RB Series 2001A 1.15%, 01/07/04 13,405 13,405 +@ Student Loan RB Subordinate Series 1996A 1.15%, 01/07/04 8,600 8,600 +@ Student Loan Refunding RB Series 1990 1.15%, 01/07/04 27,100 27,100 NORTHSIDE INDEPENDENT SD ~@ Unlimited Tax School Building Bonds Series 2003 1.02%, 06/15/04 21,000 21,000 PANHANDLE PLAINS HIGHER EDUCATION AUTH +~@ Student Loan RB Series 1991A 1.11%, 01/07/04 2,200 2,200 +~@ Student Loan RB Series 1992A 1.11%, 01/07/04 20,300 20,300 +~@ Student Loan RB Series 1993A 1.11%, 01/07/04 5,700 5,700 ROBERTSON CNTY IDA +@ IDRB (Sanderson Farms) Series 1995 1.25%, 01/07/04 3,700 3,700 SAN ANTONIO IDA +@ IDRB (Gruma Corp) Series 1994 1.22%, 01/07/04 4,095 4,095 SAN JACINTO COMMUNITY COLLEGE DISTRICT + Maintenance Tax Notes Series 2003 1.05%, 02/15/04 1,300 1,303 SOUTHEAST TEXAS HFA +~@ S/F Mortgage Refunding & RB Series 1998A TOB Series PT-165 1.33%, 01/07/04 6,615 6,615 +~@ S/F Mortgage Refunding & RB Series 1998A TOB Series PT-193 1.33%, 01/07/04 6,725 6,725 TEXAS TRAN Series 2003 1.16%, 08/31/04 200,000 201,103 1.18%, 08/31/04 255,000 256,372 1.19%, 08/31/04 45,000 45,239 ~@ Veterans' Housing Assistance Program Fund I Series 1995 Refunding Bonds 1.06%, 01/07/04 12,261 12,261 ~@ Veterans' Housing Assistance Program Fund II Series 2002 A-2 Bonds 1.17%, 01/07/04 2,000 2,000 TEXAS A&M UNIVERSITY ~@ Permanent University Fund Bonds Series 1998 TOB Series 984302 1.30%, 01/07/04 28,445 28,445 TEXAS DEPT OF HOUSING & COMMUNITY AFFAIRS +@ M/F Housing RB (Creek Point Apts) Series 2000 1.25%, 01/07/04 7,200 7,200 ~@ Residential Mortgage RB Series 1998A TOB Series 1999C 1.38%, 01/07/04 14,950 14,950 +~@ S/F Mortgage RB Series 2002A&B TOB Series 178 1.35%, 01/07/04 4,250 4,250 TEXAS MUNICIPAL GAS CORP. +~@ Senior Lien Gas Reserve RB Series 1998 1.15%, 01/07/04 2,790 2,790 TRINITY RIVER AUTH +@ Solid Waste Disposal RB (Community Waste Disposal) Series 1999 1.20%, 01/07/04 5,795 5,795 WACO EDUCATION FINANCE CORP +~@ RB (Baylor Univ) Series 2002A 1.25%, 01/07/04 9,900 9,900 ----------- 1,509,401
See financial notes. 43 SCHWAB MUNICIPAL MONEY FUND PORTFOLIO HOLDINGS continued
ISSUER SECURITY TYPE, PROJECT, SERIES, FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) UTAH 1.6% INTERMOUNTAIN POWER AGENCY +~@ Power Supply Refunding RB Series 1996C TOB Series 2000-409 1.29%, 01/07/04 15,330 15,330 SALT LAKE CITY +@ Airport RB Series 2001 1.15%, 01/07/04 9,100 9,100 +~@ Hospital RB Series 2001 (IHC Health Services) TOB Series 20014401 1.30%, 01/07/04 26,730 26,730 +@ RB (Rowland Hall - St. Mark's School) Series 2001 1.25%, 01/07/04 9,515 9,515 UNIVERSITY OF UTAH +~@ Auxiliary & Campus Facilities System Refunding & RB Series 1998A TOB Series 984401 1.30%, 01/07/04 30,060 30,060 +@ Student Loan RB Series 1993A 1.15%, 01/07/04 35,000 35,000 +~@ Student Loan RB Series 1995l 1.15%, 01/07/04 27,500 27,500 UTAH ~@ GO Highway Bonds Series 1998A TOB PT-429 1.28%, 01/07/04 31,085 31,085 UTAH BUILDING OWNERSHIP AUTH +~@ Lease Refunding RB Series 1998C TOB Series 984402 1.30%, 01/07/04 9,695 9,695 WOODS CROSS CITY +@ M/F Housing Refunding RB (Springwood Apts) Series 2001A 1.25%, 01/07/04 3,605 3,605 ----------- 197,620 VERMONT 0.1% VERMONT ECONOMIC DEVELOPMENT AUTH +@ IDRB (Agri-Mark) Series 1999A 1.45%, 01/07/04 17,000 17,000 +@ IDRB (Agri-Mark) Series 1999B 1.45%, 01/07/04 1,000 1,000 ----------- 18,000 VIRGINIA 1.0% CHESTERFIELD CNTY IDA +@ Solid Waste Disposal Facility RB (Ridewater Fibre Corp) Series 2000 1.35%, 01/07/04 5,100 5,100 FAIRFAX CNTY ECONOMIC DEVELOPMENT AUTH ~@ RB (Smithsonian Institution) Series A 1.18%, 01/07/04 8,000 8,000 KING GEORGE CNTY +@ Solid Waste Disposal Facility RB (Garnet) Series 1996 1.35%, 01/07/04 3,700 3,700 LOUDOUN CNTY IDA @ RB (Howard Hughes Medical Institute) Series 2003B 1.05%, 01/07/04 4,200 4,200 @ RB (Howard Hughes Medical Institute) Series 2003D 1.20%, 01/07/04 5,000 5,000 @ RB (Howard Hughes Medical Institute) Series 2003E 1.26%, 01/02/04 10,900 10,900 @ RB (Howard Hughes Medical Institute) Series 2003F 1.06%, 01/07/04 9,500 9,500 METROPOLITAN WASHINGTON AIRPORTS AUTH +~@ Airport System RB Series 2001A TOB Series PT-689 1.34%, 01/07/04 5,870 5,870 +~@ Airport System Refunding RB Series 2002C 1.15%, 01/07/04 9,700 9,700 ~ TECP Series A 1.15%, 01/07/04 23,000 23,000 MONTGOMERY CNTY IDA +@ RB (Virginia Tech Foundation) Series 2001A 1.25%, 01/07/04 9,300 9,300
44 See financial notes. SCHWAB MUNICIPAL MONEY FUND
ISSUER SECURITY TYPE, PROJECT, SERIES, FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) +@ RB (Virginia Tech Foundation) Series 2001B 1.33%, 01/07/04 1,310 1,310 +@ RB (Virginia Tech Foundation) Series 2002 1.25%, 01/07/04 4,655 4,655 NORFOLK +~@ Parking System Refunding & RB Series 2000B TOB Series 20004601 1.30%, 01/07/04 9,450 9,450 PORTSMOUTH REDEVELOPMENT & HOUSING AUTH., VIRGINIA +@ M/F Housing RB (Churchland North Apts) Series 1999 1.30%, 01/07/04 6,705 6,705 RICHMOND IDA +@ Educational Facilities RB (Church Schools) Series 2002 1.25%, 01/07/04 9,775 9,775 VIRGINIA BEACH DEVELOPMENT AUTH +@ M/F Residential Rental Housing RB (Silver Hill at Thalia) Series 1999 1.30%, 01/07/04 4,300 4,300 ----------- 130,465 WASHINGTON 4.3% DOUGLAS CNTY DEVELOPMENT CORP +@ RB (Executive Flight) Series 1998 1.20%, 01/07/04 6,500 6,500 ENERGY NORTHWEST +~@ Columbia Generating Station & Project #3 Refunding Electric RB Series 2001A TOB Series 20014701 1.30%, 01/07/04 29,700 29,700 +~@ Project #1 Refunding Electric RB Series 2002A TOB Series PT-615 1.28%, 01/07/04 13,530 13,530 +~@ Project #3 Refunding Electric RB Series 2003A TOB Series PT-778 1.28%, 01/07/04 8,690 8,690 +@ Project #3 Refunding Electric RB Series 2003E 1.15%, 01/07/04 5,000 5,000 +~@ Project #3 Refunding Electric RB, Series 2003D-3-1 1.09%, 01/07/04 1,000 1,000 +~@ Project #3 Refunding Electric RB, Series 2003D-3-2 1.07%, 01/07/04 8,000 8,000 EVERETT IDA @ Exempt Facilities RB (Kimberly-Clark Corp) Series 2002 1.25%, 01/07/04 3,200 3,200 +@ RB (Partners Trust I SYNSOR) Series 1896 1.25%, 01/07/04 3,500 3,500 KING CNTY Limited Tax GO BAN Series 2003A 1.05%, 10/01/04 80,000 80,564 OLYMPIA +@ Solid Waste RB (LeMay Enterprises) Series 1999 1.20%, 01/07/04 6,695 6,695 PIERCE CNTY +@ IDRB (McFarland Cascade) Series 1996 1.40%, 01/07/04 2,000 2,000 +~@ Unlimited Tax GO Bonds Series 2001TOB Series 20014703 1.30%, 01/07/04 43,655 43,655 PIERCE CNTY ECONOMIC DEVELOPMENT CORP +@ RB (Flex-A-Lite Consolidated) Series 1996 1.25%, 01/07/04 2,400 2,400 +@ RB (K&M Holdings II) Series 1997 1.55%, 01/07/04 1,400 1,400 +@ Solid Waste RB (LeMay Enterprises) Series 1999 1.20%, 01/07/04 2,620 2,620 PORT OF CENTRALIA IDA +@ Solid Waste RB (LeMay Enterprises) Series 1999 1.20%, 01/07/04 1,645 1,645
See financial notes. 45 SCHWAB MUNICIPAL MONEY FUND PORTFOLIO HOLDINGS continued
ISSUER SECURITY TYPE, PROJECT, SERIES, FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) PORT OF MOSES LAKE PUBLIC CORP +@ RB (National Frozen Foods Corp) Series 1997 1.15%, 01/07/04 3,800 3,800 PORT OF SEATTLE +~@ RB Series 2001B TOB Series PT-728 1.33%, 01/07/04 4,430 4,430 +~@ Special Facility RB Series 1999B (Terminal 18) Merlot TOB Series 1999J 1.26%, 01/07/04 49,795 49,795 PORT OF TACOMA + Subordinate Lien Revenue TECP Series A 1.05%, 03/19/04 15,500 15,500 SEATTLE +~@ Drainage & Wastewater Refunding & RB Series 2002 TOB Series PT-1605 1.28%, 01/07/04 6,875 6,875 SEATTLE HOUSING AUTH +@ RB (CHHIP & HRG) Series 1996 1.25%, 01/07/04 3,485 3,485 +@ RB (Casa Pacifica Apts) Series 1997 1.25%, 01/07/04 3,000 3,000 SNOHOMISH CNTY PUBLIC UTILITY DISTRICT #1 +~@ Generation System Refunding RB Series 2002A-1 1.09%, 01/07/04 4,200 4,200 +~@ Generation System Refunding RB Series 2002A-2 1.09%, 01/07/04 27,000 27,000 SPOKANE IDA +@ Refunding IDRB (Interlock Realty Co) Series 1996 1.53%, 01/07/04 945 945 TACOMA HOUSING AUTH +@ RB (Crown Assisted Living) Series 1998 1.25%, 01/07/04 3,255 3,255 WASHINGTON +~@ GO Bond Series 2003A TOB Series 2002G 1.34%, 01/07/04 5,170 5,170 ~@ GO Bonds Series 1998C TOB Series 984704 1.30%, 01/07/04 12,150 12,150 ~@ GO Bonds Series 2000B TOB Series 20004702 1.30%, 01/07/04 13,380 13,380 +~@ GO Bonds Series 2001A TOB Series 228 1.30%, 01/07/04 5,950 5,950 + Motor Vehicle Fuel Tax GO Refunding Bonds Series R-2001B 1.04%, 09/01/04 10,000 10,262 +~@ Unlimited GO Bonds Series B TOB Series 20024702 1.30%, 01/07/04 30,485 30,485 WASHINGTON ECONOMIC DEVELOPMENT FINANCE AUTH +@ Economic Development RB (Skills) Series 1998N 1.25%, 01/07/04 2,940 2,940 +@ IDRB (Tonkin Building Associates) Series 1997A 1.40%, 01/07/04 1,000 1,000 +@ RB (Ace Tank) Series 1998 1.40%, 01/07/04 1,180 1,180 +@ RB (Hunter Douglas) Series 1997A 1.30%, 01/07/04 3,500 3,500 +@ Solid Waste Disposal RB (Waste Management ) Series 2000C 1.22%, 01/07/04 5,500 5,500 +@ Solid Waste Disposal RB (Waste Management) Series 2000I 1.20%, 01/07/04 10,240 10,240 1.22%, 01/07/04 7,235 7,235 +@ Solid Waste Disposal RB (Waste Management) Series 2000H 1.22%, 01/07/04 6,825 6,825 WASHINGTON HEALTH CARE FACILITIES AUTH +@ RB (Yakima Valley Farm Workers Clinic) Series 1997 1.15%, 01/07/04 3,300 3,300
46 See financial notes. SCHWAB MUNICIPAL MONEY FUND
ISSUER SECURITY TYPE, PROJECT, SERIES, FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) WASHINGTON HOUSING FINANCE COMMISSION +@ M/F Housing RB (Lakewood Meadows Apts) Series 2000A 1.35%, 01/07/04 3,140 3,140 +@ M/F Housing RB (Woodrose Apts) Series 1999A 1.30%, 01/07/04 6,750 6,750 +@ M/F Mortgage RB (Canyon Lakes) Series 1993 1.30%, 01/07/04 4,370 4,370 +@ M/F Mortgage RB (Lake Washington Apts) Series 1996 1.25%, 01/07/04 8,350 8,350 +@ M/F Mortgage RB (Meridian Court Apts) Series 1996 1.25%, 01/07/04 6,700 6,700 +@ M/F RB (Brittany Park Phase II) Series 1998A 1.30%, 01/07/04 3,480 3,480 +@ M/F RB (Brittany Park) Series 1996A 1.30%, 01/07/04 8,530 8,530 +@ M/F RB (Merrill Gardens) Series 1997A 1.30%, 01/07/04 6,125 6,125 +@ M/F RB (Rosecreek Apts) Series 1998A 1.33%, 01/07/04 3,570 3,570 +~@ S/F Program Bonds Draw Down Issue 2002A TOB Series PT-636 1.35%, 01/07/04 11,360 11,360 YAKAMA INDIAN NATION +@ RB (Yakama Forest Products) Series 1997 1.25%, 01/07/04 3,600 3,600 YAKIMA CNTY PUBLIC CORP +@ IDRB (Cowiche Growers) Series 1998 1.35%, 01/07/04 3,000 3,000 +@ RB (Michelsen Packaging) Series 1996 1.25%, 01/07/04 1,600 1,600 +@ RB (Printing Press) Series 1995 1.25%, 01/07/04 1,200 1,200 +@ Refunding & RB (Hi-Country Foods) Series 1996 1.25%, 01/07/04 5,900 5,900 ----------- 539,176 WEST VIRGINIA 0.6% FAYETTE CNTY DEV AUTH +@ Solid Waste Disposal Facility RB (Georgia-Pacific Corp) Series 1995 1.30%, 01/07/04 11,100 11,100 MARION CNTY +@ Solid Waste Disposal Facility RB (Grant Town Cogeneration) Series 1990B 1.20%, 01/07/04 21,225 21,225 +@ Solid Waste Disposal Facility RB (Grant Town Cogeneration) Series 1990C 1.20%, 01/07/04 18,100 18,100 +@ Solid Waste Disposal Facility RB (Grant Town Cogeneration) Series 1990D 1.20%, 01/07/04 3,400 3,400 WEST VIRGINIA PARKWAYS, ECONOMIC DEVELOPMENT & TOURISM AUTH +~@ Refunding RB Series 2003 1.06%, 01/07/04 17,600 17,600 WEST VIRGINIA STATE HOSPITAL FINANCE AUTH +@ Refunding RB (St. Josephs Hospital Project) 1.16%, 01/07/04 1,300 1,300 ----------- 72,725 WISCONSIN 1.2% COLBURN IDA +@ IDRB (Heartland Farms) Series 1994 1.53%, 01/07/04 5,900 5,900 FRANKLIN REGIONAL SOLID WASTE FINANCE COMMISSION +@ Solid Waste Disposal RB (Waste Management) Series 2003A 1.30%, 01/07/04 5,200 5,200 KENOSHA +@ IDRB (Asyst Technologies) Series 1997 1.35%, 01/07/04 5,000 5,000
See financial notes. 47 SCHWAB MUNICIPAL MONEY FUND PORTFOLIO HOLDINGS continued
ISSUER SECURITY TYPE, PROJECT, SERIES, FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) MILWAUKEE CNTY +~@ Airport RB Series 2000A Series PT-681 1.34%, 01/07/04 18,470 18,470 RHINELANDER IDA +@ IDRB (Lake Shore) Series 1990 1.53%, 01/07/04 3,820 3,820 SOUTHEAST WISCONSIN PROFESSIONAL BASEBALL PARK DISTRICT +~@ Sales Tax Refunding Bonds Series 1998 TOB Series 2000Y 1.21%, 01/07/04 5,000 5,000 WISCONSIN HEALTH & EDUCATIONAL FACILITIES AUTH +@ RB (Wisconsin Lutheran College) Series 2001 1.30%, 01/07/04 7,000 7,000 +~@ RB Series 1993C (Sisters of the Sorrowful Mother) TOB Series PT-856 1.26%, 01/07/04 22,015 22,015 WISCONSIN HOUSING & ECONOMIC DEVELOPMENT AUTH +@ Business Development RB (Ultratec) 1995 Series 7 1.53%, 01/07/04 2,350 2,350 ~@ Home Ownership RB Series 1997H TOB Series PT-194 1.33%, 01/07/04 4,285 4,285 +~@ Home Ownership RB Series 1999A TOB Series 1999R 1.35%, 01/07/04 17,250 17,250 ~@ Home Ownership RB Series 2002C 1.12%, 01/07/04 3,000 3,000 ~@ Home Ownership RB Series 2002D 1.17%, 01/07/04 1,960 1,960 ~@ Home Ownership RB Series 2003B 1.17%, 01/07/04 15,000 15,000 +~@ Housing RB Series 2002 B TOB Series 2001-650 1.29%, 01/07/04 16,380 16,380 +~@ S/F Draw Down RB Series 2003I TOB Series PT-860 1.35%, 01/07/04 12,685 12,685 WISCONSIN RAPIDS +@ IDRB (Thiele Kaolin) Series 1998 1.30%, 01/07/04 4,500 4,500 ----------- 149,815 WYOMING 0.4% LINCOLN CNTY @ Pollution Control RB (Exxon) Series 1987A 1.26%, 01/02/04 5,300 5,300 @ Pollution Control RB (Exxon) Series 1987B 1.26%, 01/02/04 1,600 1,600 @ Pollution Control RB (Exxon) Series 1987C 1.26%, 01/02/04 14,800 14,800 UINTA CNTY @ Pollution Control Refunding RB (Chevron USA) Series 1992 1.30%, 01/02/04 9,000 9,000 @ Pollution Control Refunding RB (Chevron USA) Series 1993 1.22%, 01/02/04 6,500 6,500 WYOMING COMMUNITY DEVELOPMENT AUTH ~@ Housing RB 1997 Series 4 TOB Series PT-261 1.33%, 01/07/04 2,320 2,320 ~@ Housing RB 2001 Series 1 TOB Series PT-553 1.33%, 01/07/04 5,730 5,730 ----------- 45,250
END OF INVESTMENTS. For totals, please see the first page of holdings for this fund. 48 See financial notes. SCHWAB MUNICIPAL MONEY FUND Statement of ASSETS AND LIABILITIES As of December 31, 2003. All numbers x 1,000 except NAV. ASSETS -------------------------------------------------------------------------------- Investments, at value $12,414,710 a Cash 1,918 Receivables: Fund shares sold 27,271 Interest 34,394 Investments sold 139,100 Prepaid expenses + 401 ----------------- TOTAL ASSETS 12,617,794 LIABILITIES -------------------------------------------------------------------------------- Payables: Fund shares redeemed 29,345 Dividends to shareholders 806 Investment adviser and administrator fees 77 Transfer agent and shareholder service fees 114 Accrued expenses + 573 ----------------- TOTAL LIABILITIES 30,915 NET ASSETS -------------------------------------------------------------------------------- TOTAL ASSETS 12,617,794 TOTAL LIABILITIES - 30,915 ----------------- NET ASSETS $12,586,879 NET ASSETS BY SOURCE Capital received from investors 12,589,656 Net investment income not yet distributed 25 Net realized capital losses (2,802) NET ASSET VALUE (NAV) BY SHARE CLASS SHARES SHARE CLASS NET ASSETS / OUTSTANDING = NAV Sweep Shares $7,493,807 7,496,766 $1.00 Value Advantage Shares $3,900,679 3,900,725 $1.00 Select Shares(R) $474,101 474,119 $1.00 Institutional Shares $718,292 718,313 $1.00
Unless stated, all numbers x 1,000. a The amortized cost for the fund's securities was $12,414,710. During the reporting period, the fund had $4,857,368 in transactions with other SchwabFunds(R). FEDERAL TAX DATA ----------------------------------------------------- COST BASIS OF PORTFOLIO $12,414,762 UNDISTRIBUTED EARNINGS: Tax-exempt income $25 Long-term capital gains -- UNUSED CAPITAL LOSSES: Expires 12/31 of: Loss amount: 2004 $338 2005 523 2007 775 2008 873 2011 + 241 ------------- $2,750
See financial notes. 49 SCHWAB MUNICIPAL MONEY FUND Statement of Operations For January 1, 2003 through December 31, 2003. All numbers x 1,000. INVESTMENT INCOME -------------------------------------------------------------------------------- Interest $140,795 NET REALIZED GAINS AND LOSSES -------------------------------------------------------------------------------- Net realized losses on investments sold (208) EXPENSES -------------------------------------------------------------------------------- Investment adviser and administrator fees 43,460 a Transfer agent and shareholder service fees: Sweep Shares 33,661 b Value Advantage Shares 10,225 b Select Shares(R) 422 b Institutional Shares 507 b Trustees' fees 63 c Custodian and portfolio accounting fees 993 Professional fees 51 Registration fees 336 Shareholder reports 459 Other expenses + 81 ------------------ Total expenses 90,258 Expense reduction - 18,750 d ------------------ NET EXPENSES 71,508 INCREASE IN NET ASSETS FROM OPERATIONS -------------------------------------------------------------------------------- TOTAL INVESTMENT INCOME 140,795 NET EXPENSES - 71,508 ------------------ NET INVESTMENT INCOME 69,287 NET REALIZED LOSSES + (208) ------------------ INCREASE IN NET ASSETS FROM OPERATIONS $69,079
Unless stated, all numbers x 1,000. a Calculated on a graduated basis as a percentage of average daily net assets: 0.38% of the first $1 billion, 0.35% over $1 billion, 0.32% over $10 billion, 0.30% over $20 billion and 0.27% over $40 billion. b Calculated as a percentage of average daily net assets as follows: TRANSFER AGENT SERVICES:
% OF AVERAGE SHARE CLASS DAILY NET ASSETS ---------------------------------------------- Sweep Shares 0.25 Value Advantage Shares 0.05 Select Shares(R) 0.05 Institutional Shares 0.05
SHAREHOLDER SERVICES:
% OF AVERAGE SHARE CLASS DAILY NET ASSETS ---------------------------------------------- Sweep Shares 0.20 Value Advantage Shares 0.17 Select Shares(R) 0.17 Institutional Shares 0.17
These fees are paid to Charles Schwab & Co. c For the fund's independent trustees only. d Includes $16,579 from the investment adviser (CSIM) and $2,171 from the transfer agent and shareholder service agent (Schwab). These reductions reflect a guarantee by CSIM and Schwab to limit the annual operating expenses of this fund through at least April 30, 2004, as follows:
% OF AVERAGE SHARE CLASS DAILY NET ASSETS ----------- ---------------- Sweep Shares 0.66 Value Advantage Shares 0.45 Select Shares(R) 0.35 Institutional Shares 0.24
This limit doesn't include interest, taxes and certain non-routine expenses. 50 See financial notes. SCHWAB MUNICIPAL MONEY FUND Statements of CHANGES IN NET ASSETS For the current and prior report periods. All numbers x 1,000.
OPERATIONS ------------------------------------------------------------------------------------- 1/1/03-12/31/03 1/1/02-12/31/02 Net investment income $69,287 $109,422 Net realized gains or losses + (208) 347 ------------------------------------- INCREASE IN NET ASSETS FROM OPERATIONS 69,079 109,769 DISTRIBUTIONS PAID ------------------------------------------------------------------------------------- DIVIDENDS FROM NET INVESTMENT INCOME Sweep Shares 34,685 64,407 Value Advantage Shares 31,426 45,015 Select Shares(R) 1,306 -- Institutional Shares + 1,845 -- ------------------------------------- TOTAL DIVIDENDS FROM NET INVESTMENT INCOME 69,262 109,422 a TRANSACTIONS IN FUND SHARES b ------------------------------------------------------------------------------------- SHARES SOLD Sweep Shares 27,215,378 24,400,497 Value Advantage Shares 5,280,015 5,574,437 Select Shares(R) 859,347 -- Institutional Shares + 1,161,958 -- ------------------------------------- TOTAL SHARES SOLD 34,516,698 29,974,934 SHARES REINVESTED Sweep Shares 34,072 63,259 Value Advantage Shares 28,395 41,570 Select Shares(R) 1,192 -- Institutional Shares + 1,497 -- ------------------------------------- TOTAL SHARES REINVESTED 65,156 104,829 SHARES REDEEMED Sweep Shares (27,190,937) (24,293,754) Value Advantage Shares (5,887,801) (4,913,621) Select Shares(R) (386,420) -- Institutional Shares + (445,142) -- ------------------------------------- TOTAL SHARES REDEEMED (33,910,300) (29,207,375) NET TRANSACTIONS IN FUND SHARES 671,554 872,388 c NET ASSETS ------------------------------------------------------------------------------------- Beginning of period 11,915,508 11,042,773 Total increase + 671,371 872,735 d ------------------------------------- END OF PERIOD $12,586,879 $11,915,508
Unless stated, all numbers x 1,000. UNAUDITED a The fund hereby designates 100% of its dividends for the current report period as tax-exempt interest dividends. b Because all transactions in this section took place at $1.00 per share, figures for share quantities are the same as for dollars. The fund started offering Select Shares(R) and Institutional Shares on June 2, 2003. c Represents shares sold plus shares reinvested, minus shares redeemed. d Represents the changes in net assets from operations plus the changes in value of transactions in fund shares, minus distributions paid. See financial notes. 51 SCHWAB MUNICIPAL MONEY FUND FINANCIAL NOTES BUSINESS STRUCTURE OF THE FUND THE FUND DISCUSSED IN THIS REPORT IS A SERIES OF THE CHARLES SCHWAB FAMILY OF FUNDS(TM), A NO-LOAD, OPEN-END MANAGEMENT INVESTMENT COMPANY. The company is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended. The sidebar shows the fund in this report and its trust. THE FUND OFFERS FOUR SHARE CLASSES: Sweep Shares, Value Advantage Shares, Select Shares and Institutional Shares. Shares of each class represent interests in the same portfolio, but each class has different expenses and investment minimums. Shares are bought and sold at $1.00 per share. Each share has a par value of 1/1,000 of a cent, and the trust may issue as many shares as necessary. FUND OPERATIONS Most of the fund's investments are described in sections earlier in this report. However, there are certain other investments and policies that may affect a fund's financials. The most significant of these are described below. Other policies concerning the fund's business operations also are described here. THE FUND DECLARES DIVIDENDS EVERY DAY IT IS OPEN FOR BUSINESS. These dividends, which are equal to the fund's net investment income for that day, are paid out to shareholders once a month. The fund may make distributions from any net realized capital gains once a year. THE FUND MAY BUY SECURITIES ON A DELAYED-DELIVERY BASIS. In these transactions, the fund agrees to buy a security for a stated price, with settlement generally occurring within two weeks. If the security's value falls before settlement occurs, the fund could end up paying more for the security than its market value at the time of settlement. The fund has set aside sufficient securities as collateral for those securities bought on a delayed-delivery basis. THE FUND PAYS FEES TO AFFILIATES OF THE INVESTMENT ADVISER FOR VARIOUS SERVICES. Through its trust, the fund has agreements with Charles Schwab Investment Management, Inc. (CSIM) to provide investment advisory and administrative services and with Charles Schwab & Co., Inc. (Schwab) to provide transfer agent and shareholder services. Although these agreements specify certain fees for these services, CSIM and Schwab have made additional agreements with the fund that may limit the total expenses charged. The rates and limitations for these fees are described in the fund's Statement of Operations. THE FUND MAY ENGAGE IN CERTAIN TRANSACTIONS INVOLVING AFFILIATES. The fund may make direct transactions with certain other SchwabFunds(R) when practical. When one fund is seeking to sell a security that another is THE TRUST AND ITS FUNDS This list shows all of the funds included in The Charles Schwab Family of Funds. The fund discussed in this report is highlighted. THE CHARLES SCHWAB FAMILY OF FUNDS organized October 20, 1989 Schwab Money Market Fund Schwab Government Money Fund Schwab U.S. Treasury Money Fund Schwab Value Advantage Money Fund(R) Schwab Municipal Money Fund Schwab California Municipal Money Fund Schwab New York Municipal Money Fund Schwab New Jersey Municipal Money Fund Schwab Pennsylvania Municipal Money Fund Schwab Florida Municipal Money Fund Schwab Massachusetts Municipal Money Fund Schwab Institutional Advantage Money Fund(R) Schwab Retirement Money Fund(R) Schwab Government Cash Reserves 52 SCHWAB MUNICIPAL MONEY FUND seeking to buy, an interfund transaction can allow both funds to benefit by reducing transaction costs. This practice is limited to funds that share the same investment adviser, trustees and officers. Pursuant to an exemptive order issued by the SEC, the funds may enter into interfund borrowing and lending transactions within the SchwabFunds(R). All loans are for temporary or emergency purposes only. The interest rate charged on the loan is the average of the overnight repurchase agreement rate and the short-term bank loan rate. The interfund lending facility is subject to the oversight and periodic review of the Board of Trustees of the SchwabFunds(R). TRUSTEES MAY INCLUDE PEOPLE WHO ARE OFFICERS AND/OR DIRECTORS OF THE INVESTMENT ADVISER OR SCHWAB. Federal securities law limits the percentage of such "interested persons" who may serve on a trust's board, and the trust was in compliance with these limitations throughout the report period. The trust did not pay any of these persons for their service as trustees, but it did pay non-interested persons (independent trustees), as noted in each fund's Statement of Operations. THE FUNDS MAY BORROW MONEY FROM BANKS AND CUSTODIANS. The funds may obtain temporary bank loans through the trust to which they belong, to use for meeting shareholder redemptions or for extraordinary or emergency purposes. The trusts have custodian overdraft facilities and line of credit arrangements of $150 million and $100 million with PNC Bank, N.A. and Bank of America, N.A., respectively. The funds pay interest on the amounts they borrow at rates that are negotiated periodically. THE FUND INTENDS TO MEET FEDERAL INCOME AND EXCISE TAX REQUIREMENTS FOR REGULATED INVESTMENT COMPANIES. Accordingly, the fund distributes substantially all of their net investment income and net realized capital gains (if any) to its respective shareholders each year. As long as the fund meets the tax requirements, it is not required to pay federal income tax. UNDER THE FUND'S ORGANIZATIONAL DOCUMENTS, ITS OFFICERS AND TRUSTEES ARE INDEMNIFIED AGAINST CERTAIN LIABILITY ARISING OUT OF THE PERFORMANCE OF THEIR DUTIES TO THE FUND. In addition, in the normal course of business the fund enters into contracts with its vendors and others that provide general indemnifications. The fund's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the fund. However, based on experience, the fund expects the risk of loss to be remote. ACCOUNTING POLICIES The following are the main policies the fund uses in preparing their financial statements. THE FUND VALUES ITS SECURITIES AT AMORTIZED COST, which approximates market value. SECURITY TRANSACTIONS are recorded as of the date the order to buy or sell the security is executed. INTEREST INCOME is recorded as it accrues. If the fund bought a debt instrument at a discount (that is, for less than its face value) or a premium (more than its face value), it amortizes the discount or premium from the current date up to maturity. The fund then increases (in the case of discounts) or reduces (in the case of premiums) the income it records from the security. If the security is callable (meaning that the issuer has the option to pay it off before its maturity date), then the fund amortizes the premium to the security's call date and price, rather than the maturity date and price. REALIZED GAINS AND LOSSES from security transactions are based on the identified costs of the securities involved. EXPENSES that are specific to the fund or a class are charged directly to the fund or class. Expenses that are common to all funds within the trust generally are allocated among the funds in proportion to their average daily net assets. 53 SCHWAB MUNICIPAL MONEY FUND FOR FUNDS OFFERING MULTIPLE SHARE CLASSES, all of the realized and unrealized gains or losses and net investment income, other than class specific expenses, are allocated daily to each class in proportion to its net assets. THE FUND MAINTAINS ITS OWN ACCOUNT FOR PURPOSES OF HOLDING ASSETS AND ACCOUNTING, and is considered a separate entity for tax purposes. Within its account, the fund also keeps certain assets in segregated accounts, as may be required by securities law. THE ACCOUNTING POLICIES DESCRIBED ABOVE CONFORM WITH ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES OF AMERICA. Notwithstanding this, shareholders should understand that in order to follow these principles, fund management has to make estimates and assumptions that affect the information reported in the financial statements. It's possible that once the results are known, they may turn out to be different from these estimates. 54 REPORT OF INDEPENDENT AUDITORS TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF: Schwab Municipal Money Fund In our opinion, the accompanying statement of assets and liabilities, including the portfolio holdings, 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 Schwab Municipal Money Fund (one of the portfolios constituting The Charles Schwab Family of Funds, hereafter referred to as the "Fund") at December 31, 2003, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America. These financial statements and the financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund'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 auditing standards generally accepted in the United States of America, 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, 2003 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. PRICEWATERHOUSECOOPERS LLP San Francisco, CA February 6, 2004 55 SCHWAB MUNICIPAL MONEY FUND FUND TRUSTEES A fund's Board of Trustees is responsible for protecting the interests of that fund's shareholders. The tables below give information about the people who serve as trustees and officers for the SchwabFunds(R), including the funds covered in this report. Trustees remain in office until they resign, retire or are removed by shareholder vote. 1 Under the Investment Company Act of 1940, any officer, director, or employee of Schwab or CSIM is considered an "interested person," meaning that he or she is considered to have a business interest in Schwab or CSIM. These individuals are listed as "interested trustees." The "independent trustees" are individuals who, under the 1940 Act, are not considered to have a business interest in Schwab or CSIM. Each of the SchwabFunds (of which there were 49 as of 12/31/03) belongs to one of these trusts: The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust or Schwab Annuity Portfolios. Currently all these trusts have the same trustees and officers. The address for all trustees and officers is 101 Montgomery Street, San Francisco, CA 94104. You can find more information about the trustees and officers in the Statement of Additional Information, which is available free by calling 1-800-435-4000. INDIVIDUALS WHO ARE INTERESTED TRUSTEES AND OFFICERS OF THE TRUST
TRUST POSITION(S); NAME AND BIRTHDATE TRUSTEE SINCE MAIN OCCUPATIONS AND OTHER DIRECTORSHIPS AND AFFILIATIONS -------------------------------------------------------------------------------------------------------------------------- CHARLES R. SCHWAB 2 Chair, Trustee: Chair, Director, The Charles Schwab Corp.; CEO, Director, Schwab 7/29/37 Family of Funds, 1989; Holdings, Inc.; Chair, Director, Charles Schwab & Co., Inc.; Charles Investments, 1991; Schwab Investment Management, Inc.; Chair, Charles Schwab Capital Trust, 1993; Holdings, Inc. I, Schwab International Holdings, Inc.; Director, U.S. Annuity Portfolios, 1994. Trust Corp., United States Trust Co. of New York, The Gap, Inc. (clothing retailer), Siebel Systems (software); Trustee, Stanford University. Until 6/03: Director, Xsign, Inc. (electronic payment systems). Until 5/03: Co-Chair, The Charles Schwab Corporation. Until 5/02: Director, Vodafone AirTouch PLC (telecom). Until 3/02: Director, Audiobase, Inc. (Internet audio solutions). Until 7/01: Director, The Charles Schwab Trust Company. Until 1/99: Director, Schwab Retirement Plan Services, Inc., Mayer & Schweitzer, Inc. (securities brokerage subsidiary of The Charles Schwab Corp.), Performance Technologies, Inc. (technology), TrustMark, Inc.
1 The SchwabFunds retirement policy requires that independent trustees elected after January 1, 2000 retire at age 72 or after twenty years of service as a trustee, whichever comes first. Independent trustees elected prior to January 1, 2000 will retire on the following schedule: Messrs. Holmes and Dorward will retire on December 31, 2007, and Messrs. Stephens and Wilsey will retire on December 31, 2010. 2 In addition to their positions with the investment adviser and the distributor, Ms. Lepore and Messrs. Schwab and Lyons, as well as some of Mr. Lyons's immediate family members, also own stock of The Charles Schwab Corporation. 56 SCHWAB MUNICIPAL MONEY FUND INDIVIDUALS WHO ARE INTERESTED TRUSTEES BUT NOT OFFICERS OF THE TRUST
NAME AND BIRTHDATE TRUSTEE SINCE MAIN OCCUPATIONS AND OTHER DIRECTORSHIPS AND AFFILIATIONS ---------------------------------------------------------------------------------------------------------------------- DAWN G. LEPORE 1 Trustee: 2003 Vice Chair, EVP, The Charles Schwab Corp.; Until 10/01: CIO, The 3/21/54 (all trusts) Charles Schwab Corporation. Until 1999: EVP, The Charles Schwab Corporation. Director, Wal-Mart Stores, eBay, Inc. ---------------------------------------------------------------------------------------------------------------------- JEFFREY M. LYONS 1 Trustee: 2002 EVP, Asset Management Products and Services, Charles Schwab & 2/22/55 (all trusts). Co., Inc. Until 9/01: EVP, Mutual Funds, Charles Schwab & Co., Inc.
INDIVIDUALS WHO ARE OFFICERS OF THE TRUST BUT NOT TRUSTEES
NAME AND BIRTHDATE TRUST OFFICE(S) HELD MAIN OCCUPATIONS AND OTHER DIRECTORSHIPS AND AFFILIATIONS ---------------------------------------------------------------------------------------------------------------------- RANDALL W. MERK President, CEO President, CEO, Charles Schwab Investment Management, Inc; 7/25/54 (all trusts). EVP, Charles Schwab & Co., Inc.; Director, Charles Schwab Worldwide Funds PLC, Charles Schwab Asset Management (Ireland) Ltd. Until 9/02: President, CIO, American Century Investment Management; Director, American Century Cos., Inc. Until 6/01: CIO, Fixed Income, American Century Cos., Inc. Until 1997: SVP, Director, Fixed Income and Quantitative Equity Portfolio Management, Twentieth Century Investors, Inc. ---------------------------------------------------------------------------------------------------------------------- TAI-CHIN TUNG Treasurer, Principal SVP, CFO, Charles Schwab Investment Management, Inc.; VP, 3/7/51 Financial Officer The Charles Schwab Trust Co.; Director, Charles Schwab Asset (all trusts). Management (Ireland) Ltd., Charles Schwab Worldwide Funds PLC. ---------------------------------------------------------------------------------------------------------------------- STEPHEN B. WARD SVP, Chief Investment SVP, Chief Investment Officer, Director, Charles Schwab Investment 4/5/55 Officer Management, Inc.; CIO, The Charles Schwab Trust Co. (all trusts). ---------------------------------------------------------------------------------------------------------------------- KOJI E. FELTON Secretary SVP, Chief Counsel, Assistant Corporate Secretary, Charles Schwab 3/13/61 (all trusts). Investment Management, Inc. Until 6/98: Branch Chief in Enforcement, U.S. Securities and Exchange Commission, San Francisco.
1 In addition to their positions with the investment adviser and the distributor, Ms. Lepore and Messrs. Schwab and Lyons, as well as some of Mr. Lyons's immediate family members, also own stock of The Charles Schwab Corporation. 57 SCHWAB MUNICIPAL MONEY FUND INDIVIDUALS WHO ARE INDEPENDENT TRUSTEES
NAME AND BIRTHDATE TRUSTEE SINCE MAIN OCCUPATIONS AND OTHER DIRECTORSHIPS AND AFFILIATIONS ------------------------------------------------------------------------------------------------------------------------- MARIANN BYERWALTER 2000 (all trusts). Chair, JDN Corp. Advisory LLC; Trustee, Stanford University, Director, 8/13/60 America First Cos., (venture capital/fund management), Redwood Trust, Inc. (mortgage finance), Stanford Hospitals and Clinics, SRI International (research), PMI Group, Inc. (mortgage insurance), Lucile Packard Children's Hospital. 2001: Special Advisor to the President, Stanford University. Until 2002: Director, LookSmart, Ltd. (Internet infrastructure). Until 2001: VP, Business Affairs, CFO, Stanford University. ------------------------------------------------------------------------------------------------------------------------- DONALD F. DORWARD Family of Funds, CEO, Dorward & Associates (management, marketing and 9/23/31 1989; Investments, communications consulting). Until 1999: EVP, Managing Director, 1991; Capital Grey Advertising. Trust, 1993; Annuity Portfolios, 1994. ------------------------------------------------------------------------------------------------------------------------- WILLIAM A. HASLER 2000 (all trusts). Co-CEO, Aphton Corp. (bio-pharmaceuticals). Director, Non-Executive 11/22/41 Chairman, Solectron Corp. (manufacturing), Airlease Ltd. (aircraft leasing), Mission West Properties (commercial real estate), Stratex Networks (telecommunications); Public Governor, Member, executive committee, Pacific Stock & Options Exchange. Director, Digital Microwave Corp. (network equipment). Until 1998: Dean, Haas School of Business, University of California, Berkeley. ------------------------------------------------------------------------------------------------------------------------- ROBERT G. HOLMES Family of Funds, Chair, CEO, Director, Semloh Financial, Inc. (international financial 5/15/31 1989; services and investment advice). Investments, 1991; Capital Trust, 1993; Annuity Portfolios, 1994. ------------------------------------------------------------------------------------------------------------------------- GERALD B. SMITH 2000 (all trusts). Chair, CEO, Founder, Smith Graham & Co. (investment advisors); 9/28/50 Director, Pennzoil-Quaker State Co. (oil and gas), Rorento N.V. (investments -- Netherlands), Cooper Industries (electrical products); Member, audit committee, Northern Border Partners, L.P. (energy). ------------------------------------------------------------------------------------------------------------------------- DONALD R. STEPHENS Family of Funds, Managing Partner, D.R. Stephens & Co. (investments). Until 1996: 6/28/38 1989; Chair, CEO, North American Trust (real estate investments). Investments, 1991; Capital Trust, 1993; Annuity Portfolios, 1994. ------------------------------------------------------------------------------------------------------------------------- MICHAEL W. WILSEY Family of Funds, Chair, CEO, Wilsey Bennett, Inc. (transportation, real estate and 8/18/43 1989; Investments, investments). 1991; Capital Trust, 1993; Annuity Portfolios, 1994.
58 SCHWAB MUNICIPAL MONEY FUND GLOSSARY AGENCY DISCOUNT NOTES Notes issued by federal agencies--known as Government Sponsored Enterprises, or GSEs--at a discount to their value at maturity. An agency discount note is a short-term investment alternative offering a high degree of credit quality. ALTERNATIVE MINIMUM TAX (AMT) A federal income tax designed to limit the extent to which high-income taxpayers (including individuals, estates, trusts and corporations) can benefit from certain deductions and exemptions. For example, some types of income that are exempt from regular federal income tax are not exempt from the AMT. ASSET-BACKED SECURITY A bond or other debt security that represents ownership in a pool of debt obligations such as credit card debt. BOND A security representing a loan from the investor to the issuer. A bond typically pays interest at a fixed rate (the "coupon rate") until a specified date (the "maturity date"), at which time the issuer returns the money borrowed ("principal" or "face value") to the bondholder. Because of their structure, bonds are sometimes called "fixed income securities" or "debt securities." BOND ANTICIPATION NOTES Obligations sold by a municipality on an interim basis in anticipation of the municipality's issuance of a longer-term bond in the future. CAPITAL GAIN, CAPITAL LOSS The difference between the amount paid for an investment and its value at a later time. If the investment has been sold, the capital gain or loss is considered a realized gain or loss. If the investment is still held, the gain or loss is still "on paper" and is considered unrealized. COMMERCIAL PAPER Promissory notes issued by banks, corporations, state and local governments and other entities to finance short-term credit needs. These securities generally are structured on a discounted basis but sometimes may be interest-bearing notes. Commercial paper, which may be unsecured, is subject to credit risk. CREDIT-ENHANCED SECURITY A security that is backed by the credit of an entity other than the issuer (such as a financial institution). Credit enhancements, which can equal up to 100% of the security's value, are designed to help lower the risk of default on a security and may also make the security more liquid. CREDIT QUALITY The capacity of an issuer to make its interest and principal payments. Federal regulations strictly limit the credit quality of the securities a money market fund can buy. CREDIT RATINGS Debt issuers, including corporations, states and municipalities, may arrange with a recognized independent rating organization, such as Moody's Investor Service, Standard & Poor's and Fitch, Inc., to rate their creditworthiness and/or the creditworthiness of their debt issues. For example, an issuer may obtain a long-term rating within the investment grade rating category, which is, from high to low, AAA, AA, A and BBB for Standard & Poor's and Fitch, and Aaa, Aa, A and Baa for Moody's. CREDIT RISK The risk that a debt issuer may be unable to pay interest or principal to its debtholders. DOLLAR-WEIGHTED AVERAGE MATURITY (DWAM) See weighted average maturity. EFFECTIVE YIELD A measurement of a fund's yield that assumes that all dividends were reinvested in additional shares of the fund. PORTFOLIO TERMS To help reduce the space occupied by the portfolio holdings, we use the following terms. Most of them appear within descriptions of individual securities in municipal funds, and describe features of the issuer or the security. Some of these are more fully defined elsewhere in the Glossary. ACES Adjustable convertible extendable security BAN Bond anticipation note COP Certificate of participation GAN Grant anticipation note GO General obligation HDA Housing Development Authority HFA Housing Finance Agency IDA Industrial Development Authority IDB Industrial Development Board IDRB Industrial Development Revenue Bond M/F Multi-family RAN Revenue anticipation note RB Revenue bond S/F Single-family TAN Tax anticipation note TECP Tax-exempt commercial paper TOB Tender option bond TOBP Tender option bond partnership TRAN Tax and revenue anticipation note VRD Variable-rate demand 59 SCHWAB MUNICIPAL MONEY FUND EXPENSE RATIO The amount that is taken from a mutual fund's assets each year to cover the fund's operating expenses. An expense ratio of 0.50% means that a fund's expenses amount to half of one percent of its average net assets a year. FACE VALUE The value of a bond, note, mortgage or other security as given on the certificate or instrument. Face value is also referred to as par value or nominal value. ILLIQUID SECURITIES A security is generally considered illiquid if it cannot be disposed of promptly (typically within seven days) and in the ordinary course of business at approximately the amount at which a fund has valued the instrument. INTEREST Payments to holders of debt securities as compensation for loaning a security's principal to the issuer. LIQUIDITY-ENHANCED SECURITY A security that when tendered is paid from funds advanced by an entity other than the issuer (such as a large financial institution). Liquidity enhancements are often used on variable-rate securities where the portfolio manager has an option to tender the securities prior to their final maturity. MATURITY Generally, the date a debt security is scheduled to be "retired" and its principal amount returned to the bondholder. MONEY MARKET SECURITIES High-quality, short-term debt securities that may be issued by entities such as the U.S. government, corporations and financial institutions (such as banks). Money market securities include commercial paper, promissory notes, certificates of deposit, banker's acceptances, notes and time deposits. MUNICIPAL SECURITIES Debt securities issued by a state, its counties, municipalities, authorities and other subdivisions, or the territories and possessions of the United States and the District of Columbia, including their subdivisions, agencies and instrumentalities and corporations. These securities may be issued to obtain money for various public purposes, including the construction of a wide range of public facilities such as airports, bridges, highways, housing, hospitals, mass transportation, public utilities, schools, streets, and water and sewer works. NET ASSET VALUE PER SHARE (NAV) The value of one share of a mutual fund. NAV is calculated by taking the fund's total assets, subtracting liabilities, and dividing by the number of shares outstanding. Money funds seek to maintain a steady NAV of $1.00. OUTSTANDING SHARES, SHARES OUTSTANDING When speaking of a company or mutual fund, indicates all shares currently held by investors. RESTRICTED SECURITIES A security that is subject to contractual restrictions on resale and may be sold only to "qualified institutional buyers" under Securities Act Rule 144A. These securities are often purchased in private placement transactions. REVENUE ANTICIPATION NOTES Obligations that are issued in expectation of the receipt of revenue, such as income taxes, property taxes, etc. SECTION 3C7 SECURITIES Section 3c7 of the Investment Company Act of 1940 (the "1940 Act") exempts certain issuers from many regulatory requirements applicable to investment companies under the 1940 Act. An issuer whose outstanding securities are exclusively owned by "qualified purchasers" and who is not making or proposing to make a public offering of the securities may qualify for this exemption. SECTION 4(2)/144A SECURITIES A security exempt from registration under Section 4(2) of the Securities Act of 1933. It may be sold only to qualified institutional buyers under Securities Act Rule 144A. TAXABLE-EQUIVALENT YIELD The yield an investor would need to get from a taxable investment in order to match the yield paid by a given tax-exempt investment, once the effect of all applicable taxes is taken into account. For example, if your tax rate were 25%, a tax-exempt investment paying 4.5% would have a taxable-equivalent yield for you of 6.0% (4.5% / [1 - 0.25%] = 6.0%). TOTAL RETURN The percentage that an investor would have earned or lost on an investment in the fund assuming dividends and distributions were reinvested. TAX ANTICIPATION NOTES Notes that typically are sold to finance the cash flow needs of municipalities in anticipation of the receipt of taxes on a future date. TIER 1, TIER 2 Tier 1 is the highest category of credit quality, Tier 2 the second highest. A security's tier can be established either by an independent rating organization or by a determination of the investment adviser. Money market fund shares and U.S. government securities are automatically considered Tier 1 securities. WEIGHTED AVERAGE MATURITY For mutual funds, the maturity of all the debt securities in its portfolio, calculated as a weighted average. As a rule, the longer a fund's weighted average maturity, the greater its interest rate risk. Money funds are required to maintain a weighted average maturity of no more than 90 days. YIELD The income paid out by an investment, expressed as an annual rate and calculated as a percentage of the investment's market value. 60 CONTACT SCHWAB SchwabFunds(R) offers you a complete family of mutual funds, each one based on a clearly defined investment approach and using disciplined management strategies. Actively managed funds include multi-manager stock funds, a fund that uses long-short strategies, and a range of taxable and tax-free bond funds. Index funds include large-cap, small-cap and international stock funds. The list at right shows all currently available SchwabFunds. Whether you're an experienced investor or just starting out, SchwabFunds can help you achieve your financial goals. Please call 1-800-435-4000 for a prospectus and brochure for any SchwabFund. Please read the prospectus carefully before you invest. This report must be preceded or accompanied by a current prospectus. METHODS FOR PLACING ORDERS The following information outlines how Schwab investors can place orders. If you are investing through a third-party investment provider, methods for placing orders may be different. INTERNET 1 www.schwab.com SCHWAB BY PHONE(TM) 2 Use our automated voice service or speak to a representative. Call 1-800-435-4000, day or night (for TDD service, call 1-800-345-2550). TELEBROKER(R) Automated touch-tone phone service at 1-800-272-4922. MAIL Write to SchwabFunds at: P.O. Box 3812 Englewood, CO 80155-3812 When selling or exchanging shares, be sure to include the signatures of at least one of the persons whose name is on the account. 1 Shares of Sweep Investments(TM) may not be purchased directly over the Internet. 2 Orders placed in person or through a telephone representative may be subject to a service fee payable to Schwab. THE SCHWABFUNDS FAMILY(R) STOCK FUNDS Schwab S&P 500 Fund Schwab 1000 Fund(R) Schwab Small-Cap Index Fund(R) Schwab Total Stock Market Index Fund(R) Schwab International Index Fund(R) Schwab Core Equity Fund(TM) Schwab Dividend Equity Fund(TM) Schwab Small-Cap Equity Fund(TM) Schwab Hedged Equity Fund(TM) Schwab Focus Funds Communications Focus Fund Financial Services Focus Fund Health Care Focus Fund Technology Focus Fund Schwab MarketMasters Funds(TM) Schwab U.S. MarketMasters Fund(TM) Schwab Small-Cap MarketMasters Fund(TM) Schwab International MarketMasters Fund(TM) Schwab Balanced MarketMasters Fund(TM) ASSET ALLOCATION FUNDS Schwab MarketTrack Portfolios(R) Schwab MarketTrack All Equity Portfolio(TM) Schwab MarketTrack Growth Portfolio(TM) Schwab MarketTrack Balanced Portfolio(TM) Schwab MarketTrack Conservative Portfolio(TM) BOND FUNDS Schwab YieldPlus Fund(R) Schwab Short-Term Bond Market Fund(TM) Schwab Total Bond Market Fund(TM) Schwab GNMA Fund(TM) Schwab Short/Intermediate Tax-Free Bond Fund(TM) Schwab Long-Term Tax-Free Bond Fund(TM) Schwab California Short/Intermediate Tax-Free Bond Fund(TM) Schwab California Long-Term Tax-Free Bond Fund(TM) SCHWAB MONEY FUNDS Schwab offers an array of money market funds that seek high current income consistent with safety and liquidity. 3 Choose from taxable or tax-advantaged alternatives. Many can be linked to your Schwab account to "sweep" cash balances automatically, subject to availability, when you're between investments. Or, for your larger cash reserves, choose one of our Value Advantage Investments(R). 3 Investments in money market funds are neither insured nor guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency and, although they seek to preserve the value of your investment at $1 per share, it is possible to lose money. [CHARLES SCHWAB LOGO] INVESTMENT ADVISER Charles Schwab Investment Management, Inc. 101 Montgomery Street, San Francisco, CA 94104 DISTRIBUTOR SchwabFunds(R) P.O. Box 3812, Englewood, CO 80155-3812 This report is not authorized to distribution to prospective investors unless preceded or accompanied by a current prospectus. (C) 2004 Charles Schwab & Co., Inc. All rights reserved. Member SIPC/NYSE. Printed on recycled paper. REG26568 SCHWAB MUNICIPAL MONEY FUNDS ANNUAL REPORT December 31, 2003 Schwab New York Municipal Money Fund Schwab New Jersey Municipal Money Fund Schwab Pennsylvania Municipal Money Fund Schwab Florida Municipal Money Fund Schwab Massachusetts Municipal Money Fund(TM) (CHARLES SCHWAB LOGO) IN THIS REPORT Management's Discussion ............................................... 2 The president of SchwabFunds(R) and the funds' managers take a look at the factors that shaped fund performance during the report period. Performance and Fund Facts ....... 5 Schwab New York Municipal Money Fund Sweep Shares: SWNXX Value Advantage Shares: SWYXX Financial Statements ............. 6 Schwab New Jersey Municipal Money Fund Ticker Symbol: SWJXX Financial Statements ............. 17 Schwab Pennsylvania Municipal Money Fund Ticker Symbol: SWEXX Financial Statements ............. 25 Schwab Florida Municipal Money Fund Ticker Symbol: SWFXX Financial Statements ............. 32 Schwab Massachusetts Municipal Money Fund(TM) Ticker Symbol: SWDXX Financial Statements ............. 47 Financial Notes ....................................................... 54 Fund Trustees ......................................................... 58 Glossary .............................................................. 61 Fund investment adviser: Charles Schwab Investment Management, Inc. (CSIM). Distributor and transfer agent: Charles Schwab & Co., Inc. (Schwab). (PHOTO OF CHARLES R. SCHWAB) Charles R. Schwab Chairman FROM THE CHAIRMAN In 1989, we founded SchwabFunds(R) on the belief that mutual funds represent an important tool for investors. Money funds, for example, are especially well-suited for the cash portion of your portfolio when you are seeking capital preservation or liquidity. Over the past few years, mutual funds have faced a number of challenges, affecting both their performance and investor perception. Yet recently we have seen signs of positive change. The economy and the stock market have shown increasing strength. And while much remains to be done within the fund industry, the industry has been moving quickly to assess and improve its operations and its investor safeguards. As a firm, we continue to change as well. Our capabilities are evolving in ways that allow us to offer investors more choices and better ways to do business with us. I'm enthusiastic about these changes because they're designed to offer benefits for our fund shareholders. One thing that hasn't changed is my belief in mutual funds. Mutual funds still offer all the features that have made them so popular: diversification, liquidity, convenience, low investment minimums, and professional management. For individual investors especially, I believe mutual funds continue to be one of the most cost-effective investment vehicles available. To date, millions of Americans have successfully relied on mutual funds as an important way to invest for retirement security, their children's education, and other financial goals. We remain optimistic that mutual funds will continue to do the same for millions more Americans in the years to come. Sincerely, /s/ Charles R. Schwab MANAGEMENT'S DISCUSSION for the year ended December 31, 2003 (PHOTO OF RANDALL W. MERK) RANDALL W. MERK is President and CEO of Charles Schwab Investment Management, Inc. and is president of each of the funds covered in this report. He joined the firm in August 2002, bringing with him 24 years of experience in the asset management industry. Dear Shareholder: In today's current low-interest-rate environment, it's tempting to ask whether money funds still have a place in an investment portfolio. It's a fair question, but I'd suggest the answer is not as obvious as it may seem. Money funds are designed to offer several potential benefits. If you're like many investors, your asset allocation calls for a portion of your portfolio to be in cash. If the purpose of that allocation is to offer capital preservation or liquidity, or to help reduce the impact of market volatility on your portfolio, then money funds probably still make sense for you, regardless of the yield environment. Here at SchwabFunds(R), we're proud of our seasoned fund managers and their ability to work as a team. Our managers have an average of over 16 years of experience in the investment management industry. I'm also proud to say that we're in the process of building on that experience: by expanding our selection of mutual funds, adding new share classes, and offering new, competitively priced alternatives. Thirty years ago, Charles Schwab founded his firm with a vision to create the most useful and ethical financial services firm in the world. We live by that philosophy every day. Your investment in SchwabFunds is an indication of the trust you place in us. As the managers of your money, we have a special obligation to live up to that trust. I have enjoyed the opportunity to respond to several shareholder inquiries, and I hope you'll let us know how we're doing. I want to thank you for investing with us and want to assure you that we strive relentlessly to operate our business with the highest ethical standards and an unwavering commitment to serve you, our SchwabFunds shareholders. Sincerely, /s/ Randall W. Merk 2 Schwab Municipal Money Funds (PHOTO OF KEVIN SHAUGHNESSY) KEVIN SHAUGHNESSY, CFA, a vice president of the investment adviser and senior portfolio manager, is responsible for the day-to-day management of the Schwab New York, New Jersey and Massachusetts municipal money funds. Prior to joining the firm in 2000, he worked for more than ten years in fixed-income portfolio management. (PHOTO OF WALTER BEVERIDGE) WALTER BEVERIDGE, a portfolio manager, has been responsible for day-to-day management of the Schwab Pennsylvania and Florida municipal money funds since their inception in 1998. Prior to joining the firm in 1992, he worked for nearly ten years in asset management. THE INVESTMENT ENVIRONMENT AND THE FUNDS DURING 2003, THE U.S. ECONOMY BEGAN TO GATHER STRENGTH, ESPECIALLY DURING THE SECOND HALF OF THE YEAR. In the months before the war in Iraq (which began in March 2003), the economy remained in a holding pattern, as businesses and investors adopted a wait-and-see stance. Once the combat phase drew to an end, America began to pay more attention to the economy, which by year-end appeared to be recovering. SEEKING ADDITIONAL PROTECTION AGAINST THE RISK OF DEFLATION, THE FEDERAL RESERVE (THE FED) CUT SHORT-TERM INTEREST RATES BY 0.25% IN JUNE. This brought the Fed funds target rate to a 45-year low of 1.00%. Short-term interest rates began plummeting in May in anticipation of the Fed's rate cut but quickly began a modest recovery and ended the year somewhat above their mid-year lows. Nevertheless, money fund yields remained close to historically low levels. THROUGHOUT THE REPORT PERIOD, SHORT-TERM MUNICIPAL YIELDS REMAINED ATTRACTIVELY VALUED RELATIVE TO SHORT-TERM TAXABLE YIELDS. During the year, the ratio of short-term muni yields to taxables averaged 82%, and at times exceeded 95%. We attribute this situation to the unusually large quantity of municipal money market debt that was issued during 2003. In order to attract buyers for these securities, municipal issuers needed to offer higher yields than they otherwise might have. SCHWAB NEW YORK MUNICIPAL MONEY FUND. For the first time in three years, New York did not have a mid-year budget deficit to address. However, the state is facing a $6 billion deficit for fiscal 2005 (which begins April 1, 2004)--not including a court-ordered increase in New York City education funding or demands from local governments for relief from state-mandated Medicaid and pension obligations. New York City lowered its projected 2005 budget gap, but many upstate areas came under enormous financial pressure as their manufacturing economies shrank while state-mandated costs rose. Several local governments became subject to financial control boards, and their credit ratings were lowered as a consequence. However, due to the diversity of its economy as well as its revenue-raising ability, the state, as well as most of its local governments, remained strong investment-grade credits. As of the report date, the state's credit ratings were A2 from Moody's, AA with a negative outlook from Standard & Poor's and AA- from Fitch. SCHWAB NEW JERSEY MUNICIPAL MONEY FUND. The use of $1.3 billion in tobacco-settlement bonds and over $500 million in federal economic aid helped balance the state's fiscal 2004 budget, but the economic environment remains challenging. The state expects to end fiscal 2004 with a modest $253 million in its general fund (1.1% of spending), Schwab Municipal Money Funds 3 MANAGEMENT'S DISCUSSION continued Most states have addressed their fiscal challenges through a combination of budget cuts and the use of one-time revenue sources and financing. which leaves it little financial flexibility. However, as of November 2003, revenues were running 2.5% ahead of projections, and expenditures were on budget. Given the diversity of the state's economy, its high level of personal wealth and its associated ability to raise revenue, New Jersey remains a strong investment-grade credit. As of the report date, the state's credit ratings were Aa2 with a negative outlook from Moody's, AA from Standard & Poor's and AA from Fitch. SCHWAB PENNSYLVANIA MUNICIPAL MONEY FUND. Pennsylvania's fiscal 2004 budget was designed to close a $2.4 billion budget gap and increase subsidies for education. Revenues and expenditures were each projected to be $22.6 billion. The state's overall fiscal 2004 revenues were slightly ahead of projections for the first half of the fiscal year. The state expects a modest operating surplus of more than $100 million by fiscal year-end. The state's above-average credit quality is derived from its conservative financial management, increasing economic diversification and moderate debt level. As of the report date, Pennsylvania's general obligations were rated Aa2 by Moody's, AA by S&P and AA by Fitch. SCHWAB FLORIDA MUNICIPAL MONEY FUND. Although it has drawn on reserves to balance its budget in the last two years, Florida expected to end fiscal 2003 (6/30/03) with $1.6 billion in its general fund and to increase this balance to $2 billion through fiscal 2004. Florida has benefited from its reliance on sales taxes rather than personal income taxes. Total payroll jobs were up an estimated 1.2% for 2003. With its substantial reserves and strong financial controls, the state's ratings at the end of the report period were Aa2 from Moody's, AA+ from Standard & Poor's and AA from Fitch. SCHWAB MASSACHUSETTS MUNICIPAL MONEY FUND(TM). Massachusetts continued to manage in a tough financial environment. The state anticipates ending fiscal 2004 (6/30/04) with a $681 million general fund balance (3% of expenditures). The fiscal 2004 budget projects a conservative 1.6% increase in revenues and no increase in spending. The state has cut aid to local governments and school districts in each of the last two fiscal years but most continue to operate with sufficient financial flexibility due to strong reserves. Because of its diverse economy, its high personal wealth levels and its associated revenue-raising ability, Massachusetts remained a strong investment-grade credit. As of the report date, the state's credit ratings were Aa2 with a negative outlook from Moody's, AA- from Standard & Poor's and AA- from Fitch. Nothing in this report represents a recommendation of a security by the investment adviser. Manager views and portfolio holdings may have changed since the report date. 4 Schwab Municipal Money Funds PERFORMANCE AND FUND FACTS as of 12/31/03 SEVEN-DAY YIELDS The seven-day yields are calculated using standard SEC formulas. The effective yields include the effect of reinvesting daily dividends. Please remember that money market fund yields fluctuate, and that past performance is not an indication of future results.
NEW YORK NEW JERSEY PENNSYLVANIA FLORIDA MASSACHUSETTS MUNICIPAL MUNICIPAL MUNICIPAL MUNICIPAL MUNICIPAL MONEY FUND MONEY FUND MONEY FUND MONEY FUND MONEY FUND --------------------------------------------------------------------------------------------------------------- Value Sweep Advantage Shares Shares --------------------------------------------------------------------------------------------------------------- SEVEN-DAY YIELD 1 0.50% 0.74% 0.52% 0.55% 0.50% 0.59% --------------------------------------------------------------------------------------------------------------- SEVEN-DAY YIELD 0.34% 0.58% 0.31% 0.33% 0.32% 0.26% 3 - NO WAIVER 2 --------------------------------------------------------------------------------------------------------------- SEVEN-DAY 0.50% 0.74% 0.53% 0.55% 0.50% 0.59% EFFECTIVE YIELD --------------------------------------------------------------------------------------------------------------- SEVEN-DAY 0.88% 1.30% 0.87% 0.87% 0.77% 0.96% TAXABLE-EQUIVALENT EFFECTIVE YIELD 4 ---------------------------------------------------------------------------------------------------------------
STATISTICS Money funds must maintain a dollar-weighted average maturity of no longer than 90 days, and cannot invest in any security whose effective maturity is longer than 397 days (approximately 13 months).
NEW YORK NEW JERSEY PENNSYLVANIA FLORIDA MASSACHUSETTS MUNICIPAL MUNICIPAL MUNICIPAL MUNICIPAL MUNICIPAL MONEY FUND MONEY FUND MONEY FUND MONEY FUND MONEY FUND --------------------------------------------------------------------------------------------------------------- WEIGHTED AVERAGE 55 days 53 days 41 days 51 days 76 days MATURITY --------------------------------------------------------------------------------------------------------------- CREDIT QUALITY 100% Tier 1 100% Tier 1 100% Tier 1 100% Tier 1 100% Tier 1 OF HOLDINGS % of portfolio --------------------------------------------------------------------------------------------------------------- CREDIT-ENHANCED 68% 72% 78% 80% 51% SECURITIES % of portfolio ---------------------------------------------------------------------------------------------------------------
An investment in a money fund is neither insured nor guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency. Although money funds seek to preserve the value of your investment at $1 per share, it is possible to lose money by investing in a money fund. Portfolio holdings may have changed since the report date. 1 Fund expenses have been partially absorbed by CSIM and Schwab. 2 Yield if fund expenses had not been partially absorbed by CSIM and Schwab. 3 Please refer to the Statement of Operations for additional information on expense waivers. 4 Taxable-equivalent effective yields assume the following 2003 maximum tax rates: New York 42.90% (federal regular income, New York state and New York city taxes); New Jersey 39.14%, Pennsylvania 36.82%, and Massachusetts 38.45% (federal regular and state personal income taxes); Florida 35.00% (federal regular income tax). Investment income may be subject to the Alternative Minimum Tax. Schwab Municipal Money Funds 5 SCHWAB NEW YORK MUNICIPAL MONEY FUND FINANCIAL STATEMENTS FINANCIAL HIGHLIGHTS
1/1/03- 1/1/02- 1/1/01- 1/1/00- 1/1/99- SWEEP SHARES 12/31/03 12/31/02 12/31/01 12/31/00 12/31/99 ------------------------------------------------------------------------------------------------------------------------------------ PER-SHARE DATA ($) ------------------------------------------------------------------------------------------------------------------------------------ Net asset value at beginning of period 1.00 1.00 1.00 1.00 1.00 ----------------------------------------------------------------------------------- Income from investment operations: Net investment income 0.00 1 0.01 0.02 0.03 0.03 ----------------------------------------------------------------------------------- Less distributions: Dividends from net investment income (0.00) 1 (0.01) (0.02) (0.03) (0.03) ----------------------------------------------------------------------------------- Net asset value at end of period 1.00 1.00 1.00 1.00 1.00 ----------------------------------------------------------------------------------- Total return (%) 0.41 0.80 2.06 3.39 2.59 RATIOS/SUPPLEMENTAL DATA (%) ------------------------------------------------------------------------------------------------------------------------------------ Ratios to average net assets: Net operating expenses 0.69 0.69 0.69 0.70 2 0.69 Gross operating expenses 0.84 0.85 0.86 0.88 0.91 Net investment income 0.41 0.80 2.04 3.35 2.57 Net assets, end of period ($ x 1,000,000) 1,038 944 889 798 604
1/1/03- 1/1/02- 1/1/01- 1/1/00- 1/1/99- VALUE ADVANTAGE SHARES 12/31/03 12/31/02 12/31/01 12/31/00 12/31/99 ------------------------------------------------------------------------------------------------------------------------------------ PER-SHARE DATA ($) ------------------------------------------------------------------------------------------------------------------------------------ Net asset value at beginning of period 1.00 1.00 1.00 1.00 1.00 ----------------------------------------------------------------------------------- Income from investment operations: Net investment income 0.01 0.01 0.02 0.04 0.03 ----------------------------------------------------------------------------------- Less distributions: Dividends from net investment income (0.01) (0.01) (0.02) (0.04) (0.03) ----------------------------------------------------------------------------------- Net asset value at end of period 1.00 1.00 1.00 1.00 1.00 ----------------------------------------------------------------------------------- Total return (%) 0.66 1.04 2.30 3.64 2.83 RATIOS/SUPPLEMENTAL DATA (%) ------------------------------------------------------------------------------------------------------------------------------------ Ratios to average net assets: Net operating expenses 0.45 0.45 0.45 0.46 3 0.45 Gross operating expenses 0.61 0.62 0.64 0.68 0.71 Net investment income 0.65 1.04 2.23 3.59 2.81 Net assets, end of period ($ x 1,000,000) 690 676 604 419 296
1 Per share amount was less than $0.01. 2 The ratio of net operating expenses would have been 0.69% if certain non-routine expenses (proxy fees) had not been included. 3 The ratio of net operating expenses would have been 0.45% if certain non-routine expenses (proxy fees) had not been included. 6 See financial notes. SCHWAB NEW YORK MUNICIPAL MONEY FUND PORTFOLIO HOLDINGS as of December 31, 2003 This section shows all the securities in the fund's portfolio and their market value, as of the report date. We use the symbols below to designate certain characteristics: + Credit-enhanced security ~ Liquidity-enhanced security @ Variable-rate security For fixed-rate obligations, the rate shown is the effective yield at the time of purchase. For variable-rate obligations, the rate shown is the rate as of the report date. For variable-rate obligations with scheduled maturities greater than 397 days, the maturity shown is the later of the next interest rate change date or demand date. For variable-rate obligations with scheduled maturities less than 397 days, the maturity shown is the earlier of the next interest rate change date or demand date. For variable-rate obligations without demand features, the maturity shown is the next interest rate change date.
COST VALUE HOLDINGS BY CATEGORY ($x1,000) ($x1,000) -------------------------------------------------------------------------------- 100.7% MUNICIPAL SECURITIES 1,739,303 1,739,303 -------------------------------------------------------------------------------- 100.7% TOTAL INVESTMENTS 1,739,303 1,739,303 (0.7)% OTHER ASSETS AND LIABILITIES (11,624) -------------------------------------------------------------------------------- 100.0% TOTAL NET ASSETS 1,727,679
ISSUER SECURITY TYPE, PROJECT, SERIES, FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) MUNICIPAL SECURITIES 100.7% of Net Assets NEW YORK 99.5% ALBANY IDA +@ IDRB (Newkirk Products Project) Series 1995A 1.29%, 01/07/04 1,000 1,000 +@ Refunding IDRB (United Cerebral Palsy Association of the Capital District) 1997B 1.27%, 01/07/04 10,500 10,500 BABYLON IDA +~@ Resource Recovery Refunding RB Series 1998 (Ogden Martin Systems of Babylon Project) 1.11%, 01/07/04 5,000 5,000 BROOME CNTY IDA +@ Civic Facility RB 2003 Series (Elizabeth Church Manor Nursing Home Project) 1.07%, 01/07/04 6,475 6,475 +@ Civic Facility RB 2003 Series (Methodist Homes For the Aging Project) 1.07%, 01/07/04 6,070 6,070 BUFFALO + RAN 2003-2004A 1.08%, 07/29/04 10,000 10,095 CHAUTAUQUA CNTY +@ Civic Facility RB (Jamestown Center City Development Corp Project) Series 2000A 1.32%, 01/07/04 4,950 4,950 +@ IDRB (Grafco Industries Ltd Partnership Project) Series 2002 1.25%, 01/07/04 6,865 6,865 CHENANGO CNTY IDA +@ IDRB (Baillie Lumber Co. Project) Series 2000A 1.55%, 01/07/04 4,551 4,551 CONNETQUOT CENTRAL SD TAN 2003-2004 0.94%, 06/30/04 2,000 2,010 CORNWALL CENTRAL SD BAN 2003 1.04%, 10/15/04 29,286 29,504 DUTCHESS CNTY IDA +@ Civic Facility RB (Trinity-Pawling School Corp Civic Facility) Series 1998 1.20%, 01/07/04 3,075 3,075 +@ IDRB (Mechtronics Corp Project) Series 1998 1.41%, 01/07/04 2,925 2,925
See financial notes. 7 SCHWAB NEW YORK MUNICIPAL MONEY FUND PORTFOLIO HOLDINGS continued
ISSUER SECURITY TYPE, PROJECT, SERIES, FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) EAST MEADOW UNION FREE SD TAN 2003-2004 0.82%, 06/29/04 4,000 4,018 1.14%, 06/29/04 5,000 5,009 GARDEN CITY UNION FREE SD TAN 2003-2004 0.94%, 06/29/04 5,000 5,015 GREECE CENTRAL SD BAN 2003 1.05%, 06/18/04 18,000 18,078 HEMPSTEAD UNION FREE SD TAN 2003-2004 0.92%, 06/29/04 4,400 4,423 HERKIMER CNTY +@ Civic Facility RB Series 2000 (Templeton Foundation Project) 1.35%, 01/07/04 1,900 1,900 JAY STREET DEV CORP +@ Courts Facility Lease RB (Jay Street Project) Fiscal 2004 Bonds A-1 1.20%, 01/07/04 5,000 5,000 +@ Courts Facility Lease RB (Jay Street Project) Fiscal 2004 Bonds A-2 1.18%, 01/07/04 5,000 5,000 +@ Courts Facility Lease RB (Jay Street Project) Fiscal 2004 Bonds A-3 1.12%, 01/07/04 5,000 5,000 LONG ISLAND POWER AUTH +~@ Electric System General RB Series 1998A TOB Series PA-522 1.26%, 01/07/04 21,000 21,000 +~@ Electric System General RB Series 2001A TOB Series PA-841 1.26%, 01/07/04 4,365 4,365 +~@ Electric System RB Series 1998A TOB Series 983205 1.26%, 01/07/04 1,900 1,900 +@ Electric System Subordinated RB 2001 Series 1-B 1.27%, 01/02/04 1,500 1,500 +@ Electric System Subordinated RB 2001 Series 2-B 1.27%, 01/02/04 1,400 1,400 +@ Electric System Subordinated RB 2001 Series 3-A 1.10%, 01/07/04 8,500 8,500 METROPOLITAN TRANSP AUTH ~@ Dedicated Tax Fund Bonds Series 1998A TOB Series PT-395 1.10%, 01/07/04 9,440 9,440 +~@ Dedicated Tax Fund Bonds Series 2002A TOB Series 2002H 1.28%, 01/07/04 5,490 5,490 +~@ Dedicated Tax Fund Bonds Series 2002B 1.18%, 01/07/04 23,000 23,000 +~@ Transportation Refunding RB Series 2002A TOB Series 2001-724x 1.26%, 01/07/04 22,000 22,000 +~@ Transportation Refunding RB Series 2002D-1 1.20%, 01/07/04 7,600 7,600 +~@ Transportation Refunding RB Series 2002G-1 1.18%, 01/07/04 4,725 4,725 +~@ Transportation Refunding RB Series 2002G-2 1.18%, 01/07/04 5,000 5,000 + Transportation Revenue BAN Sub-series B 1.00%, 02/13/04 20,000 20,000 NASSAU CNTY GO TAN 2003 Series B 1.13%, 10/15/04 28,700 28,894 GO TAN, 2003 Series A 1.05%, 04/15/04 5,000 5,014 NASSAU COUNTY INTERIM FINANCE AUTH +~@ Sales Tax Secured Bonds Series 2002B 1.05%, 01/07/04 4,965 4,965 NEW YORK CITY +@ GO Bonds Fiscal 1994 Series A-7 1.27%, 01/02/04 2,400 2,400
8 See financial notes. SCHWAB NEW YORK MUNICIPAL MONEY FUND
ISSUER SECURITY TYPE, PROJECT, SERIES, FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) +@ GO Bonds Fiscal 1994 Series A-8 1.27%, 01/02/04 1,285 1,285 1.27%, 01/07/04 700 700 +~@ GO Bonds Fiscal 1994 Series H-3 1.27%, 01/02/04 1,700 1,700 +~@ GO Bonds Fiscal 1998D TOB Series 1997C 1.17%, 01/07/04 26,000 26,000 +~@ GO Bonds Fiscal 2000 Series A TOB Series 17 1.11%, 01/07/04 3,395 3,395 +~@ GO Bonds Fiscal 2001 Series B TOB Series 2000-394 1.26%, 01/07/04 6,920 6,920 +~@ GO Bonds Fiscal 2002 Series A TOB Series 20013204 1.26%, 01/07/04 24,750 24,750 +@ GO Bonds Fiscal 2003 C-2 1.10%, 01/07/04 5,000 5,000 +@ GO Bonds Fiscal 2003 Series C-3 1.12%, 01/07/04 3,300 3,300 +@ GO Bonds Fiscal 2004 Series A-3 1.10%, 01/07/04 7,000 7,000 +@ GO Bonds Fiscal 2004 Series A-6 1.05%, 01/07/04 9,000 9,000 GO Bonds Fiscal 2004 Series E 1.12%, 08/01/04 35,775 35,956 +~@ GO Bonds Series 2004F TOB Series 251 1.33%, 01/07/04 50,000 50,000 +~@ GO Bonds, Fiscal 2002 Series A-6 1.30%, 01/02/04 2,000 2,000 +@ GO RAN Fiscal 2004 Series A, TOB Series 2003-L40J 1.30%, 01/07/04 25,000 25,000 +@ Special RB (NYSE Project) Fiscal 2004 Series B Bonds 1.20%, 01/07/04 7,000 7,000 NEW YORK CITY HEALTH & HOSPITALS CORP +~@ Health System Bonds 1999 Series A TOB Series PA-555 1.25%, 01/07/04 17,620 17,620 NEW YORK CITY HOUSING DEVEL CORP +@ M/F Mortgage RB (2 Gold Street) 2003 Series A 1.12%, 01/07/04 15,000 15,000 +@ M/F Mortgage RB (92nd & First Residential Tower), 2003 Series A 1.04%, 01/07/04 20,000 20,000 +@ M/F Mortgage RB (Atlantic Court Apartments), 2003 Series A 1.10%, 01/07/04 17,000 17,000 +@ M/F Mortgage RB (Upper East), 2003 Series A 1.12%, 01/07/04 18,000 18,000 +@ M/F Rental Housing RB (1 Columbus Place Dev), 1998 Series A 1.10%, 01/07/04 20,700 20,700 +@ M/F Rental Housing RB (100 Jane Street Dev), 1998 Series A 1.10%, 01/07/04 6,525 6,525 +@ M/F Rental Housing RB (Sierra Dev) 2003 Series A 1.10%, 01/07/04 18,000 18,000 +@ M/F Rental Housing RB (Tribeca Tower) Series 1997A 1.15%, 01/07/04 2,300 2,300 NEW YORK CITY IDA +@ Civic Facility RB (2000 Jewish Board of Family & Childrens Services Project) 1.13%, 01/07/04 15,820 15,820 +@ Refunding IDRB (Allway Tools) Series 1997 1.35%, 01/07/04 1,560 1,560 +@ Special Facility RB (1997 Korean Air Lines Project) Series 1997A 1.09%, 01/07/04 7,400 7,400
See financial notes. 9 SCHWAB NEW YORK MUNICIPAL MONEY FUND PORTFOLIO HOLDINGS continued
ISSUER SECURITY TYPE, PROJECT, SERIES, FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) NEW YORK CITY MUNICIPAL WATER FINANCE AUTH +@ Crossover Refunding Bonds 2002 F TOB Series PA-1109 1.26%, 01/07/04 7,495 7,495 +~@ Water & Sewer System RB Series 1993C 1.27%, 01/02/04 1,600 1,600 +~@ Water & Sewer System RB Series 1995A 1.30%, 01/02/04 3,500 3,500 +~@ Water & Sewer System RB Series 1998 B TOB Series PA-523 1.25%, 01/07/04 4,735 4,735 +@ Water & Sewer System RB Series 2000C 1.17%, 01/02/04 2,800 2,800 +@ Water & Sewer System RB Series 2001D TOB Series PA-838 1.28%, 01/07/04 4,995 4,995 +~@ Water & Sewer System RB Series 2002 G TOB Series PA-1054 1.26%, 01/07/04 10,000 10,000 +@ Water & Sewer System RB Series 2003 C-2 1.22%, 01/07/04 5,200 5,200 +@ Water & Sewer System RB Series 2003 C-3 1.27%, 01/02/04 2,500 2,500 +@ Water & Sewer System RB Series 2003 F-1 1.19%, 01/07/04 6,000 6,000 +@ Water & Sewer System RB Series 2003 F-2 1.17%, 01/02/04 1,000 1,000 NEW YORK CITY TRANSITIONAL FINANCE AUTH BAN Fiscal 2003 Series 2 0.95%, 02/19/04 8,525 8,537 1.07%, 02/19/04 25,000 25,031 1.10%, 02/19/04 40,000 40,048 Future Tax Secured Bonds Fiscal 2002C 1.00%, 02/15/04 1,000 1,005 +~@ Future Tax Secured Bonds Series 2000A TOB Series 20003202 1.26%, 01/07/04 15,720 15,720 +@ Future Tax Secured Bonds Series 2000C PA-917R 1.27%, 01/07/04 14,545 14,545 +@ Future Tax Secured Bonds Series 2001B 1.30%, 01/02/04 2,400 2,400 +@ Future Tax Secured Bonds Series 2001C 1.12%, 01/07/04 2,000 2,000 +@ Future Tax Secured Refunding Bonds Series 2003A TOB Series PT-1724 1.27%, 01/07/04 6,000 6,000 +@ New York City Recovery Bonds Fiscal 2003 Series 2-A 1.30%, 01/02/04 1,400 1,400 +@ New York City Recovery Bonds Fiscal 2003 Series 2-D 1.12%, 01/07/04 2,500 2,500 +@ New York City Recovery Bonds Fiscal 2003 Series 2-F 1.27%, 01/02/04 14,000 14,000 +@ New York City Recovery Bonds Fiscal 2003 Series 3-B 1.34%, 01/02/04 800 800 NEW YORK STATE +@ Environmental Quality GO Series 1998G 1.03%, 10/02/04 38,300 38,300 +@ GO Bonds Series 2000A 1.05%, 10/07/04 15,000 15,000 NEW YORK STATE DORMITORY AUTH +~@ (Mt Sinai School of Medicine) Insured RB Series 1994A TOB Series 2001D 1.24%, 01/07/04 2,900 2,900 +~@ City University System Consolidated Fifth General Resolution RB Series 2003A TOB Series PT-797 1.00%, 02/05/04 7,295 7,295
10 See financial notes. SCHWAB NEW YORK MUNICIPAL MONEY FUND
ISSUER SECURITY TYPE, PROJECT, SERIES, FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) +@ New York State Dormitory Authority New York Foundling Charitable Corp RB Series 1997 1.11%, 01/07/04 7,950 7,950 +~@ State University Educational Facilities RB Series 1993A TOB Series 107 1.26%, 01/07/04 18,495 18,495 +~@ State University Educational Facilities RB Series 2000 TOB Series 20003201 1.26%, 01/07/04 12,375 12,375 +~@ State University Educational Facilities RB Series 2000B TOB Series 2000-15 1.12%, 06/23/04 27,030 27,030 NEW YORK STATE ENERGY RESEARCH DEV AUTH +~@ Gas Facilities RB Series 1996 (Brooklyn Union Gas Co. Project) TOB Series 2000-379 1.26%, 01/07/04 14,125 14,125 +~@ Pollution Control Refunding RB (Niagara Mohawk Power Corp Project) Series 1994A TOB Series 943207 1.26%, 01/07/04 14,850 14,850 NEW YORK STATE ENVIRONMENTAL FACILITIES CORP +@ State Clean Water & Drinking Water Revolving Funds RB Series 2002B TOB Series 20023202 1.26%, 01/07/04 24,225 24,225 +@ State Water Pollution Control Revolving Fund RB Series 1994D TOB Series 96-C3202 1.26%, 01/07/04 17,050 17,050 NEW YORK STATE HFA +@ 101 West End Ave Housing RB Series 1998A 1.09%, 01/07/04 10,600 10,600 +@ 101 West End Ave Housing RB Series 1999A 1.09%, 01/07/04 1,600 1,600 +@ 150 East 44th St Housing RB 2000A 1.09%, 01/07/04 22,500 22,500 +@ 250 West 50th St Housing RB Series 1997A 1.15%, 01/07/04 24,000 24,000 +@ 345 East 94th St Housing RB Series 1998A 1.09%, 01/07/04 5,665 5,665 +@ 345 East 94th St Housing RB Series 1999A 1.09%, 01/07/04 3,800 3,800 +@ 350 West 43rd St Housing RB Series 2002A 1.12%, 01/07/04 1,500 1,500 +@ 66 West 38th St Housing RB Series 2001A 1.18%, 01/07/04 5,200 5,200 +@ 66 West 38th St Housing RB Series 2002A 1.30%, 01/01/04 11,400 11,400 +@ 70 Battery Place Housing RB Series 1997A 1.10%, 01/07/04 10,100 10,100 +@ Chelsea Arms Housing RB Series 1998A 1.13%, 01/07/04 18,000 18,000 +@ East 84th St Housing RB Series 1995A 1.15%, 01/07/04 9,100 9,100 +@ Helena Housing RB Series 2003A 1.10%, 01/07/04 20,000 20,000 +@ Normandie Court II RB Housing RB Series 1999A 1.10%, 01/07/04 19,600 19,600 +@ Service Contract Refunding RB Series 2003B 1.20%, 01/07/04 10,000 10,000 +@ Service Contract Refunding RB Series 2003D 1.20%, 01/07/04 6,800 6,800 +@ Service Contract Refunding RB Series 2003E 1.10%, 01/07/04 7,000 7,000 +@ Service Contract Refunding RB Series 2003G 1.12%, 01/07/04 10,000 10,000
See financial notes. 11 SCHWAB NEW YORK MUNICIPAL MONEY FUND PORTFOLIO HOLDINGS continued
ISSUER SECURITY TYPE, PROJECT, SERIES, FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) +@ Service Contract Refunding RB Series 2003I 1.12%, 01/07/04 12,500 12,500 +@ Tribeca Green Housing RB 2003 Series 2003A 1.10%, 01/07/04 40,000 40,000 +@ Tribeca Landing Housing RB Series 1997A 1.13%, 01/07/04 13,000 13,000 +@ Tribeca Park Housing RB Series 1997A 1.15%, 01/07/04 4,500 4,500 +@ Union Square South Housing RB Series 1996A 1.15%, 01/07/04 16,800 16,800 +@ Worth St Housing RB 2001 Series 2001A 1.13%, 01/07/04 10,000 10,000 NEW YORK STATE LOCAL ASSISTANCE CORP +@ RB Bonds Series 1995G 1.07%, 01/07/04 8,800 8,800 +@ RB Series 1993A 1.08%, 01/07/04 11,090 11,090 +@ RB Series 1994B 1.08%, 01/07/04 3,000 3,000 +@ RB Series 1995D 1.05%, 01/07/04 7,500 7,500 +~@ Series 1993-C Refunding Bonds TOB Series 20013201 1.26%, 01/07/04 9,900 9,900 +~@ Series 1997B Refunding Bonds TOB Series 2000-23 1.15%, 01/07/04 20,965 20,965 +~@ Subordinate Lien Refunding RB Series 2003-A-5V 1.10%, 01/07/04 10,000 10,000 +~@ Subordinate Lien Refunding RB Series 2003-A-7V 1.08%, 01/07/04 5,000 5,000 NEW YORK STATE MORTGAGE AGENCY +@ Homeowner Mortgage RB Series 65 TOB Series PA-153 1.28%, 01/07/04 4,640 4,640 +@ Homeowner Mortgage RB Series 77-A TOB Series 1999F 1.00%, 02/05/04 24,795 24,795 +@ Homeowner Mortgage RB Series 87 TOB Series 1999z 1.24%, 01/07/04 7,365 7,365 +@ Homeowner Mortgage RB Series 87 TOB Series PT-289 1.13%, 02/05/04 4,585 4,585 +@ Mortgage RB 24th Series TOB Series 2000 B3 1.31%, 01/07/04 710 710 +@ NEW YORK STATE POWER AUTHORITY RB Sub-series 5 1.10%, 01/07/04 8,400 8,400 NEW YORK STATE THRUWAY AUTH +@ General Refunding RB Series E TOB Series 2000-456 1.26%, 01/07/04 6,995 6,995 General Revenue BAN Series 2003A 1.10%, 04/20/04 30,000 30,002 NORTH SYRACUSE CENTRAL SD GO BAN 2003 0.95%, 06/18/04 29,200 29,307 PORT AUTH OF NEW YORK & NEW JERSEY +~@ Consolidated Bonds 127th SeriesTOB Series PT-870 1.26%, 01/07/04 3,000 3,000 +~@ Special Project Bonds Series 6 (JFK Intl Air Terminal Project) TOB Series 2000B5 1.20%, 01/07/04 1,480 1,480 QUEENSBURY UNION FREE SD BAN 2004 1.11%, 01/06/05 16,394 16,539 SCHENECTADY IDA +@ IDRB (Fortitech Holding Corp. Project) Series 1995A 1.34%, 01/07/04 900 900
12 See financial notes. SCHWAB NEW YORK MUNICIPAL MONEY FUND
ISSUER SECURITY TYPE, PROJECT, SERIES, FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) SUFFOLK CNTY WATER AUTH +@ BAN, 2003 1.08%, 01/07/04 10,000 10,000 TAN 2003 Series II 1.07%, 09/08/04 25,000 25,158 TOMPKINS CNTY IDA +@ Civic Facility RB Series 2002A Cornell Univ Project 1.18%, 01/07/04 6,525 6,525 +@ Civic Facility RB Series 2002B Cornell Univ Project 1.18%, 01/07/04 7,000 7,000 TRIBOROUGH BRIDGE & TUNNEL AUTH +~@ General Purpose RB Series 2001A TOB Series 2002-14 1.08%, 01/07/04 20,000 20,000 +@ General Purpose RB Series 2002a TOB Series 293 1.26%, 01/07/04 9,995 9,995 +@ General Refunding RB Series 2002B TOB Series PA-1070 1.11%, 01/07/04 14,000 14,000 +~@ Special Obligation 1991 Resolution Refunding Bonds, Series 2000A 1.10%, 01/07/04 8,550 8,550 ULSTER CNTY GO BAN 2003 1.00%, 06/11/04 6,500 6,521 GO BAN, 2003 1.15%, 11/19/04 16,034 16,153 WESTCHESTER CNTY IDA +@ IDRB (Levister Redevelopment Co Project) Series 2001B 1.22%, 01/07/04 6,000 6,000 YONKERS IDA +@ Civic Facility RB (Consumers Union Facility) Series 1989 1.12%, 01/07/04 1,200 1,200 +@ Civic Facility RB (Consumers Union Facility) Series 1991 1.12%, 01/07/04 700 700 +~@ Civic Facility RB (Consumers Union Facility) Series 1994 1.12%, 01/07/04 1,740 1,740 ----------- 1,718,173 PUERTO RICO 1.2% PUERTO RICO +~@ Public Improvement Bonds 2000 TOB Series PA-652 1.22%, 01/07/04 8,730 8,730 +~@ Public Improvement Bonds Series 2001A TOB Series 2001R 1.24%, 01/07/04 2,500 2,500 +~@ PUERTO RICO HFC Homeownership Mortgage GNMA-guaranteed RB Series 1998A TOB Series 1999J 1.20%, 04/01/04 9,900 9,900 ----------- 21,130
END OF INVESTMENTS. For totals, please see the first page of holdings for this fund. See financial notes. 13 SCHWAB NEW YORK MUNICIPAL MONEY FUND Statement of ASSETS AND LIABILITIES As of December 31, 2003. All numbers x 1,000 except NAV. ASSETS ------------------------------------------------------------------------ Investments, at value $ 1,739,303 a Cash 167 Receivables: Fund shares sold 2,252 Interest 4,946 Prepaid expenses + 22 ----------------- TOTAL ASSETS 1,746,690 LIABILITIES ------------------------------------------------------------------------ Payables: Fund shares redeemed 2,284 Dividends to shareholders 45 Investments bought 16,538 Investment adviser and administrator fees 16 Transfer agent and shareholder service 20 fees Accrued expenses + 108 ----------------- TOTAL LIABILITIES 19,011 NET ASSETS ------------------------------------------------------------------------ TOTAL ASSETS 1,746,690 TOTAL LIABILITIES - 19,011 ----------------- NET ASSETS $ 1,727,679 NET ASSETS BY SOURCE Capital received from investors 1,727,691 Net realized capital losses (12) NET ASSET VALUE (NAV) BY SHARE CLASS SHARES SHARE CLASS NET ASSETS / OUTSTANDING = NAV Sweep Shares $1,037,935 1,038,021 $ 1.00 Value Advantage Shares $689,744 689,733 $ 1.00
Unless stated, all numbers x 1,000. a The amortized cost for the fund's securities was $1,739,303. During the reporting period, the fund had $581,905 in transactions with other SchwabFunds(R). FEDERAL TAX DATA ------------------------------------------- COST BASIS OF PORTFOLIO $1,739,303 CAPITAL LOSSES UTILIZED $ 89 UNUSED CAPITAL LOSSES: Expires 12/31 of: Loss amount: 2009 $ 12
14 See financial notes. SCHWAB NEW YORK MUNICIPAL MONEY FUND Statement of OPERATIONS For January 1, 2003 through December 31, 2003. All numbers x 1,000.
INVESTMENT INCOME ------------------------------------------------------------------------------- Interest $ 19,094 NET REALIZED GAINS AND LOSSES ------------------------------------------------------------------------------- Net realized gains on investments sold 105 EXPENSES ------------------------------------------------------------------------------- Investment adviser and administrator fees 6,365 a Transfer agent and shareholder service fees: Sweep Shares 4,560 b Value Advantage Shares 1,583 b Trustees' fees 36 c Custodian and portfolio accounting fees 166 Professional fees 27 Registration fees 39 Shareholder reports 63 Other expenses + 21 --------------- Total expenses 12,860 Expense reduction - 2,630 d --------------- NET EXPENSES 10,230 INCREASE IN NET ASSETS FROM OPERATIONS ------------------------------------------------------------------------------- TOTAL INVESTMENT INCOME 19,094 NET EXPENSES - 10,230 --------------- NET INVESTMENT INCOME 8,864 NET REALIZED GAINS + 105 --------------- INCREASE IN NET ASSETS FROM OPERATIONS $ 8,969
Unless stated, all numbers x 1,000. a Calculated on a graduated basis as a percentage of average daily net assets: 0.38% of the first $1 billion, 0.35% over $1 billion, 0.32% over $10 billion, 0.30% over $20 billion and 0.27% over $40 billion. b Calculated as a percentage of average daily net assets as follows: TRANSFER AGENT SERVICES:
% OF AVERAGE SHARE CLASS DAILY NET ASSETS -------------------------------------------- Sweep Shares 0.25 Value Advantage Shares 0.05
SHAREHOLDER SERVICES:
% OF AVERAGE SHARE CLASS DAILY NET ASSETS -------------------------------------------- Sweep Shares 0.20 Value Advantage Shares 0.17
These fees are paid to Charles Schwab & Co. c For the fund's independent trustees only. d Includes $2,561 from the investment adviser (CSIM) and $69 from the transfer agent and shareholder service agent (Schwab). These reductions reflect a guarantee by CSIM and Schwab to limit the annual operating expenses of this fund through at least April 30, 2004, as follows:
% OF AVERAGE SHARE CLASS DAILY NET ASSETS -------------------------------------------- Sweep Shares 0.69 Value Advantage Shares 0.45
This limit doesn't include interest, taxes and certain non-routine expenses. See financial notes. 15 SCHWAB NEW YORK MUNICIPAL MONEY FUND Statements of CHANGES IN NET ASSETS For the current and prior report periods. All numbers x 1,000.
OPERATIONS ------------------------------------------------------------------------------- 1/1/03-12/31/03 1/1/02-12/31/02 Net investment income $ 8,864 $ 14,200 Net realized gains + 105 198 ----------------------------------- INCREASE IN NET ASSETS FROM OPERATIONS 8,969 14,398 DISTRIBUTIONS PAID ------------------------------------------------------------------------------- Dividends from net investment income Sweep Shares 4,159 7,395 Value Advantage Shares + 4,705 6,805 ----------------------------------- TOTAL DIVIDENDS FROM NET INVESTMENT INCOME 8,864 14,200 a TRANSACTIONS IN FUND SHARES b ------------------------------------------------------------------------------- SHARES SOLD Sweep Shares 3,340,823 2,917,032 Value Advantage Shares + 728,144 691,543 ----------------------------------- TOTAL SHARES SOLD 4,068,967 3,608,575 SHARES REINVESTED Sweep Shares 4,096 7,250 Value Advantage Shares + 4,416 6,470 ----------------------------------- TOTAL SHARES REINVESTED 8,512 13,720 SHARES REDEEMED Sweep Shares (3,250,610) (2,869,694) Value Advantage Shares + (719,030) (625,673) ----------------------------------- TOTAL SHARES REDEEMED (3,969,640) (3,495,367) NET TRANSACTIONS IN FUND SHARES 107,839 126,928 c NET ASSETS ------------------------------------------------------------------------------- Beginning of period 1,619,735 1,492,609 Total increase + 107,944 127,126 d ----------------------------------- END OF PERIOD $ 1,727,679 $ 1,619,735
Unless stated, all numbers x 1,000. UNAUDITED a The fund hereby designates 100% of its dividends for the current report period as tax-exempt interest dividends. b Because all transactions in this section took place at $1.00 per share, figures for share quantities are the same as for dollars. c Represents shares sold plus shares reinvested, minus shares redeemed. d Represents the changes in net assets from operations plus the changes in value of transactions in fund shares, minus distributions paid. 16 See financial notes. SCHWAB NEW JERSEY MUNICIPAL MONEY FUND FINANCIAL STATEMENTS FINANCIAL HIGHLIGHTS
1/1/03- 1/1/02- 1/1/01- 1/1/00- 1/1/99- 12/31/03 12/31/02 12/31/01 12/31/00 12/31/99 ------------------------------------------------------------------------------------------------------------------------------------ PER-SHARE DATA ($) ------------------------------------------------------------------------------------------------------------------------------------ Net asset value at beginning of period 1.00 1.00 1.00 1.00 1.00 ---------------------------------------------------------------------------------- Income from investment operations: Net investment income 0.00 1 0.0 1 0.02 0.03 0.03 ---------------------------------------------------------------------------------- Less distributions: Dividends from net investment income (0.00) 1 (0.01) (0.02) (0.03) (0.03) ---------------------------------------------------------------------------------- Net asset value at end of period 1.00 1.00 1.00 1.00 1.00 ---------------------------------------------------------------------------------- Total return (%) 0.43 0.84 2.13 3.38 2.58 RATIOS/SUPPLEMENTAL DATA (%) ------------------------------------------------------------------------------------------------------------------------------------ Ratios to average net assets: Net operating expenses 0.65 0.66 2 0.65 0.66 3 0.65 Gross operating expenses 0.86 0.89 0.90 0.93 0.94 Net investment income 0.43 0.83 2.08 3.35 2.60 Net assets, end of period ($ x 1,000,000) 463 425 382 321 206
1 Per share amount was less than $0.01. 2 The ratio of net operating expenses would have been 0.65% if certain non-routine expenses (taxes) had not been included. 3 The ratio of net operating expenses would have been 0.65% if certain non-routine expenses (proxy fees) had not been included. See financial notes. 17 SCHWAB NEW JERSEY MUNICIPAL MONEY FUND PORTFOLIO HOLDINGS as of December 31, 2003 This section shows all the securities in the fund's portfolio and their market value, as of the report date. We use the symbols below to designate certain characteristics: + Credit-enhanced security ~ Liquidity-enhanced security @ Variable-rate security = Delayed-delivery security For fixed-rate obligations, the rate shown is the effective yield at the time of purchase. For variable-rate obligations, the rate shown is the rate as of the report date. For variable-rate obligations with scheduled maturities greater than 397 days, the maturity shown is the later of the next interest rate change date or demand date. For variable-rate obligations with scheduled maturities less than 397 days, the maturity shown is the earlier of the next interest rate change date or demand date. For variable-rate obligations without demand features, the maturity shown is the next interest rate change date.
COST VALUE HOLDINGS BY CATEGORY ($x1,000) ($x1,000) -------------------------------------------------------------------------------- 100.6% MUNICIPAL SECURITIES 465,836 465,836 -------------------------------------------------------------------------------- 100.6% TOTAL INVESTMENTS 465,836 465,836 (0.6)% OTHER ASSETS AND LIABILITIES (2,716) -------------------------------------------------------------------------------- 100.0% TOTAL NET ASSETS 463,120
ISSUER SECURITY TYPE, PROJECT, SERIES, FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) MUNICIPAL SECURITIES 100.6% of Net Assets NEW JERSEY 91.8% DELAWARE RIVER PORT AUTH +~@ RB Series 1999 TOB Series PA-611 1.26%, 01/07/04 4,495 4,495 +~@ RB Series 1999, PA-606 1.26%, 01/07/04 17,300 17,300 DELRAN TOWNSHIP BAN 2003, Series A 1.10%, 01/14/04 2,842 2,843 EAST BRUNSWICK TOWNSHIP BAN 1.10%, 02/27/04 8,000 8,011 GARDEN STATE PRESERVATION TRUST +~@ Open Space and Farmland Preservation Bonds Series 2003A TOB Series 2001-860 1.23%, 01/07/04 5,000 5,000 GLOUCESTER CNTY BAN Series 2003A 1.07%, 10/27/04 8,000 8,060 NEW JERSEY TRAN Series Fiscal 2004A 1.03%, 06/25/04 15,000 15,069 1.04%, 06/25/04 10,000 10,046 @ TRAN Series Fiscal 2004A TOB Series L36J 1.30%, 01/07/04 14,000 14,000 NEW JERSEY ECONOMIC DEVELOPMENT AUTH +@ Economic Development RB (Catholic Community Services Project) Series 993 1.19%, 01/07/04 4,960 4,960 +@ Economic Development RB (Encap Golf Holdings Project), Series 2001A 1.25%, 01/07/04 22,000 22,000 +@ Economic Development RB Stone Brothers Secaucus - 2001 Project) 1.26%, 01/07/04 1,760 1,760 +~@ Economic Development Refunding RB Airis Newark Project) Series 1998 1.25%, 01/07/04 3,800 3,800 +@ IDRB (Tru Urban Renewal Corp.) Series 1984 1.30%, 01/30/04 3,000 3,000
18 See financial notes. SCHWAB NEW JERSEY MUNICIPAL MONEY FUND
ISSUER SECURITY TYPE, PROJECT, SERIES, FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) +~@ Natural Gas Facilities Refunding RB Series 1997A (Nui Corp. Projects) TOB Series 1998-161 1.26%, 01/07/04 1,525 1,525 +@ RB (Baptist Home Society of New Jersey - 2003 Project) 1.55%, 01/07/04 3,520 3,520 +@ RB (G&W Laboratories, Inc. - 2003 Project) 1.34%, 01/07/04 5,960 5,960 +@ RB (Geriatric Services Housing Corporation) Series 2001 1.10%, 01/07/04 10,475 10,475 +@ RB (Graphic Management Project) Series 1999 1.19%, 01/07/04 5,245 5,245 +@ RB (Hamilton Industrial Development Project) Series 1998 1.24%, 01/07/04 5,950 5,950 +@ RB (Jewish Home at Rockleigh Project) Series 1998A 1.05%, 01/07/04 4,800 4,800 +@ RB (Job Haines Home) Series 1998 1.07%, 01/07/04 3,700 3,700 +@ RB (Mt. Olive Realty) Amended 1995 Series 1.25%, 01/07/04 5,800 5,800 +@ RB (St. James Preparatory School & St. James Social Service Corp.) Series 1998 1.24%, 01/07/04 5,140 5,140 +@ Refunding RB (Station Plaza Park & Ride Project) Series 2003 1.34%, 01/07/04 3,615 3,615 +@ Special Facility RB (Port Newark Container Terminal Project) Series 2003 1.15%, 01/07/04 14,300 14,300 +@ Thermal Energy Facilities RB (Marina Energy Llc - 2001 Project) Series A 1.25%, 01/07/04 8,100 8,100 +@ Thermal Energy Facilities RB (Thermal Energy Limited Partnership I Project) Series 1997 1.15%, 01/07/04 8,600 8,600 NEW JERSEY EDUCATIONAL FACILITIES AUTH +~@ Higher Education Capital Improvement Fund Issue RB Series 2002A TOB Series 213 1.26%, 01/07/04 8,610 8,610 +@ RB Caldwell College Issue Series 2000B 1.24%, 01/07/04 2,200 2,200 @ RB Princeton University Issue Series 2001B 1.25%, 01/02/04 6,500 6,500 NEW JERSEY HEALTH CARE FACILITIES FINANCING AUTH +@ RB (St Barnabas Health Care System Issue) Series 2001A 1.20%, 01/07/04 4,500 4,500 +@ RB Composite Program Series 2001 A-1 1.25%, 01/07/04 5,700 5,700 +@ RB Composite Program Series 2003 A-1 1.19%, 01/07/04 4,950 4,950 +@ RB Composite Program Series 2003 A-2 1.19%, 01/07/04 3,500 3,500 +@ RB Composite Program Series 2003 A-6 1.24%, 01/07/04 3,250 3,250 +~@ RB Hunterdon Medical Center Issue Series A TOB Series 2001-833 1.26%, 01/07/04 3,560 3,560 +@ RB Meridian Health System Obligated Group Issue Series 2003A 1.20%, 01/07/04 2,500 2,500 +@ RB Meridian Health System Obligation Group Issue Series 2003B 1.20%, 01/07/04 3,000 3,000
See financial notes. 19 SCHWAB NEW JERSEY MUNICIPAL MONEY FUND PORTFOLIO HOLDINGS continued
ISSUER SECURITY TYPE, PROJECT, SERIES, FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) NEW JERSEY HOUSING & MORTGAGE FINANCE AGENCY + Home Buyer RB Series 2003 EE 1.10%, 04/01/04 7,430 7,430 NEW JERSEY SPORTS & EXPOSITION AUTH +~@ Home Buyer RB Series AA TOB Series PT-287 1.22%, 01/02/04 1,900 1,900 +~@ Home Buyer Series 2000 CC RB TOB Series PT-635 1.26%, 01/07/04 3,915 3,915 +~@ State Contract Bonds Series 1992C 1.20%, 01/07/04 18,225 18,225 +~@ State Contract Bonds Series 2002 B-1 1.10%, 01/07/04 9,180 9,180 NEW JERSEY TRANSPORTATION TRUST FUND AUTH ~@ Transportation System Bonds Series 1998A TOB Series 2000C 1.13%, 01/07/04 11,495 11,495 +~@ Transportation System Bonds Series 2003C TOB Series 236 1.26%, 01/07/04 5,495 5,495 +~@ Transportation System RB Series 2000B TOB Series 2000-203 1.23%, 01/07/04 4,895 4,895 NEW JERSEY TURNPIKE AUTH +~@ Turnpike RB Series 1991C TOB Series PT-747 1.14%, 01/07/04 3,595 3,595 + Turnpike RB Series 2000A 1.15%, 01/01/05 2,750 2,862 +~@ Turnpike RB Series 2000A TOB Series 2000-3002 1.26%, 01/07/04 1,000 1,000 +~@ Turnpike RB Series 2000A TOB Series 2000-6 1.17%, 01/07/04 11,200 11,200 +~@ Turnpike RB Series 2000A TOB Series PA-719R 1.26%, 01/07/04 3,665 3,665 NORTH BURNSWICK TOWNSHIP BAN 2003 1.13%, 12/10/04 12,860 12,964 PORT AUTH OF NEW YORK & NEW JERSEY +~@ Consolidated Bonds 119th Series Second Installment TOB Series 153 1.31%, 01/07/04 370 370 + Consolidated Bonds 122nd Series 1.08%, 07/15/04 1,085 1,109 +~@ Consolidated Bonds 127th Series TOB Series PT-870 1.26%, 01/07/04 10,280 10,280 = Consolidated Bonds 131st Series 1.17%, 12/15/04 5,015 5,056 ~@ Consolidated Bonds 85th Series TOB Series PA-518 1.10%, 04/08/04 6,795 6,795 +~@ Special Project Bonds Series 6 (JFK Intl Air Terminal Project) TOB Series 2000B5 1.20%, 01/07/04 800 800 +~@ Special Project Bonds Series 6 (JFK Intl Air Terminal Project) TOB Series 2000-243 1.26%, 01/07/04 1,650 1,650 ~ TECP Series A 1.05%, 01/09/04 11,450 11,450 RAHWAY TOWNSHIP BAN 2003 1.15%, 12/06/04 8,343 8,427 SOMERSET CNTY GO Open Space/Farmland Preservation Bonds Series 2003B 1.02%, 10/01/04 1,000 1,022 General Improvement Bonds Series 2003A 1.02%, 10/01/04 1,200 1,218
20 See financial notes. SCHWAB NEW JERSEY MUNICIPAL MONEY FUND
ISSUER SECURITY TYPE, PROJECT, SERIES, FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) SPARTA TOWNSHIP BAN 1.02%, 06/04/04 6,595 6,615 TRENTON PARKING AUTH +~@ Parking RB Series 2000 TOB Series 221 1.25%, 01/07/04 4,320 4,320 UNION CNTY POLLUTION CONTROL FINANCING AUTH = Refunding RB (Exxon) Series 1994 1.22%, 01/02/04 6,000 6,000 UNIVERSITY OF MEDICINE & DENTISTRY +~@ RB Series 2002B 1.21%, 01/07/04 7,000 7,000 ------- 425,277 PUERTO RICO 8.8% GOVERNMENT DEVELOPMENT BANK OF PUERTO RICO TECP Series 1997 1.15%, 01/09/04 450 450 0.97%, 01/12/04 8,225 8,225 1.10%, 03/10/04 4,232 4,232 1.08%, 04/16/04 9,107 9,107 PUERTO RICO +~@ Public Improvement & Refunding Bonds Series 2000 TOB Series 3 1.11%, 01/07/04 2,820 2,820 +~@ Public Improvement Bonds Series 2001A TOB Series 2001R 1.13%, 01/07/04 5,900 5,900 PUERTO RICO HFC +~@ Homeownership Mortgage RB Series 2000A TOB Series 2000R 1.25%, 01/07/04 5,430 5,430 PUERTO RICO HWY & TRANSP AUTH +~@ Transportation RB Series 1998A 1.10%, 01/07/04 4,395 4,395 ------- 40,559
END OF INVESTMENTS. For totals, please see the first page of holdings for this fund. See financial notes. 21 SCHWAB NEW JERSEY MUNICIPAL MONEY FUND Statement of ASSETS AND LIABILITIES As of December 31, 2003. All numbers x 1,000 except NAV. ASSETS ------------------------------------------------------------------------------- Investments, at value $465,836 a Cash 118 Interest receivable 1,260 Prepaid expenses + 18 ------------------- TOTAL ASSETS 467,232 LIABILITIES ------------------------------------------------------------------------------ Payables: Dividends to shareholders 6 Investments bought 4,052 Investment adviser and administrator fees 4 Transfer agent and shareholder service fees 6 Accrued expenses + 44 ------------------- TOTAL LIABILITIES 4,112 NET ASSETS ------------------------------------------------------------------------------ TOTAL ASSETS 467,232 TOTAL LIABILITIES - 4,112 ------------------- NET ASSETS $ 463,120 NET ASSETS BY SOURCE Capital received from investors 463,118 Net investment income not yet distributed 2 NET ASSET VALUE (NAV) SHARES NET ASSETS / OUTSTANDING = NAV $ 463,120 462,845 $1.00
Unless stated, all numbers x 1,000. a The amortized cost for the fund's securities was $465,836. During the reporting period, the fund had $580,570 in transactions with other SchwabFunds(R). FEDERAL TAX DATA ----------------------------------------- COST BASIS OF PORTFOLIO $465,836 UNDISTRIBUTED EARNINGS: Tax-exempt income $2 Long-term capital gains $-- RECLASSIFICATIONS: Net realized capital gains ($15) Reclassified as: Capital received from investors $13 Net investment income not yet distributed $2
TAX DESIGNATION (UNAUDITED): The fund hereby designates $15 as a capital gain dividend for the fiscal year ended December 31, 2003. 22 See financial notes. SCHWAB NEW JERSEY MUNICIPAL MONEY FUND Statement of OPERATIONS For January 1, 2003 through December 31, 2003. All numbers x 1,000. INVESTMENT INCOME ------------------------------------------------------------------------------ Interest $5,081 NET REALIZED GAINS AND LOSSES ------------------------------------------------------------------------------ Net realized gains on investments sold 15 EXPENSES ------------------------------------------------------------------------------ Investment adviser and administrator fees 1,792 a Transfer agent and shareholder service fees 2,122 b Trustees' fees 30 c Custodian and portfolio accounting fees 39 Professional fees 24 Registration fees 17 Shareholder reports 18 Other expenses + 10 ------------ Total expenses 4,052 Expense reduction - 987 d ------------ NET EXPENSES 3,065 INCREASE IN NET ASSETS FROM OPERATIONS ------------------------------------------------------------------------------ TOTAL INVESTMENT INCOME 5,081 NET EXPENSES - 3,065 ------------ NET INVESTMENT INCOME 2,016 NET REALIZED GAINS + 15 ------------ INCREASE IN NET ASSETS FROM OPERATIONS $2,031
Unless stated, all numbers x 1,000. a Calculated on a graduated basis as a percentage of average daily net assets: 0.38% of the first $1 billion, 0.35% over $1 billion, 0.32% over $10 billion, 0.30% over $20 billion and 0.27% over $40 billion. b Calculated as a percentage of average daily net assets: for transfer agent services, 0.25% of the fund's assets; for shareholder services, 0.20% of the fund's assets. These fees are paid to Charles Schwab & Co. c For the fund's independent trustees only. d This reduction was made by the investment adviser (CSIM). It reflects a guarantee by CSIM and the transfer agent and shareholder service agent (Schwab) to limit the annual operating expenses of this fund through at least April 30, 2004, to 0.65% of average daily net assets. This limit doesn't include interest, taxes and certain non-routine expenses. See financial notes. 23 SCHWAB NEW JERSEY MUNICIPAL MONEY FUND Statements of CHANGES IN NET ASSETS For the current and prior report periods. All numbers x 1,000. OPERATIONS ------------------------------------------------------------------------------- 1/1/03-12/31/03 1/1/02-12/31/02 Net investment income $2,016 $3,334 Net realized gains + 15 339 ---------------------------------- INCREASE IN NET ASSETS FROM OPERATIONS 2,031 3,673 DISTRIBUTIONS PAID ------------------------------------------------------------------------------- Dividends from net investment income 2,016 3,348 a TRANSACTIONS IN FUND SHARES b ------------------------------------------------------------------------------- Shares sold 1,245,576 1,159,279 Shares reinvested 1,988 3,302 Shares redeemed + (1,209,262) (1,120,441) ---------------------------------- NET TRANSACTIONS IN FUND SHARES 38,302 42,140 NET ASSETS ------------------------------------------------------------------------------- Beginning of period 424,803 382,338 Total increase + 38,317 42,465 c ---------------------------------- END OF PERIOD $463,120 $424,803
Unless stated, all numbers x 1,000. a UNAUDITED The fund hereby designates 100% of its dividends for the current report period as tax-exempt interest dividends. b Because all transactions in this section took place at $1.00 per share, figures for share quantities are the same as for dollars. c Represents the changes in net assets from operations plus the changes in value of transactions in fund shares, minus distributions paid. 24 See financial notes. SCHWAB PENNSYLVANIA MUNICIPAL MONEY FUND Financial Statements FINANCIAL HIGHLIGHTS
1/1/03- 1/1/02- 1/1/01- 1/1/00- 1/1/99- 12/31/03 12/31/02 12/31/01 12/31/00 12/31/99 ------------------------------------------------------------------------------------------------------------------------------------ PER-SHARE DATA ($) ------------------------------------------------------------------------------------------------------------------------------------ Net asset value at beginning of period 1.00 1.00 1.00 1.00 1.00 ------------------------------------------------------------------------------- Income from investment operations: Net investment income 0.00 1 0.01 0.02 0.04 0.03 ------------------------------------------------------------------------------- Less distributions: Dividends from net investment income (0.00) 1 (0.01) (0.02) (0.04) (0.03) ------------------------------------------------------------------------------- Net asset value at end of period 1.00 1.00 1.00 1.00 1.00 ------------------------------------------------------------------------------- Total return (%) 0.49 0.87 2.20 3.57 2.71 RATIOS/SUPPLEMENTAL DATA (%) ------------------------------------------------------------------------------------------------------------------------------------ Ratios to average net assets: Net operating expenses 0.65 0.65 0.65 0.66 2 0.65 Gross operating expenses 0.87 0.89 0.92 0.93 0.94 Net investment income 0.48 0.87 2.14 3.52 2.68 Net assets, end of period ($ x 1,000,000) 328 301 292 225 164
1 Per share amount was less than $0.01. 2 The ratio of net operating expenses would have been 0.65% if certain non-routine expenses (proxy fees) had not been included. See financial notes. 25 SCHWAB PENNSYLVANIA MUNICIPAL MONEY FUND PORTFOLIO HOLDINGS as of December 31, 2003 This section shows all the securities in the fund's portfolio and their market value, as of the report date. We use the symbols below to designate certain characteristics: + Credit-enhanced security ~ Liquidity-enhanced security @ Variable-rate security For fixed-rate obligations, the rate shown is the effective yield at the time of purchase. For variable-rate obligations, the rate shown is the rate as of the report date. For variable-rate obligations with scheduled maturities greater than 397 days, the maturity shown is the later of the next interest rate change date or demand date. For variable-rate obligations with scheduled maturities less than 397 days, the maturity shown is the earlier of the next interest rate change date or demand date. For variable-rate obligations without demand features, the maturity shown is the next interest rate change date.
COST VALUE HOLDINGS BY CATEGORY ($x1,000) ($x1,000) -------------------------------------------------------------------------------- 99.7% MUNICIPAL SECURITIES 326,822 326,822 -------------------------------------------------------------------------------- 99.7% TOTAL INVESTMENTS 326,822 326,822 0.3% OTHER ASSETS AND LIABILITIES 890 -------------------------------------------------------------------------------- 100.0% TOTAL NET ASSETS 327,712
ISSUER SECURITY TYPE, PROJECT, SERIES, FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) MUNICIPAL SECURITIES 99.7% of Net Assets PENNSYLVANIA 99.7% ALLEGHENY CNTY HOSPITAL DEVELOPMENT AUTH +@ RB Series 2003 (UPMC Senior Communities) 1.25%, 01/07/03 10,000 10,000 ALLEGHENY CNTY IDB +~@ Pollution Control Refunding RB Series 1999B (Duquesne Light Co Project) TOB Series 2002 A48 1.21%, 01/07/04 14,495 14,495 ALLEGHENY CNTY SANITARY AUTH +~@ Sewer RB Series 1997 TOB Series 374Z 1.27%, 01/07/04 4,995 4,995 BERKS CNTY +@ RB (Beacon Container Project) Series 1998A 1.35%, 01/07/04 1,090 1,090 BLAIR CNTY IDA +@ First Mortgage RB (Village At Penn State Project) Series 2002C 1.07%, 01/07/04 5,000 5,000 BUCKS CNTY IDA +@ RB (Klearfold) Series 1997 1.65%, 01/07/04 4,000 4,000 CAMBRIA CNTY IDA +@ Resource Recovery RB (Cambria Cogen Co Project) Series 1998 A-1 1.20%, 01/07/04 15,750 15,750 CHESTER CNTY HEALTH & EDUCATION FACILITIES AUTH +@ RB (Simpson Meadows Project) Series 2000 1.27%, 01/07/04 2,880 2,880 CLARION CNTY IDA +@ Energy Development RB (Piney Creek Project) 1990 Series 1.11%, 01/07/04 16,000 16,000 DELAWARE CNTY IDA +@ Hospital RB Series 2002 (Crozer-Chester Medical Center Obligated Group) 1.25%, 01/07/04 4,900 4,900 +@ RB (YMCA of Philadelphia Project) Series 1999 1.25%, 01/07/04 2,565 2,565
26 See financial notes. SCHWAB PENNSYLVANIA MUNICIPAL MONEY FUND
ISSUER SECURITY TYPE, PROJECT, SERIES, FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) DELAWARE RIVER PORT AUTH + Port District Project Refunding Bonds Series 2001A 1.20%, 01/01/04 750 750 DELAWARE VALLEY REGIONAL FINANCE AUTH +~@ Local Government RB Series 1998A TOB Series 2002E 1.17%, 01/07/04 4,555 4,555 ERIE SD +~@ GO Bonds Series 2001A TOB Series 2001-5 1.05%, 05/07/04 16,800 16,800 HARRISBURG AUTH +~@ Water Refunding RB Series 2002B 1.06%, 01/07/04 2,500 2,500 +~@ Water Refunding RB Series 2003A 1.07%, 01/07/04 6,700 6,700 LANCASTER CNTY HOSPITAL AUTH +@ Health Center RB (Brethren Village) Series 2000 1.30%, 01/07/04 1,300 1,300 LUZERNE CNTY IDA +@ RB 2003 Series (Methodist Homes Project) 1.17%, 01/07/04 2,900 2,900 MERCER CNTY +~@ GO Bonds Series 2001 TOB Series 2001-18 1.19%, 01/07/04 3,600 3,600 MONTGOMERY CNTY HIGHER EDUCATION & HEALTH AUTH +@ RB Series 2001 (Madlyn & Leonard Abramson Center For Jewish Life) 1.27%, 01/07/04 3,200 3,200 MONTGOMERY CNTY IDA +@ Environmental Facilities RB (Ionza Inc. Project) Series 2000 1.32%, 01/07/04 7,000 7,000 MONTGOMERY CNTY REDEVELOPMENT AUTH +@ M/F Housing RB (Brookside Manor Apartments Project) Series 2001A 1.20%, 01/07/04 6,310 6,310 NORTHHAMPTON CNTY +~@ County Agreement RB Series 2001 TOB Series 2002-2 1.12%, 06/02/04 3,000 3,000 NORWIN SD +~@ GO Bonds Series 2001A TOB Series 2001-12 1.12%, 06/16/04 8,710 8,710 PENNSYLVANIA +~@ GO Bonds First Series 1995 TOB Series 97C3801 1.18%, 01/07/04 11,870 11,870 +~@ GO Bonds First Series 2003 PA-1112 1.25%, 01/07/04 5,000 5,000 + GO Bonds Refunding Series 1996 0.98%, 11/15/04 1,000 1,037 +~@ GO Bonds Second Series 2002 TOB Series PA-1035R 1.13%, 01/07/04 4,995 4,995 PENNSYLVANIA CONVENTION CENTER AUTH +~@ RB Series 1989A TOB Series PT-1224 1.25%, 01/07/04 3,345 3,345 PENNSYLVANIA ECONOMIC DEVELOPMENT FINANCING AUTH +@ Exempt Facilities RB (Amtrak Project) Series 2001B 1.25%, 01/07/04 11,200 11,200 @ Exempt Facilities RB (Merck & Co. Project) Series 2000 1.30%, 01/07/04 5,000 5,000 @ Exempt Facilities RB (Merck & Co. West Point Project) Series 2001 1.30%, 01/07/04 10,750 10,750
See financial notes. 27 SCHWAB PENNSYLVANIA MUNICIPAL MONEY FUND PORTFOLIO HOLDINGS continued
ISSUER SECURITY TYPE, PROJECT, SERIES, FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) +@ Exempt Facilities RB (Reliant Energy Seward Project) Series 2001A 1.15%, 01/07/04 9,900 9,900 +@ Exempt Facilities RB (Reliant Energy Seward Project) Series 2002B 1.17%, 01/07/04 6,000 6,000 PENNSYLVANIA ENERGY DEVELOPMENT AUTH +@ Energy Development RB (B&W Ebensburg Project) Series 1986 1.11%, 01/07/04 15,295 15,295 PENNSYLVANIA HFA +@ Residental Development Refunding RB Series 2002A TOB Series 2002-L10 1.35%, 01/07/04 6,000 6,000 +@ S/F Mortgage RB Series 1997-56C TOB Series PT-119A 1.25%, 01/07/04 2,340 2,340 +@ S/F Mortgage RB Series 1999-66A TOB Series PT-278 1.30%, 12/16/04 8,210 8,210 +@ S/F Mortgage RB Series 1999A TOB Series 1999-u 1.00%, 02/26/04 4,895 4,895 S/F Mortgage RB Series 2001-72A 1.14%, 10/01/04 1,685 1,716 +@ S/F Mortgage RB Series 2002-74B TOB Series PA-1055 1.28%, 01/07/04 3,600 3,600 +@ S/F RB Series 1998-64 TOB Series 1998Y 1.12%, 03/25/04 15,000 15,000 PENNSYLVANIA HIGHER EDUCATION ASSISTANCE AGENCY +~@ Student Loan RB 2003 A-2 1.34%, 01/07/04 500 500 +~@ Student Loan RB Series 2000A 1.34%, 01/07/04 5,800 5,800 +~@ Student Loan RB Series 2001A 1.34%, 01/07/04 7,800 7,800 PENNSYLVANIA STATE UNIVERSITY @ RB Series 2001A 1.24%, 01/07/04 5,000 5,000 @ RB Series 2002 1.24%, 01/07/04 5,000 5,000 PENNSYLVANIA TURNPIKE COMM +@ Turnpike RB Series 2001U 1.18%, 01/07/04 9,600 9,600 PHILADELPHIA HOSPITAL & HIGHER EDUCATION FACILITIES AUTH +@ RB (Wills Eye Hospital Project) Series 2000 1.25%, 01/07/04 1,800 1,800 PHILADELPHIA IDA +~@ Airport RB Series 1998A TOB Series 1998P2 1.05%, 08/05/04 5,000 5,000 PHILADELPHIA SD + GO Refunding Bonds Series 1993A 1.09%, 07/01/04 3,000 3,062 + GO Refunding Bonds Series 1999D 0.87%, 03/01/04 1,000 1,007 TEMPLE UNIVERSITY University Funding Obligations Series 2003 1.20%, 05/04/04 7,100 7,100 ------- 326,822
END OF INVESTMENTS. For totals, please see the first page of holdings for this fund. 28 See financial notes. SCHWAB PENNSYLVANIA MUNICIPAL MONEY FUND Statement of ASSETS AND LIABILITIES As of December 31, 2003. All numbers x 1,000 except NAV. ASSETS ----------------------------------------------------------------------------- Investments, at value $326,822 a Cash 144 Interest receivable 783 Prepaid expenses + 19 ----------- TOTAL ASSETS 327,768 LIABILITIES ----------------------------------------------------------------------------- Payables: Dividends to shareholders 4 Investment adviser and administrator fees 1 Transfer agent and shareholder service fees 4 Federal and state taxes 7 Accrued expenses + 40 ----------- TOTAL LIABILITIES 56 NET ASSETS ----------------------------------------------------------------------------- TOTAL ASSETS 327,768 TOTAL LIABILITIES - 56 ----------- NET ASSETS $ 327,712 NET ASSETS BY SOURCE Capital received from investors 327,709 Net investment income not yet distributed 3
NET ASSET VALUE (NAV) SHARES NET ASSETS / OUTSTANDING = NAV $ 327,712 327,696 $ 1.00 Unless stated, all numbers x 1,000. a The amortized cost for the fund's securities was $326,822. During the reporting the fund had $725,660 in transactions with other SchwabFunds(R). FEDERAL TAX DATA ----------------------------------------------- COST BASIS OF PORTFOLIO $ 326,822 UNDISTRIBUTED EARNINGS: Tax-exempt income $ 3 Long-term capital gains -- RECLASSIFICATIONS: Net realized capital gains ($42) Distributions in excess of net investment income $ 15 Reclassified as: Capital received from investors $ 27
TAX DESIGNATION (UNAUDITED): The fund hereby designates $14 as a capital gain dividend for the fiscal year ended December 31, 2003. See financial notes. 29 SCHWAB PENNSYLVANIA MUNICIPAL MONEY FUND Statement of OPERATIONS For January 1, 2003 through December 31, 2003. All numbers x 1,000. INVESTMENT INCOME ----------------------------------------------------------------------------- Interest $ 3,664 NET REALIZED GAINS AND LOSSES ----------------------------------------------------------------------------- Net realized gains on investments sold 42 EXPENSES ----------------------------------------------------------------------------- Investment adviser and administrator fees 1,225 a Transfer agent and shareholder service fees 1,450 b Trustees' fees 32 c Custodian and portfolio accounting fees 31 Professional fees 24 Registration fees 17 Shareholder reports 15 Federal and state taxes 12 Other expenses + 12 -------------- Total expenses 2,818 Expense reduction - 711 d -------------- NET EXPENSES 2,107 INCREASE IN NET ASSETS FROM OPERATIONS ----------------------------------------------------------------------------- TOTAL INVESTMENT INCOME 3,664 NET EXPENSES - 2,107 -------------- NET INVESTMENT INCOME 1,557 NET REALIZED GAINS + 42 -------------- INCREASE IN NET ASSETS FROM OPERATIONS $ 1,599
Unless stated, all numbers x 1,000. a Calculated on a graduated basis as a percentage of average daily net assets: 0.38% of the first $1 billion, 0.35% over $1 billion, 0.32% over $10 billion, 0.30% over $20 billion and 0.27% over $40 billion. b Calculated as a percentage of average daily net assets: for transfer agent services, 0.25% of the fund's assets; for shareholder services, 0.20% of the fund's assets. These fees are paid to Charles Schwab & Co. c For the fund's independent trustees only. d This reduction was made by the investment adviser (CSIM). It reflects a guarantee by CSIM and the transfer agent and shareholder service agent (Schwab) to limit the annual operating expenses of this fund through at least April 30, 2004, to 0.65% of average daily net assets. This limit doesn't include interest, taxes and certain non-routine expenses. 30 See financial notes. SCHWAB PENNSYLVANIA MUNICIPAL MONEY FUND Statements of CHANGES IN NET ASSETS For the current and prior report periods. All numbers x 1,000.
OPERATIONS -------------------------------------------------------------------------------- 1/1/03-12/31/03 1/1/02-12/31/02 Net investment income $ 1,557 $ 2,481 Net realized gains + 42 27 -------------------------------- INCREASE IN NET ASSETS FROM OPERATIONS 1,599 2,508 DISTRIBUTIONS PAID a -------------------------------------------------------------------------------- Dividends from net investment income 1,569 2,485 b TRANSACTIONS IN FUND SHARES c -------------------------------------------------------------------------------- Shares sold 1,014,686 836,701 Shares reinvested 1,546 2,427 Shares redeemed + (989,751) (829,555) -------------------------------- NET TRANSACTIONS IN FUND SHARES 26,481 9,573 NET ASSETS -------------------------------------------------------------------------------- Beginning of period 301,201 291,605 Total increase + 26,511 9,596 d -------------------------------- END OF PERIOD $ 327,712 $ 301,201
Unless stated, all numbers x 1,000. a For the current year, the fund elected not to distribute realized capital gains and accordingly paid federal and state taxes on such gains in the amount of $12. b UNAUDITED The fund hereby designates 100% of its dividends for the current report period as tax-exempt interest dividends. c Because all transactions in this section took place at $1.00 per share, figures for share quantities are the same as for dollars. d Represents the changes in net assets from operations plus the changes in value of transactions in fund shares, minus distributions paid. See financial notes. 31 SCHWAB FLORIDA MUNICIPAL MONEY FUND FINANCIAL STATEMENTS FINANCIAL HIGHLIGHTS
1/1/03- 1/1/02- 1/1/01- 1/1/00- 1/1/99- 12/31/03 12/31/02 12/31/01 12/31/00 12/31/99 ------------------------------------------------------------------------------------------------------------------------------------ PER-SHARE DATA ($) ------------------------------------------------------------------------------------------------------------------------------------ Net asset value at beginning of period 1.00 1.00 1.00 1.00 1.00 ------------------------------------------------------------------------------------- Income from investment operations: Net investment income 0.00 1 0.01 0.02 0.04 0.03 ------------------------------------------------------------------------------------- Less distributions: Dividends from net investment income (0.00) 1 (0.01) (0.02) (0.04) (0.03) ------------------------------------------------------------------------------------- Net asset value at end of period 1.00 1.00 1.00 1.00 1.00 ------------------------------------------------------------------------------------- Total return (%) 0.46 0.96 2.32 3.62 2.78 RATIOS/SUPPLEMENTAL DATA (%) ------------------------------------------------------------------------------------------------------------------------------------ Ratios to average net assets: Net operating expenses 0.64 0.59 0.59 0.60 2 0.59 Gross operating expenses 0.85 0.87 0.87 0.89 0.92 Net investment income 0.47 0.95 2.30 3.56 2.75 Net assets, end of period ($ x 1,000,000) 1,804 1,785 1,518 1,435 1,215
1 Per share amount was less than $0.01. 2 The ratio of net operating expenses would have been 0.59% if certain non-routine expenses (proxy fees) had not been included. 32 See financial notes. SCHWAB FLORIDA MUNICIPAL MONEY FUND PORTFOLIO HOLDINGS as of December 31, 2003 This section shows all the securities in the fund's portfolio and their market value, as of the report date. We use the symbols below to designate certain characteristics: + Credit-enhanced security ~ Liquidity-enhanced security @ Variable-rate security For fixed-rate obligations, the rate shown is the effective yield at the time of purchase. For variable-rate obligations, the rate shown is the rate as of the report date. For variable-rate obligations with scheduled maturities greater than 397 days, the maturity shown is the later of the next interest rate change date or demand date. For variable-rate obligations with scheduled maturities less than 397 days, the maturity shown is the earlier of the next interest rate change date or demand date. For variable-rate obligations without demand features, the maturity shown is the next interest rate change date.
COST VALUE HOLDINGS BY CATEGORY ($x1,000) ($x1,000) -------------------------------------------------------------------------------- 99.7% MUNICIPAL SECURITIES 1,798,943 1,798,943 -------------------------------------------------------------------------------- 99.7% TOTAL INVESTMENTS 1,798,943 1,798,943 0.3% OTHER ASSETS AND LIABILITIES 5,132 -------------------------------------------------------------------------------- 100.0% TOTAL NET ASSETS 1,804,075
ISSUER SECURITY TYPE, PROJECT, SERIES, FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) MUNICIPAL SECURITIES 99.7% of Net Assets DISTRICT OF COLUMBIA 0.7% METROPOLITAN WASHINGTON AIRPORTS AUTH ~ TECP Series A 1.15%, 01/07/04 12,000 12,000 FLORIDA 91.5% ALACHUA CNTY HEALTH FACILITIES AUTH +@ Continuing Care Retirement Community Variable Rate RB (Oak Hammock Project) Series 2002A 1.32%, 01/02/04 3,000 3,000 +~@ Health Facilities RB, Series 1992R (Shands Hospital At the University of Florida Project) 1.28%, 01/07/04 27,050 27,050 BREVARD CNTY EDUCATIONAL FACILITIES AUTH +@ RB (Florida Institute of Technology Project) Series B 1.25%, 01/07/04 10,000 10,000 BREVARD CNTY HFA +@ M/F Housing Refunding RB Series 1995 (Shore View Apartments Project) 1.10%, 01/07/04 1,900 1,900 BREVARD CNTY SD TANS, Series 2003 1.01%, 06/30/04 10,000 10,049 1.04%, 06/30/04 28,000 28,132 BROWARD CNTY + Passenger Facility Charge/ Airport System Convertible Lien RB 1998H-1 1.20%, 10/01/04 3,280 3,360 +~@ Subordinate Port Facilities Refunding RB (Port Everglades) Series 1998 1.32%, 01/07/04 9,240 9,240 BROWARD CNTY EDUCATIONAL FACILITIES AUTH +@ Educational Facilities RB Series 2000A (Nova Southeastern University Project) 1.20%, 01/07/04 5,400 5,400 BROWARD CNTY HFA +@ M/F Housing RB (Southern Pointe Project) Series 1997 1.20%, 01/07/04 7,750 7,750
See financial notes. 33 SCHWAB FLORIDA MUNICIPAL MONEY FUND PORTFOLIO HOLDINGS continued
ISSUER SECURITY TYPE, PROJECT, SERIES, FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) +@ M/F Housing RB (Landings of Inverrary Apartments Project) 1985 Series 1.15%, 01/07/04 7,500 7,500 +@ M/F Housing Refunding RB (Fisherman's Landing Project) 1999 Series 1.10%, 01/07/04 1,070 1,070 +@ M/F Housing Refunding RB (Island Club Apartments Project) Series 2001A 1.15%, 01/07/04 3,000 3,000 +@ M/F Housing Refunding RB (Reflections Apartments Project) Series 1999 1.10%, 01/07/04 13,000 13,000 +@ M/F Housing Refunding RB (Water's Edge Project) Series 1997 1.20%, 01/07/04 400 400 +@ M/F Housing Variable Rate Demand RB (Sanctuary Apartments Project), 1985 Series 1.15%, 01/07/04 9,000 9,000 +~@ S/F Mortgage Revenue Bonds, Series 1999B 1.33%, 01/07/04 2,425 2,425 BROWARD CNTY SD GO Refunding Bonds, Series 2002 1.10%, 02/15/04 9,625 9,671 CHARLOTTE CNTY +~@ Refunding RB, Series 2003A 1.12%, 01/07/04 12,405 12,405 +~@ Refunding RB, Series 2003B 1.25%, 01/07/04 6,000 6,000 CHARLOTTE CNTY HFA +@ M/F Housing RB Series 2000 (Murdock Circle Apartments Project) 1.20%, 01/07/04 10,370 10,370 CHARLOTTE CNTY SD TANS Series 2003 1.04%, 06/30/04 12,000 12,057 CLAY CNTY UTILITY AUTH +@ Utilities System RB, Series 2003A 1.25%, 01/07/04 3,240 3,240 COLLIER CNTY + Capital Improvement and Refunding RB, Series 2003 1.05%, 10/01/04 1,325 1,334 COLLIER CNTY HEALTH FACILITIES AUTH +@ RB, Series 2003c (Cleveland Clinic Health System Obligated Group) Subseries C-1 1.30%, 01/02/04 2,000 2,000 COLLIER CNTY HFA +@ M/F Housing RB, Series 2001A (Brittany Bay Apartments Project) 1.13%, 01/07/04 3,350 3,350 COLLIER CNTY IDA +@ Educational Facilities RB (Community School of Naples, Inc. Project) Series 2002 1.25%, 01/07/04 7,950 7,950 DADE CNTY + Aviation Refunding RB, Series 1997 1.11%, 10/01/04 5,000 5,172 +~@ Water and Sewer System RB Series 1994 1.07%, 01/07/04 88,700 88,700 DADE CNTY IDA +@ IDRB (Michael-Ann Russell Jewish Community Center Project) Series 1997 1.20%, 01/07/04 4,885 4,885 +@ IDRB (South Florida Stadium Corp) Series 1985C 1.12%, 01/07/04 1,050 1,050 DAVIE +@ RB (United Jewish Community of Broward County Project) Series 2003 1.25%, 01/07/04 6,000 6,000
34 See financial notes. SCHWAB FLORIDA MUNICIPAL MONEY FUND
ISSUER SECURITY TYPE, PROJECT, SERIES, FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) ESCAMBIA HFA ~@ S/F RB Series 1995B TOB Series PT-121 1.33%, 01/07/04 3,000 3,000 +~@ S/F RB Series 1997A TOB Series 1997E 1.26%, 01/07/04 3,585 3,585 +~@ S/F RB Series 2001A TOB Series 2001c 1.23%, 01/07/04 2,170 2,170 +~@ S/F RB Series 2001A TOB Series PT-519 1.33%, 01/07/04 2,970 2,970 +~@ S/F RB Series 2002A-1 TOB Series 2002B 1.15%, 04/08/04 2,675 2,675 EUSTIS +@ RB, Installment 1997A 1.20%, 01/07/04 3,560 3,560 FLORIDA Department of Transportation Turnpike RB Series 2000B 0.95%, 07/01/04 9,490 9,704 + Department of Transportation Turnpike Refunding RB, Series 2003B 0.92%, 07/01/04 2,255 2,281 + Dept of Environmental Protection Florida Forever RB, Series 2003a 0.92%, 07/01/04 3,885 3,925 +~@ Dept of Environmental Protection Preservation 2000 RB Series 1997B TOB Series 2000-317 1.29%, 01/07/04 23,065 23,065 + Improvement Refunding RB Series 2003A 0.84%, 07/01/04 5,230 5,312 FLORIDA CAPITAL PROJECTS AUTH + RB (Capital Projects Loan Program - AAAE Airport Projects) 2001 Series I (Springfield, Missouri Loan) 1.09%, 06/01/04 3,480 3,525 FLORIDA DEV FINANCE CORP. +@ IDRB 1999 Series A1 (Vutec Corp Project) 1.35%, 01/07/04 1,680 1,680 +@ IDRB 1999 Series A2 (Schmitt Family Partnership Project) 1.35%, 01/07/04 2,000 2,000 +@ IDRB 1999 Series A3 (Sunshine State Christian Homes, Inc. Project) 1.25%, 01/07/04 1,260 1,260 +@ IDRB 1999 Series A4 (Central Farms, Ltd. Project) 1.35%, 01/07/04 950 950 +@ IDRB Enterprise Bond Program (Pioneer-Ram, Inc.) Series 1998 A3 1.35%, 01/07/04 1,070 1,070 FLORIDA HFA +~@ Homeowner Mortgage RB 2000 Series 4 TOB Series 2000 J 1.23%, 01/07/04 4,095 4,095 +@ Housing RB (Ashley Lake Park II Project) Series 1989J 1.13%, 01/07/04 10,800 10,800 +@ Housing RB 1996 Series F (Caribbean Key Apartments Project) 1.17%, 01/07/04 3,400 3,400 +@ Housing RB Series 1996P (Tiffany Club Apartments Project) 1.17%, 01/07/04 7,250 7,250 +@ Housing RB Series 1996U (Heron Park) 1.13%, 01/07/04 3,735 3,735 +@ Housing Refunding RB 1998 Series M (Ashley Lake Apartments) TOB Series PT-471 1.05%, 04/01/04 14,760 14,760 +@ Housing Refunding RB 2001 Series D (Vinings At Hampton Village) 1.20%, 01/07/04 10,800 10,800
See financial notes. 35 SCHWAB FLORIDA MUNICIPAL MONEY FUND PORTFOLIO HOLDINGS continued
ISSUER SECURITY TYPE, PROJECT, SERIES, FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) +@ M/F Guaranteed Mortgage RB (Forest Place Apartments Project) 1983 Series J 1.06%, 01/07/04 3,270 3,270 +@ M/F Guaranteed Mortgage RB 1983 Series K (Oaks At Regency Project) 1.15%, 01/07/04 6,925 6,925 +@ M/F Housing RB 1985 Series MM (Buena Vista Place Project) 1.06%, 01/07/04 10,000 10,000 +@ M/F Housing RB 1985 Series XX (Cameron Cove Apartments) 1.28%, 01/07/04 7,100 7,100 +@ M/F Housing Refunding RB (Reflections Apartments) Series 2001 K-A 1.17%, 01/07/04 12,500 12,500 +@ M/F Housing Refunding RB 1998 Series J (South Pointe Project) 1.15%, 01/07/04 5,500 5,500 +@ M/F Mortgage RB 2003 Series 0 (Wellesley Apartments) 1.13%, 01/07/04 7,940 7,940 +@ M/F Mortgage RB 2003 Series N (Pinnacle Pointe Apartments) 1.13%, 01/07/04 7,915 7,915 +@ M/F Mortgage RB 2003 Series P (Wexford Apartments) 1.13%, 01/07/04 8,035 8,035 +@ M/F Mortgage Refunding RB 2002 Series J-1 (Victoria Park Apartments) 1.25%, 01/07/04 10,370 10,370 +@ RB 1999 Series I-1 Heritage Pointe Apartments 1.13%, 01/07/04 9,500 9,500 +@ RB 1999 Series P Timberline Apartments 1.15%, 01/07/04 6,135 6,135 FLORIDA HIGHER EDUCATIONAL FACILITIES FINANCING AUTH +@ RB Series 2003 (St. Thomas University Project) 1.31%, 01/02/04 5,000 5,000 FLORIDA LOCAL GOVERNMENT FINANCE COMM + Pooled TECP Series 1994A 1.10%, 04/08/04 2,000 2,000 + Pooled TECP, 1998 Series B 0.95%, 01/16/04 2,989 2,989 FLORIDA MUNICIPAL POWER AGENCY +~@ Stanton Project Refunding RB, Series 1997 1.12%, 01/07/04 6,150 6,150 FLORIDA PORTS FINANCING COMM + RB (State Transportation Trust Fund), Series 1996 1.05%, 06/01/04 1,630 1,663 FLORIDA STATE BOARD OF EDUCATION +~@ Public Education Capital Outlay Bonds 1998 Series A 1.18%, 01/07/04 11,000 11,000 ~@ Public Education Capital Outlay Bonds 1998 Series E TOB Series 20000901 1.30%, 01/07/04 12,280 12,280 ~@ Public Education Capital Outlay Bonds 2001 Series I, TOB Series 235 1.30%, 01/07/04 4,715 4,715 +~@ Public Education Capital Outlay Bonds, 1999 Series C TOB Series 137 1.29%, 01/07/04 17,890 17,890 ~@ Public Education Capital Outlay Refunding Bonds, 2001 Series TOB Series 20010903 1.30%, 01/07/04 14,100 14,100 FORT PIERCE UTILITIES AUTH +~@ Utilities Refunding RB Series 2003 TOB Series 241 1.18%, 01/07/04 6,325 6,325
36 See financial notes. SCHWAB FLORIDA MUNICIPAL MONEY FUND
ISSUER SECURITY TYPE, PROJECT, SERIES, FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) GAINESVILLE +@ IDRB (Exactech, Inc.) Series 1997 1.30%, 01/07/04 2,700 2,700 +@ IDRB (Lifesouth Community Blood Centers, Inc. Project), Series 1999 1.20%, 01/07/04 5,665 5,665 GREATER ORLANDO AVIATION AUTH + Airport Facilites Subordinated TECP Series B 0.90%, 01/15/04 16,337 16,337 1.10%, 03/10/04 12,650 12,650 +~@ Airport Facilities RB Series 2002E 1.10%, 01/07/04 46,130 46,130 +@ Airport Facility RB (Flightsafety International Inc. Project) Series 2003A 1.35%, 01/07/04 8,900 8,900 GULF BREEZE +~@ Local Government Loan Program RB Series 1985B 1.10%, 01/07/04 34,500 34,500 +~@ Local Government Loan Program RB Series 1985C 1.10%, 01/07/04 2,070 2,070 HALIFAX HOSPITAL MEDICAL CENTER +@ RB (Florida Health Care Plan, Inc. Project) Series 1998 1.10%, 01/07/04 5,200 5,200 HILLSBOROUGH CNTY + Capital Improvement Program TECP, Series A 1.15%, 09/09/04 41,120 41,120 + Capital Improvement Program TECP, Series B 1.00%, 01/15/04 4,200 4,200 HILLSBOROUGH CNTY AVIATION AUTH + Airport Facilities Subordinated TECP, Series B 1.13%, 01/27/04 2,700 2,700 + Airport Facilities Subordinated TECP, Series D 1.00%, 01/15/04 2,000 2,000 +~@ Tampa International Airport RB 2003 Series A TOB Series PT-745 1.34%, 01/07/04 5,495 5,495 HILLSBOROUGH CNTY EDUCATIONAL FACILITIES AUTH +@ RB (Univ of Tampa Project) Series 2000 1.30%, 01/07/04 5,600 5,600 +@ HILLSBOROUGH CNTY IDA Educational Facilities RB (Berkeley Preparatory School, Inc. Project), Series 1999 1.20%, 01/07/04 4,670 4,670 +@ RB (Independent Day School Project) Series 2000 1.30%, 01/07/04 1,900 1,900 +@ RB Tampa Metropolitan Area Ymca Project), Series 2000 1.30%, 01/07/04 8,300 8,300 HILLSBOROUGH CNTY PORT AUTH + Tampa Port Auth. Special Refunding RB, Series 1995 0.99%, 06/01/04 2,000 2,045 JACKSONVILLE +@ Refunding IDRB (Pavillion Associates, Ltd.) Series 1996 1.10%, 01/07/04 4,540 4,540 JACKSONVILLE ECONOMIC DEV COMM +@ Educational Facilities RB Series 2002 (Episcopal High School Project) 1.25%, 01/07/04 5,800 5,800 +@ RB (Bolles School Project), Series 1999A 1.15%, 01/07/04 3,230 3,230 +@ Refunding RB (YMCA of Florida's First Coast Project) Series 2003 1.25%, 01/07/04 5,000 5,000 JACKSONVILLE ELECTRIC AUTH ~@ Electric System RB Series Three 2000A TOB Series 2000FF 1.21%, 01/07/04 9,945 9,945
See financial notes. 37 SCHWAB FLORIDA MUNICIPAL MONEY FUND PORTFOLIO HOLDINGS continued
ISSUER SECURITY TYPE, PROJECT, SERIES, FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) + Water and Sewer System RB 1997 Series B 1.09%, 10/01/04 2,025 2,091 ~@ Water and Sewer System RB, 2000 Series B 1.10%, 01/07/04 4,450 4,450 +~@ Water and Sewer System Subordinated RB, 2003 Series B 1.17%, 01/07/04 18,600 18,600 JACKSONVILLE HEALTH FACILITIES AUTH +@ Health Facilities RB (River Garden 1.20%, 01/07/04 3,415 3,415 +@ Hospital RB Series 2003C 1.18%, 01/02/04 300 300 +@ Hospital Refunding RB (Genesis Rehabilitation Hospital Project) Series 1996 1.30%, 01/02/04 700 700 JACKSONVILLE PORT AUTH +~@ 1996 Port Facility RB TOB 960902 1.18%, 01/07/04 10,100 10,100 LAKE SHORE HOSPITAL AUTH +@ Health Facility RB (Lake Shore Hospital) Series 1991 1.20%, 01/07/04 3,200 3,200 LAKELAND +@ Educational Facilities RB (Florida Southern College Project), Series 1999 1.20%, 01/07/04 30,000 30,000 LEE CNTY +~@ Airport RB, Series 2000A TOB Series 2001-811 1.34%, 01/07/04 4,958 4,958 +@ Educational Facilities RB (Canterbury School Project) Series 1999 1.20%, 01/07/04 6,000 6,000 LEE CNTY HFA +@ M/F Housing RB Series 1999A (Crossings At Cape Coral Apartments Project) 1.20%, 01/07/04 6,160 6,160 +@ M/F Housing RB Series 2002A (University Club Apartments) 1.32%, 01/07/04 6,700 6,700 LEE CNTY IDA +@ Healthcare Facilities RB (Cypress Cove At Healthpark Project) Series 2002B 1.05%, 01/07/04 2,850 2,850 LEON CNTY SD + Sales Tax RB Series 2003 1.50%, 07/01/04 5,590 5,602 MANATEE CNTY + Public Utilities Refunding and Improvement RB, Series 2003 1.09%, 10/01/04 1,430 1,440 MANATEE CNTY HFA +@ M/F Housing RB Series 2000 (Centre Court Apartments Project) 1.15%, 01/07/04 3,760 3,760 +@ M/F Housing RB Series 2000B (Sabal Palm Harbor Apartments Project) 1.20%, 01/07/04 3,880 3,880 +@ M/F Housing RB Series 2002A (La Mirada Gardens Project) 1.32%, 01/07/04 4,000 4,000 +@ M/F Mortgage Refunding RB (Hampton Court) Series 1989A 1.15%, 01/07/04 3,635 3,635 +@ M/FHousing RB Series 2000A (Sabal Palm Harbor Apartments Project) 1.20%, 01/07/04 7,270 7,270 MARION CNTY IDA +@ M/F Housing Refunding RB (Chambrel At Pinecastle Project) Series 2002 1.27%, 01/07/04 7,741 7,741
38 See financial notes. SCHWAB FLORIDA MUNICIPAL MONEY FUND
ISSUER SECURITY TYPE, PROJECT, SERIES, FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) MARTIN CNTY + GO Refunding Bonds Series 2003 0.93%, 02/01/04 1,970 1,972 MIAMI + GO Refunding Bonds, Series 2003 0.83%, 07/01/04 1,760 1,770 MIAMI HEALTH FACILITIES AUTH. +@ Health Facilities RB (Miami Jewish Home and Hospital For the Aged) Series 1996 1.20%, 01/07/04 7,700 7,700 MIAMI-DADE CNTY + Aviation TECP Series A Miami International Airport 1.10%, 01/07/04 3,025 3,025 1.06%, 01/08/04 9,033 9,033 1.01%, 02/09/04 7,507 7,507 + Aviation TECP Series B Miami International Airport 1.09%, 01/08/04 7,604 7,604 MIAMI-DADE CNTY IDA +@ IDRB (Airbus Service Co) Series 1998A 1.30%, 01/07/04 8,880 8,880 +~@ IDRB (Airis Miami LLC Project) Series 1999A 1.27%, 01/07/04 15,400 15,400 +@ IDRB (Arctic Partners Project) Series 1999 1.35%, 01/07/04 2,440 2,440 +@ IDRB (Badia Spices, Inc. Project) 1.30%, 01/07/04 3,575 3,575 +@ IDRB (Fine Art Lamps Project), Series 1998 1.30%, 01/07/04 1,700 1,700 +@ RB (Belen Jesuit Preparatory School Project), Series 1999 1.20%, 01/07/04 6,960 6,960 +@ RB (Gulliver Schools Project), Series 2000 1.30%, 01/07/04 3,900 3,900 MIAMI-DADE CNTY SD TAN Series 2003 1.04%, 06/28/04 45,000 45,210 NASSAU CNTY +@ Pollution Control Private Activity RB Series 1999 (Rayonier Project) 1.12%, 01/07/04 7,515 7,515 OCEAN HIGHWAY & PORT AUTH +@ RB Series 1990 1.25%, 01/07/04 10,200 10,200 OKEECHOBEE CNTY +@ Exempt Facility RB (Okeechobee Landfill Project) Series 1999 1.25%, 01/07/04 15,000 15,000 ORANGE CNTY + Sales Tax RB, Series 2002A 1.14%, 01/01/05 4,100 4,175 + Solid Waste Facility Refunding RB Series 2003 1.10%, 10/01/04 2,745 2,763 ORANGE CNTY HEALTH FINANCE AUTH +@ RB Series 1992 (Adventist Health System/Sunbelt, Inc.) 1.30%, 01/07/04 3,200 3,200 + Refunding Program RB (Pooled Hospital Loan Program) Series 1985 1.08%, 01/05/04 19,900 19,900 1.13%, 01/29/04 23,900 23,900 1.12%, 01/30/04 20,000 20,000 ORANGE CNTY HFA +@ M/F Guaranteed Mortgage Refunding RB 1989 Series A (Sundown Associates II Project) 0.99%, 01/07/04 4,100 4,100 +@ M/F Housing RB (Glenn On Millenia Boulevard) 2001 Series C 1.13%, 01/07/04 3,355 3,355 +@ M/F Housing RB 2000 Series E (Windsor Pines Project) 1.20%, 01/07/04 3,200 3,200 +@ M/F Housing Refunding RB (Heather Glen Apts) Series 2001E 1.08%, 01/07/04 8,300 8,300
See financial notes. 39 SCHWAB FLORIDA MUNICIPAL MONEY FUND PORTFOLIO HOLDINGS continued
ISSUER SECURITY TYPE, PROJECT, SERIES, FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) +@ M/F Housing Refunding RB (Smokewood/Sun Key Apartments Project) 1992 Series A 1.15%, 01/07/04 19,950 19,950 ORANGE CNTY IDA +@ IDRB (Central Florida Kidney Centers Project) Series 2000 1.20%, 01/07/04 5,000 5,000 +@ IDRB (Central Florida YMCA Project) Series 2002A 1.30%, 01/07/04 4,700 4,700 +@ IDRB (Goodwill Industries of Central Florida Project) Series 1999 1.20%, 01/07/04 6,000 6,000 +@ RB (Center For Drug Free Living Project) Series 1999 1.15%, 01/07/04 9,360 9,360 ORANGE CNTY SD +~@ COP Series 2000B 1.30%, 01/02/04 4,300 4,300 TAN Series 2003 1.07%, 09/16/04 30,000 30,196 ORLANDO & ORANGE CNTY EXPRESSWAY AUTH +~@ Expressway Refunding RB Series 2003 C-4 1.20%, 01/07/04 5,500 5,500 ORLANDO UTILITIES COMMISSION +@ Water & Electric RB Series 2002B 1.10%, 01/07/04 11,500 11,500 ~ Water & Electric Revenue BAN, 1999 Series A 1.05%, 01/05/04 13,900 13,900 PALM BEACH CNTY +@ Airport RB (Galaxy Aviation Project) Series 2000A 1.30%, 01/07/04 6,000 6,000 +@ IDBR (South Florida Blood Banks Project) Series 2002 1.15%, 01/07/04 8,940 8,940 +@ IDRB (Palm Beach Day School Project) Series 1999 1.20%, 01/07/04 7,000 7,000 +@ RB (Benjamin Private School Project) Series 2003 1.25%, 01/07/04 4,500 4,500 +@ RB (Comprehensive Alcoholism Rehabilitation Programs Project) Series 2000 1.15%, 01/07/04 5,300 5,300 +@ RB (Norton Gallery & School of Art) Series 1995 1.15%, 01/07/04 2,500 2,500 +@ RB (Raymond F. Kravis Center for the Performing Arts) Series 2002 1.20%, 01/07/04 100 100 +@ RB (Zoological Society of the Palm Beaches Project) Series 2001 1.30%, 01/07/04 5,500 5,500 +@ Student Housing Refunding RB Series 2002 (Palm Beach Comm. College Foundation Project) 1.30%, 01/07/04 2,900 2,900 PALM BEACH CNTY EDUCATIONAL FACILITIES AUTH +@ Educational Facilities RB (Lynn University Project) Series 2001 1.25%, 01/07/04 3,490 3,490 PALM BEACH CNTY HEALTH FACILITES AUTH + Refunding Program RB Series 1985 (Pooled Hospital Loan Program) 1.10%, 02/05/04 4,800 4,800 PALM BEACH CNTY HFA +@ M/F Housing RB Series 1999A (Azalea Place Apartments Project) 1.20%, 01/07/04 3,000 3,000 +@ M/F Housing Refunding RB (Spinnaker Landing Apartments) Series 1998 1.20%, 01/07/04 2,845 2,845 PALM BEACH CNTY SD +~@ COP Series 2002B 1.17%, 01/07/04 22,550 22,550
40 See financial notes. SCHWAB FLORIDA MUNICIPAL MONEY FUND
ISSUER SECURITY TYPE, PROJECT, SERIES, FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) PASCO CNTY + Solid Waste Disposal and Resource Recovery System RB Series 1998 0.97%, 04/01/04 3,380 3,420 PASCO CNTY SD +~@ COP Series 1996 1.25%, 01/07/04 44,000 44,000 PINELLAS CNTY HFA +~@ S/F Housing RB 1999 Series B-1 TOB Series Pt-352 1.33%, 01/07/04 3,220 3,220 PINELLAS CNTY IDA +@ IDRB (H & S Swansons Tool Company Project) Series 2001 1.30%, 01/07/04 3,785 3,785 +@ IDRB (Restorative Care of America Project) Series 2001 1.35%, 01/07/04 1,745 1,745 PINELLAS CNTY SD TAN Series 2003 1.04%, 06/30/04 21,000 21,100 1.06%, 06/30/04 47,000 47,216 POLK CNTY IDA +@ IDRB (Juice Bowl Products Project) Series 2000 1.30%, 01/07/04 2,170 2,170 +@ IDRB (Pavermodule) Series 1998 1.30%, 01/07/04 3,310 3,310 SARASOTA CNTY +@ RB (Sarasota Family YMCA Project), Series 1999 1.15%, 01/07/04 2,810 2,810 SEMINOLE CNTY IDA +@ IDRB (Amrhein Family Limited Partnership Project) Series 2001 1.25%, 01/07/04 4,420 4,420 SOUTHEAST VOLUSIA HOSPITAL DISTRICT +@ RB (Bert Fish Medical Center) Series 1995 1.35%, 01/07/04 11,405 11,405 ST PETERSBURG +@ Capital Improvement RB (Airport & Golf Course Project) Series 1997B 1.20%, 01/07/04 2,245 2,245 +@ Capital Improvement RB (Airport Project) Series 1997C 1.30%, 01/07/04 355 355 SUMTER CNTY IDA +@ IDRB (Robbins Mfg Co Project), Series 1997 1.30%, 01/07/04 1,500 1,500 SUNSHINE STATE GOVT FINANCE COMM +~ TECP Series 1998A 1.13%, 01/07/04 9,500 9,500 TALLAHASSEE-LEON CNTY CIVIC CENTER AUTH +@ Capital Improvement RB Series 1998A 1.20%, 01/07/04 1,290 1,290 TAMPA +@ Educational Facilities RB (Pepin Academy of Tampa Project) Series 2002 1.28%, 01/07/04 3,990 3,990 +@ Health Care Facilities RB (Lifelink Foundation) Series 1997 1.20%, 01/07/04 4,900 4,900 +~@ Occupational License Tax Refunding Bonds Series 2002C 1.10%, 01/07/04 500 500 TAMPA BAY WATER AUTH +~@ Utility System Refunding & Improvement RB Series 2001A, TOB Series 2001N 1.19%, 01/07/04 5,200 5,200 +@ Utility System RB Series 2002 1.35%, 01/07/04 600 600
See financial notes. 41 SCHWAB FLORIDA MUNICIPAL MONEY FUND PORTFOLIO HOLDINGS continued
ISSUER SECURITY TYPE, PROJECT, SERIES, FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) VOLUSIA CNTY EDUCATIONAL FACILITIES AUTH +@ Educational Facilities RB (Bethune-Cookman College Project) Series 2001 1.15%, 01/07/04 10,650 10,650 VOLUSIA CNTY HEALTH FACILITIES AUTH +@ Hospital RB (Southwest Volusia Healthcare Corp) Series 1994A 1.15%, 01/07/04 8,590 8,590 WEST ORANGE HEALTHCARE DISTRICT +@ RB Series 1999B 1.22%, 01/07/04 10,900 10,900 --------- 1,651,819 INDIANA 0.3% INDIANA HFA +@ S/F Mortgage RB Series 2002B TOB Series 2002 A45 1.26%, 01/07/04 5,065 5,065 KENTUCKY 0.7% KENTUCKY HOUSING CORP. +@ Housing RB Series 1998B TOB Series 1998O 1.05%, 07/29/04 11,995 11,995 MASSACHUSETTS 2.6% CLINTON Unlimited Tax BAN 2003 1.20%, 02/06/04 5,000 5,004 LAWRENCE School BAN Series 2003 1.17%, 12/23/04 15,000 15,120 MILTON BAN 2003 0.97%, 08/06/04 15,000 15,069 NASHOBA VALLEY TECHNICAL HIGH SD BAN 2003 1.02%, 08/12/04 10,000 10,044 WOBURN BAN 2003 0.95%, 07/16/04 1,000 1,003 --------- 46,240 MICHIGAN 0.0% WAYNE CNTY +~@ Airport Refunding RB (Detroit Metropolitan Wayne Cnty Airport) Series 1996B 1.11%, 01/07/04 1,000 1,000 PENNSYLVANIA 0.0% DELAWARE VALLEY REGIONAL FINANCE AUTH +~@ Local Government RB Series 1998A PT1651 1.29%, 01/07/04 870 870 PUERTO RICO 2.4% PUERTO RICE PUBLIC BUILDINGS AUTH +~@ Government Facilities RB Series B TOB Series 211 1.26%, 01/07/04 13,995 13,995 PUERTO RICO ELECTRIC POWER AUTH +~@ Power RB Series HH TOB Series 164 1.26%, 01/07/04 9,200 9,200 PUERTO RICO HWY & TRANSP AUTH +~@ Highway RB Series Y TOB Series PA-605 1.22%, 01/07/04 7,800 7,800 +~@ Subordinated Transportation RB Series 2003 TOB Series 247 1.26%, 01/07/04 5,200 5,200 PUERTO RICO PUBLIC BUILDINGS AUTH +~@ Refunding RB Series L TOB Series 56 1.26%, 01/07/04 6,545 6,545 --------- 42,740
42 See financial notes. SCHWAB FLORIDA MUNICIPAL MONEY FUND
ISSUER SECURITY TYPE, PROJECT, SERIES, FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) SOUTH CAROLINA 0.2% MYRTLE BEACH + Waterworks and Sewer System Refunding RB Series 2003 1.16%, 03/01/04 4,160 4,179 TEXAS 0.8% GRAND PRAIRIE SPORTS FACILITIES DEV CORP. +~@ Sales Tax Refunding RB, Series 2003-B 1.23%, 09/15/04 10,040 10,040 TEXAS +@ Veterans' Housing Assistance Program Fund II Series 2002 A-2 Bonds 1.17%, 01/07/04 4,000 4,000 --------- 14,040 WASHINGTON 0.5% ENERGY NORTHWEST +~@ Project #1 Refunding Electric RB Series 2002A TOB Series PT-615 1.28%, 01/01/04 2,700 2,700 +~@ Project No. 1 Refunding Electric RB, Series 2002A TOB Series 242 1.29%, 01/07/04 6,295 6,295 --------- 8,995
END OF INVESTMENTS. For totals, please see the first page of holdings for this fund. See financial notes. 43 SCHWAB FLORIDA MUNICIPAL MONEY FUND Statement of ASSETS AND LIABILITIES As of December 31, 2003. All numbers x 1,000 except NAV. ASSETS -------------------------------------------------------------------------------- Investments, at value $1,798,943 a Cash 828 Interest 4,459 Prepaid expenses + 44 -------------- TOTAL ASSETS 1,804,274 LIABILITIES -------------------------------------------------------------------------------- Payables: Dividends to shareholders 21 Investment adviser and administrator fees 25 Transfer agent and shareholder service fees 27 Federal and state taxes 58 Accrued expenses + 68 -------------- TOTAL LIABILITIES 199 NET ASSETS -------------------------------------------------------------------------------- TOTAL ASSETS 1,804,274 TOTAL LIABILITIES - 199 -------------- NET ASSETS $1,804,075 NET ASSETS BY SOURCE Capital received from investors 1,804,075 NET ASSET VALUE (NAV) SHARES NET ASSETS / OUTSTANDING = NAV $1,804,075 1,803,987 $1.00
Unless stated, all numbers x 1,000. a The amortized cost for the fund's securities was $1,798,943. During the reporting period, the fund had $2,485,595 in transactions with other SchwabFunds(R). FEDERAL TAX DATA ------------------------------------------------ COST BASIS OF PORTFOLIO $1,798,943 CAPITAL LOSSES UTILIZED $130 RECLASSIFICATIONS: Net realized capital gains ($169) Reclassified as: Capital received from investors $111 Net investment income not yet distributed $58
TAX DESIGNATION (UNAUDITED): The fund hereby designates $35 as a capital gain dividend for the fiscal year ended December 31, 2003. 44 See financial notes. SCHWAB FLORIDA MUNICIPAL MONEY FUND Statement of OPERATIONS For January 1, 2003 through December 31, 2003. All numbers x 1,000. INVESTMENT INCOME -------------------------------------------------------------------------------- Interest $12,110 NET REALIZED GAINS AND LOSSES -------------------------------------------------------------------------------- Net realized gains on investments sold 299 EXPENSES -------------------------------------------------------------------------------- Investment adviser and administrator fees 4,130 a Transfer agent and shareholder service fees 4,924 b Trustees' fees 34 c Custodian and portfolio accounting fees 87 Professional fees 25 Registration fees 32 Shareholder reports 33 Federal and state taxes 58 Other expenses + 16 ----------- Total expenses 9,339 Expense reduction - 2,332 d ----------- NET EXPENSES 7,007 INCREASE IN NET ASSETS FROM OPERATIONS -------------------------------------------------------------------------------- TOTAL INVESTMENT INCOME 12,110 NET EXPENSES - 7,007 ----------- NET INVESTMENT INCOME 5,103 NET REALIZED GAINS + 299 ----------- INCREASE IN NET ASSETS FROM OPERATIONS $5,402
Unless stated, all numbers x 1,000. a Calculated on a graduated basis as a percentage of average daily net assets: 0.38% of the first $1 billion, 0.35% over $1 billion, 0.32% over $10 billion, 0.30% over $20 billion and 0.27% over $40 billion. b Calculated as a percentage of average daily net assets: for transfer agent services, 0.25% of the fund's assets; for shareholder services, 0.20% of the fund's assets. These fees are paid to Charles Schwab & Co. c For the fund's independent trustees only. d This reduction was made by the investment adviser (CSIM). It reflects a guarantee by CSIM and the transfer agent and shareholder service agent (Schwab) to limit the annual operating expenses of this fund through at least April 30, 2004, to 0.66% of average daily net assets. Prior to May 1, 2003, this limit was 0.59%. These limits do not include interest, taxes and certain non-routine expenses. See financial notes. 45 SCHWAB FLORIDA MUNICIPAL MONEY FUND Statements of CHANGES IN NET ASSETS For the current and prior report periods. All numbers x 1,000.
OPERATIONS -------------------------------------------------------------------------------- 1/1/03-12/31/03 1/1/02-12/31/02 Net investment income $5,103 $8,632 Net realized gains or losses + 299 (31) ---------------------------------- INCREASE IN NET ASSETS FROM OPERATIONS 5,402 8,601 DISTRIBUTIONS PAID a -------------------------------------------------------------------------------- Dividends from net investment income 5,161 8,632 b TRANSACTIONS IN FUND SHARES c -------------------------------------------------------------------------------- Shares sold 4,082,999 3,528,005 Shares reinvested 5,010 8,424 Shares redeemed + (4,069,070) (3,269,159) ---------------------------------- NET TRANSACTIONS IN FUND SHARES 18,939 267,270 NET ASSETS -------------------------------------------------------------------------------- Beginning of period 1,784,895 1,517,656 Total increase + 19,180 267,239 d ---------------------------------- END OF PERIOD $1,804,075 $1,784,895
Unless stated, all numbers x 1,000. a For the current year, the fund elected not to distribute realized capital gains and accordingly paid federal and state taxes on such gains in the amount of $58. b UNAUDITED The fund hereby designates 100% of its dividends for the current report period as tax-exempt interest dividends. c Because all transactions in this section took place at $1.00 per share, figures for share quantities are the same as for dollars. d Represents the changes in net assets from operations plus the changes in value of transactions in fund shares, minus distributions paid. 46 See financial notes. Schwab Massachusetts Municipal Money Fund Financial Statements FINANCIAL HIGHLIGHTS
5/16/03 1- 12/31/03 -------------------------------------------------------------------------------- PER-SHARE DATA ($) -------------------------------------------------------------------------------- Net asset value at beginning of period 1.00 ------------------------------- Income from investment operations: Net investment income 0.00 2 ------------------------------- Less distributions: Dividends from net investment income (0.00) 2 ------------------------------- Net asset value at end of period 1.00 ------------------------------- Total return (%) 00.30 3 RATIOS/SUPPLEMENTAL DATA (%) -------------------------------------------------------------------------------- Ratios to average net assets: Net operating expenses 0.51 4 Gross operating expenses 0.86 4 Net investment income 0.48 4 Net assets, end of period ($ x 1,000,000) 363
1 Commencement of operations. 2 Per share amount was less than $0.01. 3 Not annualized. 4 Annualized. Also, please refer to Statement of Operations for additional information on expense waivers. See financial notes. 47 SCHWAB MASSACHUSETTS MUNICIPAL MONEY FUND PORTFOLIO HOLDINGS as of December 31, 2003 This section shows all the securities in the fund's portfolio and their market value, as of the report date. We use the symbols below to designate certain characteristics: + Credit-enhanced security ~ Liquidity-enhanced security @ Variable-rate security For fixed-rate obligations, the rate shown is the effective yield at the time of purchase. For variable-rate obligations, the rate shown is the rate as of the report date. For variable-rate obligations with scheduled maturities greater than 397 days, the maturity shown is the later of the next interest rate change date or demand date. For variable-rate obligations with scheduled maturities less than 397 days, the maturity shown is the earlier of the next interest rate change date or demand date. For variable-rate obligations without demand features, the maturity shown is the next interest rate change date.
COST VALUE HOLDINGS BY CATEGORY ($x1,000) ($x1,000) 99.6% MUNICIPAL SECURITIES 361,083 361,083 99.6% TOTAL INVESTMENTS 361,083 361,083 0.4% OTHER ASSETS AND LIABILITIES 1,447 ----------------------------------------------------- 100.0% TOTAL NET ASSETS 362,530
ISSUER SECURITY TYPE, PROJECT; SERIES, FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) MUNICIPAL SECURITIES 99.6% of Net Assets MASSACHUSETTS 98.3% ACUSHNET Unlimited Tax BAN Series 2003 1.75%, 08/13/04 5,864 5,892 AYER BAN Series 2003 0.89%, 06/24/04 5,063 5,076 CANTON BAN Unlimited Tax 0.90%, 01/29/04 5,000 5,004 CHICOPEE 2003 BAN 1.18%, 11/19/04 3,000 3,021 DIGHTON-REHOBOTH REGIONAL SD 2003 BAN 1.00%, 06/04/04 5,000 5,010 1.03%, 06/04/04 5,000 5,015 EVERETT BAN 2003 1.07%, 09/10/04 5,000 5,023 LAWRENCE School BAN Series 2003 1.17%, 12/23/04 10,000 10,080 MASSACHUSETTS GO Bonds Consolidated Loan Series 1999C 1.10%, 09/01/04 2,000 2,052 GO Bonds Consolidated Loan Series 2003B 0.98%, 08/01/04 3,000 3,018 +~@ GO Bonds Consolidated Loan of 1998 Series C TOB Series 2002C 1.04%, 01/07/04 3,485 3,485 ~@ GO Bonds Consolidated Loan of 2000 Series C TOB Series PA-793 1.24%, 01/07/04 3,000 3,000 GO Bonds Consolidated Loan of 2002 Series A 1.15%, 01/01/05 2,500 2,571 ~@ GO Refunding Bonds Series 2001B 1.25%, 01/07/04 4,750 4,750 ~@ GO Refunding Bonds Series 2001C 1.25%, 01/07/04 6,600 6,600 GO Refunding Bonds Series 2003B 1.14%, 12/01/04 3,000 3,078 ~ TECP Series G 0.98%, 01/14/04 5,600 5,600
48 See financial notes. SCHWAB MASSACHUSETTS MUNICIPAL MONEY FUND
ISSUER SECURITY TYPE, PROJECT, SERIES, FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) MASSACHUSETTS BAY TRANSIT AUTH +~@ General Transportation System Bonds Series 1999A TOB Series PT-1218 1.24%, 01/07/04 1,000 1,000 MASSACHUSETTS DEV FINANCE AGENCY +@ Education RB Rivers School Issue, Series 2002 1.25%, 01/07/04 5,000 5,000 +@ M/F Housing RB (Salem Heights Apts) Series 2003A 1.32%, 01/07/04 6,000 6,000 +@ M/F Housing RB Midway Studios Project Series 2003A 1.35%, 01/07/04 5,000 5,000 +@ RB (Assumption College) Series 2002A 1.15%, 01/07/04 10,000 10,000 +~@ RB (Boston Univ) Series R-3 1.25%, 01/07/04 9,100 9,100 +@ RB (Dean College) Series 1999 1.30%, 01/07/04 2,030 2,030 +@ RB (Judge Rotenberg Center) Series 2003 1.13%, 01/07/04 4,000 4,000 +~@ RB (Wentworth Institute of Technology) Series 2000 1.27%, 01/07/04 2,600 2,600 +@ RB Gordon College Issue, Series 2002 1.12%, 01/07/04 5,000 5,000 +@ RB You Inc. Issue Series 2002 1.15%, 01/07/04 5,000 5,000 +@ Solid Waste Disposal RB Waste Management Project Series 2003 1.15%, 01/07/04 7,500 7,500 + TECP Program 3 0.95%, 01/21/04 3,000 3,000 0.95%, 02/06/04 3,500 3,500 MASSACHUSETTS HEALTH & EDUCATION FACILITIES AUTH +~@ RB (Baystate Medical Center) Series D TOB Series 2001-834 1.28%, 01/07/04 25,000 25,000 @ RB (MIT) Series 2001 J-1 1.15%, 01/07/04 2,000 2,000 ~@ RB (MIT) Series K TOB Series 2002D 1.13%, 01/07/04 14,000 14,000 @ RB (Capital Assets Program) Series 1985D 1.26%, 01/02/04 20 20 +@ RB Boston Home Issue Series 2002B 1.27%, 01/07/04 5,000 5,000 +@ RB Endicott College Issue Series B 1.30%, 01/07/04 3,800 3,800 +~@ RB Hallmark Health System Issue Series 1998B 1.20%, 01/07/04 13,450 13,450 +@ RB Sherrill House Issue, Series A-1 1.22%, 01/07/04 10,000 10,000 @ RB Williams College Issue 1993E 1.08%, 01/07/04 10,205 10,205 MASSACHUSETTS HFA +~@ M/F Housing Refunding RB Series 1995A TOB Series PT-162 1.24%, 01/07/04 5,000 5,000 MASSACHUSETTS MUNI WHOLESALE ELECTRIC CO +~@ Power Supply Project RB Series A Nuclear Project No. 4, 5, 6 TOB Series 2001-674 1.23%, 01/07/04 8,000 8,000 MASSACHUSETTS PORT AUTH + Refunding RB Series 2003C 1.02%, 07/01/04 2,200 2,211 + TECP Series 2003A 1.05%, 01/09/04 1,000 1,000 MASSACHUSETTS STATE IFA ~@ RB (Whitehead Institute For Biomedical Research) Series 1995 1.08%, 01/07/04 5,200 5,200 +@ RB Williston Northampton School Issue Series B 1.25%, 01/07/04 5,000 5,000
See financial notes. 49 SCHWAB MASSACHUSETTS MUNICIPAL MONEY FUND PORTFOLIO HOLDINGS continued
ISSUER SECURITY TYPE, PROJECT, SERIES, FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) MASSACHUSETTS TURNPIKE AUTH +~@ Western Turnpike RB Series 1997A TOB Series N 1.13%, 01/07/04 10,000 10,000 MASSACHUSETTS WATER POLLUTION ABATEMENT TRUST ~@ Pool Program Bonds Series 5 TOB Series PT-1185 1.24%, 01/07/04 5,000 5,000 ~@ Water Pollution Abatement RB (MWRA) Subordinate Series 1999A TOB Series 1999N 1.18%, 01/07/04 15,000 15,000 MASSACHUSETTS WATER RESOURCES AUTH + TECP Series 1994 1.05%, 01/09/04 5,000 5,000 1.03%, 02/06/04 10,000 10,000 MEDFORD BAN 2003 1.10%, 09/10/04 3,000 3,018 MILTON BAN 2003 0.97%, 08/06/04 10,000 10,046 NASHOBA VALLEY TECHNICAL HIGH SD BAN 2003 1.02%, 08/12/04 5,000 5,022 OLD ROCHESTER REGIONAL SD Unlimited Tax BAN 2003 1.18%, 10/15/04 8,200 8,252 PEABODY BAN Series 2003 1.05%, 10/01/04 3,600 3,625 WOBURN BAN 2003 0.95%, 07/16/04 7,000 7,021 BAN Series 2003 0.95%, 06/11/04 10,000 10,035 WORCESTER REGIONAL TRANSIT AUTH + RAN Series 2003 0.88%, 06/30/04 7,560 7,583 ----------- 356,493 PUERTO RICO 1.3% GOVERNMENT DEVELOPMENT BANK OF PUERTO RICO TECP Series 1997 0.95%, 02/03/04 4,590 4,590
END OF INVESTMENTS. For totals, please see the first page of holdings for this fund. 50 See financial notes. SCHWAB MASSACHUSETTS MUNICIPAL MONEY FUND Statement of ASSETS AND LIABILITIES As of December 31, 2003. All numbers x 1,000 except NAV. ASSETS ------------------------------------------------------------------------------- Investments, at market value $361,083 a Cash 155 Interest 1,356 Prepaid expenses + 1 ------------ TOTAL ASSETS 362,595 LIABILITIES ------------------------------------------------------------------------------- Payables: Dividends to shareholders 5 Investment adviser and administrator fees 23 Transfer agent and shareholder service fees 4 Accrued expenses + 33 ------------ TOTAL LIABILITIES 65 NET ASSETS ------------------------------------------------------------------------------- TOTAL ASSETS 362,595 TOTAL LIABILITIES - 65 ------------ NET ASSETS $362,530 NET ASSETS BY SOURCE Capital received from investors 362,532 Net realized capital losses (2) NET ASSET VALUE (NAV) SHARES NET ASSETS / OUTSTANDING = NAV $362,530 362,532 $1.00
Unless stated, all numbers x 1,000. a The amortized cost for the fund's securities was $361,083. During the reporting period, the fund had $489,639 in transactions with other SchwabFunds(R). FEDERAL TAX DATA ---------------------------------------- COST BASIS OF PORTFOLIO $361,083 UNUSED CAPITAL LOSSES: Expires 12/31 of: Loss amount: 2011 $2
See financial notes. 51 SCHWAB MASSACHUSETTS MUNICIPAL MONEY FUND Statement of OPERATIONS For January 1, 2003 through December 31, 2003. All numbers x 1,000. INVESTMENT INCOME ------------------------------------------------------------------------------- Interest $2,188 NET REALIZED GAINS AND LOSSES ------------------------------------------------------------------------------- Net realized losses on investments sold (2) EXPENSES ------------------------------------------------------------------------------- Investment adviser and administrator fees 846 a Transfer agent and shareholder service fees 1,002 b Trustees' fees 17 c Custodian and portfolio accounting fees 20 Professional fees 12 Registration fees 3 Shareholder reports 18 Other expenses + 5 ------------ Total expenses 1,923 Expense reduction - 798 d ------------ NET EXPENSES 1,125 INCREASE IN NET ASSETS FROM OPERATIONS ------------------------------------------------------------------------------- TOTAL INVESTMENT INCOME 2,188 NET EXPENSES - 1,125 ------------ NET INVESTMENT INCOME 1,063 NET REALIZED LOSSES (2) ------------ INCREASE IN NET ASSETS FROM OPERATIONS $1,061
Unless stated, all numbers x 1,000. a Calculated on a graduated basis as a percentage of average daily net assets: 0.38% of the first $1 billion, 0.35% over $1 billion, 0.32% over $10 billion, 0.30% over $20 billion and 0.27% over $40 billion. b Calculated as a percentage of average daily net assets: for transfer agent services, 0.25% of the fund's assets; for shareholder services, 0.20% of the fund's assets. These fees are paid to Charles Schwab & Co. c For the fund's independent trustees only. d This reduction consisted of two components. A reduction of $588, which reduced the fund's annualized operating expense ratio (OER) by 0.26%, was made by the investment adviser (CSIM) to reflect a guarantee by CSIM and the transfer agent and shareholder service agent (Schwab) to limit the annual OER of this fund through at least April 30, 2004, to 0.60% of average daily net assets. This limit doesn't include interest, taxes and certain non-routine expenses. Also, CSIM voluntarily waived an additional $210 of the fund's expenses, which reduced the fund's annualized OER by an additional 0.09%. The combination of these two waivers resulted in a net annualized OER for the period of 0.51%. 52 See financial notes. SCHWAB MASSACHUSETTS MUNICIPAL MONEY FUND Statements of CHANGES IN NET ASSETS For the current report period only. Because the fund commenced operations on May 16, 2003, it has no prior report period. All numbers x 1,000. OPERATIONS ------------------------------------------------------------------------------ 5/16/03-12/31/03 Net investment income $1,063 Net realized losses (2) ---------------------------------- INCREASE IN NET ASSETS FROM OPERATIONS 1,061 DISTRIBUTIONS PAID ------------------------------------------------------------------------------ Dividends from net investment income 1,063 a TRANSACTIONS IN FUND SHARES b ------------------------------------------------------------------------------ Shares sold 1,001,230 Shares reinvested 1,047 Shares redeemed + (639,745) ---------------------------------- NET TRANSACTIONS IN FUND SHARES 362,532 SHARES OUTSTANDING AND NET ASSETS ------------------------------------------------------------------------------ Beginning of period -- Total increase + 362,530 c ---------------------------------- END OF PERIOD $362,530
Unless stated, all numbers x 1,000. UNAUDITED a The fund hereby designates 100% of its dividends for the current report period as tax-exempt interest dividends. b Because all transactions in this section and in "Shares outstanding and net assets" took place at $1.00 a share, figures for share quantities are the same as for dollars. c Represents the changes in net assets from operations plus the changes in value of transactions in fund shares, minus distributions paid. See financial notes. 53 SCHWAB MUNICIPAL MONEY FUNDS FINANCIAL NOTES BUSINESS STRUCTURE OF THE FUNDS EACH OF THE FUNDS DISCUSSED IN THIS REPORT IS A SERIES OF THE CHARLES SCHWAB FAMILY OF FUNDS(TM), A NO-LOAD, OPEN-END MANAGEMENT INVESTMENT COMPANY. The company is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended. The sidebar shows the funds in this report and their trust. THE SCHWAB NEW YORK MUNICIPAL MONEY FUND OFFERS TWO SHARE CLASSES : Sweep Shares and Value Advantage Shares. Shares of each class represent interests in the same portfolio, but each class has different expenses and investment minimums. The Schwab New Jersey Municipal Money, Pennsylvania Municipal Money, Florida Municipal Money and Massachusetts Funds each offers one share class. Shares are bought and sold at $1.00 per share. Each share has a par value of 1/1,000 of a cent, and the trust may issue as many shares as necessary. FUND OPERATIONS Most of the funds' investments are described in the fund-by-fund sections earlier in this report. However, there are certain other investments and policies that may affect a fund's financials. The most significant of these are described below. Other policies concerning the funds' business operations also are described here. THE FUNDS DECLARE DIVIDENDS EVERY DAY THEY ARE OPEN FOR BUSINESS. These dividends, which are equal to a fund's net investment income for that day, are paid out to shareholders once a month. The funds may make distributions from any net realized capital gains once a year. THE FUNDS MAY BUY SECURITIES ON A DELAYED-DELIVERY BASIS. In these transactions, a fund agrees to buy a security for a stated price, with settlement generally occurring within two weeks. If the security's value falls before settlement occurs, a fund could end up paying more for the security than its market value at the time of settlement. The funds have set aside sufficient securities as collateral for those securities bought on a delayed-delivery basis. THE FUNDS PAY FEES TO AFFILIATES OF THE INVESTMENT ADVISER FOR VARIOUS SERVICES. Through their trust, the funds have agreements with Charles Schwab Investment Management, Inc. (CSIM) to provide investment advisory and administrative services and with Charles Schwab & Co., Inc. (Schwab) to provide transfer agent and shareholder services. Although these agreements specify certain fees for these services, CSIM and Schwab have made additional agreements with the funds that may limit the total expenses charged. The rates and limitations for these fees vary from fund to fund, and are described in each fund's Statement of Operations. THE TRUST AND ITS FUNDS This list shows all of the funds included in The Charles Schwab Family of Funds. The funds discussed in this report are highlighted. THE CHARLES SCHWAB FAMILY OF FUNDS organized October 20, 1989 Schwab Money Market Fund Schwab Government Money Fund Schwab U.S. Treasury Money Fund Schwab Value Advantage Money Fund(R) Schwab Municipal Money Fund Schwab California Municipal Money Fund Schwab New York Municipal Money Fund Schwab New Jersey Municipal Money Fund Schwab Pennsylvania Municipal Money Fund Schwab Florida Municipal Money Fund Schwab Massachusetts Municipal Money Fund Schwab Institutional Advantage Money Fund(R) Schwab Retirement Money Fund(R) Schwab Government Cash Reserves 54 SCHWAB MUNICIPAL MONEY FUNDS THE FUNDS MAY ENGAGE IN CERTAIN TRANSACTIONS INVOLVING AFFILIATES. The funds may make direct transactions with certain other SchwabFunds(R) when practical. When one fund is seeking to sell a security that another is seeking to buy, an interfund transaction can allow both funds to benefit by reducing transaction costs. This practice is limited to funds that share the same investment adviser, trustees and officers. Pursuant to an exemptive order issued by the SEC, the funds may enter into interfund borrowing and lending transactions within the SchwabFunds(R). All loans are for temporary or emergency purposes only. The interest rate charged on the loan is the average of the overnight repurchase agreement rate and the short-term bank loan rate. The interfund lending facility is subject to the oversight and periodic review of the Board of Trustees of the SchwabFunds(R). TRUSTEES MAY INCLUDE PEOPLE WHO ARE OFFICERS AND/OR DIRECTORS OF THE INVESTMENT ADVISER OR SCHWAB. Federal securities law limits the percentage of such "interested persons" who may serve on a trust's board, and the trust was in compliance with these limitations throughout the report period. The trust did not pay any of these persons for their service as trustees, but it did pay non-interested persons (independent trustees), as noted in each fund's Statement of Operations. THE FUNDS MAY BORROW MONEY FROM BANKS AND CUSTODIANS. The funds may obtain temporary bank loans through the trust to which they belong, to use for meeting shareholder redemptions or for extraordinary or emergency purposes. The trusts have custodian overdraft facilities and line of credit arrangements of $150 million and $100 million with PNC Bank, N.A. and Bank of America, N.A., respectively. The funds pay interest on the amounts they borrow at rates that are negotiated periodically. THE FUNDS INTEND TO MEET FEDERAL INCOME AND EXCISE TAX REQUIREMENTS FOR REGULATED INVESTMENT COMPANIES. Accordingly, the funds distribute substantially all of their net investment income and net realized capital gains (if any) to their respective shareholders each year. As long as a fund meets the tax requirements, it is not required to pay federal income tax. UNDER THE FUNDS' ORGANIZATIONAL DOCUMENTS, ITS OFFICERS AND TRUSTEES ARE INDEMNIFIED AGAINST CERTAIN LIABILITY ARISING OUT OF THE PERFORMANCE OF THEIR DUTIES TO THE FUNDS. In addition, in the normal course of business the funds enter into contracts with their vendors and others that provide general indemnifications. The funds' maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the funds. However, based on experience, the funds expect the risk of loss to be remote. ACCOUNTING POLICIES The following are the main policies the funds use in preparing their financial statements. THE FUNDS VALUE THEIR SECURITIES AT AMORTIZED COST, which approximates market value. SECURITY TRANSACTIONS are recorded as of the date the order to buy or sell the security is executed. INTEREST INCOME is recorded as it accrues. If a fund bought a debt instrument at a discount (that is, for less than its face value) or a premium (more than face value), it amortizes the discount or premium from the current date up to maturity. The fund then increases (in the case of discounts) or reduces (in the case of premiums) the income it records from the security. If the security is callable (meaning that the issuer has the option to pay it off before its maturity date), then the fund amortizes the premium to the security's call date and price, rather than the maturity date and price. 55 SCHWAB MUNICIPAL MONEY FUNDS REALIZED GAINS AND LOSSES from security transactions are based on the identified costs of the securities involved. EXPENSES that are specific to a fund or a class are charged directly to that fund or class. Expenses that are common to all funds within the trust generally are allocated among the funds in proportion to their average daily net assets. FOR FUNDS OFFERING MULTIPLE SHARE CLASSES, all of the realized and unrealized gains or losses and net investment income, other than class specific expenses, are allocated daily to each class in proportion to its net assets. EACH FUND MAINTAINS ITS OWN ACCOUNT FOR PURPOSES OF HOLDING ASSETS AND ACCOUNTING, and is considered a separate entity for tax purposes. Within its account, each fund also keeps certain assets in segregated accounts, as may be required by securities law. THE ACCOUNTING POLICIES DESCRIBED ABOVE CONFORM WITH ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES OF AMERICA. Notwithstanding this, shareholders should understand that in order to follow these principles, fund management has to make estimates and assumptions that affect the information reported in the financial statements. It's possible that once the results are known, they may turn out to be different from these estimates. 56 REPORT OF INDEPENDENT AUDITORS TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF: Schwab New York Municipal Money Fund Schwab New Jersey Municipal Money Fund Schwab Pennsylvania Municipal Money Fund Schwab Florida Municipal Money Fund Schwab Massachusetts Municipal Money Fund In our opinion, the accompanying statements of assets and liabilities, including the portfolio holdings, 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 Schwab New York Municipal Money Fund, Schwab New Jersey Municipal Money Fund, Schwab Pennsylvania Municipal Money Fund, Schwab Florida Municipal Money Fund and Schwab Massachusetts Municipal Money Fund (five of the portfolios constituting The Charles Schwab Family of Funds, hereafter referred to as the "Funds") at December 31, 2003, the results of each of their operations for the period then ended, the changes in each of their net assets and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America. These financial statements and the financial highlights (hereafter referred to as "financial statements") are the responsibility of the Funds' 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 auditing standards generally accepted in the United States of America, 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, 2003 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. PRICEWATERHOUSECOOPERS LLP San Francisco, CA February 6, 2004 57 SCHWAB MUNICIPAL MONEY FUNDS FUND TRUSTEES A fund's Board of Trustees is responsible for protecting the interests of that fund's shareholders. The tables below give information about the people who serve as trustees and officers for the SchwabFunds(R), including the funds covered in this report. Trustees remain in office until they resign, retire or are removed by shareholder vote. 1 Under the Investment Company Act of 1940, any officer, director, or employee of Schwab or CSIM is considered an "interested person," meaning that he or she is considered to have a business interest in Schwab or CSIM. These individuals are listed as "interested trustees." The "independent trustees" are individuals who, under the 1940 Act, are not considered to have a business interest in Schwab or CSIM. Each of the SchwabFunds (of which there were 49 as of 12/31/03) belongs to one of these trusts: The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust or Schwab Annuity Portfolios. Currently all these trusts have the same trustees and officers. The address for all trustees and officers is 101 Montgomery Street, San Francisco, CA 94104. You can find more information about the trustees and officers in the Statement of Additional Information, which is available free by calling 1-800-435-4000. INDIVIDUALS WHO ARE INTERESTED TRUSTEES AND OFFICERS OF THE TRUST
TRUST POSITION(S); NAME AND BIRTHDATE TRUSTEE SINCE MAIN OCCUPATIONS AND OTHER DIRECTORSHIPS AND AFFILIATIONS ---------------------------------------------------------------------------------------------------------------------- CHARLES R. SCHWAB 2 Chair, Trustee: Chair, Director, The Charles Schwab Corp.; CEO, Director, Schwab 7/29/37 Family of Funds, 1989; Holdings, Inc.; Chair, Director, Charles Schwab & Co., Inc.; Charles Investments, 1991; Schwab Investment Management, Inc.; Chair, Charles Schwab Capital Trust, 1993; Holdings, Inc. I, Schwab International Holdings, Inc.; Director, U.S. Annuity Portfolios, Trust Corp., United States Trust Co. of New York, The Gap, Inc. 1994. (clothing retailer), Siebel Systems (software); Trustee, Stanford University. Until 6/03: Director, Xsign, Inc. (electronic payment systems). Until 5/03: Co-Chair, The Charles Schwab Corporation. Until 5/02: Director, Vodafone AirTouch PLC (telecom). Until 3/02: Director, Audiobase, Inc. (Internet audio solutions). Until 7/01: Director, The Charles Schwab Trust Company. Until 1/99: Director, Schwab Retirement Plan Services, Inc., Mayer & Schweitzer, Inc. (securities brokerage subsidiary of The Charles Schwab Corp.), Performance Technologies, Inc. (technology), TrustMark, Inc.
1 The SchwabFunds retirement policy requires that independent trustees elected after January 1, 2000 retire at age 72 or after twenty years of service as a trustee, whichever comes first. Independent trustees elected prior to January 1, 2000 will retire on the following schedule: Messrs. Holmes and Dorward will retire on December 31, 2007, and Messrs. Stephens and Wilsey will retire on December 31, 2010. 2 In addition to their positions with the investment adviser and the distributor, Ms. Lepore and Messrs. Schwab and Lyons, as well as some of Mr. Lyons's immediate family members, also own stock of The Charles Schwab Corporation. 58 SCHWAB MUNICIPAL MONEY FUNDS INDIVIDUALS WHO ARE INTERESTED TRUSTEES BUT NOT OFFICERS OF THE TRUST
NAME AND BIRTHDATE TRUSTEE SINCE MAIN OCCUPATIONS AND OTHER DIRECTORSHIPS AND AFFILIATIONS -------------------------------------------------------------------------------------------------------------------------- DAWN G. LEPORE 1 Trustee: 2003 Vice Chair, EVP, The Charles Schwab Corp.; Until 10/01: CIO, The 3/21/54 (all trusts) Charles Schwab Corporation. Until 1999: EVP, The Charles Schwab Corporation. Director, Wal-Mart Stores, eBay, Inc. -------------------------------------------------------------------------------------------------------------------------- JEFFREY M. LYONS 1 Trustee: 2002 EVP, Asset Management Products and Services, Charles Schwab & 2/22/55 (all trusts). Co., Inc. Until 9/01: EVP, Mutual Funds, Charles Schwab & Co., Inc.
INDIVIDUALS WHO ARE OFFICERS OF THE TRUST BUT NOT TRUSTEES
NAME AND BIRTHDATE TRUST OFFICE(S) HELD MAIN OCCUPATIONS AND OTHER DIRECTORSHIPS AND AFFILIATIONS ----------------------------------------------------------------------------------------------------------------------- RANDALL W. MERK President, CEO President, CEO, Charles Schwab Investment Management, Inc; 7/25/54 (all trusts). EVP, Charles Schwab & Co., Inc.; Director, Charles Schwab Worldwide Funds PLC, Charles Schwab Asset Management (Ireland) Ltd. Until 9/02: President, CIO, American Century Investment Management; Director, American Century Cos., Inc. Until 6/01: CIO, Fixed Income, American Century Cos., Inc. Until 1997: SVP, Director, Fixed Income and Quantitative Equity Portfolio Management, Twentieth Century Investors, Inc. ----------------------------------------------------------------------------------------------------------------------- TAI-CHIN TUNG Treasurer, Principal SVP, CFO, Charles Schwab Investment Management, Inc.; VP, 3/7/51 Financial Officer The Charles Schwab Trust Co.; Director, Charles Schwab Asset (all trusts). Management (Ireland) Ltd., Charles Schwab Worldwide Funds PLC. ----------------------------------------------------------------------------------------------------------------------- STEPHEN B. WARD SVP, Chief Investment SVP, Chief Investment Officer, Director, Charles Schwab Investment 4/5/55 Officer Management, Inc.; CIO, The Charles Schwab Trust Co. (all trusts). ----------------------------------------------------------------------------------------------------------------------- KOJI E. FELTON Secretary SVP, Chief Counsel, Assistant Corporate Secretary, Charles Schwab 3/13/61 (all trusts). Investment Management, Inc. Until 6/98: Branch Chief in Enforcement, U.S. Securities and Exchange Commission, San Francisco.
1 In addition to their positions with the investment adviser and the distributor, Ms. Lepore and Messrs. Schwab and Lyons, as well as some of Mr. Lyons's immediate family members, also own stock of The Charles Schwab Corporation. 59 SCHWAB MUNICIPAL MONEY FUNDS INDIVIDUALS WHO ARE INDEPENDENT TRUSTEES
NAME AND BIRTHDATE TRUSTEE SINCE MAIN OCCUPATIONS AND OTHER DIRECTORSHIPS AND AFFILIATIONS ----------------------------------------------------------------------------------------------------------------------------- MARIANN BYERWALTER 2000 (all trusts). Chair, JDN Corp. Advisory LLC; Trustee, Stanford University, Director, 8/13/60 America First Cos., (venture capital/fund management), Redwood Trust, Inc. (mortgage finance), Stanford Hospitals and Clinics, SRI International (research), PMI Group, Inc. (mortgage insurance), Lucile Packard Children's Hospital. 2001: Special Advisor to the President, Stanford University. Until 2002: Director, LookSmart, Ltd. (Internet infrastructure). Until 2001: VP, Business Affairs, CFO, Stanford University. ----------------------------------------------------------------------------------------------------------------------------- DONALD F. DORWARD Family of Funds, 1989; CEO, Dorward & Associates (management, marketing and 9/23/31 Investments, 1991; communications consulting). Until 1999: EVP, Managing Director, Capital Trust, 1993; Grey Advertising. Annuity Portfolios, 1994. ----------------------------------------------------------------------------------------------------------------------------- WILLIAM A. HASLER 2000 (all trusts). Co-CEO, Aphton Corp. (bio-pharmaceuticals). Director, Non-Executive 11/22/41 Chairman, Solectron Corp. (manufacturing), Airlease Ltd. (aircraft leasing), Mission West Properties (commercial real estate), Stratex Networks (telecommunications); Public Governor, Member, executive committee, Pacific Stock & Options Exchange. Director, Digital Microwave Corp. (network equipment). Until 1998: Dean, Haas School of Business, University of California, Berkeley. ----------------------------------------------------------------------------------------------------------------------------- ROBERT G. HOLMES Family of Funds, 1989; Chair, CEO, Director, Semloh Financial, Inc. (international financial 5/15/31 Investments, 1991; services and investment advice). Capital Trust, 1993; Annuity Portfolios, 1994. ----------------------------------------------------------------------------------------------------------------------------- GERALD B. SMITH 2000 (all trusts). Chair, CEO, Founder, Smith Graham & Co. (investment advisors); 9/28/50 Director, Pennzoil-Quaker State Co. (oil and gas), Rorento N.V. (investments--Netherlands), Cooper Industries (electrical products); Member, audit committee, Northern Border Partners, L.P. (energy). ----------------------------------------------------------------------------------------------------------------------------- DONALD R. STEPHENS Family of Funds, 1989; Managing Partner, D.R. Stephens & Co. (investments). Until 1996: 6/28/38 Investments, 1991; Chair, CEO, North American Trust (real estate investments). Capital Trust, 1993; Annuity Portfolios, 1994. ----------------------------------------------------------------------------------------------------------------------------- MICHAEL W. WILSEY Family of Funds, 1989; Chair, CEO, Wilsey Bennett, Inc. (transportation, real estate and 8/18/43 Investments, 1991; investments). Capital Trust, 1993; Annuity Portfolios, 1994.
60 SCHWAB MUNICIPAL MONEY FUNDS GLOSSARY AGENCY DISCOUNT NOTES Notes issued by federal agencies --known as Government Sponsored Enterprises, or GSEs --at a discount to their value at maturity. An agency discount note is a short-term investment alternative offering a high degree of credit quality. ALTERNATIVE MINIMUM TAX (AMT) A federal income tax designed to limit the extent to which high-income taxpayers (including individuals, estates, trusts and corporations) can benefit from certain deductions and exemptions. For example, some types of income that are exempt from regular federal income tax are not exempt from the AMT. ASSET-BACKED SECURITY A bond or other debt security that represents ownership in a pool of debt obligations such as credit card debt. BOND A security representing a loan from the investor to the issuer. A bond typically pays interest at a fixed rate (the "coupon rate") until a specified date (the "maturity date"), at which time the issuer returns the money borrowed ("principal" or "face value") to the bondholder. Because of their structure, bonds are sometimes called "fixed income securities" or "debt securities." BOND ANTICIPATION NOTES Obligations sold by a municipality on an interim basis in anticipation of the municipality's issuance of a longer-term bond in the future. CAPITAL GAIN, CAPITAL LOSS The difference between the amount paid for an investment and its value at a later time. If the investment has been sold, the capital gain or loss is considered a realized gain or loss. If the investment is still held, the gain or loss is still "on paper" and is considered unrealized. COMMERCIAL PAPER Promissory notes issued by banks, corporations, state and local governments and other entities to finance short-term credit needs. These securities generally are structured on a discounted basis but sometimes may be interest-bearing notes. Commercial paper, which may be unsecured, is subject to credit risk. CREDIT-ENHANCED SECURITY A security that is backed by the credit of an entity other than the issuer (such as a financial institution). Credit enhancements, which can equal up to 100% of the security's value, are designed to help lower the risk of default on a security and may also make the security more liquid. CREDIT QUALITY The capacity of an issuer to make its interest and principal payments. Federal regulations strictly limit the credit quality of the securities a money market fund can buy. CREDIT RATINGS Debt issuers, including corporations, states and municipalities, may arrange with a recognized independent rating organization, such as Moody's Investor Service, Standard & Poor's and Fitch, Inc., to rate their creditworthiness and/or the creditworthiness of their debt issues. For example, an issuer may obtain a long-term rating within the investment grade rating category, which is, from high to low, AAA, AA, A and BBB for Standard & Poor's and Fitch, and Aaa, Aa, A and Baa for Moody's. CREDIT RISK The risk that a debt issuer may be unable to pay interest or principal to its debtholders. DOLLAR-WEIGHTED AVERAGE MATURITY (DWAM) See weighted average maturity. EFFECTIVE YIELD A measurement of a fund's yield that assumes that all dividends were reinvested in additional shares of the fund. PORTFOLIO TERMS To help reduce the space occupied by the portfolio holdings, we use the following terms. Most of them appear within descriptions of individual securities in municipal funds, and describe features of the issuer or the security. Some of these are more fully defined elsewhere in the Glossary. ACES Adjustable convertible extendable security BAN Bond anticipation note COP Certificate of participation GAN Grant anticipation note GO General obligation HDA Housing Development Authority HFA Housing Finance Agency IDA Industrial Development Authority IDB Industrial Development Board IDRB Industrial Development Revenue Bond M/F Multi-family RAN Revenue anticipation note RB Revenue bond S/F Single-family TAN Tax anticipation note TECP Tax-exempt commercial paper TOB Tender option bond TOBP Tender option bond partnership TRAN Tax and revenue anticipation note VRD Variable-rate demand 61 SCHWAB MUNICIPAL MONEY FUNDS EXPENSE RATIO The amount that is taken from a mutual fund's assets each year to cover the fund's operating expenses. An expense ratio of 0.50% means that a fund's expenses amount to half of one percent of its average net assets a year. FACE VALUE The value of a bond, note, mortgage or other security as given on the certificate or instrument. Face value is also referred to as par value or nominal value. ILLIQUID SECURITIES A security is generally considered illiquid if it cannot be disposed of promptly (typically within seven days) and in the ordinary course of business at approximately the amount at which a fund has valued the instrument. INTEREST Payments to holders of debt securities as compensation for loaning a security's principal to the issuer. LIQUIDITY-ENHANCED SECURITY A security that when tendered is paid from funds advanced by an entity other than the issuer (such as a large financial institution). Liquidity enhancements are often used on variable-rate securities where the portfolio manager has an option to tender the securities prior to their final maturity. MATURITY Generally, the date a debt security is scheduled to be "retired" and its principal amount returned to the bondholder. MONEY MARKET SECURITIES High-quality, short-term debt securities that may be issued by entities such as the U.S. government, corporations and financial institutions (such as banks). Money market securities include commercial paper, promissory notes, certificates of deposit, banker's acceptances, notes and time deposits. MUNICIPAL SECURITIES Debt securities issued by a state, its counties, municipalities, authorities and other subdivisions, or the territories and possessions of the United States and the District of Columbia, including their subdivisions, agencies and instrumentalities and corporations. These securities may be issued to obtain money for various public purposes, including the construction of a wide range of public facilities such as airports, bridges, highways, housing, hospitals, mass transportation, public utilities, schools, streets, and water and sewer works. NET ASSET VALUE PER SHARE (NAV) The value of one share of a mutual fund. NAV is calculated by taking the fund's total assets, subtracting liabilities, and dividing by the number of shares outstanding. Money funds seek to maintain a steady NAV of $1.00. OUTSTANDING SHARES, SHARES OUTSTANDING When speaking of a company or mutual fund, indicates all shares currently held by investors. RESTRICTED SECURITIES A security that is subject to contractual restrictions on resale and may be sold only to "qualified institutional buyers" under Securities Act Rule 144A. These securities are often purchased in private placement transactions. REVENUE ANTICIPATION NOTES Obligations that are issued in expectation of the receipt of revenue, such as income taxes, property taxes, etc. SECTION 3c7 SECURITIES Section 3c7 of the Investment Company Act of 1940 (the "1940 Act") exempts certain issuers from many regulatory requirements applicable to investment companies under the 1940 Act. An issuer whose outstanding securities are exclusively owned by "qualified purchasers" and who is not making or proposing to make a public offering of the securities may qualify for this exemption. SECTION 4(2)/144A SECURITIES A security exempt from registration under Section 4(2) of the Securities Act of 1933. It may be sold only to qualified institutional buyers under Securities Act Rule 144A. TAXABLE-EQUIVALENT YIELD The yield an investor would need to get from a taxable investment in order to match the yield paid by a given tax-exempt investment, once the effect of all applicable taxes is taken into account. For example, if your tax rate were 25%, a tax-exempt investment paying 4.5% would have a taxable-equivalent yield for you of 6.0% (4.5% / [1 - 0.25%] = 6.0%). TOTAL RETURN The percentage that an investor would have earned or lost on an investment in the fund assuming dividends and distributions were reinvested. TAX ANTICIPATION NOTES Notes that typically are sold to finance the cash flow needs of municipalities in anticipation of the receipt of taxes on a future date. TIER 1, TIER 2 Tier 1 is the highest category of credit quality, Tier 2 the second highest. A security's tier can be established either by an independent rating organization or by a determination of the investment adviser. Money market fund shares and U.S. government securities are automatically considered Tier 1 securities. WEIGHTED AVERAGE MATURITY For mutual funds, the maturity of all the debt securities in its portfolio, calculated as a weighted average. As a rule, the longer a fund's weighted average maturity, the greater its interest rate risk. Money funds are required to maintain a weighted average maturity of no more than 90 days. YIELD The income paid out by an investment, expressed as an annual rate and calculated as a percentage of the investment's market value. 62 NOTES NOTES CONTACT SCHWAB SchwabFunds(R) offers you a complete family of mutual funds, each one based on a clearly defined investment approach and using disciplined management strategies. Actively managed funds include multi-manager stock funds, a fund that uses long-short strategies, and a range of taxable and tax-free bond funds. Index funds include large-cap, small-cap and international stock funds. The list at right shows all currently available SchwabFunds. Whether you're an experienced investor or just starting out, SchwabFunds can help you achieve your financial goals. Please call 1-800-435-4000 for a prospectus and brochure for any SchwabFund. Please read the prospectus carefully before you invest. This report must be preceded or accompanied by a current prospectus. METHODS FOR PLACING ORDERS The following information outlines how Schwab investors can place orders. If you are investing through a third-party investment provider, methods for placing orders may be different. INTERNET 1 www.schwab.com SCHWAB BY PHONE(TM) 2 Use our automated voice service or speak to a representative. Call 1-800-435-4000, day or night (for TDD service, call 1-800-345-2550). TELEBROKER(R) Automated touch-tone phone service at 1-800-272-4922. MAIL Write to SchwabFunds at: P.O. Box 3812 Englewood, CO 80155-3812 When selling or exchanging shares, be sure to include the signatures of at least one of the persons whose name is on the account. 1 Shares of Sweep Investments(TM) may not be purchased directly over the Internet. 2 Orders placed in person or through a telephone representative may be subject to a service fee payable to Schwab. THE SCHWABFUNDS FAMILY(R) STOCK FUNDS Schwab S&P 500 Fund Schwab 1000 Fund(R) Schwab Small-Cap Index Fund(R) Schwab Total Stock Market Index Fund(R) Schwab International Index Fund(R) Schwab Core Equity Fund(TM) Schwab Dividend Equity Fund(TM) Schwab Small-Cap Equity Fund(TM) Schwab Hedged Equity Fund(TM) Schwab Focus Funds Communications Focus Fund Financial Services Focus Fund Health Care Focus Fund Technology Focus Fund Schwab MarketMasters Funds(TM) Schwab U.S. MarketMasters Fund(TM) Schwab Small-Cap MarketMasters Fund(TM) Schwab International MarketMasters Fund(TM) Schwab Balanced MarketMasters Fund(TM) ASSET ALLOCATION FUNDS Schwab MarketTrack Portfolios(R) Schwab MarketTrack All Equity Portfolio(TM) Schwab MarketTrack Growth Portfolio(TM) Schwab MarketTrack Balanced Portfolio(TM) Schwab MarketTrack Conservative Portfolio(TM) BOND FUNDS Schwab YieldPlus Fund(R) Schwab Short-Term Bond Market Fund(TM) Schwab Total Bond Market Fund(TM) Schwab GNMA Fund(TM) Schwab Short/Intermediate Tax-Free Bond Fund(TM) Schwab Long-Term Tax-Free Bond Fund(TM) Schwab California Short/Intermediate Tax-Free Bond Fund(TM) Schwab California Long-Term Tax-Free Bond Fund(TM) SCHWAB MONEY FUNDS Schwab offers an array of money market funds that seek high current income consistent with safety and liquidity. 3 Choose from taxable or tax-advantaged alternatives. Many can be linked to your Schwab account to "sweep" cash balances automatically, subject to availability, when you're between investments. Or, for your larger cash reserves, choose one of our Value Advantage Investments(R). 3 Investments in money market funds are neither insured nor guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency and, although they seek to preserve the value of your investment at $1 per share, it is possible to lose money. [CHARLES SCHWAB LOGO] INVESTMENT ADVISER Charles Schwab Investment Management, Inc. 101 Montgomery Street, San Francisco, CA 94104 DISTRIBUTOR SchwabFunds(R) P.O. Box 3812, Englewood, CO 80155-3812 This report is not authorized for distribution to prospective investors unless preceded or accompanied by a current prospectus. (C)2004 Charles Schwab & Co., Inc. All rights reserved. Member SIPC/NYSE. Printed on recycled paper. REG13859-06 SCHWAB CALIFORNIA MUNICIPAL MONEY FUND ANNUAL REPORT December 31, 2003 [CHARLES SCHWAB LOGO] IN THIS REPORT SCHWAB CALIFORNIA MUNICIPAL MONEY FUND Sweep Shares: SWCXX Value Advantage Shares: SWKXX Management's Discussion .......................................................... 2 The president of SchwabFunds(R) and the fund's manager take a look at the factors that shaped fund performance during the report period. Performance and Fund Facts ....................................................... 5 Financial Statements ............................................................. 6 Financial Notes .................................................................. 28 Fund Trustees .................................................................... 32 Glossary ......................................................................... 35
Fund investment adviser: Charles Schwab Investment Management, Inc. (CSIM). Distributor and transfer agent: Charles Schwab & Co., Inc. (Schwab). [PHOTO OF CHARLES R. SCHWAB] Charles R. Schwab Chairman FROM THE CHAIRMAN In 1989, we founded SchwabFunds(R) on the belief that mutual funds represent an important tool for investors. Money funds, for example, are especially well-suited for the cash portion of your portfolio when you are seeking capital preservation or liquidity. Over the past few years, mutual funds have faced a number of challenges, affecting both their performance and investor perception. Yet recently we have seen signs of positive change. The economy and the stock market have shown increasing strength. And while much remains to be done within the fund industry, the industry has been moving quickly to assess and improve its operations and its investor safeguards. As a firm, we continue to change as well. Our capabilities are evolving in ways that allow us to offer investors more choices and better ways to do business with us. I'm enthusiastic about these changes because they're designed to offer benefits for our fund shareholders. One thing that hasn't changed is my belief in mutual funds. Mutual funds still offer all the features that have made them so popular: diversification, liquidity, convenience, low investment minimums, and professional management. For individual investors especially, I believe mutual funds continue to be one of the most cost-effective investment vehicles available. To date, millions of Americans have successfully relied on mutual funds as an important way to invest for retirement security, their children's education, and other financial goals. We remain optimistic that mutual funds will continue to do the same for millions more Americans in the years to come. Sincerely, /s/ Charles R. Schwab MANAGEMENT'S DISCUSSION for the year ended December 31, 2003 [PHOTO OF RANDALL W. MERK] RANDALL W. MERK is President and CEO of Charles Schwab Investment Management, Inc. and is president of each of the funds covered in this report. He joined the firm in August 2002, bringing with him 24 years of experience in the asset management industry. Dear Shareholder: In today's current low-interest-rate environment, it's tempting to ask whether money funds still have a place in an investment portfolio. It's a fair question, but I'd suggest the answer is not as obvious as it may seem. Money funds are designed to offer several potential benefits. If you're like many investors, your asset allocation calls for a portion of your portfolio to be in cash. If the purpose of that allocation is to offer capital preservation or liquidity, or to help reduce the impact of market volatility on your portfolio, then money funds probably still make sense for you, regardless of the yield environment. Here at SchwabFunds(R), we're proud of our seasoned fund managers and their ability to work as a team. Our managers have an average of over 16 years of experience in the investment management industry. I'm also proud to say that we're in the process of building on that experience: by expanding our selection of mutual funds, adding new share classes, and offering new, competitively priced alternatives. Thirty years ago, Charles Schwab founded his firm with a vision to create the most useful and ethical financial services firm in the world. We live by that philosophy every day. Your investment in SchwabFunds is an indication of the trust you place in us. As the managers of your money, we have a special obligation to live up to that trust. I have enjoyed the opportunity to respond to several shareholder inquiries, and I hope you'll let us know how we're doing. I want to thank you for investing with us and want to assure you that we strive relentlessly to operate our business with the highest ethical standards and an unwavering commitment to serve you, our SchwabFunds shareholders. Sincerely, /s/ Randall W. Merk 2 Schwab California Municipal Money Fund [PHOTO OF KEVIN SHAUGHNESSY] KEVIN SHAUGHNESSY, CFA, a vice president of the investment adviser and senior portfolio manager, is responsible for the day-to-day management of the fund. Prior to joining the firm in 2000, he worked for more than ten years in fixed-income portfolio management. THE INVESTMENT ENVIRONMENT AND THE FUND DURING 2003, THE U.S. ECONOMY BEGAN TO GATHER STRENGTH, ESPECIALLY DURING THE SECOND HALF OF THE YEAR. In the months before the war in Iraq (which began in March 2003), the economy remained in a holding pattern, as businesses and investors adopted a wait-and-see stance. Once the combat phase drew to an end, America began to pay more attention to the economy, which by year-end appeared to be recovering. SEEKING ADDITIONAL PROTECTION AGAINST THE RISK OF DEFLATION, THE FEDERAL RESERVE (THE FED) CUT SHORT-TERM INTEREST RATES BY 0.25% IN JUNE. This brought the Fed funds target rate to a 45-year low of 1.00%. Short-term interest rates began plummeting in May in anticipation of the Fed's rate cut but quickly began a modest recovery and ended the year somewhat above their mid-year lows. Nevertheless, money fund yields remained close to historically low levels. THROUGHOUT THE REPORT PERIOD, SHORT-TERM MUNICIPAL YIELDS REMAINED ATTRACTIVELY VALUED RELATIVE TO SHORT-TERM TAXABLE YIELDS. During the year, the ratio of short-term muni yields to taxables averaged 82%, and at times exceeded 95%. We attribute this situation to the unusually large quantity of municipal money market debt that was issued during 2003. In order to attract buyers for these securities, municipal issuers needed to offer higher yields than they otherwise might have. AFTER A PROTRACTED AND PARTISAN SESSION, THE CALIFORNIA LEGISLATURE ADOPTED A BUDGET IN LATE JULY 2003. The budget closed an estimated $38 billion gap through a combination of spending cuts, deferrals and the proposed sale of deficit bonds. In October 2003, voters recalled Governor Gray Davis and installed Arnold Schwarzenegger as governor. Governor Schwarzenegger's fiscal 2005 proposed budget shows the multi-year gap narrowing to $26 billion and calls for another round of program cuts, deferrals and a $15 billion bond sale to close the gap. The new deficit bond proposal would supersede last year's. California voters will be asked to approve the plan in March 2004. CALIFORNIA'S ECONOMIC RECOVERY APPEARS TO BE STRENGTHENING, WITH RENEWED GROWTH IN OUT-OF-STATE EXPORTS AND PERSONAL INCOME. However, the state's job growth still lags the nation's, with payroll employment expected to show no growth from 2002 to 2003. The Department of Finance is forecasting 1.1% growth in employment for 2004. Schwab California Municipal Money Fund 3 MANAGEMENT'S DISCUSSION continued Most of the fund's holdings carry credit enhancements from highly rated third-party providers. In the late 1990s, the state saw a large increase in its revenues from income taxes, particularly stock-related income from the technology and business services industries, and state budgets began to assume these revenues would continue. When they did not, a politically divided legislature failed to cut spending or raise revenues proportionately, passing deficit budgets and relying on one-time solutions that left the underlying problems largely unaddressed. THE STATE'S CREDIT RATINGS SUFFERED MULTIPLE DOWNGRADES DURING 2003. These were tied to the protracted budget debate, the reliance on deficit bond sales and future budget shortfall projections. As of the report date, Standard and Poor's and Fitch rated California BBB, and Moody's rated it Baa1 -- all low investment grade ratings. Fitch continues to have California on its watch list for possible further downgrades, and Moody's outlook for California's rating remains negative. Though many of the state's cities and counties have had to contend with less revenue from the state, their credit ratings have largely remained unchanged. To date, the state has made all of its general obligation debt payments on time; in previous crises, it always did so as well. The state's controller is required to make cash payments to its general obligation bondholders even if the state has not adopted a budget. We also note that the type of direct state securities the fund has purchased has constitutional priority over most state spending. DURING THE REPORT PERIOD, THE FUND TOOK SEVERAL STEPS TO HELP ENSURE THAT ITS INVESTMENTS WOULD CONTINUE TO BE OF THE HIGHEST CREDIT QUALITY. As the state's financial woes continued, we reduced our holdings of direct state obligations in favor of other municipal issuers within the state, such as cities, universities, counties and school districts. In addition, we favored securities whose credit was enhanced by highly rated banks and insurance companies. As of the report date, approximately 70% of the portfolio carried these credit enhancements, including many of our direct state holdings. Nothing in this report represents a recommendation of a security by the investment adviser. Manager views and portfolio holdings may have changed since the report date. 4 Schwab California Municipal Money Fund PERFORMANCE AND FUND FACTS as of 12/31/03 SEVEN-DAY YIELDS The seven-day yields are calculated using standard SEC formulas. The effective yields include the effect of reinvesting daily dividends. Please remember that money market fund yields fluctuate, and that past performance is not an indication of future results.
VALUE ADVANTAGE SWEEP SHARES SHARES --------------------------------------------------------------------------- SEVEN-DAY YIELD 1 0.54% 0.74% --------------------------------------------------------------------------- SEVEN-DAY YIELD - NO WAIVER 2 0.37% 0.60% --------------------------------------------------------------------------- SEVEN-DAY EFFECTIVE YIELD 0.54% 0.74% --------------------------------------------------------------------------- SEVEN-DAY TAXABLE-EQUIVALENT 0.92% 1.26% EFFECTIVE YIELD 3 ---------------------------------------------------------------------------
STATISTICS Money funds must maintain a dollar-weighted average maturity of no longer than 90 days, and cannot invest in any security whose effective maturity is longer than 397 days (approximately 13 months). -------------------------------------------------------------------------- WEIGHTED AVERAGE MATURITY 55 days -------------------------------------------------------------------------- CREDIT QUALITY OF HOLDINGS % of portfolio 100% Tier 1 -------------------------------------------------------------------------- CREDIT-ENHANCED SECURITIES % of portfolio 70% --------------------------------------------------------------------------
An investment in a money fund is neither insured nor guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency. Although money funds seek to preserve the value of your investment at $1 per share, it is possible to lose money by investing in a money fund. Portfolio holdings may have changed since the report date. 1 Fund expenses have been partially absorbed by CSIM and Schwab. 2 Yield if fund expenses had not been partially absorbed by CSIM and Schwab. 3 Taxable-equivalent effective yield assumes a 2003 maximum combined federal regular income and California state personal income tax rate of 41.05%. Investment income may be subject to the Alternative Minimum Tax. Schwab California Municipal Money Fund 5 FINANCIAL STATEMENTS FINANCIAL HIGHLIGHTS
1/1/03- 1/1/02- 1/1/01- 1/1/00- 1/1/99- SWEEP SHARES 12/31/03 12/31/02 12/31/01 12/31/00 12/31/99 ------------------------------------------------------------------------------------------------------------------------- PER-SHARE DATA ($) ------------------------------------------------------------------------------------------------------------------------- Net asset value at beginning of period 1.00 1.00 1.00 1.00 1.00 ---------------------------------------------------------------------------- Income from investment operations: Net investment income 0.00 1 0.01 0.02 0.03 0.02 ---------------------------------------------------------------------------- Less distributions: Dividends from net investment income (0.00) 1 (0.01) (0.02) (0.03) (0.02) ---------------------------------------------------------------------------- Net asset value at end of period 1.00 1.00 1.00 1.00 1.00 ---------------------------------------------------------------------------- Total return (%) 0.46 0.83 1.99 3.02 2.42 RATIOS/SUPPLEMENTAL DATA(%) ------------------------------------------------------------------------------------------------------------------------- Ratios to average net assets: Net operating expenses 0.65 0.65 0.65 0.66 2 0.65 Gross operating expenses 0.82 0.82 0.82 0.84 0.85 Net investment income 0.45 0.83 1.98 2.98 2.41 Net assets, end of period ($ x 1,000,000) 4,169 4,056 3,897 3,923 3,457
1/1/03- 1/1/02- 1/1/01- 1/1/00- 1/1/99- VALUE ADVANTAGE SHARES 12/31/03 12/31/02 12/31/01 12/31/00 12/31/99 ------------------------------------------------------------------------------------------------------------------------- PER-SHARE DATA ($) ------------------------------------------------------------------------------------------------------------------------- Net asset value at beginning of period 1.00 1.00 1.00 1.00 1.00 --------------------------------------------------------------------------- Income from investment operations: Net investment income 0.01 0.01 0.02 0.03 0.03 --------------------------------------------------------------------------- Less distributions: Dividends from net investment income (0.01) (0.01) (0.02) (0.03) (0.03) --------------------------------------------------------------------------- Net asset value at end of period 1.00 1.00 1.00 1.00 1.00 --------------------------------------------------------------------------- Total return (%) 0.66 1.03 2.19 3.22 2.62 RATIOS/SUPPLEMENTAL DATA(%) ------------------------------------------------------------------------------------------------------------------------- Ratios to average net assets: Net operating expenses 0.45 0.45 0.45 0.46 3 0.45 Gross operating expenses 0.59 0.59 0.61 0.63 0.65 Net investment income 0.65 1.03 2.11 3.20 2.60 Net assets, end of period ($ x 1,000,000) 3,061 3,081 2,563 2,170 1,604
1 Per-share amount was less than $0.01. 2 The ratio of net operating expenses would have been 0.65% if certain non-routine expenses (proxy fees) had not been included. 3 The ratio of net operating expenses would have been 0.45% if certain non-routine expenses (proxy fees) had not been included. 6 See financial notes. SCHWAB CALIFORNIA MUNICIPAL MONEY FUND PORTFOLIO HOLDINGS as of December 31, 2003 This section shows all the securities in the fund's portfolio and their market value, as of the report date. We use the symbols below to designate certain characteristics: + Credit-enhanced security ~ Liquidity-enhanced security @ Variable-rate security For fixed-rate obligations, the rate shown is the effective yield at the time of purchase. For variable-rate obligations, the rate shown is the rate as of the report date. For variable-rate obligations with scheduled maturities greater than 397 days, the maturity shown is the later of the next interest rate change date or demand date. For variable-rate obligations with scheduled maturities less than 397 days, the maturity shown is the earlier of the next interest rate change date or demand date. For variable-rate obligations without demand features, the maturity shown is the next interest rate change date.
COST VALUE HOLDINGS BY CATEGORY ($x1,000) ($x1,000) -------------------------------------------------------------------------------- 99.5% MUNICIPAL SECURITIES 7,193,284 7,193,284 -------------------------------------------------------------------------------- 99.5% TOTAL INVESTMENTS 7,193,284 7,193,284 0.5% OTHER ASSETS AND LIABILITIES 36,908 -------------------------------------------------------------------------------- 100.0% TOTAL NET ASSETS 7,230,192
ISSUER SECURITY TYPE, PROJECT, SERIES, FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) MUNICIPAL SECURITIES 99.5% of Net Assets CALIFORNIA 97.8% AFFORDABLE HOUSING AGENCY +@ M/F Housing RB (Westridge at Hilltop Apts) Series 2003A 1.25%, 01/07/04 13,750 13,750 ALAMEDA CNTY IDA +@ RB (JMS Family Partnership) Series 1995A 1.17%, 01/07/04 1,000 1,000 +@ RB 1999 Series 1999A (Malmberg Engineering) 1.35%, 01/07/04 2,415 2,415 +@ RB Series 1993A (Aitchison Family Partnership) 1.17%, 01/07/04 2,600 2,600 +@ RB Series 1994A (Scientific Technology) 1.22%, 01/07/04 2,300 2,300 ALAMEDA-CONTRA COSTA TRANSIT DISTRICT + 2003-04 RAN 0.98%, 08/19/04 14,000 14,089 ANAHEIM +~@ Police Facilities COP Series 1993 1.03%, 01/07/04 1,900 1,900 +~@ Refunding COP Series 1993 1.03%, 01/07/04 22,115 22,115 ANAHEIM HOUSING AUTH +@ M/F Housing RB (Casa Granada Apts) Series 1997A 1.25%, 01/07/04 3,595 3,595 +@ M/F Housing RB (Park Vista Apts) Series 2000D 1.18%, 01/07/04 21,000 21,000 +@ M/F Housing RB (Port Trinidad Apts) Series 1997C 1.25%, 01/07/04 2,040 2,040 +@ M/F Housing Refunding RB (Sage Park) Series 1998A 1.30%, 01/07/04 5,500 5,500 ANAHEIM UNION HIGH SD +~@ School Facility Bridge Funding Program COP Series 1999 1.20%, 01/07/04 5,500 5,500 ASSOCIATION OF BAY AREA GOVERNMENTS +~@ Bart SFO Extension Bonds (Airport Premium Fare) Series 2002A TOB Series 2002-26 1.25%, 01/07/04 9,995 9,995 +@ COP (Harker School Foundation) Series 1998 1.15%, 01/07/04 4,700 4,700 +~@ Lease RB Series 2003A 1.30%, 01/07/04 8,000 8,000
See financial notes. 7 SCHWAB CALIFORNIA MUNICIPAL MONEY FUND PORTFOLIO HOLDINGS continued
ISSUER SECURITY TYPE, PROJECT, SERIES, FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) +@ M/F Housing RB (Artech Building) Series 1999A 1.35%, 01/07/04 3,200 3,200 +@ M/F Housing RB (Crossing Apts) Series 2002A 1.30%, 01/07/04 55,700 55,700 +@ M/F Housing RB (Miramar Apts) Series 2000A 1.30%, 01/07/04 30,000 30,000 +@ M/F Housing RB (Mountain View Apts) Series 1997A 1.35%, 01/07/04 6,230 6,230 +@ RB (Public Policy Institute of California) Series 2001A 1.25%, 01/07/04 9,000 9,000 +@ Refunding & RB Series 2003 (Valley Christian Schools) 1.25%, 01/07/04 17,000 17,000 BAY AREA TOLL AUTH +~@ San Francisco Bay Area Toll Bridge RB Series 2003C 1.23%, 01/07/04 60,300 60,300 +~@ San Francisco Bay Area Toll Bridge RB Series D TOB Series 2001Q 1.13%, 01/07/04 10,125 10,125 +~@ San Francisco Bay Area Toll Bridge RB Series 2001C 1.23%, 01/07/04 29,335 29,335 BURBANK REDEVELOPMENT AGENCY +@ M/F Housing RB Series 1985A 1.15%, 01/07/04 13,960 13,960 CALIFORNIA ~ 2003 RAW Series A 1.12%, 06/16/04 60,000 60,239 ~ 2003 RAW Series B 1.04%, 06/16/04 100,000 100,407 ~ 1.11%, 06/16/04 205,000 205,825 ~ 1.12%, 06/16/04 12,500 12,550 ~ 1.40%, 06/16/04 8,000 8,022 ~ 1.72%, 06/16/04 65,000 65,080 ~ 1.74%, 06/16/04 50,000 50,057 + 2003-04 Fixed Rate RAN Subseries A-1 1.07%, 06/23/04 56,000 56,246 + 2003-04 Fixed Rate RAN Subseries A-2 1.07%, 06/23/04 50,000 50,220 2003-04 Fixed Rate RAN Subseries A-3 1.05%, 06/23/04 14,925 14,992 + 1.06%, 06/23/04 10,000 10,044 + 1.07%, 06/23/04 2,120 2,129 + 1.08%, 06/23/04 17,850 17,928 + 2003-04 Fixed Rate RAN Subseries A-4 1.07%, 06/23/04 50,000 50,220 + 2003-04 Fixed Rate RAN Subseries A-6 1.07%, 06/23/04 50,000 50,220 +~@ GO Bonds Series 1999 TOB Series 1998-195 1.28%, 01/07/04 10,835 10,835 +~@ GO Bonds Series 1999 TOB Series 20010502 1.26%, 01/07/04 13,675 13,675 +@ GO Bonds Series 2003 B-4 1.10%, 01/07/04 19,800 19,800 +@ GO Bonds Series 2003 C-1 1.25%, 01/07/04 17,000 17,000 +@ GO Bonds Series 2003 C-2 1.22%, 01/07/04 18,000 18,000 +@ GO Bonds Series 2003 C-3 1.22%, 01/07/04 30,000 30,000 +@ GO Bonds Series 2003 C-4 1.25%, 01/07/04 10,000 10,000 +~@ GO Bonds TOB Series 132 1.26%, 01/07/04 94,870 94,870 +~@ GO Bonds TOB Series 20000501 1.16%, 01/07/04 10,740 10,740 +~@ GO Bonds TOB Series 20000502 1.14%, 01/07/04 15,580 15,580 +~@ GO Bonds TOB Series 20000503 1.28%, 01/07/04 9,900 9,900 +~@ GO Bonds TOB Series 20000506 1.28%, 01/07/04 19,800 19,800 +~@ GO Bonds TOB Series PA-676R 1.60%, 01/07/04 26,125 26,125 +~@ GO Bonds TOB Series PA-815R 1.28%, 01/07/04 13,835 13,835
8 See financial notes. SCHWAB CALIFORNIA MUNICIPAL MONEY FUND
ISSUER SECURITY TYPE, PROJECT, SERIES, FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) +~@ GO Bonds TOB Series PT-1236 1.27%, 01/07/04 24,405 24,405 +~@ GO Bonds TOB Series PT-1257 1.27%, 01/07/04 38,020 38,020 CALIFORNIA ALTERNATIVE ENERGY SOURCE FINANCING AUTH @ Cogeneration Facility RB Series 1993A 1.08%, 01/07/04 25,330 25,330 @ Cogeneration Facility RB Series 1993B 1.15%, 01/07/04 13,360 13,360 CALIFORNIA COMMUNITY COLLEGE FINANCING AUTH + 2003 TRAN, Series A 0.91%, 06/30/04 5,000 5,027 + 1.03%, 06/30/04 13,500 13,564 + 1.09%, 06/30/04 50,000 50,222 CALIFORNIA DEPT OF WATER RESOURCES +~@ 1996 Water Refunding RB (Big Bear Lake) TOB Series PA-597 1.03%, 04/08/04 8,445 8,445 +~@ Power Supply RB Series 2002A Series 2003 TOB Series FR-L11 1.30%, 01/07/04 6,325 6,325 +~@ Power Supply RB Series 2002A Series 2003 TOB Series FR-L12 1.30%, 01/07/04 10,200 10,200 +~@ Power Supply RB Series 2002A Series 2003 TOB Series FR-L13 1.30%, 01/07/04 2,500 2,500 +~@ Power Supply RB Series 2002A Series 2003 TOB Series FR-L14 1.30%, 01/07/04 12,500 12,500 +~@ Power Supply RB Series 2002A TOB Series PA-1100 1.25%, 01/07/04 19,995 19,995 +~@ Power Supply RB Series 2002A TOB Series PA-1120R 1.25%, 01/07/04 12,835 12,835 +~@ Power Supply RB Series 2002A TOB Series PT-730 1.25%, 01/07/04 34,740 34,740 +@ Power Supply RB Series 2002B-2 1.33%, 01/02/04 6,900 6,900 +@ Power Supply RB Series 2002B-3 1.30%, 01/02/04 5,500 5,500 +@ Power Supply RB Series 2002B-5 1.26%, 01/02/04 10,000 10,000 +@ Power Supply RB Series 2002C-10 1.19%, 01/07/04 20,000 20,000 +~@ Power Supply RB Series 2002C-13 1.20%, 01/07/04 23,600 23,600 +@ Power Supply RB Series 2002C-14 1.25%, 01/07/04 21,330 21,330 +@ Power Supply RB Series 2002C-17 1.25%, 01/07/04 8,300 8,300 +~@ Power Supply RB Series 2002C-7 1.27%, 01/07/04 50,000 50,000 CALIFORNIA ECONOMIC DEVELOPMENT FINANCING AUTH +@ Airport Facilities RB (Mercury Air Group) Series 1998 1.30%, 01/07/04 14,000 14,000 +@ IDRB (Calco) Series 1997 1.40%, 01/07/04 565 565 +@ IDRB (Costa Macaroni Mfg) Series 1997 1.17%, 01/07/04 2,765 2,765 +@ IDRB (Gaiser Tool Company) Series 1997 1.17%, 01/07/04 2,005 2,005 +@ IDRB (Lion Raisins) Series 1998 1.30%, 01/07/04 1,350 1,350 CALIFORNIA EDUCATIONAL FACILITIES AUTH +@ RB (Chapman University) Series 2000 1.30%, 01/07/04 4,700 4,700 +~@ RB (St. Marys College of California) Series 2001B 1.20%, 01/07/04 8,050 8,050
See financial notes. 9 SCHWAB CALIFORNIA MUNICIPAL MONEY FUND PORTFOLIO HOLDINGS continued
ISSUER SECURITY TYPE, PROJECT, SERIES, FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) +@ RB (University of Judaism) Series 1998A 1.15%, 01/07/04 5,300 5,300 +~@ RB (University of San Francisco) Series 1996 TOB Series 2000-413 1.23%, 01/07/04 8,995 8,995 +@ RB (University of San Francisco) Series 2000 1.20%, 01/07/04 20,000 20,000 +@ RB (University of San Francisco) Series 2003 1.15%, 01/07/04 37,000 37,000 +@ RB (San Francisco Conservatory of Music) Series 2000 1.15%, 01/07/04 2,830 2,830 TECP (Standford University) 0.85%, 01/23/04 9,700 9,700 CALIFORNIA HEALTH FACILITIES FINANCING AUTH +~@ Insured Hospital RB (Scripps Memorial Hospital) Series 1985B 1.19%, 01/07/04 2,610 2,610 +~@ Insured RB (Catholic Healthcare West) Series 1988A 1.15%, 01/07/04 8,300 8,300 +~@ Insured RB (Southern California Presbyterian Homes) Series 1998 1.16%, 01/07/04 29,200 29,200 +~@ RB (Kaiser Permanente) Series 1998A TOB Series 181 1.24%, 01/07/04 9,995 9,995 +@ RB (Scripps Health) Series 2001A 1.11%, 01/07/04 13,300 13,300 CALIFORNIA HFA +~@ Home Mortgage RB 2000 Series J 1.15%, 01/07/04 21,955 21,955 +~@ Home Mortgage RB 2000 Series N 1.15%, 01/07/04 40,000 40,000 +~@ Home Mortgage RB 2002 Series P 1.30%, 01/07/04 61,000 61,000 +~@ Home Mortgage RB 2003 Series D 1.25%, 01/07/04 15,000 15,000 +~@ Home Mortgage RB 2003 Series H 1.13%, 01/07/04 60,465 60,465 ~@ Home Mortgage RB 2003 Series K 1.15%, 08/01/04 73,500 73,500 ~@ Home Mortgage RB 2003 Series M 1.08%, 02/02/04 39,580 39,580 +~@ Home Mortgage RB Series 1998J Bonds TOB Series 1998R 1.15%, 09/02/04 3,750 3,750 ~@ M/F Housing RB III 2001 Series G 1.30%, 01/07/04 65,425 65,425 ~@ M/F Housing RB III 2002 Series A 1.16%, 01/07/04 26,175 26,175 ~@ M/F Housing RB III Series 2002 E 1.16%, 01/07/04 71,000 71,000 ~@ S/F Mortgage Bonds II, 1997 Series C-4 TOB Series 1998E 1.25%, 01/07/04 3,840 3,840 ~@ S/F Mortgage RB Draw Down Series 2003B TOB Series PT-843 1.37%, 01/07/04 7,870 7,870 CALIFORNIA INFRASTRUCTURE & ECONOMIC DEVELOPMENT BANK +@ IDRB (American-De Rosa Lamp Arts) Series 1999 1.22%, 01/07/04 4,950 4,950 +@ IDRB (Fairmont Sign Co) Series 2000A 1.45%, 01/07/04 4,250 4,250 +@ IDRB (Lafayette Textile Industries) Series 1999 1.22%, 01/07/04 1,745 1,745 +@ IDRB (Nelson Name Plate Co) Series 1999 1.35%, 01/07/04 3,450 3,450
10 See financial notes. SCHWAB CALIFORNIA MUNICIPAL MONEY FUND
ISSUER SECURITY TYPE, PROJECT, SERIES, FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) +@ IDRB (Roller Bearing Co) Series 1999 1.25%, 01/07/04 2,400 2,400 +@ RB (Buck Institute For Age Research) Series 2001 1.10%, 01/07/04 40,100 40,100 +~@ RB (California Independent System Operator Corp) Series A 1.15%, 01/07/04 11,600 11,600 @ RB (J. Paul Getty Trust) Series 2003B 1.00%, 01/07/04 20,000 20,000 @ RB (J. Paul Getty Trust) Series 2003C 1.00%, 01/07/04 20,000 20,000 +@ RB (SRI International) Series 2003A 1.16%, 01/07/04 4,000 4,000 TECP (J. Paul Getty Trust) Series 2002 0.90%, 02/13/04 6,000 6,000 CALIFORNIA POLLUTION CONTROL FINANCE AUTH +@ Pollution Control Refunding RB (US Borax) Series 1995A 1.19%, 01/07/04 10,200 10,200 +@ Resource Recovery RB (Sanger) Series 1990A 1.17%, 01/07/04 19,200 19,200 +@ Resource Recovery RB (Wadham Energy) Series 1987B 1.12%, 01/07/04 3,100 3,100 +@ Solid Waste Disposal RB (Agrifab) Series 2003 1.20%, 01/07/04 2,900 2,900 +@ Solid Waste Disposal RB (Alameda County Industries) Series 2000A 1.20%, 01/07/04 4,075 4,075 +@ Solid Waste Disposal RB (Athens Disposal Co) Series 1999A 1.20%, 01/07/04 6,400 6,400 +@ Solid Waste Disposal RB (Athens Disposal Company) Series 1995A 1.20%, 01/07/04 13,020 13,020 +@ Solid Waste Disposal RB (Athens Services) Series 2001A 1.20%, 01/07/04 4,500 4,500 +@ Solid Waste Disposal RB (Atlas Disposal Industries) Series 1999A 1.25%, 01/07/04 3,000 3,000 +@ Solid Waste Disposal RB (BLT Enterprises of Sacramento) Series 1999A 1.20%, 01/07/04 7,330 7,330 +@ Solid Waste Disposal RB (Blue Line Transfer) Series 1999A 1.20%, 01/07/04 4,500 4,500 +@ Solid Waste Disposal RB (Blue Line Transfer) Series 2001A 1.20%, 01/07/04 4,600 4,600 +@ Solid Waste Disposal RB (Browning-Ferris Industries of California Inc) Series 1997A 1.14%, 01/07/04 10,000 10,000 +@ Solid Waste Disposal RB (Burrtec Waste Industries Inc.) Series 1998A 1.70%, 01/07/04 1,270 1,270 +@ Solid Waste Disposal RB (Burrtec Waste Industries) Series 1997B 1.70%, 01/07/04 3,430 3,430 +@ Solid Waste Disposal RB (CR&R Inc) Series 2002A 1.25%, 01/07/04 3,900 3,900 +@ Solid Waste Disposal RB (Cal-San) Series 1996B 1.20%, 01/07/04 2,550 2,550 +@ Solid Waste Disposal RB (California Waste Solutions) Series 2002A 1.20%, 01/07/04 3,760 3,760 +@ Solid Waste Disposal RB (Cheese & Protein International) Series 2001A 1.32%, 01/07/04 10,000 10,000 +@ Solid Waste Disposal RB (Cold Canyon Landfill) Series 1998A 1.20%, 01/07/04 5,845 5,845 +@ Solid Waste Disposal RB (Colmac Energy) Series 1990A 1.08%, 01/07/04 6,470 6,470
See financial notes. 11 SCHWAB CALIFORNIA MUNICIPAL MONEY FUND PORTFOLIO HOLDINGS continued
ISSUER SECURITY TYPE, PROJECT, SERIES, FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) +@ Solid Waste Disposal RB (Contra Costa Waste Service) Series 1995A 1.20%, 01/07/04 2,300 2,300 +@ Solid Waste Disposal RB (EDCO Disposal Corp) Series 1996A 1.20%, 01/07/04 13,885 13,885 +@ Solid Waste Disposal RB (Escondido Disposal/Jemco Equipment Corp.) Series 1998A 1.70%, 01/07/04 7,845 7,845 +@ Solid Waste Disposal RB (Federal Disposal Service) Series 2001A 1.25%, 01/07/04 2,800 2,800 +@ Solid Waste Disposal RB (Greenteam of San Jose) Series 2001A 1.20%, 01/07/04 13,000 13,000 +@ Solid Waste Disposal RB (Greenwaste of Tehama) Series 1999A 1.25%, 01/07/04 2,060 2,060 +@ Solid Waste Disposal RB (Madera Disposal Systems Inc) Series 1998A 1.25%, 01/07/04 1,800 1,800 +@ Solid Waste Disposal RB (Marborg Industries) Series 2000A 1.20%, 01/07/04 4,830 4,830 +@ Solid Waste Disposal RB (Metropolitan Recycling Corp) Series 2000B 1.25%, 01/07/04 4,160 4,160 +@ Solid Waste Disposal RB (Mottra Corp) Series 2002A 1.20%, 01/07/04 2,625 2,625 +@ Solid Waste Disposal RB (Norcal Waste System) Series 2001 1.20%, 01/07/04 8,740 8,740 +@ Solid Waste Disposal RB (Norcal Waste System) Series 2002A 1.20%, 01/07/04 6,000 6,000 +@ Solid Waste Disposal RB (Norcal Waste Systems) Series 2003A 1.30%, 01/07/04 4,000 4,000 +@ Solid Waste Disposal RB (Orange Ave Disposal Co.) Series 2002A 1.20%, 01/07/04 6,250 6,250 +@ Solid Waste Disposal RB (Ratto Group of Companies) Series 2001A 1.20%, 01/07/04 4,340 4,340 +@ Solid Waste Disposal RB (Sanco Services) Series 2002A 1.70%, 01/07/04 4,000 4,000 +@ Solid Waste Disposal RB (Santa Clara Valley Disposal) Series 2001A 1.20%, 01/07/04 6,110 6,110 +@ Solid Waste Disposal RB (Santa Clara Valley Industries) Series 1998A 1.25%, 01/07/04 3,100 3,100 +@ Solid Waste Disposal RB (Solag Disposal) Series 1997A 1.25%, 01/07/04 2,400 2,400 +@ Solid Waste Disposal RB (Specialty Solid Waste & Recycling) Series 2001A 1.25%, 01/07/04 3,945 3,945 +@ Solid Waste Disposal RB (Talco Plastics) Series 1997A 1.22%, 01/07/04 3,925 3,925 +@ Solid Waste Disposal RB (Tri-CED Community Recycling) Series 1998A 1.22%, 01/07/04 1,770 1,770 +@ Solid Waste Disposal RB (Valley Vista Services) Series 2003A 1.20%, 01/07/04 2,350 2,350 +@ Solid Waste Disposal RB (Waste Management ) Series 2003A 1.30%, 01/07/04 5,500 5,500 +@ Solid Waste Disposal RB (Waste Management) Series 2001A 1.20%, 01/07/04 5,000 5,000 +@ Solid Waste Disposal RB (West Valley MRF) Series 1997A 1.70%, 01/07/04 4,560 4,560 +@ Solid Waste Disposal RB (Zanker Road Landfill) Series 1999C 1.25%, 01/07/04 6,370 6,370
12 See financial notes. SCHWAB CALIFORNIA MUNICIPAL MONEY FUND
ISSUER SECURITY TYPE, PROJECT, SERIES, FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) +@ Solid Waste Disposal Refunding RB (Waste Management) Series 2002A 1.29%, 01/07/04 16,000 16,000 CALIFORNIA PUBLIC WORKS BOARD +~@ Lease RB Series 1997C (University of California) TOB Series 970503 1.26%, 01/07/04 10,900 10,900 +~@ Lease RB Series 1999A TOB Series 1999F 1.15%, 01/07/04 9,985 9,985 +~@ Refunding Lease RB (Dept of Corrections) Series 1993A TOB Series 2000D 1.25%, 01/07/04 3,000 3,000 CALIFORNIA SCHOOL CASH RESERVE PROGRAM AUTH + 2003 Pool Bonds Series A 0.90%, 07/06/04 35,000 35,195 1.05%, 07/06/04 50,000 50,241 CALIFORNIA STATEWIDE COMMUNITIES DEVELOPMENT AUTH +@ COP (SVDP Management) Series 1998 1.07%, 01/07/04 5,685 5,685 +~@ COP (Sutter Health Related Group) TOB Series 1999E 1.15%, 01/07/04 5,000 5,000 +@ IDRB (Biocol Investments) Series 1997B 1.75%, 01/07/04 1,500 1,500 +@ IDRB (Cowden Metal Stamping & Tooling) Series 1997A 1.75%, 01/07/04 1,430 1,430 +@ IDRB (Diamond Food Corp) Series 1991 1.75%, 01/07/04 665 665 +@ IDRB (Golden Valley Grape Juice & Wine) Series 1998 1.20%, 01/07/04 1,050 1,050 +@ IDRB (Integrated Rolling Co) Series 1999A 1.35%, 01/07/04 1,900 1,900 +@ IDRB (RL Group) Series 1998C 1.20%, 01/07/04 1,715 1,715 +~@ Insured RB (Childrens Hospital Los Angeles) Series 2002B 1.03%, 01/07/04 7,800 7,800 +@ M/F Housing RB (Agave at Elk Grove Apts) Series 2003DD 1.17%, 01/07/04 15,100 15,100 +@ M/F Housing RB (Bay Vista at MeadowPark Apts) Series 2003 NN-1 1.18%, 10/15/04 7,500 7,500 +@ M/F Housing RB (Creekside at MeadowPark Apts) Series 2002HH 1.30%, 01/07/04 15,000 15,000 +@ M/F Housing RB (Cypress Villa Apts) Series 2000F 1.30%, 01/07/04 4,725 4,725 +@ M/F Housing RB (Dublin Ranch Senior Apts) Series 2003OO 1.15%, 01/07/04 15,090 15,090 +@ M/F Housing RB (Emerald Gardens Apts) Series 2000E 1.30%, 01/07/04 7,320 7,320 +@ M/F Housing RB (Fairway Family Apts) Series 2003PP 1.15%, 01/07/04 30,000 30,000 +@ M/F Housing RB (Kimberly Woods Apts) Series 1995B 1.18%, 01/07/04 13,400 13,400 +@ M/F Housing RB (Laurel Park Senior Apts) Series 2002H 1.35%, 01/07/04 5,500 5,500 +@ M/F Housing RB (Los Padres Apts) Series 2003E 1.30%, 01/07/04 10,750 10,750 +@ M/F Housing RB (Marlin Cove Apts) Series 2000V 1.17%, 01/07/04 8,000 8,000 +@ M/F Housing RB (Oakmont of Concord) Series 2002Q 1.36%, 01/07/04 25,000 25,000 +@ M/F Housing RB (Park David Senior Apts) Series 1999D 1.30%, 01/07/04 8,220 8,220 +@ M/F Housing RB (Plaza Club Apts) Series 1997A 1.26%, 01/07/04 10,290 10,290
See financial notes. 13 SCHWAB CALIFORNIA MUNICIPAL MONEY FUND PORTFOLIO HOLDINGS continued
ISSUER SECURITY TYPE, PROJECT, SERIES, FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) +@ M/F Housing RB (Silvercrest Residence) Series 2003EEE 1.20%, 01/07/04 13,130 13,130 +@ M/F Housing RB (Valley Palms Apts) Series 2002C 1.17%, 01/07/04 12,000 12,000 +@ M/F Housing RB (Victoria Palm Villa Apts) Series 2003VV 1.30%, 01/07/04 34,000 34,000 +@ M/F Housing RB (Woodsong Apts) Series 1997B 1.25%, 01/07/04 3,227 3,227 +@ RB (Biola University) Series 2002B 1.10%, 01/07/04 22,600 22,600 +@ RB (Elder Care Alliance) Series 2000 1.16%, 01/07/04 12,760 12,760 +~@ RB (Gemological Institute) Series 2001 1.20%, 01/07/04 34,790 34,790 +@ RB (Japanese American National Museum) Series 2000A 1.25%, 01/07/04 4,700 4,700 +@ RB (Jewish Federation Council of Greater Los Angeles) Series 2000A 1.15%, 01/07/04 5,500 5,500 @ RB (Kaiser Permanente) Series 2001A 1.38%, 01/07/04 19,000 19,000 @ RB (Kaiser Permanente) Series 2001B 1.00%, 01/07/04 25,000 25,000 @ RB (Kaiser Permanente) Series 2002B 1.19%, 01/07/04 17,000 17,000 @ RB (Kaiser Permanente) Series 2003A 1.19%, 01/07/04 3,000 3,000 @ RB (Kaiser Permanente) Series 2003B 1.19%, 01/07/04 8,400 8,400 +@ RB (Laurence School) Series 2003 1.10%, 01/07/04 4,000 4,000 +@ RB (Master's College) Series 2002 1.20%, 01/07/04 11,250 11,250 +@ RB (National Public Radio) Series 2002 1.15%, 01/07/04 7,800 7,800 +@ Refunding RB (13th & I Associates) Series 1991 1.75%, 01/07/04 4,400 4,400 TRAN Series 2003 A-3 1.01%, 06/30/04 27,000 27,131 CARLSBAD +@ M/F Housing Refunding RB (Santa Fe Ranch Apts) Series 1993A 1.19%, 01/07/04 14,400 14,400 CONTRA COSTA CNTY +@ M/F Mortgage RB (El Cerrito Royale) Series 1987A 1.30%, 01/07/04 2,480 2,480 DAVIS COMMUNITY FACILITIES DISTRICT 1992-2 +@ Special Tax Bonds (East Davis Mace Ranch Area II) Series 2000 1.22%, 01/07/04 3,200 3,200 DESERT SANDS UNIFIED SD 2003 GO BAN 0.82%, 06/30/04 52,000 52,238 1.04%, 06/30/04 10,000 10,034 DIAMOND BAR PUBLIC FINANCING AUTH +@ Lease RB (Community Center) Series 2002A 1.20%, 01/07/04 9,755 9,755 DUBLIN HOUSING AUTH +@ M/F Housing RB (Park Sierra At Iron Horse Trail) Series 1998A 1.12%, 01/07/04 14,900 14,900 DUBLIN SAN RAMON SERVICE DISTRICT +~@ Sewer Revenue COP Series 2000 1.18%, 01/07/04 15,400 15,400 EAST BAY MUNICIPAL UTILITY DISTRICT +~@ Water System Subordinated Refunding RB Series 2002A 1.05%, 01/07/04 14,800 14,800
14 See financial notes. SCHWAB CALIFORNIA MUNICIPAL MONEY FUND
ISSUER SECURITY TYPE, PROJECT, SERIES, FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) +~@ Water System Subordinated Refunding RB Series 2002B 1.08%, 01/07/04 9,900 9,900 ~ Water System TECP 1.10%, 01/12/04 31,300 31,300 1.03%, 01/22/04 9,000 9,000 1.00%, 02/25/04 21,900 21,900 1.05%, 03/11/04 30,000 30,000 EASTERN MUNICIPAL WATER DISTRICT +~@ Water & Sewer Revenue COP Series 2003B 1.20%, 01/07/04 25,000 25,000 EL CAJON REDEVELOPMENT AGENCY +@ M/F Housing RB (Park-Mollison & Madison Apts) Series 1998 1.26%, 01/07/04 5,000 5,000 EL CAMINO COMMUNITY COLLEGE DISTRICT +~@ GO Bonds Series 2003A TOB Series 2003-12 1.11%, 07/14/04 16,100 16,100 EMERYVILLE REDEVELOPMENT AGENCY +@ M/F Housing RB (Bay St Apts) Series 2002A 1.26%, 01/07/04 33,215 33,215 FILLMORE PUBLIC FINANCING AUTH +@ RB Series 2003A (Central City Redevelopment Area) 1.30%, 01/07/04 27,775 27,775 FOOTHILL-DE ANZA COMMUNITY COLLEGE DISTRICT ~@ GO Bonds Series A TOB Series 2000YY) 1.15%, 01/07/04 9,985 9,985 FRESNO COUNTY 2003-04 TRAN 0.90%, 06/30/04 7,000 7,038 FRESNO IDA +@ IDRB (Keiser Corp.) Series 1997 1.22%, 01/07/04 1,660 1,660 GOLDEN EMPIRE SCHOOLS FINANCING AUTH +@ Lease RB (Kern High SD) Series 2001 1.12%, 01/07/04 10,600 10,600 HAYWARD +~@ M/F Housing RB (Shorewood Apts) Series 1984A 1.20%, 01/07/04 19,700 19,700 HAYWARD HOUSING AUTH +@ M/F Mortgage Refunding RB (Huntwood Terrace Apts) Series 1993A 1.28%, 01/07/04 5,365 5,365 HERCULES PUBLIC FINANCING AUTH +@ Lease RB Series 2003A 1.05%, 01/07/04 7,000 7,000 HERCULES REDEVELOPMENT AGENCY +@ IDRB (Pro Media) Series 2000A 1.20%, 01/07/04 2,500 2,500 HUNTINGTON BEACH +@ M/F Housing RB (Five Points Seniors) Series 1991A 1.26%, 01/07/04 9,500 9,500 HUNTINGTON PARK REDEVELOPMENT AGENCY +@ M/F Housing RB (Casa Rita Apts) Series 1994A 1.26%, 01/07/04 4,100 4,100 IRVINE ASSESSMENT DISTRICT +~@ Special Assessment District 85-7-I Bonds 1.12%, 01/07/04 20,000 20,000 IRVINE UNIFIED SD +@ Special Tax Bonds (South Irvine Communities) Series 2003 1.27%, 01/02/04 2,000 2,000 KERN CNTY 2003-04 TRAN 0.92%, 06/30/04 25,000 25,132 +@ COP Series 1986A 1.10%, 01/07/04 2,200 2,200
See financial notes. 15 SCHWAB CALIFORNIA MUNICIPAL MONEY FUND PORTFOLIO HOLDINGS continued
ISSUER SECURITY TYPE, PROJECT, SERIES, FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) LODI +~@ Electric System Revenue COP Series 2002A 1.03%, 01/07/04 38,360 38,360 LONG BEACH HARBOR FACILITIES CORP +~ Harbor RB Series 2002A 0.97%, 05/14/04 13,095 13,240 +~ Harbor RB Series 2002B 4.00%, 05/15/04 56,560 58,143 ~ Harbor TECP Series A 0.95%, 01/08/04 17,250 17,250 1.05%, 02/05/04 10,000 10,000 LONG BEACH HOUSING AUTH +@ M/F Housing Refunding RB (Channel Point Apts) Series 1998A 1.25%, 01/07/04 7,000 7,000 LONG BEACH UNIFIED SD +~@ Capital Improvement Refinancing COP Series 2001 1.25%, 01/07/04 30,965 30,965 LOS ANGELES +~@ GO Refunding Bonds Series 1998A TOB Series PA-554 1.25%, 01/07/04 3,150 3,150 +@ M/F Housing RB (Beverly Park Apts) Series 1988A 1.30%, 01/07/04 34,000 34,000 +@ M/F Housing RB (Channel Gateway Apts) Issue 1989B 1.30%, 01/07/04 67,700 67,700 +@ M/F Housing RB (Fountain Park Phase II) Series 2000B 1.09%, 01/07/04 33,615 33,615 +@ M/F Housing RB (Fountain Park) Series 1999P 1.09%, 01/07/04 37,300 37,300 +@ M/F Housing RB (Studio Colony) Series 1985C 1.25%, 01/07/04 15,521 15,521 +@ M/F Housing RB Series 1985K 1.15%, 01/07/04 12,455 12,455 +@ M/F Housing Refunding RB (Tri-City) Series 2001I 1.09%, 01/07/04 3,700 3,700 +~@ Wastewater System Subordinate Refunding RB Series 2003B TOB Series 234 1.26%, 01/07/04 14,995 14,995 ~ Wastewater System TECP 0.92%, 01/15/04 20,000 20,000 0.93%, 01/15/04 5,000 5,000 1.04%, 01/20/04 34,000 34,000 0.93%, 01/21/04 36,875 36,875 LOS ANGELES AIRPORT DEPARTMENT + Los Angeles International Airport TECP Series A 1.00%, 01/09/04 3,000 3,000 + Los Angeles International Airport TECP Series B 1.00%, 01/09/04 2,500 2,500 LOS ANGELES CNTY +@ COP (LA County Museum of Art) Series 1985A 1.10%, 01/07/04 1,100 1,100 +@ COP (LA County Museum of Art) Series 1985B 1.10%, 01/07/04 1,100 1,100 +~@ Pension Obligation Refunding RB Series 1996A 1.03%, 01/07/04 16,000 16,000 LOS ANGELES CNTY HOUSING AUTH +@ M/F Housing RB (Malibu Canyon Apts) Series 1985B 1.23%, 01/07/04 28,520 28,520 LOS ANGELES CNTY METROPOLITAN TRANSPORTATION AUTH +~@ Sales Tax RB Series 1997A TOB Series 1998B 1.15%, 01/07/04 23,830 23,830 +~@ Sales Tax Refunding RB Series 1992A 1.03%, 01/07/04 8,050 8,050 + Second Subordinate Sales Tax Revenue TECP Series A 0.93%, 01/08/04 25,267 25,267 +~@ Senior Sales Tax RB Series 2001A TOB Series 2003-4 1.10%, 01/07/04 12,600 12,600
16 See financial notes. SCHWAB CALIFORNIA MUNICIPAL MONEY FUND
ISSUER SECURITY TYPE, PROJECT, SERIES, FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) +~@ Senior Sales Tax Refunding RB Series 2001B TOB Series 20010504 1.26%, 01/07/04 24,750 24,750 LOS ANGELES COMMUNITY COLLEGE DISTRICT + GO Refunding Bonds Series 2003A 0.90%, 08/01/04 27,890 28,067 LOS ANGELES COMMUNITY REDEVELOPMENT AGENCY +@ M/F Housing RB (Metropolitan Lofts Apts) Series 2002A 1.33%, 01/07/04 17,750 17,750 +@ M/F Housing Refunding RB (Promenade Towers) Series 2000 1.20%, 01/07/04 39,600 39,600 LOS ANGELES CONVENTION & EXHIBITION CENTER AUTH +~@ Refunding Lease RB Series 2003B2 0.97%, 01/07/04 4,000 4,000 +~@ Refunding Lease RB Series 2003E 0.97%, 01/07/04 41,700 41,700 LOS ANGELES COUNTY CAPITAL ASSET LEASING CORP + Lease Revenue TECP 0.93%, 01/12/04 17,500 17,500 0.93%, 01/20/04 6,000 6,000 1.05%, 03/11/04 9,400 9,400 LOS ANGELES COUNTY SCHOOLS POOLED FINANCING PROGRAM + 2003-04 Pooled TRAN COP Series A 0.92%, 06/30/04 12,000 12,049 LOS ANGELES DEPT. OF WATER AND POWER ~@ Electric Plant RB Series 2000 TOB Series 2000-370 1.23%, 01/07/04 11,620 11,620 ~@ Power System RB Series 2001B-1 1.20%, 01/07/04 36,300 36,300 ~@ Power System RB Series 2001B-2 1.06%, 01/07/04 35,300 35,300 +~@ Power System RB Series 2001A TOB Series 20010503 1.26%, 01/07/04 24,750 24,750 +~@ Power System RB Series 2001A-1 TOB Series 184 1.26%, 01/07/04 15,000 15,000 ~@ Power System RB Series 2001A-1 TOB Series PA-1087 1.27%, 01/07/04 7,120 7,120 +~@ Water System RB Series 2001A TOB Series 2001-754 1.23%, 01/07/04 12,707 12,707 +~@ Water Works RB Series 1999 TOB Series 1999I 1.15%, 01/07/04 22,090 22,090 LOS ANGELES HARBOR DEPARTMENT ~ TECP Series B 0.95%, 01/27/04 22,192 22,192 1.10%, 02/10/04 11,194 11,194 LOS ANGELES UNIFIED SD +~@ GO Bonds Series 1999C TOB Series 1999-7 1.14%, 01/07/04 15,400 15,400 +~@ GO Bonds Series 2003A TOB Series PT-1730 1.25%, 01/07/04 30,000 30,000 LOS ANGELES WASTEWATER SYSTEM +~@ RB Series 1998A TOB Series 1998-25 1.16%, 01/07/04 17,000 17,000 +~@ Refunding RB Series 2002A TOB Series 2002J 1.13%, 01/07/04 12,245 12,245 +~@ Subordinate Refunding RB Series 2001A 1.15%, 12/09/04 30,000 30,000 +~@ Subordinate Refunding RB Series 2001B 1.15%, 12/09/04 24,600 24,600 +~@ Subordinate Refunding RB Series 2001C 1.15%, 12/09/04 24,065 24,065
See financial notes. 17 SCHWAB CALIFORNIA MUNICIPAL MONEY FUND PORTFOLIO HOLDINGS continued
ISSUER SECURITY TYPE, PROJECT, SERIES, FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) +~@ Subordinate Refunding RB Series 2001D 1.15%, 12/09/04 7,550 7,550 LOS RIOS COMMUNITY COLLEGE DISTRICT 2003-04 TRAN 1.03%, 11/06/04 21,000 21,171 M-S-R PUBLIC POWER AGENCY +~@ Subordinate Lien RB (San Juan) Series 1997D 1.25%, 01/07/04 2,500 2,500 +~@ Subordinate Lien RB (San Juan) Series 1997E 1.20%, 01/07/04 5,000 5,000 MADERA CNTY +@ Lease RB (Madera Municipal Golf Course Refinancing) Series 1993 1.20%, 01/07/04 3,150 3,150 MARTINEZ +@ M/F Housing Refunding RB (Muirwood Garden Apts) Series 2003A 1.12%, 01/07/04 6,800 6,800 MODESTO CITY SD + GO Refunding Bonds Series 2003 0.95%, 08/01/04 2,115 2,140 MODESTO HIGH SD + GO Refunding Bonds Series 2003 0.95%, 08/01/04 2,000 2,024 MOUNT SAN JACINTO WINTER PARK AUTH +@ COP (1998 Palm Springs Aerial Tramway) 1.25%, 01/07/04 7,600 7,600 +@ COP (Palm Springs Aerial Tramway) Series 2000B 1.25%, 01/07/04 2,900 2,900 NORTHERN CALIFORNIA POWER AGENCY +~@ Hydroelectric Project #1 Refunding RB Series 2003A 1.11%, 01/07/04 9,500 9,500 NORTHERN CALIFORNIA TRANSMISSION AGENCY +~@ Transmission Project Refunding RB Series 2002A 1.06%, 01/07/04 9,800 9,800 OAKLAND 2003-2004 TRAN 0.93%, 07/29/04 38,160 38,392 +~@ Insured RB (180 Harrison Foundation) Series 1999A TOB Series 2000M 1.15%, 01/07/04 4,500 4,500 OCEANSIDE +@ M/F Mortgage RB (Riverview Springs Apts) Series 1990A 1.26%, 01/07/04 12,470 12,470 ORANGE CNTY +@ Apartment Development RB (Jess L. Frost) Series 1985B 1.12%, 01/07/04 10,200 10,200 +@ Apartment Development RB Issue 1985U (Hon Development Corp) Series C 1.23%, 01/07/04 13,300 13,300 +@ Apartment Development Refunding RB (Vintage Woods) Series 1998H 1.25%, 01/07/04 10,000 10,000 +@ Apartment Development Refunding RB (WLCO LF Partners) Series 1998G 1.25%, 01/07/04 14,100 14,100 +@ Apartment Development Refunding RB (Pointe Niguel) Series 1992C 1.20%, 01/07/04 19,300 19,300 +@ COP (Florence Crittenton Services) Series 1990 1.11%, 01/07/04 5,500 5,500 ORANGE CNTY +@ Apartment Development Refunding RB (Villa La Paz) Series 1998F 1.20%, 01/07/04 15,900 15,900
18 See financial notes. SCHWAB CALIFORNIA MUNICIPAL MONEY FUND
ISSUER SECURITY TYPE, PROJECT, SERIES, FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) +@ Apartment Development Refunding RB (Villas Aliento) Series 1998E 1.20%, 01/07/04 4,500 4,500 ORANGE CNTY LOCAL TRANSP AUTH + Sales Tax Revenue TECP 1.00%, 02/13/04 42,000 42,000 ORANGE CNTY SANITATION DISTRICT +~@ Refunding COP Series 1992 1.20%, 01/07/04 15,300 15,300 ~@ Refunding COP Series 2000B 1.27%, 01/02/04 2,800 2,800 ORANGE COUNTY HOUSING AUTH +@ Apartment Development RB (Lantern Pines) Series 1985CC 1.15%, 01/07/04 14,700 14,700 OXNARD FINANCING AUTH +~@ Lease RB Series 2003B 1.20%, 01/07/04 14,750 14,750 PALO ALTO UNIFIED SD ~@ GO Bonds Series B TOB Series 1997R 1.15%, 01/07/04 6,000 6,000 PASADENA +~@ COP (City Hall & Park Improvements) Series 2003 1.20%, 01/07/04 35,290 35,290 PENINSULA CORRIDOR JOINT POWERS BOARD Grant Anticipation Notes 2003D 1.15%, 11/19/04 12,000 12,023 PERALTA COMMUNITY COLLEGE DISTRICT BAN Series 2003 1.12%, 03/04/04 28,500 28,501 PETALUMA COMMUNITY DEVELOPMENT COMMISSION +@ M/F Housing RB (Oakmont) Series 1996A 1.35%, 01/07/04 3,450 3,450 PINOLE REDEVELOPMENT AGENCY +@ M/F Housing RB (East Bluff Apts) Series 1998A 1.35%, 01/07/04 4,959 4,959 PLEASANT HILL +@ M/F Mortgage RB (Brookside Apts) Series 1988A 1.08%, 01/07/04 4,500 4,500 PLEASANTON +@ M/F Housing RB (Busch Senior Housing) Series 2003A 1.17%, 01/07/04 13,360 13,360 PORT OF OAKLAND +~@ RB Series 2000K TOB Series 2000JJ 1.20%, 01/07/04 15,000 15,000 +~@ RB Series 2000K TOB Series PA-663R 1.29%, 01/07/04 8,415 8,415 RANCHO CALIFORNIA WATER DISTRICT FINANCING AUTH +~@ RB Series 2001B 1.05%, 01/07/04 7,800 7,800 REDWOOD CITY +@ COP (City Hall) Series 1998 1.25%, 01/07/04 2,195 2,195 RIVERSIDE CNTY HOUSING AUTH +@ M/F Housing RB (Victoria Springs Apts) Series 1989C 1.26%, 01/07/04 9,000 9,000 +@ M/F Housing RB (Briarwood Apts) Series 1985C 1.12%, 01/07/04 4,500 4,500 +@ M/F Housing Refunding RB (Tyler Springs Apts) Series 1999C 1.12%, 01/07/04 8,300 8,300 RIVERSIDE CNTY IDA +@ IDRB (Cal-Mold) Series 1997 1.50%, 01/07/04 3,070 3,070 ROSEVILLE ELECTRIC SYSTEM +~@ Electric System Revenue COP Series 2002 1.18%, 01/07/04 30,365 30,365 ROSEVILLE JOINT UNION HIGH SD +~@ COP Series 2003 1.10%, 01/07/04 6,300 6,300
See financial notes. 19 SCHWAB CALIFORNIA MUNICIPAL MONEY FUND PORTFOLIO HOLDINGS continued
ISSUER SECURITY TYPE, PROJECT, SERIES, FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) SACRAMENTO CNTY 2003-2004 TRAN Series A 0.95%, 07/30/04 77,000 77,463 +@ COP (Administration Center & Courthouse) Series 1990 1.25%, 01/07/04 7,665 7,665 +@ Special Facilities Airport RB (Cessna Aircraft Co) Series 1998 1.25%, 01/07/04 3,300 3,300 SACRAMENTO CNTY HOUSING AUTH +@ M/F Housing RB (Carlton Plaza Senior Apts) Series 2003E 1.31%, 01/07/04 14,000 14,000 +@ M/F Housing RB (Hidden Oaks Apts) Series 1999C 1.30%, 01/07/04 6,300 6,300 +@ M/F Housing Refunding RB (Chesapeake Commons Apts) Series 2001C 1.26%, 01/07/04 28,000 28,000 SACRAMENTO CNTY SANITATION DISTRICT ~@ RB Series 2000A TOB Series 2000-366 1.23%, 01/07/04 12,445 12,445 ~@ RB Series 2000A TOB Series PA-694R 1.25%, 01/07/04 6,090 6,090 SACRAMENTO HOUSING AUTH +@ M/F Housing RB (St. Anton Building Apts) Series 2003I 1.15%, 01/07/04 8,000 8,000 SACRAMENTO REDEVELOPMENT AGENCY +@ M/F Housing RB (18th & L Apts) Series 2002E 1.30%, 01/07/04 10,525 10,525 SALINAS +@ Apartment Development RB (Mariner Village) Series 1985B 1.20%, 01/07/04 2,825 2,825 SAN DIEGO HOUSING AUTH +@ M/F Housing RB (La Cima Apts) Series 1985K 1.20%, 01/07/04 9,140 9,140 +@ M/F Housing RB (Nobel Court Apts) Series 1985L 1.20%, 01/07/04 15,815 15,815 +@ M/F Mortgage Refunding RB (Creekside Villa Apts) Issue 1999B 1.26%, 01/07/04 6,000 6,000 SAN DIEGO UNIFIED SD 2003-2004 TRAN Series A 1.00%, 06/30/04 10,900 10,953 +~@ GO Bonds Series 2002D TOB Series 2002-28 1.10%, 05/12/04 12,280 12,280 +~@ GO Bonds Series 2003E TOB Series 2003-26 1.10%, 01/07/04 20,165 20,165 SAN FRANCISCO AIRPORTS COMMISSION +~@ Second Series RB Series 18B TOB Series 2000-476 1.23%, 01/07/04 16,255 16,255 +~@ Second Series RB Series 24A TOB Series PA-662 1.33%, 01/07/04 12,670 12,670 SAN FRANCISCO CITY & CNTY +@ M/F Housing Refunding RB (City Heights Apts) Series 1997A 1.18%, 01/07/04 16,800 16,800 +@ M/F Housing Refunding RB (Post St Towers) Series 2000A 1.15%, 01/07/04 17,000 17,000 SAN FRANCISCO CITY & CNTY FINANCE CORPORATION +~@ Lease RB (Moscone Center Expansion) Series 2000-1 1.25%, 01/07/04 10,000 10,000 +~@ Lease RB (Moscone Center Expansion) Series 2000-2 1.18%, 01/07/04 11,000 11,000 SAN FRANCISCO CITY & CNTY REDEVELOPMENT AGENCY +@ Community Facilities District #4 RB (Mission Bay North) Series 2002-North 1.07%, 01/07/04 23,440 23,440
20 See financial notes. SCHWAB CALIFORNIA MUNICIPAL MONEY FUND
ISSUER SECURITY TYPE, PROJECT, SERIES, FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) +@ M/F Housing RB (3rd & Mission) Series 1999C 1.25%, 01/07/04 21,500 21,500 +@ M/F Housing RB (Ocean Beach Apts) Series 2001B 1.20%, 01/07/04 4,335 4,335 +@ M/F Housing Refunding RB (Fillmore Center) Series 1992A2 1.07%, 01/07/04 3,750 3,750 SAN JOAQUIN CNTY TRANSPORTATION AUTH + Sales Tax Revenue TECP 0.93%, 03/11/04 19,000 19,000 0.93%, 03/12/04 23,000 23,000 SAN JOSE +~@ GO Bonds Series 2002 (Libraries, Parks & Public Safety) TOB Series 2001-760 1.23%, 01/07/04 11,223 11,223 +@ M/F Housing RB (Almaden Family Apts) Series 2003D 1.30%, 01/07/04 5,000 5,000 +@ M/F Housing RB (Almaden Lake Village Apts) Series 1997A 1.26%, 01/07/04 15,900 15,900 +@ M/F Housing RB (Betty Anne Gardens Apts), Series 2002A 1.14%, 01/07/04 11,000 11,000 +@ M/F Housing RB (El Paseo Apts) Series 2002B 1.14%, 01/07/04 5,000 5,000 +@ M/F Housing RB (Siena at Renaissance Square Apts) Series 1996A 1.30%, 01/07/04 21,500 21,500 SAN JOSE FINANCING AUTHORITY +~@ Lease RB (Hayes Mansion Phase III) Series 2001D 1.07%, 01/07/04 10,800 10,800 SAN JOSE REDEVELOPMENT AGENCY +@ M/F Housing RB (101 San Fernando Apts) Series 1998A 1.20%, 01/07/04 38,000 38,000 +@ RB (Merged Area Redevelopment) Series 1996B 1.15%, 01/07/04 6,000 6,000 +~@ Tax Allocation Bonds (Merged Area Redevelopment) Series 1993 TOB Series 158 1.24%, 01/07/04 30,095 30,095 SAN JUAN UNIFIED SD 2003-04 TRAN 1.03%, 11/06/04 40,000 40,326 SAN MARCOS REDEVELOPMENT AGENCY +@ M/F Housing RB (Grandon Village) Series 2002A 1.12%, 01/07/04 13,500 13,500 SANGER PUBLIC FINANCE AUTHORITY +@ Refunding RB (Utility System) Series 2002A 1.20%, 01/07/04 10,000 10,000 SANTA BARBARA CNTY 2003-2004 TRAN Series A 0.80%, 07/23/04 11,000 11,073 SANTA CLARA +~@ Electric RB Series 1985C 1.20%, 01/07/04 15,800 15,800 SANTA CLARA CNTY +@ M/F Housing Refunding RB (Briarwood Apts) Series 1996B 1.25%, 01/07/04 12,400 12,400 +@ M/F Housing Refunding RB (Grove Garden Apts) Series 1997A 1.25%, 01/07/04 14,000 14,000 SANTA CLARA VALLEY WATER DISTRICT +~@ Refunding & Improvement COP Series 1994A TOB Series 2000-411 1.23%, 01/07/04 15,120 15,120 SANTA CRUZ CNTY Santa Cruz County, California 2003/2004 Tax and Revenue Anticipation Notes 1.11%, 07/01/04 15,400 15,467 SANTA FE SPRINGS IDA +@ IDRB (Tri-West) Series 1983 1.15%, 02/02/04 4,000 4,000
See financial notes. 21 SCHWAB CALIFORNIA MUNICIPAL MONEY FUND PORTFOLIO HOLDINGS continued
ISSUER SECURITY TYPE, PROJECT, SERIES, FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) SANTA ROSA HOUSING AUTH +@ M/F Housing RB (Apple Creek Apts) Series 1985E 1.15%, 01/07/04 17,140 17,140 +@ M/F Housing RB (Quail Run Apts) Series 1997A 1.35%, 01/07/04 4,710 4,710 SONOMA CNTY 2003-04 TRAN 0.99%, 09/30/04 60,000 60,446 SOUTH COAST LOCAL EDUCATION AGENCIES Pooled TRAN Participations Series 2003A 1.03%, 06/30/04 10,000 10,047 SOUTH PLACER WASTEWATER AUTH +~@ Wastewater RB Series B 1.18%, 01/07/04 29,500 29,500 SOUTH SAN FRANCISCO +@ M/F Housing RB Series 1987A (Magnolia Plaza Apts) 1.17%, 01/07/04 5,500 5,500 SOUTHERN CALIFORNIA HOME FINANCING AUTH ~@ S/F Mortgage RB Draw Down Series 2002 TOB Series PT-629 1.33%, 01/07/04 28,350 28,350 SOUTHERN CALIFORNIA METROPOLITAN WATER DISTRICT ~@ Water RB Series 1997B 1.20%, 01/07/04 15,700 15,700 ~@ Water RB Series 1997C 1.25%, 01/07/04 15,000 15,000 ~@ Water RB Series 1999A TOB Series 19990 1.15%, 01/07/04 18,500 18,500 ~@ Water RB Series 1999C 1.25%, 01/07/04 4,100 4,100 ~@ Water RB Series 2000 B-1 1.27%, 01/02/04 4,700 4,700 ~@ Water RB Series 2000 B-2 1.05%, 01/07/04 2,850 2,850 +~@ Water Refunding RB Series 1996A 1.20%, 01/07/04 16,800 16,800 ~@ Water Refunding RB Series 2001 B-1 1.18%, 01/07/04 45,100 45,100 ~@ Water Refunding RB Series 2001 B-2 1.18%, 01/07/04 15,500 15,500 ~@ Water Refunding RB Series 2002A 1.25%, 01/07/04 8,900 8,900 ~@ Water Refunding RB Series 2003 C-1 1.15%, 01/07/04 6,500 6,500 ~@ Water Refunding RB Series 2003 C-2 1.15%, 01/07/04 10,000 10,000 ~@ Water Refunding RB Series 2003 C-3 1.15%, 01/07/04 12,000 12,000 SOUTHERN CALIFORNIA PUBLIC POWER AUTH +~@ Power Project Subordinate Refunding RB (Palo Verde) Series 1996B 1.03%, 01/07/04 1,100 1,100 +~@ Subordinate Refunding RB (Southern Transmission) Series 2000A 1.10%, 01/07/04 6,500 6,500 +~@ Subordinate Refunding RB (Southern Transmission) Series 2001A 1.10%, 01/07/04 16,795 16,795 +@ Transmission Project Subordinate Refunding RB Series 1991 1.03%, 01/07/04 13,500 13,500 STANISLAUS CNTY 2003-04 TRAN 0.99%, 10/14/04 45,000 45,353 STOCKTON +@ Arch Road East Community Facilities District No. 99-02 Special Tax Bonds Series 1999 1.22%, 01/07/04 1,430 1,430 SUNNYVALE +~@ COP (Government Center Site Acquisition) Series 2001A 1.20%, 01/07/04 13,280 13,280
22 See financial notes. SCHWAB CALIFORNIA MUNICIPAL MONEY FUND
ISSUER SECURITY TYPE, PROJECT, SERIES, FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) UNION CITY +@ M/F Housing Refunding RB (Greenhaven Apts) Series 1997A 1.25%, 01/07/04 10,975 10,975 UNIVERSITY OF CALIFORNIA +~@ General RB Series 2003A TOB Series PT-872 1.25%, 01/07/04 8,265 8,265 ~@ RB (Multiple Purpose) Series K TOB Series 20000504 1.26%, 01/07/04 19,430 19,430 +~@ RB (Multiple Purpose) Series O TOB Series 2001-762 1.23%, 01/07/04 7,495 7,495 TECP Series A 1.05%, 01/08/04 13,545 13,545 0.90%, 01/22/04 25,200 25,200 VALLECITOS WATER DISTRICT +@ Water Revenue COP (Twin Oaks Reservoir) Series 1998 1.10%, 01/07/04 18,700 18,700 VENTURA CNTY 2003-04 TRAN 0.90%, 07/01/04 25,000 25,074 VERNON ELECTRIC SYSTEM +@ Electric System RB (Malburg Generating Station) Series 2003A 1.20%, 01/07/04 11,000 11,000 VICTOR VALLEY COMMUNITY COLLEGE DISTRICT +@ COP Series 1997 1.18%, 01/07/04 53,450 53,450 VISTA IDA +@ IDRB (Desalination Systems) Series 1995 1.17%, 01/07/04 4,240 4,240 WEST SACRAMENTO COMMUNITY FACILITIES DISTRICT #6 +@ Special Tax Bonds Series 1997A 1.72%, 01/07/04 3,635 3,635 WESTERN MUNICIPAL WATER DISTRICT FACILITIES AUTH +~@ RB Series 2002A 1.10%, 01/07/04 20,400 20,400 WESTERN PLACER UNIFIED SD + COP (School Facilities) Series 2003 1.25%, 01/07/04 9,000 9,000 WESTMINISTER REDEVELOPMENT AGENCY +@ M/F Housing RB (Brookhurst Royale Senior Assisted Living) Series 2000A 1.75%, 01/07/04 7,700 7,700 WESTMINSTER +~@ COP (Civic Center Refunding) Series 1998A 1.25%, 01/07/04 3,610 3,610 WESTMINSTER REDEVELOPMENT AGENCY +~@ Commercial Redevelopment Project No. 1 Tax Allocation Refunding RB Series 1997 1.25%, 01/07/04 8,960 8,960 ---------- 7,070,457 PUERTO RICO 1.7% GOVERNMENT DEVELOPMENT BANK OF PUERTO RICO TECP Series 1997 1.05%, 03/10/04 12,812 12,812 PUERTO RICO +~@ Public Improvement & Refunding Bonds Series 2000 TOB Series 3 1.11%, 01/07/04 2,315 2,315 +~@ Public Improvement Bonds Series 2001A TOB Series 2001R 1.13%, 01/07/04 4,435 4,435 +~@ Public Improvement Bonds Series 2001B TOB Series 204 1.26%, 01/07/04 7,295 7,295 +~@ Public Improvement Refunding Bonds Series 2001A TOB Series 232 1.26%, 01/07/04 14,995 14,995 +~@ Public Improvement Refunding Bonds Series 2002A TOB Series 124 1.35%, 01/07/04 4,995 4,995
See financial notes. 23 SCHWAB CALIFORNIA MUNICIPAL MONEY FUND PORTFOLIO HOLDINGS continued
ISSUER SECURITY TYPE, PROJECT, SERIES, FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) PUERTO RICO ELECTRIC POWER AUTH +~@ Power RB Series HH TOB Series 147 1.26%, 01/07/04 5,000 5,000 +~@ Power RB Series HH TOB Series 164 1.26%, 01/07/04 6,565 6,565 +~@ Power RB Series II TOB Series 20025101 1.28%, 01/07/04 7,405 7,405 PUERTO RICO HFC +~@ M/F Mortgage RB Portfolio A Series I TOB Series 97C5101 1.14%, 01/07/04 5,015 5,015 +~@ M/F Mortgage RB Portfolio A Series I TOB Series 97C5102 1.14%, 01/07/04 6,965 6,965 PUERTO RICO HIGHWAY AND TRANSPORTATION AUTH +~@ Highway RB Series Y TOB Series 66 1.14%, 01/07/04 8,600 8,600 +~@ Highway Refunding RB Series AA TOB Series 227) 1.26%, 01/07/04 3,995 3,995 +~@ Subordinated Transportation RB Series 2003 TOB Series 247 1.26%, 01/07/04 4,180 4,180 +~@ Transportation RB Series 2000B TOB Series 2000FFF 1.15%, 01/07/04 4,965 4,965 PUERTO RICO INFRASTRUCTURE FINANCING AUTH ~@ Special Obligation Bonds Series 2000A TOB Series 20005101 1.26%, 01/07/04 20,000 20,000 +~@ Special Tax RB Series 1997A PA-498 1.22%, 01/07/04 3,290 3,290 ---------- 122,827
END OF INVESTMENTS. For totals, please see the first page of holdings for this fund. 24 See financial notes. SCHWAB CALIFORNIA MUNICIPAL MONEY FUND Statement of ASSETS AND LIABILITIES As of December 31, 2003. All numbers x 1,000 except NAV. ASSETS ------------------------------------------------------------------------------- Investments, at value $ 7,193,284 a Cash 321 Receivables: Fund shares sold 28,517 Interest 22,795 Prepaid expenses + 45 --------------- TOTAL ASSETS 7,244,962 LIABILITIES ------------------------------------------------------------------------------- Payables: Fund shares redeemed 14,049 Dividends to shareholders 271 Investment adviser and administrator fees 65 Transfer agent and shareholder service fees 66 Accrued expenses + 319 --------------- TOTAL LIABILITIES 14,770 NET ASSETS ------------------------------------------------------------------------------ TOTAL ASSETS 7,244,962 TOTAL LIABILITIES - 14,770 --------------- NET ASSETS $ 7,230,192 NET ASSETS BY SOURCE Capital received from investors 7,231,655 Net realized capital losses (1,463) NET ASSET VALUE (NAV) BY SHARE CLASS SHARES SHARE CLASS NET ASSETS / OUTSTANDING = NAV Sweep Shares $4,169,448 4,170,777 $1.00 Value Advantage Shares $3,060,744 3,060,993 $1.00
a Unless stated, all numbers x 1,000. The amortized cost for the fund's securities was $7,193,284. During the reporting period, the fund had $1,493,442 in transactions with other SchwabFunds(R).
FEDERAL TAX DATA ------------------------------------------------------ COST BASIS OF PORTFOLIO $ 7,193,284 UNUSED CAPITAL LOSSES: Expires 12/31 of: Loss amount: 2008 $955 2011 + 508 ------------- $1,463
See financial notes. 25 SCHWAB CALIFORNIA MUNICIPAL MONEY FUND Statement of OPERATIONS For January 1, 2003 through December 31, 2003. All numbers x 1,000. INVESTMENT INCOME -------------------------------------------------------------------------------- Interest $80,064 NET REALIZED GAINS AND LOSSES -------------------------------------------------------------------------------- Net realized losses on investments sold (322) EXPENSES -------------------------------------------------------------------------------- Investment adviser and administrator fees 25,713 a Transfer agent and shareholder service fees: Sweep Shares 18,471 b Value Advantage Shares 6,943 b Trustees' fees 53 c Custodian and portfolio accounting fees 570 Professional fees 42 Registration fees 69 Shareholder reports 236 Other expenses + 50 ------------- Total expenses 52,147 Expense reduction - 11,264 d ------------- NET EXPENSES 40,883 INCREASE IN NET ASSETS FROM OPERATIONS -------------------------------------------------------------------------------- TOTAL INVESTMENT INCOME 80,064 NET EXPENSES - 40,883 ------------- NET INVESTMENT INCOME 39,181 NET REALIZED LOSSES + (322) ------------- INCREASE IN NET ASSETS FROM OPERATIONS $38,859
Unless stated, all numbers x 1,000. a Calculated on a graduated basis as a percentage of average daily net assets: 0.38% of the first $1 billion, 0.35% over $1 billion, 0.32% over $10 billion, 0.30% over $20 billion and 0.27% over $40 billion. b Calculated as a percentage of average daily net assets as follows: TRANSFER AGENT SERVICES:
% OF AVERAGE SHARE CLASS DAILY NET ASSETS ------------------------------------------------- Sweep Shares 0.25 Value Advantage Shares 0.05
SHAREHOLDER SERVICES:
% OF AVERAGE SHARE CLASS DAILY NET ASSETS ------------------------------------------------- Sweep Shares 0.20 Value Advantage Shares 0.17
These fees are paid to Charles Schwab & Co. c For the fund's independent trustees only. d Includes $10,033 from the investment adviser (CSIM) and $1,231 from the transfer agent and shareholder service agent (Schwab). These reductions reflect a guarantee by CSIM and Schwab to limit the annual operating expenses of this fund through at least April 30, 2004, as follows:
% OF AVERAGE SHARE CLASS DAILY NET ASSETS ------------------------------------------------- Sweep Shares 0.65 Value Advantage Shares 0.45
This limit doesn't include interest, taxes and certain non-routine expenses. 26 See financial notes. SCHWAB CALIFORNIA MUNICIPAL MONEY FUND Statements of CHANGES IN NET ASSETS For the current and prior report periods. All numbers x 1,000. OPERATIONS ------------------------------------------------------------------------------------- 1/1/03-12/31/03 1/1/02-12/31/02 Net investment income $39,181 $59,336 Net realized gains or losses + (322) 419 ---------------------------------------- INCREASE IN NET ASSETS FROM OPERATIONS 38,859 59,755 DISTRIBUTIONS PAID ------------------------------------------------------------------------------------- DIVIDENDS FROM NET INVESTMENT INCOME Sweep Shares 18,595 31,864 Value Advantage Shares + 20,586 27,472 ---------------------------------------- TOTAL DIVIDENDS FROM NET INVESTMENT INCOME 39,181 59,336 a TRANSACTIONS IN FUND SHARES b ------------------------------------------------------------------------------------- SHARES SOLD Sweep Shares 13,539,485 12,462,311 Value Advantage Shares + 3,354,779 3,283,142 ---------------------------------------- TOTAL SHARES SOLD 16,894,264 15,745,453 SHARES REINVESTED Sweep Shares 18,322 31,365 Value Advantage Shares + 19,098 26,012 ---------------------------------------- TOTAL SHARES REINVESTED 37,420 57,377 SHARES REDEEMED Sweep Shares (13,443,811) (12,335,422) Value Advantage Shares + (3,394,287) (2,791,080) ---------------------------------------- TOTAL SHARES REDEEMED (16,838,098) (15,126,502) NET TRANSACTIONS IN FUND SHARES 93,586 676,328 c NET ASSETS ------------------------------------------------------------------------------------- Beginning of period 7,136,928 6,460,181 Total increase + 93,264 676,747 d ---------------------------------------- END OF PERIOD $7,230,192 $7,136,928
Unless stated, all numbers x 1,000. a UNAUDITED The fund hereby designates 100% of its dividends for the current report period as tax-exempt interest dividends. b Because all transactions in this section took place at $1.00 per share, figures for share quantities are the same as for dollars. c Represents shares sold plus shares reinvested, minus shares redeemed. d Represents the changes in net assets from operations plus the changes in value of transactions in fund shares, minus distributions paid. See financial notes. 27 SCHWAB CALIFORNIA MUNICIPAL MONEY FUND FINANCIAL NOTES BUSINESS STRUCTURE OF THE FUND THE FUND DISCUSSED IN THIS REPORT IS A SERIES OF THE CHARLES SCHWAB FAMILY OF FUNDS(TM), A NO-LOAD, OPEN-END MANAGEMENT INVESTMENT COMPANY. The company is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended. The sidebar shows the fund in this report and its trust. THE FUND OFFERS TWO SHARE CLASSES: Sweep Shares and Value Advantage Shares. Shares of each class represent interests in the same portfolio, but each class has different expenses and investment minimums. Shares are bought and sold at $1.00 per share. Each share has a par value of 1/1,000 of a cent, and the trust may issue as many shares as necessary. FUND OPERATIONS Most of the fund's investments are described in sections earlier in this report. However, there are certain other investments and policies that may affect a fund's financials. The most significant of these are described below. Other policies concerning the fund's business operations also are described here. THE FUND DECLARES DIVIDENDS EVERY DAY IT IS OPEN FOR BUSINESS. These dividends, which are equal to the fund's net investment income for that day, are paid out to shareholders once a month. The fund may make distributions from any net realized capital gains once a year. THE FUND MAY BUY SECURITIES ON A DELAYED-DELIVERY BASIS. In these transactions, the fund agrees to buy a security for a stated price, with settlement generally occurring within two weeks. If the security's value falls before settlement occurs, the fund could end up paying more for the security than its market value at the time of settlement. The fund has set aside sufficient securities as collateral for those securities bought on a delayed-delivery basis. THE FUND PAYS FEES TO AFFILIATES OF THE INVESTMENT ADVISER FOR VARIOUS SERVICES. Through its trust, the fund has agreements with Charles Schwab Investment Management, Inc. (CSIM) to provide investment advisory and administrative services and with Charles Schwab & Co., Inc. (Schwab) to provide transfer agent and shareholder services. Although these agreements specify certain fees for these services, CSIM and Schwab have made additional agreements with the fund that may limit the total expenses charged. The rates and limitations for these fees are described in the fund's Statement of Operations. THE FUND MAY ENGAGE IN CERTAIN TRANSACTIONS INVOLVING AFFILIATES. The fund may make direct transactions with certain other SchwabFunds(R) when practical. When one fund is seeking to sell a security that another is THE TRUST AND ITS FUNDS This list shows all of the funds included in The Charles Schwab Family of Funds. The funds discussed in this report are highlighted. THE CHARLES SCHWAB FAMILY OF FUNDS organized October 20, 1989 Schwab Money Market Fund Schwab Government Money Fund Schwab U.S. Treasury Money Fund Schwab Value Advantage Money Fund(R) Schwab Municipal Money Fund Schwab California Municipal Money Fund Schwab New York Municipal Money Fund Schwab New Jersey Municipal Money Fund Schwab Pennsylvania Municipal Money Fund Schwab Florida Municipal Money Fund Schwab Massachusetts Municipal Money Fund Schwab Institutional Advantage Money Fund(R) Schwab Retirement Money Fund(R) Schwab Government Cash Reserves 28 SCHWAB CALIFORNIA MUNICIPAL MONEY FUND seeking to buy, an interfund transaction can allow both funds to benefit by reducing transaction costs. This practice is limited to funds that share the same investment adviser, trustees and officers. Pursuant to an exemptive order issued by the SEC, the funds may enter into interfund borrowing and lending transactions within the SchwabFunds(R). All loans are for temporary or emergency purposes only. The interest rate charged on the loan is the average of the overnight repurchase agreement rate and the short-term bank loan rate. The interfund lending facility is subject to the oversight and periodic review of the Board of Trustees of the SchwabFunds(R). TRUSTEES MAY INCLUDE PEOPLE WHO ARE OFFICERS AND/OR DIRECTORS OF THE INVESTMENT ADVISER OR SCHWAB. Federal securities law limits the percentage of such "interested persons" who may serve on a trust's board, and the trust was in compliance with these limitations throughout the report period. The trust did not pay any of these persons for their service as trustees, but it did pay non-interested persons (independent trustees), as noted in each fund's Statement of Operations. THE FUNDS MAY BORROW MONEY FROM BANKS AND CUSTODIANS. The funds may obtain temporary bank loans through the trust to which they belong, to use for meeting shareholder redemptions or for extraordinary or emergency purposes. The trusts have custodian overdraft facilities and line of credit arrangements of $150 million and $100 million with PNC Bank, N.A. and Bank of America, N.A., respectively. The funds pay interest on the amounts they borrow at rates that are negotiated periodically. THE FUND INTENDS TO MEET FEDERAL INCOME AND EXCISE TAX REQUIREMENTS FOR REGULATED INVESTMENT COMPANIES. Accordingly, the fund distributes substantially all of its net investment income and net realized capital gains (if any) to its respective shareholders each year. As long as the fund meets the tax requirements, it is not required to pay federal income tax. UNDER THE FUND'S ORGANIZATIONAL DOCUMENTS, ITS OFFICERS AND TRUSTEES ARE INDEMNIFIED AGAINST CERTAIN LIABILITY ARISING OUT OF THE PERFORMANCE OF THEIR DUTIES TO THE FUND. In addition, in the normal course of business the fund enters into contracts with its vendors and others that provide general indemnifications. The fund's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the fund. However, based on experience, the fund expects the risk of loss to be remote. ACCOUNTING POLICIES The following are the main policies the fund uses in preparing its financial statements. THE FUND VALUES ITS SECURITIES AT AMORTIZED COST, which approximates market value. SECURITY TRANSACTIONS are recorded as of the date the order to buy or sell the security is executed. INTEREST INCOME is recorded as it accrues. If the fund bought a debt instrument at a discount (that is, for less than its face value) or a premium (more than face value), it amortizes the discount or premium from the current date up to maturity. The fund then increases (in the case of discounts) or reduces (in the case of premiums) the income it records from the security. If the security is callable (meaning that the issuer has the option to pay it off before its maturity date), then the fund amortizes the premium to the security's call date and price, rather than the maturity date and price. REALIZED GAINS AND LOSSES from security transactions are based on the identified costs of the securities involved. EXPENSES that are specific to the fund or a class are charged directly to the fund or class. Expenses that are common to all funds within the trust generally are allocated among the funds in proportion to their average daily net assets. 29 SCHWAB CALIFORNIA MUNICIPAL MONEY FUND FOR FUNDS OFFERING MULTIPLE SHARE CLASSES, all of the realized and unrealized gains or losses and net investment income, other than class specific expenses, are allocated daily to each class in proportion to its net assets. THE FUND MAINTAINS ITS OWN ACCOUNT FOR PURPOSES OF HOLDING ASSETS AND ACCOUNTING, and is considered a separate entity for tax purposes. Within its account, the fund also keeps certain assets in segregated accounts, as may be required by securities law. THE ACCOUNTING POLICIES DESCRIBED ABOVE CONFORM WITH ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES OF AMERICA. Notwithstanding this, shareholders should understand that in order to follow these principles, fund management has to make estimates and assumptions that affect the information reported in the financial statements. It's possible that once the results are known, they may turn out to be different from these estimates. 30 REPORT OF INDEPENDENT AUDITORS TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF: Schwab California Municipal Money Fund In our opinion, the accompanying statement of assets and liabilities, including the portfolio holdings, 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 Schwab California Municipal Money Fund (one of the portfolios constituting The Charles Schwab Family of Funds, (hereafter referred to as the "Fund") at December 31, 2003, and the results of its operations for the year then ended, the changes in its net assets and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund'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 auditing standards generally accepted in the United States of America, 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, 2003 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. PRICEWATERHOUSECOOPERS LLP San Francisco, CA February 6, 2004 31 SCHWAB CALIFORNIA MUNICIPAL MONEY FUND FUND TRUSTEES A fund's Board of Trustees is responsible for protecting the interests of that fund's shareholders. The tables below give information about the people who serve as trustees and officers for the SchwabFunds(R), including the funds covered in this report. Trustees remain in office until they resign, retire or are removed by shareholder vote. 1 Under the Investment Company Act of 1940, any officer, director, or employee of Schwab or CSIM is considered an "interested person," meaning that he or she is considered to have a business interest in Schwab or CSIM. These individuals are listed as "interested trustees." The "independent trustees" are individuals who, under the 1940 Act, are not considered to have a business interest in Schwab or CSIM. Each of the SchwabFunds (of which there were 49 as of 12/31/03) belongs to one of these trusts: The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust or Schwab Annuity Portfolios. Currently all these trusts have the same trustees and officers. The address for all trustees and officers is 101 Montgomery Street, San Francisco, CA 94104. You can find more information about the trustees and officers in the Statement of Additional Information, which is available free by calling 1-800-435-4000. INDIVIDUALS WHO ARE INTERESTED TRUSTEES AND OFFICERS OF THE TRUST
TRUST POSITION(S); NAME AND BIRTHDATE TRUSTEE SINCE MAIN OCCUPATIONS AND OTHER DIRECTORSHIPS AND AFFILIATIONS ------------------------------------------------------------------------------------------------------------------------------------ CHARLES R. SCHWAB 2 Chair, Trustee: Chair, Director, The Charles Schwab Corp.; CEO, Director, Schwab 7/29/37 Family of Funds, 1989; Holdings, Inc.; Chair, Director, Charles Schwab & Co., Inc.; Charles Investments, 1991; Schwab Investment Management, Inc.; Chair, Charles Schwab Capital Trust, 1993; Holdings, Inc. I, Schwab International Holdings, Inc.; Director, U.S. Annuity Portfolios, 1994. Trust Corp., United States Trust Co. of New York, The Gap, Inc. (clothing retailer), Siebel Systems (software); Trustee, Stanford University. Until 6/03: Director, Xsign, Inc. (electronic payment systems). Until 5/03: Co-Chair, The Charles Schwab Corporation. Until 5/02: Director, Vodafone AirTouch PLC (telecom). Until 3/02: Director, Audiobase, Inc. (Internet audio solutions). Until 7/01: Director, The Charles Schwab Trust Company. Until 1/99: Director, Schwab Retirement Plan Services, Inc., Mayer & Schweitzer, Inc. (securities brokerage subsidiary of The Charles Schwab Corp.), Performance Technologies, Inc. (technology), TrustMark, Inc.
1 The SchwabFunds retirement policy requires that independent trustees elected after January 1, 2000 retire at age 72 or after twenty years of service as a trustee, whichever comes first. Independent trustees elected prior to January 1, 2000 will retire on the following schedule: Messrs. Holmes and Dorward will retire on December 31, 2007, and Messrs. Stephens and Wilsey will retire on December 31, 2010. 2 In addition to their positions with the investment adviser and the distributor, Ms. Lepore and Messrs. Schwab and Lyons, as well as some of Mr. Lyons's immediate family members, also own stock of The Charles Schwab Corporation. 32 SCHWAB CALIFORNIA MUNICIPAL MONEY FUND INDIVIDUALS WHO ARE INTERESTED TRUSTEES BUT NOT OFFICERS OF THE TRUST
NAME AND BIRTHDATE TRUSTEE SINCE MAIN OCCUPATIONS AND OTHER DIRECTORSHIPS AND AFFILIATIONS ------------------------------------------------------------------------------------------------------------------------------------ DAWN G. LEPORE 1 Trustee:2003 Vice Chair, EVP, The Charles Schwab Corp.; Until 10/01: CIO, The 3/21/54 (all trusts) Charles Schwab Corporation. Until 1999: EVP, The Charles Schwab Corporation. Director, Wal-Mart Stores, eBay, Inc. ------------------------------------------------------------------------------------------------------------------------------------ JEFFREY M. LYONS 1 Trustee: 2002 EVP, Asset Management Products and Services, Charles Schwab & Co., Inc. 2/22/55 (all trusts). Until 9/01: EVP, Mutual Funds, Charles Schwab & Co., Inc.
INDIVIDUALS WHO ARE OFFICERS OF THE TRUST BUT NOT TRUSTEES
NAME AND BIRTHDATE TRUSTEE OFFICE(S) HELD MAIN OCCUPATIONS AND OTHER DIRECTORSHIPS AND AFFILIATIONS ------------------------------------------------------------------------------------------------------------------------------------ RANDALL W. MERK President, CEO President, CEO, Charles Schwab Investment Management, Inc; EVP, 7/25/54 (all trusts). Charles Schwab & Co., Inc.; Director, Charles Schwab Worldwide Funds PLC, Charles Schwab Asset Management (Ireland) Ltd. Until 9/02: President, CIO, American Century Investment Management; Director, American Century Cos., Inc. Until 6/01: CIO, Fixed Income, American Century Cos., Inc. Until 1997: SVP, Director, Fixed Income and Quantitative Equity Portfolio Management, Twentieth Century Investors, Inc. ------------------------------------------------------------------------------------------------------------------------------------ TAI-CHIN TUNG Treasurer, Principal SVP, CFO, Charles Schwab Investment Management, Inc.; VP, The Charles 3/7/51 Financial Officer Schwab Trust Co.; Director, Charles Schwab Asset Management (Ireland) Ltd., (all trusts). Charles Schwab Worldwide Funds PLC. ------------------------------------------------------------------------------------------------------------------------------------ STEPHEN B. WARD SVP, Chief Investment SVP, Chief Investment Officer, Director, Charles Schwab Investment 4/5/55 Officer Management, Inc.; CIO, The Charles Schwab Trust Co. (all trusts). ------------------------------------------------------------------------------------------------------------------------------------ KOJI E. FELTON Secretary SVP, Chief Counsel, Assistant Corporate Secretary, Charles Schwab Investment 3/13/61 (all trusts). Management, Inc. Until 6/98: Branch Chief in Enforcement, U.S. Securities and Exchange Commission, San Francisco.
1 In addition to their positions with the investment adviser and the distributor, Ms. Lepore and Messrs. Schwab and Lyons, as well as some of Mr. Lyons's immediate family members, also own stock of The Charles Schwab Corporation. 33 SCHWAB CALIFORNIA MUNICIPAL MONEY FUND INDIVIDUALS WHO ARE INDEPENDENT TRUSTEES
NAME AND BIRTHDATE TRUSTEE SINCE MAIN OCCUPATIONS AND OTHER DIRECTORSHIPS AND AFFILIATIONS ------------------------------------------------------------------------------------------------------------------------------------ MARIANN BYERWALTER 2000 (all trusts). Chair, JDN Corp. Advisory LLC; Trustee, Stanford University, Director, 8/13/60 America First Cos., (venture capital/fund management), Redwood Trust, Inc. (mortgage finance), Stanford Hospitals and Clinics, SRI International (research), PMI Group, Inc. (mortgage insurance), Lucile Packard Children's Hospital. 2001: Special Advisor to the President, Stanford University. Until 2002: Director, LookSmart, Ltd. (Internet infrastructure). Until 2001: VP, Business Affairs, CFO, Stanford University. ------------------------------------------------------------------------------------------------------------------------------------ DONALD F. DORWARD Family of Funds, 1989; CEO, Dorward & Associates (management, marketing and consulting). Until 9/23/31 Investments, 1991; 1999: EVP, Managing Director, Grey Advertising. Capital Trust, 1993; Annuity Portfolios, 1994. ------------------------------------------------------------------------------------------------------------------------------------ WILLIAM A. HASLER 2000 (all trusts). Co-CEO, Aphton Corp. (bio-pharmaceuticals). Director, Non-Executive 11/22/41 Chairman, Solectron Corp. (manufacturing), Airlease Ltd. (aircraft leasing), Mission West Properties (commercial real estate), Stratex Networks (telecommunications); Public Governor, Member, executive committee, Pacific Stock & Options Exchange. Director, Digital Microwave Corp. (network equipment). Until 1998: Dean, Haas School of Business, University of California, Berkeley. ------------------------------------------------------------------------------------------------------------------------------------ ROBERT G. HOLMES Family of Funds, 1989; Chair, CEO, Director, Semloh Financial, Inc. (international financial 5/15/31 Investments, 1991; services and investment advice). Capital Trust, 1993; Annuity Portfolios, 1994. ------------------------------------------------------------------------------------------------------------------------------------ GERALD B. SMITH 2000 (all trusts). Chair, CEO, Founder, Smith Graham & Co. (investment advisors); 9/28/50 Director, Pennzoil-Quaker State Co. (oil and gas), Rorento N.V. (investments -- Netherlands), Cooper Industries (electrical products); Member, audit committee, Northern Border Partners, L.P. (energy). ------------------------------------------------------------------------------------------------------------------------------------ DONALD R. STEPHENS Family of Funds, 1989; Managing Partner, D.R. Stephens & Co. (investments). Until 1996: 6/28/38 Investments, 1991; Chair, CEO, North American Trust (real estate investments). Capital Trust, 1993; Annuity Portfolios, 1994. ------------------------------------------------------------------------------------------------------------------------------------ MICHAEL W. WILSEY Family of Funds, 1989; Chair, CEO, Wilsey Bennett, Inc. (transportation, real estate and 8/18/43 Investments, 1991; investments). Capital Trust, 1993; Annuity Portfolios, 1994.
34 SCHWAB CALIFORNIA MUNICIPAL MONEY FUND GLOSSARY AGENCY DISCOUNT NOTES Notes issued by federal agencies--known as Government Sponsored Enterprises, or GSEs--at a discount to their value at maturity. An agency discount note is a short-term investment alternative offering a high degree of credit quality. ALTERNATIVE MINIMUM TAX (AMT) A federal income tax designed to limit the extent to which high-income taxpayers (including individuals, estates, trusts and corporations) can benefit from certain deductions and exemptions. For example, some types of income that are exempt from regular federal income tax are not exempt from the AMT. ASSET-BACKED SECURITY A bond or other debt security that represents ownership in a pool of debt obligations such as credit card debt. BOND A security representing a loan from the investor to the issuer. A bond typically pays interest at a fixed rate (the "coupon rate") until a specified date (the "maturity date"), at which time the issuer returns the money borrowed ("principal" or "face value") to the bondholder. Because of their structure, bonds are sometimes called "fixed income securities" or "debt securities." BOND ANTICIPATION NOTES Obligations sold by a municipality on an interim basis in anticipation of the municipality's issuance of a longer-term bond in the future. CAPITAL GAIN, CAPITAL LOSS The difference between the amount paid for an investment and its value at a later time. If the investment has been sold, the capital gain or loss is considered a realized gain or loss. If the investment is still held, the gain or loss is still "on paper" and is considered unrealized. COMMERCIAL PAPER Promissory notes issued by banks, corporations, state and local governments and other entities to finance short-term credit needs. These securities generally are structured on a discounted basis but sometimes may be interest-bearing notes. Commercial paper, which may be unsecured, is subject to credit risk. CREDIT-ENHANCED SECURITY A security that is backed by the credit of an entity other than the issuer (such as a financial institution). Credit enhancements, which can equal up to 100% of the security's value, are designed to help lower the risk of default on a security and may also make the security more liquid. CREDIT QUALITY The capacity of an issuer to make its interest and principal payments. Federal regulations strictly limit the credit quality of the securities a money market fund can buy. CREDIT RATINGS Debt issuers, including corporations, states and municipalities, may arrange with a recognized independent rating organization, such as Moody's Investor Service, Standard & Poor's and Fitch, Inc., to rate their creditworthiness and/or the creditworthiness of their debt issues. For example, an issuer may obtain a long-term rating within the investment grade rating category, which is, from high to low, AAA, AA, A and BBB for Standard & Poor's and Fitch, and Aaa, Aa, A and Baa for Moody's. CREDIT RISK The risk that a debt issuer may be unable to pay interest or principal to its debtholders. DOLLAR-WEIGHTED AVERAGE MATURITY (DWAM) See weighted average maturity. EFFECTIVE YIELD A measurement of a fund's yield that assumes that all dividends were reinvested in additional shares of the fund. PORTFOLIO TERMS To help reduce the space occupied by the portfolio holdings, we use the following terms. Most of them appear within descriptions of individual securities in municipal funds, and describe features of the issuer or the security. Some of these are more fully defined elsewhere in the Glossary. ACES Adjustable convertible extendable security BAN Bond anticipation note COP Certificate of participation GAN Grant anticipation note GO General obligation HDA Housing Development Authority HFA Housing Finance Agency IDA Industrial Development Authority IDB Industrial Development Board IDRB Industrial Development Revenue Bond M/F Multi-family RAN Revenue anticipation note RB Revenue bond S/F Single-family TAN Tax anticipation note TECP Tax-exempt commercial paper TOB Tender option bond TOBP Tender option bond partnership TRAN Tax and revenue anticipation note VRD Variable-rate demand 35 SCHWAB CALIFORNIA MUNICIPAL MONEY FUND EXPENSE RATIO The amount that is taken from a mutual fund's assets each year to cover the fund's operating expenses. An expense ratio of 0.50% means that a fund's expenses amount to half of one percent of its average net assets a year. FACE VALUE The value of a bond, note, mortgage or other security as given on the certificate or instrument. Face value is also referred to as par value or nominal value. ILLIQUID SECURITIES A security is generally considered illiquid if it cannot be disposed of promptly (typically within seven days) and in the ordinary course of business at approximately the amount at which a fund has valued the instrument. INTEREST Payments to holders of debt securities as compensation for loaning a security's principal to the issuer. LIQUIDITY-ENHANCED SECURITY A security that when tendered is paid from funds advanced by an entity other than the issuer (such as a large financial institution). Liquidity enhancements are often used on variable-rate securities where the portfolio manager has an option to tender the securities prior to their final maturity. MATURITY Generally, the date a debt security is scheduled to be "retired" and its principal amount returned to the bondholder. MONEY MARKET SECURITIES High-quality, short-term debt securities that may be issued by entities such as the U.S. government, corporations and financial institutions (such as banks). Money market securities include commercial paper, promissory notes, certificates of deposit, banker's acceptances, notes and time deposits. MUNICIPAL SECURITIES Debt securities issued by a state, its counties, municipalities, authorities and other subdivisions, or the territories and possessions of the United States and the District of Columbia, including their subdivisions, agencies and instrumentalities and corporations. These securities may be issued to obtain money for various public purposes, including the construction of a wide range of public facilities such as airports, bridges, highways, housing, hospitals, mass transportation, public utilities, schools, streets, and water and sewer works. NET ASSET VALUE PER SHARE (NAV) The value of one share of a mutual fund. NAV is calculated by taking the fund's total assets, subtracting liabilities, and dividing by the number of shares outstanding. Money funds seek to maintain a steady NAV of $1.00. OUTSTANDING SHARES, SHARES OUTSTANDING When speaking of a company or mutual fund, indicates all shares currently held by investors. RESTRICTED SECURITIES A security that is subject to contractual restrictions on resale and may be sold only to "qualified institutional buyers" under Securities Act Rule 144A. These securities are often purchased in private placement transactions. REVENUE ANTICIPATION NOTES Obligations that are issued in expectation of the receipt of revenue, such as income taxes, property taxes, etc. SECTION 3C7 SECURITIES Section 3c7 of the Investment Company Act of 1940 (the "1940 Act") exempts certain issuers from many regulatory requirements applicable to investment companies under the 1940 Act. An issuer whose outstanding securities are exclusively owned by "qualified purchasers" and who is not making or proposing to make a public offering of the securities may qualify for this exemption. SECTION 4(2)/144A SECURITIES A security exempt from registration under Section 4(2) of the Securities Act of 1933. It may be sold only to qualified institutional buyers under Securities Act Rule 144A. TAXABLE-EQUIVALENT YIELD The yield an investor would need to get from a taxable investment in order to match the yield paid by a given tax-exempt investment, once the effect of all applicable taxes is taken into account. For example, if your tax rate were 25%, a tax-exempt investment paying 4.5% would have a taxable-equivalent yield for you of 6.0% (4.5% / [1 - 0.25%] = 6.0%). TOTAL RETURN The percentage that an investor would have earned or lost on an investment in the fund assuming dividends and distributions were reinvested. TAX ANTICIPATION NOTES Notes that typically are sold to finance the cash flow needs of municipalities in anticipation of the receipt of taxes on a future date. TIER 1, TIER 2 Tier 1 is the highest category of credit quality, Tier 2 the second highest. A security's tier can be established either by an independent rating organization or by a determination of the investment adviser. Money market fund shares and U.S. government securities are automatically considered Tier 1 securities. WEIGHTED AVERAGE MATURITY For mutual funds, the maturity of all the debt securities in its portfolio, calculated as a weighted average. As a rule, the longer a fund's weighted average maturity, the greater its interest rate risk. Money funds are required to maintain a weighted average maturity of no more than 90 days. YIELD The income paid out by an investment, expressed as an annual rate and calculated as a percentage of the investment's market value. 36 CONTACT SCHWAB SchwabFunds(R) offers you a complete family of mutual funds, each one based on a clearly defined investment approach and using disciplined management strategies. Actively managed funds include multi-manager stock funds, a fund that uses long-short strategies, and a range of taxable and tax-free bond funds. Index funds include large-cap, small-cap and international stock funds. The list at right shows all currently available SchwabFunds. Whether you're an experienced investor or just starting out, SchwabFunds can help you achieve your financial goals. Please call 1-800-435-4000 for a prospectus and brochure for any SchwabFund. Please read the prospectus carefully before you invest. This report must be preceded or accompanied by a current prospectus. METHODS FOR PLACING ORDERS The following information outlines how Schwab investors can place orders. If you are investing through a third-party investment provider, methods for placing orders may be different. INTERNET 1 www.schwab.com SCHWAB BY PHONE(TM) 2 Use our automated voice service or speak to a representative. Call 1-800-435-4000, day or night (for TDD service, call 1-800-345-2550). TELEBROKER(R) Automated touch-tone phone service at 1-800-272-4922. MAIL Write to SchwabFunds at: P.O. Box 3812 Englewood, CO 80155-3812 When selling or exchanging shares, be sure to include the signatures of at least one of the persons whose name is on the account. 1 Shares of Sweep Investments(TM) may not be purchased directly over the Internet. 2 Orders placed in person or through a telephone representative may be subject to a service fee payable to Schwab. THE SCHWABFUNDS FAMILY(R) STOCK FUNDS Schwab S&P 500 Fund Schwab 1000 Fund(R) Schwab Small-Cap Index Fund(R) Schwab Total Stock Market Index Fund(R) Schwab International Index Fund(R) Schwab Core Equity Fund(TM) Schwab Dividend Equity Fund(TM) Schwab Small-Cap Equity Fund(TM) Schwab Hedged Equity Fund(TM) Schwab Focus Funds Communications Focus Fund Financial Services Focus Fund Health Care Focus Fund Technology Focus Fund Schwab MarketMasters Funds(TM) Schwab U.S. MarketMasters FUND(TM) Schwab Small-Cap MarketMasters Fund(TM) Schwab International MarketMasters Fund(TM) Schwab Balanced MarketMasters Fund(TM) ASSET ALLOCATION FUNDS Schwab MarketTrack Portfolios(R) Schwab MarketTrack All Equity Portfolio(TM) Schwab MarketTrack Growth Portfolio(TM) Schwab MarketTrack Balanced Portfolio(TM) Schwab MarketTrack Conservative Portfolio(TM) BOND FUNDS Schwab YieldPlus Fund(R) Schwab Short-Term Bond Market Fund(TM) Schwab Total Bond Market Fund(TM) Schwab GNMA Fund(TM) Schwab Short/Intermediate Tax-Free Bond Fund(TM) Schwab Long-Term Tax-Free Bond Fund(TM) Schwab California Short/Intermediate Tax-Free Bond Fund(TM) Schwab California Long-Term Tax-Free Bond Fund(TM) SCHWAB MONEY FUNDS Schwab offers an array of money market funds that seek high current income consistent with safety and liquidity. 3 Choose from taxable or tax-advantaged alternatives. Many can be linked to your Schwab account to "sweep" cash balances automatically, subject to availability, when you're between investments. Or, for your larger cash reserves, choose one of our Value Advantage Investments(R). 3 Investments in money market funds are neither insured nor guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency and, although they seek to preserve the value of your investment at $1 per share, it is possible to lose money. [CHARLES SCHWAB LOGO] INVESTMENT ADVISER Charles Schwab Investment Management, Inc. 101 Montgomery Street, San Francisco, CA 94104 DISTRIBUTOR SchwabFunds P.O. Box 3812, Englewood, CO 80155-3812 This report is not authorized for distribution to prospective investors unless preceded or accompanied by a current prospectus. (C) 2004 Charles Schwab & Co., Inc. All rights reserved. Member SIPC/NYSE. Printed on recycled paper. REG26569 SCHWAB MONEY FUNDS ANNUAL REPORT December 31, 2003 Schwab Money Market Fund Schwab Government Money Fund Schwab U.S. Treasury Money Fund Schwab Value Advantage Money Fund(R) [CHARLES SCHWAB LOGO] IN THIS REPORT Management's Discussion ............................................... 2 The president of SchwabFunds(R) and the funds' managers take a look at the factors that shaped fund performance during the report period. Performance and Fund Facts ........... 4 Schwab Money Market Fund Ticker Symbol: SWMXX Financial Statements ................. 5 Schwab Government Money Fund Ticker Symbol: SWGXX Financial Statements ................. 20 Schwab U.S. Treasury Money Fund Ticker Symbol: SWUXX Financial Statements ................. 26 Schwab Value Advantage Money Fund(R) Investor Shares: SWVXX Select Shares(R): SWBXX Institutional Shares: SWAXX Financial Statements ................. 31 Financial Notes ....................................................... 45 Fund Trustees ......................................................... 49 Glossary .............................................................. 52 Fund investment adviser: Charles Schwab Investment Management, Inc. (CSIM). Distributor and transfer agent: Charles Schwab & Co., Inc. (Schwab). [PHOTO OF CHARLES R. SCHWAB] Charles R. Schwab Chairman FROM THE CHAIRMAN In 1989, we founded SchwabFunds(R) on the belief that mutual funds represent an important tool for investors. Money funds, for example, are especially well-suited for the cash portion of your portfolio when you are seeking capital preservation or liquidity. Over the past few years, mutual funds have faced a number of challenges, affecting both their performance and investor perception. Yet recently we have seen signs of positive change. The economy and the stock market have shown increasing strength. And while much remains to be done within the fund industry, the industry has been moving quickly to assess and improve its operations and its investor safeguards. As a firm, we continue to change as well. Our capabilities are evolving in ways that allow us to offer investors more choices and better ways to do business with us. I'm enthusiastic about these changes because they're designed to offer benefits for our fund shareholders. One thing that hasn't changed is my belief in mutual funds. Mutual funds still offer all the features that have made them so popular: diversification, liquidity, convenience, low investment minimums, and professional management. For individual investors especially, I believe mutual funds continue to be one of the most cost-effective investment vehicles available. To date, millions of Americans have successfully relied on mutual funds as an important way to invest for retirement security, their children's education, and other financial goals. We remain optimistic that mutual funds will continue to do the same for millions more Americans in the years to come. Sincerely, /s/ Charles R. Schwab MANAGEMENT'S DISCUSSION for the year ended December 31, 2003 [PHOTO OF RANDALL W. MERK] RANDALL W. MERK is President and CEO of Charles Schwab Investment Management, Inc. and is president of each of the funds covered in this report. He joined the firm in August 2002, bringing with him 24 years of experience in the asset management industry. Dear Shareholder: In today's current low-interest-rate environment, it's tempting to ask whether money funds still have a place in an investment portfolio. It's a fair question, but I'd suggest the answer is not as obvious as it may seem. Money funds are designed to offer several potential benefits. If you're like many investors, your asset allocation calls for a portion of your portfolio to be in cash. If the purpose of that allocation is to offer capital preservation or liquidity, or to help reduce the impact of market volatility on your portfolio, then money funds probably still make sense for you, regardless of the yield environment. Here at SchwabFunds(R), we're proud of our seasoned fund managers and their ability to work as a team. Our managers have an average of over 16 years of experience in the investment management industry. I'm also proud to say that we're in the process of building on that experience: by expanding our selection of mutual funds, adding new share classes, and offering new, competitively priced alternatives. Thirty years ago, Charles Schwab founded his firm with a vision to create the most useful and ethical financial services firm in the world. We live by that philosophy every day. Your investment in SchwabFunds is an indication of the trust you place in us. As the managers of your money, we have a special obligation to live up to that trust. I have enjoyed the opportunity to respond to several shareholder inquiries, and I hope you'll let us know how we're doing. I want to thank you for investing with us and want to assure you that we strive relentlessly to operate our business with the highest ethical standards and an unwavering commitment to serve you, our SchwabFunds shareholders. Sincerely, /s/ Randall W. Merk 2 Schwab Money Funds [PHOTO OF LINDA KLINGMAN AND MIKE NEITZKE] LINDA KLINGMAN, a vice president of the investment adviser and senior portfolio manager, has overall responsibility for the management of the Money Market and Value Advantage Money funds. She joined the firm in 1990 and has managed money market funds since 1988. MIKE NEITZKE, a portfolio manager, has day-to-day responsibility for management of the Money Market and Value Advantage Money funds. Prior to joining the firm in March 2001, he worked for more than 15 years in the financial services industry as a portfolio manager. [PHOTO OF KAREN WIGGAN] KAREN WIGGAN, a vice president of the investment adviser and senior portfolio manager, has been responsible for day-to-day management of the Government Money and U.S. Treasury Money funds since 1999. She joined the firm in 1987 and has worked in fixed-income portfolio management since 1991. THE INVESTMENT ENVIRONMENT AND THE FUNDS DURING 2003, THE U.S. ECONOMY BEGAN TO GATHER STRENGTH, ESPECIALLY DURING THE SECOND HALF OF THE YEAR. In the months before the war in Iraq (which began in March 2003), the economy remained in a holding pattern, as businesses and investors adopted a wait-and-see stance. Once the combat phase drew to an end, America began to pay more attention to the economy, which by year-end appeared to be recovering. SEEKING ADDITIONAL PROTECTION AGAINST THE RISK OF DEFLATION, THE FEDERAL RESERVE (THE FED) CUT SHORT-TERM INTEREST RATES BY 0.25% IN JUNE. This brought the Fed funds target rate to a 45-year low of 1.00%. Short-term interest rates began plummeting in May in anticipation of the Fed's rate cut but quickly began a modest recovery and ended the year somewhat above their mid-year lows. Nevertheless, money fund yields remained close to historically low levels. FALLING INTEREST RATES PUSHED MONEY FUND YIELDS TO NEW LOWS (see next page for fund yield information). Within this challenging interest rate environment, we took what measures we could to gain incrementally higher yields for the funds. For example, we were able to take advantage of modest fluctuations in yields of one-year securities. These fluctuations appeared to be driven by shifts in the market's outlook on the economic recovery. The funds bought longer-term money market securities when, in our view, they offered an attractive yield compared to their shorter maturity counterparts. Because of this, the funds' weighted average maturities were often longer than the average for their peer group during the report period. 1 DURING THE PERIOD, THE SECURITIES OF FREDDIE MAC CAME UNDER PRESSURE AS NEWS OF POTENTIAL EARNINGS RESTATEMENTS AROSE. Our analysis indicated that the creditworthiness of these securities was not in doubt. As a result, the funds increased their holdings of these securities at yields comparable to CDs and commercial paper. AS OF THE END OF THE REPORT PERIOD, NEITHER DEFLATION NOR INFLATION APPEARED TO BE IMMEDIATE RISKS. In our view, the main questions facing the market were: how strong is the economy, when might inflation return, and when might the Fed increase short-term rates? Nothing in this report represents a recommendation of a security by the investment adviser. Manager views and portfolio holdings may have changed since the report date. 1 Source: iMoney Net, Inc. First Tier Retail Category, 12/31/03. Schwab Money Funds 3 MANAGEMENT'S DISCUSSION continued PERFORMANCE AND FUND FACTS as of 12/31/03 SEVEN-DAY YIELDS 1 The seven-day yields are calculated using standard SEC formulas. The effective yield includes the effect of reinvesting daily dividends. Please remember that money market fund yields fluctuate, and that past performance is not an indication of future results.
MONEY GOVERNMENT U.S. TREASURY VALUE ADVANTAGE MARKET FUND MONEY FUND MONEY FUND MONEY FUND ------------------------------------------------------------------------------------------------------------------------------------ Investor Select Institutional Shares Shares(R) Shares ------------------------------------------------------------------------------------------------------------------------------------ SEVEN-DAY YIELD 1 0.39% 0.37% 0.36% 0.69% 0.79% 0.90% ------------------------------------------------------------------------------------------------------------------------------------ SEVEN-DAY YIELD 0.35% 0.29% 0.19% 0.58% 0.58% 0.58% - NO WAIVER 2 ------------------------------------------------------------------------------------------------------------------------------------ SEVEN-DAY 0.39% 0.37% 0.36% 0.69% 0.79% 0.90% EFFECTIVE YIELD ------------------------------------------------------------------------------------------------------------------------------------
STATISTICS Money funds must maintain a dollar-weighted average maturity of no longer than 90 days, and cannot invest in any security whose effective maturity is longer than 397 days (approximately 13 months).
MONEY GOVERNMENT U.S. TREASURY VALUE ADVANTAGE MARKET FUND MONEY FUND MONEY FUND MONEY FUND ------------------------------------------------------------------------------------------------------------------------------------ WEIGHTED AVERAGE 57 days 50 days 76 days 56 days MATURITY ------------------------------------------------------------------------------------------------------------------------------------ CREDIT QUALITY 100% Tier 1 100% Tier 1 100% Tier 1 100% Tier 1 OF HOLDINGS % of portfolio ------------------------------------------------------------------------------------------------------------------------------------
An investment in a money fund is neither insured nor guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency. Although money funds seek to preserve the value of your investment at $1 per share, it is possible to lose money by investing in a money fund. Portfolio holdings may have changed since the report date. 1 Fund expenses have been partially absorbed by CSIM and Schwab. 2 Yield if fund expenses had not been partially absorbed by CSIM and Schwab. 4 Schwab Money Funds SCHWAB MONEY MARKET FUND FINANCIAL STATEMENTS FINANCIAL HIGHLIGHTS
1/1/03- 1/1/02- 1/1/01- 1/1/00- 1/1/99- 12/31/03 12/31/02 12/31/01 12/31/00 12/31/99 ------------------------------------------------------------------------------------------------------------------------------------ PER-SHARE DATA ($) ------------------------------------------------------------------------------------------------------------------------------------ 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 0.04 0.06 0.05 ------------------------------------------------------------------------------------ Less distributions: Dividends from net investment income (0.01) (0.01) (0.04) (0.06) (0.05) ------------------------------------------------------------------------------------ Net asset value at end of period 1.00 1.00 1.00 1.00 1.00 ------------------------------------------------------------------------------------ Total return (%) 0.50 1.23 3.73 5.84 4.64 RATIOS/SUPPLEMENTAL DATA (%) ------------------------------------------------------------------------------------------------------------------------------------ Ratios to average net assets: Net operating expenses 0.75 0.75 0.75 0.76 1 0.75 Gross operating expenses 0.78 0.78 0.79 0.81 0.84 Net investment income 0.50 1.22 3.63 5.70 4.56 Net assets, end of period ($ x 1,000,000) 49,079 51,063 49,116 41,823 36,099
1 The ratio of net operating expenses would have been 0.75% if certain non-routine expenses (proxy fees) had not been included. See financial notes. 5 SCHWAB MONEY MARKET FUND PORTFOLIO HOLDINGS as of December 31, 2003 This section shows all the securities in the fund's portfolio and their market value, as of the report date. We use the symbols below to designate certain characteristics: * Asset-backed security + Credit-enhanced security o Illiquid restricted security For fixed-rate obligations, the rate shown is the effective yield at the time of purchase, except for U.S. government agency coupon notes and U.S. Treasury notes, for which the rate shown is the interest rate (the rate established when the obligation was issued). For variable-rate obligations, the rate shown is the rate as of the report date. For variable-rate obligations with scheduled maturities greater than 397 days, the maturity shown is the later of the next interest rate change date or demand date. For variable-rate obligations with scheduled maturities less than 397 days, the maturity shown is the earlier of the next interest rate change date or demand date. For variable-rate obligations without demand features, the maturity shown is the next interest rate change date.
COST VALUE HOLDINGS BY CATEGORY ($x1,000) ($x1,000) -------------------------------------------------------------------------------- 83.1% FIXED-RATE OBLIGATIONS 40,795,769 40,795,769 4.1% U.S. GOVERNMENT SECURITIES 1,999,679 1,999,679 5.4% VARIABLE-RATE OBLIGATIONS 2,633,430 2,633,430 7.3% OTHER INVESTMENTS 3,612,584 3,612,584 -------------------------------------------------------------------------------- 99.9% TOTAL INVESTMENTS 49,041,462 49,041,462 0.1% OTHER ASSETS AND LIABILITIES 37,795 -------------------------------------------------------------------------------- 100.0% TOTAL NET ASSETS 49,079,257
ISSUER FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) FIXED-RATE OBLIGATIONS 83.1% of Net Assets COMMERCIAL PAPER & OTHER CORPORATE OBLIGATIONS 49.8% -------------------------------------------------------------------------- AB SPINTAB 1.09%, 02/05/04 98,000 97,897 1.10%, 03/03/04 45,000 44,915 ALLIANCE & LEICESTER, PLC, SECTION 4(2) / 144A 1.09%, 01/14/04 7,000 6,997 1.10%, 02/17/04 50,000 49,928 * AMSTEL FUNDING CORP., SECTION 4(2) / 144A 1.11%, 01/28/04 43,000 42,964 1.09%, 02/12/04 130,000 129,835 *+ AMSTERDAM FUNDING CORP., SECTION 4(2) / 144A 1.10%, 01/05/04 25,000 24,997 1.09%, 01/22/04 88,000 87,944 1.09%, 01/26/04 25,000 24,981 1.09%, 02/04/04 96,000 95,902 1.09%, 02/06/04 25,000 24,973 1.09%, 02/13/04 58,000 57,924 + ANZ (DELAWARE), INC. 1.08%, 01/09/04 17,000 16,996 *+ AQUINAS FUNDING, L.L.C., SECTION 4(2) / 144A 1.11%, 03/02/04 29,000 28,945 1.10%, 03/05/04 35,000 34,932 1.09%, 03/17/04 29,000 28,933 1.13%, 04/08/04 15,000 14,954 * ASAP FUNDING, LTD., SECTION 4(2) / 144A 1.11%, 01/15/04 84,000 83,964 1.11%, 01/27/04 100,000 99,920 1.13%, 01/30/04 10,000 9,991 1.12%, 02/20/04 40,000 39,938 1.12%, 02/27/04 120,000 119,787 *+ ASSET PORTFOLIO FUNDING CORP., SECTION 4(2) / 144A 1.09%, 01/09/04 30,229 30,222 1.10%, 01/22/04 68,000 67,956 *+ ASSET SECURITIZATION COOPERATIVE CORP., SECTION 4(2) / 144A 1.09%, 01/08/04 120,000 119,975 1.10%, 01/16/04 50,000 49,977 1.10%, 01/20/04 120,000 119,930 1.10%, 01/21/04 185,000 184,887
6 See financial notes. SCHWAB MONEY MARKET FUND
ISSUER FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) *+ ATLANTIS ONE FUNDING CORP., SECTION 4(2) / 144A 1.10%, 01/08/04 12,000 11,997 1.11%, 01/13/04 50,000 49,982 1.11%, 01/21/04 40,000 39,976 1.10%, 01/29/04 25,000 24,979 1.10%, 02/11/04 30,089 30,051 1.10%, 03/09/04 44,000 43,909 1.11%, 03/11/04 144,000 143,692 1.12%, 03/11/04 100,000 99,784 1.13%, 03/12/04 64,000 63,859 1.11%, 03/17/04 110,000 109,745 1.12%, 03/18/04 102,000 101,758 1.12%, 03/19/04 100,000 99,759 1.10%, 04/16/04 104,979 104,639 1.10%, 04/19/04 150,000 149,500 BANK OF AMERICA CORP. 1.14%, 05/06/04 600,000 597,627 BANK OF IRELAND, SECTION 4(2) / 144A 1.10%, 01/15/04 10,000 9,996 1.10%, 03/04/04 80,000 79,846 * BARTON CAPITAL CORP., SECTION 4(2) / 144A 1.09%, 01/06/04 50,000 49,992 1.09%, 01/07/04 85,488 85,472 1.09%, 01/08/04 24,000 23,995 1.10%, 01/08/04 25,064 25,059 1.10%, 01/20/04 55,000 54,968 1.09%, 01/21/04 120,000 119,927 1.10%, 01/21/04 58,585 58,549 BEAR STEARNS COMPANIES, INC. 1.10%, 01/29/04 150,000 149,872 1.09%, 02/02/04 191,000 190,816 1.09%, 02/09/04 87,000 86,897 *+ BETA FINANCE, INC., SECTION 3C7 / 144A 1.10%, 01/26/04 90,500 90,431 1.10%, 01/29/04 44,000 43,962 1.10%, 01/30/04 65,000 64,942 1.10%, 02/02/04 34,000 33,967 1.12%, 03/15/04 73,000 72,833 1.12%, 03/22/04 42,000 41,894 1.16%, 04/15/04 15,000 14,950 *+ CAFCO, L.L.C., SECTION 4(2) / 144A 1.08%, 01/16/04 200,000 199,910 * CC (USA), INC., SECTION 3C7 / 144A 1.09%, 01/07/04 18,000 17,997 1.09%, 01/12/04 15,500 15,495 1.10%, 01/12/04 17,950 17,944 1.10%, 01/22/04 10,000 9,994 1.10%, 01/29/04 12,500 12,489 1.10%, 02/03/04 36,000 35,964 1.11%, 02/10/04 45,000 44,944 1.11%, 02/13/04 50,000 49,934 1.10%, 02/18/04 60,500 60,411 1.10%, 02/19/04 35,500 35,447 1.12%, 03/04/04 22,000 21,957 1.12%, 03/15/04 84,500 84,306 1.13%, 03/18/04 38,000 37,909 1.24%, 08/09/04 60,000 60,000 1.58%, 11/17/04 50,000 49,964 CDC COMMERCIAL PAPER CORP., SECTION 4(2) / 144A 1.09%, 03/16/04 30,000 29,932 1.09%, 03/18/04 196,000 195,543 CITICORP 1.08%, 01/22/04 120,000 119,924 1.09%, 02/11/04 265,000 264,671 1.09%, 02/12/04 145,000 144,816 1.08%, 02/25/04 110,000 109,818 CITIGROUP GLOBAL MARKETS HOLDINGS, INC. 1.09%, 01/05/04 210,000 209,975 1.08%, 01/06/04 20,000 19,997 1.09%, 01/26/04 42,000 41,968 *+ CLIPPER RECEIVABLES CORP., SECTION 4(2) / 144A 1.10%, 01/05/04 50,000 49,994 1.11%, 01/06/04 93,000 92,986 1.10%, 01/08/04 27,200 27,194 1.11%, 01/09/04 50,098 50,086 1.10%, 01/12/04 364,000 363,877 1.10%, 01/14/04 45,000 44,982 1.10%, 01/20/04 15,432 15,423 1.09%, 01/27/04 23,000 22,982 * CONCORD MINUTEMEN CAPITAL CO., L.L.C., SECTION 3C7 / 144A Series A 1.12%, 01/12/04 83,000 82,972 1.11%, 01/21/04 15,000 14,991 1.11%, 01/23/04 30,000 29,980 1.11%, 02/04/04 30,143 30,111 1.11%, 02/05/04 10,000 9,989 1.17%, 02/06/04 22,988 22,961 1.11%, 02/10/04 170,886 170,675 1.11%, 02/11/04 18,000 17,977 1.11%, 02/17/04 30,000 29,957 1.12%, 02/18/04 30,000 29,955
See financial notes. 7 SCHWAB MONEY MARKET FUND PORTFOLIO HOLDINGS continued
ISSUER FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) 1.12%, 03/05/04 99,000 98,803 1.13%, 04/06/04 75,589 75,363 *+ CRC FUNDING, L.L.C., SECTION 4(2) / 144A 1.08%, 01/09/04 100,000 99,976 1.09%, 01/14/04 41,000 40,984 * DAKOTA CP NOTES OF CITIBANK CREDIT CARD ISSUANCE TRUST, SECTION 4(2) / 144A 1.09%, 01/07/04 100,000 99,982 1.09%, 01/08/04 200,000 199,958 1.09%, 01/13/04 80,000 79,971 1.10%, 01/14/04 100,000 99,960 1.10%, 01/15/04 11,000 10,995 1.10%, 01/20/04 150,000 149,913 1.10%, 01/22/04 50,000 49,968 1.10%, 01/23/04 17,000 16,989 1.11%, 01/23/04 25,000 24,983 1.10%, 01/26/04 100,000 99,924 1.09%, 01/30/04 125,000 124,890 1.09%, 02/05/04 30,000 29,968 + DANSKE CORP. 1.09%, 01/05/04 41,000 40,995 1.10%, 04/01/04 21,000 20,942 1.11%, 05/05/04 200,000 199,229 * DELAWARE FUNDING CORP., SECTION 4(2) / 144A 1.09%, 01/13/04 50,000 49,982 1.09%, 01/22/04 20,278 20,265 1.08%, 01/23/04 50,000 49,967 DEN NORSKE BANK ASA 1.11%, 02/10/04 25,000 24,969 1.10%, 02/13/04 30,000 29,961 1.11%, 03/02/04 15,000 14,972 1.11%, 03/04/04 10,000 9,981 1.11%, 04/07/04 63,000 62,812 1.12%, 05/19/04 58,000 57,750 DEPFA PLC, SECTION 4(2) / 144A 1.10%, 03/10/04 18,000 17,962 + DEXIA DELAWARE, L.L.C. 1.08%, 02/25/04 300,000 299,505 1.08%, 02/26/04 140,000 139,765 * DORADA FINANCE, INC., SECTION 3C7 / 144A 1.10%, 01/20/04 46,650 46,623 1.11%, 02/17/04 10,000 9,986 1.10%, 02/26/04 17,000 16,971 1.10%, 03/10/04 50,000 49,895 *+ EDISON ASSET SECURITIZATION CORP., L.L.C., SECTION 4(2) / 144A 1.09%, 02/05/04 53,000 52,944 1.10%, 02/18/04 213,000 212,688 1.10%, 02/19/04 180,000 179,730 * EIFFEL FUNDING, L.L.C., SECTION 4(2) / 144A 1.10%, 01/08/04 25,000 24,995 1.10%, 01/09/04 15,000 14,996 1.11%, 01/09/04 25,000 24,994 1.10%, 01/12/04 62,000 61,979 1.11%, 01/20/04 50,000 49,971 1.10%, 01/23/04 16,000 15,989 1.11%, 01/23/04 74,000 73,950 *+ FAIRWAY FINANCE CORP., SECTION 4(2) / 144A 1.09%, 01/06/04 89,400 89,386 1.10%, 01/06/04 15,000 14,998 1.10%, 01/08/04 45,591 45,581 1.10%, 01/21/04 29,251 29,233 1.10%, 01/22/04 48,251 48,220 1.10%, 02/02/04 25,073 25,048 1.16%, 02/05/04 15,813 15,795 1.10%, 02/12/04 22,035 22,007 1.10%, 03/01/04 132,571 132,328 1.12%, 03/12/04 35,000 34,923 *+ FALCON ASSET SECURITIZATION CORP., SECTION 4(2) / 144A 1.09%, 01/09/04 128,864 128,833 1.10%, 01/09/04 168,121 168,080 1.04%, 01/12/04 28,000 27,991 1.09%, 01/12/04 127,000 126,958 1.09%, 01/16/04 50,000 49,977 1.09%, 01/27/04 23,000 22,982 1.09%, 01/29/04 44,000 43,963 FORENINGSSPARBANKEN AB (SWEDBANK) 1.08%, 02/03/04 125,000 124,876 1.08%, 02/12/04 39,000 38,951 1.10%, 02/20/04 40,000 39,939 + FORTIS FUNDING, L.L.C., SECTION 4(2) / 144A 1.10%, 01/15/04 30,000 29,987 *+ GALAXY FUNDING, INC., SECTION 4(2) / 144A 1.10%, 01/16/04 70,000 69,968 1.11%, 01/16/04 13,000 12,994 1.10%, 01/20/04 50,000 49,971 1.10%, 01/22/04 67,000 66,957 1.10%, 01/23/04 20,000 19,987 1.11%, 01/23/04 15,000 14,990
8 See financial notes. SCHWAB MONEY MARKET FUND
ISSUER FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) 1.10%, 01/26/04 45,000 44,966 1.10%, 02/11/04 48,000 47,940 1.11%, 02/12/04 50,000 49,935 1.10%, 02/19/04 63,000 62,906 1.10%, 02/20/04 150,000 149,771 1.10%, 02/25/04 15,000 14,975 1.11%, 03/03/04 60,000 59,885 1.11%, 03/08/04 60,000 59,876 1.10%, 03/15/04 7,000 6,984 1.09%, 03/29/04 43,000 42,885 + GE CAPITAL INTERNATIONAL FUNDING, INC., SECTION 4(2) / 144A 1.11%, 01/21/04 42,000 41,974 1.10%, 01/27/04 112,000 111,911 1.10%, 01/28/04 119,000 118,902 1.10%, 02/06/04 48,000 47,947 1.10%, 02/19/04 185,000 184,723 1.08%, 02/24/04 23,000 22,963 1.11%, 03/03/04 183,000 182,650 1.11%, 03/05/04 79,000 78,844 1.10%, 04/16/04 55,000 54,822 1.10%, 04/20/04 150,000 149,496 GE FINANCIAL ASSURANCE HOLDINGS, INC., SECTION 4(2) / 144A 1.09%, 01/30/04 93,000 92,918 1.09%, 02/10/04 27,000 26,967 1.11%, 03/03/04 80,000 79,847 GENERAL ELECTRIC CAPITAL CORP. 1.10%, 01/28/04 290,000 289,761 1.09%, 02/12/04 138,000 137,825 1.10%, 02/19/04 17,000 16,975 1.12%, 02/19/04 30,000 29,954 1.11%, 03/03/04 30,000 29,943 1.11%, 03/04/04 137,000 136,734 GENERAL ELECTRIC CAPITAL SERVICES 1.10%, 02/06/04 12,000 11,987 1.09%, 02/09/04 41,000 40,952 1.10%, 02/11/04 78,000 77,902 GENERAL ELECTRIC CO. 1.13%, 02/13/04 211,000 210,715 *+ GIRO FUNDING U.S. CORP., SECTION 4(2) / 144A 1.09%, 01/09/04 30,000 29,993 1.10%, 01/15/04 45,000 44,981 1.11%, 01/16/04 60,000 59,972 1.10%, 01/22/04 20,000 19,987 1.12%, 02/03/04 45,000 44,954 1.10%, 02/05/04 65,000 64,930 1.10%, 02/06/04 45,000 44,950 1.11%, 02/09/04 40,000 39,952 1.11%, 02/24/04 91,000 90,849 1.10%, 03/12/04 51,000 50,889 1.13%, 03/24/04 123,000 122,682 *+ GRAMPIAN FUNDING, LTD., SECTION 4(2) / 144A 1.10%, 02/19/04 20,000 19,970 * GREYHAWK FUNDING, L.L.C., SECTION 4(2) / 144A 1.10%, 01/09/04 72,000 71,982 1.11%, 01/16/04 93,000 92,957 1.12%, 01/20/04 42,000 41,975 1.09%, 01/27/04 51,000 50,960 1.10%, 01/28/04 57,000 56,953 1.09%, 02/06/04 75,000 74,918 1.10%, 02/06/04 38,000 37,958 1.09%, 02/09/04 78,000 77,908 *+ HATTERAS FUNDING CORP., SECTION 4(2) / 144A 1.04%, 01/06/04 48,000 47,993 1.10%, 01/15/04 28,013 28,001 1.11%, 01/20/04 24,617 24,603 1.11%, 01/22/04 18,000 17,988 1.10%, 01/26/04 59,000 58,955 1.10%, 01/28/04 35,000 34,971 1.10%, 02/20/04 25,000 24,962 1.11%, 02/23/04 11,000 10,982 + HBOS TREASURY SERVICES, PLC 1.10%, 02/03/04 18,000 17,982 1.10%, 02/05/04 80,000 79,914 1.10%, 02/23/04 43,000 42,930 1.11%, 02/23/04 67,000 66,891 1.12%, 03/03/04 87,000 86,832 1.11%, 03/05/04 97,000 96,809 1.13%, 03/11/04 25,000 24,945 1.12%, 03/15/04 18,000 17,959 HSBC U.S.A., INC. 1.09%, 01/27/04 150,000 149,882 *+ INDEPENDENCE FUNDING, L.L.C., SECTION 4(2) / 144A 1.10%, 01/07/04 85,000 84,984 1.09%, 01/14/04 20,000 19,992 1.10%, 02/03/04 125,000 124,874 + ING (U.S.) FUNDING, L.L.C. 1.10%, 03/05/04 59,000 58,885
See financial notes. 9 SCHWAB MONEY MARKET FUND PORTFOLIO HOLDINGS continued
ISSUER FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) IRISH LIFE & PERMANENT, PLC, SECTION 4(2) / 144A 1.10%, 03/05/04 7,500 7,485 1.10%, 03/10/04 50,000 49,895 1.09%, 04/13/04 40,000 39,875 J.P. MORGAN CHASE & CO. 1.10%, 02/10/04 156,000 155,809 1.10%, 02/12/04 165,000 164,788 *+ JUPITER SECURITIZATION CORP., SECTION 4(2) / 144A 1.10%, 02/02/04 75,214 75,140 1.10%, 03/01/04 24,980 24,934 + KBC FINANCIAL PRODUCTS INTERNATIONAL, LTD., SECTION 4(2) / 144A 1.10%, 02/10/04 92,000 91,888 *+ KITTY HAWK FUNDING CORP., SECTION 4(2) / 144A 1.10%, 01/27/04 20,559 20,543 1.11%, 02/10/04 72,000 71,911 1.10%, 02/17/04 25,000 24,964 1.10%, 03/16/04 121,000 120,724 + LANDESBANK SCHLESWIG-HOLSTEIN GIROZENTRALE, SECTION 4(2) / 144A 1.29%, 03/09/04 108,000 107,741 1.34%, 03/18/04 50,000 49,859 1.24%, 03/26/04 10,000 9,971 1.33%, 03/26/04 35,000 34,892 1.35%, 04/15/04 10,000 9,961 * LEXINGTON PARKER CAPITAL CO., L.L.C., SECTION 4(2) / 144A 1.15%, 01/08/04 58,000 57,987 1.11%, 01/20/04 32,213 32,194 1.10%, 01/23/04 38,538 38,512 1.11%, 01/23/04 127,000 126,914 1.13%, 01/23/04 9,000 8,994 1.10%, 02/05/04 100,000 99,893 1.11%, 02/11/04 43,000 42,946 1.12%, 02/27/04 51,500 51,409 *+ LINKS FINANCE, L.L.C., SECTION 3C7 / 144A 1.10%, 01/06/04 18,710 18,707 1.09%, 01/07/04 45,000 44,992 1.11%, 01/08/04 30,000 29,994 1.09%, 01/20/04 16,000 15,991 1.15%, 05/05/04 30,000 29,880 * MANE FUNDING CORP., SECTION 4(2) / 144A 1.11%, 01/26/04 20,000 19,985 1.11%, 01/27/04 19,000 18,985 1.12%, 01/27/04 36,000 35,971 1.11%, 02/03/04 127,000 126,871 *+ MONT BLANC CAPITAL CORP., SECTION 4(2) / 144A 1.10%, 01/13/04 85,801 85,770 1.09%, 01/14/04 92,000 91,964 1.10%, 01/14/04 76,000 75,970 1.12%, 01/22/04 28,000 27,982 1.11%, 03/03/04 10,634 10,614 MORGAN STANLEY 1.08%, 01/05/04 225,000 224,973 1.08%, 01/26/04 120,000 119,910 1.08%, 02/10/04 20,000 19,976 1.08%, 02/20/04 200,000 199,700 1.08%, 02/23/04 22,000 21,965 NATIONWIDE BUILDING SOCIETY 1.10%, 01/29/04 122,000 121,896 * NEWCASTLE CERTIFICATES PROGRAM, SECTION 4(2) / 144A Series 2000A 1.11%, 01/12/04 64,000 63,978 1.11%, 01/16/04 46,000 45,979 1.10%, 01/21/04 17,000 16,990 1.10%, 01/22/04 15,000 14,990 1.10%, 01/23/04 18,000 17,988 1.10%, 01/27/04 105,000 104,917 1.10%, 02/18/04 80,000 79,883 + NORDEA NORTH AMERICA, INC. 1.09%, 01/14/04 29,000 28,989 1.10%, 01/15/04 50,000 49,979 1.08%, 01/22/04 10,000 9,994 1.08%, 01/27/04 100,000 99,922 1.09%, 03/09/04 10,871 10,849 1.10%, 03/25/04 45,000 44,884 *+ OLD LINE FUNDING CORP., SECTION 4(2) / 144A 1.09%, 01/07/04 54,206 54,196 1.10%, 01/07/04 23,062 23,058 1.10%, 01/08/04 7,025 7,023 1.10%, 01/15/04 48,035 48,014 1.10%, 01/16/04 25,056 25,045 1.11%, 01/21/04 60,177 60,140 1.09%, 01/23/04 42,849 42,820 * PARK AVENUE RECEIVABLES CORP., SECTION 4(2) / 144A 1.10%, 01/07/04 25,000 24,995 * PARK GRANADA, L.L.C., SECTION 4(2) / 144A 1.12%, 01/06/04 144,597 144,574 1.12%, 01/07/04 152,888 152,860 1.12%, 01/08/04 25,000 24,995 1.12%, 02/12/04 48,000 47,937 1.11%, 03/09/04 40,000 39,916
10 See financial notes. SCHWAB MONEY MARKET FUND
ISSUER FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) 1.13%, 03/09/04 55,000 54,883 1.11%, 03/11/04 30,000 29,935 *+ PREFERRED RECEIVABLES FUNDING CORP., SECTION 4(2) / 144A 1.10%, 01/05/04 119,000 118,985 1.09%, 01/08/04 24,000 23,995 1.11%, 01/20/04 13,000 12,992 1.10%, 01/26/04 25,000 24,981 1.11%, 02/11/04 96,000 95,879 1.13%, 03/10/04 22,538 22,489 * RECEIVABLES CAPITAL CORP., SECTION 4(2) / 144A 1.09%, 01/07/04 7,742 7,741 1.10%, 03/01/04 65,000 64,881 + SAN PAOLO IMI U.S. FINANCIAL CO. 1.09%, 03/18/04 182,000 181,576 * SCALDIS CAPITAL LTD., SECTION 4(2) / 144A 1.10%, 01/16/04 60,000 59,972 1.11%, 01/20/04 50,135 50,106 1.11%, 01/21/04 38,838 38,814 1.10%, 01/23/04 17,128 17,116 1.10%, 01/27/04 21,942 21,925 1.10%, 02/26/04 19,247 19,214 1.14%, 03/24/04 32,000 31,917 1.12%, 03/30/04 27,000 26,926 *+ SIGMA FINANCE, INC., SECTION 3C7 / 144A 1.11%, 01/08/04 21,500 21,495 1.12%, 01/20/04 20,000 19,988 1.11%, 01/26/04 18,000 17,986 1.11%, 01/28/04 52,000 51,957 1.10%, 02/02/04 26,000 25,975 1.11%, 02/02/04 19,651 19,632 1.12%, 02/02/04 20,000 19,980 1.13%, 02/13/04 13,000 12,982 1.10%, 02/19/04 30,000 29,955 1.13%, 03/11/04 10,000 9,978 1.14%, 03/11/04 47,000 46,897 1.10%, 03/15/04 10,000 9,977 1.11%, 03/16/04 33,000 32,924 1.14%, 03/23/04 84,000 83,784 1.50%, 09/24/04 70,000 69,990 + SOCIETE GENERALE N.A., INC. 1.08%, 02/05/04 150,000 149,842 + STADSHYPOTEK DELAWARE, INC., SECTION 4(2) / 144A 1.11%, 03/03/04 62,000 61,882 1.13%, 04/08/04 96,000 95,705 *+ THUNDER BAY FUNDING, INC., SECTION 4(2) / 144A 1.10%, 01/13/04 22,490 22,482 1.09%, 01/14/04 25,000 24,990 1.09%, 01/15/04 25,090 25,079 1.10%, 01/15/04 10,981 10,976 1.10%, 01/16/04 23,091 23,080 1.09%, 01/22/04 21,540 21,526 1.10%, 01/22/04 23,913 23,898 1.09%, 02/06/04 8,696 8,687 1.09%, 02/09/04 25,204 25,174 1.09%, 02/13/04 42,000 41,945 1.09%, 02/17/04 53,263 53,187 1.09%, 02/20/04 65,195 65,096 *+ TICONDEROGA FUNDING, L.L.C., SECTION 4(2) / 144A 1.10%, 01/13/04 55,000 54,980 1.09%, 01/14/04 70,089 70,061 1.09%, 01/23/04 143,000 142,905 1.10%, 01/23/04 50,000 49,966 1.10%, 03/05/04 105,281 105,075 *+ TRIPLE-A ONE FUNDING CORP., SECTION 4(2) / 144A 1.10%, 01/05/04 19,325 19,323 1.09%, 01/13/04 30,000 29,989 1.09%, 01/30/04 23,533 23,512 *+ TULIP FUNDING CORP., SECTION 4(2) / 144A 1.09%, 01/12/04 26,199 26,190 1.10%, 01/23/04 43,000 42,971 1.10%, 01/26/04 90,000 89,931 1.10%, 01/30/04 7,388 7,381 *+ VARIABLE FUNDING CAPITAL CORP., SECTION 4(2) / 144A 1.10%, 01/16/04 16,479 16,471 1.09%, 01/26/04 24,000 23,982 + WESTPAC CAPITAL CORP. 1.08%, 02/04/04 42,000 41,957 1.10%, 03/24/04 30,000 29,924 + WESTPAC TRUST SECURITIES NZ 1.11%, 03/12/04 93,000 92,797 *+ WINDMILL FUNDING CORP., SECTION 4(2) / 144A 1.09%, 02/06/04 25,000 24,973 ----------- 24,428,801
See financial notes. 11 SCHWAB MONEY MARKET FUND PORTFOLIO HOLDINGS continued
ISSUER FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) CERTIFICATES OF DEPOSIT 28.7% -------------------------------------------------------------------------- + ABBEY NATIONAL TREASURY SERVICES, PLC 1.09%, 01/06/04 191,000 191,000 ALLIANCE & LEICESTER, PLC 1.10%, 02/20/04 76,000 76,000 1.10%, 03/10/04 50,000 50,000 1.11%, 03/19/04 11,000 11,000 AMERICAN EXPRESS CENTURION BANK 1.08%, 01/26/04 40,000 40,000 1.08%, 01/30/04 40,000 40,000 1.08%, 02/02/04 96,000 96,000 BANK OF NOVA SCOTIA 1.10%, 03/24/04 200,000 200,000 BARCLAYS BANK, PLC 1.10%, 01/09/04 75,000 75,000 1.10%, 01/13/04 261,000 261,000 1.12%, 03/17/04 21,000 21,000 1.10%, 03/22/04 300,000 300,000 1.10%, 04/19/04 46,000 46,034 1.35%, 08/26/04 150,000 149,990 BAYERISCHE LANDESBANK GIROZENTRALE 1.25%, 03/15/04 30,000 30,000 1.30%, 03/26/04 195,000 194,997 BNP PARIBAS 1.10%, 02/06/04 170,000 170,000 1.12%, 02/17/04 298,000 298,000 1.11%, 03/10/04 200,000 200,000 1.10%, 03/25/04 234,000 234,000 1.10%, 03/26/04 157,000 157,000 1.10%, 04/19/04 130,000 130,000 1.50%, 11/19/04 150,000 150,000 CANADIAN IMPERIAL BANK OF COMMERCE 1.09%, 01/15/04 100,000 100,000 1.08%, 02/06/04 81,000 81,000 1.10%, 02/17/04 86,000 86,000 CITIBANK, N.A. 1.10%, 01/22/04 50,000 50,000 1.09%, 02/04/04 275,000 275,000 1.10%, 02/13/04 104,000 104,000 1.10%, 03/04/04 308,000 308,000 COMMONWEALTH BANK OF AUSTRALIA 1.10%, 01/13/04 100,000 100,000 CREDIT AGRICOLE INDOSUEZ 1.08%, 02/02/04 142,000 142,000 1.10%, 03/04/04 155,000 155,000 CREDIT LYONNAIS S.A. 1.12%, 03/08/04 72,000 71,999 1.11%, 04/01/04 160,000 160,004 CREDIT SUISSE FIRST BOSTON 1.09%, 03/16/04 245,000 245,000 1.09%, 03/17/04 200,000 200,000 DANSKE BANK A/S 1.09%, 02/23/04 200,000 200,001 1.10%, 03/03/04 117,000 117,001 DEPFA BANK, PLC 1.13%, 03/18/04 30,000 30,000 1.10%, 03/29/04 75,000 75,000 DEUTSCHE BANK, AG 1.40%, 09/03/04 173,000 173,000 1.41%, 10/15/04 400,000 400,000 1.42%, 10/27/04 165,000 165,000 FIRST TENNESSEE BANK, N.A. 1.10%, 02/10/04 85,000 85,000 FORTIS BANK 1.08%, 02/03/04 175,000 175,000 1.10%, 04/06/04 89,000 89,000 + HBOS TREASURY SERVICES, PLC 1.11%, 01/20/04 78,000 78,000 1.09%, 02/06/04 32,000 32,000 1.11%, 03/12/04 46,000 46,000 1.13%, 03/25/04 125,000 124,997 HSBC BANK, PLC 1.09%, 02/11/04 120,000 120,000 1.09%, 02/17/04 21,000 21,000 1.08%, 02/19/04 80,000 80,000 HSBC BANK USA 1.11%, 03/08/04 90,000 90,000 HSH NORDBANK, AG 1.08%, 02/09/04 93,000 93,000 1.42%, 09/07/04 92,000 91,994 1.42%, 10/29/04 42,000 41,997 ING BANK, NV 1.05%, 01/14/04 30,000 30,000 1.10%, 02/20/04 98,000 98,000 1.10%, 03/24/04 446,000 446,000 1.10%, 03/25/04 100,000 100,000
12 See financial notes. SCHWAB MONEY MARKET FUND
ISSUER FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) LANDESBANK BADEN WURTTEMBERG 1.10%, 01/30/04 50,000 50,000 1.10%, 02/26/04 70,000 70,000 1.10%, 03/19/04 180,000 180,000 LANDESBANK HESSEN-THURINGEN GIROZENTRALE 1.30%, 02/03/04 108,000 108,010 1.11%, 04/02/04 60,000 60,000 1.35%, 08/26/04 39,000 38,997 1.41%, 09/07/04 91,000 91,000 LLOYDS TSB BANK, PLC 1.09%, 04/02/04 55,000 54,999 NATIONWIDE BUILDING SOCIETY 1.09%, 02/04/04 75,000 75,000 NORDDEUTSCHE LANDESBANK GIROZENTRALE 1.04%, 01/15/04 29,000 29,000 1.25%, 03/15/04 70,000 69,999 1.30%, 04/13/04 70,000 69,999 1.40%, 08/05/04 27,000 27,001 NORDEA BANK FINLAND, PLC 1.08%, 02/04/04 236,000 236,000 1.08%, 02/24/04 250,000 250,000 RABOBANK NEDERLAND 1.37%, 08/26/04 38,000 37,983 ROYAL BANK OF SCOTLAND, PLC 1.08%, 01/14/04 190,000 190,000 1.08%, 02/06/04 135,000 135,000 1.10%, 03/15/04 8,000 8,000 1.35%, 08/26/04 100,000 99,993 1.40%, 09/07/04 115,000 114,992 1.50%, 11/19/04 155,000 154,986 SAN PAOLO IMI SPA 1.10%, 01/30/04 120,000 120,001 1.11%, 02/17/04 120,000 120,002 1.10%, 02/18/04 48,000 48,000 1.12%, 02/18/04 260,000 260,002 SOCIETE GENERALE 1.11%, 03/16/04 37,000 37,000 1.10%, 03/22/04 292,000 292,000 1.10%, 03/23/04 200,000 200,000 SOUTHTRUST BANK 1.08%, 02/11/04 17,000 17,000 SVENSKA HANDELSBANKEN AB 1.08%, 01/08/04 89,000 89,000 1.11%, 02/03/04 13,000 13,000 1.10%, 03/19/04 134,000 134,000 TORONTO DOMINION BANK 1.08%, 03/02/04 286,000 286,000 1.10%, 03/08/04 50,000 50,000 1.10%, 03/26/04 129,000 129,000 UBS, AG 1.32%, 08/04/04 71,000 71,000 1.38%, 08/26/04 90,000 89,994 1.42%, 11/12/04 100,000 99,996 UNICREDITO ITALIANO SPA 1.10%, 01/15/04 265,000 265,000 1.11%, 01/21/04 140,000 140,000 1.12%, 01/22/04 63,000 63,000 1.11%, 01/26/04 49,000 49,000 1.09%, 01/29/04 186,000 186,000 1.11%, 01/29/04 148,000 148,000 1.10%, 03/19/04 76,000 76,000 1.12%, 03/24/04 35,000 35,000 WASHINGTON MUTUAL BANK 1.11%, 02/09/04 85,000 85,000 WELLS FARGO BANK N.A. 1.08%, 01/06/04 50,000 50,000 1.08%, 01/07/04 150,000 150,000 WESTLB AG 1.05%, 01/07/04 15,000 15,000 1.09%, 01/09/04 13,000 13,000 1.05%, 01/14/04 14,000 14,000 1.26%, 04/02/04 55,000 55,000 1.30%, 04/07/04 180,000 180,000 1.34%, 04/14/04 100,000 100,000 WILMINGTON TRUST CO. 1.10%, 01/22/04 25,000 25,000 1.14%, 02/19/04 25,000 25,000 ----------- 14,081,968 BANK NOTES 3.1% -------------------------------------------------------------------------- BANK OF AMERICA, N.A. 1.10%, 03/15/04 130,000 130,000 1.08%, 04/13/04 500,000 500,000 1.08%, 04/15/04 405,000 405,000 LASALLE NATIONAL BANK, N.A. 1.10%, 01/30/04 200,000 200,000 1.10%, 02/09/04 54,000 54,000 STANDARD FEDERAL BANK, N.A. 1.10%, 02/05/04 100,000 100,000 1.10%, 02/13/04 147,000 147,000 ----------- 1,536,000
See financial notes. 13 SCHWAB MONEY MARKET FUND PORTFOLIO HOLDINGS continued
ISSUER FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) PROMISSORY NOTES 1.5% -------------------------------------------------------------------------- o THE GOLDMAN SACHS GROUP, INC. 1.14%, 01/28/04 150,000 150,000 1.22%, 02/05/04 62,000 62,000 1.21%, 02/18/04 15,000 15,000 1.21%, 02/20/04 12,000 12,000 1.19%, 03/23/04 273,000 273,000 1.25%, 05/04/04 20,000 20,000 1.25%, 07/16/04 150,000 150,000 1.45%, 08/27/04 67,000 67,000 ----------- 749,000 U.S. GOVERNMENT SECURITIES 4.1% of Net Assets DISCOUNT NOTES 3.6% -------------------------------------------------------------------------- FANNIE MAE 1.09%, 03/01/04 145,000 144,737 1.22%, 03/05/04 223,120 222,640 1.09%, 03/10/04 204,004 203,578 1.10%, 03/17/04 200,000 199,535 FREDDIE MAC 1.09%, 03/12/04 150,000 149,677 1.23%, 03/12/04 19,775 19,728 1.10%, 03/15/04 300,000 299,322 1.00%, 03/25/04 19,671 19,626 1.10%, 03/25/04 41,420 41,314 1.30%, 03/25/04 155,858 155,392 1.10%, 04/05/04 140,000 139,595 1.10%, 04/06/04 160,000 159,535 ----------- 1,754,679 COUPON NOTES 0.5% -------------------------------------------------------------------------- FANNIE MAE 1.55%, 11/17/04 50,000 50,000 FREDDIE MAC 1.65%, 12/30/04 195,000 195,000 ----------- 245,000 VARIABLE-RATE OBLIGATIONS 5.4% of Net Assets + ABAG FINANCIAL AUTHORITY FOR NONPROFIT CORPS., CALIFORNIA RB (Public Pole Institute) Series 2002B 1.25%, 01/07/04 17,870 17,870 BANK OF NEW YORK CO., INC., 144A 1.13%, 01/27/04 75,000 75,000 BAYERISCHE LANDESBANK GIROZENTRALE 1.11%, 01/13/04 47,000 46,995 + BROOKS COUNTY, GEORGIA DEVELOPMENT AUTHORITY RB (Langboard, Inc. Project) 1.17%, 01/07/04 10,000 10,000 CANADIAN IMPERIAL BANK OF COMMERCE 1.18%, 01/15/04 100,000 100,000 + CFM INTERNATIONAL, INC., 144A 1.17%, 01/07/04 25,075 25,075 CHASE MANHATTAN BANK (USA) 1.10%, 01/30/04 100,000 100,000 o GE LIFE & ANNUITY ASSURANCE CO., 144A 1.22%, 01/01/04 100,000 100,000 1.23%, 01/01/04 50,000 50,000 1.24%, 02/02/04 50,000 50,000 GENERAL ELECTRIC CAPITAL CORP. 1.25%, 01/09/04 175,000 175,000 1.23%, 01/20/04 75,000 75,000 GRAND PRAIRIE, TEXAS SPORTS FACILITY DEVELOPMENT CORP. Sales Tax Revenue Refunding Taxable Bonds Series 2003A 1.60%, 09/15/04 15,920 15,920 LLOYDS TSB BANK, PLC 1.06%, 01/13/04 50,000 49,981 + LOANSTAR ASSETS PARTNERS II, L.P., 144A 1.17%, 01/07/04 45,000 45,000 + LOWNDES CORP., GEORGIA, 144A Taxable Demand Bond Series 1997 1.16%, 01/07/04 4,850 4,850 + MERLOT TRUST Series 2000B, SECTION 4(2) / 144A 1.25%, 01/07/04 32,630 32,630 Series 2001A67, SECTION 4(2) / 144A 1.25%, 01/07/04 35,065 35,065
14 See financial notes. SCHWAB MONEY MARKET FUND
ISSUER FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) Series 2001A7, SECTION 4(2) / 144A 1.25%, 01/07/04 15,470 15,470 o METROPOLITAN LIFE INSURANCE CO., 144A 1.22%, 01/30/04 50,000 50,000 1.24%, 02/02/04 100,000 100,000 o MONUMENTAL LIFE INSURANCE CO., 144A 1.29%, 01/01/04 100,000 100,000 + NEW JERSEY ECONOMIC DEVELOPMENT AUTHORITY Adjustable Rate Lease Revenue Taxable Bonds (Barnes & Noble, Inc. Distribution & Freight Consolidation Center Project) Series 1995A 1.11%, 01/07/04 14,670 14,670 Adjustable Rate Lease Revenue Taxable Bonds (Barnes & Noble, Inc. Distribution & Freight Consolidation Center Project) Series 1995B 1.11%, 01/07/04 10,000 10,000 Adjustable Rate Lease Revenue Taxable Bonds (Camden Center Project) Series 2002A 1.11%, 01/07/04 22,045 22,045 Adjustable Rate Lease Revenue Taxable Bonds (Camden Center Project) Series 2002B 1.11%, 01/07/04 20,000 20,000 NORDDEUTSCHE LANDESBANK GIROZENTRALE 1.08%, 01/23/04 135,000 134,960 o PACIFIC LIFE INSURANCE CO. 1.22%, 01/02/04 100,000 100,000 ROYAL BANK OF CANADA 1.15%, 01/12/04 60,000 60,000 ROYAL BANK OF SCOTLAND, PLC 1.09%, 01/14/04 100,000 99,975 + SANTA ROSA, CALIFORNIA Pension Obligation Revenue Taxable Bonds Series 2003A 1.25%, 01/07/04 10,000 10,000 + SE CHRISTIAN CHURCH, JEFFERSON COUNTY, KENTUCKY Series 2003 1.20%, 01/07/04 11,100 11,100 * SIGMA FINANCE, INC., 3C7 / 144A 1.13%, 01/05/04 100,000 99,993 1.14%, 01/12/04 195,000 195,000 1.13%, 01/15/04 60,000 60,000 1.12%, 01/15/04 230,000 229,976 1.12%, 01/16/04 45,000 45,000 1.12%, 01/20/04 40,000 39,997 1.10%, 01/21/04 20,000 19,998 + SISTERS OF MERCY OF THE AMERICAS REGIONAL COMMUNITY OF OMAHA, NEBRASKA Series 2001 1.14%, 01/07/04 11,860 11,860 o TRAVELERS INSURANCE CO., 144A 1.23%, 02/01/04 100,000 100,000 WELLS FARGO & CO. 1.16%, 01/02/04 75,000 75,000 ----------- 2,633,430
MATURITY AMOUNT VALUE SECURITY ($ x 1,000) ($ x 1,000) OTHER INVESTMENTS 7.3% of investments REPURCHASE AGREEMENTS 7.3% -------------------------------------------------------------------------- BEAR STEARNS & CO., INC. Tri-Party Repurchase Agreement Collateralized by U.S. Government Securities with a value of $336,604 1.02%, issued 12/31/03, due 01/02/04 330,019 330,000 CREDIT SUISSE FIRST BOSTON L.L.C. Tri-Party Repurchase Agreement Collateralized by U.S. Government Securities with a value of $510,602 1.02%, issued 12/31/03, due 01/02/04 320,602 320,584 1.06%, issued 12/30/03, due 01/07/04 180,042 180,000 J.P. MORGAN SECURITIES, INC. Tri-Party Repurchase Agreement Collateralized by U.S. Government Securities with a value of $78,541 1.02%, issued 12/31/03, due 01/02/04 77,004 77,000
See financial notes. 15 SCHWAB MONEY MARKET FUND PORTFOLIO HOLDINGS continued
MATURITY AMOUNT VALUE SECURITY ($ x 1,000) ($ x 1,000) GOLDMAN SACHS & CO. Tri-Party Repurchase Agreement Collateralized by U.S. Government Securities with a value of $846,600 1.02%, issued 12/31/03, due 01/02/04 830,047 830,000 UBS FINANCIAL SERVICES, INC. Tri-Party Repurchase Agreement Collateralized by U.S. Government Securities with a value of $1,912,505 1.02%, issued 12/31/03, due 01/02/04 1,875,106 1,875,000 ----------- 3,612,584
END OF INVESTMENTS. For totals, please see the first page of holdings for this fund. AT DECEMBER 31, 2003, PORTFOLIO HOLDINGS INCLUDED ILLIQUID RESTRICTED SECURITIES AS FOLLOWS:
ISSUER COST/ RATE, ACQUISITION DATE, FACE AMOUNT VALUE MATURITY DATE ($ x 1,000) ($ x 1,000) GE LIFE & ANNUITY ASSURANCE CO., 144A 1.22%, 05/03/99, 01/02/04 100,000 100,000 1.22%, 08/02/99, 01/02/04 50,000 50,000 1.24%, 02/03/03, 01/02/04 50,000 50,000 ----------- 200,000 METROPOLITAN LIFE INSURANCE CO., 144A 1.22%, 12/28/00, 01/30/04 50,000 50,000 1.24%, 02/03/03, 02/02/04 100,000 100,000 ----------- 150,000 MONUMENTAL LIFE INSURANCE CO., 144A 1.24%, 06/09/93, 01/02/04 100,000 100,000 PACIFIC LIFE INSURANCE CO. 1.22%, 09/26/03, 01/02/04 100,000 100,000 THE GOLDMAN SACHS GROUP, INC. 1.14%, 07/28/03, 01/28/04 150,000 150,000 1.22%, 08/05/03, 02/05/04 62,000 62,000 1.21%, 08/18/03, 02/18/04 15,000 15,000 1.21%, 08/19/03, 02/20/04 12,000 12,000 1.19%, 09/22/03, 03/23/04 251,000 251,000 1.19%, 09/23/03, 03/23/04 22,000 22,000 1.25%, 11/04/03, 05/04/04 20,000 20,000 1.25%, 12/16/03, 07/16/04 150,000 150,000 1.45%, 12/02/03, 08/27/04 67,000 67,000 ----------- 749,000 TRAVELERS INSURANCE CO., 144A 1.23%, 10/31/03, 02/02/04 100,000 100,000
16 See financial notes. SCHWAB MONEY MARKET FUND Statement of ASSETS AND LIABILITIES As of December 31, 2003. All numbers x 1,000 except NAV. ASSETS -------------------------------------------------------------------------------- Investments, at value $49,041,462 a Interest receivable 41,551 Prepaid expenses + 781 --------------- TOTAL ASSETS 49,083,794 LIABILITIES -------------------------------------------------------------------------------- Payables: Dividends to shareholders 466 Investment adviser and administrator fees 483 Transfer agent and shareholder service fees 604 Accrued expenses + 2,984 --------------- TOTAL LIABILITIES 4,537 NET ASSETS -------------------------------------------------------------------------------- TOTAL ASSETS 49,083,794 TOTAL LIABILITIES - 4,537 --------------- NET ASSETS $49,079,257 NET ASSETS BY SOURCE Capital received from investors 49,079,306 Net realized capital losses (49) NET ASSET VALUE (NAV) SHARES NET ASSETS / OUTSTANDING = NAV $49,079,257 49,079,865 $1.00
Unless stated, all numbers x 1,000. a The amortized cost of the fund's securities was $49,041,462. Includes illiquid restricted securities worth $1,399,000, or 2.85% of the fund's total net assets. Also, includes other restricted but deemed liquid securities comprised of 144A, section 4(2) and 3c7 securities, worth $18,755,512 or 38.21% of the fund's total net assets. FEDERAL TAX DATA ----------------------------------------- COST BASIS OF PORTFOLIO $49,041,462 UNUSED CAPITAL LOSSES: Expires 12/31 of: Loss amount: 2007 $49 RECLASSIFICATIONS: Net realized capital losses $27 Reclassified as: Capital received from investors ($27)
See financial notes. 17 SCHWAB MONEY MARKET FUND Statement of OPERATIONS For January 1, 2003 through December 31, 2003. All numbers x 1,000. INVESTMENT INCOME -------------------------------------------------------------------------------- Interest $644,039 EXPENSES -------------------------------------------------------------------------------- Investment adviser and administrator fees 158,547 a Transfer agent and shareholder service fees 232,078 b Trustees' fees 174 c Custodian and portfolio accounting fees 4,388 Professional fees 149 Registration fees 844 Shareholder reports 5,432 Other expenses + 504 ------------ Total expenses 402,116 Expense reduction - 15,320 d ------------ NET EXPENSES 386,796 INCREASE IN NET ASSETS FROM OPERATIONS -------------------------------------------------------------------------------- TOTAL INVESTMENT INCOME 644,039 NET EXPENSES - 386,796 ------------ NET INVESTMENT INCOME 257,243 ------------ INCREASE IN NET ASSETS FROM OPERATIONS $257,243
Unless stated, all numbers x 1,000. a Calculated on a graduated basis as a percentage of average daily net assets: 0.38% of the first $1 billion, 0.35% over $1 billion, 0.32% over $10 billion, 0.30% over $20 billion and 0.27% over $40 billion. b Calculated as a percentage of average daily net assets: for transfer agent services, 0.25% of the fund's assets; for shareholder services, 0.20% of the fund's assets. These fees are paid to Charles Schwab & Co. c For the fund's independent trustees only. d This reduction was made by the investment adviser (CSIM). It reflects a guarantee by CSIM and the transfer agent and shareholder service agent (Schwab) to limit the annual operating expenses of this fund through at least April 30, 2004 to 0.75% of average daily net assets. This limit does not include interest, taxes and certain non-routine expenses. 18 See financial notes. SCHWAB MONEY MARKET FUND Statements of CHANGES IN NET ASSETS For the current and prior report periods. All numbers x 1,000.
OPERATIONS -------------------------------------------------------------------------------- 1/1/03-12/31/03 1/1/02-12/31/02 Net investment income $257,243 $613,708 ------------------------------------ INCREASE IN NET ASSETS FROM OPERATIONS 257,243 613,708 DISTRIBUTIONS PAID -------------------------------------------------------------------------------- Dividends from net investment income 257,243 613,708 a TRANSACTIONS IN FUND SHARES b -------------------------------------------------------------------------------- Shares sold 132,562,456 137,199,724 Shares reinvested 253,763 604,716 Shares redeemed + (134,800,345) (135,856,854) ------------------------------------ NET TRANSACTIONS IN FUND SHARES (1,984,126) 1,947,586 NET ASSETS -------------------------------------------------------------------------------- Beginning of period 51,063,383 49,115,797 Total increase or decrease + (1,984,126) 1,947,586 c ------------------------------------ END OF PERIOD $49,079,257 $51,063,383
Unless stated, all numbers x 1,000. a The tax-basis components of distributions are: CURRENT YEAR Ordinary income $257,243 Long-term capital gains $-- PRIOR YEAR Ordinary income $613,708 Long-term capital gains $--
b Because all transactions in this section took place at $1.00 per share, figures for share quantities are the same as for dollars. c Represents the changes in net assets from operations plus the changes in value of transactions in fund shares, minus distributions paid. See financial notes. 19 SCHWAB GOVERNMENT MONEY FUND FINANCIAL STATEMENTS FINANCIAL HIGHLIGHTS
1/1/03- 1/1/02- 1/1/01- 1/1/00- 1/1/99- 12/31/03 12/31/02 12/31/01 12/31/00 12/31/99 ------------------------------------------------------------------------------------------------------------------------------------ PER-SHARE DATA ($) ------------------------------------------------------------------------------------------------------------------------------------ Net asset value at beginning of period 1.00 1.00 1.00 1.00 1.00 ---------------------------------------------------------------------------------------- Income from investment operations: Net investment income 0.00 1 0.01 0.04 0.06 0.04 ---------------------------------------------------------------------------------------- Less distributions: Dividends from net investment income (0.00) 1 (0.01) (0.04) (0.06) (0.04) ---------------------------------------------------------------------------------------- Net asset value at end of period 1.00 1.00 1.00 1.00 1.00 ---------------------------------------------------------------------------------------- Total return (%) 0.48 1.20 3.63 5.69 4.50 RATIOS/SUPPLEMENTAL DATA (%) ------------------------------------------------------------------------------------------------------------------------------------ Ratios to average net assets: Net operating expenses 0.75 0.75 0.75 0.76 2 0.75 Gross operating expenses 0.83 0.83 0.84 0.85 0.85 Net investment income 0.49 1.19 3.52 5.54 4.42 Net assets, end of period ($ x 1,000,000) 2,838 3,092 3,054 2,509 2,545
1 Per-share amount was less than $0.01. 2 The ratio of net operating expenses would have been 0.75% if certain non-routine expenses (proxy fees) had not been included. 20 See financial notes. SCHWAB GOVERNMENT MONEY FUND PORTFOLIO HOLDINGS as of December 31, 2003 This section shows all the securities in the fund's portfolio and their market value, as of the report date. For fixed-rate obligations, the rate shown is the effective yield at the time of purchase, except for U.S. government agency coupon notes and U.S. Treasury notes, for which the rate shown is the interest rate (the rate established when the obligation was issued). For variable-rate obligations, the rate shown is the rate as of the report date. For variable-rate obligations with scheduled maturities greater than 397 days, the maturity shown is the later of the next interest rate change date or demand date. For variable-rate obligations with scheduled maturities less than 397 days, the maturity shown is the earlier of the next interest rate change date or demand date. For variable-rate obligations without demand features, the maturity shown is the next interest rate change date.
COST VALUE HOLDINGS BY CATEGORY ($x1,000) ($x1,000) -------------------------------------------------------------------------------- 56.9% U.S. GOVERNMENT SECURITIES 1,615,349 1,615,349 2.3% VARIABLE-RATE OBLIGATION 64,131 64,131 42.4% OTHER INVESTMENTS 1,202,304 1,202,304 -------------------------------------------------------------------------------- 101.6% TOTAL INVESTMENTS 2,881,784 2,881,784 (1.6)% OTHER ASSETS AND LIABILITIES (44,255) -------------------------------------------------------------------------------- 100.0% TOTAL NET ASSETS 2,837,529
ISSUER FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) U.S. GOVERNMENT SECURITIES 56.9% of Net Assets DISCOUNT NOTES 41.6% -------------------------------------------------------------------------------- FANNIE MAE 1.07%, 01/07/04 20,000 19,996 1.08%, 01/07/04 12,500 12,498 1.06%, 01/09/04 8,360 8,358 1.07%, 01/14/04 30,535 30,523 1.08%, 01/14/04 25,000 24,990 1.08%, 01/21/04 30,000 29,982 1.07%, 01/28/04 11,300 11,291 1.10%, 02/02/04 12,565 12,553 1.07%, 02/04/04 20,000 19,980 1.08%, 02/11/04 10,000 9,988 1.08%, 02/25/04 36,000 35,941 1.20%, 03/05/04 10,000 9,979 1.33%, 03/05/04 2,300 2,295 1.12%, 03/10/04 35,000 34,926 1.10%, 03/17/04 15,240 15,205 1.08%, 04/01/04 50,000 49,865 1.22%, 04/02/04 15,000 14,954 1.32%, 04/02/04 15,000 14,950 1.11%, 04/07/04 15,000 14,955 1.12%, 04/14/04 15,000 14,952 1.15%, 05/19/04 10,000 9,956 1.38%, 08/20/04 10,000 9,912 1.39%, 10/15/04 15,000 14,836 FEDERAL FARM CREDIT BANK 1.25%, 02/13/04 20,000 19,970 FEDERAL HOME LOAN BANK 1.05%, 01/05/04 65,000 64,992 1.06%, 01/14/04 4,678 4,676 1.13%, 01/16/04 15,700 15,693 1.06%, 01/23/04 39,500 39,475 1.08%, 03/17/04 25,000 24,943 1.09%, 03/17/04 23,000 22,947 FREDDIE MAC 1.06%, 01/06/04 61,500 61,491 1.07%, 01/08/04 12,298 12,295 1.06%, 01/13/04 20,000 19,993 1.06%, 01/14/04 75,660 75,631 1.07%, 01/15/04 11,600 11,595 1.08%, 01/15/04 20,000 19,992 1.08%, 01/22/04 31,000 30,980 1.08%, 01/29/04 50,000 49,958 1.09%, 02/04/04 15,000 14,985 1.08%, 02/05/04 35,000 34,963 1.09%, 02/12/04 5,183 5,176 1.09%, 02/19/04 25,800 25,761 1.11%, 03/01/04 15,000 14,972 1.09%, 03/05/04 16,600 16,568 1.10%, 03/18/04 15,469 15,433 1.27%, 03/25/04 15,000 14,956 1.30%, 03/25/04 23,000 22,931 1.11%, 04/01/04 97,898 97,626 1.11%, 04/15/04 6,273 6,253 1.15%, 05/20/04 2,500 2,489 1.41%, 11/04/04 10,000 9,881 --------- 1,179,510
See financial notes. 21 SCHWAB GOVERNMENT MONEY FUND PORTFOLIO HOLDINGS continued
ISSUER FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) COUPON NOTES 15.3% -------------------------------------------------------------------------------- FANNIE MAE 5.13%, 02/13/04 68,100 68,416 3.63%, 04/15/04 20,000 20,130 6.50%, 08/15/04 38,905 40,124 1.30%, 08/30/04 10,000 10,000 3.50%, 09/15/04 10,000 10,145 1.50%, 09/24/04 15,000 15,000 1.43%, 11/15/04 15,000 15,000 1.55%, 11/17/04 20,000 20,000 FEDERAL HOME LOAN BANK 5.38%, 01/05/04 14,010 14,016 3.75%, 02/13/04 15,000 15,046 3.75%, 04/15/04 34,115 34,358 4.88%, 04/16/04 16,405 16,582 3.38%, 05/14/04 30,580 30,824 3.63%, 10/15/04 10,500 10,680 1.46%, 11/17/04 15,000 15,000 FREDDIE MAC 3.25%, 01/15/04 15,000 15,010 5.25%, 02/15/04 20,000 20,099 3.75%, 04/15/04 20,000 20,139 6.25%, 07/15/04 10,000 10,270 1.50%, 11/16/04 20,000 20,000 1.65%, 12/30/04 15,000 15,000 ------- 435,839 VARIABLE-RATE OBLIGATION 2.3% of Net Assets FREDDIE MAC 1.11%, 01/07/04 64,125 64,131
MATURITY AMOUNT SECURITY ($ x 1,000) OTHER INVESTMENTS 42.4% of Net Assets REPURCHASE AGREEMENTS 42.4% -------------------------------------------------------------------------------- BEAR STEARNS & CO., INC. Tri-Party Repurchase Agreement Collateralized by U.S. Government Securities with a value of $308,046 1.02%, issued 12/31/03, due 01/02/04 97,005 97,000 1.05%, issued 12/17/03, due 01/07/04 140,086 140,000 1.06%, issued 12/08/03, due 01/07/04 65,057 65,000 CREDIT SUISSE FIRST BOSTON L.L.C. Tri-Party Repurchase Agreement Collateralized by U.S. Government Securities with a value of $538,887 1.02%, issued 12/31/03, due 01/02/04 98,310 98,304 1.05%, issued 12/11/03, due 01/07/04 150,118 150,000 1.05%, issued 12/12/03, due 01/07/04 20,016 20,000 1.05%, issued 12/16/03, due 01/07/04 80,051 80,000 1.05%, issued 12/22/03, due 01/07/04 90,042 90,000 1.06%, issued 12/29/03, due 01/07/04 90,024 90,000 GOLDMAN SACHS & CO. Tri-Party Repurchase Agreement Collateralized by U.S. Government Securities with a value of $98,940 1.02%, issued 12/31/03, due 01/02/04 97,005 97,000 UBS FINANCIAL SERVICES, INC. Tri-Party Repurchase Agreement Collateralized by U.S. Government Securities with a value of $280,509 1.04%, issued 12/01/03, due 01/05/04 75,076 75,000 1.05%, issued 12/10/03, due 01/07/04 30,025 30,000 1.05%, issued 12/15/03, due 01/07/04 100,067 100,000 1.05%, issued 12/18/03, due 01/07/04 70,041 70,000 --------- 1,202,304
END OF INVESTMENTS. For totals, please see the first page of holdings for this fund. 22 See financial notes. SCHWAB GOVERNMENT MONEY FUND Statement of ASSETS AND LIABILITIES As of December 31, 2003. All numbers x 1,000 except NAV. ASSETS -------------------------------------------------------------------------------- Investments, at value $1,679,480 a Repurchase agreements, at value 1,202,304 a Interest receivable 5,806 Prepaid expenses + 71 ------------- TOTAL ASSETS 2,887,661 LIABILITIES -------------------------------------------------------------------------------- Payables: Dividends to shareholders 24 Investments bought 49,865 Investment adviser and administrator fees 22 Transfer agent and shareholder service fees 34 Accrued expenses + 187 ------------- TOTAL LIABILITIES 50,132 NET ASSETS -------------------------------------------------------------------------------- TOTAL ASSETS 2,887,661 TOTAL LIABILITIES - 50,132 ------------- NET ASSETS $2,837,529 NET ASSETS BY SOURCE Capital received from investors 2,838,250 Net realized capital losses (721) NET ASSET VALUE (NAV) SHARES NET ASSETS / OUTSTANDING = NAV $2,837,529 2,838,641 $1.00
Unless stated, all numbers x 1,000. a The amortized cost for the fund's securities was $2,881,784 FEDERAL TAX DATA ---------------------------------------------------------- COST BASIS OF PORTFOLIO $2,881,784 UNUSED CAPITAL LOSSES: Expires 12/31 of: Loss amount: 2004 $162 2005 226 2006 119 2007 184 2008 13 2010 1 2011 + 16 ------------ $721 RECLASSIFICATIONS: Net realized capital losses $161 Reclassified as: Capital received from investors ($161)
See financial notes. 23 SCHWAB GOVERNMENT MONEY FUND Statement of OPERATIONS For January 1, 2003 through December 31, 2003. All numbers x 1,000. INVESTMENT INCOME -------------------------------------------------------------------------------- Interest $38,000 NET REALIZED GAINS AND LOSSES -------------------------------------------------------------------------------- Net realized losses on investments sold (16) EXPENSES -------------------------------------------------------------------------------- Investment adviser and administrator fees 11,059 a Transfer agent and shareholder service fees 13,834 b Trustees' fees 42 c Custodian and portfolio accounting fees 245 Professional fees 30 Registration fees 190 Shareholder reports 164 Other expenses + 25 ----------- Total expenses 25,589 Expense reduction - 2,533 d ----------- NET EXPENSES 23,056 INCREASE IN NET ASSETS FROM OPERATIONS -------------------------------------------------------------------------------- TOTAL INVESTMENT INCOME 38,000 NET EXPENSES - 23,056 ----------- NET INVESTMENT INCOME 14,944 NET REALIZED LOSSES + (16) ----------- INCREASE IN NET ASSETS FROM OPERATIONS $14,928
Unless stated, all numbers x 1,000. a Calculated on a graduated basis as a percentage of average daily net assets: 0.38% of the first $1 billion, 0.35% over $1 billion, 0.32% over $10 billion, 0.30% over $20 billion and 0.27% over $40 billion. b Calculated as a percentage of average daily net assets: for transfer agent services, 0.25% of the fund's assets; for shareholder services, 0.20% of the fund's assets. These fees are paid to Charles Schwab & Co. c For the fund's independent trustees only. d This reduction was made by the investment adviser (CSIM). It reflects a guarantee by CSIM and the transfer agent and shareholder service agent (Schwab) to limit the annual operating expenses of this fund through at least April 30, 2004 to 0.75% of average daily net assets. This limit doesn't include interest, taxes and certain non-routine expenses. 24 See financial notes. SCHWAB GOVERNMENT MONEY FUND Statements of CHANGES IN NET ASSETS For the current and prior report periods. All numbers x 1,000.
OPERATIONS -------------------------------------------------------------------------------- 1/1/03 -12/31/03 1/1/02 - 12/31/02 Net investment income $14,944 $38,140 Net realized losses + (16) (1) ------------------------------------ INCREASE IN NET ASSETS FROM OPERATIONS 14,928 38,139 DISTRIBUTIONS PAID -------------------------------------------------------------------------------- Dividends from net investment income 14,944 38,140 a TRANSACTIONS IN FUND SHARES b -------------------------------------------------------------------------------- Shares sold 8,476,017 7,912,017 Shares reinvested 14,704 37,703 Shares redeemed + (8,744,747) (7,911,680) ------------------------------------ NET TRANSACTIONS IN FUND SHARES (254,026) 38,040 NET ASSETS -------------------------------------------------------------------------------- Beginning of period 3,091,571 3,053,532 Total increase or decrease + (254,042) 38,039 c ------------------------------------ END OF PERIOD $2,837,529 $3,091,571
Unless stated, all numbers x 1,000. a The tax-basis components of distributions are: CURRENT YEAR Ordinary income $14,944 Long-term capital gains $-- PRIOR YEAR Ordinary income $38,140 Long-term capital gains $--
b Because all transactions in this section took place at $1.00 per share, figures for share quantities are the same as for dollars. c Represents the changes in net assets from operations plus the changes in value of transactions in fund shares, minus distributions paid. See financial notes. 25 Schwab U.S. Treasury Money Fund Financial Statements FINANCIAL HIGHLIGHTS
1/1/03- 1/1/02- 1/1/01- 1/1/00- 1/1/99- 12/31/03 12/31/02 12/31/01 12/31/00 12/31/99 ------------------------------------------------------------------------------------------------------------------------------------ PER-SHARE DATA ($) ------------------------------------------------------------------------------------------------------------------------------------ Net asset value at beginning of period 1.00 1.00 1.00 1.00 1.00 --------------------------------------------------------------------------------------- Income from investment operations: Net investment income 0.00 1 0.01 0.04 0.05 0.04 Less distributions: Dividends from net investment income (0.00) 1 (0.01) (0.04) (0.05) (0.04) --------------------------------------------------------------------------------------- Net asset value at end of period 1.00 1.00 1.00 1.00 1.00 --------------------------------------------------------------------------------------- Total return (%) 0.49 1.15 3.61 5.40 4.25 RATIOS/SUPPLEMENTAL DATA (%) ------------------------------------------------------------------------------------------------------------------------------------ Ratios to average net assets: Net operating expenses 0.65 0.65 0.65 0.66 2 0.65 Gross operating expenses 0.82 0.82 0.84 0.85 0.86 Net investment income 0.49 1.15 3.44 5.27 4.18 Net assets, end of period ($ x 1,000,000) 4,046 4,323 4,042 2,750 2,592
1 Per-share amount was less than $0.01. 2 The ratio of net operating expenses would have been 0.65% if certain non-routine expenses (proxy fees) had not been included. 26 See financial notes. SCHWAB U.S. TREASURY MONEY FUND PORTFOLIO HOLDINGS as of December 31, 2003 This section shows all the securities in the fund's portfolio and their market value, as of the report date. For fixed-rate obligations, the rate shown is the effective yield at the time of purchase, except U.S. Treasury notes, for which the rate shown is the interest rate (the rate established when the obligation was issued). For variable-rate obligations, the rate shown is the rate as of the report date. For variable-rate obligations with scheduled maturities greater than 397 days, the maturity shown is the later of the next interest rate change date or demand date. For variable-rate obligations with scheduled maturities less than 397 days, the maturity shown is the earlier of the next interest rate change date or demand date.
COST VALUE HOLDINGS BY CATEGORY ($x1,000) ($x1,000) -------------------------------------------------------------------------------- 99.3% U.S. GOVERNMENT SECURITIES 4,015,588 4,015,588 -------------------------------------------------------------------------------- 99.3% TOTAL INVESTMENTS 4,015,588 4,015,588 0.7% OTHER ASSETS AND LIABILITIES 30,222 -------------------------------------------------------------------------------- 100.0% TOTAL NET ASSETS 4,045,810
ISSUER FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) -------------------------------------------------------------------------- U.S. GOVERNMENT SECURITIES 99.3% of Net Assets TREASURY BILLS 29.9% -------------------------------------------------------------------------- U.S. TREASURY BILLS 0.89%, 01/02/04 1,250 1,250 0.92%, 01/02/04 1,785 1,785 0.93%, 01/02/04 30,935 30,934 0.98%, 01/02/04 13,075 13,075 0.93%, 01/15/04 205,175 205,101 0.94%, 01/15/04 51,720 51,701 0.95%, 01/15/04 150,000 149,945 0.97%, 01/15/04 4,590 4,588 0.98%, 01/15/04 2,060 2,059 0.99%, 01/15/04 37,105 37,090 1.02%, 01/15/04 30,000 29,988 0.84%, 02/12/04 21,450 21,429 0.92%, 02/19/04 10,330 10,317 0.99%, 02/19/04 22,540 22,510 0.93%, 02/26/04 60,000 59,913 1.05%, 02/26/04 50,000 49,919 0.85%, 03/18/04 129,160 128,925 0.99%, 03/18/04 15,310 15,278 1.00%, 03/18/04 1,335 1,332 0.89%, 04/01/04 10,870 10,846 0.96%, 04/01/04 3,265 3,257 0.97%, 04/01/04 2,270 2,265 0.98%, 04/01/04 9,790 9,766 0.99%, 04/01/04 16,420 16,379 0.99%, 04/15/04 330,000 329,052 ----------- 1,208,704 TREASURY NOTES 69.4% -------------------------------------------------------------------------- U.S. TREASURY NOTES 3.00%, 01/31/04 461,045 461,787 5.88%, 02/15/04 305,000 306,790 3.00%, 02/29/04 576,305 578,153 3.63%, 03/31/04 574,315 578,004 3.38%, 04/30/04 312,720 315,135 7.25%, 05/15/04 190,000 194,380 12.38%, 05/15/04 140,000 145,864 3.25%, 05/31/04 164,440 165,917 2.13%, 08/31/04 51,330 51,625 5.88%, 11/15/04 8,885 9,229 ----------- 2,806,884
END OF INVESTMENTS. For totals, please see the first page of holdings for this fund. See financial notes. 27 SCHWAB U.S. TREASURY MONEY FUND Statement of ASSETS AND LIABILITIES As of December 31, 2003. All numbers x 1,000 except NAV. ASSETS ------------------------------------------------------------------------------- Investments, at value $4,015,588 a Cash 1 Interest receivable 30,405 Prepaid expenses + 109 ------------ TOTAL ASSETS 4,046,103 LIABILITIES ------------------------------------------------------------------------------- Payables: Dividends to shareholders 39 Investment adviser and administrator fees 31 Transfer agent and shareholder service fees 50 Accrued expenses + 173 ------------ TOTAL LIABILITIES 293 NET ASSETS ------------------------------------------------------------------------------- TOTAL ASSETS 4,046,103 TOTAL LIABILITIES - 293 ------------ NET ASSETS $4,045,810 NET ASSETS BY SOURCE Capital received from investors 4,046,682 Net realized capital losses (872) NET ASSET VALUE (NAV) SHARES NET ASSETS / OUTSTANDING = NAV $4,045,810 4,046,746 $1.00
Unless stated, all numbers x 1,000. a The amortized cost for the fund's securities was $4,015,588. FEDERAL TAX DATA ----------------------------------------- COST BASIS OF PORTFOLIO $4,015,588 UNUSED CAPITAL LOSSES: Expires 12/31 of: Loss amount: 2005 $62 2006 89 2007 580 2010 66 2011 + 75 ------------ $872
28 See financial notes. SCHWAB U.S. TREASURY MONEY FUND Statement of OPERATIONS For January 1, 2003 through December 31, 2003. All numbers x 1,000. INVESTMENT INCOME ------------------------------------------------------------------------------ Interest $47,177 NET REALIZED GAINS AND LOSSES ------------------------------------------------------------------------------ Net realized losses on investments sold (56) EXPENSES ------------------------------------------------------------------------------ Investment adviser and administrator fees 14,778 a Transfer agent and shareholder service fees 18,614 b Trustees' fees 44 c Custodian and portfolio accounting fees 311 Professional fees 32 Registration fees 139 Shareholder reports 112 Other expenses + 35 ------------ Total expenses 34,065 Expense reduction - 7,178 d ------------ NET EXPENSES 26,887 INCREASE IN NET ASSETS FROM OPERATIONS ------------------------------------------------------------------------------ TOTAL INVESTMENT INCOME 47,177 NET EXPENSES - 26,887 ------------ NET INVESTMENT INCOME 20,290 NET REALIZED LOSSES + (56) ------------ INCREASE IN NET ASSETS FROM OPERATIONS $20,234
Unless stated, all numbers x 1,000. a Calculated on a graduated basis as a percentage of average daily net assets: 0.38% of the first $1 billion, 0.35% over $1 billion, 0.32% over $10 billion, 0.30% over $20 billion and 0.27% over $40 billion. b Calculated as a percentage of average daily net assets: for transfer agent services, 0.25% of the fund's assets; for shareholder services, 0.20% of the fund's assets. These fees are paid to Charles Schwab & Co. c For the fund's independent trustees only. d This reduction was made by the investment adviser (CSIM). It reflects a guarantee by CSIM and the transfer agent and shareholder service agent (Schwab) to limit the annual operating expenses of this fund through at least April 30, 2004 to 0.65% of average daily net assets. This limit doesn't include interest, taxes and certain non-routine expenses. See financial notes. 29 SCHWAB U.S. TREASURY MONEY FUND Statements of CHANGES IN NET ASSETS For the current and prior report periods. All numbers x 1,000.
OPERATIONS ------------------------------------------------------------------------------- 1/1/03-12/31/03 1/1/02-12/31/02 Net investment income $20,290 $45,709 Net realized losses + (56) (72) --------------------------------- INCREASE IN NET ASSETS FROM OPERATIONS 20,234 45,637 DISTRIBUTIONS PAID ------------------------------------------------------------------------------- Dividends from net investment income 20,290 45,709 a TRANSACTIONS IN FUND SHARES b ------------------------------------------------------------------------------- Shares sold 10,404,314 10,640,600 Shares reinvested 20,037 45,056 Shares redeemed + (10,701,867) (10,404,554) --------------------------------- NET TRANSACTIONS IN FUND SHARES (277,516) 281,102 NET ASSETS ------------------------------------------------------------------------------- Beginning of period 4,323,382 4,042,352 Total increase or decrease + (277,572) 281,030 c --------------------------------- END OF PERIOD $4,045,810 $4,323,382
Unless stated, all numbers x 1,000. a The tax-basis components of distributions are: CURRENT YEAR Ordinary income $20,290 Long-term capital gains $-- PRIOR YEAR Ordinary income $45,709 Long-term capital gains $--
b Because all transactions in this section took place at $1.00 per share, figures for share quantities are the same as for dollars. c Represents the changes in net assets from operations plus the changes in value of transactions in fund shares, minus distributions paid. 30 See financial notes. SCHWAB VALUE ADVANTAGE MONEY FUND Financial Statements FINANCIAL HIGHLIGHTS
1/1/03- 1/1/02- 1/1/01- 1/1/00- 1/1/99- INVESTOR SHARES 12/31/03 12/31/02 12/31/01 12/31/00 12/31/99 ------------------------------------------------------------------------------------------------------------------------------------ PER-SHARE DATA ($) ------------------------------------------------------------------------------------------------------------------------------------ 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 0.02 0.04 0.06 0.05 ------------------------------------------------------------------------------------- Less distributions: Dividends from net investment income (0.01) (0.02) (0.04) (0.06) (0.05) ------------------------------------------------------------------------------------- Net asset value at end of period 1.00 1.00 1.00 1.00 1.00 ------------------------------------------------------------------------------------- Total return (%) 0.80 1.55 4.05 6.22 5.01 RATIOS/SUPPLEMENTAL DATA (%) ------------------------------------------------------------------------------------------------------------------------------------ Ratios to average net assets: Net operating expenses 0.45 0.45 0.43 0.41 1 0.40 Gross operating expenses 0.55 0.54 0.56 0.60 0.61 Net investment income 0.81 1.55 3.92 6.07 4.91 Net assets, end of period ($ x 1,000,000) 28,860 38,728 44,247 36,319 27,265
2/28/03 2- SELECT SHARES(R) 12/31/03 ------------------------------------------------------------------------------------------------------------------------------------ PER-SHARE DATA ($) ------------------------------------------------------------------------------------------------------------------------------------ Net asset value at beginning of period 1.00 ------------------------------------------------------------------------------------- Income from investment operations: Net investment income 0.01 ------------------------------------------------------------------------------------- Less distributions: Dividends from net investment income (0.01) ------------------------------------------------------------------------------------- Net asset value at end of period 1.00 ------------------------------------------------------------------------------------- Total return (%) 0.72 3 RATIOS/SUPPLEMENTAL DATA (%) ------------------------------------------------------------------------------------------------------------------------------------ Ratios to average net assets: Net operating expenses 0.35 4 Gross operating expenses 0.55 4 Net investment income 0.83 4 Net assets, end of period ($ x 1,000,000) 1,013
1 The ratio of net operating expenses would have been 0.40% if certain non-routine expenses (proxy fees) had not been included. 2 Commencement of operations. 3 Not annualized. 4 Annualized. See financial notes. 31 SCHWAB VALUE ADVANTAGE MONEY FUND(R)
1/1/03- 7/1/02 1- INSTITUTIONAL SHARES 12/31/03 12/31/02 ------------------------------------------------------------------------------------------------------------------------------------ PER-SHARE DATA ($) ------------------------------------------------------------------------------------------------------------------------------------ Net asset value at beginning of period 1.00 1.00 ------------------------------------------------------------------------------------- Income from investment operations: Net investment income 0.01 0.01 ------------------------------------------------------------------------------------- Less distributions: Dividends from net investment income (0.01) (0.01) ------------------------------------------------------------------------------------- Net asset value at end of period 1.00 1.00 ------------------------------------------------------------------------------------- Total return (%) 1.01 0.81 2 RATIOS/SUPPLEMENTAL DATA (%) ------------------------------------------------------------------------------------------------------------------------------------ Ratios to average net assets: Net operating expenses 0.24 0.24 3 Gross operating expenses 0.55 0.55 3 Net investment income 1.00 1.57 3 Net assets, end of period ($ x 1,000,000) 720 521
1 Commencement of operations. 2 Not annualized. 3 Annualized. 32 See financial notes. SCHWAB VALUE ADVANTAGE MONEY FUND(R) PORTFOLIO HOLDINGS as of December 31, 2003 This section shows all the securities in the fund's portfolio and their market value, as of the report date. We use the symbols below to designate certain characteristics: * Asset-backed security + Credit-enhanced security o Illiquid restricted security For fixed-rate obligations, the rate shown is the effective yield at the time of purchase, except for U.S. government agency coupon notes and U.S. Treasury notes, for which the rate shown is the interest rate (the rate established when the obligation was issued). For variable-rate obligations, the rate shown is the rate as of the report date. For variable-rate obligations with scheduled maturities greater than 397 days, the maturity shown is the later of the next interest rate change date or demand date. For variable-rate obligations with scheduled maturities less than 397 days, the maturity shown is the earlier of the next interest rate change date or demand date. For variable-rate obligations without demand features, the maturity shown is the next interest rate change date.
COST VALUE HOLDINGS BY CATEGORY ($x1,000) ($x1,000) -------------------------------------------------------------------------------- 85.6% FIXED-RATE OBLIGATIONS 26,210,020 26,210,020 2.8% U.S. GOVERNMENT SECURITIES 849,265 849,265 6.4% VARIABLE-RATE OBLIGATIONS 1,962,608 1,962,608 5.1% OTHER INVESTMENTS 1,555,455 1,555,455 -------------------------------------------------------------------------------- 99.9% TOTAL INVESTMENTS 30,577,348 30,577,348 0.1% OTHER ASSETS AND LIABILITIES 16,470 -------------------------------------------------------------------------------- 100.0% TOTAL NET ASSETS 30,593,818
ISSUER FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) FIXED-RATE OBLIGATIONS 85.6% of Net Assets COMMERCIAL PAPER & OTHER CORPORATE OBLIGATIONS 51.5% -------------------------------------------------------------------------- AB SPINTAB 1.11%, 02/06/04 38,000 37,958 1.09%, 02/10/04 8,000 7,990 1.10%, 03/03/04 15,000 14,972 1.11%, 04/08/04 15,000 14,955 ALLIANCE & LEICESTER, PLC, SECTION 4(2) / 144A 1.09%, 01/14/04 30,000 29,988 * AMSTEL FUNDING CORP., SECTION 4(2) / 144A 1.09%, 02/12/04 130,000 129,835 1.11%, 02/17/04 25,000 24,964 *+ AMSTERDAM FUNDING CORP., SECTION 4(2) / 144A 1.09%, 01/23/04 25,000 24,983 1.09%, 02/03/04 25,000 24,975 1.09%, 02/13/04 15,000 14,980 + ANZ (DELAWARE), INC. 1.08%, 01/09/04 110,000 109,974 *+ APRECO, INC., SECTION 4(2) / 144A 1.11%, 01/15/04 10,000 9,996 *+ AQUINAS FUNDING, L.L.C., SECTION 4(2) / 144A 1.11%, 02/12/04 50,000 49,936 1.11%, 02/20/04 13,000 12,980 1.10%, 02/23/04 25,000 24,960 1.13%, 04/08/04 30,000 29,909 * ASAP FUNDING, LTD., SECTION 4(2) / 144A 1.12%, 01/29/04 25,000 24,978 1.12%, 01/30/04 46,000 45,959 1.12%, 02/20/04 105,000 104,836 1.12%, 02/27/04 50,000 49,911 *+ ASSET PORTFOLIO FUNDING CORP., SECTION 4(2) / 144A 1.09%, 01/09/04 29,000 28,993 1.13%, 03/19/04 38,000 37,908 *+ ASSET SECURITIZATION COOPERATIVE CORP., SECTION 4(2) / 144A 1.10%, 01/16/04 50,000 49,977 1.10%, 01/20/04 79,000 78,954 1.10%, 01/21/04 25,000 24,985 * ATLANTIC ASSET SECURITIZATION, SECTION 4(2) / 144A 1.10%, 01/20/04 10,099 10,093
See financial notes. 33 SCHWAB VALUE ADVANTAGE MONEY FUND(R) PORTFOLIO HOLDINGS continued
ISSUER FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) *+ ATLANTIS ONE FUNDING CORP., SECTION 4(2) / 144A 1.10%, 01/08/04 12,000 11,997 1.11%, 01/13/04 40,000 39,985 1.09%, 02/18/04 9,750 9,736 1.11%, 03/11/04 6,000 5,987 1.13%, 03/12/04 79,000 78,826 1.11%, 03/17/04 70,000 69,837 1.13%, 03/17/04 10,169 10,145 1.12%, 03/18/04 103,000 102,755 1.10%, 04/13/04 45,000 44,858 1.10%, 04/14/04 190,000 189,396 BANK OF AMERICA CORP. 1.14%, 05/06/04 370,000 368,537 * BARTON CAPITAL CORP., SECTION 4(2) / 144A 1.09%, 01/06/04 50,000 49,992 1.10%, 01/20/04 35,000 34,980 BEAR STEARNS COMPANIES, INC. 1.10%, 01/29/04 49,000 48,958 1.09%, 02/09/04 58,000 57,932 *+ BETA FINANCE, INC., SECTION 3C7 / 144A 1.10%, 01/23/04 19,000 18,987 1.10%, 01/28/04 68,000 67,944 1.10%, 02/24/04 19,000 18,969 1.13%, 03/10/04 43,000 42,908 1.12%, 03/18/04 37,000 36,912 1.13%, 03/22/04 14,000 13,965 1.13%, 04/15/04 6,000 5,980 1.16%, 04/15/04 25,000 24,916 * CC (USA), INC., SECTION 3C7 / 144A 1.10%, 01/28/04 20,000 19,984 1.09%, 01/30/04 68,000 67,940 1.10%, 02/09/04 22,500 22,473 1.10%, 02/11/04 10,000 9,987 1.11%, 02/13/04 25,000 24,967 1.11%, 02/17/04 27,500 27,460 1.12%, 03/15/04 55,000 54,873 1.12%, 03/18/04 53,000 52,874 1.13%, 04/13/04 7,000 6,978 1.24%, 08/09/04 75,000 75,000 CDC COMMERCIAL PAPER CORP., SECTION 4(2) / 144A 1.09%, 03/16/04 77,000 76,825 CITICORP 1.09%, 02/11/04 15,000 14,981 CITIGROUP GLOBAL MARKETS HOLDINGS, INC. 1.09%, 01/05/04 75,000 74,991 1.08%, 01/08/04 90,000 89,981 1.09%, 01/26/04 75,000 74,943 *+ CLIPPER RECEIVABLES CORP., SECTION 4(2) / 144A 1.11%, 01/05/04 85,000 84,990 1.10%, 01/06/04 48,731 48,724 1.11%, 01/07/04 50,000 49,991 1.10%, 01/08/04 50,000 49,989 1.10%, 01/12/04 100,000 99,966 1.10%, 01/20/04 100,000 99,942 * CONCORD MINUTEMEN CAPITAL CO., L.L.C., SECTION 3C7 / 144A Series A 1.11%, 01/09/04 46,000 45,989 1.12%, 01/12/04 15,000 14,995 1.11%, 01/21/04 41,000 40,975 1.12%, 01/21/04 31,000 30,981 1.11%, 01/23/04 110,000 109,925 1.11%, 02/05/04 40,151 40,108 1.17%, 02/06/04 30,000 29,965 1.11%, 02/10/04 50,000 49,938 1.11%, 02/17/04 16,000 15,977 *+ CRC FUNDING, L.L.C., SECTION 4(2) / 144A 1.09%, 01/09/04 14,000 13,997 1.09%, 01/14/04 58,000 57,977 * DAKOTA CP NOTES OF CITIBANK CREDIT CARD ISSUANCE TRUST, SECTION 4(2) / 144A 1.09%, 01/09/04 25,000 24,994 1.09%, 01/13/04 24,000 23,991 1.10%, 01/13/04 75,000 74,973 1.10%, 01/14/04 48,000 47,981 1.10%, 01/21/04 150,000 149,908 1.10%, 01/22/04 200,000 199,872 1.11%, 01/22/04 45,000 44,971 1.10%, 01/23/04 24,000 23,984 1.11%, 01/23/04 16,000 15,989 1.09%, 01/30/04 19,000 18,983 1.09%, 02/05/04 10,000 9,989 + DANSKE CORP. 1.11%, 03/08/04 50,000 49,897 * DELAWARE FUNDING CORP., SECTION 4(2) / 144A 1.09%, 01/13/04 31,127 31,116 1.08%, 01/23/04 25,099 25,082 1.09%, 01/23/04 25,031 25,014
34 See financial notes. SCHWAB VALUE ADVANTAGE MONEY FUND(R)
ISSUER FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) DEN NORSKE BANK ASA 1.11%, 03/02/04 70,000 69,868 1.11%, 03/04/04 23,000 22,955 1.12%, 05/19/04 35,000 34,849 DEPFA PLC, SECTION 4(2) / 144A 1.10%, 03/10/04 11,000 10,977 + DEXIA DELAWARE, L.L.C. 1.08%, 02/25/04 110,000 109,819 1.08%, 02/26/04 167,000 166,719 * DORADA FINANCE, INC., SECTION 3C7 / 144A 1.09%, 01/12/04 42,500 42,486 1.10%, 01/28/04 17,000 16,986 1.11%, 01/28/04 42,500 42,465 1.13%, 04/13/04 17,000 16,946 *+ EDISON ASSET SECURITIZATION CORP., L.L.C., SECTION 4(2) / 144A 1.10%, 02/19/04 33,000 32,951 * EIFFEL FUNDING, L.L.C., SECTION 4(2) / 144A 1.10%, 01/12/04 50,000 49,983 1.10%, 01/23/04 59,000 58,960 1.11%, 01/23/04 65,000 64,956 *+ FAIRWAY FINANCE CORP., SECTION 4(2) / 144A 1.06%, 01/08/04 5,000 4,999 1.10%, 01/15/04 50,000 49,979 1.10%, 01/29/04 18,171 18,155 1.10%, 02/17/04 11,987 11,970 1.12%, 03/08/04 14,453 14,423 1.12%, 03/12/04 125,000 124,726 1.12%, 03/25/04 35,000 34,909 1.15%, 04/15/04 17,657 17,598 *+ FALCON ASSET SECURITIZATION CORP., SECTION 4(2) / 144A 1.04%, 01/12/04 18,000 17,994 1.09%, 01/12/04 91,920 91,889 1.09%, 01/16/04 128,835 128,777 1.09%, 01/27/04 27,000 26,979 1.09%, 01/30/04 30,000 29,974 FORENINGSSPARBANKEN AB (SWEDBANK) 1.08%, 02/05/04 80,000 79,916 1.08%, 02/12/04 17,000 16,979 + FORTIS FUNDING, L.L.C., SECTION 4(2) / 144A 1.10%, 01/15/04 33,000 32,986 1.10%, 01/16/04 27,886 27,873 *+ GALAXY FUNDING, INC., SECTION 4(2) / 144A 1.11%, 01/16/04 30,000 29,986 1.10%, 01/26/04 93,000 92,929 1.10%, 01/28/04 103,000 102,915 1.11%, 02/11/04 22,000 21,972 1.11%, 02/12/04 50,000 49,935 1.11%, 02/17/04 7,750 7,739 1.10%, 02/18/04 30,000 29,956 1.10%, 02/20/04 130,000 129,801 1.10%, 02/24/04 20,000 19,967 1.10%, 02/25/04 40,000 39,933 + GE CAPITAL INTERNATIONAL FUNDING, INC., SECTION 4(2) / 144A 1.10%, 01/27/04 28,000 27,978 1.11%, 03/03/04 71,000 70,864 1.11%, 03/05/04 202,000 201,601 GE FINANCIAL ASSURANCE HOLDINGS, INC., SECTION 4(2) / 144A 1.10%, 01/22/04 68,090 68,046 1.09%, 02/10/04 20,000 19,976 GENERAL ELECTRIC CAPITAL CORP. 1.10%, 01/27/04 185,000 184,853 1.10%, 02/19/04 238,000 237,644 1.11%, 03/03/04 235,000 234,551 1.11%, 03/04/04 87,000 86,831 GENERAL ELECTRIC CAPITAL SERVICES 1.09%, 02/09/04 44,000 43,948 1.10%, 02/11/04 25,000 24,969 1.10%, 03/05/04 255,000 254,501 GENERAL ELECTRIC CO. 1.13%, 02/12/04 232,000 231,694 *+ GIRO FUNDING U.S. CORP., SECTION 4(2) / 144A 1.10%, 01/15/04 143,824 143,762 1.11%, 01/16/04 38,000 37,982 1.10%, 01/22/04 20,000 19,987 1.10%, 01/27/04 20,000 19,984 1.12%, 02/03/04 30,000 29,969 1.10%, 02/06/04 55,000 54,940 1.11%, 02/09/04 25,000 24,970 1.10%, 03/12/04 45,000 44,902 1.13%, 03/24/04 24,000 23,938 *+ GRAMPIAN FUNDING, LTD., SECTION 4(2) / 144A 1.10%, 02/19/04 49,000 48,927 1.11%, 02/25/04 31,000 30,947 * GREYHAWK FUNDING, L.L.C., SECTION 4(2) / 144A 1.10%, 01/28/04 42,000 41,965 1.11%, 02/05/04 17,000 16,982 1.10%, 02/06/04 25,000 24,973
See financial notes. 35 SCHWAB VALUE ADVANTAGE MONEY FUND(R) PORTFOLIO HOLDINGS continued
ISSUER FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) 1.11%, 02/06/04 154,000 153,829 1.10%, 02/13/04 49,800 49,735 *+ HATTERAS FUNDING CORP., SECTION 4(2) / 144A 1.11%, 01/15/04 24,018 24,008 1.11%, 01/22/04 15,000 14,990 1.11%, 01/23/04 13,305 13,296 1.10%, 01/26/04 27,000 26,979 1.10%, 01/28/04 23,269 23,250 1.10%, 02/20/04 15,533 15,509 1.10%, 02/23/04 35,014 34,957 + HBOS TREASURY SERVICES, PLC 1.10%, 02/04/04 55,000 54,943 1.10%, 02/19/04 59,000 58,912 1.11%, 02/23/04 33,000 32,946 1.11%, 03/03/04 64,000 63,878 1.13%, 03/11/04 15,000 14,967 1.10%, 03/23/04 50,000 49,875 HSBC U.S.A., INC. 1.09%, 01/27/04 146,000 145,885 *+ INDEPENDENCE FUNDING, L.L.C., SECTION 4(2) / 144A 1.09%, 01/12/04 16,000 15,995 1.10%, 01/15/04 128,000 127,946 IRISH LIFE & PERMANENT, PLC, SECTION 4(2) / 144A 1.10%, 03/10/04 38,000 37,920 1.09%, 04/13/04 22,000 21,931 J.P. MORGAN CHASE & CO. 1.10%, 02/10/04 107,000 106,869 1.10%, 02/12/04 70,000 69,910 *+ JUPITER SECURITIZATION CORP., SECTION 4(2) / 144A 1.09%, 01/12/04 114,000 113,962 1.12%, 01/20/04 23,000 22,986 + KBC FINANCIAL PRODUCTS INTERNATIONAL, LTD., SECTION 4(2) / 144A 1.10%, 01/14/04 98,000 97,961 *+ KITTY HAWK FUNDING CORP., SECTION 4(2) / 144A 1.08%, 01/12/04 100,000 99,967 1.09%, 01/15/04 33,899 33,885 1.10%, 02/10/04 13,577 13,560 1.11%, 02/10/04 48,342 48,282 1.10%, 02/17/04 16,566 16,542 1.10%, 03/16/04 20,419 20,372 1.13%, 03/22/04 38,309 38,212 + LANDESBANK SCHLESWIG-HOLSTEIN GIROZENTRALE, SECTION 4(2) / 144A 1.29%, 03/09/04 90,000 89,784 1.33%, 03/26/04 30,000 29,907 1.35%, 04/15/04 35,000 34,864 * LEXINGTON PARKER CAPITAL CO., L.L.C., SECTION 4(2) / 144A 1.16%, 01/08/04 30,000 29,993 1.11%, 01/20/04 11,503 11,496 1.11%, 01/23/04 46,000 45,969 1.10%, 02/05/04 70,545 70,470 1.11%, 02/10/04 40,000 39,951 1.11%, 02/11/04 45,000 44,943 1.13%, 03/05/04 18,480 18,443 1.15%, 04/16/04 35,715 35,595 *+ LINKS FINANCE, L.L.C., SECTION 3C7 / 144A 1.10%, 02/19/04 49,000 48,927 1.10%, 03/08/04 59,000 58,879 * MANE FUNDING CORP., SECTION 4(2) / 144A 1.11%, 01/22/04 50,086 50,054 1.11%, 01/27/04 8,505 8,498 1.12%, 01/27/04 10,000 9,992 1.10%, 02/04/04 100,000 99,896 1.10%, 02/05/04 36,534 36,495 1.11%, 02/09/04 35,000 34,958 *+ MONT BLANC CAPITAL CORP., SECTION 4(2) / 144A 1.10%, 01/06/04 65,000 64,990 1.10%, 01/07/04 13,000 12,998 1.10%, 01/15/04 16,000 15,993 1.09%, 01/20/04 40,000 39,977 1.11%, 01/28/04 22,999 22,980 1.10%, 02/12/04 80,000 79,897 MORGAN STANLEY 1.08%, 01/05/04 185,000 184,978 1.08%, 01/13/04 100,000 99,964 1.08%, 01/20/04 195,000 194,889 1.08%, 01/26/04 76,000 75,943 1.08%, 02/10/04 175,000 174,790 NATIONWIDE BUILDING SOCIETY 1.10%, 01/28/04 45,000 44,963 * NEWCASTLE CERTIFICATES PROGRAM, SECTION 4(2) / 144A Series 2000A 1.11%, 01/16/04 31,000 30,986 1.10%, 01/21/04 107,000 106,935 1.11%, 01/23/04 36,000 35,976
36 See financial notes. SCHWAB VALUE ADVANTAGE MONEY FUND(R)
ISSUER FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) + NORDEA NORTH AMERICA, INC. 1.08%, 01/22/04 53,554 53,520 1.09%, 02/12/04 98,000 97,875 1.10%, 03/25/04 20,000 19,949 *+ OLD LINE FUNDING CORP., SECTION 4(2) / 144A 1.09%, 01/08/04 30,033 30,027 1.09%, 01/09/04 17,884 17,880 1.09%, 01/15/04 27,938 27,926 1.10%, 01/16/04 62,829 62,800 1.10%, 01/20/04 12,462 12,455 1.09%, 01/23/04 9,591 9,585 1.09%, 01/28/04 14,094 14,083 1.10%, 01/28/04 18,115 18,100 * PARK GRANADA, L.L.C., SECTION 4(2) / 144A 1.11%, 01/06/04 50,000 49,992 1.12%, 01/07/04 100,397 100,378 1.12%, 01/08/04 14,000 13,997 1.12%, 01/09/04 106,100 106,074 1.12%, 02/12/04 12,000 11,984 1.13%, 03/09/04 39,000 38,917 *+ PREFERRED RECEIVABLES FUNDING CORP., SECTION 4(2) / 144A 1.09%, 01/14/04 134,533 134,480 1.11%, 02/11/04 61,000 60,923 * RECEIVABLES CAPITAL CORP., SECTION 4(2) / 144A 1.09%, 01/05/04 20,000 19,998 1.08%, 01/16/04 225,780 225,678 1.09%, 01/20/04 80,000 79,954 1.10%, 01/20/04 25,023 25,008 1.10%, 03/01/04 40,000 39,927 + SAN PAOLO IMI U.S. FINANCIAL CO. 1.09%, 03/18/04 115,000 114,732 * SCALDIS CAPITAL LTD., SECTION 4(2) / 144A 1.10%, 01/14/04 6,056 6,054 1.11%, 01/21/04 95,000 94,941 1.10%, 02/26/04 45,000 44,923 1.14%, 03/24/04 23,000 22,940 *+ SIGMA FINANCE, INC., SECTION 3C7 / 144A 1.11%, 01/28/04 10,000 9,992 1.11%, 02/13/04 112,000 111,852 1.14%, 02/13/04 16,000 15,978 1.10%, 02/19/04 10,000 9,985 1.13%, 02/26/04 24,000 23,958 1.13%, 03/11/04 15,000 14,967 1.14%, 03/11/04 20,000 19,956 1.13%, 03/23/04 54,000 53,862 1.14%, 03/23/04 39,000 38,900 + STADSHYPOTEK DELAWARE, INC., SECTION 4(2) / 144A 1.11%, 03/03/04 35,000 34,933 *+ THUNDER BAY FUNDING, INC., SECTION 4(2) / 144A 1.10%, 01/09/04 42,893 42,883 1.10%, 01/15/04 38,699 38,683 1.10%, 01/20/04 20,000 19,988 1.09%, 01/23/04 27,079 27,061 1.09%, 01/26/04 13,766 13,756 1.09%, 02/05/04 19,081 19,061 1.09%, 02/13/04 23,000 22,970 *+ TICONDEROGA FUNDING, L.L.C., SECTION 4(2) / 144A 1.10%, 01/13/04 33,000 32,988 1.09%, 01/14/04 53,000 52,979 1.10%, 01/16/04 15,686 15,679 1.09%, 01/23/04 95,533 95,469 1.10%, 01/23/04 43,209 43,180 1.10%, 01/28/04 20,500 20,483 *+ TRIPLE-A ONE FUNDING CORP., SECTION 4(2) / 144A 1.08%, 01/08/04 13,411 13,408 1.10%, 01/09/04 16,939 16,935 1.09%, 01/13/04 25,078 25,069 1.08%, 01/14/04 20,000 19,992 *+ TULIP FUNDING CORP., SECTION 4(2) / 144A 1.09%, 01/09/04 56,598 56,584 1.10%, 01/14/04 100,000 99,960 1.10%, 01/23/04 20,000 19,987 1.10%, 01/26/04 185,000 184,859 + WESTPAC CAPITAL CORP. 1.08%, 02/04/04 123,000 122,875 + WESTPAC TRUST SECURITIES NZ 1.10%, 03/05/04 12,700 12,675 1.11%, 03/12/04 106,000 105,769 *+ WINDMILL FUNDING CORP., SECTION 4(2) / 144A 1.09%, 01/23/04 25,000 24,983 1.09%, 02/03/04 99,000 98,901 1.10%, 02/04/04 17,000 16,982 ----------- 15,771,018
See financial notes. 37 SCHWAB VALUE ADVANTAGE MONEY FUND(R) PORTFOLIO HOLDINGS continued
ISSUER FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) CERTIFICATES OF DEPOSIT 30.3% -------------------------------------------------------------------------- + ABBEY NATIONAL TREASURY SERVICES, PLC 1.09%, 01/06/04 126,000 126,000 ALLIANCE & LEICESTER, PLC 1.10%, 02/20/04 30,000 30,000 1.10%, 03/10/04 50,000 50,000 1.11%, 03/19/04 19,000 19,000 AMERICAN EXPRESS CENTURION BANK 1.08%, 01/30/04 141,000 141,000 BANK OF NOVA SCOTIA 1.10%, 03/24/04 194,000 194,000 BARCLAYS BANK, PLC 1.10%, 01/09/04 125,000 125,000 1.10%, 01/13/04 127,000 127,000 1.10%, 03/22/04 200,000 200,000 1.10%, 04/19/04 25,000 25,019 1.35%, 08/26/04 49,000 48,997 BAYERISCHE LANDESBANK GIROZENTRALE 1.25%, 03/15/04 100,000 99,997 1.30%, 03/26/04 100,000 99,998 BNP PARIBAS 1.08%, 02/04/04 50,000 50,000 1.10%, 02/06/04 214,000 214,000 1.11%, 03/10/04 200,000 200,000 1.11%, 04/02/04 196,000 196,000 1.10%, 04/19/04 140,000 140,000 CANADIAN IMPERIAL BANK OF COMMERCE 1.09%, 01/15/04 45,000 45,000 1.08%, 02/06/04 19,000 19,000 1.10%, 02/17/04 232,000 232,000 CITIBANK, N.A. 1.10%, 01/22/04 160,000 160,000 1.09%, 02/04/04 20,000 20,000 1.10%, 02/13/04 70,000 70,000 1.10%, 03/04/04 155,000 155,000 COMMONWEALTH BANK OF AUSTRALIA 1.10%, 01/13/04 71,000 71,000 CREDIT AGRICOLE INDOSUEZ 1.08%, 02/02/04 161,000 161,000 CREDIT LYONNAIS S.A. 1.12%, 03/08/04 28,000 27,999 1.11%, 04/01/04 140,000 140,004 CREDIT SUISSE FIRST BOSTON 1.09%, 03/16/04 283,000 283,000 DANSKE BANK A/S 1.09%, 02/23/04 299,000 299,002 DEPFA BANK, PLC 1.13%, 03/22/04 68,000 68,000 DEUTSCHE BANK, AG 1.40%, 09/03/04 110,000 110,000 1.41%, 10/15/04 285,000 285,000 1.42%, 10/27/04 27,000 27,000 1.50%, 11/19/04 100,000 100,000 FIRST TENNESSEE BANK, N.A. 1.10%, 02/10/04 55,000 55,000 FORENINGSSPARBANKEN, AB (SWEDBANK) 1.05%, 01/12/04 50,000 50,000 FORTIS BANK 1.08%, 02/03/04 100,000 100,000 1.10%, 02/13/04 98,000 98,000 + HBOS TREASURY SERVICES, PLC 1.11%, 01/20/04 48,000 48,000 1.09%, 02/06/04 17,000 17,000 1.11%, 03/12/04 24,000 24,000 1.11%, 04/19/04 27,000 27,000 HSBC BANK, PLC 1.09%, 02/11/04 78,000 78,000 1.09%, 02/17/04 21,000 21,000 1.09%, 02/19/04 55,000 55,000 HSH NORDBANK, AG 1.08%, 02/09/04 34,000 34,000 1.42%, 09/07/04 92,000 91,994 1.42%, 10/29/04 18,000 17,999 ING BANK, NV 1.05%, 01/14/04 65,000 65,000 1.10%, 02/20/04 102,000 102,000 1.10%, 03/24/04 150,000 150,000 KBC BANK NV 1.10%, 01/20/04 35,000 35,000 LANDESBANK BADEN WURTTEMBERG 1.10%, 01/30/04 143,000 143,000 1.10%, 02/26/04 90,000 90,000 1.10%, 03/19/04 20,000 20,000 LANDESBANK HESSEN-THURINGEN GIROZENTRALE 1.30%, 02/03/04 36,000 36,003 1.35%, 08/26/04 80,000 79,995 1.51%, 11/19/04 62,000 62,000
38 See financial notes. SCHWAB VALUE ADVANTAGE MONEY FUND(R)
ISSUER FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) LLOYDS TSB BANK, PLC 1.10%, 04/02/04 39,000 39,000 NATIONWIDE BUILDING SOCIETY 1.10%, 02/04/04 85,000 85,000 NORDDEUTSCHE LANDESBANK GIROZENTRALE 1.25%, 04/05/04 50,000 50,000 1.30%, 04/13/04 55,000 54,999 1.40%, 08/05/04 33,000 33,001 1.38%, 09/03/04 5,000 5,000 ROYAL BANK OF SCOTLAND, PLC 1.08%, 01/14/04 89,000 89,000 1.08%, 02/06/04 97,000 97,000 1.10%, 03/15/04 92,000 92,002 1.35%, 08/26/04 100,000 99,993 1.40%, 09/07/04 85,000 84,994 SAN PAOLO IMI SPA 1.03%, 01/07/04 90,000 90,000 1.10%, 01/30/04 80,000 80,000 1.11%, 02/17/04 78,000 78,002 1.10%, 02/18/04 77,000 77,000 1.12%, 02/18/04 15,000 15,000 SOCIETE GENERALE 1.11%, 03/16/04 100,000 100,000 1.10%, 03/22/04 292,000 292,000 1.10%, 03/23/04 200,000 200,000 SOUTHTRUST BANK 1.08%, 02/11/04 82,000 82,000 SVENSKA HANDELSBANKEN AB 1.08%, 01/08/04 82,000 82,000 1.08%, 01/21/04 92,000 92,000 1.11%, 02/03/04 48,000 48,000 TORONTO DOMINION BANK 1.11%, 04/02/04 75,000 75,000 UBS, AG 1.10%, 03/17/04 71,000 71,019 1.32%, 08/04/04 25,000 25,000 1.38%, 08/26/04 45,000 44,997 1.42%, 11/12/04 200,000 199,991 UNICREDITO ITALIANO SPA 1.10%, 01/15/04 165,000 165,000 1.12%, 01/21/04 45,000 45,000 1.12%, 01/26/04 107,000 107,000 1.09%, 01/29/04 20,000 20,000 1.11%, 03/19/04 240,000 240,000 1.12%, 03/24/04 30,000 30,000 WASHINGTON MUTUAL BANK 1.11%, 02/09/04 57,000 57,000 WELLS FARGO BANK N.A. 1.08%, 01/07/04 25,000 25,000 WESTLB AG 1.26%, 04/02/04 105,000 105,000 1.34%, 04/14/04 99,000 99,000 1.35%, 04/23/04 100,000 99,997 WILMINGTON TRUST CO. 1.13%, 02/27/04 25,000 25,000 ----------- 9,259,002 BANK NOTES 2.4% -------------------------------------------------------------------------- BANK OF AMERICA, N.A. 1.10%, 03/15/04 208,000 208,000 1.08%, 04/13/04 190,000 190,000 1.08%, 04/15/04 175,000 175,000 LASALLE NATIONAL BANK, N.A. 1.10%, 02/09/04 17,000 17,000 STANDARD FEDERAL BANK, N.A. 1.10%, 01/30/04 89,000 89,000 1.10%, 02/13/04 73,000 73,000 ----------- 752,000 PROMISSORY NOTES 1.4% -------------------------------------------------------------------------- o THE GOLDMAN SACHS GROUP, INC. 1.14%, 01/28/04 60,000 60,000 1.22%, 02/05/04 77,000 77,000 1.21%, 02/20/04 12,000 12,000 1.19%, 03/23/04 279,000 279,000 ----------- 428,000 U.S. GOVERNMENT SECURITIES 2.8% of Net Assets DISCOUNT NOTES 2.4% -------------------------------------------------------------------------- FANNIE MAE 1.10%, 03/17/04 381,000 380,115 FREDDIE MAC 1.10%, 03/15/04 185,000 184,582 1.00%, 03/25/04 50,000 49,885 1.10%, 04/05/04 110,000 109,683 ----------- 724,265
See financial notes. 39 SCHWAB VALUE ADVANTAGE MONEY FUND(R) PORTFOLIO HOLDINGS continued
ISSUER FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) COUPON NOTES 0.4% -------------------------------------------------------------------------- FANNIE MAE 1.55%, 11/17/04 25,000 25,000 1.65%, 12/30/04 100,000 100,000 ----------- 125,000 VARIABLE-RATE OBLIGATIONS 6.4% of Net Assets + ACCESS LOANS FOR LEARNING STUDENT LOAN CORP. Taxable Student Loan RB Series II-A-6 1.17%, 01/07/04 27,800 27,800 + ACTIVE LIVING OF GLENVIEW, L.L.C., 144A Senior Floating Rate Note Series 1998 1.22%, 01/07/04 10,900 10,900 BANK OF NEW YORK CO., INC., 144A 1.13%, 01/27/04 50,000 50,000 CANADIAN IMPERIAL BANK OF COMMERCE 1.18%, 01/15/04 100,000 100,000 CHASE MANHATTAN BANK (USA) 1.10%, 01/30/04 100,000 100,000 + CITY OF NEW BRITAIN, CONNECTICUT GO Pension Bonds, Series 98 1.27%, 01/07/04 40,000 40,000 + COLUMBUS, GEORGIA DEVELOPMENT AUTHORITY Taxable RB (Jay Leasing, Inc. Project) Series 1997 1.25%, 01/07/04 6,165 6,165 * DORADA FINANCE, INC., 144A 1.10%, 01/26/04 30,000 29,999 1.14%, 01/26/04 65,000 65,017 o GE LIFE & ANNUITY ASSURANCE CO., 144A 1.22%, 01/01/04 50,000 50,000 GENERAL ELECTRIC CAPITAL CORP. 1.23%, 01/20/04 225,000 225,000 LLOYDS TSB BANK, PLC 1.06%, 01/13/04 48,000 47,981 + LOANSTAR ASSETS PARTNERS II, L.P., 144A 1.17%, 01/07/04 25,000 25,000 + MERLOT TRUST Series 2000B, SECTION 4(2) / 144A 1.25%, 01/07/04 30,000 30,000 o METROPOLITAN LIFE INSURANCE CO., 144A 1.22%, 01/30/04 50,000 50,000 1.24%, 02/02/04 100,000 100,000 o MONUMENTAL LIFE INSURANCE CO., 144A 1.25%, 01/01/04 100,000 100,000 1.29%, 01/01/04 10,000 10,000 1.27%, 01/02/04 100,000 100,000 + NEW JERSEY ECONOMIC DEVELOPMENT AUTHORITY Taxable Economic Development Bonds (MSNBC CNBC Project) Series 1997A, 144A 1.15%, 01/02/04 23,500 23,500 ROYAL BANK OF CANADA 1.15%, 01/12/04 40,000 40,000 ROYAL BANK OF SCOTLAND, PLC 1.09%, 01/14/04 85,000 84,979 + SANTA ROSA, CALIFORNIA Wastewater Taxable RB Series 2002A 1.25%, 01/07/04 23,700 23,700 * SIGMA FINANCE, INC., SECTION 3C7 / 144A 1.14%, 01/05/04 35,000 34,998 1.14%, 01/12/04 20,000 20,000 1.13%, 01/14/04 50,000 49,997 1.12%, 01/15/04 100,000 99,999 1.12%, 01/16/04 50,000 49,999 1.12%, 01/20/04 60,000 59,995 1.10%, 01/21/04 55,000 54,995 1.09%, 01/27/04 50,000 49,993 1.12%, 11/22/04 50,000 49,996 + TOWN OF ISLIP, NEW YORK IDA, 144A Taxable Adjustable Rate IDRB (Nussdorf Associates/Quality King Distributions, Inc. Facility) Series 1992 1.32%, 01/07/04 2,595 2,595 o TRAVELERS INSURANCE CO., 144A 1.22%, 01/30/04 25,000 25,000 1.23%, 02/01/04 25,000 25,000 1.25%, 02/21/04 100,000 100,000 ----------- 1,962,608
40 See financial notes. SCHWAB VALUE ADVANTAGE MONEY FUND(R)
MATURITY AMOUNT VALUE SECURITY ($ x 1,000) ($ x 1,000) OTHER INVESTMENTS 5.1% of Net Assets REPURCHASE AGREEMENTS 5.1% -------------------------------------------------------------------------- CREDIT SUISSE FIRST BOSTON L.L.C. Tri-Party Repurchase Agreement Collateralized by U.S. Government Securities with a value of $56,566 1.02% issued 12/31/03, due 01/02/04 55,458 55,455 GOLDMAN SACHS & CO. Tri-Party Repurchase Agreement Collateralized by U.S. Government Securities with a value of $1,020,000 1.02% issued 12/31/03, due 01/02/04 1,000,057 1,000,000 UBS FINANCIAL SERVICES, INC. Tri-Party Repurchase Agreement Collateralized by U.S. Government Securities with a value of $510,001 1.02% issued 12/31/03, due 01/02/04 500,028 500,000 ----------- 1,555,455
END OF INVESTMENTS. For totals, please see the first page of holdings for this fund. AT DECEMBER 31, 2003, PORTFOLIO HOLDINGS INCLUDED ILLIQUID RESTRICTED SECURITIES AS FOLLOWS:
ISSUER COST/ RATE, ACQUISITION DATE, FACE AMOUNT VALUE MATURITY DATE ($ x 1,000) ($ x 1,000) GE LIFE & ANNUITY ASSURANCE CO., 144A 1.22%, 10/01/03, 01/01/04 50,000 50,000 METROPOLITAN LIFE INSURANCE CO., 144A 1.22%, 12/28/00, 01/30/04 50,000 50,000 1.24%, 02/03/03, 02/02/04 100,000 100,000 ----------- 150,000 MONUMENTAL LIFE INSURANCE CO., 144A 1.25%, 10/09/96, 01/01/04 100,000 100,000 1.27%, 01/12/00, 01/02/04 100,000 100,000 1.29%, 06/09/93, 01/01/04 10,000 10,000 ----------- 210,000 THE GOLDMAN SACHS GROUP, INC. 1.14%, 07/28/03, 01/28/04 60,000 60,000 1.22%, 08/05/03, 02/04/04 77,000 77,000 1.21%, 08/19/03, 02/20/04 12,000 12,000 1.19%, 09/24/03, 03/23/04 235,000 235,000 1.19%, 09/25/03, 03/23/04 44,000 44,000 ----------- 428,000 TRAVELERS INSURANCE CO., 144A 1.22%, 01/31/03, 01/30/04 25,000 25,000 1.23%, 10/31/03, 02/01/04 25,000 25,000 1.25%, 08/21/03, 02/21/04 100,000 100,000 ----------- 150,000
See financial notes. 41 SCHWAB VALUE ADVANTAGE MONEY FUND(R) Statement of ASSETS AND LIABILITIES As of December 31, 2003. All numbers x 1,000 except NAV. ASSETS -------------------------------------------------------------------------------- Investments, at value $30,577,348 a Receivables: Fund shares sold 133,735 Interest 29,665 Prepaid expenses + 485 --------------- TOTAL ASSETS 30,741,233 LIABILITIES -------------------------------------------------------------------------------- Payables: Fund shares redeemed 143,504 Dividends to shareholders 2,687 Investment adviser and administrator fees 176 Transfer agent and shareholder service fees 173 Accrued expenses + 875 --------------- TOTAL LIABILITIES 147,415 NET ASSETS -------------------------------------------------------------------------------- TOTAL ASSETS 30,741,233 TOTAL LIABILITIES - 147,415 --------------- NET ASSETS $30,593,818 NET ASSETS BY SOURCE Capital received from investors 30,593,921 Net realized capital losses (103) NET ASSET VALUE (NAV) BY SHARE CLASS SHARES SHARE CLASS NET ASSETS / OUTSTANDING = NAV Investor Shares $28,860,444 28,860,656 $1.00 Select Shares(R) $1,012,891 1,012,891 $1.00 Institutional Shares $720,483 720,483 $1.00
Unless stated, all numbers x 1,000. a The amortized cost of the fund's securities was $30,577,348. Includes illiquid restricted securities worth $988,000, or 3.23% of the fund's total net assets. Also, includes other restricted but deemed liquid securities comprised of 144A, section 4(2) and 3c7 securities, worth $11,810,729 or 38.60% of the fund's total net assets. FEDERAL TAX DATA -------------------------------------------- COST BASIS OF PORTFOLIO $30,577,348 CAPITAL LOSSES UTILIZED $1 UNUSED CAPITAL LOSSES: Expires 12/31 of: Loss amount: 2005 $103
42 See financial notes. SCHWAB VALUE ADVANTAGE MONEY FUND(R) Statement of OPERATIONS For January 1, 2003 through December 31, 2003. All numbers x 1,000. INVESTMENT INCOME -------------------------------------------------------------------------------- Interest $458,365 NET REALIZED GAINS AND LOSSES -------------------------------------------------------------------------------- Net realized gains 1 EXPENSES -------------------------------------------------------------------------------- Investment adviser and administrator fees 116,421 a Transfer agent and shareholder service fees: Investor Shares 76,724 b Select Shares(R) 1,686 b Institutional Shares 1,613 b Trustees' fees 178 c Custodian and portfolio accounting fees 3,157 Professional fees 130 Registration fees 953 Shareholder reports 382 Other expenses + 352 ------------- Total expenses 201,596 Expense reduction - 40,218 d ------------- NET EXPENSES 161,378 INCREASE IN NET ASSETS FROM OPERATIONS -------------------------------------------------------------------------------- TOTAL INVESTMENT INCOME 458,365 NET EXPENSES - 161,378 ------------- NET INVESTMENT INCOME 296,987 NET REALIZED GAINS + 1 ------------- INCREASE IN NET ASSETS FROM OPERATIONS $296,988
Unless stated, all numbers x 1,000. a Calculated on a graduated basis as a percentage of average daily net assets: 0.38% of the first $1 billion, 0.35% over $1 billion, 0.32% over $10 billion, 0.30% over $20 billion and 0.27% over $40 billion. b Calculated as a percentage of average daily net assets: for transfer agent services, 0.05% of the fund's assets; for shareholder services 0.17% of the fund's assets. These fees are paid by Charles Schwab & Co. c For the fund's independent trustees only. d Includes $37,912 from the investment adviser (CSIM) and $2,306 from the transfer agent and shareholder service agent (Schwab). These reductions reflect a guarantee by CSIM and Schwab to limit the annual operating expenses of this fund through at least April 30, 2004, as follows:
% OF AVERAGE SHARE CLASS DAILY NET ASSETS ------------------------------------------------ Investor Shares 0.45 Select Shares(R) 0.35 Institutional Shares 0.24
This limit doesn't include interest, taxes and certain non-routine expenses. See financial notes. 43 SCHWAB VALUE ADVANTAGE MONEY FUND(R) Statements of CHANGES IN NET ASSETS For the current and prior report periods. All numbers x 1,000. OPERATIONS -------------------------------------------------------------------------------- 1/1/03-12/31/03 1/1/02-12/31/02 Net investment income $296,987 $650,804 Net realized gains 1 -- ----------------------------------- INCREASE IN NET ASSETS FROM OPERATIONS 296,988 650,804 DISTRIBUTIONS PAID -------------------------------------------------------------------------------- Dividends from net investment income Investor Shares 283,303 648,150 Select Shares(R) 6,346 -- Institutional Shares + 7,338 2,654 ----------------------------------- TOTAL DIVIDENDS FROM NET INVESTMENT INCOME 296,987 650,804 a TRANSACTIONS IN FUND SHARES b -------------------------------------------------------------------------------- SHARES SOLD Investor Shares 22,006,388 34,345,512 Select Shares(R) 2,532,939 -- Institutional Shares + 2,319,828 1,058,467 ----------------------------------- TOTAL SHARES SOLD 26,859,155 35,403,979 SHARES REINVESTED Investor Shares 263,067 608,484 Select Shares(R) 5,541 -- Institutional Shares + 6,123 1,551 ----------------------------------- TOTAL SHARES REINVESTED 274,731 610,035 SHARES REDEEMED Investor Shares (32,136,966) (40,473,102) Select Shares(R) (1,525,589) -- Institutional Shares + (2,126,860) (538,626) ----------------------------------- TOTAL SHARES REDEEMED (35,789,415) (41,011,728) NET TRANSACTIONS IN FUND SHARES (8,655,529) (4,997,714) c NET ASSETS -------------------------------------------------------------------------------- Beginning of period 39,249,346 44,247,060 Total decrease + (8,655,528) (4,997,714) d ----------------------------------- END OF PERIOD $30,593,818 $39,249,346
Unless stated, all numbers x 1,000. a The tax-basis components of distributions are: CURRENT YEAR Ordinary income $296,987 Long-term capital gains $-- PRIOR YEAR Ordinary income $650,804 Long-term capital gains $--
b Because all transactions in this section took place at $1.00 per share, figures for share quantities are the same as for dollars. The fund started offering Select Shares(R) on February 28, 2003. c Represents shares sold plus shares reinvested, minus shares redeemed. d Represents the changes in net assets from operations plus the changes in value of transactions in fund shares, minus distributions paid. 44 See financial notes. SCHWAB MONEY FUNDS FINANCIAL NOTES BUSINESS STRUCTURE OF THE FUNDS EACH OF THE FUNDS DISCUSSED IN THIS REPORT IS A SERIES OF THE CHARLES SCHWAB FAMILY OF FUNDS(TM), A NO-LOAD, OPEN-END MANAGEMENT INVESTMENT COMPANY. The company is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended. The sidebar shows the funds in this report and their trust. THE SCHWAB VALUE ADVANTAGE MONEY FUND(R) OFFERS THREE SHARE CLASSES: Investor Shares, Select Shares(R) and Institutional Shares. Shares of each class represent interests in the same portfolio, but each class has different expenses and investment minimums. The Schwab Money Market, Government Money and U.S. Treasury Money Funds each offers one share class. Shares are bought and sold at $1.00 per share. Each share has a par value of 1/1,000 of a cent, and the trust may issue as many shares as necessary. FUND OPERATIONS Most of the funds' investments are described in the fund-by-fund sections earlier in this report. However, there are certain other investments and policies that may affect a fund's financials. The most significant of these are described below. Other policies concerning the funds' business operations also are described here. THE FUNDS DECLARE DIVIDENDS EVERY DAY THEY ARE OPEN FOR BUSINESS. These dividends, which are equal to a fund's net investment income for that day, are paid out to shareholders once a month. The funds may make distributions from any net realized capital gains once a year. THE FUNDS MAY BUY SECURITIES ON A DELAYED-DELIVERY BASIS. In these transactions, a fund agrees to buy a security for a stated price, with settlement generally occurring within two weeks. If the security's value falls before settlement occurs, a fund could end up paying more for the security than its market value at the time of settlement. The funds have set aside sufficient securities as collateral for those securities bought on a delayed-delivery basis. THE FUNDS MAY ENTER INTO REPURCHASE AGREEMENTS. In a repurchase agreement, a fund buys a security from another party (usually a financial institution) with the agreement that it be sold back in the future. The date, price and other conditions are all specified when the agreement is created. Any repurchase agreements with due dates later than seven days from issue dates may be subject to seven day put features for liquidity purposes. The funds' repurchase agreements will be fully collateralized by U.S. government securities. All collateral is held by the funds' custodian (or, with tri-party agreements, the agent's bank) and is monitored daily to ensure that its market value is at least equal to the repurchase price under the agreement. THE TRUST AND ITS FUNDS This list shows all of the funds included in The Charles Schwab Family of Funds. The funds discussed in this report are highlighted. THE CHARLES SCHWAB FAMILY OF FUNDS organized October 20, 1989 Schwab Money Market Fund Schwab Government Money Fund Schwab U.S. Treasury Money Fund Schwab Value Advantage Money Fund(R) Schwab Municipal Money Fund Schwab California Municipal Money Fund Schwab New York Municipal Money Fund Schwab New Jersey Municipal Money Fund Schwab Pennsylvania Municipal Money Fund Schwab Florida Municipal Money Fund Schwab Massachusetts Municipal Money Fund Schwab Institutional Advantage Money Fund(R) Schwab Retirement Money Fund(R) Schwab Government Cash Reserves 45 SCHWAB MONEY FUNDS THE FUNDS PAY FEES TO AFFILIATES OF THE INVESTMENT ADVISER FOR VARIOUS SERVICES. Through their trust, the funds have agreements with Charles Schwab Investment Management, Inc. (CSIM) to provide investment advisory and administrative services and with Charles Schwab & Co., Inc. (Schwab) to provide transfer agent and shareholder services. Although these agreements specify certain fees for these services, CSIM and Schwab have made additional agreements with the funds that may limit the total expenses charged. The rates and limitations for these fees vary from fund to fund, and are described in each fund's Statement of Operations. THE FUNDS MAY ENGAGE IN CERTAIN TRANSACTIONS INVOLVING AFFILIATES. The funds may make direct transactions with certain other SchwabFunds(R) when practical. When one fund is seeking to sell a security that another is seeking to buy, an interfund transaction can allow both funds to benefit by reducing transaction costs. This practice is limited to funds that share the same investment adviser, trustees and officers. Pursuant to an exemptive order issued by the SEC, the funds may enter into interfund borrowing and lending transactions within the SchwabFunds(R). All loans are for temporary or emergency purposes only. The interest rate charged on the loan is the average of the overnight repurchase agreement rate and the short-term bank loan rate. The interfund lending facility is subject to the oversight and periodic review of the Board of Trustees of the SchwabFunds(R). TRUSTEES MAY INCLUDE PEOPLE WHO ARE OFFICERS AND/OR DIRECTORS OF THE INVESTMENT ADVISER OR SCHWAB. Federal securities law limits the percentage of such "interested persons" who may serve on a trust's board, and the trust was in compliance with these limitations throughout the report period. The trust did not pay any of these persons for their service as trustees, but it did pay non-interested persons (independent trustees), as noted in each fund's Statement of Operations. THE FUNDS MAY BORROW MONEY FROM BANKS AND CUSTODIANS. The funds may obtain temporary bank loans through the trust to which they belong, to use for meeting shareholder redemptions or for extraordinary or emergency purposes. The trusts have custodian overdraft facilities and line of credit arrangements of $150 million and $100 million with PNC Bank, N.A. and Bank of America, N.A., respectively. The funds pay interest on the amounts they borrow at rates that are negotiated periodically. THE FUNDS INTEND TO MEET FEDERAL INCOME AND EXCISE TAX REQUIREMENTS FOR REGULATED INVESTMENT COMPANIES. Accordingly, the funds distribute substantially all of their net investment income and net realized capital gains (if any) to their respective shareholders each year. As long as a fund meets the tax requirements, it is not required to pay federal income tax. UNDER THE FUNDS' ORGANIZATIONAL DOCUMENTS, ITS OFFICERS AND TRUSTEES ARE INDEMNIFIED AGAINST CERTAIN LIABILITY ARISING OUT OF THE PERFORMANCE OF THEIR DUTIES TO THE FUNDS. In addition, in the normal course of business the funds enter into contracts with their vendors and others that provide general indemnifications. The funds' maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the funds. However, based on experience, the funds expect the risk of loss to be remote. ACCOUNTING POLICIES The following are the main policies the funds use in preparing their financial statements. THE FUNDS VALUE THEIR SECURITIES AT AMORTIZED COST, which approximates market value. SECURITY TRANSACTIONS are recorded as of the date the order to buy or sell the security is executed. 46 SCHWAB MONEY FUNDS INTEREST INCOME is recorded as it accrues. If a fund bought a debt security at a discount (that is, for less than its face value) or a premium (more than face value), it amortizes the discount or premium from the current date up to maturity. The fund then increases (in the case of discounts) or reduces (in the case of premiums) the income it records from the security. If the security is callable (meaning that the issuer has the option to pay it off before its maturity date), then the fund amortizes the premium to the security's call date and price, rather than the maturity date and price. REALIZED GAINS AND LOSSES from security transactions are based on the identified costs of the securities involved. EXPENSES that are specific to a fund or a class are charged directly to that fund or class. Expenses that are common to all funds within the trust generally are allocated among the funds in proportion to their average daily net assets. FOR FUNDS OFFERING MULTIPLE SHARE CLASSES, all of the realized and unrealized gains or losses and net investment income, other than class specific expenses, are allocated daily to each class in proportion to its net assets. EACH FUND MAINTAINS ITS OWN ACCOUNT FOR PURPOSES OF HOLDING ASSETS AND ACCOUNTING, and is considered a separate entity for tax purposes. Within its account, each fund also keeps certain assets in segregated accounts, as may be required by securities law. THE ACCOUNTING POLICIES DESCRIBED ABOVE CONFORM WITH ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES OF AMERICA. Notwithstanding this, shareholders should understand that in order to follow these principles, fund management has to make estimates and assumptions that affect the information reported in the financial statements. It's possible that once the results are known, they may turn out to be different from these estimates. 47 REPORT OF INDEPENDENT AUDITORS TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF: Schwab Money Market Fund Schwab Government Money Fund Schwab U.S. Treasury Money Fund Schwab Value Advantage Money Fund(R) In our opinion, the accompanying statements of assets and liabilities, including the Portfolio holdings, 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 Schwab Money Market Fund, Schwab Government Money Fund, Schwab U.S. Treasury Money Fund and Schwab Value Advantage Money Fund (four of the portfolios constituting The Charles Schwab Family of Funds, hereafter referred to as the "Funds") at December 31, 2003, 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 accounting principles generally accepted in the United States of America. These financial statements and the financial highlights (hereafter referred to as "financial statements") are the responsibility of the Funds' 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 auditing standards generally accepted in the United States of America, 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, 2003 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. PRICEWATERHOUSECOOPERS LLP San Francisco, CA February 6, 2004 48 SCHWAB MONEY FUNDS FUND TRUSTEES A fund's Board of Trustees is responsible for protecting the interests of that fund's shareholders. The tables below give information about the people who serve as trustees and officers for the SchwabFunds(R), including the funds covered in this report. Trustees remain in office until they resign, retire or are removed by shareholder vote.1 Under the Investment Company Act of 1940, any officer, director, or employee of Schwab or CSIM is considered an "interested person," meaning that he or she is considered to have a business interest in Schwab or CSIM. These individuals are listed as "interested trustees." The "independent trustees" are individuals who, under the 1940 Act, are not considered to have a business interest in Schwab or CSIM. Each of the SchwabFunds (of which there were 49 as of 12/31/03) belongs to one of these trusts: The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust or Schwab Annuity Portfolios. Currently all these trusts have the same trustees and officers. The address for all trustees and officers is 101 Montgomery Street, San Francisco, CA 94104. You can find more information about the trustees and officers in the Statement of Additional Information, which is available free by calling 1-800-435-4000. INDIVIDUALS WHO ARE INTERESTED TRUSTEES AND OFFICERS OF THE TRUST
TRUST POSITION(S); NAME AND BIRTHDATE TRUSTEE SINCE MAIN OCCUPATIONS AND OTHER DIRECTORSHIPS AND AFFILIATIONS ------------------------------------------------------------------------------------------------------------------------------------ CHARLES R. SCHWAB 2 Chair, Trustee: Chair, Director, The Charles Schwab Corp.; CEO, Director, Schwab Holdings, 7/29/37 Family of Funds, 1989; Inc.; Chair, Director, Charles Schwab & Co., Inc.; Charles Schwab Investments, 1991; Investment Management, Inc.; Chair, Charles Schwab Holdings, Inc. I, Capital Trust, 1993; Schwab International Holdings, Inc.; Director, U.S. Trust Corp., United Annuity Portfolios, 1994. States Trust Co. of New York, The Gap, Inc. (clothing retailer), Siebel Systems (software); Trustee, Stanford University. Until 6/03: Director, Xsign, Inc. (electronic payment systems). Until 5/03: Co-Chair, The Charles Schwab Corporation. Until 5/02: Director, Vodafone AirTouch PLC (telecom). Until 3/02: Director, Audiobase, Inc. (Internet audio solutions). Until 7/01: Director, The Charles Schwab Trust Company. Until 1/99: Director, Schwab Retirement Plan Services, Inc., Mayer & Schweitzer, Inc. (securities brokerage subsidiary of The Charles Schwab Corp.), Performance Technologies, Inc. (technology), TrustMark, Inc.
1 The SchwabFunds retirement policy requires that independent trustees elected after January 1, 2000 retire at age 72 or after twenty years of service as a trustee, whichever comes first. Independent trustees elected prior to January 1, 2000 will retire on the following schedule: Messrs. Holmes and Dorward will retire on December 31, 2007, and Messrs. Stephens and Wilsey will retire on December 31, 2010. 2 In addition to their positions with the investment adviser and the distributor, Ms. Lepore and Messrs. Schwab and Lyons, as well as some of Mr. Lyons's immediate family members, also own stock of The Charles Schwab Corporation. 49 SCHWAB MONEY FUNDS INDIVIDUALS WHO ARE INTERESTED TRUSTEES BUT NOT OFFICERS OF THE TRUST
NAME AND BIRTHDATE TRUSTEE SINCE MAIN OCCUPATIONS AND OTHER DIRECTORSHIPS AND AFFILIATIONS ------------------------------------------------------------------------------------------------------------------------------------ DAWN G. LEPORE 1 Trustee: 2003 Vice Chair, EVP, The Charles Schwab Corp.; Until 10/01: CIO, The 3/21/54 (all trusts) Charles Schwab Corporation. Until 1999: EVP, The Charles Schwab Corporation. Director, Wal-Mart Stores, eBay, Inc. ------------------------------------------------------------------------------------------------------------------------------------ JEFFREY M. LYONS 1 Trustee: 2002 EVP, Asset Management Products and Services, Charles Schwab & 2/22/55 (all trusts). Co., Inc. Until 9/01: EVP, Mutual Funds, Charles Schwab & Co., Inc.
INDIVIDUALS WHO ARE OFFICERS OF THE TRUST BUT NOT TRUSTEES
NAME AND BIRTHDATE TRUST OFFICE(S) HELD MAIN OCCUPATIONS AND OTHER DIRECTORSHIPS AND AFFILIATIONS ------------------------------------------------------------------------------------------------------------------------------------ RANDALL W. MERK President, CEO President, CEO, Charles Schwab Investment Management, Inc; 7/25/54 (all trusts). EVP, Charles Schwab & Co., Inc.; Director, Charles Schwab Worldwide Funds PLC, Charles Schwab Asset Management (Ireland) Ltd. Until 9/02: President, CIO, American Century Investment Management; Director, American Century Cos., Inc. Until 6/01: CIO, Fixed Income, American Century Cos., Inc. Until 1997: SVP, Director, Fixed Income and Quantitative Equity Portfolio Management, Twentieth Century Investors, Inc. ------------------------------------------------------------------------------------------------------------------------------------ TAI-CHIN TUNG Treasurer, Principal SVP, CFO, Charles Schwab Investment Management, Inc.; VP, 3/7/51 Financial Officer The Charles Schwab Trust Co.; Director, Charles Schwab Asset (all trusts). Management (Ireland) Ltd., Charles Schwab Worldwide Funds PLC. ------------------------------------------------------------------------------------------------------------------------------------ STEPHEN B. WARD SVP, Chief Investment SVP, Chief Investment Officer, Director, Charles Schwab Investment 4/5/55 Officer Management, Inc.; CIO, The Charles Schwab Trust Co. (all trusts). ------------------------------------------------------------------------------------------------------------------------------------ KOJI E. FELTON Secretary SVP, Chief Counsel, Assistant Corporate Secretary, Charles Schwab 3/13/61 (all trusts). Investment Management, Inc. Until 6/98: Branch Chief in Enforcement, U.S. Securities and Exchange Commission, San Francisco.
1 In addition to their positions with the investment adviser and the distributor, Ms. Lepore and Messrs. Schwab and Lyons, as well as some of Mr. Lyons's immediate family members, also own stock of The Charles Schwab Corporation. 50 SCHWAB MONEY FUNDS INDIVIDUALS WHO ARE INDEPENDENT TRUSTEES
NAME AND BIRTHDATE TRUSTEE SINCE MAIN OCCUPATIONS AND OTHER DIRECTORSHIPS AND AFFILIATIONS ------------------------------------------------------------------------------------------------------------------------------------ MARIANN BYERWALTER 2000 (all trusts). Chair, JDN Corp. Advisory LLC; Trustee, Stanford University, Director, 8/13/60 America First Cos., (venture capital/fund management), Redwood Trust, Inc. (mortgage finance), Stanford Hospitals and Clinics, SRI International (research), PMI Group, Inc. (mortgage insurance), Lucile Packard Children's Hospital. 2001: Special Advisor to the President, Stanford University. Until 2002: Director, LookSmart, Ltd. (Internet infrastructure). Until 2001: VP, Business Affairs, CFO, Stanford University. ------------------------------------------------------------------------------------------------------------------------------------ DONALD F. DORWARD Family of Funds, 1989; CEO, Dorward & Associates (management, marketing and 9/23/31 Investments, 1991; communications consulting). Until 1999: EVP, Managing Director, Capital Trust, 1993; Grey Advertising. Annuity Portfolios, 1994. ------------------------------------------------------------------------------------------------------------------------------------ WILLIAM A. HASLER 2000 (all trusts). Co-CEO, Aphton Corp. (bio-pharmaceuticals). Director, Non-Executive 11/22/41 Chairman, Solectron Corp. (manufacturing), Airlease Ltd. (aircraft leasing), Mission West Properties (commercial real estate), Stratex Networks (telecommunications); Public Governor, Member, executive committee, Pacific Stock & Options Exchange. Director, Digital Microwave Corp. (network equipment). Until 1998: Dean, Haas School of Business, University of California, Berkeley. ------------------------------------------------------------------------------------------------------------------------------------ ROBERT G. HOLMES Family of Funds, 1989; Chair, CEO, Director, Semloh Financial, Inc. (international financial 5/15/31 Investments, 1991; services and investment advice). Capital Trust, 1993; Annuity Portfolios, 1994. ------------------------------------------------------------------------------------------------------------------------------------ GERALD B. SMITH 2000 (all trusts). Chair, CEO, Founder, Smith Graham & Co. (investment advisors); 9/28/50 Director, Pennzoil-Quaker State Co. (oil and gas), Rorento N.V. (investments -- Netherlands), Cooper Industries (electrical products); Member, audit committee, Northern Border Partners, L.P. (energy). ------------------------------------------------------------------------------------------------------------------------------------ DONALD R. STEPHENS Family of Funds, 1989; Managing Partner, D.R. Stephens & Co. (investments). Until 1996: 6/28/38 Investments, 1991; Chair, CEO, North American Trust (real estate investments). Capital Trust, 1993; Annuity Portfolios, 1994. ------------------------------------------------------------------------------------------------------------------------------------ MICHAEL W. WILSEY Family of Funds, 1989; Chair, CEO, Wilsey Bennett, Inc. (transportation, real estate and 8/18/43 Investments, 1991; investments). Capital Trust, 1993; Annuity Portfolios, 1994.
51 SCHWAB MONEY FUNDS GLOSSARY AGENCY DISCOUNT NOTES Notes issued by federal agencies -- known as Government Sponsored Enterprises, or GSEs -- at a discount to their value at maturity. An agency discount note is a short-term investment alternative offering a high degree of credit quality. ALTERNATIVE MINIMUM TAX (AMT) A federal income tax designed to limit the extent to which high-income taxpayers (including individuals, estates, trusts and corporations) can benefit from certain deductions and exemptions. For example, some types of income that are exempt from regular federal income tax are not exempt from the AMT. ASSET-BACKED SECURITY A bond or other debt security that represents ownership in a pool of debt obligations such as credit card debt. BOND A security representing a loan from the investor to the issuer. A bond typically pays interest at a fixed rate (the "coupon rate") until a specified date (the "maturity date"), at which time the issuer returns the money borrowed ("principal" or "face value") to the bondholder. Because of their structure, bonds are sometimes called "fixed income securities" or "debt securities." BOND ANTICIPATION NOTES Obligations sold by a municipality on an interim basis in anticipation of the municipality's issuance of a longer-term bond in the future. CAPITAL GAIN, CAPITAL LOSS The difference between the amount paid for an investment and its value at a later time. If the investment has been sold, the capital gain or loss is considered a realized gain or loss. If the investment is still held, the gain or loss is still "on paper" and is considered unrealized. COMMERCIAL PAPER Promissory notes issued by banks, corporations, state and local governments and other entities to finance short-term credit needs. These securities generally are structured on a discounted basis but sometimes may be interest-bearing notes. Commercial paper, which may be unsecured, is subject to credit risk. CREDIT-ENHANCED SECURITY A security that is backed by the credit of an entity other than the issuer (such as a financial institution). Credit enhancements, which can equal up to 100% of the security's value, are designed to help lower the risk of default on a security and may also make the security more liquid. CREDIT QUALITY The capacity of an issuer to make its interest and principal payments. Federal regulations strictly limit the credit quality of the securities a money market fund can buy. CREDIT RATINGS Debt issuers, including corporations, states and municipalities, may arrange with a recognized independent rating organization, such as Moody's Investor Service, Standard & Poor's and Fitch, Inc., to rate their creditworthiness and/or the creditworthiness of their debt issues. For example, an issuer may obtain a long-term rating within the investment grade rating category, which is, from high to low, AAA, AA, A and BBB for Standard & Poor's and Fitch, and Aaa, Aa, A and Baa for Moody's. CREDIT RISK The risk that a debt issuer may be unable to pay interest or principal to its debtholders. DOLLAR-WEIGHTED AVERAGE MATURITY (DWAM) See weighted average maturity. EFFECTIVE YIELD A measurement of a fund's yield that assumes that all dividends were reinvested in additional shares of the fund. PORTFOLIO TERMS To help reduce the space occupied by the portfolio holdings, we use the following terms. Most of them appear within descriptions of individual securities in municipal funds, and describe features of the issuer or the security. Some of these are more fully defined elsewhere in the Glossary. ACES Adjustable convertible extendable security BAN Bond anticipation note COP Certificate of participation GAN Grant anticipation note GO General obligation HDA Housing Development Authority HFA Housing Finance Agency IDA Industrial Development Authority IDB Industrial Development Board IDRB Industrial Development Revenue Bond M/F Multi-family RAN Revenue anticipation note RB Revenue bond S/F Single-family TAN Tax anticipation note TECP Tax-exempt commercial paper TOB Tender option bond TOBP Tender option bond partnership TRAN Tax and revenue anticipation note VRD Variable-rate demand 52 SCHWAB MONEY FUNDS EXPENSE RATIO The amount that is taken from a mutual fund's assets each year to cover the fund's operating expenses. An expense ratio of 0.50% means that a fund's expenses amount to half of one percent of its average net assets a year. FACE VALUE The value of a bond, note, mortgage or other security as given on the certificate or instrument. Face value is also referred to as par value or nominal value. ILLIQUID SECURITIES A security is generally considered illiquid if it cannot be disposed of promptly (typically within seven days) and in the ordinary course of business at approximately the amount at which a fund has valued the instrument. INTEREST Payments to holders of debt securities as compensation for loaning a security's principal to the issuer. LIQUIDITY-ENHANCED SECURITY A security that when tendered is paid from funds advanced by an entity other than the issuer (such as a large financial institution). Liquidity enhancements are often used on variable-rate securities where the portfolio manager has an option to tender the securities prior to their final maturity. MATURITY Generally, the date a debt security is scheduled to be "retired" and its principal amount returned to the bondholder. MONEY MARKET SECURITIES High-quality, short-term debt securities that may be issued by entities such as the U.S. government, corporations and financial institutions (such as banks). Money market securities include commercial paper, promissory notes, certificates of deposit, banker's acceptances, notes and time deposits. MUNICIPAL SECURITIES Debt securities issued by a state, its counties, municipalities, authorities and other subdivisions, or the territories and possessions of the United States and the District of Columbia, including their subdivisions, agencies and instrumentalities and corporations. These securities may be issued to obtain money for various public purposes, including the construction of a wide range of public facilities such as airports, bridges, highways, housing, hospitals, mass transportation, public utilities, schools, streets, and water and sewer works. NET ASSET VALUE PER SHARE (NAV) The value of one share of a mutual fund. NAV is calculated by taking the fund's total assets, subtracting liabilities, and dividing by the number of shares outstanding. Money funds seek to maintain a steady NAV of $1.00. OUTSTANDING SHARES, SHARES OUTSTANDING When speaking of a company or mutual fund, indicates all shares currently held by investors. RESTRICTED SECURITIES A security that is subject to contractual restrictions on resale and may be sold only to "qualified institutional buyers" under Securities Act Rule 144A. These securities are often purchased in private placement transactions. REVENUE ANTICIPATION NOTES Obligations that are issued in expectation of the receipt of revenue, such as income taxes, property taxes, etc. SECTION 3C7 SECURITIES Section 3c7 of the Investment Company Act of 1940 (the "1940 Act") exempts certain issuers from many regulatory requirements applicable to investment companies under the 1940 Act. An issuer whose outstanding securities are exclusively owned by "qualified purchasers" and who is not making or proposing to make a public offering of the securities may qualify for this exemption. SECTION 4(2)/144A SECURITIES A security exempt from registration under Section 4(2) of the Securities Act of 1933. It may be sold only to qualified institutional buyers under Securities Act Rule 144A. TAXABLE-EQUIVALENT YIELD The yield an investor would need to get from a taxable investment in order to match the yield paid by a given tax-exempt investment, once the effect of all applicable taxes is taken into account. For example, if your tax rate were 25%, a tax-exempt investment paying 4.5% would have a taxable-equivalent yield for you of 6.0% (4.5% / [1 - 0.25%] = 6.0%). TOTAL RETURN The percentage that an investor would have earned or lost on an investment in the fund assuming dividends and distributions were reinvested. TAX ANTICIPATION NOTES Notes that typically are sold to finance the cash flow needs of municipalities in anticipation of the receipt of taxes on a future date. TIER 1, TIER 2 Tier 1 is the highest category of credit quality, Tier 2 the second highest. A security's tier can be established either by an independent rating organization or by a determination of the investment adviser. Money market fund shares and U.S. government securities are automatically considered Tier 1 securities. WEIGHTED AVERAGE MATURITY For mutual funds, the maturity of all the debt securities in its portfolio, calculated as a weighted average. As a rule, the longer a fund's weighted average maturity, the greater its interest rate risk. Money funds are required to maintain a weighted average maturity of no more than 90 days. YIELD The income paid out by an investment, expressed as an annual rate and calculated as a percentage of the investment's market value. 53 NOTES NOTES NOTES CONTACT SCHWAB SchwabFunds(R) offers you a complete family of mutual funds, each one based on a clearly defined investment approach and using disciplined management strategies. Actively managed funds include multi-manager stock funds, a fund that uses long-short strategies, and a range of taxable and tax-free bond funds. Index funds include large-cap, small-cap and international stock funds. The list at right shows all currently available SchwabFunds. Whether you're an experienced investor or just starting out, SchwabFunds can help you achieve your financial goals. Please call 1-800-435-4000 for a prospectus and brochure for any SchwabFund. Please read the prospectus carefully before you invest. This report must be preceded or accompanied by a current prospectus. METHODS FOR PLACING ORDERS The following information outlines how Schwab investors can place orders. If you are investing through a third-party investment provider, methods for placing orders may be different. INTERNET 1 www.schwab.com SCHWAB BY PHONE(TM) 2 Use our automated voice service or speak to a representative. Call 1-800-435-4000, day or night (for TDD service, call 1-800-345-2550). TELEBROKER(R) Automated touch-tone phone service at 1-800-272-4922. MAIL Write to SchwabFunds at: P.O. Box 3812 Englewood, CO 80155-3812 When selling or exchanging shares, be sure to include the signatures of at least one of the persons whose name is on the account. 1 Shares of Sweep Investments(TM) may not be purchased directly over the Internet. 2 Orders placed in person or through a telephone representative may be subject to a service fee payable to Schwab. THE SCHWABFUNDS FAMILY(R) STOCK FUNDS Schwab S&P 500 Fund Schwab 1000 Fund(R) Schwab Small-Cap Index Fund(R) Schwab Total Stock Market Index Fund(R) Schwab International Index Fund(R) Schwab Core Equity Fund(TM) Schwab Dividend Equity Fund(TM) Schwab Small-Cap Equity Fund(TM) Schwab Hedged Equity Fund(TM) Schwab Focus Funds Communications Focus Fund Financial Services Focus Fund Health Care Focus Fund Technology Focus Fund Schwab MarketMasters Funds(TM) Schwab U.S. MarketMasters Fund(TM) Schwab Small-Cap MarketMasters Fund(TM) Schwab International MarketMasters Fund(TM) Schwab Balanced MarketMasters Fund(TM) ASSET ALLOCATION FUNDS Schwab MarketTrack Portfolios(R) Schwab MarketTrack All Equity Portfolio(TM) Schwab MarketTrack Growth Portfolio(TM) Schwab MarketTrack Balanced Portfolio(TM) Schwab MarketTrack Conservative Portfolio(TM) BOND FUNDS Schwab YieldPlus Fund(R) Schwab Short-Term Bond Market Fund(TM) Schwab Total Bond Market Fund(TM) Schwab GNMA Fund(TM) Schwab Short/Intermediate Tax-Free Bond Fund(TM) Schwab Long-Term Tax-Free Bond Fund(TM) Schwab California Short/Intermediate Tax-Free Bond Fund(TM) Schwab California Long-Term Tax-Free Bond Fund(TM) SCHWAB MONEY FUNDS Schwab offers an array of money market funds that seek high current income consistent with safety and liquidity.3 Choose from taxable or tax-advantaged alternatives. Many can be linked to your Schwab account to "sweep" cash balances automatically, subject to availability, when you're between investments. Or, for your larger cash reserves, choose one of our Value Advantage Investments(R). 3 Investments in money market funds are neither insured nor guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency and, although they seek to preserve the value of your investment at $1 per share, it is possible to lose money. [CHARLES SCHWAB LOGO} INVESTMENT ADVISER Charles Schwab Investment Management, Inc. 101 Montgomery Street, San Francisco, CA 94104 DISTRIBUTOR SchwabFunds(R) P.O. Box 3812, Englewood, CO 80155-3812 This report is not authorized for distribution to prospective investors unless preceded or accompanied by a current prospectus. (C)2004 Charles Schwab & Co., Inc. All rights reserved. Member SIPC/NYSE. Printed on recycled paper. REG13857-06 Schwab Government Cash Reserves ANNUAL REPORT December 31, 2003 [CHARLES SCHWAB LOGO] In This Report Schwab Government Cash Reserves Ticker Symbol: SWHXX Management's Discussion ................................................ 2 The president of SchwabFunds(R) and the fund's manager take a look at the factors that shaped fund performance during the report period. Performance and Fund Facts .......................................... 4 Financial Statements ................................................... 5 Financial Notes ........................................................ 11 Fund Trustees .......................................................... 15 Glossary ............................................................... 18 Fund investment adviser: Charles Schwab Investment Management, Inc. (CSIM). Distributor and transfer agent: Charles Schwab & Co., Inc. (Schwab). [PHOTO OF CHARLES R. SCHWAB] Charles R. Schwab Chairman FROM THE CHAIRMAN In 1989, we founded SchwabFunds(R) on the belief that mutual funds represent an important tool for investors. Money funds, for example, are especially well-suited for the cash portion of your portfolio when you are seeking capital preservation or liquidity. Over the past few years, mutual funds have faced a number of challenges, affecting both their performance and investor perception. Yet recently we have seen signs of positive change. The economy and the stock market have shown increasing strength. And while much remains to be done within the fund industry, the industry has been moving quickly to assess and improve its operations and its investor safeguards. As a firm, we continue to change as well. Our capabilities are evolving in ways that allow us to offer investors more choices and better ways to do business with us. I'm enthusiastic about these changes because they're designed to offer benefits for our fund shareholders. One thing that hasn't changed is my belief in mutual funds. Mutual funds still offer all the features that have made them so popular: diversification, liquidity, convenience, low investment minimums, and professional management. For individual investors especially, I believe mutual funds continue to be one of the most cost-effective investment vehicles available. To date, millions of Americans have successfully relied on mutual funds as an important way to invest for retirement security, their children's education, and other financial goals. We remain optimistic that mutual funds will continue to do the same for millions more Americans in the years to come. Sincerely, /s/ Charles R. Schwab MANAGEMENT'S DISCUSSION for the year ended December 31, 2003 [PHOTO OF RANDALL W. MERK] RANDALL W. MERK is President and CEO of Charles Schwab Investment Management, Inc. and is president of each of the funds covered in this report. He joined the firm in August 2002, bringing with him 24 years of experience in the asset management industry. Dear Shareholder: In today's current low-interest-rate environment, it's tempting to ask whether money funds still have a place in an investment portfolio. It's a fair question, but I'd suggest the answer is not as obvious as it may seem. Money funds are designed to offer several potential benefits. If you're like many investors, your asset allocation calls for a portion of your portfolio to be in cash. If the purpose of that allocation is to offer capital preservation or liquidity, or to help reduce the impact of market volatility on your portfolio, then money funds probably still make sense for you, regardless of the yield environment. Here at SchwabFunds(R), we're proud of our seasoned fund managers and their ability to work as a team. Our managers have an average of over 16 years of experience in the investment management industry. I'm also proud to say that we're in the process of building on that experience: by expanding our selection of mutual funds, adding new share classes, and offering new, competitively priced alternatives. Thirty years ago, Charles Schwab founded his firm with a vision to create the most useful and ethical financial services firm in the world. We live by that philosophy every day. Your investment in SchwabFunds is an indication of the trust you place in us. As the managers of your money, we have a special obligation to live up to that trust. I have enjoyed the opportunity to respond to several shareholder inquiries, and I hope you'll let us know how we're doing. I want to thank you for investing with us and want to assure you that we strive relentlessly to operate our business with the highest ethical standards and an unwavering commitment to serve you, our SchwabFunds shareholders. Sincerely, /s/ Randall W. Merk 2 Schwab Government Cash Reserves [PHOTO OF KAREN WIGGAN] KAREN WIGGAN, a vice president of the investment adviser and senior portfolio manager, has been responsible for day-to-day management of the fund since 1999. She joined the firm in 1987 and has worked in fixed-income portfolio management since 1991. THE INVESTMENT ENVIRONMENT AND THE FUND DURING 2003, THE U.S. ECONOMY BEGAN TO GATHER STRENGTH, ESPECIALLY DURING THE SECOND HALF OF THE YEAR. In the months before the war in Iraq (which began in March 2003), the economy remained in a holding pattern, as businesses and investors adopted a wait-and-see stance. Once the combat phase drew to an end, America began to pay more attention to the economy, which by year-end appeared to be recovering. SEEKING ADDITIONAL PROTECTION AGAINST THE RISK OF DEFLATION, THE FEDERAL RESERVE (THE FED) CUT SHORT-TERM INTEREST RATES BY 0.25% IN JUNE. This brought the Fed funds target rate to a 45-year low of 1.00%. Short-term interest rates began plummeting in May in anticipation of the Fed's rate cut but quickly began a modest recovery and ended the year somewhat above their mid-year lows. Nevertheless, money fund yields remained close to historically low levels. DURING THE PERIOD, THE SECURITIES OF FREDDIE MAC CAME UNDER PRESSURE AS NEWS OF POTENTIAL EARNINGS RESTATEMENTS AROSE. Our analysis indicated that the creditworthiness of these securities was not in doubt. As a result, we continued purchasing these securities at yields comparable to CDs and commercial paper. AS OF THE END OF THE REPORT PERIOD, NEITHER DEFLATION NOR INFLATION APPEARED TO BE IMMEDIATE RISKS. In our view, the main questions facing the market were: how strong is the economy, when might inflation return, and when might the Fed start tightening short-term rates? Nothing in this report represents a recommendation of a security by the investment adviser. Manager views and portfolio holdings may have changed since the report date. Schwab Government Cash Reserves 3 MANAGEMENT'S DISCUSSION continued PERFORMANCE AND FUND FACTS as of 12/31/03 SEVEN-DAY YIELDS The seven-day yields are calculated using standard SEC formulas. The effective yield includes the effect of reinvesting daily dividends. Please remember that money market fund yields fluctuate, and that past performance is not an indication of future results. -------------------------------------------------------------------------------- SEVEN-DAY YIELD 1 0.05% -------------------------------------------------------------------------------- SEVEN-DAY YIELD - NO WAIVER 2 -0.40% -------------------------------------------------------------------------------- SEVEN-DAY EFFECTIVE YIELD 0.05% --------------------------------------------------------------------------------
STATISTICS Money funds must maintain a dollar-weighted average maturity of no longer than 90 days, and cannot invest in any security whose effective maturity is longer than 397 days (approximately 13 months). -------------------------------------------------------------------------------- WEIGHTED AVERAGE MATURITY 7 days -------------------------------------------------------------------------------- CREDIT QUALITY OF HOLDINGS % of portfolio 100% Tier 1 --------------------------------------------------------------------------------
An investment in a money fund is neither insured nor guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency. Although money funds seek to preserve the value of your investment at $1 per share, it is possible to lose money by investing in a money fund. Portfolio holdings may have changed since the report date. 1 Fund expenses have been partially absorbed by CSIM and Schwab. 2 Yield if fund expenses had not been partially absorbed by CSIM and Schwab. Please refer to the Statement of Operations for additional information on expense waivers. 4 Schwab Government Cash Reserves FINANCIAL STATEMENTS FINANCIAL HIGHLIGHTS
1/1/03- 1/1/02- 1/1/01- 1/1/00- 1/1/99- 12/31/03 12/31/02 12/31/01 12/31/00 12/31/99 ------------------------------------------------------------------------------------------------------------------------------------ PER-SHARE DATA ($) ------------------------------------------------------------------------------ Net asset value at beginning of period 1.00 1.00 1.00 1.00 1.00 ------------------------------------------------------------------------------ Income from investment operations: Net investment income 0.00 1 0.01 0.03 0.05 0.04 ------------------------------------------------------------------------------ Less distributions: Dividends from net investment income (0.00) 1 (0.01) (0.03) (0.05) (0.04) ------------------------------------------------------------------------------ Net asset value at end of period 1.00 1.00 1.00 1.00 1.00 ------------------------------------------------------------------------------ Total return (%) 0.08 0.68 3.08 5.33 4.28 RATIOS/SUPPLEMENTAL DATA (%) ------------------------------------------------------------------------------------------------------------------------------------ Ratios to average net assets: Net operating expenses 1.14 2 1.25 1.25 1.14 3 0.95 Gross operating expenses 1.45 2 1.41 1.50 1.47 1.09 Net investment income 0.08 0.67 2.99 5.24 4.34 Net assets, end of period ($ x 1,000,000) 644 639 562 412 198
1 Per-share amount was less than $0.01. 2 Please refer to Statement of Operations for additional information on expense waivers. 3 The ratio of net operating expenses would have been 1.13% if certain non-routine expenses (proxy fees) had not been included. See financial notes. 5 SCHWAB GOVERNMENT CASH RESERVES PORTFOLIO HOLDINGS as of December 31, 2003 This section shows all the securities in the fund's portfolio and their market value, as of the report date. For fixed-rate obligations, the rate shown is the effective yield at the time of purchase, except for U.S. government agency coupon notes and U.S. Treasury notes, for which the rate shown is the interest rate (the rate established when the obligation was issued). For variable-rate obligations with scheduled maturities greater than 397 days, the maturity shown is the later of the next interest rate change date or demand date. For variable-rate obligations with scheduled maturities less than 397 days, the maturity shown is the earlier of the next interest rate change date or demand date. For variable-rate obligations without demand features, the maturity shown is the next interest rate change date.
COST VALUE HOLDINGS BY CATEGORY ($x1,000) ($x1,000) -------------------------------------------------------------------------------- 54.6% U.S. GOVERNMENT SECURITIES 351,102 351,102 45.5% OTHER INVESTMENTS 292,866 292,866 -------------------------------------------------------------------------------- 100.1% TOTAL INVESTMENTS 643,968 643,968 (0.1)% OTHER ASSETS AND LIABILITIES (392) -------------------------------------------------------------------------------- 100.0% TOTAL NET ASSETS 643,576
ISSUER FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) U.S. GOVERNMENT SECURITIES 54.6% of Net Assets -------------------------------------------------------------------------- DISCOUNT NOTES 52.7% -------------------------------------------------------------------------- FANNIE MAE 1.03%, 01/05/04 15,000 14,998 1.05%, 01/05/04 19,500 19,498 1.02%, 01/08/04 30,000 29,994 1.06%, 01/09/04 1,600 1,600 1.00%, 01/14/04 1,455 1,455 1.03%, 01/14/04 2,200 2,199 1.07%, 01/14/04 20,000 19,992 1.03%, 01/15/04 1,000 1,000 1.07%, 02/04/04 10,000 9,990 FEDERAL HOME LOAN BANK 1.05%, 01/02/04 94,450 94,447 1.05%, 01/05/04 10,000 9,999 1.02%, 01/07/04 11,600 11,598 1.03%, 01/09/04 3,062 3,061 1.12%, 01/09/04 1,013 1,013 1.00%, 01/14/04 2,000 1,999 FREDDIE MAC 1.03%, 01/06/04 24,786 24,782 1.03%, 01/08/04 19,583 19,579 1.06%, 01/08/04 3,026 3,025 1.06%, 01/14/04 10,000 9,996 1.03%, 01/15/04 26,400 26,389 1.08%, 01/15/04 5,000 4,998 1.08%, 01/21/04 13,756 13,748 1.07%, 01/30/04 3,023 3,020 1.09%, 02/02/04 1,400 1,399 1.09%, 02/19/04 5,000 4,993 1.08%, 03/01/04 4,100 4,093 ----------- 338,865 COUPON NOTES 1.9% -------------------------------------------------------------------------- FANNIE MAE 5.13%, 02/13/04 7,680 7,715 FEDERAL HOME LOAN BANK 5.25%, 02/13/04 4,500 4,522 ----------- 12,237
6 See financial notes. SCHWAB GOVERNMENT CASH RESERVES
MATURITY AMOUNT VALUE SECURITY ($ x 1,000) ($ x 1,000) OTHER INVESTMENTS 45.5% of Net Assets REPURCHASE AGREEMENTS 45.5% -------------------------------------------------------------------------------- BEAR STEARNS & CO., INC. Tri-Party Repurchase Agreement Collateralized by U.S. Government Securities with a value of $74,464 1.02%, issued 12/31/03, due 01/02/04 73,004 73,000 CREDIT SUISSE FIRST BOSTON L.L.C. Tri-Party Repurchase Agreement Collateralized by U.S. Government Securities with a value of $75,344 1.02%, issued 12/31/03, due 01/02/04 73,870 73,866 J.P. MORGAN CHASE & CO. Tri-Party Repurchase Agreement Collateralized by U.S. Government Securities with a value of $74,462 1.02%, issued 12/31/03, due 01/02/04 73,004 73,000 THE GOLDMAN SACHS GROUP, INC. Tri-Party Repurchase Agreement Collateralized by U.S. Government Securities with a value of $74,460 1.02%, issued 12/31/03, due 01/02/04 73,004 73,000 --------- 292,866
END OF INVESTMENTS. For totals, please see the first page of holdings for this fund. See financial notes. 7 SCHWAB GOVERNMENT CASH RESERVES Statement of ASSETS AND LIABILITIES As of December 31, 2003. All numbers x 1,000 except NAV. ASSETS ------------------------------------------------------------------------------ Investments, at value $351,102 a Repurchase agreements, at value 292,866 a Receivables: Interest 246 Prepaid expenses + 251 ---------- TOTAL ASSETS 644,465 LIABILITIES ------------------------------------------------------------------------------ Payables: Dividends to shareholders 3 Transfer agent and shareholder service fees 2 Transaction service fees 797 Accrued expenses + 87 ----------- TOTAL LIABILITIES 889 NET ASSETS ------------------------------------------------------------------------------ TOTAL ASSETS 644,465 TOTAL LIABILITIES - 889 ----------- NET ASSETS $643,576 NET ASSETS BY SOURCE Capital received from investors 643,599 Net realized capital losses (23) NET ASSET VALUE (NAV) SHARES NET ASSETS / OUTSTANDING = NAV $643,576 643,599 $1.00
Unless stated, all numbers x 1,000. a The amortized cost for the fund's securities was $643,968. FEDERAL TAX DATA ------------------------------------------------ COST BASIS OF PORTFOLIO $643,968 UNUSED CAPITAL LOSSES: Expires 12/31 of: Loss amount: 2007 $1 2011 + 22 ------------ $23
8 See financial notes. SCHWAB GOVERNMENT CASH RESERVES Statement of OPERATIONS For January 1, 2003 through December 31, 2003. All numbers x 1,000. INVESTMENT INCOME ----------------------------------------------------------------------------- Interest $7,790 NET REALIZED GAINS AND LOSSES ----------------------------------------------------------------------------- Net realized loss on investments sold (22) EXPENSES ----------------------------------------------------------------------------- Investment adviser and administrator fees 2,435 a Transfer agent and shareholder service fees 2,883 b Transaction service fees 3,525 c Trustees' fees 30 d Custodian and portfolio accounting fees 63 Professional fees 25 Registration fees 207 Shareholder reports 108 Other expenses + 9 ---------- Total expenses 9,285 Expense reduction - 1,997 e ---------- NET EXPENSES 7,288 INCREASE IN NET ASSETS FROM OPERATIONS ----------------------------------------------------------------------------- TOTAL INVESTMENT INCOME 7,790 NET EXPENSES - 7,288 ----------- NET INVESTMENT INCOME 502 NET REALIZED LOSSES + (22) ----------- INCREASE IN NET ASSETS FROM OPERATIONS $480
Unless stated, all numbers x 1,000. a Calculated on a graduated basis as a percentage of average daily net assets: 0.38% of the first $1 billion, 0.35% over $1 billion, 0.32% over $10 billion, 0.30% over $20 billion and 0.27% over $40 billion. b Calculated as a percentage of average daily net assets: for transfer agent services, 0.25% of the fund's assets; for shareholder services, 0.20% of the fund's assets. These fees are paid to Charles Schwab & Co. c For transaction services, Schwab receives a fee based on the number and type of transactions provided. d For the fund's independent trustees only. e This reduction consisted of two components. A reduction of $1,274, which reduced the fund's annualized operating expense ratio (OER) by 0.20%, was made by the investment adviser (CSIM) to reflect a guarantee by CSIM and the transfer agent and shareholder service agent (Schwab) to limit the annual OER of this fund through at least April 30, 2004, to 1.25% of average daily net assets. This limit doesn't include interest, taxes and certain non-routine expenses. Also, CSIM voluntarily waived an additional $723 of the fund's expenses, which reduced the fund's annualized OER by an additional 0.11%. The combination of these two waivers resulted in a net annualized OER for the period of 1.14%. See financial notes. 9 SCHWAB GOVERNMENT CASH RESERVES Statements of CHANGES IN NET ASSETS For the current and prior report periods. All numbers x 1,000.
OPERATIONS ------------------------------------------------------------------------------ 1/1/03-12/31/03 1/1/02-12/31/02 Net investment income $502 $3,885 Net realized losses + (22) -- ------------------------------------ INCREASE IN NET ASSETS FROM OPERATIONS 480 3,885 DISTRIBUTIONS PAID ------------------------------------------------------------------------------ Dividends from net investment income 502 3,885 a TRANSACTIONS IN FUND SHARES b ------------------------------------------------------------------------------ Shares sold 6,056,415 5,847,747 Shares reinvested 481 3,716 Shares redeemed + (6,052,786) (5,773,588 ------------------------------------ NET TRANSACTIONS IN FUND SHARES 4,110 77,875 NET ASSETS ------------------------------------------------------------------------------ Beginning of period 639,488 561,613 Total increase + 4,088 77,875 c ------------------------------------ END OF PERIOD $643,576 $639,488
Unless stated, all numbers x 1,000. a The tax-basis components of distributions are: b Because all transactions in this section took place at $1.00 per share, figures for share quantities are the same as for dollars. c Represents the changes in net assets from operations plus the changes in value of transactions in fund shares, minus distributions paid. CURRENT PERIOD Ordinary income $502 Long-term capital gains $-- PRIOR PERIOD Ordinary income $3,885 Long-term capital gains $--
10 See financial notes. SCHWAB GOVERNMENT CASH RESERVES FINANCIAL NOTES BUSINESS STRUCTURE OF THE FUND THE FUND DISCUSSED IN THIS REPORT IS A SERIES OF THE CHARLES SCHWAB FAMILY OF FUNDS((TM)), A NO-LOAD, OPEN-END MANAGEMENT INVESTMENT COMPANY. The company is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended. The sidebar shows the fund in this report and its trust. THE FUND OFFERS ONE SHARE CLASS. Shares are bought and sold at $1.00 per share. Each share has a par value of 1/1,000 of a cent, and the trust may issue as many shares as necessary. FUND OPERATIONS Most of the fund's investments are described in sections earlier in this report. However, there are certain other investments and policies that may affect the fund's financials. The most significant of these are described below. Other policies concerning the fund's business operations also are described here. THE FUND DECLARES DIVIDENDS EVERY DAY IT IS OPEN FOR BUSINESS. These dividends, which are equal to the fund's net investment income for that day, are paid out to shareholders once a month. The fund may make distributions from any net realized capital gains once a year. THE FUND MAY BUY SECURITIES ON A DELAYED-DELIVERY BASIS. In these transactions, the fund agrees to buy a security for a stated price, with settlement generally occurring within two weeks. If the security's value falls before settlement occurs, the fund could end up paying more for the security than its market value at the time of settlement. The fund has set aside sufficient securities as collateral for those securities bought on a delayed-delivery basis. THE FUND MAY ENTER INTO REPURCHASE AGREEMENTS. In a repurchase agreement, the fund buys a security from another party (usually a financial institution) with the agreement that it be sold back in the future. The date, price and other conditions are all specified when the agreement is created. Any repurchase agreement with due dates later than seven days from issue dates may be subject to seven day put features for liquidity purposes. The fund's repurchase agreements will be fully collateralized by U.S. government securities. All collateral is held by the fund's custodian (or, with tri-party agreements, the agent's bank) and is monitored daily to ensure that its market value is at least equal to the repurchase price under the agreement. THE FUND PAYS FEES TO AFFILIATES OF THE INVESTMENT ADVISER FOR VARIOUS SERVICES. Through its trust, the fund has agreements with Charles Schwab Investment Management, Inc. (CSIM) to provide investment advisory and administrative services and with Charles Schwab & Co., Inc. (Schwab) to provide transfer agent, shareholder services and transaction services. THE TRUST AND ITS FUNDS This list shows all of the funds included in The Charles Schwab Family of Funds. The fund discussed in this report is highlighted. THE CHARLES SCHWAB FAMILY OF FUNDS organized October 20, 1989 Schwab Money Market Fund Schwab Government Money Fund Schwab U.S. Treasury Money Fund Schwab Value Advantage Money Fund(R) Schwab Municipal Money Fund Schwab California Municipal Money Fund Schwab New York Municipal Money Fund Schwab New Jersey Municipal Money Fund Schwab Pennsylvania Municipal Money Fund Schwab Florida Municipal Money Fund Schwab Massachusetts Municipal Money Fund Schwab Institutional Advantage Money Fund(R) Schwab Retirement Money Fund(R) Schwab Government Cash Reserves 11 SCHWAB GOVERNMENT CASH RESERVES Although these agreements specify certain fees for these services, CSIM and Schwab have made additional agreements with the fund that may limit the total expenses charged. The rates and limitations for these fees are described in the fund's Statement of Operations. THE FUND MAY ENGAGE IN CERTAIN TRANSACTIONS INVOLVING AFFILIATES. The fund may make direct transactions with certain other SchwabFunds(R) when practical. When one fund is seeking to sell a security that another is seeking to buy, an interfund transaction can allow both funds to benefit by reducing transaction costs. This practice is limited to funds that share the same investment adviser, trustees and officers. Pursuant to an exemptive order issued by the SEC, the funds may enter into interfund borrowing and lending transactions within the SchwabFunds(R). All loans are for temporary or emergency purposes only. The interest rate charged on the loan is the average of the overnight repurchase agreement rate and the short-term bank loan rate. The interfund lending facility is subject to the oversight and periodic review of the Board of Trustees of the SchwabFunds(R). TRUSTEES MAY INCLUDE PEOPLE WHO ARE OFFICERS AND/ OR DIRECTORS OF THE INVESTMENT ADVISER OR SCHWAB. Federal securities law limits the percentage of such "interested persons" who may serve on a trust's board, and the trust was in compliance with these limitations throughout the report period. The trust did not pay any of these persons for their service as trustees, but it did pay non-interested persons (independent trustees), as noted in the fund's Statement of Operations. THE FUNDS MAY BORROW MONEY FROM BANKS AND CUSTODIANS. The funds may obtain temporary bank loans through the trust to which they belong, to use for meeting shareholder redemptions or for extraordinary or emergency purposes. The trusts have custodian overdraft facilities and line of credit arrangements of $150 million and $100 million with PNC Bank, N.A. and Bank of America, N.A., respectively. The funds pay interest on the amounts that they borrow at rates that are negotiated periodically. THE FUND INTENDS TO MEET FEDERAL INCOME AND EXCISE TAX REQUIREMENTS FOR REGULATED INVESTMENT COMPANIES. Accordingly, the fund distributes substantially all of its net investment income and net realized capital gains (if any) to its respective shareholders each year. As long as the fund meets the tax requirements, it is not required to pay federal income tax. UNDER THE FUND'S ORGANIZATIONAL DOCUMENTS, ITS OFFICERS AND TRUSTEES ARE INDEMNIFIED AGAINST CERTAIN LIABILITY ARISING OUT OF THE PERFORMANCE OF THEIR DUTIES TO THE FUNDS. In addition, in the normal course of business the fund enters into contracts with its vendors and others that provide general indemnifications. The fund's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the fund. However, based on experience, the fund expects the risk of loss to be remote. ACCOUNTING POLICIES The following are the main policies the fund uses in preparing its financial statements. THE FUND VALUES ITS SECURITIES AT AMORTIZED COST, which approximates market value. SECURITY TRANSACTIONS are recorded as of the date the order to buy or sell the security is executed. 12 SCHWAB GOVERNMENT CASH RESERVES INTEREST INCOME is recorded as it accrues. If the fund bought a debt instrument at a discount (that is, for less than its face value) or a premium (more than its face value), it amortizes the discount or premium from the current date up to maturity. The fund then increases (in the case of discounts) or reduces (in the case of premiums) the income it records from the security. If the security is callable (meaning that the issuer has the option to pay it off before its maturity date), then the fund amortizes the premium to the security's call date and price, rather than the maturity date and price. REALIZED GAINS AND LOSSES from security transactions are based on the identified costs of the securities involved. EXPENSES that are specific to the fund or a class are charged directly to the fund or class. Expenses that are common to all funds within the trust generally are allocated among the funds in proportion to their average daily net assets. THE FUND MAINTAINS ITS OWN ACCOUNT FOR PURPOSES OF HOLDING ASSETS AND ACCOUNTING, and is considered a separate entity for tax purposes. Within its account, the fund also keeps certain assets in segregated accounts, as may be required by securities law. THE ACCOUNTING POLICIES DESCRIBED ABOVE CONFORM WITH ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES OF AMERICA. Notwithstanding this, shareholders should understand that in order to follow these principles, fund management has to make estimates and assumptions that affect the information reported in the financial statements. It's possible that once the results are known, they may turn out to be different from these estimates. 13 REPORT OF INDEPENDENT AUDITORS TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF: Schwab Government Cash Reserves In our opinion, the accompanying statement of assets and liabilities, including the portfolio holdings, 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 Schwab Government Cash Reserves (one of the portfolios constituting The Charles Schwab Family of Funds, hereafter referred to as the "Fund") at December 31, 2003, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America. These financial statements and the financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund'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 auditing standards generally accepted in the United States of America, 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, 2003 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. PRICEWATERHOUSECOOPERS LLP San Francisco, CA February 6, 2004 14 SCHWAB GOVERNMENT CASH RESERVES FUND TRUSTEES A fund's Board of Trustees is responsible for protecting the interests of that fund's shareholders. The tables below give information about the people who serve as trustees and officers for the SchwabFunds(R), including the funds covered in this report. Trustees remain in office until they resign, retire or are removed by shareholder vote. 1 Under the Investment Company Act of 1940, any officer, director, or employee of Schwab or CSIM is considered an "interested person," meaning that he or she is considered to have a business interest in Schwab or CSIM. These individuals are listed as "interested trustees." The "independent trustees" are individuals who, under the 1940 Act, are not considered to have a business interest in Schwab or CSIM. Each of the SchwabFunds (of which there were 49 as of 12/31/03) belongs to one of these trusts: The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust or Schwab Annuity Portfolios. Currently all these trusts have the same trustees and officers. The address for all trustees and officers is 101 Montgomery Street, San Francisco, CA 94104. You can find more information about the trustees and officers in the Statement of Additional Information, which is available free by calling 1-800-435-4000. INDIVIDUALS WHO ARE INTERESTED TRUSTEES AND OFFICERS OF THE TRUST
TRUST POSITION(S); NAME AND BIRTHDATE TRUSTEE SINCE MAIN OCCUPATIONS AND OTHER DIRECTORSHIPS AND AFFILIATIONS ------------------------------------------------------------------------------------------------------------------------- CHARLES R. SCHWAB 2 Chair, Trustee: Chair, Director, The Charles Schwab Corp.; CEO, Director, Schwab 7/29/37 Family of Funds, 1989; Holdings, Inc.; Chair, Director, Charles Schwab & Co., Inc.; Charles Investments, 1991; Schwab Investment Management, Inc.; Chair, Charles Schwab Capital Trust, 1993; Holdings, Inc. I, Schwab International Holdings, Inc.; Director, U.S. Annuity Portfolios, 1994. Trust Corp., United States Trust Co. of New York, The Gap, Inc. (clothing retailer), Siebel Systems (software); Trustee, Stanford University. Until 6/03: Director, Xsign, Inc. (electronic payment systems). Until 5/03: Co-Chair, The Charles Schwab Corporation. Until 5/02: Director, Vodafone AirTouch PLC (telecom). Until 3/02: Director, Audiobase, Inc. (Internet audio solutions). Until 7/01: Director, The Charles Schwab Trust Company. Until 1/99: Director, Schwab Retirement Plan Services, Inc., Mayer & Schweitzer, Inc. (securities brokerage subsidiary of The Charles Schwab Corp.), Performance Technologies, Inc. (technology), TrustMark, Inc.
1 The SchwabFunds retirement policy requires that independent trustees elected after January 1, 2000 retire at age 72 or after twenty years of service as a trustee, whichever comes first. Independent trustees elected prior to January 1, 2000 will retire on the following schedule: Messrs. Holmes and Dorward will retire on December 31, 2007, and Messrs. Stephens and Wilsey will retire on December 31, 2010. 2 In addition to their positions with the investment adviser and the distributor, Ms. Lepore and Messrs. Schwab and Lyons, as well as some of Mr. Lyons's immediate family members, also own stock of The Charles Schwab Corporation. 15 SCHWAB GOVERNMENT CASH RESERVES INDIVIDUALS WHO ARE INTERESTED TRUSTEES BUT NOT OFFICERS OF THE TRUST
NAME AND BIRTHDATE TRUSTEE SINCE MAIN OCCUPATIONS AND OTHER DIRECTORSHIPS AND AFFILIATIONS ----------------------------------------------------------------------------------------------------------------- DAWN G. LEPORE 1 Trustee:2003 Vice Chair, EVP, The Charles Schwab Corp.; Until 10/01: CIO, The 3/21/54 (all trusts) Charles Schwab Corporation. Until 1999: EVP, The Charles Schwab Corporation. Director, Wal-Mart Stores, eBay, Inc. ----------------------------------------------------------------------------------------------------------------- JEFFREY M. LYONS 1 Trustee: 2002 EVP, Asset Management Products and Services, Charles Schwab & 2/22/55 (all trusts). Co., Inc. Until 9/01: EVP, Mutual Funds, Charles Schwab & Co., Inc.
INDIVIDUALS WHO ARE OFFICERS OF THE TRUST BUT NOT TRUSTEES
NAME AND BIRTHDATE TRUST OFFICE(S) HELD MAIN OCCUPATIONS AND OTHER DIRECTORSHIPS AND AFFILIATIONS -------------------------------------------------------------------------------------------------------------------- RANDALL W. MERK President, CEO President, CEO, Charles Schwab Investment Management, Inc; 7/25/54 (all trusts). EVP, Charles Schwab & Co., Inc.; Director, Charles Schwab Worldwide Funds PLC, Charles Schwab Asset Management (Ireland) Ltd. Until 9/02: President, CIO, American Century Investment Management; Director, American Century Cos., Inc. Until 6/01: CIO, Fixed Income, American Century Cos., Inc. Until 1997: SVP, Director, Fixed Income and Quantitative Equity Portfolio Management, Twentieth Century Investors, Inc. -------------------------------------------------------------------------------------------------------------------- TAI-CHIN TUNG Treasurer, Principal SVP, CFO, Charles Schwab Investment Management, Inc.; VP, 3/7/51 Financial Officer The Charles Schwab Trust Co.; Director, Charles Schwab Asset (all trusts). Management (Ireland) Ltd., Charles Schwab Worldwide Funds PLC. -------------------------------------------------------------------------------------------------------------------- STEPHEN B. WARD SVP, Chief Investment SVP, Chief Investment Officer, Director, Charles Schwab Investment 4/5/55 Officer Management, Inc.; CIO, The Charles Schwab Trust Co. (all trusts). -------------------------------------------------------------------------------------------------------------------- KOJI E. FELTON Secretary SVP, Chief Counsel, Assistant Corporate Secretary, Charles Schwab 3/13/61 (all trusts). Investment Management, Inc. Until 6/98: Branch Chief in Enforcement, U.S. Securities and Exchange Commission, San Francisco.
1 In addition to their positions with the investment adviser and the distributor, Ms. Lepore and Messrs. Schwab and Lyons, as well as some of Mr. Lyons's immediate family members, also own stock of The Charles Schwab Corporation. 16 SCHWAB GOVERNMENT CASH RESERVES INDIVIDUALS WHO ARE INDEPENDENT TRUSTEES
NAME AND BIRTHDATE TRUSTEE SINCE MAIN OCCUPATIONS AND OTHER DIRECTORSHIPS AND AFFILIATIONS -------------------------------------------------------------------------------------------------------------------------------- MARIANN BYERWALTER 2000 (all trusts). Chair, JDN Corp. Advisory LLC; Trustee, Stanford University, Director, 8/13/60 America First Cos., (venture capital/fund management), Redwood Trust, Inc. (mortgage finance), Stanford Hospitals and Clinics, SRI International (research), PMI Group, Inc. (mortgage insurance), Lucile Packard Children's Hospital. 2001: Special Advisor to the President, Stanford University. Until 2002: Director, LookSmart, Ltd. (Internet infrastructure). Until 2001: VP, Business Affairs, CFO, Stanford University. ----------------------------------------------------------------------------------------------------------------------------- DONALD F. DORWARD Family of Funds, 1989; CEO, Dorward & Associates (management, marketing and 9/23/31 Investments, 1991; communications consulting). Until 1999: EVP, Managing Director, Capital Trust, 1993; Grey Advertising. Annuity Portfolios, 1994. ----------------------------------------------------------------------------------------------------------------------------- WILLIAM A. HASLER 2000 (all trusts). Co-CEO, Aphton Corp. (bio-pharmaceuticals). Director, Non-Executive 11/22/41 Chairman, Solectron Corp. (manufacturing), Airlease Ltd. (aircraft leasing), Mission West Properties (commercial real estate), Stratex Networks (telecommunications); Public Governor, Member, executive committee, Pacific Stock & Options Exchange. Director, Digital Microwave Corp. (network equipment). Until 1998: Dean, Haas School of Business, University of California, Berkeley. ----------------------------------------------------------------------------------------------------------------------------- ROBERT G. HOLMES Family of Funds, 1989; Chair, CEO, Director, Semloh Financial, Inc. (international financial 5/15/31 Investments, 1991; services and investment advice). Capital Trust, 1993; Annuity Portfolios, 1994. ----------------------------------------------------------------------------------------------------------------------------- GERALD B. SMITH 2000 (all trusts). Chair, CEO, Founder, Smith Graham & Co. (investment advisors); 9/28/50 Director, Pennzoil-Quaker State Co. (oil and gas), Rorento N.V. (investments -- Netherlands), Cooper Industries (electrical products); Member, audit committee, Northern Border Partners, L.P. (energy). ----------------------------------------------------------------------------------------------------------------------------- DONALD R. STEPHENS Family of Funds, 1989; Managing Partner, D.R. Stephens & Co. (investments). Until 1996: 6/28/38 Investments, 1991; Chair, CEO, North American Trust (real estate investments). Capital Trust, 1993; Annuity Portfolios, 1994. ----------------------------------------------------------------------------------------------------------------------------- MICHAEL W. WILSEY Family of Funds, 1989; Chair, CEO, Wilsey Bennett, Inc. (transportation, real estate and 8/18/43 Investments, 1991; investments). Capital Trust, 1993; Annuity Portfolios, 1994.
17 SCHWAB GOVERNMENT CASH RESERVES GLOSSARY AGENCY DISCOUNT NOTES Notes issued by federal agencies -- known as Government Sponsored Enterprises, or GSEs -- at a discount to their value at maturity. An agency discount note is a short-term investment alternative offering a high degree of credit quality. ALTERNATIVE MINIMUM TAX (AMT) A federal income tax designed to limit the extent to which high-income taxpayers (including individuals, estates, trusts and corporations) can benefit from certain deductions and exemptions. For example, some types of income that are exempt from regular federal income tax are not exempt from the AMT. ASSET-BACKED SECURITY A bond or other debt security that represents ownership in a pool of debt obligations such as credit card debt. BOND A security representing a loan from the investor to the issuer. A bond typically pays interest at a fixed rate (the "coupon rate") until a specified date (the "maturity date"), at which time the issuer returns the money borrowed ("principal" or "face value") to the bondholder. Because of their structure, bonds are sometimes called "fixed income securities" or "debt securities." BOND ANTICIPATION NOTES Obligations sold by a municipality on an interim basis in anticipation of the municipality's issuance of a longer-term bond in the future. CAPITAL GAIN, CAPITAL LOSS The difference between the amount paid for an investment and its value at a later time. If the investment has been sold, the capital gain or loss is considered a realized gain or loss. If the investment is still held, the gain or loss is still "on paper" and is considered unrealized. COMMERCIAL PAPER Promissory notes issued by banks, corporations, state and local governments and other entities to finance short-term credit needs. These securities generally are structured on a discounted basis but sometimes may be interest-bearing notes. Commercial paper, which may be unsecured, is subject to credit risk. CREDIT-ENHANCED SECURITY A security that is backed by the credit of an entity other than the issuer (such as a financial institution). Credit enhancements, which can equal up to 100% of the security's value, are designed to help lower the risk of default on a security and may also make the security more liquid. CREDIT QUALITY The capacity of an issuer to make its interest and principal payments. Federal regulations strictly limit the credit quality of the securities a money market fund can buy. CREDIT RATINGS Debt issuers, including corporations, states and municipalities, may arrange with a recognized independent rating organization, such as Moody's Investor Service, Standard & Poor's and Fitch, Inc., to rate their creditworthiness and/or the creditworthiness of their debt issues. For example, an issuer may obtain a long-term rating within the investment grade rating category, which is, from high to low, AAA, AA, A and BBB for Standard & Poor's and Fitch, and Aaa, Aa, A and Baa for Moody's. CREDIT RISK The risk that a debt issuer may be unable to pay interest or principal to its debtholders. DOLLAR-WEIGHTED AVERAGE MATURITY (DWAM) See weighted average maturity. EFFECTIVE YIELD A measurement of a fund's yield that assumes that all dividends were reinvested in additional shares of the fund. PORTFOLIO TERMS To help reduce the space occupied by the portfolio holdings, we use the following terms. Most of them appear within descriptions of individual securities in municipal funds, and describe features of the issuer or the security. Some of these are more fully defined elsewhere in the Glossary. ACES Adjustable convertible extendable security BAN Bond anticipation note COP Certificate of participation GAN Grant anticipation note GO General obligation HDA Housing Development Authority HFA Housing Finance Agency IDA Industrial Development Authority IDB Industrial Development Board IDRB Industrial Development Revenue Bond M/F Multi-family RAN Revenue anticipation note RB Revenue bond S/F Single-family TAN Tax anticipation note TECP Tax-exempt commercial paper TOB Tender option bond TOBP Tender option bond partnership TRAN Tax and revenue anticipation note VRD Variable-rate demand 18 SCHWAB GOVERNMENT CASH RESERVES EXPENSE RATIO The amount that is taken from a mutual fund's assets each year to cover the fund's operating expenses. An expense ratio of 0.50% means that a fund's expenses amount to half of one percent of its average net assets a year. FACE VALUE The value of a bond, note, mortgage or other security as given on the certificate or instrument. Face value is also referred to as par value or nominal value. ILLIQUID SECURITIES A security is generally considered illiquid if it cannot be disposed of promptly (typically within seven days) and in the ordinary course of business at approximately the amount at which a fund has valued the instrument. INTEREST Payments to holders of debt securities as compensation for loaning a security's principal to the issuer. LIQUIDITY-ENHANCED SECURITY A security that when tendered is paid from funds advanced by an entity other than the issuer (such as a large financial institution). Liquidity enhancements are often used on variable-rate securities where the portfolio manager has an option to tender the securities prior to their final maturity. MATURITY Generally, the date a debt security is scheduled to be "retired" and its principal amount returned to the bondholder. MONEY MARKET SECURITIES High-quality, short-term debt securities that may be issued by entities such as the U.S. government, corporations and financial institutions (such as banks). Money market securities include commercial paper, promissory notes, certificates of deposit, banker's acceptances, notes and time deposits. MUNICIPAL SECURITIES Debt securities issued by a state, its counties, municipalities, authorities and other subdivisions, or the territories and possessions of the United States and the District of Columbia, including their subdivisions, agencies and instrumentalities and corporations. These securities may be issued to obtain money for various public purposes, including the construction of a wide range of public facilities such as airports, bridges, highways, housing, hospitals, mass transportation, public utilities, schools, streets, and water and sewer works. NET ASSET VALUE PER SHARE (NAV) The value of one share of a mutual fund. NAV is calculated by taking the fund's total assets, subtracting liabilities, and dividing by the number of shares outstanding. Money funds seek to maintain a steady NAV of $1.00. OUTSTANDING SHARES, SHARES OUTSTANDING When speaking of a company or mutual fund, indicates all shares currently held by investors. RESTRICTED SECURITIES A security that is subject to contractual restrictions on resale and may be sold only to "qualified institutional buyers" under Securities Act Rule 144A. These securities are often purchased in private placement transactions. REVENUE ANTICIPATION NOTES Obligations that are issued in expectation of the receipt of revenue, such as income taxes, property taxes, etc. SECTION 3C7 SECURITIES Section 3c7 of the Investment Company Act of 1940 (the "1940 Act") exempts certain issuers from many regulatory requirements applicable to investment companies under the 1940 Act. An issuer whose outstanding securities are exclusively owned by "qualified purchasers" and who is not making or proposing to make a public offering of the securities may qualify for this exemption. SECTION 4(2)/144A SECURITIES A security exempt from registration under Section 4(2) of the Securities Act of 1933. It may be sold only to qualified institutional buyers under Securities Act Rule 144A. TAXABLE-EQUIVALENT YIELD The yield an investor would need to get from a taxable investment in order to match the yield paid by a given tax-exempt investment, once the effect of all applicable taxes is taken into account. For example, if your tax rate were 25%, a tax-exempt investment paying 4.5% would have a taxable-equivalent yield for you of 6.0% (4.5% / [1 - 0.25%] = 6.0%). TOTAL RETURN The percentage that an investor would have earned or lost on an investment in the fund assuming dividends and distributions were reinvested. TAX ANTICIPATION NOTES Notes that typically are sold to finance the cash flow needs of municipalities in anticipation of the receipt of taxes on a future date. TIER 1, TIER 2 Tier 1 is the highest category of credit quality, Tier 2 the second highest. A security's tier can be established either by an independent rating organization or by a determination of the investment adviser. Money market fund shares and U.S. government securities are automatically considered Tier 1 securities. WEIGHTED AVERAGE MATURITY For mutual funds, the maturity of all the debt securities in its portfolio, calculated as a weighted average. As a rule, the longer a fund's weighted average maturity, the greater its interest rate risk. Money funds are required to maintain a weighted average maturity of no more than 90 days. YIELD The income paid out by an investment, expressed as an annual rate and calculated as a percentage of the investment's market value. 19 NOTES CONTACT SCHWAB SchwabFunds(R) offers you a complete family of mutual funds, each one based on a clearly defined investment approach and using disciplined management strategies. Actively managed funds include multi-manager stock funds, a fund that uses long-short strategies, and a range of taxable and tax-free bond funds. Index funds include large-cap, small-cap and international stock funds. The list at right shows all currently available SchwabFunds. Whether you're an experienced investor or just starting out, SchwabFunds can help you achieve your financial goals. Please call 1-800-435-4000 for a prospectus and brochure for any SchwabFund. Please read the prospectus carefully before you invest. This report must be preceded or accompanied by a current prospectus. METHODS FOR PLACING ORDERS The following information outlines how Schwab investors can place orders. If you are investing through a third-party investment provider, methods for placing orders may be different. INTERNET 1 www.schwab.com SCHWAB BY PHONE(TM) 2 Use our automated voice service or speak to a representative. Call 1-800-435-4000, day or night (for TDD service, call 1-800-345-2550). TELEBROKER(R) Automated touch-tone phone service at 1-800-272-4922. MAIL Write to SchwabFunds at: P.O. Box 3812 Englewood, CO 80155-3812 When selling or exchanging shares, be sure to include the signatures of at least one of the persons whose name is on the account. 1 Shares of Sweep Investments(TM) may not be purchased directly over the Internet. 2 Orders placed in person or through a telephone representative may be subject to a service fee payable to Schwab. THE SCHWABFUNDS FAMILY(R) STOCK FUNDS Schwab S&P 500 Fund Schwab 1000 Fund(R) Schwab Small-Cap Index Fund(R) Schwab Total Stock Market Index Fund(R) Schwab International Index Fund(R) Schwab Core Equity Fund(TM) Schwab Dividend Equity Fund(TM) Schwab Small-Cap Equity Fund(TM) Schwab Hedged Equity Fund(TM) Schwab Focus Funds Communications Focus Fund Financial Services Focus Fund Health Care Focus Fund Technology Focus Fund Schwab MarketMasters Funds(TM) Schwab U.S. MarketMasters Fund(TM) Schwab Small-Cap MarketMasters Fund(TM) Schwab International MarketMasters Fund(TM) Schwab Balanced MarketMasters Fund(TM) ASSET ALLOCATION FUNDS Schwab MarketTrack Portfolios(R) Schwab MarketTrack All Equity Portfolio(TM) Schwab MarketTrack Growth Portfolio(TM) Schwab MarketTrack Balanced Portfolio(TM) Schwab MarketTrack Conservative Portfolio(TM) BOND FUNDS Schwab YieldPlus Fund(R) Schwab Short-Term Bond Market Fund(TM) Schwab Total Bond Market Fund(TM) Schwab GNMA Fund(TM) Schwab Short/Intermediate Tax-Free Bond Fund(TM) Schwab Long-Term Tax-Free Bond Fund(TM) Schwab California Short/Intermediate Tax-Free Bond Fund(TM) Schwab California Long-Term Tax-Free Bond Fund(TM) SCHWAB MONEY FUNDS Schwab offers an array of money market funds that seek high current income consistent with safety and liquidity. 3 Choose from taxable or tax-advantaged alternatives. Many can be linked to your Schwab account to "sweep" cash balances automatically, subject to availability, when you're between investments. Or, for your larger cash reserves, choose one of our Value Advantage Investments(R). 3 Investments in money market funds are neither insured nor guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency and, although they seek to preserve the value of your investment at $1 per share, it is possible to lose money. [CHARLES SCHWAB LOGO] INVESTMENT ADVISER Charles Schwab Investment Management, Inc. 101 Montgomery Street, San Francisco, CA 94104 DISTRIBUTOR SchwabFunds(R) P.O. Box 3812, Englewood, CO 80155-3812 This report is not authorized for distribution to prospective investors unless preceded or accompanied by a current prospectus. (C) 2004 Charles Schwab & Co., Inc. All rights reserved. Member SIPC/NYSE. Printed on recycled paper. REG13856-06 SCHWAB INSTITUTIONAL ADVANTAGE MONEY FUND(R) SCHWAB RETIREMENT MONEY FUND(R) ANNUAL REPORT December 31, 2003 [CHARLES SCHWAB LOGO] IN THIS REPORT Management's Discussion The president of and the funds' managers take a look at the SchwabFunds(R) factors that shaped fund performance during the report period. Performance and Fund Facts ...... 4 Schwab Institutional Advantage Money Fund(R) Ticker Symbol: SWIXX Financial Statements ............ 5 Schwab Retirement Money Fund(R) Ticker Symbol: SWRXX Financial Statements ............ 15 Financial Notes ...................................................... 24 Fund Trustees ........................................................ 28 Glossary ............................................................. 31 Fund investment adviser: Charles Schwab Investment Management, Inc. (CSIM). Distributor and transfer agent: Charles Schwab & Co., Inc. (Schwab). [PHOTO OF CHARLES R. SCHWAB] Charles R. Schwab Chairman FROM THE CHAIRMAN In 1989, we founded SchwabFunds(R) on the belief that mutual funds represent an important tool for investors. Money funds, for example, are especially well-suited for the cash portion of your portfolio when you are seeking capital preservation or liquidity. Over the past few years, mutual funds have faced a number of challenges, affecting both their performance and investor perception. Yet recently we have seen signs of positive change. The economy and the stock market have shown increasing strength. And while much remains to be done within the fund industry, the industry has been moving quickly to assess and improve its operations and its investor safeguards. As a firm, we continue to change as well. Our capabilities are evolving in ways that allow us to offer investors more choices and better ways to do business with us. I'm enthusiastic about these changes because they're designed to offer benefits for our fund shareholders. One thing that hasn't changed is my belief in mutual funds. Mutual funds still offer all the features that have made them so popular: diversification, liquidity, convenience, low investment minimums, and professional management. For individual investors especially, I believe mutual funds continue to be one of the most cost-effective investment vehicles available. To date, millions of Americans have successfully relied on mutual funds as an important way to invest for retirement security, their children's education, and other financial goals. We remain optimistic that mutual funds will continue to do the same for millions more Americans in the years to come. Sincerely, /s/ Charles R. Schwab MANAGEMENT'S DISCUSSION for the year ended December 31, 2003 [PHOTO OF RANDALL W. MERK] RANDALL W. MERK is President and CEO of Charles Schwab Investment Management, Inc. and is president of each of the funds covered in this report. He joined the firm in August 2002, bringing with him 24 years of experience in the asset management industry. Dear Shareholder: In today's current low-interest-rate environment, it's tempting to ask whether money funds still have a place in an investment portfolio. It's a fair question, but I'd suggest the answer is not as obvious as it may seem. Money funds are designed to offer several potential benefits. If you're like many investors, your asset allocation calls for a portion of your portfolio to be in cash. If the purpose of that allocation is to offer capital preservation or liquidity, or to help reduce the impact of market volatility on your portfolio, then money funds probably still make sense for you, regardless of the yield environment. Here at SchwabFunds(R), we're proud of our seasoned fund managers and their ability to work as a team. Our managers have an average of over 16 years of experience in the investment management industry. I'm also proud to say that we're in the process of building on that experience: by expanding our selection of mutual funds, adding new share classes, and offering new, competitively priced alternatives. Thirty years ago, Charles Schwab founded his firm with a vision to create the most useful and ethical financial services firm in the world. We live by that philosophy every day. Your investment in SchwabFunds is an indication of the trust you place in us. As the managers of your money, we have a special obligation to live up to that trust. I have enjoyed the opportunity to respond to several shareholder inquiries, and I hope you'll let us know how we're doing. I want to thank you for investing with us and want to assure you that we strive relentlessly to operate our business with the highest ethical standards and an unwavering commitment to serve you, our SchwabFunds shareholders. Sincerely, /s/ Randall W. Merk 2 Schwab Institutional Advantage Money Fund(R) and Schwab Retirement Money Fund(R) [PHOTO OF LINDA KLINGMAN AND MIKE NEITZKE] LINDA KLINGMAN, a vice president of the investment adviser and senior portfolio manager, has overall responsibility for the management of the funds. She joined the firm in 1990 and has managed money market funds since 1988. MIKE NEITZKE, a portfolio manager, has day-to-day responsibility for management of the funds. Prior to joining the firm in March 2001, he worked for more than 15 years in the financial industry as a portfolio manager. THE INVESTMENT ENVIRONMENT AND THE FUNDS DURING 2003, THE U.S. ECONOMY BEGAN TO GATHER STRENGTH, ESPECIALLY DURING THE SECOND HALF OF THE YEAR. In the months before the war in Iraq (which began in March 2003), the economy remained in a holding pattern, as businesses and investors adopted a wait-and-see stance. Once the combat phase drew to an end, America began to pay more attention to the economy, which by year-end appeared to be recovering. SEEKING ADDITIONAL PROTECTION AGAINST THE RISK OF DEFLATION, THE FEDERAL RESERVE (THE FED) CUT SHORT-TERM INTEREST RATES BY 0.25% IN JUNE. This brought the Fed funds target rate to a 45-year low of 1.00%. Short-term interest rates began plummeting in May in anticipation of the Fed's rate cut but quickly began a modest recovery and ended the year somewhat above their mid-year lows. Nevertheless, money fund yields remained close to historically low levels. FALLING INTEREST RATES PUSHED MONEY FUND YIELDS TO NEW LOWS (see next page for fund yield information). Within this challenging interest rate environment, we sought to take what measures we could to gain incrementally higher yields for the funds. For example, we were able to take advantage of modest fluctuations in yields of one-year securities. These fluctuations appeared to be driven by shifts in the market's outlook on the economic recovery. The funds bought longer-term money market securities when, in our view, they offered an attractive yield compared to their shorter maturity counterparts. Because of this, the funds' weighted average maturities were often longer than the average for their peer group during the report period. 1 DURING THE PERIOD, THE SECURITIES OF FREDDIE MAC CAME UNDER PRESSURE AS NEWS OF POTENTIAL EARNINGS RESTATEMENTS AROSE. Our analysis indicated that the creditworthiness of these securities was not in doubt. As a result, the funds increased their holdings of these securities at yields comparable to CDs and commercial paper. AS OF THE END OF THE REPORT PERIOD, NEITHER DEFLATION NOR INFLATION APPEARED TO BE IMMEDIATE RISKS. In our view, the main questions facing the market were: how strong is the economy, when might inflation return, and when might the Fed increase short-term rates? Nothing in this report represents a recommendation of a security by the investment adviser. Manager views and portfolio holdings may have changed since the report date. 1 Source: iMoney Net, Inc. First Tier Retail Category, 12/31/03. Schwab Institutional Advantage Money Fund(R) 3 and Schwab Retirement Money Fund(R) MANAGEMENT'S DISCUSSION continued PERFORMANCE AND FUND FACTS as of 12/31/03 SEVEN-DAY YIELDS The seven-day yields are calculated using standard SEC formulas. The effective yield includes the effect of reinvesting daily dividends. Please remember that money market fund yields fluctuate, and that past performance is not an indication of future results.
INSTITUTIONAL ADVANTAGE RETIREMENT MONEY FUND MONEY FUND -------------------------------------------------------------------------------- SEVEN-DAY YIELD 0.64% 1 0.47% -------------------------------------------------------------------------------- SEVEN-DAY YIELD - NO WAIVER 0.51% 2 n/a -------------------------------------------------------------------------------- SEVEN-DAY EFFECTIVE YIELD 0.64% 0.47% --------------------------------------------------------------------------------
STATISTICS Money funds must maintain a dollar-weighted average maturity of no longer than 90 days, and cannot invest in any security whose effective maturity is longer than 397 days (approximately 13 months).
INSTITUTIONAL ADVANTAGE RETIREMENT MONEY FUND MONEY FUND -------------------------------------------------------------------------------- WEIGHTED AVERAGE MATURITY 55 days 52 days -------------------------------------------------------------------------------- CREDIT QUALITY OF HOLDINGS% of portfolio 100% Tier 1 100% Tier 1 --------------------------------------------------------------------------------
An investment in a money fund is neither insured nor guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency. Although money funds seek to preserve the value of your investment at $1 per share, it is possible to lose money by investing in a money fund. Portfolio holdings may have changed since the report date. 1 Fund expenses have been partially absorbed by CSIM and Schwab. 2 Yield if fund expenses had not been partially absorbed by CSIM and Schwab. 4 Schwab Institutional Advantage Money Fund(R) and Schwab Retirement Money Fund(R) SCHWAB INSTITUTIONAL ADVANTAGE MONEY FUND(R) FINANCIAL STATEMENTS FINANCIAL HIGHLIGHTS
1/1/03- 1/1/02- 1/1/01- 1/1/00- 1/1/99- 12/31/03 12/31/02 12/31/01 12/31/00 12/31/99 ------------------------------------------------------------------------------------------------------------------------------------ PER-SHARE DATA ($) ------------------------------------------------------------------------------------------------------------------------------------ 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 0.04 0.06 0.05 ------------------------------------------------------------------------------ Less distributions: Dividends from net investment income (0.01) (0.01) (0.04) (0.06) (0.05) ------------------------------------------------------------------------------ Net asset value at end of period 1.00 1.00 1.00 1.00 1.00 ------------------------------------------------------------------------------ Total return (%) 0.74 1.48 3.96 6.12 4.90 RATIOS/SUPPLEMENTAL DATA(%) ------------------------------------------------------------------------------------------------------------------------------------ Ratios to average net assets: Net operating expenses 0.50 0.50 0.50 0.51 1 0.50 Gross operating expenses 0.63 0.63 0.66 0.69 0.71 Net investment income 0.75 1.46 3.83 5.96 4.84 Net assets, end of period ($ x 1,000,000) 766 907 797 647 604
1 The ratio of net operating expenses would have been 0.50% if certain non-routine expenses (proxy fees) had not been included. See financial notes. 5 SCHWAB INSTITUTIONAL ADVANTAGE MONEY FUND(R) PORTFOLIO HOLDINGS as of December 31, 2003 This section shows all the securities in the fund's portfolio and their market value, as of the report date. We use the symbols below to designate certain characteristics: * Asset-backed security + Credit-enhanced security o Illiquid restricted security For fixed-rate obligations, the rate shown is the effective yield at the time of purchase, except for U.S. government agency coupon notes and U.S. Treasury notes, for which the rate shown is the interest rate (the rate established when the obligation was issued). For variable-rate obligations, the rate shown is the rate as of the report date. For variable-rate obligations with scheduled maturities greater than 397 days, the maturity shown is the later of the next interest rate change date or demand date. For variable-rate obligations with scheduled maturities less than 397 days, the maturity shown is the earlier of the next interest rate change date or demand date. For variable-rate obligations without demand features, the maturity shown is the next interest rate change date.
COST VALUE HOLDINGS BY CATEGORY ($x1,000) ($x1,000) -------------------------------------------------------------------------------- 91.2% FIXED-RATE OBLIGATIONS 698,943 698,943 2.3% U.S. GOVERNMENT SECURITIES 17,667 17,667 5.9% VARIABLE-RATE OBLIGATIONS 45,174 45,174 6.4% OTHER INVESTMENTS 48,612 48,612 -------------------------------------------------------------------------------- 105.8% TOTAL INVESTMENTS 810,396 810,396 (5.8)% OTHER ASSETS AND LIABILITIES (44,366) -------------------------------------------------------------------------------- 100.0% TOTAL NET ASSETS 766,030
ISSUER FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) FIXED-RATE OBLIGATIONS 91.2% of Net Assets COMMERCIAL PAPER & OTHER CORPORATE OBLIGATIONS 54.4% -------------------------------------------------------------------------- AB SPINTAB 1.09%, 02/05/04 1,000 999 1.10%, 02/06/04 3,000 2,997 1.09%, 02/10/04 1,000 999 ALLIANCE & LEICESTER, PLC, SECTION 4(2) / 144A 1.09%, 01/14/04 2,000 1,999 * AMSTEL FUNDING CORP., SECTION 4(2) / 144A 1.11%, 01/15/04 1,500 1,499 1.12%, 01/15/04 1,000 1,000 1.09%, 02/12/04 1,000 999 *+ AMSTERDAM FUNDING CORP., SECTION 4(2) / 144A 1.10%, 01/06/04 2,000 2,000 1.09%, 02/04/04 4,000 3,996 + ANZ (DELAWARE), INC. 1.09%, 02/10/04 2,088 2,085 *+ AQUINAS FUNDING, L.L.C., SECTION 4(2) / 144A 1.11%, 03/02/04 1,000 998 1.10%, 03/05/04 1,000 998 * ASAP FUNDING, LTD., SECTION 4(2) / 144A 1.12%, 02/27/04 5,000 4,991 *+ ASSET SECURITIZATION COOPERATIVE CORP., SECTION 4(2) / 144A 1.10%, 01/20/04 1,000 999 1.10%, 01/21/04 11,000 10,993 *+ ATLANTIS ONE FUNDING CORP., SECTION 4(2) / 144A 1.11%, 01/13/04 5,000 4,998 1.12%, 03/18/04 5,000 4,988 BANK OF AMERICA CORP. 1.14%, 05/06/04 10,000 9,960 * BARTON CAPITAL CORP., SECTION 4(2) / 144A 1.10%, 01/20/04 10,000 9,994 BEAR STEARNS COMPANIES, INC. 1.09%, 02/02/04 4,000 3,996 *+ BETA FINANCE, INC., SECTION 3C7 / 144A 1.10%, 01/23/04 1,000 999 1.13%, 03/10/04 1,000 998 1.12%, 03/15/04 2,000 1,995 1.16%, 04/15/04 2,000 1,993
6 See financial notes. SCHWAB INSTITUTIONAL ADVANTAGE MONEY FUND(R)
ISSUER FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) + CBA (DELAWARE) FINANCE, INC. 1.10%, 01/26/04 1,200 1,199 1.10%, 01/30/04 1,100 1,099 1.10%, 02/09/04 2,400 2,397 1.10%, 02/17/04 1,000 999 1.10%, 03/09/04 2,400 2,395 * CC (USA), INC., SECTION 3C7 / 144A 1.10%, 01/12/04 2,000 1,999 1.09%, 01/30/04 2,000 1,998 1.10%, 02/03/04 3,000 2,997 1.24%, 08/09/04 1,000 1,000 CDC COMMERCIAL PAPER CORP., SECTION 4(2) / 144A 1.09%, 03/18/04 3,000 2,993 CITIGROUP GLOBAL MARKETS HOLDINGS, INC. 1.09%, 01/05/04 1,000 1,000 1.08%, 01/08/04 5,000 4,999 1.09%, 01/26/04 4,000 3,997 *+ CLIPPER RECEIVABLES CORP., SECTION 4(2) / 144A 1.11%, 01/06/04 5,000 4,999 1.10%, 01/12/04 6,000 5,998 * CONCORD MINUTEMEN CAPITAL CO., L.L.C., SECTION 3C7 / 144A Series A 1.11%, 01/06/04 1,000 1,000 1.11%, 02/11/04 4,000 3,995 1.10%, 02/18/04 5,000 4,993 *+ CRC FUNDING, L.L.C., SECTION 4(2) / 144A 1.09%, 01/14/04 5,000 4,998 * DAKOTA CP NOTES OF CITIBANK CREDIT CARD ISSUANCE TRUST, SECTION 4(2) / 144A 1.09%, 01/29/04 5,000 4,996 + DANSKE CORP. 1.09%, 02/17/04 3,140 3,136 1.10%, 02/17/04 1,000 999 1.10%, 02/23/04 1,400 1,398 1.10%, 04/01/04 4,000 3,989 DEN NORSKE BANK ASA 1.10%, 02/13/04 2,000 1,997 1.12%, 05/19/04 2,000 1,991 + DEXIA DELAWARE, L.L.C. 1.08%, 02/26/04 8,000 7,987 * DORADA FINANCE, INC., SECTION 3C7 / 144A 1.11%, 02/17/04 4,000 3,994 *+ EDISON ASSET SECURITIZATION CORP., L.L.C., SECTION 4(2) / 144A 1.09%, 02/05/04 8,000 7,992 1.11%, 02/12/04 3,000 2,996 1.10%, 02/18/04 2,000 1,997 * EIFFEL FUNDING, L.L.C., SECTION 4(2) / 144A 1.10%, 01/12/04 5,000 4,998 *+ FAIRWAY FINANCE CORP., SECTION 4(2) / 144A 1.10%, 02/17/04 2,000 1,997 1.12%, 03/12/04 3,443 3,435 *+ FALCON ASSET SECURITIZATION CORP., SECTION 4(2) / 144A 1.10%, 01/09/04 8,000 7,998 FORENINGSSPARBANKEN AB (SWEDBANK) 1.08%, 02/12/04 1,000 999 + FORTIS FUNDING, L.L.C., SECTION 4(2) / 144A 1.10%, 01/16/04 1,000 1,000 *+ GALAXY FUNDING, INC., SECTION 4(2) / 144A 1.10%, 02/11/04 2,000 1,998 1.11%, 02/11/04 6,000 5,992 1.10%, 02/18/04 3,000 2,996 1.11%, 03/08/04 2,000 1,996 + GE CAPITAL INTERNATIONAL FUNDING, INC., SECTION 4(2) / 144A 1.11%, 01/21/04 1,000 999 1.10%, 02/06/04 2,000 1,998 1.10%, 02/19/04 5,000 4,993 1.08%, 02/24/04 4,000 3,994 1.11%, 03/05/04 3,000 2,994 1.12%, 03/12/04 7,000 6,984 1.10%, 04/16/04 1,000 997 GE FINANCIAL ASSURANCE HOLDINGS, INC., SECTION 4(2) / 144A 1.09%, 02/10/04 3,000 2,996 GENERAL ELECTRIC CAPITAL CORP. 1.11%, 01/21/04 1,250 1,249 1.10%, 01/27/04 1,000 999 1.10%, 02/24/04 1,505 1,503 1.11%, 03/03/04 3,000 2,994 1.10%, 03/15/04 1,100 1,098 1.12%, 04/06/04 1,000 997 GENERAL ELECTRIC CAPITAL SERVICES 1.10%, 02/11/04 6,000 5,993
See financial notes. 7 SCHWAB INSTITUTIONAL ADVANTAGE MONEY FUND(R) PORTFOLIO HOLDINGS continued
ISSUER FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) *+ GIRO FUNDING U.S. CORP., SECTION 4(2) / 144A 1.11%, 01/16/04 2,000 1,999 1.11%, 02/24/04 5,000 4,992 1.13%, 03/24/04 1,000 997 *+ GRAMPIAN FUNDING, LTD., SECTION 4(2) / 144A 1.10%, 02/19/04 1,000 999 1.10%, 02/20/04 1,000 998 1.11%, 02/25/04 1,000 998 * GREYHAWK FUNDING, L.L.C., SECTION 4(2) / 144A 1.11%, 02/05/04 5,000 4,995 *+ HATTERAS FUNDING CORP., SECTION 4(2) / 144A 1.10%, 01/15/04 1,000 1,000 1.11%, 01/20/04 3,000 2,998 + HBOS TREASURY SERVICES, PLC 1.11%, 02/05/04 1,500 1,498 1.10%, 02/23/04 1,000 998 HSBC BANK, PLC 1.09%, 01/27/04 2,000 1,998 *+ INDEPENDENCE FUNDING, L.L.C., SECTION 4(2) / 144A 1.10%, 01/07/04 3,210 3,209 + ING (U.S.) FUNDING, L.L.C. 1.10%, 03/05/04 8,000 7,984 IRISH LIFE & PERMANENT, PLC, SECTION 4(2) / 144A 1.11%, 03/05/04 1,000 998 1.10%, 03/10/04 1,000 998 J.P. MORGAN CHASE & CO. 1.10%, 02/10/04 1,000 999 1.10%, 02/12/04 6,000 5,992 + KBC FINANCIAL PRODUCTS INTERNATIONAL, LTD., SECTION 4(2) / 144A 1.10%, 01/14/04 2,000 1,999 *+ KITTY HAWK FUNDING CORP., SECTION 4(2) / 144A 1.11%, 02/06/04 1,737 1,735 1.10%, 02/10/04 5,000 4,994 * LEXINGTON PARKER CAPITAL CO., L.L.C., SECTION 4(2) / 144A 1.15%, 01/08/04 2,000 2,000 1.11%, 01/12/04 1,000 1,000 1.11%, 01/23/04 2,000 1,999 LLOYDS TSB BANK, PLC 1.10%, 03/09/04 1,100 1,098 * MANE FUNDING CORP., SECTION 4(2) / 144A 1.11%, 01/27/04 1,000 999 1.12%, 01/27/04 2,000 1,998 1.11%, 02/03/04 2,000 1,998 1.08%, 01/26/04 2,000 1,999 1.08%, 02/23/04 9,000 8,986 MORGAN STANLEY 1.08%, 01/26/04 2,000 1,999 1.08%, 02/23/04 9,000 8,986 * NEWCASTLE CERTIFICATES PROGRAM, SECTION 4(2) / 144A Series 2000A 1.11%, 01/12/04 1,000 1,000 1.10%, 02/18/04 3,000 2,996 1.10%, 03/10/04 1,000 998 *+ NORDEA NORTH AMERICA, INC. 1.08%, 01/22/04 1,000 999 1.10%, 01/26/04 3,600 3,597 *+ OLD LINE FUNDING CORP., SECTION 4(2) / 144A 1.09%, 01/23/04 7,500 7,495 * PARK GRANADA, L.L.C., SECTION 4(2) / 144A 1.10%, 03/25/04 6,000 5,985 1.10%, 03/26/04 2,000 1,995 *+ PREFERRED RECEIVABLES FUNDING CORP., SECTION 4(2) / 144A 1.10%, 01/05/04 6,000 5,999 1.10%, 01/07/04 1,100 1,100 1.09%, 01/08/04 1,000 1,000 * RECEIVABLES CAPITAL CORP., SECTION 4(2) / 144A 1.09%, 01/07/04 5,000 4,999 1.10%, 03/01/04 5,438 5,428 * SCALDIS CAPITAL LTD., SECTION 4(2) / 144A 1.10%, 02/23/04 4,000 3,994 + SHELL FINANCE (UK), PLC 1.10%, 01/15/04 3,600 3,598 *+ SIGMA FINANCE, INC., SECTION 3C7 / 144A 1.11%, 02/13/04 1,000 999 1.14%, 02/13/04 3,000 2,996 1.13%, 03/11/04 1,000 998 1.14%, 03/11/04 5,000 4,989 1.14%, 03/23/04 2,000 1,995 *+ THUNDER BAY FUNDING, INC., SECTION 4(2) / 144A 1.09%, 02/05/04 3,000 2,997 *+ TICONDEROGA FUNDING, L.L.C., SECTION 4(2) / 144A 1.10%, 01/13/04 7,250 7,247 *+ TRIPLE-A ONE FUNDING CORP., SECTION 4(2) / 144A 1.10%, 01/05/04 3,000 3,000 *+ VARIABLE FUNDING CAPITAL CORP., SECTION 4(2) / 144A 1.10%, 01/16/04 10,000 9,995 1.09%, 01/26/04 1,000 999
8 See financial notes. SCHWAB INSTITUTIONAL ADVANTAGE MONEY FUND(R)
ISSUER FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) + WESTPAC CAPITAL CORP. 1.10%, 02/05/04 1,900 1,898 1.10%, 03/24/04 1,000 997 *+ WINDMILL FUNDING CORP., SECTION 4(2) / 144A 1.10%, 02/04/04 1,000 999 ----------- 416,944 CERTIFICATES OF DEPOSIT 32.8% -------------------------------------------------------------------------- + ABBEY NATIONAL TREASURY SERVICES, PLC 1.09%, 01/06/04 4,000 4,000 ALLIANCE & LEICESTER, PLC 1.10%, 02/20/04 3,000 3,000 AMERICAN EXPRESS CENTURION BANK 1.08%, 02/02/04 3,000 3,000 BANK OF NOVA SCOTIA 1.10%, 03/24/04 4,000 4,000 BARCLAYS BANK, PLC 1.10%, 01/13/04 6,000 6,000 BAYERISCHE LANDESBANK GIROZENTRALE 1.30%, 03/26/04 3,000 3,000 BNP PARIBAS 1.10%, 02/06/04 3,000 3,000 1.10%, 03/25/04 6,000 6,000 1.50%, 11/19/04 5,000 5,000 CANADIAN IMPERIAL BANK OF COMMERCE 1.09%, 01/15/04 5,000 5,000 CITIBANK, N.A. 1.10%, 01/22/04 2,000 2,000 1.10%, 02/13/04 10,000 10,000 1.10%, 03/04/04 14,000 14,000 CREDIT AGRICOLE INDOSUEZ 1.08%, 02/02/04 1,000 1,000 1.11%, 04/14/04 3,000 3,001 CREDIT SUISSE FIRST BOSTON 1.09%, 03/16/04 7,000 7,000 DANSKE BANK A/S 1.10%, 03/03/04 1,000 1,000 DEPFA BANK, PLC 1.13%, 03/22/04 3,000 3,000 1.11%, 03/29/04 2,000 2,000 DEUTSCHE BANK, AG 1.40%, 09/03/04 7,000 7,000 1.41%, 10/15/04 5,000 5,000 1.42%, 10/27/04 5,000 5,000 FORTIS BANK 1.10%, 02/13/04 1,000 1,000 1.10%, 04/06/04 4,000 4,000 + HBOS TREASURY SERVICES, PLC 1.11%, 01/20/04 3,000 3,000 1.11%, 04/19/04 3,000 3,000 HSBC BANK, PLC 1.09%, 02/17/04 3,000 3,000 HSH NORDBANK, AG 1.08%, 02/09/04 1,000 1,000 ING BANK, NV 1.10%, 03/24/04 3,000 3,000 LANDESBANK BADEN WURTTEMBERG 1.10%, 01/30/04 4,000 4,000 1.10%, 02/26/04 5,000 5,000 LANDESBANK HESSEN-THURINGEN GIROZENTRALE 1.41%, 09/07/04 5,000 5,000 LLOYDS TSB BANK, PLC 1.10%, 04/02/04 6,000 6,000 NATIONWIDE BUILDING SOCIETY 1.10%, 02/04/04 5,000 5,000 NORDDEUTSCHE LANDESBANK GIROZENTRALE 1.38%, 09/03/04 2,000 2,000 NORDEA BANK FINLAND, PLC 1.09%, 02/04/04 4,000 4,000 1.08%, 02/24/04 3,000 3,000 RABOBANK NEDERLAND 1.37%, 08/26/04 2,000 1,999 ROYAL BANK OF SCOTLAND, PLC 1.08%, 01/14/04 5,000 5,000 1.08%, 02/06/04 4,000 4,000 SAN PAOLO IMI SPA 1.10%, 01/30/04 10,000 10,000 1.11%, 02/17/04 2,000 2,000 SOCIETE GENERALE 1.10%, 03/22/04 8,000 8,000 SVENSKA HANDELSBANKEN AB 1.08%, 01/08/04 4,000 4,000 1.08%, 01/21/04 1,000 1,000 1.10%, 03/19/04 1,000 1,000 TORONTO DOMINION BANK 1.08%, 03/02/04 6,000 6,000 1.10%, 03/26/04 1,000 1,000
See financial notes. 9 SCHWAB INSTITUTIONAL ADVANTAGE MONEY FUND(R) PORTFOLIO HOLDINGS continued
ISSUER FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) UBS, AG 1.32%, 08/04/04 2,000 2,000 1.38%, 08/26/04 10,000 9,999 UNICREDITO ITALIANO SPA 1.10%, 01/15/04 4,000 4,000 1.12%, 01/22/04 2,000 2,000 1.12%, 01/26/04 4,000 4,000 1.09%, 01/29/04 2,000 2,000 1.11%, 03/19/04 2,000 2,000 1.12%, 03/24/04 1,000 1,000 WASHINGTON MUTUAL BANK 1.11%, 02/09/04 4,000 4,000 WELLS FARGO BANK N.A. 1.08%, 01/07/04 10,000 10,000 WESTLB AG 1.10%, 01/09/04 1,000 1,000 1.05%, 01/14/04 3,000 3,000 1.26%, 04/02/04 2,000 2,000 1.34%, 04/14/04 1,000 1,000 WILMINGTON TRUST CO. 1.10%, 01/09/04 5,000 5,000 ----------- 250,999 BANK NOTES 3.1% -------------------------------------------------------------------------- BANK OF AMERICA, N.A. 1.10%, 03/15/04 2,000 2,000 1.08%, 04/15/04 15,000 15,000 LASALLE NATIONAL BANK, N.A. 1.10%, 02/09/04 3,000 3,000 STANDARD FEDERAL BANK, N.A. 1.10%, 01/30/04 4,000 4,000 ----------- 24,000 PROMISSORY NOTES 0.9% -------------------------------------------------------------------------- o THE GOLDMAN SACHS GROUP, INC. 1.22%, 02/05/04 1,000 1,000 1.18%, 03/04/04 2,000 2,000 1.19%, 03/23/04 1,000 1,000 1.45%, 08/27/04 3,000 3,000 ----------- 7,000 U.S. GOVERNMENT SECURITIES 2.3% of Net Assets DISCOUNT NOTES 2.3% -------------------------------------------------------------------------- FANNIE MAE 1.22%, 03/05/04 4,700 4,690 FREDDIE MAC 1.10%, 03/15/04 10,000 9,977 1.65%, 12/30/04 3,000 3,000 ----------- 17,667 VARIABLE-RATE OBLIGATIONS 5.9% of Net Assets + BMC SPECIAL CARE FACILITIES FINANCING AUTHORITY OF THE CITY OF MONTGOMERY, ALABAMA Taxable RB (Montgomery Baptist Outreach Services Corp. Project) Series 1997A 1.25%, 01/07/04 8,200 8,200 Taxable RB (Montgomery Baptist Outreach Services Corp. Project) Series 1997B 1.25%, 01/07/04 2,105 2,105 + BAYERISCHE LANDESBANK GIROZENTRALE 1.11%, 01/13/04 3,000 3,000 + CITY OF NEW BRITAIN, CONNECTICUT GO, 144A 1.27%, 01/07/04 4,900 4,900 + LOANSTAR ASSETS PARTNERS II, L.P., 144A 1.17%, 01/07/04 5,000 5,000 + MARTINEZ, CALIFORNIA M/F Housing Revenue Refunding Bond (Muirwood Garden Apartments) Series 2003A-T 1.25%, 01/07/04 2,800 2,800 + NEW YORK CITY IDA Taxable Industrial Revenue Refunding Bond (Allway Tools, Inc. Project) Series 1997 1.35%, 01/07/04 170 170
10 See financial notes. SCHWAB INSTITUTIONAL ADVANTAGE MONEY FUND(R)
ISSUER FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) + PALM SPRINGS, CALIFORNIA COP (Downtown Parking Project) Series 2002A 1.27%, 01/07/04 7,000 7,000 ROYAL BANK OF SCOTLAND, PLC 1.09%, 01/14/04 5,000 4,999 * SIGMA FINANCE, INC., SECTION 3C7 / 144A 1.14%, 01/05/04 5,000 5,000 1.12%, 01/16/04 2,000 2,000 ----------- 45,174
MATURITY AMOUNT SECURITY ($ x 1,000) OTHER INVESTMENTS 6.4% of Net Assets REPURCHASE AGREEMENTS 6.4% -------------------------------------------------------------------------------- CREDIT SUISSE FIRST BOSTON L.L.C. Tri-Party Repurchase Agreement Collateralized by U.S. Government Securities with a value of $49,585 1.02%, issued 12/31/03, due 01/02/04 48,615 48,612
END OF INVESTMENTS. For totals, please see the first page of holdings for this fund. AT DECEMBER 31, 2003, PORTFOLIO HOLDINGS INCLUDED ILLIQUID RESTRICTED SECURITIES AS FOLLOWS:
ISSUER COST/ RATE, ACQUISITION DATE, FACE AMOUNT VALUE MATURITY DATE ($ x 1,000) ($ x 1,000) THE GOLDMAN SACHS GROUP, INC. 1.22%, 08/05/03, 02/05/04 1,000 1,000 1.18%, 09/08/03, 03/04/04 2,000 2,000 1.19%, 09/23/03, 03/23/04 1,000 1,000 1.45%, 12/02/03, 08/27/04 3,000 3,000 ----------- 7,000
See financial notes. 11 SCHWAB INSTITUTIONAL ADVANTAGE MONEY FUND(R) Statement of ASSETS AND LIABILITIES As of December 31, 2003. All numbers x 1,000 except NAV. ASSETS --------------------------------------------------------------------------------- Investments, at value $810,396 a Receivables: Fund shares sold 2,821 Interest 679 Prepaid expenses + 38 ----------- TOTAL ASSETS 813,934 LIABILITIES --------------------------------------------------------------------------------- Payables: Fund shares redeemed 47,808 Dividends to shareholders 13 Investment adviser and administrator fees 10 Transfer agent and shareholder service fees 5 Accrued expenses + 68 ----------- TOTAL LIABILITIES 47,904 NET ASSETS --------------------------------------------------------------------------------- TOTAL ASSETS 813,934 TOTAL LIABILITIES - 47,904 ------------ NET ASSETS $766,030 NET ASSETS BY SOURCE Capital received from investors 766,031 Net realized capital losses (1) NET ASSET VALUE (NAV) SHARES NET ASSETS / OUTSTANDING = NAV $766,030 766,088 $1.00
Unless stated, all numbers x 1,000. a The amortized cost of the fund's securities was $810,396. Includes illiquid restricted securities worth $7,000, or 0.91% of the fund's total net assets. Also, includes other restricted but deemed liquid securities comprised of 144A, section 4(2) and 3c7 securities, worth $314,753 or 41.09% of the fund's total net assets. FEDERAL TAX DATA ---------------------------------------- COST BASIS OF PORTFOLIO $810,396 UNUSED CAPITAL LOSSES: Expires 12/31 of: Loss amount: 2004 $ 1
12 See financial notes. SCHWAB INSTITUTIONAL ADVANTAGE MONEY FUND(R) Statement of OPERATIONS For January 1, 2003 through December 31, 2003. All numbers x 1,000. INVESTMENT INCOME --------------------------------------------------------------------------------- Interest $10,982 EXPENSES --------------------------------------------------------------------------------- Investment adviser and administrator fees 3,350 a Transfer agent and shareholder service fees 1,940 b Trustees' fees 32 c Custodian and portfolio accounting fees 102 Professional fees 27 Registration fees 54 Shareholder reports 17 Other expenses + 14 ------------ Total expenses 5,536 Expense reduction - 1,128 d ------------ NET EXPENSES 4,408 INCREASE IN NET ASSETS FROM OPERATIONS --------------------------------------------------------------------------------- TOTAL INVESTMENT INCOME 10,982 NET EXPENSES - 4,408 ------------ NET INVESTMENT INCOME 6,574 ------------ INCREASE IN NET ASSETS FROM OPERATIONS $6,574
Unless stated, all numbers x 1,000. a Calculated on a graduated basis as a percentage of average daily net assets: 0.38% of the first $1 billion, 0.35% over $1 billion, 0.32% over $10 billion, 0.30% over $20 billion and 0.27% over $40 billion. b Calculated as a percentage of average daily net assets: for transfer agent services, 0.05% of the fund's assets; for shareholder services, 0.17% of the fund's assets. These fees are paid to Charles Schwab & Co. c For the fund's independent trustees only. d This reduction was made by the investment adviser (CSIM). It reflects a guarantee by CSIM and the transfer agent and shareholder service agent (Schwab) to limit the annual operating expenses of this fund through at least April 30, 2004, to 0.50% of average daily net assets. This limit doesn't include interest, taxes and certain non-routine expenses. See financial notes. 13 SCHWAB INSTITUTIONAL ADVANTAGE MONEY FUND(R) Statements of CHANGES IN NET ASSETS For the current and prior report periods. All numbers x 1,000.
OPERATIONS --------------------------------------------------------------------------------- 1/1/03-12/31/03 1/1/02-12/31/02 Net investment income $6,574 $12,097 --------------- ---------------- INCREASE IN NET ASSETS FROM OPERATIONS 6,574 12,097 DISTRIBUTIONS PAID --------------------------------------------------------------------------------- Dividends from net investment income 6,574 12,097 a TRANSACTIONS IN FUND SHARES b --------------------------------------------------------------------------------- Shares sold 638,868 810,966 Shares reinvested 6,495 12,003 Shares redeemed + (786,194) (712,969) --------------- ---------------- NET TRANSACTIONS IN FUND SHARES (140,831) 110,000 NET ASSETS --------------------------------------------------------------------------------- Beginning of period 906,861 796,861 Total increase or decrease + (140,831) 110,000 c --------------- --------------- END OF PERIOD $766,030 $906,861
Unless stated, all numbers x 1,000. a The tax-basis components of distributions are: b Because all transactions in this section took place at $1.00 per share, figures for share quantities are the same as for dollars. c Represents the changes in net assets from operations plus the changes in value of transactions in fund shares, minus distributions paid. CURRENT PERIOD Ordinary income $6,574 Long-term capital gain $-- PRIOR PERIOD Ordinary income $12,097 Long-term capital gains $--
14 See financial notes. SCHWAB RETIREMENT MONEY FUND(R) FINANCIAL STATEMENTS FINANCIAL HIGHLIGHTS
1/1/03- 1/1/02- 1/1/01- 1/1/00- 1/1/99- 12/31/03 12/31/02 12/31/01 12/31/00 12/31/99 ------------------------------------------------------------------------------------------------------------------------------------ PER-SHARE DATA ($) ------------------------------------------------------------------------------------------------------------------------------------ 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 0.04 0.06 0.05 ----------------------------------------------------------------------------- Less distributions: Dividends from net investment income (0.01) (0.01) (0.04) (0.06) (0.05) ----------------------------------------------------------------------------- Net asset value at end of period 1.00 1.00 1.00 1.00 1.00 ----------------------------------------------------------------------------- Total return (%) 0.58 1.30 3.75 5.90 4.68 RATIOS/SUPPLEMENTAL DATA (%) ------------------------------------------------------------------------------------------------------------------------------------ Ratios to average net assets: Net operating expenses 0.66 0.68 0.70 0.72 1 0.72 Gross operating expenses 0.66 0.68 0.70 0.72 0.74 Net investment income 0.58 1.28 3.61 5.77 4.62 Net assets, end of period ($ x 1,000,000) 578 566 515 399 322
1 The ratio of net operating expenses would have been 0.71% if certain non-routine expenses (proxy fees) had not been included. See financial notes. 15 SCHWAB RETIREMENT MONEY FUND(R) PORTFOLIO HOLDINGS as of December 31, 2003 This section shows all the securities in the fund's portfolio and their market value, as of the report date. We use the symbols below to designate certain characteristics: * Asset-backed security + Credit-enhanced security o Illiquid restricted security For fixed-rate obligations, the rate shown is the effective yield at the time of purchase, except for U.S. government agency coupon notes and U.S. Treasury notes, for which the rate shown is the interest rate (the rate established when the obligation was issued). For variable-rate obligations, the rate shown is the rate as of the report date. For variable-rate obligations with scheduled maturities greater than 397 days, the maturity shown is the later of the next interest rate change date or demand date. For variable-rate obligations with scheduled maturities less than 397 days, the maturity shown is the earlier of the next interest rate change date or demand date. For variable-rate obligations without demand features, the maturity shown is the next interest rate change date.
COST VALUE HOLDINGS BY CATEGORY ($x1,000) ($x1,000) -------------------------------------------------------------------------------- 87.3% FIXED-RATE OBLIGATIONS 504,279 504,279 1.9% U.S. GOVERNMENT SECURITIES 10,980 10,980 5.6% VARIABLE-RATE OBLIGATIONS 32,438 32,438 6.1% OTHER INVESTMENTS 35,179 35,179 -------------------------------------------------------------------------------- 100.9% TOTAL INVESTMENTS 582,876 582,876 (0.9)% OTHER ASSETS AND LIABILITIES (5,208) -------------------------------------------------------------------------------- 100.0% TOTAL NET INVESTMENTS 577,668
ISSUER FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) FIXED-RATE OBLIGATIONS 87.3% of Net Assets COMMERCIAL PAPER & OTHER CORPORATE OBLIGATIONS 53.9% -------------------------------------------------------------------------- AB SPINTAB 1.09%, 02/10/04 1,000 999 1.10%, 02/10/04 2,000 1,998 1.11%, 04/08/04 2,000 1,994 ALLIANCE & LEICESTER, PLC, SECTION 4(2) / 144A 1.09%, 01/14/04 2,000 1,999 * AMSTEL FUNDING CORP., SECTION 4(2) / 144A 1.09%, 02/12/04 2,000 1,997 *+ AQUINAS FUNDING, L.L.C., SECTION 4(2) / 144A 1.10%, 02/23/04 2,000 1,997 * ASAP FUNDING, LTD., SECTION 4(2) / 144A 1.12%, 01/30/04 4,000 3,996 *+ ASSET PORTFOLIO FUNDING CORP., SECTION 4(2) / 144A 1.09%, 01/09/04 1,000 1,000 1.10%, 01/13/04 1,000 1,000 *+ ASSET SECURITIZATION COOPERATIVE CORP., SECTION 4(2) / 144A 1.10%, 01/09/04 8,000 7,998 *+ ATLANTIS ONE FUNDING CORP., SECTION 4(2) / 144A 1.10%, 01/08/04 1,606 1,606 1.11%, 01/13/04 2,000 1,999 1.10%, 03/09/04 1,000 998 BANK OF AMERICA CORP. 1.14%, 05/06/04 10,000 9,960 BANK OF IRELAND, SECTION 4(2) / 144A 1.10%, 01/15/04 3,000 2,999 BEAR STEARNS COMPANIES, INC. 1.09%, 02/09/04 5,000 4,994 *+ BETA FINANCE, INC., SECTION 3C7 / 144A 1.11%, 01/12/04 1,600 1,599 1.13%, 03/10/04 1,000 998 1.13%, 03/22/04 1,500 1,496 + CBA (DELAWARE) FINANCE, INC. 1.10%, 01/27/04 1,300 1,299 1.10%, 02/17/04 1,100 1,098 * CC (USA), INC., SECTION 3C7 / 144A 1.10%, 02/03/04 2,000 1,998 1.12%, 03/18/04 2,500 2,494
16 See financial notes. SCHWAB RETIREMENT MONEY FUND(R)
ISSUER FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) CITICORP 1.09%, 02/12/04 2,000 1,997 CITIGROUP GLOBAL MARKETS HOLDINGS, INC. 1.08%, 01/06/04 3,000 3,000 1.09%, 01/26/04 4,000 3,997 *+ CLIPPER RECEIVABLES CORP., SECTION 4(2) / 144A 1.11%, 01/06/04 2,000 2,000 1.10%, 01/08/04 6,000 5,999 * CONCORD MINUTEMEN CAPITAL CO., L.L.C., SECTION 3C7 / 144A Series A 1.17%, 01/13/04 2,034 2,033 1.11%, 02/11/04 2,000 1,997 1.10%, 02/18/04 3,000 2,996 + CREDIT LYONNAIS N.A., INC. 1.09%, 03/05/04 2,000 1,996 * DAKOTA CP NOTES OF CITIBANK CREDIT CARD ISSUANCE TRUST, SECTION 4(2) / 144A 1.11%, 01/22/04 5,000 4,997 + DANSKE CORP. 1.10%, 04/01/04 2,000 1,995 DEN NORSKE BANK ASA 1.10%, 02/13/04 1,000 999 1.11%, 03/02/04 2,000 1,996 + DEXIA DELAWARE, L.L.C. 1.10%, 01/05/04 1,000 1,000 1.08%, 02/26/04 4,000 3,993 * DORADA FINANCE, INC., SECTION 3C7 / 144A 1.11%, 01/30/04 3,250 3,247 *+ EDISON ASSET SECURITIZATION CORP., L.L.C., SECTION 4(2) / 144A 1.11%, 03/12/04 5,000 4,989 * EIFFEL FUNDING, L.L.C., SECTION 4(2) / 144A 1.10%, 01/12/04 4,000 3,999 *+ FAIRWAY FINANCE CORP., SECTION 4(2) / 144A 1.06%, 01/08/04 3,698 3,697 1.10%, 02/17/04 2,000 1,997 *+ FALCON ASSET SECURITIZATION CORP., SECTION 4(2) / 144A 1.09%, 01/16/04 3,000 2,999 *+ GALAXY FUNDING, INC., SECTION 4(2) / 144A 1.10%, 01/26/04 5,000 4,996 1.10%, 03/15/04 3,000 2,993 1.09%, 03/29/04 1,000 997 + GE CAPITAL INTERNATIONAL FUNDING, INC., SECTION 4(2) / 144A 1.11%, 01/21/04 6,000 5,996 1.10%, 01/27/04 1,000 999 1.10%, 02/19/04 4,000 3,994 1.11%, 03/05/04 3,000 2,994 GE FINANCIAL ASSURANCE HOLDINGS, INC., SECTION 4(2) / 144A 1.09%, 01/30/04 1,000 999 GENERAL ELECTRIC CAPITAL CORP. 1.10%, 01/27/04 3,000 2,998 1.10%, 02/19/04 2,000 1,997 1.10%, 02/24/04 2,000 1,997 1.11%, 03/04/04 1,000 998 1.11%, 04/06/04 4,000 3,988 GENERAL ELECTRIC CAPITAL SERVICES 1.11%, 03/24/04 8,000 7,980 *+ GIRO FUNDING U.S. CORP., SECTION 4(2) / 144A 1.10%, 03/12/04 4,000 3,991 1.13%, 03/24/04 1,000 997 *+ GRAMPIAN FUNDING, LTD., SECTION 4(2) / 144A 1.11%, 02/25/04 2,000 1,997 * GREYHAWK FUNDING, L.L.C., SECTION 4(2) / 144A 1.12%, 01/20/04 3,000 2,998 *+ HATTERAS FUNDING CORP., SECTION 4(2) / 144A 1.05%, 01/06/04 2,000 2,000 + HBOS TREASURY SERVICES, PLC 1.10%, 02/19/04 1,000 999 1.11%, 03/05/04 2,000 1,996 HSBC U.S.A., INC. 1.09%, 01/27/04 1,000 999 *+ INDEPENDENCE FUNDING, L.L.C., SECTION 4(2) / 144A 1.10%, 01/15/04 2,000 1,999 + ING (U.S.) FUNDING, L.L.C. 1.10%, 03/05/04 3,000 2,994 IRISH LIFE & PERMANENT, PLC, SECTION 4(2) / 144A 1.11%, 03/05/04 1,000 998 J.P. MORGAN CHASE & CO. 1.10%, 02/10/04 4,000 3,995 *+ JUPITER SECURITIZATION CORP., SECTION 4(2) / 144A 1.09%, 01/12/04 1,000 1,000 1.12%, 01/20/04 2,000 1,999 1.10%, 03/01/04 2,000 1,996
See financial notes. 17 SCHWAB RETIREMENT MONEY FUND(R) PORTFOLIO HOLDINGS continued
ISSUER FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) + KBC FINANCIAL PRODUCTS INTERNATIONAL, LTD., SECTION 4(2) / 144A 1.10%, 01/14/04 2,000 1,999 *+ KITTY HAWK FUNDING CORP., SECTION 4(2) / 144A 1.10%, 02/10/04 4,000 3,995 1.10%, 03/16/04 1,000 998 + LANDESBANK SCHLESWIG-HOLSTEIN GIROZENTRALE, SECTION 4(2) / 144A 1.35%, 04/15/04 1,000 996 * LEXINGTON PARKER CAPITAL CO., L.L.C., SECTION 4(2) / 144A 1.11%, 01/12/04 2,119 2,118 1.09%, 01/26/04 2,000 1,999 *+ LINKS FINANCE, L.L.C., SECTION 3C7 / 144A 1.10%, 02/19/04 1,000 999 LLOYDS TSB BANK, PLC 1.11%, 03/09/04 1,000 998 * MANE FUNDING CORP., SECTION 4(2) / 144A 1.12%, 01/27/04 3,000 2,998 1.11%, 02/03/04 2,000 1,998 *+ MONT BLANC CAPITAL CORP., SECTION 4(2) / 144A 1.10%, 01/15/04 5,000 4,998 1.12%, 01/22/04 1,000 999 MORGAN STANLEY 1.08%, 02/23/04 13,000 12,979 * NEWCASTLE CERTIFICATES PROGRAM, SECTION 4(2) / 144A Series 2000A 1.11%, 01/16/04 2,000 1,999 1.10%, 03/10/04 1,000 998 + NORDEA NORTH AMERICA, INC. 1.09%, 01/14/04 3,000 2,999 *+ OLD LINE FUNDING CORP., SECTION 4(2) / 144A 1.09%, 01/07/04 1,000 1,000 1.10%, 01/15/04 2,000 1,999 1.11%, 01/21/04 4,000 3,998 1.11%, 02/17/04 1,118 1,116 * PARK AVENUE RECEIVABLES CORP., SECTION 4(2) / 144A 1.10%, 01/07/04 6,141 6,140 1.08%, 01/29/04 1,000 999 * PARK GRANADA, L.L.C., SECTION 4(2) / 144A 1.13%, 03/09/04 6,000 5,987 *+ PREFERRED RECEIVABLES FUNDING CORP., SECTION 4(2) / 144A 1.11%, 01/20/04 3,000 2,998 * RECEIVABLES CAPITAL CORP., SECTION 4(2) / 144A 1.10%, 01/09/04 4,981 4,980 ROYAL BANK OF SCOTLAND, PLC 1.12%, 01/27/04 1,500 1,499 * SCALDIS CAPITAL LTD., SECTION 4(2) / 144A 1.12%, 03/30/04 3,000 2,992 + SHELL FINANCE (UK), PLC 1.10%, 01/15/04 2,000 1,999 *+ SIGMA FINANCE, INC., SECTION 3C7 / 144A 1.10%, 02/02/04 4,000 3,996 1.11%, 02/13/04 2,000 1,997 1.14%, 02/13/04 3,000 2,996 1.14%, 03/11/04 1,000 998 *+ THUNDER BAY FUNDING, INC., SECTION 4(2) / 144A 1.10%, 01/13/04 2,000 1,999 1.10%, 01/16/04 2,000 1,999 *+ TICONDEROGA FUNDING, L.L.C., SECTION 4(2) / 144A 1.10%, 01/13/04 5,000 4,998 1.08%, 02/17/04 1,665 1,663 *+ TRIPLE-A ONE FUNDING CORP., SECTION 4(2) / 144A 1.10%, 01/05/04 2,000 2,000 *+ TULIP FUNDING CORP., SECTION 4(2) / 144A 1.09%, 01/21/04 1,000 999 1.10%, 01/23/04 7,542 7,537 + WESTPAC CAPITAL CORP. 1.10%, 02/12/04 1,000 999 1.10%, 03/24/04 1,000 997 + WESTPAC TRUST SECURITIES NZ 1.10%, 02/04/04 1,000 999 1.10%, 02/05/04 1,000 999 *+ WINDMILL FUNDING CORP., SECTION 4(2) / 144A 1.09%, 02/03/04 1,000 999 ----------- 311,275 CERTIFICATES OF DEPOSIT 29.4% -------------------------------------------------------------------------- ALLIANCE & LEICESTER, PLC 1.10%, 02/20/04 3,000 3,000 BANK OF NOVA SCOTIA 1.10%, 03/24/04 1,000 1,000 BARCLAYS BANK, PLC 1.12%, 03/17/04 1,000 1,000 1.10%, 04/19/04 3,000 3,002 BAYERISCHE LANDESBANK GIROZENTRALE 1.30%, 03/26/04 2,000 2,000
18 See financial notes. SCHWAB RETIREMENT MONEY FUND(R)
ISSUER FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) BNP PARIBAS 1.10%, 02/06/04 2,000 2,000 1.12%, 02/17/04 1,000 1,000 1.10%, 03/25/04 5,000 5,000 1.11%, 04/02/04 4,000 4,000 1.10%, 04/19/04 3,000 3,000 CITIBANK, N.A. 1.09%, 02/04/04 3,000 3,000 1.10%, 02/13/04 10,000 10,000 1.10%, 03/04/04 13,000 13,000 COMMONWEALTH BANK OF AUSTRALIA 1.10%, 01/13/04 4,000 4,000 CREDIT AGRICOLE INDOSUEZ 1.11%, 04/14/04 5,000 5,002 DANSKE BANK A/S 1.10%, 03/03/04 5,000 5,000 DEPFA BANK, PLC 1.13%, 03/22/04 3,000 3,000 1.11%, 03/29/04 2,000 2,000 DEUTSCHE BANK, AG 1.40%, 09/03/04 7,000 7,000 1.41%, 10/15/04 7,000 7,000 FIRST TENNESSEE BANK, N.A. 1.10%, 02/10/04 1,000 1,000 FORTIS BANK 1.10%, 04/06/04 2,000 2,000 + HBOS TREASURY SERVICES, PLC 1.11%, 01/20/04 3,000 3,000 HSBC BANK, PLC 1.09%, 02/11/04 2,000 2,000 1.09%, 02/17/04 3,000 3,000 HSH NORDBANK, AG 1.42%, 09/07/04 1,000 1,000 KBC BANK NV 1.10%, 01/20/04 3,000 3,000 LANDESBANK BADEN WURTTEMBERG 1.10%, 01/30/04 1,000 1,000 LANDESBANK HESSEN-THURINGEN GIROZENTRALE 1.30%, 02/03/04 1,000 1,000 1.51%, 11/19/04 3,000 3,000 NATIONWIDE BUILDING SOCIETY 1.10%, 02/04/04 5,000 5,000 ROYAL BANK OF SCOTLAND, PLC 1.08%, 01/14/04 2,000 2,000 1.08%, 02/06/04 2,000 2,000 SAN PAOLO IMI SPA 1.03%, 01/07/04 5,000 5,000 1.10%, 01/30/04 3,000 3,000 SOCIETE GENERALE 1.11%, 03/16/04 3,000 3,000 1.10%, 03/22/04 4,000 4,000 SVENSKA HANDELSBANKEN AB 1.08%, 01/08/04 4,000 4,000 TORONTO DOMINION BANK 1.08%, 03/02/04 2,000 2,000 1.11%, 04/02/04 3,000 3,000 UBS, AG 1.32%, 08/04/04 1,000 1,000 1.38%, 08/26/04 5,000 5,000 UNICREDITO ITALIANO SPA 1.10%, 01/15/04 3,000 3,000 1.12%, 01/26/04 5,000 5,000 1.11%, 01/29/04 1,000 1,000 1.11%, 03/19/04 2,000 2,000 WASHINGTON MUTUAL BANK 1.11%, 02/09/04 4,000 4,000 WELLS FARGO BANK N.A. 1.08%, 01/06/04 4,000 4,000 WESTLB AG 1.05%, 01/14/04 1,000 1,000 1.26%, 04/02/04 3,000 3,000 WILMINGTON TRUST CO. 1.10%, 01/09/04 4,000 4,000 ----------- 170,004 BANK NOTES 2.8% -------------------------------------------------------------------------- BANK OF AMERICA, N.A. 1.08%, 04/13/04 10,000 10,000 1.08%, 04/15/04 2,000 2,000 LASALLE NATIONAL BANK, N.A. 1.10%, 02/09/04 1,000 1,000 STANDARD FEDERAL BANK, N.A. 1.10%, 01/30/04 3,000 3,000 ----------- 16,000
See financial notes. 19 SCHWAB RETIREMENT MONEY FUND(R) PORTFOLIO HOLDINGS continued
ISSUER FACE AMOUNT VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) PROMISSORY NOTES 1.2% -------------------------------------------------------------------------- o THE GOLDMAN SACHS GROUP, INC. 1.22%, 02/05/04 2,000 2,000 1.18%, 03/09/04 1,000 1,000 1.19%, 03/23/04 4,000 4,000 ----------- 7,000 U.S. GOVERNMENT SECURITIES 1.9% of Net Assets -------------------------------------------------------------------------- DISCOUNT NOTES 1.9% -------------------------------------------------------------------------- FANNIE MAE 1.10%, 03/17/04 4,000 3,991 FREDDIE MAC 1.10%, 03/15/04 5,000 4,989 1.65%, 12/30/04 2,000 2,000 ----------- 10,980 VARIABLE-RATE OBLIGATIONS 5.6% of Net Assets -------------------------------------------------------------------------- + CALIFORNIA POLLUTION CONTROL FINANCING AUTHORITY Solid Waste Disposable RB (Burr Properties Project) Series 1998 1.75%, 01/07/04 1,835 1,835 + COLUMBUS, GEORGIA DEVELOPMENT AUTHORITY Taxable RB (Jay Leasing, Inc. Project) Series 1997 1.25%, 01/07/04 1,940 1,940 + EAGLE COUNTY, COLORADO TAXABLE HOUSING FACILITIES RB (BC Housing, L.L.C. Project) Series 1997B 1.14%, 01/07/04 1,500 1,500 LLOYDS TSB BANK, PLC 1.06%, 01/13/04 2,000 1,999 + LP PINEWOODS SPV 1.14%, 01/07/04 15,000 15,000 ROYAL BANK OF SCOTLAND, PLC 1.09%, 01/14/04 5,000 4,999 * SIGMA FINANCE, INC., SECTION 4(2) / 144A 1.12%, 01/16/04 3,000 3,000 + TRAP ROCK INDUSTRIES, INC. RB Series 1997, 144A 1.12%, 01/07/04 1,240 1,240 + VILLAGE OF STURTEVANT, WISCONSIN IDRB (Andis Co. Project) Series 1996B 1.32%, 01/07/04 925 925 ----------- 32,438
MATURITY AMOUNT VALUE SECURITY ($ x 1,000) ($ x 1,000) OTHER INVESTMENTS 6.1% of Net Assets -------------------------------------------------------------------------- REPURCHASE AGREEMENTS 6.1% -------------------------------------------------------------------------- CREDIT SUISSE FIRST BOSTON L.L.C. Tri-Party Repurchase Agreement Collateralized by U.S. Government Securities with a value of $35,885 1.02% issued 12/31/03, due 01/02/04 35,181 35,179
END OF INVESTMENTS. For totals, please see the first page of holdings for this fund. AT DECEMBER 31, 2003, PORTFOLIO HOLDINGS INCLUDED ILLIQUID RESTRICTED SECURITIES AS FOLLOWS:
ISSUER COST/ RATE, ACQUISITION DATE, FACE AMOUNT VALUE MATURITY DATE ($ x 1,000) ($ x 1,000) THE GOLDMAN SACHS GROUP, INC. 1.22%, 08/05/03, 02/05/04 2,000 2,000 1.18%, 09/09/03, 03/09/04 1,000 1,000 1.19%, 09/22/03, 03/23/04 4,000 4,000 ----------- 7,000
20 See financial notes. SCHWAB RETIREMENT MONEY FUND(R) Statement of ASSETS AND LIABILITIES As of December 31, 2003. All numbers x 1,000 except NAV. ASSETS ---------------------------------------------------------------------------------- Investments, at value $582,876 a Receivables: Fund shares sold 1,790 Interest 552 Prepaid expenses + 34 ------------ TOTAL ASSETS 585,252 LIABILITIES -------------------------------------------------------------------- ------------- Payables: Fund shares redeemed 7,505 Dividends to shareholders 4 Investment adviser and administrator fees 6 Transfer agent and shareholder service fees 4 Accrued expenses + 65 ------------ TOTAL LIABILITIES 7,584 NET ASSETS --------------------------------------------------------------------------------- TOTAL ASSETS 585,252 TOTAL LIABILITIES - 7,584 ------------ NET ASSETS $577,668 NET ASSETS BY SOURCE Capital received from investors 577,669 Net realized capital losses (1) NET ASSET VALUE (NAV) SHARES NET ASSETS / OUTSTANDING = NAV $577,668 577,726 $1.00
Unless stated, all numbers x 1,000. a The amortized cost of the fund's securities was $582,876. Includes illiquid restricted securities worth $7,000, or 1.21% of the fund's total net assets. Also, includes other restricted but deemed liquid securities comprised of 144A, section 4(2) and 3c7 securities, worth $216,791 or 37.53% of the fund's total net assets. FEDERAL TAX DATA ---------------------------------------- COST BASIS OF PORTFOLIO $582,876 UNUSED CAPITAL LOSSES: Expires 12/31 of: Loss amount: 2004 $1
See financial notes. 21 SCHWAB RETIREMENT MONEY FUND(R) Statement of OPERATIONS For January 1, 2003 through December 31, 2003. All numbers x 1,000. INVESTMENT INCOME --------------------------------------------------------------------------------- Interest $7,389 EXPENSES --------------------------------------------------------------------------------- Investment adviser and administrator fees 2,263 a Transfer agent and shareholder service fees 1,489 b Trustees' fees 32 c Custodian and portfolio accounting fees 75 Professional fees 24 Registration fees 27 Shareholder reports 31 Other expenses + 9 ---------- TOTAL EXPENSES 3,950 INCREASE IN NET ASSETS FROM OPERATIONS --------------------------------------------------------------------------------- TOTAL INVESTMENT INCOME 7,389 TOTAL EXPENSES - 3,950 ---------- NET INVESTMENT INCOME 3,439 ---------- INCREASE IN NET ASSETS FROM OPERATIONS $3,439
Unless stated, all numbers x 1,000. a Calculated on a graduated basis as a percentage of average daily net assets: 0.38% of the first $1 billion, 0.35% over $1 billion, 0.32% over $10 billion, 0.30% over $20 billion and 0.27% over $40 billion. b Calculated as a percentage of average daily net assets: for transfer agent services, 0.05% of the fund's assets; for shareholder services, 0.20% of the fund's assets. These fees are paid to Charles Schwab & Co. c For the fund's independent trustees only. 22 See financial notes. SCHWAB RETIREMENT MONEY FUND(R) Statements of CHANGES IN NET ASSETS For the current and prior report periods. All numbers x 1,000.
OPERATIONS --------------------------------------------------------------------------------- 1/1/03-12/31/03 1/1/02-12/31/02 Net investment income $3,439 $6,849 ------------------------------------- INCREASE IN NET ASSETS FROM OPERATIONS 3,439 6,849 DISTRIBUTIONS PAID --------------------------------------------------------------------------------- Dividends from net investment income 3,439 6,849 a TRANSACTIONS IN FUND SHARES b --------------------------------------------------------------------------------- Shares sold 449,661 449,315 Shares reinvested 3,396 6,808 Shares redeemed + (441,321) (405,628) ------------------------------------- NET TRANSACTIONS IN FUND SHARES 11,736 50,495 NET ASSETS --------------------------------------------------------------------------------- Beginning of period 565,932 515,437 Total increase + 11,736 50,495 c ------------------------------------- END OF PERIOD $577,668 $565,932
Unless stated, all numbers x 1,000. a The tax-basis components of distributions are: CURRENT PERIOD Ordinary income $3,439 Long-term capital gains $-- PRIOR PERIOD Ordinary income $6,849 Long-term capital gains $--
b Because all transactions in this section took place at $1.00 per share, figures for share quantities are the same as for dollars. c Represents the changes in net assets from operations plus the changes in value of transactions in fund shares, minus distributions paid. See financial notes. 23 SCHWAB INSTITUTIONAL ADVANTAGE MONEY FUND AND SCHWAB RETIREMENT MONEY FUND FINANCIAL NOTES BUSINESS STRUCTURE OF THE FUNDS EACH OF THE FUNDS DISCUSSED IN THIS REPORT IS A SERIES OF THE CHARLES SCHWAB FAMILY OF FUNDS(TM), A NO-LOAD, OPEN-END MANAGEMENT INVESTMENT COMPANY. The company is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended. The sidebar shows the funds in this report and their trust. THE FUNDS OFFER ONE SHARE CLASS. For these funds, shares are bought and sold at $1.00 per share. Each share has a par value of 1/1,000 of a cent, and the trust may issue as many shares as necessary. FUND OPERATIONS Most of the funds' investments are described in the fund-by-fund sections earlier in this report. However, there are certain other investments and policies that may affect a fund's financials. The most significant of these are described below. Other policies concerning the funds' business operations also are described here. THE FUNDS DECLARE DIVIDENDS EVERY DAY THEY ARE OPEN FOR BUSINESS. These dividends, which are equal to a fund's net investment income for that day, are paid out to shareholders once a month. The funds may make distributions from any net realized capital gains once a year. THE FUNDS MAY BUY SECURITIES ON A DELAYED-DELIVERY BASIS. In these transactions, a fund agrees to buy a security for a stated price, with settlement generally occurring within two weeks. If the security's value falls before settlement occurs, a fund could end up paying more for the security than its market value at the time of settlement. The funds have set aside sufficient securities as collateral for those securities bought on a delayed-delivery basis. THE FUNDS MAY ENTER INTO REPURCHASE AGREEMENTS. In a repurchase agreement, a fund buys a security from another party (usually a financial institution) with the agreement that it be sold back in the future. The date, price and other conditions are all specified when the agreement is created. Any repurchase agreements with due dates later than seven days from issue dates may be subject to seven day put features for liquidity purposes. The funds' repurchase agreements will be fully collateralized by U.S. government securities. All collateral is held by the funds' custodian (or, with tri-party agreements, the agent's bank) and is monitored daily to ensure that its market value is at least equal to the repurchase price under the agreement. THE FUNDS PAY FEES TO AFFILIATES OF THE INVESTMENT ADVISER FOR VARIOUS SERVICES. Through their trust, the funds have agreements with Charles Schwab Investment Management, Inc. (CSIM) to provide investment advisory and administrative services and with Charles Schwab & Co., Inc. (Schwab) to provide transfer agent and shareholder services. THE TRUST AND ITS FUNDS This list shows all of the funds included in The Charles Schwab Family of Funds. The funds discussed in this report are highlighted. THE CHARLES SCHWAB FAMILY OF FUNDS organized October 20, 1989 Schwab Money Market Fund Schwab Government Money Fund Schwab U.S. Treasury Money Fund Schwab Value Advantage Money Fund(R) Schwab Municipal Money Fund Schwab California Municipal Money Fund Schwab New York Municipal Money Fund Schwab New Jersey Municipal Money Fund Schwab Pennsylvania Municipal Money Fund Schwab Florida Municipal Money Fund Schwab Massachusetts Municipal Money Fund Schwab Institutional Advantage Money Fund(R) Schwab Retirement Money Fund(R) Schwab Government Cash Reserves 24 SCHWAB INSTITUTIONAL ADVANTAGE MONEY FUND AND SCHWAB RETIREMENT MONEY FUND Although these agreements specify certain fees for these services, CSIM and Schwab have made additional agreements with the funds that may limit the total expenses charged. The rates and limitations for these fees vary from fund to fund, and are described in each fund's Statement of Operations. THE FUNDS MAY ENGAGE IN CERTAIN TRANSACTIONS INVOLVING AFFILIATES. The funds may make direct transactions with certain other SchwabFunds(R) when practical. When one fund is seeking to sell a security that another is seeking to buy, an interfund transaction can allow both funds to benefit by reducing transaction costs. This practice is limited to funds that share the same investment adviser, trustees and officers. Pursuant to an exemptive order issued by the SEC, the funds may enter into interfund borrowing and lending transactions within the SchwabFunds(R). All loans are for temporary or emergency purposes only. The interest rate charged on the loan is the average of the overnight repurchase agreement rate and the short-term bank loan rate. The interfund lending facility is subject to the oversight and periodic review of the Board of Trustees of the SchwabFunds(R). TRUSTEES MAY INCLUDE PEOPLE WHO ARE OFFICERS AND/OR DIRECTORS OF THE INVESTMENT ADVISER OR SCHWAB. Federal securities law limits the percentage of such "interested persons" who may serve on a trust's board, and the trust was in compliance with these limitations throughout the report period. The trust did not pay any of these persons for their service as trustees, but it did pay non-interested persons (independent trustees), as noted in each fund's Statement of Operations. THE FUNDS MAY BORROW MONEY FROM BANKS AND CUSTODIANS. The funds may obtain temporary bank loans through the trust to which they belong, to use for meeting shareholder redemptions or for extraordinary or emergency purposes. The trusts have custodian overdraft facilities and line of credit arrangements of $150 million and $100 million with PNC Bank, N.A. and Bank of America, N.A., respectively. The funds pay interest on the amounts they borrow at rates that are negotiated periodically. THE FUNDS INTEND TO MEET FEDERAL INCOME AND EXCISE TAX REQUIREMENTS FOR REGULATED INVESTMENT COMPANIES. Accordingly, the funds distribute substantially all of their net investment income and net realized capital gains (if any) to their respective shareholders each year. As long as a fund meets the tax requirements, it is not required to pay federal income tax. UNDER THE FUNDS' ORGANIZATIONAL DOCUMENTS, ITS OFFICERS AND TRUSTEES ARE INDEMNIFIED AGAINST CERTAIN LIABILITY ARISING OUT OF THE PERFORMANCE OF THEIR DUTIES TO THE FUNDS. In addition, in the normal course of business the funds enter into contracts with their vendors and others that provide general indemnifications. The funds' maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the funds. However, based on experience, the funds expect the risk of loss to be remote. Accounting Policies The following are the main policies the funds use in preparing their financial statements. THE FUNDS VALUE THEIR SECURITIES AT AMORTIZED COST, which approximates market value. SECURITY TRANSACTIONS are recorded as of the date the order to buy or sell the security is executed. 25 SCHWAB INSTITUTIONAL ADVANTAGE MONEY FUND AND SCHWAB RETIREMENT MONEY FUND INTEREST INCOME is recorded as it accrues. If a fund bought a debt instrument at a discount (that is, for less than its face value) or a premium (more than face value), it amortizes the discount or premium from the current date up to maturity. The fund then increases (in the case of discounts) or reduces (in the case of premiums) the income it records from the security. If the security is callable (meaning that the issuer has the option to pay it off before its maturity date), then the fund amortizes the premium to the security's call date and price, rather than the maturity date and price. REALIZED GAINS AND LOSSES from security transactions are based on the identified costs of the securities involved. EXPENSES that are specific to a fund or a class are charged directly to that fund or class. Expenses that are common to all funds within the trust generally are allocated among the funds in proportion to their average daily net assets. EACH FUND MAINTAINS ITS OWN ACCOUNT FOR PURPOSES OF HOLDING ASSETS AND ACCOUNTING, and is considered a separate entity for tax purposes. Within its account, each fund also keeps certain assets in segregated accounts, as may be required by securities law. THE ACCOUNTING POLICIES DESCRIBED ABOVE CONFORM WITH ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES OF AMERICA. Notwithstanding this, shareholders should understand that in order to follow these principles, fund management has to make estimates and assumptions that affect the information reported in the financial statements. It's possible that once the results are known, they may turn out to be different from these estimates. 26 REPORT OF INDEPENDENT AUDITORS TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF: Schwab Institutional Advantage Money Fund(R) and Schwab Retirement Money Fund(R) In our opinion, the accompanying statements of assets and liabilities, including the portfolio holdings, 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 Schwab Institutional Advantage Money Fund and Schwab Retirement Money Fund (two of the portfolios constituting The Charles Schwab Family of Funds, hereafter referred to as the "Funds") at December 31, 2003, 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 five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and the financial highlights (hereafter referred to as "financial statements") are the responsibility of the Funds' 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 auditing standards generally accepted in the United States of America, 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, 2003 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. PRICEWATERHOUSECOOPERS LLP San Francisco, CA February 6, 2004 27 SCHWAB INSTITUTIONAL ADVANTAGE MONEY FUND(R) AND SCHWAB RETIREMENT MONEY FUND(R) FUND TRUSTEES A fund's Board of Trustees is responsible for protecting the interests of that fund's shareholders. The tables below give information about the people who serve as trustees and officers for the SchwabFunds(R), including the funds covered in this report. Trustees remain in office until they resign, retire or are removed by shareholder vote.1 Under the Investment Company Act of 1940, any officer, director, or employee of Schwab or CSIM is considered an "interested person," meaning that he or she is considered to have a business interest in Schwab or CSIM. These individuals are listed as "interested trustees." The "independent trustees" are individuals who, under the 1940 Act, are not considered to have a business interest in Schwab or CSIM. Each of the SchwabFunds (of which there were 49 as of 12/31/03) belongs to one of these trusts: The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust or Schwab Annuity Portfolios. Currently all these trusts have the same trustees and officers. The address for all trustees and officers is 101 Montgomery Street, San Francisco, CA 94104. You can find more information about the trustees and officers in the Statement of Additional Information, which is available free by calling 1-800-435-4000. INDIVIDUALS WHO ARE INTERESTED TRUSTEES AND OFFICERS OF THE TRUST
TRUST POSITION(S); NAME AND BIRTHDATE TRUSTEE SINCE MAIN OCCUPATIONS AND OTHER DIRECTORSHIPS AND AFFILIATIONS ------------------------------------------------------------------------------------------------------------------------------- CHARLES R. SCHWAB 2 Chair, Trustee: Chair, Director, The Charles Schwab Corp.; CEO, Director, Schwab 7/29/37 Family of Funds, 1989; Holdings, Inc.; Chair, Director, Charles Schwab & Co., Inc.; Charles Investments, 1991; Schwab Investment Management, Inc.; Chair, Charles Schwab Capital Trust, 1993; Holdings, Inc. I, Schwab International Holdings, Inc.; Director, U.S. Annuity Portfolios, 1994. Trust Corp., United States Trust Co. of New York, The Gap, Inc. (clothing retailer), Siebel Systems (software); Trustee, Stanford University. Until 6/03: Director, Xsign, Inc. (electronic payment systems). Until 5/03: Co-Chair, The Charles Schwab Corporation. Until 5/02: Director, Vodafone AirTouch PLC (telecom). Until 3/02: Director, Audiobase, Inc. (Internet audio solutions). Until 7/01: Director, The Charles Schwab Trust Company. Until 1/99: Director, Schwab Retirement Plan Services, Inc., Mayer & Schweitzer, Inc. (securities brokerage subsidiary of The Charles Schwab Corp.), Performance Technologies, Inc. (technology), TrustMark, Inc.
1 The SchwabFunds retirement policy requires that independent trustees elected after January 1, 2000 retire at age 72 or after twenty years of service as a trustee, whichever comes first. Independent trustees elected prior to January 1, 2000 will retire on the following schedule: Messrs. Holmes and Dorward will retire on December 31, 2007, and Messrs. Stephens and Wilsey will retire on December 31, 2010. 2 In addition to their positions with the investment adviser and the distributor, Ms. Lepore and Messrs. Schwab and Lyons, as well as some of Mr. Lyons's immediate family members, also own stock of The Charles Schwab Corporation. 28 SCHWAB INSTITUTIONAL ADVANTAGE MONEY FUND(R) AND SCHWAB RETIREMENT MONEY FUND(R) INDIVIDUALS WHO ARE INTERESTED TRUSTEES BUT NOT OFFICERS OF THE TRUST
NAME AND BIRTHDATE TRUSTEE SINCE MAIN OCCUPATIONS AND OTHER DIRECTORSHIPS AND AFFILIATIONS ---------------------------------------------------------------------------------------------------------------------- DAWN G. LEPORE 1 Trustee:2003 Vice Chair, EVP, The Charles Schwab Corp.; Until 10/01: CIO, The 3/21/54 (all trusts) Charles Schwab Corporation. Until 1999: EVP, The Charles Schwab Corporation. Director, Wal-Mart Stores, eBay, Inc. ---------------------------------------------------------------------------------------------------------------------- JEFFREY M. LYONS 1 Trustee: 2002 EVP, Asset Management Products and Services, Charles Schwab & 2/22/55 (all trusts). Co., Inc. Until 9/01: EVP, Mutual Funds, Charles Schwab & Co., Inc.
INDIVIDUALS WHO ARE OFFICERS OF THE TRUST BUT NOT TRUSTEES
NAME AND BIRTHDATE TRUST OFFICE(S) HELD MAIN OCCUPATIONS AND OTHER DIRECTORSHIPS AND AFFILIATIONS ---------------------------------------------------------------------------------------------------------------------- RANDALL W. MERK President, CEO President, CEO, Charles Schwab Investment Management, Inc; 7/25/54 (all trusts). EVP, Charles Schwab & Co., Inc.; Director, Charles Schwab Worldwide Funds PLC, Charles Schwab Asset Management (Ireland) Ltd. Until 9/02: President, CIO, American Century Investment Management; Director, American Century Cos., Inc. Until 6/01: CIO, Fixed Income, American Century Cos., Inc. Until 1997: SVP, Director, Fixed Income and Quantitative Equity Portfolio Management, Twentieth Century Investors, Inc. ---------------------------------------------------------------------------------------------------------------------- TAI-CHIN TUNG Treasurer, Principal SVP, CFO, Charles Schwab Investment Management, Inc.; VP, 3/7/51 Financial Officer The Charles Schwab Trust Co.; Director, Charles Schwab Asset (all trusts). Management (Ireland) Ltd., Charles Schwab Worldwide Funds PLC. ---------------------------------------------------------------------------------------------------------------------- STEPHEN B. WARD SVP, Chief Investment SVP, Chief Investment Officer, Director, Charles Schwab Investment 4/5/55 Officer Management, Inc.; CIO, The Charles Schwab Trust Co. (all trusts). ---------------------------------------------------------------------------------------------------------------------- KOJI E. FELTON Secretary SVP, Chief Counsel, Assistant Corporate Secretary, Charles Schwab 3/13/61 (all trusts). Investment Management, Inc. Until 6/98: Branch Chief in Enforcement, U.S. Securities and Exchange Commission, San Francisco.
1 In addition to their positions with the investment adviser and the distributor, Ms. Lepore and Messrs. Schwab and Lyons, as well as some of Mr. Lyons's immediate family members, also own stock of The Charles Schwab Corporation. 29 SCHWAB INSTITUTIONAL ADVANTAGE MONEY FUND(R) AND SCHWAB RETIREMENT MONEY FUND(R) INDIVIDUALS WHO ARE INDEPENDENT TRUSTEES
NAME AND BIRTHDATE TRUSTEE SINCE MAIN OCCUPATIONS AND OTHER DIRECTORSHIPS AND AFFILIATIONS ---------------------------------------------------------------------------------------------------------------------- MARIANN BYERWALTER 2000 (all trusts). Chair, JDN Corp. Advisory LLC; Trustee, Stanford University, 8/13/60 Director, America First Cos., (venture capital/fund management), Redwood Trust, Inc. (mortgage finance), Stanford Hospitals and Clinics, SRI International (research), PMI Group, Inc. (mortgage insurance), Lucile Packard Children's Hospital. 2001: Special Advisor to the President, Stanford University. Until 2002: Director, LookSmart, Ltd. (Internet infrastructure). Until 2001: VP, Business Affairs, CFO, Stanford University. ---------------------------------------------------------------------------------------------------------------------- DONALD F. DORWARD Family of Funds, 1989; CEO, Dorward & Associates (management, marketing and 9/23/31 Investments, 1991; communications consulting). Until 1999: EVP, Managing Capital Trust, 1993; Director, Grey Advertising. Annuity Portfolios, 1994. ---------------------------------------------------------------------------------------------------------------------- WILLIAM A. HASLER 2000 (all trusts). Co-CEO, Aphton Corp. (bio-pharmaceuticals). Director, 11/22/41 Non-Executive Chairman, Solectron Corp. (manufacturing), Airlease Ltd. (aircraft leasing), Mission West Properties (commercial real estate), Stratex Networks (telecommunications); Public Governor, Member, executive committee, Pacific Stock & Options Exchange. Director, Digital Microwave Corp. (network equipment). Until 1998: Dean, Haas School of Business, University of California, Berkeley. ---------------------------------------------------------------------------------------------------------------------- ROBERT G. HOLMES Family of Funds, 1989; Chair, CEO, Director, Semloh Financial, Inc. (international 5/15/31 Investments, 1991; financial services and investment advice). Capital Trust, 1993; Annuity Portfolios, 1994. ---------------------------------------------------------------------------------------------------------------------- GERALD B. SMITH 2000 (all trusts). Chair, CEO, Founder, Smith Graham & Co. (investment advisors); 9/28/50 Director, Pennzoil-Quaker State Co. (oil and gas), Rorento N.V. (investments -- Netherlands), Cooper Industries (electrical products); Member, audit committee, Northern Border Partners, L.P. (energy). ---------------------------------------------------------------------------------------------------------------------- DONALD R. STEPHENS Family of Funds, 1989; Managing Partner, D.R. Stephens & Co. (investments). Until 6/28/38 Investments, 1991; 1996: Chair, CEO, North American Trust (real estate Capital Trust, 1993; investments). Annuity Portfolios, 1994. ---------------------------------------------------------------------------------------------------------------------- MICHAEL W. WILSEY Family of Funds, 1989; Chair, CEO, Wilsey Bennett, Inc. (transportation, real estate 8/18/43 Investments, 1991; and investments). Capital Trust, 1993; Annuity Portfolios, 1994.
30 SCHWAB INSTITUTIONAL ADVANTAGE MONEY FUND(R) AND SCHWAB RETIREMENT MONEY FUND(R) GLOSSARY AGENCY DISCOUNT NOTES Notes issued by federal agencies -- known as Government Sponsored Enterprises, or GSEs -- at a discount to their value at maturity. An agency discount note is a short-term investment alternative offering a high degree of credit quality. ALTERNATIVE MINIMUM TAX (AMT) A federal income tax designed to limit the extent to which high-income taxpayers (including individuals, estates, trusts and corporations) can benefit from certain deductions and exemptions. For example, some types of income that are exempt from regular federal income tax are not exempt from the AMT. ASSET-BACKED SECURITY A bond or other debt security that represents ownership in a pool of debt obligations such as credit card debt. BOND A security representing a loan from the investor to the issuer. A bond typically pays interest at a fixed rate (the "coupon rate") until a specified date (the "maturity date"), at which time the issuer returns the money borrowed ("principal" or "face value") to the bondholder. Because of their structure, bonds are sometimes called "fixed income securities" or "debt securities." BOND ANTICIPATION NOTES Obligations sold by a municipality on an interim basis in anticipation of the municipality's issuance of a longer-term bond in the future. CAPITAL GAIN, CAPITAL LOSS The difference between the amount paid for an investment and its value at a later time. If the investment has been sold, the capital gain or loss is considered a realized gain or loss. If the investment is still held, the gain or loss is still "on paper" and is considered unrealized. COMMERCIAL PAPER Promissory notes issued by banks, corporations, state and local governments and other entities to finance short-term credit needs. These securities generally are structured on a discounted basis but sometimes may be interest-bearing notes. Commercial paper, which may be unsecured, is subject to credit risk. CREDIT-ENHANCED SECURITY A security that is backed by the credit of an entity other than the issuer (such as a financial institution). Credit enhancements, which can equal up to 100% of the security's value, are designed to help lower the risk of default on a security and may also make the security more liquid. CREDIT QUALITY The capacity of an issuer to make its interest and principal payments. Federal regulations strictly limit the credit quality of the securities a money market fund can buy. CREDIT RATINGS Debt issuers, including corporations, states and municipalities, may arrange with a recognized independent rating organization, such as Moody's Investor Service, Standard & Poor's and Fitch, Inc., to rate their creditworthiness and/or the creditworthiness of their debt issues. For example, an issuer may obtain a long-term rating within the investment grade rating category, which is, from high to low, AAA, AA, A and BBB for Standard & Poor's and Fitch, and Aaa, Aa, A and Baa for Moody's. CREDIT RISK The risk that a debt issuer may be unable to pay interest or principal to its debtholders. DOLLAR-WEIGHTED AVERAGE MATURITY (DWAM) See weighted average maturity. EFFECTIVE YIELD A measurement of a fund's yield that assumes that all dividends were reinvested in additional shares of the fund. PORTFOLIO TERMS To help reduce the space occupied by the portfolio holdings, we use the following terms. Most of them appear within descriptions of individual securities in municipal funds, and describe features of the issuer or the security. Some of these are more fully defined elsewhere in the Glossary. ACES Adjustable convertible extendable security BAN Bond anticipation note COP Certificate of participation GAN Grant anticipation note GO General obligation HDA Housing Development Authority HFA Housing Finance Agency IDA Industrial Development Authority IDB Industrial Development Board IDRB Industrial Development Revenue Bond M/F Multi-family RAN Revenue anticipation note RB Revenue bond S/F Single-family TAN Tax anticipation note TECP Tax-exempt commercial paper TOB Tender option bond TOBP Tender option bond partnership TRAN Tax and revenue anticipation note VRD Variable-rate demand 31 SCHWAB INSTITUTIONAL ADVANTAGE MONEY FUND(R) AND SCHWAB RETIREMENT MONEY FUND(R) EXPENSE RATIO The amount that is taken from a mutual fund's assets each year to cover the fund's operating expenses. An expense ratio of 0.50% means that a fund's expenses amount to half of one percent of its average net assets a year. FACE VALUE The value of a bond, note, mortgage or other security as given on the certificate or instrument. Face value is also referred to as par value or nominal value. ILLIQUID SECURITIES A security is generally considered illiquid if it cannot be disposed of promptly (typically within seven days) and in the ordinary course of business at approximately the amount at which a fund has valued the instrument. INTEREST Payments to holders of debt securities as compensation for loaning a security's principal to the issuer. LIQUIDITY-ENHANCED SECURITY A security that when tendered is paid from funds advanced by an entity other than the issuer (such as a large financial institution). Liquidity enhancements are often used on variable-rate securities where the portfolio manager has an option to tender the securities prior to their final maturity. MATURITY Generally, the date a debt security is scheduled to be "retired" and its principal amount returned to the bondholder. MONEY MARKET SECURITIES High-quality, short-term debt securities that may be issued by entities such as the U.S. government, corporations and financial institutions (such as banks). Money market securities include commercial paper, promissory notes, certificates of deposit, banker's acceptances, notes and time deposits. MUNICIPAL SECURITIES Debt securities issued by a state, its counties, municipalities, authorities and other subdivisions, or the territories and possessions of the United States and the District of Columbia, including their subdivisions, agencies and instrumentalities and corporations. These securities may be issued to obtain money for various public purposes, including the construction of a wide range of public facilities such as airports, bridges, highways, housing, hospitals, mass transportation, public utilities, schools, streets, and water and sewer works. NET ASSET VALUE PER SHARE (NAV) The value of one share of a mutual fund. NAV is calculated by taking the fund's total assets, subtracting liabilities, and dividing by the number of shares outstanding. Money funds seek to maintain a steady NAV of $1.00. OUTSTANDING SHARES, SHARES OUTSTANDING When speaking of a company or mutual fund, indicates all shares currently held by investors. RESTRICTED SECURITIES A security that is subject to contractual restrictions on resale and may be sold only to "qualified institutional buyers" under Securities Act Rule 144A. These securities are often purchased in private placement transactions. REVENUE ANTICIPATION NOTES Obligations that are issued in expectation of the receipt of revenue, such as income taxes, property taxes, etc. SECTION 3C7 SECURITIES Section 3c7 of the Investment Company Act of 1940 (the "1940 Act") exempts certain issuers from many regulatory requirements applicable to investment companies under the 1940 Act. An issuer whose outstanding securities are exclusively owned by "qualified purchasers" and who is not making or proposing to make a public offering of the securities may qualify for this exemption. SECTION 4(2)/144A SECURITIES A security exempt from registration under Section 4(2) of the Securities Act of 1933. It may be sold only to qualified institutional buyers under Securities Act Rule 144A. TAXABLE-EQUIVALENT YIELD The yield an investor would need to get from a taxable investment in order to match the yield paid by a given tax-exempt investment, once the effect of all applicable taxes is taken into account. For example, if your tax rate were 25%, a tax-exempt investment paying 4.5% would have a taxable-equivalent yield for you of 6.0% (4.5% / [1 - 0.25%] = 6.0%). TOTAL RETURN The percentage that an investor would have earned or lost on an investment in the fund assuming dividends and distributions were reinvested. TAX ANTICIPATION NOTES Notes that typically are sold to finance the cash flow needs of municipalities in anticipation of the receipt of taxes on a future date. TIER 1, TIER 2 Tier 1 is the highest category of credit quality, Tier 2 the second highest. A security's tier can be established either by an independent rating organization or by a determination of the investment adviser. Money market fund shares and U.S. government securities are automatically considered Tier 1 securities. WEIGHTED AVERAGE MATURITY For mutual funds, the maturity of all the debt securities in its portfolio, calculated as a weighted average. As a rule, the longer a fund's weighted average maturity, the greater its interest rate risk. Money funds are required to maintain a weighted average maturity of no more than 90 days. YIELD The income paid out by an investment, expressed as an annual rate and calculated as a percentage of the investment's market value. 32 CONTACT SCHWAB SchwabFunds(R) offers you a complete family of mutual funds, each one based on a clearly defined investment approach and using disciplined management strategies. Actively managed funds include multi-manager stock funds, a fund that uses long-short strategies, and a range of taxable and tax-free bond funds. Index funds include large-cap, small-cap and international stock funds. The list at right shows all currently available SchwabFunds. Whether you're an experienced investor or just starting out, SchwabFunds can help you achieve your financial goals. Please call 1-800-435-4000 for a prospectus and brochure for any SchwabFund. Please read the prospectus carefully before you invest. This report must be preceded or accompanied by a current prospectus. METHODS FOR PLACING ORDERS The following information outlines how Schwab investors can place orders. If you are investing through a third-party investment provider, methods for placing orders may be different. INTERNET 1 www.schwab.com SCHWAB BY PHONE(TM) 2 Use our automated voice service or speak to a representative. Call 1-800-435-4000, day or night (for TDD service, call 1-800-345-2550). TELEBROKER(R) Automated touch-tone phone service at 1-800-272-4922. MAIL Write to SchwabFunds at: P.O. Box 3812 Englewood, CO 80155-3812 When selling or exchanging shares, be sure to include the signatures of at least one of the persons whose name is on the account. 1 Shares of Sweep Investments(TM) may not be purchased directly over the Internet. 2 Orders placed in person or through a telephone representative may be subject to a service fee payable to Schwab. THE SCHWABFUNDS FAMILY(R) STOCK FUNDS Schwab S&P 500 Fund Schwab 1000 Fund(R) Schwab Small-Cap Index Fund(R) Schwab Total Stock Market Index Fund(R) Schwab International Index Fund(R) Schwab Core Equity Fund(TM) Schwab Dividend Equity Fund(TM) Schwab Small-Cap Equity Fund(TM) Schwab Hedged Equity Fund(TM) Schwab Focus Funds Communications Focus Fund Financial Services Focus Fund Health Care Focus Fund Technology Focus Fund Schwab MarketMasters Funds(TM) Schwab U.S. MarketMasters Fund(TM) Schwab Small-Cap MarketMasters Fund(TM) Schwab International MarketMasters Fund(TM) Schwab Balanced MarketMasters Fund(TM) ASSET ALLOCATION FUNDS Schwab MarketTrack Portfolios(R) Schwab MarketTrack All Equity Portfolio(TM) Schwab MarketTrack Growth Portfolio(TM) Schwab MarketTrack Balanced Portfolio(TM) Schwab MarketTrack Conservative Portfolio(TM) BOND FUNDS Schwab YieldPlus Fund(R) Schwab Short-Term Bond Market Fund(TM) Schwab Total Bond Market Fund(TM) Schwab GNMA Fund(TM) Schwab Short/Intermediate Tax-Free Bond Fund(TM) Schwab Long-Term Tax-Free Bond Fund(TM) Schwab California Short/Intermediate Tax-Free Bond Fund(TM) Schwab California Long-Term Tax-Free Bond Fund(TM) SCHWAB MONEY FUNDS Schwab offers an array of money market funds that seek high current income consistent with safety and liquidity.3 Choose from taxable or tax-advantaged alternatives. Many can be linked to your Schwab account to "sweep" cash balances automatically, subject to availability, when you're between investments. Or, for your larger cash reserves, choose one of our Value Advantage Investments(R). 3 Investments in money market funds are neither insured nor guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency and, although they seek to preserve the value of your investment at $1 per share, it is possible to lose money. [CHARLES SCHWAB LOGO] INVESTMENT ADVISER Charles Schwab Investment Management, Inc. 101 Montgomery Street, San Francisco, CA 94104 DISTRIBUTOR SchwabFunds(R) P.O. Box 3812, Englewood, CO 80155-3812 This report is not authorized for distribution to prospective investors unless preceded or accompanied by a current prospectus. (C) 2004 Charles Schwab & Co., Inc. All rights reserved. Member SIPC/NYSE. Printed on recycled paper. REG13860-06 ITEM 2: CODE OF ETHICS. (a) Registrant has adopted a code of ethics that applies to its principal executive officer, principal financial officer, and any other officers who serve a similar function. (c) During the period covered by the report, no amendments were made to the provisions of this code of ethics. (d) During the period covered by the report, Registrant did not grant any waivers, including implicit waivers, from the provisions of this code of ethics. (f)(1) Registrant has filed this code of ethics as an exhibit pursuant to Item 10(a)(1) of Form N-CSR. ITEM 3: AUDIT COMMITTEE FINANCIAL EXPERT. Registrant's Board of Trustees has determined that Registrant has three "audit committee financial experts," as such term is defined in Item 3 of Form N-CSR, serving on its audit committee, including William Hasler, Mariann Byerwalter and Donald Stephens. Each of these members of Registrant's audit committee is "independent" under the standards set forth in Item 3 of Form N-CSR. The designation of each of Messrs. Hasler and Stephens and Ms. Byerwalter as an "audit committee financial expert" pursuant to Item 3 of Form N-CSR does not (i) impose upon such individual any duties, obligations, or liability that are greater than the duties, obligations and liability imposed upon such individual as a member of Registrant's audit committee or Board of Trustees in the absence of such designation; and (ii) affect the duties, obligations or liability of any other member of Registrant's audit committee or Board of Trustees. ITEM 4: PRINCIPAL ACCOUNTANT FEES AND SERVICES. (a) Below are the aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for the audit of Registrant's annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements. Audit Fees 2003: $274,663 2002: $236,750
(b) Below are the aggregate fees billed in each of the last two fiscal years for assurance and related services by the principal accountant that are reasonably related to the performance of the audit of Registrant's financial statements and are not reported under paragraph (a) above. Audit-Related Fees For services rendered to Registrant: 2003: $22,237 2002: $19,100
Nature of these services: tax provision review. In each of the last two fiscal years there were no "Audit-Related Fees" required to be approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X. (c) Below are the aggregate fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning. Tax Fees For services rendered to Registrant: 2003: $34,398 2002: $32,900
Nature of these services: preparation and review of tax returns. In each of the last two fiscal years there were no "Tax Fees" required to be approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X. (d) Below are the aggregate fees billed in each of the last two fiscal years for products and services provided by the principal accountant, other than the services reported in paragraphs (a) through (c) above. All Other Fees For services rendered to Registrant: 2003: $7,065 2002: $7,392
Nature of these services: review of the methodology of allocation of Charles Schwab & Co., Inc. ("Schwab") expenses for purposes of Section 15(c) of the Investment Company Act of 1940. In each of the last two fiscal years there were no "All Other Fees" required to be approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X. (E)(1) Registrant's audit committee does not have pre-approval policies and procedures as described in paragraph (c)(7) of Rule 2-01 of Regulation S-X. (2) There were no services described in each of paragraphs (b) through (d) above (including services required to be approved by Registrant's audit committee pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X) that were approved by Registrant's audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X. (F) Not applicable. (G) Below are the aggregate non-audit fees billed in each of the last two fiscal years by Registrant's principal accountant for services rendered to Registrant, to Registrant's investment adviser, and to any entity controlling, controlled by, or under common control with Registrant's investment adviser that provides ongoing services to Registrant. 2003: $376,908 2002: $1,232,212
Although not required to be included in the amounts disclosed under this paragraph (g) or any other paragraph of this Item 4, below are the aggregate fees billed in each of the last two fiscal years by Registrant's principal accountant for tax compliance services rendered to U.S. Trust, an entity under common control with Registrant's investment adviser that DOES NOT provide services to Registrant. 2003: $4,713,757 2002: $3,253,013
(H) During the past fiscal year, all non-audit services provided by Registrant's principal accountant to either Registrant's investment adviser or to any entity controlling, controlled by, or under common control with Registrant's investment adviser that provides ongoing services to Registrant were pre-approved. As a matter of practice, the audit committee of Registrant's Board of Trustees reviews and considers for pre-approval all non-audit services provided by Registrant's principal accountant to Registrant's affiliates, regardless of whether pre-approval for such services is required by paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X. Included in the audit committee's review and consideration is whether the provision of these non-audit services is compatible with maintaining the principal accountant's independence. ITEM 5: AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable. ITEM 6: [RESERVED]. ITEM 7: DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 8: [RESERVED]. ITEM 9: CONTROLS AND PROCEDURES. (a) Based on their evaluation of Registrant's disclosure controls and procedures, as of a date within 90 days of the filing date, Registrant's Chief Executive Officer, Randall W. Merk and Registrant's Chief Financial Officer, Tai-Chin Tung, have concluded that Registrant's disclosure controls and procedures are: (i) reasonably designed to ensure that information required to be disclosed in this report is appropriately communicated to Registrant's officers to allow timely decisions regarding disclosures required in this report; (ii) reasonably designed to ensure that information required to be disclosed in this report is recorded, processed, summarized and reported in a timely manner; and (iii) are effective in achieving the goals described in (i) and (ii) above. (b) During Registrant's last fiscal half-year (Registrant's second fiscal half-year in the case of this annual report), there have been no changes in Registrant's internal control over financial reporting that the above officers believe to have materially affected, or to be reasonably likely to materially affect, Registrant's internal control over financial reporting. ITEM 10: EXHIBITS. (a) (1) Registrant's code of ethics (that is the subject of the disclosure required by Item 2(a)) is attached. (2) Separate certifications for Registrant's principal executive officer and principal financial officer, as required by Rule 30a-2(a) under the 1940 Act, are attached. (b) A certification for Registrant's principal executive officer and principal financial officer, as required by Rule 30a-2(b) under the 1940 Act, is attached. This certification is being furnished to the Securities and Exchange Commission solely pursuant to 18 U.S.C. section 1350 and is not being filed as part of the Form N-CSR with the Commission. Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (Registrant ) The Charles Schwab Family of Funds By: /s/ Randall W. Merk -------------------------- Randall W. Merk Chief Executive Officer Date: February 25, 2004 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By: /s/ Randall W. Merk -------------------------- Randall W. Merk Chief Executive Officer Date: February 25, 2004 By: /s/ Tai-Chin Tung -------------------------- Tai-Chin Tung Chief Financial Officer Date: February 24, 2004