SCHWABFUNDS-Registered Trademark-
SCHWAB
MONEY FUNDS
- SCHWAB MONEY MARKET FUND
- SCHWAB GOVERNMENT
MONEY FUND
- SCHWAB U.S. TREASURY
MONEY FUND
Semiannual Report
June 30, 1999
<PAGE>
SCHWAB MONEY FUNDS
We're pleased to bring you this semiannual report for the following funds (the
funds) for the six-month period ended June 30, 1999:
- Schwab Money Market Fund
- Schwab Government Money Fund
- Schwab U.S. Treasury Money Fund
During the reporting period, the funds continued to provide competitive money
market returns, combined with stability of capital and liquidity. Please
remember that an investment in the funds is neither insured nor guaranteed by
the Federal Deposit Insurance Corporation (FDIC) or any other government agency
and, although the funds seek to preserve the value of your investment at $1 per
share, it is possible to lose money by investing in the funds.
The funds presented in this report are Sweep Investments-TM- that are designed
for your day-to-day cash needs and can be conveniently linked to your Schwab
account to serve as a primary sweep money fund. For your larger cash balances
that do not require frequent access, you may wish to consider the Value
Advantage Investments.-Registered Trademark- You'll find more information on
Schwab's money funds on page 3 of this report.
CONTENTS
<TABLE>
<S> <C>
- ----------------------------------------------------
A Message from the Chairman 1
- ----------------------------------------------------
What Money Fund Investors Should Know 2
- ----------------------------------------------------
Market Overview 5
- ----------------------------------------------------
Portfolio Management 8
- ----------------------------------------------------
Schwab Money Market Fund 9
- ----------------------------------------------------
Schwab Government Money Fund 10
- ----------------------------------------------------
Schwab U.S. Treasury Money Fund 11
- ----------------------------------------------------
Fund Discussion 12
- ----------------------------------------------------
Glossary of Terms 13
- ----------------------------------------------------
Portfolio Highlights 14
- ----------------------------------------------------
Financial Statements and Notes 16
- ----------------------------------------------------
</TABLE>
<PAGE>
A MESSAGE FROM THE CHAIRMAN
Dear Shareholder,
[PHOTO]
During the past several years, the benefits of investing have been readily
apparent, while the risks have been somewhat less obvious. Over the past six
months, however, investors have witnessed sharp drops and big recoveries,
sometimes within the same day. After enjoying favorable market conditions for
years, investors have had to adjust to significant economic and political
developments, both here and abroad, that have contributed to rapid sentiment
swings and market turbulence. These developments have been accentuated by the
lingering expectation that stock prices are long overdue for a correction
according to several traditional, widely followed indicators. In spite of the
recent volatility, however, the markets continue to flourish, boosted by low
inflation, solid economic growth, low interest rates, a strong dollar and an
influx of money from investors.
All these trends serve to remind us that although the market's extreme ups and
downs can be harrowing, they are a natural part of market dynamics. That's why
we think it's a good time to reaffirm one of our primary investment principles:
Regardless of short-term market trends, our philosophy has always been that
REGULAR INVESTING is the best strategy over the long run. On the following
pages, we've provided guidelines to help insure that you can reach your goals by
establishing--or maintaining--an ongoing investment program.
The support of investors like you has helped Charles Schwab Investment
Management, Inc.-Registered Trademark- (CSIM) become one of the largest and
fastest growing mutual fund families in the nation. CSIM now manages more than
$94 billion in assets on behalf of approximately 3.9 million SchwabFunds
shareholders. We offer a broad spectrum of 39 mutual funds for investors with
varying financial situations and goals.
Thank you for your investment in SchwabFunds. We continue to do everything we
can to warrant the trust you have placed in us.
Please contact us toll free at 800-435-4000 with your questions or comments. As
always, we look forward to serving your investment needs.
Sincerely,
/s/ Charles R. Schwab
Charles R. Schwab
June 30, 1999
YEAR 2000 ISSUES
One issue with the potential to disrupt fund operations and affect
performance is the inability of some computers to recognize the year 2000.
The investment adviser is taking steps to enable its systems to handle this
issue. The investment adviser also is seeking assurances that its service
providers and business partners are taking similiar steps as well. However,
it is impossible to know in advance exactly how this issue will affect fund
adminstration, fund performance or securities markets in general.
1
<PAGE>
WHAT MONEY FUND INVESTORS SHOULD KNOW
WHY ASSET ALLOCATION MATTERS
As most investors know, one of the most compelling reasons to invest in a mutual
fund is diversification. By allocating your assets across many different
securities, a fund helps to reduce the risk that you might otherwise encounter
by owning just a few stocks or bonds.
Don't forget, however, that diversification across your portfolio is just as
important as diversification within one of the mutual funds you own. As you
probably know, stocks historically have offered much higher returns over the
long-term than other asset classes, such as bonds or cash, but those returns
have come at the price of higher volatility. To help mitigate some of that risk,
many investors often include at least some bonds and cash in their portfolio.
CHOOSING A MONEY MARKET FUND
Some investors may believe that there is no good reason to shop around for a
money market fund. This may be partially due to the fact that 20 years ago,
practically the only feature that differentiated one money market fund from
another was whether it allowed investors to write checks against it. Today,
investors can choose from a wide variety of options and features offered by the
more than 1,000 money market funds currently available.(1)
You can help assure that you've chosen the right money market fund by
considering the role it will play in your investment portfolio. Here are some
factors to consider when making or reviewing your money market fund choice.
EXPENSES: Because expenses are one of the key determining factors in a money
market fund's performance, investors are wise to seek out funds with low
operating expense ratios. Also, beware of those that have temporary expense
waivers that waive expenses to zero, because expenses can't stay at zero
forever, and fees will undoubtedly eventually rise.
Also consider 12b-1 fees, which some money market funds include in their expense
ratios to pay for marketing costs. These fees can reduce yield, in some cases by
a full percentage point. When comparing money market fund choices, you may want
to avoid funds that carry these unnecessary fees.
YIELDS: Look for competitive yields, but don't stop there. Many institutions
advertise their money market funds on the basis of yield.(2) Although getting a
competitive yield is important, other features, such as convenient access to
your investment, also are important considerations. Furthermore, stretching for
an additional 10 or 20 basis points in yield (0.10% to 0.20%) may not be worth
the time, effort or added risk. For example, a $10,000 investment in a money
fund that yields 0.10% more amounts to only an additional $10 over a one-year
period.
SWEEP FEATURES: If you're looking for a convenient way to link your money market
fund with your account, consider an account that has a "sweep" feature. Accounts
with this feature automatically "sweep" uninvested cash into the fund you select
as your primary money fund. The upshot: It keeps cash working. In addition,
shares of your fund will be redeemed automatically to cover investment purchases
and other debits in your account. This convenience may be well worth the small
additional cost.
LARGER CASH BALANCES: You may earn higher yields for larger cash balances. If
you don't need frequent access to the money in your money market fund, consider
one designed to pay higher yields for larger cash balances. These funds
typically have higher minimum balance requirements and transaction policies
designed to minimize fund operating expenses, and may be able to post higher
yields, all else being equal.
TAXES: Don't forget to consider your tax situation. If you're in a high
tax-bracket, investing in tax-free or municipal money market funds may help take
a bite out of your tax bill. And, if you live in a state with a high personal
state income tax, you may be best served by choosing a state-specific tax-free
fund that provides income free from federal, state and, in some cases, local
income taxes.(3)
(1) An investment in a money market fund is neither insured nor guaranteed by
the Federal Deposit Insurance Corporation or any other government agency
and, 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.
(2) Yields may vary.
(3) This may not be true for investors subject to the federal alternative
minimum tax (AMT); consult your tax advisor.
2
<PAGE>
SCHWAB MONEY FUNDS
Schwab offers two types of money funds--Sweep Investments-TM- and Value
Advantage Investments.-Registered Trademark- Both include funds that offer
taxable and tax-free income. Depending on the role that cash and cash-equivalent
investments play in your investment plan, either or both may have a place in
your investment plan.
SWEEP INVESTMENTS are designed for your day-to-day cash needs. These shares can
be linked to your Schwab account to serve as a primary sweep money fund. That
means uninvested cash in your Schwab brokerage account is automatically swept in
and out of the fund, based on transactions in your account and the terms and
conditions of your account agreement.
VALUE ADVANTAGE INVESTMENTS are designed for your larger cash balances that
don't require frequent access. Value Advantage Investments have higher minimum
initial and ongoing balance requirements than Sweep Investments. These
requirements, along with policies designed to discourage frequent transactions,
can help minimize fund expenses--which in turn can mean higher returns for
investors. Please remember that Value Advantage Investments cannot be linked to
your Schwab account to serve as your primary sweep fund.
Schwab currently offers a variety of money funds. If you are selecting from
among them, you should consider your attitude toward risk and return, as well as
your income tax bracket.
SCHWAB TAXABLE MONEY FUNDS
SCHWAB MONEY MARKET FUND A high-quality money fund for investors interested in
the potential for high money market yields.
SCHWAB GOVERNMENT MONEY FUND Designed for investors who want current money
market yields along with the added margin of safety provided by a portfolio of
U.S. government securities and repurchase agreements.
SCHWAB U.S. TREASURY MONEY FUND Of all the money funds offered by Schwab, this
one seeks to provide the highest degree of safety. The fund invests exclusively
in U.S. Treasury securities and other investments that are backed by the full
faith and credit of the U.S. government. What's more, income from the fund is
generally free from state and local income tax.
SCHWAB VALUE ADVANTAGE MONEY FUND-REGISTERED TRADEMARK- A high-quality money
fund designed for investors interested in the potential for higher money market
yields.
SCHWAB MUNICIPAL MONEY FUNDS
SCHWAB MUNICIPAL MONEY FUND A high-quality municipal money fund that seeks to
provide income that is free from federal income tax.
SCHWAB STATE-SPECIFIC MUNICIPAL MONEY FUNDS Each of these funds is designed for
taxpayers of a particular state and seeks to provide income that is exempt from
federal, state and, in some cases, local income taxes. The Schwab Florida
Municipal Money Fund also seeks to have its shares exempt from the Florida
Intangible Tax.
- Schwab California Municipal Money Fund
- Schwab Florida Municipal Money Fund
- Schwab New Jersey Municipal Money Fund
- Schwab New York Municipal Money Fund
- Schwab Pennsylvania Municipal Money Fund
3
<PAGE>
WHAT MONEY FUND INVESTORS SHOULD KNOW (continued)
The table below presents the various money fund choices available at Schwab.
<TABLE>
<CAPTION>
SWEEP VALUE ADVANTAGE
TAXABLE MONEY FUNDS INVESTMENTS-TM- INVESTMENTS-REGISTERED TRADEMARK-
<S> <C> <C>
- -------------------------------------------------------------------------------------------------------
Schwab Money Market Fund -
- -------------------------------------------------------------------------------------------------------
Schwab Government Money Fund -
- -------------------------------------------------------------------------------------------------------
Schwab U.S. Treasury Money Fund -
- -------------------------------------------------------------------------------------------------------
Schwab Value Advantage Money Fund--Investor Shares -
- -------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MUNICIPAL MONEY FUNDS
<S> <C> <C>
- ------------------------------------------------------------------------------
Schwab Municipal Money Fund - -
- ------------------------------------------------------------------------------
Schwab California Municipal Money Fund - -
- ------------------------------------------------------------------------------
Schwab Florida Municipal Money Fund -
- ------------------------------------------------------------------------------
Schwab New Jersey Municipal Money Fund -
- ------------------------------------------------------------------------------
Schwab New York Municipal Money Fund - -
- ------------------------------------------------------------------------------
Schwab Pennsylvania Municipal Money Fund -
- ------------------------------------------------------------------------------
</TABLE>
If you would like more information on any of these funds, please call us toll
free at 800-435-4000 and request a free prospectus that contains more
information, including fees and expenses. Please read the prospectus before
investing.
WE MAKE IT EASY TO INVEST
We try to make it easy and convenient to invest in
SchwabFunds-Registered Trademark-. With Schwab MoneyLink-Registered Trademark-,
Schwab's electronic transfer service, you can have money automatically
transferred into your Schwab account on a regular basis. You also can invest in
person at any of our more than 300 nationwide branches, through our Web site at
WWW.SCHWAB.COM and through our automated touch-tone telephone service,
TeleBroker-Registered Trademark-, by calling 800-272-4922.
KEEPING YOU INFORMED
One of our top priorities at Charles Schwab is to keep you informed about your
investments and potential opportunities in the marketplace. A wealth of
current information about our investment philosophy and funds, as well as the
market and economic environment, can be found at our Web site:
WWW.SCHWAB.COM/SCHWABFUNDS
4
<PAGE>
MARKET OVERVIEW
U.S. ECONOMIC GROWTH
The U.S. economy, as measured by gross domestic product (GDP), continued its
remarkable expansion as indicated by the 3.3% real growth rate for the first six
months of 1999.
The second quarter growth rate of 2.3% marks the 33rd consecutive quarter of
positive growth--the longest peacetime expansion ever. Strong consumer spending,
coupled with record domestic stock market levels and its associated wealth
effect, continued to provide momentum for this historic expansion.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
REAL GROSS DOMESTIC PRODUCT
QUARTERLY PERCENTAGE CHANGE
(ANNUALIZED RATE)
<S> <C>
Q1/90 3.9%
Q2/90 1.2%
Q3/90 -1.9%
Q4/90 -4.0%
Q1/91 -2.1%
Q2/91 1.8%
Q3/91 1.0%
Q4/91 1.0%
Q1/92 4.7%
Q2/92 2.5%
Q3/92 3.0%
Q4/92 4.3%
Q1/93 0.1%
Q2/93 2.0%
Q3/93 2.1%
Q4/93 5.3%
Q1/94 3.0%
Q2/94 4.7%
Q3/94 1.8%
Q4/94 3.6%
Q1/95 1.7%
Q2/95 0.4%
Q3/95 3.3%
Q4/95 2.8%
Q1/96 3.3%
Q2/96 6.1%
Q3/96 2.1%
Q4/96 4.2%
Q1/97 4.2%
Q2/97 4.0%
Q3/97 4.2%
Q4/97 3.0%
Q1/98 5.5%
Q2/98 1.8%
Q3/98 3.7%
Q4/98 6.0%
Q1/99 4.3%
Q2/99 2.3%
Source: BLOOMBERG L.P.
</TABLE>
The consensus of most economists is that the U.S. economy appears poised for
continued growth, but at a more moderate pace than the 4.3% rate experienced
during 1998. High levels of consumer confidence and spending, low interest
rates, rising real wages and strong gains in stock prices have been the
principal factors fueling this lengthy expansion.
Last year's concerns over the impact of international economic problems have
been displaced by concerns about imbalances in the domestic economy, namely the
surging current account (trade) deficit, record high stock valuations and the
negative savings rate. Going forward, consumers' behavior in response to
continued stock market volatility may also be a key determinant of whether the
economy continues on its current course or softens throughout the remainder of
1999.
UNEMPLOYMENT
Labor markets continue to be extremely tight in many areas of the country. After
declining to 4.2% in May-- the lowest level in 28 years--the U.S. unemployment
rate stood at 4.3% in June. While the pace of growth in the labor force slowed
during the first six months of 1999 there continues to be concern that wage and
benefits increases may begin to put more pressure on labor costs (refer to
Employment Cost Index on the following page).
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
U.S. UNEMPLOYMENT RATE
<S> <C>
1/90 5.4%
2/90 5.3%
3/90 5.2%
4/90 5.4%
5/90 5.4%
6/90 5.2%
7/90 5.5%
8/90 5.7%
9/90 5.9%
10/90 5.9%
11/90 6.2%
12/90 6.3%
1/91 6.4%
2/91 6.6%
3/91 6.8%
4/91 6.7%
5/91 6.9%
6/91 6.9%
7/91 6.8%
8/91 6.9%
9/91 6.9%
10/91 7.0%
11/91 7.0%
12/91 7.3%
1/92 7.3%
2/92 7.4%
3/92 7.4%
4/92 7.4%
5/92 7.6%
6/92 7.8%
7/92 7.7%
8/92 7.6%
9/92 7.6%
10/92 7.3%
11/92 7.4%
12/92 7.4%
1/93 7.3%
2/93 7.1%
3/93 7.0%
4/93 7.1%
5/93 7.1%
6/93 7.0%
7/93 6.9%
8/93 6.8%
9/93 6.7%
10/93 6.8%
11/93 6.6%
12/93 6.5%
1/94 6.8%
2/94 6.6%
3/94 6.5%
4/94 6.4%
5/94 6.1%
6/94 6.1%
7/94 6.3%
8/94 6.0%
9/94 5.8%
10/94 5.8%
11/94 5.6%
12/94 5.5%
1/95 5.6%
2/95 5.4%
3/95 5.3%
4/95 5.8%
5/95 5.8%
6/95 5.6%
7/95 5.6%
8/95 5.7%
9/95 5.6%
10/95 5.5%
11/95 5.7%
12/95 5.6%
1/96 5.6%
2/96 5.5%
3/96 5.6%
4/96 5.5%
5/96 5.6%
6/96 5.3%
7/96 5.5%
8/96 5.1%
9/96 5.2%
10/96 5.2%
11/96 5.3%
12/96 5.4%
1/97 5.3%
2/97 5.3%
3/97 5.1%
4/97 5.0%
5/97 4.7%
6/97 5.0%
7/97 4.7%
8/97 4.9%
9/97 4.7%
10/97 4.7%
11/97 4.6%
12/97 4.7%
1/98 4.5%
2/98 4.6%
3/98 4.6%
4/98 4.3%
5/98 4.3%
6/98 4.5%
7/98 4.5%
8/98 4.5%
9/98 4.5%
10/98 4.5%
11/98 4.4%
12/98 4.3%
1/99 4.3%
2/99 4.4%
3/99 4.2%
4/99 4.3%
5/99 4.2%
6/99 4.3%
Source: BLOOMBERG L.P.
</TABLE>
5
<PAGE>
MARKET OVERVIEW (continued)
INFLATION
Price inflation continued to remain well contained during the first six months
of 1999. The Consumer Price Index rose just 2.0% for the year ended June 30,
1999 while its core rate (which excludes the more volatile food and energy
components) rose just 2.1%. The GDP price deflator, the broadest measure of
inflation, showed prices rising at an annual rate of 2.1% during the second
quarter. The Employment Cost Index, which measures inflation in wages, salaries
and benefits, was also well contained, increasing just 3.2% for the year ended
June 1999.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MEASURES OF INFLATION
QUARTERLY EMPLOYMENT MONTHLY CONSUMER
COST INDEX PRICE INDEX
<S> <C> <C>
1/90 5.5% 5.2%
2/90 5.5% 5.3%
3/90 5.5% 5.2%
4/90 5.4% 4.7%
5/90 5.4% 4.4%
6/90 5.4% 4.7%
7/90 5.2% 4.8%
8/90 5.2% 5.6%
9/90 5.2% 6.2%
10/90 4.9% 6.3%
11/90 4.9% 6.3%
12/90 4.9% 6.1%
1/91 4.6% 5.7%
2/91 4.6% 5.3%
3/91 4.6% 4.9%
4/91 4.6% 4.9%
5/91 4.6% 5.0%
6/91 4.6% 4.7%
7/91 4.3% 4.4%
8/91 4.3% 3.8%
9/91 4.3% 3.4%
10/91 4.3% 2.9%
11/91 4.3% 3.0%
12/91 4.3% 3.1%
1/92 4.0% 2.6%
2/92 4.0% 2.8%
3/92 4.0% 3.2%
4/92 3.6% 3.2%
5/92 3.6% 3.0%
6/92 3.6% 3.1%
7/92 3.5% 3.2%
8/92 3.5% 3.1%
9/92 3.5% 3.0%
10/92 3.5% 3.2%
11/92 3.5% 3.0%
12/92 3.5% 2.9%
1/93 3.5% 3.3%
2/93 3.5% 3.2%
3/93 3.5% 3.1%
4/93 3.6% 3.2%
5/93 3.6% 3.2%
6/93 3.6% 3.0%
7/93 3.6% 2.8%
8/93 3.6% 2.8%
9/93 3.6% 2.7%
10/93 3.5% 2.8%
11/93 3.5% 2.7%
12/93 3.5% 2.7%
1/94 3.2% 2.5%
2/94 3.2% 2.5%
3/94 3.2% 2.5%
4/94 3.2% 2.4%
5/94 3.2% 2.3%
6/94 3.2% 2.5%
7/94 3.2% 2.8%
8/94 3.2% 2.9%
9/94 3.2% 3.0%
10/94 3.0% 2.6%
11/94 3.0% 2.7%
12/94 3.0% 2.7%
1/95 2.9% 2.8%
2/95 2.9% 2.9%
3/95 2.9% 2.9%
4/95 2.9% 3.1%
5/95 2.9% 3.2%
6/95 2.9% 3.0%
7/95 2.7% 2.8%
8/95 2.7% 2.6%
9/95 2.7% 2.5%
10/95 2.7% 2.8%
11/95 2.7% 2.6%
12/95 2.7% 2.5%
1/96 2.8% 2.7%
2/96 2.8% 2.7%
3/96 2.8% 2.8%
4/96 2.9% 2.9%
5/96 2.9% 2.9%
6/96 2.9% 2.8%
7/96 2.8% 3.0%
8/96 2.8% 2.9%
9/96 2.8% 3.0%
10/96 2.9% 3.0%
11/96 2.9% 3.3%
12/96 2.9% 3.3%
1/97 2.9% 3.0%
2/97 2.9% 3.0%
3/97 2.9% 2.8%
4/97 2.8% 2.5%
5/97 2.8% 2.2%
6/97 2.8% 2.3%
7/97 3.0% 2.2%
8/97 3.0% 2.2%
9/97 3.0% 2.2%
10/97 3.3% 2.1%
11/97 3.3% 1.8%
12/97 3.3% 1.7%
1/98 3.3% 1.6%
2/98 3.3% 1.4%
3/98 3.3% 1.4%
4/98 3.5% 1.4%
5/98 3.5% 1.7%
6/98 3.5% 1.7%
7/98 3.7% 1.7%
8/98 3.7% 1.6%
9/98 3.7% 1.5%
10/98 3.4% 1.5%
11/98 3.4% 1.5%
12/98 3.4% 1.6%
1/99 3.0% 1.7%
2/99 3.0% 1.6%
3/99 3.0% 1.7%
4/99 3.2% 2.3%
5/99 3.2% 2.1%
6/99 3.2% 2.0%
Source: BLOOMBERG L.P. AND BUREAU OF LABOR STATISTICS
</TABLE>
Although there is little evidence of acceleration in core inflation, the Federal
Reserve has expressed concern that should labor markets continue to tighten,
increases in wages may outpace productivity growth. In that environment,
productivity growth becomes particularly critical, as it enables companies to
pay higher wages without raising prices. Non-farm productivity grew 2.2% in 1998
and has grown at a very strong 2.4% annualized rate for the first half of 1999,
continuing a healthy trend that began in 1996.
ASSET CLASS PERFORMANCE
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
TOTAL RETURN PERFORMANCE
GROWTH OF A HYPOTHETICAL $1 INVESTMENT
MSCE-EAFE RUSSELL 2000 LEHMAN AGGREGATE
INDEX S&P 500 INDEX INDEX BOND INDEX
<S> <C> <C> <C> <C>
12/98 $1.00 $1.00 $1.00 $1.00
1/99 1.00 1.04 1.01 1.01
2/99 0.97 1.01 0.93 0.99
3/99 1.01 1.05 0.95 0.99
4/99 1.05 1.09 1.03 1.00
5/99 1.00 1.06 1.04 0.99
6/99 1.04 1.12 1.09 0.99
COMPILED BY CHARLES SCHWAB & CO., INC.
</TABLE>
Large-cap domestic stocks, as represented by the S&P 500-Registered Trademark-
Index, continued to be the strongest performing asset class, achieving a total
return of 12.4% for the six-month period ended June 30, 1999. Within the S&P
500, value stocks displaced growth stocks as the strongest performing style for
the period. Small-cap stocks, as represented by the Russell
2000-Registered Trademark- Index, produced a 9.3% return for the six-month
reporting period.
Assisted by the rebound in Asian markets, international stocks, as represented
by the MSCI-EAFE-Registered Trademark- Index, produced a 4.0% total return for
the six-month reporting period.
6
<PAGE>
Fixed income returns were generally weak for the reporting period, reflecting
the moderate rise in intermediate- and long-term interest rates. Bonds, as
represented by the Lehman Brothers Aggregate Bond Index, had a negative return
of 1.4% for the six-month reporting period.
TREASURY BOND YIELDS
Following a trend that began in October 1998, both long-term and
intermediate-term yields continued to climb during the reporting period. Scaled
back concerns about the impact of international economic problems and the
continued strong growth of the domestic economy were the primary drivers of this
upward trend in yields.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
30-YEAR AND FIVE-YEAR TREASURY BOND YIELDS
30-YEAR TREASURY FIVE-YEAR TREASURY
BOND YIELD NOTE YIELD
<S> <C> <C>
1/1/99 5.10% 4.54%
1/4/99 5.15% 4.56%
1/5/99 5.21% 4.62%
1/6/99 5.16% 4.57%
1/7/99 5.22% 4.63%
1/8/99 5.27% 4.73%
1/11/99 5.31% 4.79%
1/12/99 5.22% 4.67%
1/13/99 5.13% 4.56%
1/14/99 5.06% 4.46%
1/15/99 5.11% 4.55%
1/18/99 5.12% 4.55%
1/19/99 5.15% 4.61%
1/20/99 5.17% 4.64%
1/21/99 5.13% 4.56%
1/22/99 5.08% 4.52%
1/25/99 5.12% 4.55%
1/26/99 5.13% 4.58%
1/27/99 5.13% 4.55%
1/28/99 5.11% 4.56%
1/29/99 5.09% 4.55%
2/1/99 5.18% 4.64%
2/2/99 5.24% 4.70%
2/3/99 5.25% 4.73%
2/4/99 5.29% 4.79%
2/5/99 5.35% 4.86%
2/8/99 5.34% 4.84%
2/9/99 5.30% 4.80%
2/10/99 5.37% 4.82%
2/11/99 5.37% 4.84%
2/12/99 5.42% 4.96%
2/15/99 5.43% 4.98%
2/16/99 5.34% 4.94%
2/17/99 5.31% 4.90%
2/18/99 5.38% 4.97%
2/19/99 5.39% 4.99%
2/22/99 5.36% 4.94%
2/23/99 5.43% 5.04%
2/24/99 5.51% 5.12%
2/25/99 5.65% 5.29%
2/26/99 5.58% 5.22%
3/1/99 5.67% 5.31%
3/2/99 5.61% 5.23%
3/3/99 5.70% 5.29%
3/4/99 5.70% 5.31%
3/5/99 5.60% 5.22%
3/8/99 5.59% 5.19%
3/9/99 5.53% 5.10%
3/10/99 5.55% 5.12%
3/11/99 5.56% 5.12%
3/12/99 5.53% 5.06%
3/15/99 5.52% 5.06%
3/16/99 5.48% 5.02%
3/17/99 5.51% 5.04%
3/18/99 5.49% 5.01%
3/19/99 5.56% 5.08%
3/22/99 5.57% 5.12%
3/23/99 5.54% 5.05%
3/24/99 5.53% 5.06%
3/25/99 5.59% 5.10%
3/26/99 5.59% 5.08%
3/29/99 5.64% 5.13%
3/30/99 5.58% 5.05%
3/31/99 5.63% 5.10%
4/1/99 5.67% 5.14%
4/2/99 5.60% 5.05%
4/5/99 5.59% 5.05%
4/6/99 5.52% 4.99%
4/7/99 5.50% 5.01%
4/8/99 5.44% 4.94%
4/9/99 5.46% 4.96%
4/12/99 5.45% 4.96%
4/13/99 5.49% 5.00%
4/14/99 5.51% 5.03%
4/15/99 5.53% 5.06%
4/16/99 5.57% 5.11%
4/19/99 5.52% 5.03%
4/20/99 5.51% 5.03%
4/21/99 5.52% 5.08%
4/22/99 5.60% 5.13%
4/23/99 5.60% 5.14%
4/26/99 5.58% 5.11%
4/27/99 5.54% 5.10%
4/28/99 5.58% 5.14%
4/29/99 5.53% 5.08%
4/30/99 5.66% 5.21%
5/3/99 5.66% 5.21%
5/4/99 5.71% 5.26%
5/5/99 5.71% 5.25%
5/6/99 5.79% 5.36%
5/7/99 5.81% 5.37%
5/1/99 5.79% 5.36%
5/1/99 5.83% 5.41%
5/1/99 5.83% 5.37%
5/1/99 5.75% 5.29%
5/1/99 5.92% 5.50%
5/1/99 5.89% 5.50%
5/1/99 5.89% 5.56%
5/1/99 5.80% 5.53%
5/1/99 5.83% 5.53%
5/1/99 5.75% 5.43%
5/1/99 5.76% 5.42%
5/1/99 5.75% 5.41%
5/1/99 5.80% 5.51%
5/1/99 5.85% 5.59%
5/1/99 5.83% 5.58%
5/1/99 5.83% 5.58%
6/1/99 5.92% 5.72%
6/1/99 5.93% 5.72%
6/1/99 5.96% 5.74%
6/1/99 5.96% 5.73%
6/1/99 5.97% 5.71%
6/1/99 5.99% 5.73%
6/1/99 6.03% 5.80%
6/1/99 6.06% 5.85%
6/1/99 6.16% 5.91%
6/1/99 6.10% 5.87%
6/1/99 6.11% 5.86%
6/1/99 6.07% 5.80%
6/1/99 5.96% 5.66%
6/1/99 5.97% 5.73%
6/1/99 6.02% 5.79%
6/1/99 6.06% 5.82%
6/1/99 6.15% 5.91%
6/1/99 6.16% 5.90%
6/1/99 6.15% 5.89%
6/1/99 6.09% 5.83%
6/1/99 6.07% 5.81%
6/1/99 5.96% 5.64%
Source: BLOOMBERG L.P.
</TABLE>
SHORT-TERM INTEREST RATE ENVIRONMENT
Short-term interest rates increased marginally, but remained within a narrow
range throughout most of the reporting period. Until the April CPI report
release, the economy had demonstrated continued signs of growth with no
significant evidence of accelerating inflation or indications of potential
Federal Reserve action. After April's unexpectedly high CPI report, the Federal
Reserve adopted a "tightening" bias in May, and then, in June, announced a 0.25%
increase in the Federal Funds Rate and a return to a "neutral" bias. The Federal
Reserve has expressed concern that a potential buildup of inflationary
imbalances could undermine the favorable performance of the economy.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
1999 YIELDS ON 90-DAY COMMERCIAL PAPER
AND THREE-MONTH TREASURY BILLS
THREE-MONTH 90-DAY
TREASURY BILL COMMERCIAL PAPER
<S> <C> <C>
1/4/99 4.47% 4.80%
1/5/99 4.49% 4.80%
1/6/99 4.45% 4.75%
1/7/99 4.43% 4.79%
1/8/99 4.47% 4.78%
1/11/99 4.50% 4.80%
1/12/99 4.48% 4.79%
1/13/99 4.42% 4.80%
1/14/99 4.42% 4.79%
1/15/99 4.43% 4.78%
1/19/99 4.38% 4.77%
1/20/99 4.37% 4.76%
1/21/99 4.28% 4.76%
1/22/99 4.34% 4.75%
1/25/99 4.42% 4.74%
1/26/99 4.47% 4.75%
1/27/99 4.42% 4.75%
1/28/99 4.49% 4.75%
1/29/99 4.45% 4.74%
2/1/99 4.52% 4.75%
2/2/99 4.53% 4.76%
2/3/99 4.48% 4.75%
2/4/99 4.47% 4.76%
2/5/99 4.49% 4.76%
2/8/99 4.50% 4.78%
2/9/99 4.51% 4.79%
2/10/99 4.46% 4.78%
2/11/99 4.51% 4.78%
2/12/99 4.52% 4.79%
2/16/99 4.51% 4.80%
2/17/99 4.52% 4.79%
2/18/99 4.54% 4.81%
2/19/99 4.56% 4.80%
2/22/99 4.60% 4.79%
2/23/99 4.66% 4.81%
2/24/99 4.65% 4.81%
2/25/99 4.63% 4.81%
2/26/99 4.67% 4.82%
3/1/99 4.69% 4.83%
3/2/99 4.64% 4.83%
3/3/99 4.59% 4.83%
3/4/99 4.60% 4.82%
3/5/99 4.60% 4.84%
3/8/99 4.61% 4.82%
3/9/99 4.58% 4.80%
3/10/99 4.58% 4.81%
3/11/99 4.59% 4.82%
3/12/99 4.59% 4.81%
3/15/99 4.58% 4.81%
3/16/99 4.53% 4.81%
3/17/99 4.51% 4.80%
3/18/99 4.49% 4.81%
3/19/99 4.49% 4.81%
3/22/99 4.50% 4.82%
3/23/99 4.48% 4.81%
3/24/99 4.48% 4.81%
3/25/99 4.50% 4.80%
3/26/99 4.49% 4.81%
3/29/99 4.49% 4.80%
3/30/99 4.47% 4.82%
3/31/99 4.48% 4.82%
4/1/99 4.41% 4.80%
4/2/99 4.39% 4.84%
4/5/99 4.39% 4.81%
4/6/99 4.39% 4.82%
4/7/99 4.41% 4.80%
4/8/99 4.39% 4.80%
4/9/99 4.35% 4.79%
4/12/99 4.32% 4.79%
4/13/99 4.27% 4.79%
4/14/99 4.28% 4.80%
4/15/99 4.32% 4.80%
4/16/99 4.31% 4.77%
4/19/99 4.32% 4.79%
4/20/99 4.38% 4.78%
4/21/99 4.34% 4.80%
4/22/99 4.38% 4.78%
4/23/99 4.41% 4.76%
4/26/99 4.45% 4.77%
4/27/99 4.48% 4.73%
4/28/99 4.36% 4.78%
4/29/99 4.50% 4.79%
4/30/99 4.54% 4.78%
5/3/99 4.58% 4.78%
5/4/99 4.60% 4.79%
5/5/99 4.59% 4.80%
5/6/99 4.60% 4.79%
5/7/99 4.60% 4.79%
5/10/99 4.58% 4.78%
5/11/99 4.58% 4.79%
5/12/99 4.58% 4.79%
5/13/99 4.57% 4.79%
5/14/99 4.65% 4.80%
5/17/99 4.64% 4.83%
5/18/99 4.65% 4.81%
5/19/99 4.60% 4.85%
5/20/99 4.59% 4.83%
5/21/99 4.58% 4.84%
5/24/99 4.61% 4.84%
5/25/99 4.64% 4.83%
5/26/99 4.63% 4.83%
5/27/99 4.63% 4.85%
5/28/99 4.64% 4.86%
6/1/99 4.66% 4.86%
6/2/99 4.73% 4.86%
6/3/99 4.61% 4.89%
6/4/99 4.54% 4.86%
6/7/99 4.50% 4.91%
6/8/99 4.61% 4.89%
6/9/99 4.59% 4.90%
6/10/99 4.68% 4.90%
6/11/99 4.73% 4.91%
6/14/99 4.66% 5.00%
6/15/99 4.72% 5.00%
6/16/99 4.64% 5.01%
6/17/99 4.62% 4.99%
6/18/99 4.65% 5.00%
6/21/99 4.67% 5.00%
6/22/99 4.74% 5.01%
6/23/99 4.72% 5.03%
6/24/99 4.72% 5.03%
6/25/99 4.79% 5.06%
6/28/99 4.79% 5.13%
6/29/99 4.82% 5.12%
6/30/99 4.78% 5.17%
Source: BLOOMBERG L.P.
</TABLE>
NOTE: THIS MARKET OVERVIEW HAS BEEN PROVIDED BY THE PORTFOLIO MANAGEMENT
TEAM.
7
<PAGE>
PORTFOLIO MANAGEMENT
THE PORTFOLIO MANAGEMENT TEAM
STEPHEN B. WARD--senior vice president and chief investment officer, has overall
responsibility for the management of the Funds' portfolios. Steve joined Charles
Schwab Investment Management, Inc. (CSIM) as vice president and portfolio
manager in April 1991 and was promoted to his current position in August 1993.
Prior to joining CSIM, Steve was vice president and portfolio manager at
Federated Investors.
LINDA KLINGMAN--vice president and senior portfolio manager, has managed the
Schwab Money Market Fund since April of 1991. Linda joined CSIM in 1990 and was
promoted to her current position in August 1996. Prior to joining CSIM, Linda
was senior money market trader with AIM Management.
KAREN WIGGAN--portfolio manager, has managed the Schwab Government Money Fund
and the Schwab U.S. Treasury Fund since March 1999. Karen joined Schwab in 1986,
CSIM in 1991, and was promoted to her current position in March 1999.
8
<PAGE>
SCHWAB MONEY MARKET FUND
YIELD SUMMARY AS OF 6/30/99(1)
<TABLE>
<S> <C>
- ----------------------------------------------------------------------
Seven-Day Yield 4.29%
- ----------------------------------------------------------------------
Seven-Day Effective Yield 4.39%
- ----------------------------------------------------------------------
</TABLE>
Please remember that money market fund yields fluctuate and that past
performance is no guarantee of future results.
(1) A portion of the fund's expenses was reduced during the reporting period.
Without this reduction, as of 6/30/99, the seven-day and seven-day effective
yields for the fund would have been 4.25% and 4.34%, respectively.
PORTFOLIO COMPOSITION
The Schwab Money Market Fund invests in high-quality short-term money market
investments issued by U.S. and foreign issuers, such as commercial paper,
including asset-backed commercial paper, certificates of deposit, variable- and
floating rate debt securities, bank notes and repurchase agreements. The chart
to the right illustrates the composition of the fund's portfolio as of June
30,1999 and is not indicative of its holdings after that date. A complete list
of the securities in the fund's portfolio as of June 30,1999 is provided in the
Schedule of Investments later in this report.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
PORTFOLIO COMPOSITION AS A PERCENTAGE
OF FUND INVESTMENTS
as of 6/30/99
<TABLE>
<S> <C>
Commercial Paper and other Corporate
Obligations 71.1%
Certificates of Deposit 20.7%
Variable Rate Obligations 4.7%
Bank Notes 3.5%
</TABLE>
9
<PAGE>
SCHWAB GOVERNMENT MONEY FUND
YIELD SUMMARY AS OF 6/30/99(1)
<TABLE>
<S> <C>
- ----------------------------------------------------------------------
Seven-Day Yield 4.19%
- ----------------------------------------------------------------------
Seven-Day Effective Yield 4.28%
- ----------------------------------------------------------------------
</TABLE>
Please remember that money market fund yields fluctuate and that past
performance is no guarantee of future results.
(1) A portion of the fund's expenses was reduced during the reporting period.
Without this reduction, as of 6/30/99, the seven-day and seven-day effective
yields for the fund would have been 4.11% and 4.19%, respectively.
PORTFOLIO COMPOSITION
The Schwab Government Money Fund invests in U.S. government securities such as
U.S. Treasury bills, notes and bonds and other obligations that are issued or
guaranteed by the U.S. government, its agencies or instrumentalities including
Fannie Maes, Freddie Macs and Sallie Maes, and repurchase agreements for these
securities. The chart to the right illustrates the composition of the fund's
portfolio as of June 30,1999 and is not indicative of its holdings after that
date. A complete list of the securities in the fund's portfolio as of June
30,1999 is provided in the Schedule of Investments later in this report.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
PORTFOLIO COMPOSITION AS A PERCENTAGE
OF FUND INVESTMENTS
as of 6/30/99
<TABLE>
<S> <C>
U.S. Government Securities 80.1%
Repurchase Agreements 17.7%
Variable Rate Obligations 2.2%
</TABLE>
10
<PAGE>
SCHWAB U.S. TREASURY MONEY FUND
YIELD SUMMARY AS OF 6/30/99(1)
<TABLE>
<S> <C>
- ----------------------------------------------------------------------
Seven-Day Yield 4.02%
- ----------------------------------------------------------------------
Seven-Day Effective Yield 4.10%
- ----------------------------------------------------------------------
</TABLE>
Please remember that money market fund yields fluctuate and that past
performance is no guarantee of future results.
(1) A portion of the fund's expenses was reduced during the reporting period.
Without this reduction, as of 6/30/99, the seven-day and seven-day effective
yields for the fund would have been 3.83% and 3.90%, respectively.
PORTFOLIO COMPOSITION
The Schwab U.S. Treasury Money Fund invests exclusively in securities backed by
the full faith and credit of the U.S. government, such as U.S. Treasury notes,
bills and bonds. The chart to the right illustrates the composition of the
fund's portfolio as of June 30,1999 and is not indicative of its holdings after
that date. A complete list of the securities in the fund's portfolio as of June
30,1999 is provided in the Schedule of Investments later in this report.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
PORTFOLIO COMPOSITION AS A PERCENTAGE
OF FUND INVESTMENTS
as of 6/30/99
<TABLE>
<S> <C>
U.S. Government Securites 100%
</TABLE>
11
<PAGE>
FUND DISCUSSION
QUESTIONS TO THE
PORTFOLIO MANAGEMENT TEAM
Q. CAN YOU DESCRIBE THE SHORT-TERM INTEREST
RATE ENVIRONMENT DURING THE SIX-MONTH
REPORTING PERIOD?
A. Short-term interest rates increased marginally, but remained within a narrow
range throughout most of the reporting period. The economy demonstrated
continued signs of growth, in part due to the accommodating financial conditions
resulting from the three Federal Funds Rate cuts in late 1998.
Until the April CPI report release, there had been no significant evidence of
accelerating inflation or any indication of potential Federal Reserve action.
Following the unexpectedly high April CPI report, the Federal Reserve adopted a
"tightening" bias in May and then, in June, announced a 0.25% increase in the
Federal Funds Rate and a return to a "neutral" bias. These developments caused
short-term rates to edge upward towards the end of the reporting period. The
Federal Reserve has expressed concern that a potential buildup of inflationary
imbalances could undermine the favorable performance of the economy. Although
not universally anticipated, many market observers expect there will be at least
one additional 0.25% increase in the Federal Funds Rate by year-end.
Q. HOW HAS THE PORTFOLIO MANAGEMENT TEAM ADJUSTED THE FUND'S PORTFOLIO TO
RESPOND TO CHANGES IN INTEREST RATES?
A. During the reporting period our overall strategy for the fund was consistent
with our long-term strategy, which is to maintain a dollar-weighted average
maturity (DWAM) slightly longer than those of other funds with similar
investment objectives. This strategy had a beneficial impact on the fund's
yields throughout most of the period.
During the first quarter of 1999, based on our expectation that short-term rates
would remain relatively stable, we looked for opportunities to buy securities
with longer-dated maturities when they were available at attractive prices. In
May, as the Federal Reserve bias changed from neutral to restrictive, we
deviated from this strategy somewhat by concentrating the portfolio in
shorter-term securities while still buying higher yielding securities on a
selective basis when opportunities arose.
12
<PAGE>
GLOSSARY OF TERMS
COMMERCIAL PAPER--Short-term obligations issued by banks, corporations and other
borrowers.
CREDIT ENHANCEMENTS--A bank letter of credit, purchase agreement, insurance,
line of credit or other instrument that provides an additional level of
financial strength for debt securities to supplement the creditworthiness of the
issuer.
DOLLAR-WEIGHTED AVERAGE MATURITY (DWAM)--A measure of the average maturity of a
mutual fund's entire portfolio, weighted by the values of its individual
holdings.
FEDERAL FUNDS RATE--A key interest rate charged by banks when lending money to
other banks overnight.
FEDERAL RESERVE--The central bank of the United States, which establishes
policies on bank reserves and regulations, determines the discount rate and the
Federal Funds Rate, and tightens or loosens the availability of credit.
FIRST-TIER SECURITY--Generally, a security rated in the highest credit-rating
category by a requisite number of nationally recognized statistical rating
organizations, such as Moody's, Standard & Poor's-Registered Trademark-, Duff or
Fitch.
MATURITY--The length of time remaining until the issuer of a debt security must
repay the principal amount.
REAL GDP--The national gross domestic product (GDP) is the total value of all
goods and services produced in the United States over a specific period of time
adjusted for the rate of inflation to allow meaningful year-to-year comparisons.
YIELD--The actual annualized income earned on an investment over a stated period
of time (assumed to be generated over a one-year period). An EFFECTIVE YIELD
assumes that the income earned is reinvested.
13
<PAGE>
PORTFOLIO HIGHLIGHTS
SCHWAB MONEY MARKET FUND
AVERAGE YIELDS FOR THE PERIOD ENDED 6/30/99(1)
<TABLE>
<S> <C>
- -------------------------------------------------
Last seven days 4.29%
- -------------------------------------------------
Last three months 4.26%
- -------------------------------------------------
Last 12 months 4.58%
- -------------------------------------------------
</TABLE>
MATURITY SCHEDULE: PERCENTAGE OF TOTAL INVESTMENTS
<TABLE>
<CAPTION>
MATURITY RANGE 3/31/99 6/30/99
<S> <C> <C>
- -----------------------------------------------------------
0-15 days 12.0% 17.1%
- -----------------------------------------------------------
16-30 days 12.8% 16.2%
- -----------------------------------------------------------
31-60 days 22.4% 26.9%
- -----------------------------------------------------------
61-90 days 22.4% 24.8%
- -----------------------------------------------------------
91-120 days 17.9% 2.4%
- -----------------------------------------------------------
More than 120 days 12.5% 12.6%
- -----------------------------------------------------------
Weighted average 73 days 68 days
- -----------------------------------------------------------
</TABLE>
PORTFOLIO QUALITY
<TABLE>
<CAPTION>
PERCENTAGE OF TOTAL INVESTMENTS:
SEC TIER RATING 6/30/99
<S> <C>
- ---------------------------------------------------------------------------
Tier 1 100.0%
- ---------------------------------------------------------------------------
</TABLE>
SCHWAB GOVERNMENT MONEY FUND
AVERAGE YIELDS FOR THE PERIOD ENDED 6/30/99(1)
<TABLE>
<S> <C>
- -------------------------------------------------
Last seven days 4.19%
- -------------------------------------------------
Last three months 4.18%
- -------------------------------------------------
Last 12 months 4.48%
- -------------------------------------------------
</TABLE>
MATURITY SCHEDULE: PERCENTAGE OF TOTAL INVESTMENTS
<TABLE>
<CAPTION>
MATURITY RANGE 3/31/99 6/30/99
<S> <C> <C>
- -----------------------------------------------------------
0-15 days 37.2% 32.2%
- -----------------------------------------------------------
16-30 days 0.2% 0.8%
- -----------------------------------------------------------
31-60 days 13.5% 35.1%
- -----------------------------------------------------------
61-90 days 14.1% 12.2%
- -----------------------------------------------------------
91-120 days 7.3% 2.3%
- -----------------------------------------------------------
More than 120 days 27.7% 17.4%
- -----------------------------------------------------------
Weighted average 76 days 69 days
- -----------------------------------------------------------
</TABLE>
(1) A portion of the Fund's expenses was reduced during the periods. Without
this reduction, yields would have been lower.
14
<PAGE>
SCHWAB U.S. TREASURY MONEY FUND
AVERAGE YIELDS FOR THE PERIOD ENDED 6/30/99(1)
<TABLE>
<S> <C>
- -------------------------------------------------
Last seven days 4.02%
- -------------------------------------------------
Last three months 3.99%
- -------------------------------------------------
Last 12 months 4.25%
- -------------------------------------------------
</TABLE>
MATURITY SCHEDULE: PERCENTAGE OF TOTAL INVESTMENTS
<TABLE>
<CAPTION>
MATURITY RANGE 3/31/99 6/30/99
<S> <C> <C>
- -----------------------------------------------------------
0-15 days 0.0% 0.0%
- -----------------------------------------------------------
16-30 days 31.9% 0.0%
- -----------------------------------------------------------
31-60 days 18.4% 31.6%
- -----------------------------------------------------------
61-90 days 12.1% 18.4%
- -----------------------------------------------------------
91-120 days 7.1% 19.0%
- -----------------------------------------------------------
More than 120 days 30.5% 31.0%
- -----------------------------------------------------------
Weighted average 76 days 83 days
- -----------------------------------------------------------
</TABLE>
(1) A portion of the Fund's expenses was reduced during the periods. Without
this reduction, yields would have been lower.
15
<PAGE>
SCHWAB MONEY MARKET FUND
SCHEDULE OF INVESTMENTS (in thousands)
June 30, 1999 (unaudited)
Par Value
-------- -----------
COMMERCIAL PAPER AND OTHER CORPORATE
OBLIGATIONS -- 71.1% (a)
AUTOMOBILE RECEIVABLES -- 0.1% (g)
New Center Asset Trust Plus
4.90%, 08/13/99 $ 20,000 $ 19,884
5.03%, 09/17/99 11,000 10,882
-----------
30,766
-----------
AUTOMOTIVE -- 4.1%
Daimler Chrysler N.A. Holdings
4.91%, 07/30/99 80,000 79,688
4.91%, 08/03/99 50,000 49,778
4.96%, 08/03/99 30,000 29,865
4.91%, 08/05/99 50,000 49,765
FCE Bank PLC
4.90%, 07/23/99 100,000 99,708
General Motors Acceptance Corp.
4.89%, 07/21/99 125,000 124,665
4.89%, 07/22/99 75,000 74,789
4.89%, 08/11/99 200,000 198,902
4.89%, 08/12/99 200,000 198,875
4.89%, 08/13/99 100,000 99,424
4.90%, 08/13/99 148,000 147,148
Hertz Corp.
5.19%, 09/21/99 125,000 123,541
-----------
1,276,148
-----------
BANKING - AUSTRALIA -- 0.7%
Anz (Delaware), Inc.
4.88%, 08/12/99 50,000 49,720
Westpac Capital Corp.
4.94%, 07/09/99 75,000 74,919
4.90%, 09/09/99 100,000 99,063
-----------
223,702
-----------
BANKING - BELGIUM -- 3.0%
BBL North America
4.89%, 07/12/99 8,000 7,988
4.88%, 07/14/99 49,000 48,915
5.04%, 09/09/99 55,000 54,469
5.19%, 09/27/99 100,000 98,748
Cregem North America, Inc.
4.92%, 07/09/99 115,000 114,876
4.94%, 07/12/99 100,000 99,853
4.88%, 07/16/99 50,000 49,900
Par Value
-------- -----------
Generale Funding L.L.C.
4.96%, 07/08/99 $ 25,000 $ 24,977
4.87%, 07/19/99 18,000 17,957
4.87%, 07/20/99 100,000 99,749
4.89%, 07/22/99 50,000 49,859
4.93%, 08/11/99 100,000 99,452
4.93%, 08/12/99 50,000 49,719
4.95%, 10/27/99 25,000 24,605
4.95%, 10/29/99 75,000 73,793
5.21%, 12/10/99 25,000 24,429
-----------
939,289
-----------
BANKING - CANADA -- 2.0%
Bank of Nova Scotia
4.90%, 07/13/99 50,000 49,920
4.87%, 08/02/99 50,000 49,789
4.89%, 08/03/99 45,000 44,801
4.87%, 08/04/99 100,000 99,551
4.89%, 08/05/99 150,000 149,304
5.01%, 09/02/99 175,000 173,486
National Bank of Canada
5.02%, 08/23/99 50,000 49,639
-----------
616,490
-----------
BANKING - DENMARK -- 0.4%
Den Danske Corp.
4.90%, 08/04/99 25,000 24,887
Unifunding, Inc.
4.89%, 08/04/99 91,000 90,590
-----------
115,477
-----------
BANKING - DOMESTIC -- 4.3%
BankAmerica Corp.
4.91%, 08/05/99 50,000 49,767
4.88%, 08/24/99 100,000 99,280
Citibank Capital Markets Assets, L.L.C. (f)
4.89%, 08/13/99 16,000 15,908
4.95%, 08/23/99 58,000 57,583
5.13%, 09/21/99 100,000 98,847
Enterprise Funding Corp. (f)
4.93%, 07/02/99 30,056 30,052
4.99%, 07/08/99 12,570 12,558
16
<PAGE>
Par Value
-------- -----------
5.36%, 07/13/99 $ 50,000 $ 49,911
4.99%, 07/14/99 8,958 8,942
5.36%, 07/14/99 50,000 49,903
4.91%, 07/15/99 106,271 106,071
5.09%, 09/10/99 39,936 39,540
5.17%, 09/24/99 7,512 7,422
First Chicago Financial Corp.
4.93%, 07/28/99 90,000 89,673
Forrestal Funding Master Trust (f)
5.04%, 09/08/99 25,000 24,761
5.05%, 09/09/99 25,000 24,757
Intrepid Funding Master Trust (f)
4.89%, 07/16/99 15,194 15,163
4.91%, 08/27/99 29,191 28,968
4.98%, 09/08/99 13,000 12,878
5.20%, 10/01/99 49,944 49,291
5.24%, 10/05/99 13,000 12,821
4.95%, 10/20/99 100,000 98,509
Kitty Hawk Funding Corp. (f)
5.18%, 08/05/99 39,763 39,564
5.30%, 08/09/99 82,000 81,532
5.08%, 07/14/99 37,000 36,932
5.08%, 07/15/99 25,000 24,951
5.01%, 09/01/99 172,179 170,711
5.17%, 09/13/99 14,702 14,548
4.97%, 11/02/99 10,166 9,996
-----------
1,360,839
-----------
BANKING - FRANCE -- 0.1%
Societe Generale North America
4.93%, 07/08/99 42,000 41,960
-----------
BANKING - GERMANY -- 4.0%
Bavaria TRR Corp. (f)
4.90%, 08/03/99 14,800 14,734
4.90%, 08/16/99 31,000 30,808
4.93%, 08/17/99 34,000 33,784
5.01%, 09/02/99 35,000 34,697
5.02%, 09/02/99 27,300 27,063
Comision Federal de Electricidad (f)
4.96%, 08/30/99 50,000 49,593
5.05%, 09/15/99 25,000 24,737
Deutsche Bank Financial, Inc.
4.88%, 08/26/99 100,000 99,253
4.88%, 08/27/99 85,000 84,354
5.02%, 09/13/99 160,000 158,372
5.02%, 09/14/99 100,000 98,969
5.20%, 12/02/99 200,000 195,662
Par Value
-------- -----------
Dresdner U.S. Finance, Inc.
5.04%, 09/16/99 $250,000 $ 247,342
Giro US Funding Corp. (f)
4.93%, 08/11/99 67,000 66,628
5.30%, 08/13/99 50,277 49,961
4.94%, 08/17/99 50,000 49,682
-----------
1,265,639
-----------
BANKING - NETHERLANDS -- 4.9%
ABN-AMRO North America Finance, Inc.
4.88%, 07/19/99 50,000 49,881
Atlantis One Funding Corp. (f)
4.93%, 07/21/99 10,988 10,958
4.93%, 07/28/99 116,077 115,655
4.90%, 08/13/99 56,000 55,676
4.91%, 08/13/99 10,840 10,777
4.91%, 08/16/99 148,432 147,516
4.93%, 08/17/99 69,000 68,561
4.90%, 08/18/99 75,000 74,517
4.90%, 08/19/99 87,000 86,428
4.97%, 08/24/99 129,000 128,058
4.96%, 08/25/99 146,035 144,951
4.90%, 08/26/99 77,000 76,423
4.98%, 08/27/99 19,000 18,854
4.97%, 09/01/99 10,000 9,916
4.97%, 09/02/99 10,141 10,054
5.02%, 09/02/99 20,000 19,826
4.98%, 09/14/99 73,000 72,254
5.28%, 09/20/99 75,000 74,121
5.27%, 09/21/99 16,000 15,810
5.27%, 09/22/99 78,786 77,841
Internationale Nederlanden
(U.S.) Funding Corp.
4.88%, 07/30/99 125,000 124,516
4.89%, 08/10/99 63,000 62,663
4.89%, 08/11/99 75,000 74,589
-----------
1,529,845
-----------
BANKING - NORWAY -- 0.9%
Christiania Capital Corp.
4.90%, 08/10/99 42,000 41,775
4.92%, 08/12/99 40,000 39,774
4.90%, 08/17/99 50,000 49,685
17
<PAGE>
SCHWAB MONEY MARKET FUND
SCHEDULE OF INVESTMENTS (in thousands) (continued)
June 30, 1999 (unaudited)
Par Value
-------- -----------
Den Norske Bank
5.00%, 07/01/99 $ 50,000 $ 50,000
4.93%, 08/25/99 100,000 99,257
-----------
280,491
-----------
BANKING - SWEDEN -- 3.0%
AB Spintab
4.92%, 07/22/99 90,000 89,745
4.93%, 07/26/99 30,000 29,899
4.95%, 08/13/99 10,000 9,942
4.98%, 08/25/99 100,000 99,259
5.05%, 09/10/99 9,000 8,913
5.00%, 09/30/99 66,000 65,187
Nordbanken of North America, Inc.
4.92%, 07/12/99 85,000 84,874
4.92%, 07/13/99 100,000 99,839
4.95%, 08/10/99 40,000 39,785
4.97%, 08/10/99 45,000 44,758
4.88%, 08/19/99 126,000 125,177
Svenska Handelsbanken, Inc.
4.88%, 07/14/99 50,000 49,913
4.88%, 07/15/99 50,000 49,906
Swedbank, Inc.
4.90%, 07/06/99 9,000 8,994
4.88%, 07/16/99 10,000 9,980
4.91%, 08/09/99 50,000 49,739
4.88%, 08/26/99 50,000 49,627
4.93%, 09/15/99 34,500 34,149
-----------
949,686
-----------
BANKING - SWITZERLAND -- 1.8%
Credit Suisse First Boston, Inc.
4.93%, 08/24/99 47,300 46,955
4.93%, 08/30/99 70,000 69,432
4.97%, 09/08/99 40,000 39,624
UBS Finance (Delaware) Inc.
4.92%, 07/08/99 25,000 24,977
4.99%, 12/14/99 115,000 112,434
5.01%, 12/20/99 190,000 185,588
5.03%, 12/22/99 100,000 97,641
-----------
576,651
-----------
Par Value
-------- -----------
BANKING - UNITED KINGDOM -- 2.2%
Abbey National N.A. Corp.
4.94%, 07/02/99 $193,000 $ 192,974
4.90%, 08/02/99 8,000 7,966
Abbey National Treasury Services PLC
5.20%, 05/04/00 95,000 94,945
5.40%, 05/11/00 50,000 49,923
Banco Nacional de Comercio
Exterior, S.N.C. (f)
4.89%, 07/19/99 10,000 9,976
Banco Nacional de Mexico S.A. (f)
4.90%, 08/20/99 9,000 8,940
4.99%, 09/14/99 33,000 32,662
Bank of Scotland Treasury
Services PLC
4.88%, 08/12/99 55,000 54,691
Repeat Offering Securitization
Entity, Inc. (f)
4.89%, 07/19/99 20,500 20,451
4.89%, 07/20/99 47,966 47,845
4.91%, 07/22/99 23,483 23,417
4.89%, 07/27/99 64,106 63,883
5.02%, 08/31/99 64,340 63,800
Yorkshire Building Society
5.12%, 07/28/99 15,050 14,993
-----------
686,466
-----------
BEVERAGES -- 0.1%
Coca Cola Enterprises
5.12%, 09/17/99 25,000 24,727
-----------
CREDIT CARD RECEIVABLES -- 0.1% (g)
Providian Master Trust Series 1993-3
4.90%, 08/10/99 11,433 11,372
4.91%, 08/12/99 12,000 11,932
-----------
23,304
-----------
DIVERSIFIED FINANCIAL ASSETS -- 17.2% (g)
Ace Overseas Corp.
5.10%, 07/20/99 10,000 9,973
4.89%, 08/02/99 35,000 34,852
4.91%, 08/16/99 30,000 29,814
5.03%, 09/01/99 11,000 10,906
5.00%, 09/27/99 53,000 52,368
Amsterdam Funding Corp.
5.02%, 09/01/99 25,000 24,786
18
<PAGE>
Par Value
-------- -----------
Bavaria Universal Funding
4.90%, 07/16/99 $ 30,000 $ 29,940
4.96%, 08/20/99 38,000 37,741
5.03%, 09/03/99 25,000 24,779
5.00%, 09/27/99 12,000 11,857
Beta Finance, Inc.
4.98%, 07/01/99 50,000 50,000
4.88%, 07/19/99 45,500 45,392
4.89%, 08/02/99 20,500 20,413
4.95%, 08/09/99 21,000 20,890
4.97%, 09/13/99 23,500 23,264
5.04%, 09/13/99 98,200 97,197
5.13%, 09/21/99 50,000 49,424
5.17%, 09/22/99 33,000 32,612
5.22%, 09/22/99 25,000 24,703
5.30%, 09/28/99 36,000 35,535
4.95%, 10/19/99 26,280 25,892
5.25%, 05/11/00 75,000 75,000
5.55%, 06/09/00 50,000 49,995
CC (USA), Inc.
4.94%, 07/06/99 26,500 26,482
4.88%, 08/02/99 40,000 39,831
4.90%, 08/02/99 46,000 45,805
4.95%, 08/04/99 29,500 29,365
4.95%, 08/12/99 25,000 24,859
4.96%, 08/20/99 27,400 27,214
4.98%, 08/23/99 50,000 49,642
5.05%, 08/31/99 63,000 62,475
5.30%, 09/28/99 67,000 66,134
4.95%, 10/18/99 15,000 14,781
4.95%, 10/20/99 47,500 46,793
Concord Minutemen Capital Co., L.L.C.
Series A
4.93%, 07/09/99 22,000 21,976
4.95%, 08/20/99 30,968 30,758
4.98%, 09/15/99 101,642 100,589
4.94%, 09/20/99 25,000 24,727
4.95%, 10/13/99 25,608 25,250
5.27%, 11/08/99 28,000 27,478
Dorada Finance, Inc.
5.04%, 09/15/99 50,000 49,475
Eureka Securitization, Inc.
5.11%, 08/05/99 15,000 14,926
5.13%, 09/20/99 20,000 19,772
5.13%, 09/22/99 50,000 49,417
Par Value
-------- -----------
Greenwich Funding Corp.
4.91%, 07/01/99 $ 38,000 $ 38,000
4.93%, 08/16/99 13,000 12,919
5.01%, 08/31/99 19,109 18,949
5.01%, 09/01/99 38,786 38,455
5.03%, 09/02/99 25,322 25,102
5.03%, 09/07/99 157,003 155,529
5.16%, 09/15/99 23,000 22,753
Greyhawk Funding, L.L.C.
4.89%, 07/16/99 10,000 9,980
4.89%, 07/20/99 35,000 34,911
4.90%, 08/19/99 40,000 39,738
4.95%, 08/26/99 125,000 124,050
4.95%, 08/27/99 45,000 44,652
5.03%, 09/17/99 16,000 15,828
International Securitization Corp.
5.08%, 07/21/99 70,355 70,157
4.90%, 08/06/99 12,865 12,803
5.03%, 09/08/99 77,720 76,980
5.03%, 09/10/99 100,130 99,150
5.10%, 09/10/99 50,000 49,504
5.17%, 09/20/99 20,590 20,354
5.18%, 09/22/99 20,420 20,179
5.21%, 09/23/99 35,000 34,580
5.17%, 09/24/99 20,310 20,065
5.10%, 10/04/99 26,000 25,656
4.95%, 10/27/99 38,215 37,610
Lexington Parker Capital Corp.
4.88%, 07/20/99 75,000 74,812
4.87%, 07/23/99 15,000 14,956
4.88%, 07/23/99 27,000 26,921
4.89%, 08/06/99 50,000 49,759
4.93%, 08/18/99 40,000 39,740
4.93%, 08/19/99 41,032 40,760
4.95%, 08/19/99 50,000 49,667
4.98%, 08/20/99 41,000 40,723
4.96%, 08/23/99 79,088 78,517
4.94%, 08/24/99 63,852 63,386
4.96%, 08/24/99 60,000 59,559
5.05%, 09/02/99 65,553 64,989
5.02%, 09/03/99 30,000 29,735
5.03%, 09/03/99 44,000 43,611
5.06%, 09/03/99 37,000 36,676
4.97%, 11/08/99 62,538 61,443
19
<PAGE>
SCHWAB MONEY MARKET FUND
SCHEDULE OF INVESTMENTS (in thousands) (continued)
June 30, 1999 (unaudited)
Par Value
-------- -----------
Market Street Funding Corp.
5.08%, 07/16/99 $120,000 $ 119,747
5.08%, 07/20/99 40,000 39,893
5.08%, 07/22/99 35,000 34,897
Mont Blanc Capital Corp.
4.90%, 07/07/99 50,000 49,959
4.90%, 07/12/99 30,000 29,955
5.08%, 07/19/99 25,186 25,122
5.11%, 08/06/99 59,422 59,120
Moriarty, L.L.C.
4.91%, 07/09/99 21,000 20,977
4.90%, 07/12/99 27,000 26,960
4.90%, 08/06/99 29,000 28,860
4.90%, 08/10/99 70,600 70,220
4.90%, 08/11/99 16,000 15,912
4.95%, 08/23/99 30,000 29,784
4.94%, 08/24/99 50,000 49,635
5.02%, 09/07/99 67,000 66,374
5.06%, 09/08/99 26,000 25,751
Sigma Finance, Inc.
4.94%, 07/01/99 30,000 30,000
5.03%, 07/06/99 50,000 49,966
4.94%, 07/15/99 18,000 17,966
4.96%, 07/15/99 12,000 11,977
4.90%, 07/26/99 38,000 37,874
4.88%, 07/30/99 10,000 9,962
4.90%, 08/20/99 24,000 23,839
4.91%, 08/20/99 10,000 9,933
4.94%, 08/27/99 33,000 32,745
5.05%, 08/27/99 40,000 39,688
5.21%, 09/08/99 13,000 12,872
5.07%, 09/09/99 41,000 40,606
5.07%, 09/10/99 25,000 24,753
5.03%, 09/15/99 77,000 76,194
5.18%, 09/20/99 100,000 98,850
5.13%, 09/21/99 50,000 49,424
5.13%, 09/22/99 19,000 18,778
5.18%, 09/22/99 72,000 71,152
5.00%, 09/23/99 29,000 28,670
4.95%, 10/14/99 18,000 17,746
4.95%, 10/21/99 75,000 73,873
5.00%, 10/25/99 75,000 73,824
5.00%, 10/29/99 41,150 40,482
5.01%, 11/17/99 38,000 37,287
Par Value
-------- -----------
Stellar Funding Group, Inc.
4.89%, 07/26/99 $ 20,000 $ 19,933
4.89%, 07/28/99 10,000 9,964
Trident Capital Finance, Inc.
4.93%, 08/17/99 80,000 79,491
4.93%, 08/18/99 80,000 79,481
4.98%, 09/14/99 71,700 70,967
5.04%, 09/16/99 70,000 69,256
-----------
5,388,959
-----------
ELECTRICAL & ELECTRONICS -- 0.1%
General Electric Co.
4.91%, 07/27/99 25,000 24,913
-----------
FINANCE - COMMERCIAL -- 7.1%
CIT Group Holdings, Inc.
4.92%, 07/23/99 100,000 99,704
4.93%, 07/28/99 80,000 79,709
4.90%, 08/09/99 75,000 74,608
4.98%, 11/10/99 50,000 49,109
General Electric Capital Services
4.91%, 07/19/99 50,000 49,879
4.91%, 08/03/99 100,000 99,557
4.91%, 08/04/99 100,000 99,544
4.91%, 08/05/99 50,000 49,765
4.89%, 08/17/99 50,000 49,686
General Electric Capital Corp.
5.63%, 07/01/99 316,160 316,160
4.91%, 07/19/99 40,000 39,904
4.91%, 07/21/99 100,000 99,732
4.91%, 07/26/99 100,000 99,665
4.91%, 07/27/99 305,000 303,936
4.91%, 07/28/99 108,000 107,609
4.91%, 07/29/99 83,000 82,688
4.91%, 07/30/99 200,000 199,222
4.91%, 08/03/99 100,000 99,557
4.91%, 08/04/99 30,000 29,863
4.89%, 08/17/99 34,000 33,786
Heller Financial, Inc.
5.00%, 07/16/99 24,000 23,951
5.00%, 07/30/99 34,000 33,865
5.00%, 08/04/99 50,000 49,767
5.01%, 08/06/99 50,000 49,753
5.01%, 08/12/99 20,000 19,885
-----------
2,240,904
-----------
20
<PAGE>
Par Value
-------- -----------
FINANCE - CONSUMER -- 1.5%
Associates Corp. of North America
5.33%, 12/16/99 $ 25,000 $ 24,394
Associates First Capital BV
4.88%, 07/14/99 12,000 11,979
4.90%, 08/18/99 45,000 44,710
4.97%, 09/01/99 40,000 39,662
5.02%, 09/01/99 20,000 19,830
Associates First Capital Corp.
4.90%, 07/16/99 100,000 99,799
4.91%, 07/19/99 100,000 99,758
4.91%, 07/20/99 50,000 49,873
5.04%, 09/16/99 50,000 49,468
5.04%, 09/17/99 50,000 49,462
-----------
488,935
-----------
LIFE & HEALTH INSURANCE -- 0.2%
Prudential Funding Corp.
4.88%, 08/05/99 62,000 61,710
-----------
MULTILINE INSURANCE -- 0.1%
General Electric Financial
Assurance Holdings, Inc.
4.92%, 07/27/99 25,000 24,912
-----------
SAVINGS & LOAN -- 0.3%
Bank of America FSB
4.89%, 08/25/99 90,000 89,337
-----------
SECURITIES BROKERAGE - DEALER -- 4.3%
Bear Stearns Companies, Inc.
5.10%, 09/17/99 35,000 34,619
Goldman Sachs Group, LP
4.90%, 09/01/99 85,000 84,294
4.90%, 09/03/99 116,000 115,006
JP Morgan & Co.
5.19%, 09/22/99 79,000 78,067
4.98%, 09/23/99 300,000 296,570
5.46%, 01/21/00 200,000 194,010
Lehman Brothers Holdings, Inc.
5.08%, 09/08/99 75,000 74,280
Salomon Smith Barney Holdings
5.26%, 07/07/99 45,000 44,961
4.89%, 08/02/99 50,000 49,785
4.90%, 08/06/99 50,000 49,758
4.89%, 08/19/99 115,000 114,246
4.89%, 08/20/99 222,000 220,514
-----------
1,356,110
-----------
Par Value
-------- -----------
TRADE RECEIVABLES -- 8.6% (g)
Apreco, Inc.
5.18%, 08/09/99 $ 25,000 $ 24,861
4.99%, 08/13/99 10,000 9,941
4.93%, 08/16/99 25,000 24,844
4.93%, 08/26/99 50,000 49,622
5.10%, 09/09/99 40,000 39,608
5.10%, 09/10/99 40,000 39,603
4.97%, 09/16/99 15,000 14,843
5.17%, 09/21/99 15,000 14,826
Asset Securitization Cooperative Corp.
5.19%, 09/24/99 170,000 167,945
Barton Capital Corp.
4.90%, 07/06/99 102,810 102,740
4.90%, 07/07/99 17,303 17,289
4.91%, 07/07/99 40,000 39,967
4.91%, 07/08/99 18,012 17,995
4.89%, 07/09/99 10,000 9,989
4.91%, 07/09/99 22,261 22,237
5.41%, 07/14/99 30,000 29,941
4.92%, 07/21/99 20,000 19,946
4.99%, 07/23/99 14,535 14,491
5.10%, 08/04/99 18,002 17,916
4.89%, 08/10/99 41,213 40,992
5.00%, 08/16/99 17,000 16,892
5.17%, 09/20/99 14,918 14,747
5.00%, 09/29/99 15,606 15,416
Clipper Receivables Corp.
4.89%, 07/09/99 11,000 10,988
5.11%, 08/10/99 36,810 36,603
Corporate Asset Funding Corp.
5.26%, 07/07/99 18,000 17,984
5.26%, 07/09/99 50,000 49,942
Corporate Receivables Corp.
4.93%, 08/27/99 50,000 49,615
4.95%, 08/30/99 50,000 49,593
5.17%, 09/24/99 100,000 98,796
CXC, Inc.
4.90%, 07/14/99 30,000 29,947
4.90%, 07/15/99 30,000 29,943
4.91%, 07/15/99 25,000 24,953
5.11%, 08/05/99 25,000 24,877
5.11%, 08/06/99 40,000 39,797
5.02%, 09/08/99 75,000 74,288
5.02%, 09/09/99 75,000 74,278
5.17%, 09/24/99 50,000 49,398
21
<PAGE>
SCHWAB MONEY MARKET FUND
SCHEDULE OF INVESTMENTS (in thousands) (continued)
June 30, 1999 (unaudited)
Par Value
-------- -----------
Edison Asset Securitization Corp., L.L.C.
4.88%, 07/15/99 $ 43,281 $ 43,201
4.87%, 07/23/99 15,284 15,240
4.87%, 07/29/99 25,000 24,908
4.93%, 07/29/99 26,450 26,350
4.87%, 07/30/99 29,448 29,335
5.01%, 09/08/99 80,124 79,365
Falcon Asset Securitization Corp.
5.27%, 09/21/99 10,562 10,437
5.22%, 10/12/99 13,623 13,423
Monte Rosa Capital Corp.
4.99%, 07/13/99 26,000 25,957
5.08%, 07/26/99 30,000 29,895
5.08%, 07/28/99 90,556 90,213
Receivables Capital Corp.
4.90%, 07/13/99 50,514 50,432
5.12%, 09/03/99 110,690 109,693
5.10%, 09/08/99 50,000 49,517
Sheffield Receivables Corp.
5.87%, 07/01/99 10,000 10,000
5.08%, 07/23/99 73,800 73,572
4.93%, 08/16/99 14,200 14,112
5.32%, 12/17/99 30,800 30,051
WCP Funding, Inc.
4.93%, 08/26/99 25,000 24,811
4.93%, 08/27/99 50,000 49,615
Windmill Funding Corp.
5.08%, 07/29/99 75,000 74,705
5.18%, 08/06/99 25,000 24,871
4.95%, 08/20/99 25,000 24,830
4.97%, 09/02/99 25,000 24,785
5.10%, 09/15/99 100,000 98,937
5.12%, 09/17/99 100,250 99,153
5.13%, 09/22/99 15,950 15,764
5.30%, 09/27/99 50,000 49,361
Wood Street Funding Corp.
4.89%, 07/08/99 24,308 24,285
4.90%, 08/04/99 9,000 8,959
5.18%, 09/29/99 19,000 18,757
-----------
2,692,187
-----------
TOTAL COMMERCIAL PAPER AND
OTHER CORPORATE OBLIGATIONS
(Cost $22,309,447) 22,309,447
-----------
Par Value
-------- -----------
CERTIFICATES OF DEPOSIT -- 20.7%
BANKING - AUSTRALIA -- 0.2%
Australia & New Zealand Bank Group
4.90%, 07/07/99 $ 50,000 $ 50,000
-----------
BANKING - BELGIUM -- 3.1%
Credit Communal de Belgique
5.70%, 07/07/99 150,000 149,999
5.71%, 07/08/99 100,000 99,999
5.71%, 07/13/99 72,000 71,999
5.71%, 07/15/99 100,000 99,998
4.95%, 08/16/99 50,000 50,000
4.95%, 08/17/99 100,000 100,000
4.95%, 08/18/99 100,000 100,000
5.20%, 04/06/00 100,000 99,963
5.10%, 04/13/00 100,000 99,962
5.13%, 04/17/00 100,000 99,959
-----------
971,879
-----------
BANKING - CANADA -- 4.4%
Bank of Montreal
5.13%, 04/17/00 50,000 49,984
5.20%, 04/17/00 45,000 44,957
Bank of Nova Scotia
4.89%, 07/27/99 50,000 50,022
Canadian Imperial Bank of Commerce
5.05%, 01/27/00 75,000 74,990
5.20%, 02/25/00 100,000 99,981
5.35%, 03/03/00 25,000 24,987
5.20%, 04/04/00 100,000 99,965
5.10%, 04/12/00 88,000 87,986
5.45%, 06/01/00 45,000 44,980
National Bank of Canada
4.93%, 07/06/99 150,000 150,000
5.74%, 07/20/99 100,000 99,997
4.90%, 09/07/99 135,000 135,001
Royal Bank of Canada
5.05%, 02/04/00 100,000 99,983
5.06%, 02/08/00 75,000 74,989
Toronto-Dominion Bank
5.70%, 07/08/99 75,000 74,999
4.90%, 07/14/99 15,000 15,003
5.15%, 02/14/00 100,000 99,932
5.20%, 04/05/00 50,000 49,982
-----------
1,377,738
-----------
22
<PAGE>
Par Value
-------- -----------
BANKING - DOMESTIC -- 2.7%
BankBoston N.A.
5.09%, 09/14/99 $ 50,000 $ 49,999
Bankers Trust Co.
4.93%, 07/01/99 150,000 150,000
Chase Manhattan Bank (USA)
5.75%, 08/03/99 100,000 99,994
Morgan Guaranty Trust Co.
4.89%, 07/21/99 106,000 106,000
4.89%, 07/22/99 100,000 100,000
4.89%, 07/23/99 100,000 100,000
US Bank N.A.
4.98%, 09/21/99 40,000 40,000
4.98%, 11/03/99 25,000 25,000
4.97%, 11/08/99 14,000 14,000
5.30%, 12/14/99 25,000 25,000
Wilmington Trust Co.
4.97%, 09/07/99 62,000 62,000
4.98%, 09/16/99 40,000 40,000
4.98%, 11/17/99 25,000 25,000
-----------
836,993
-----------
BANKING - FINLAND -- 0.2%
Merita Bank Ltd.
5.03%, 09/14/99 52,000 52,000
5.30%, 12/17/99 15,000 15,000
-----------
67,000
-----------
BANKING - FRANCE -- 3.0%
Banque Nationale de Paris
5.20%, 12/08/99 25,000 25,002
Credit Agricole Indosuez
4.90%, 08/05/99 50,000 50,000
4.90%, 08/06/99 100,000 100,000
4.95%, 08/31/99 280,000 280,000
4.95%, 09/30/99 150,000 150,000
4.95%, 10/12/99 100,000 99,996
Societe Generale
4.90%, 07/12/99 150,000 150,000
4.88%, 08/09/99 100,000 100,000
-----------
954,998
-----------
BANKING - GERMANY -- 2.6%
Commerzbank, AG
4.88%, 09/10/99 100,000 100,075
4.88%, 09/13/99 75,000 75,046
5.04%, 09/15/99 50,000 50,017
Par Value
-------- -----------
Deutsche Bank AG
4.90%, 08/02/99 $ 50,000 $ 49,999
Landesbank Hessen-Thurgingen
Girozentrale
5.20%, 04/26/00 50,000 49,968
Westdeutsche Landesbank
Girozentrale
4.88%, 07/13/99 50,000 50,000
4.88%, 07/14/99 125,000 125,000
4.88%, 08/10/99 100,000 100,000
4.88%, 08/18/99 105,000 105,000
5.01%, 09/09/99 110,000 110,000
-----------
815,105
-----------
BANKING - NETHERLANDS -- 0.1%
Ing Bank NV
4.95%, 10/27/99 25,000 24,999
-----------
BANKING - NORWAY -- 0.8%
Christiania Bank
4.89%, 07/13/99 75,000 75,000
4.89%, 07/16/99 100,000 100,000
4.89%, 08/02/99 25,000 25,000
Den Norske Bank
4.94%, 08/25/99 50,000 50,000
-----------
250,000
-----------
BANKING - SWEDEN -- 0.2%
ForeningsSparbanken AB
4.91%, 07/21/99 50,000 50,000
5.20%, 12/02/99 25,000 25,000
-----------
75,000
-----------
BANKING - SWITZERLAND -- 2.3%
UBS AG
5.70%, 07/09/99 100,000 99,999
5.11%, 01/13/00 50,000 49,992
5.35%, 03/01/00 25,000 24,990
5.10%, 04/12/00 71,000 70,989
5.26%, 05/10/00 100,000 99,958
5.40%, 05/31/00 50,000 49,980
5.45%, 06/01/00 50,000 49,980
5.65%, 06/26/00 100,000 99,949
5.75%, 06/26/00 25,000 24,963
5.70%, 06/27/00 75,000 74,971
5.80%, 07/05/00 (d) 75,000 74,969
-----------
720,740
-----------
23
<PAGE>
SCHWAB MONEY MARKET FUND
SCHEDULE OF INVESTMENTS (in thousands) (continued)
June 30, 1999 (unaudited)
Par Value
-------- -----------
BANKING-UNITED KINGDOM -- 1.1%
Bank of Scotland
4.90%, 07/15/99 $ 70,000 $ 70,000
Barclays Bank PLC
5.04%, 01/12/00 100,000 99,985
5.66%, 06/14/00 25,000 24,988
National Westminster Bank PLC
5.71%, 07/16/99 100,000 99,998
5.09%, 02/09/00 50,000 49,991
-----------
344,962
-----------
TOTAL CERTIFICATES OF DEPOSIT
(Cost $6,489,414) 6,489,414
-----------
VARIABLE RATE OBLIGATIONS -- 4.7% (b)
BANKING - DOMESTIC -- 0.3% (f)
6700 Cherry Avenue Partners
Demand Bond Series 1993
5.28%, 07/07/99 9,300 9,300
Lowndes Corp., Georgia Taxable
Demand Bond Series 1997
5.15%, 07/07/99 9,200 9,200
MoviePlex Realty Leasing, L.L.C.
Adjustable Rate Tender Securities
(Carmike Cinemas, Inc.) Series 1997A1
5.08%, 07/07/99 35,125 35,125
MoviePlex Realty Leasing, L.L.C.
Adjustable Rate Tender Securities
(Carmike Cinemas, Inc.) Series 1997A2
5.08%, 07/07/99 12,325 12,325
MoviePlex Realty Leasing, L.L.C.
Adjustable Rate Tender Securities
(Carmike Cinemas, Inc.) Series 1997A3
5.08%, 07/07/99 12,325 12,325
-----------
78,275
-----------
BANKING - FRANCE -- 0.1% (f)
New Jersey Economic Development
Authority Adjustable Rate Money
Market Securities (GE Aerospace
Camden Development Project)
Series A
5.03%, 07/07/99 16,875 16,875
Par Value
-------- -----------
New Jersey Economic Development
Authority Adjustable Rate Money
Market Securities (GE Aerospace
Camden Development Project)
Series B
5.03%, 07/07/99 $ 10,000 $ 10,000
-----------
26,875
-----------
BANKING - GERMANY -- 0.1% (a) (f)
Liquid Asset Backed Securities
Series 1998-1
5.14%, 07/07/99 22,809 22,802
-----------
BANKING - NETHERLANDS -- 0.1% (f)
New Jersey Economic Development
Authority Adjustable Rate Lease
Revenue Taxable Bonds (Barnes
& Noble, Inc. Distribution & Freight
Consolidation Center Project)
Series 1995A
5.05%, 07/07/99 20,070 20,070
New Jersey Economic Development
Authority Adjustable Rate Lease
Revenue Taxable Bonds (Barnes
& Noble, Inc. Distribution & Freight
Consolidation Center Project)
Series B
5.05%, 07/07/99 10,000 10,000
-----------
30,070
-----------
CREDIT CARD RECEIVABLES -- 0.1% (a) (g)
Short Term Repackaged Asset Trust
Series 1998 E
5.02%, 07/19/99 40,000 40,000
-----------
EDUCATION -- 0.1%
Development Authority of Dekalb
County Taxable Rate Revenue Bond
(Emory University Project)
Series 1995B
5.20%, 07/07/99 32,450 32,450
-----------
HEALTH CARE -- 0.1%
Catholic Health Initiatives Taxable
Demand Bonds Series 1997C
5.20%, 07/07/99 33,800 33,800
-----------
24
<PAGE>
Par Value
-------- -----------
LIFE & HEALTH INSURANCE -- 1.7% (e)
First Allmerica Financial Life
Insurance Co.
5.00%, 07/01/99 $ 50,000 $ 50,000
General Electric Life & Annuity
Assurance Co.
4.98%, 07/01/99 100,000 100,000
Jackson National Life Insurance Co.
5.01%, 07/01/99 60,000 60,000
John Hancock Mutual Life
Insurance Co.
4.95%, 07/01/99 50,000 50,000
Monumental Life Insurance Co.
5.01%, 07/01/99 100,000 100,000
Pacific Mutual Life Insurance Co.
4.93%, 07/01/99 100,000 100,000
United of Omaha Life Insurance Co.
5.08%, 07/01/99 60,000 60,000
-----------
520,000
-----------
MONOLINE INSURANCE -- 0.2% (f)
Baptist Health Systems of South
Florida, Inc. Taxable Direct Note
Obligations Series 1995A
5.20%, 07/07/99 12,555 12,555
Baptist Health Systems of South
Florida, Inc. Taxable Direct Note
Obligations Series 1995B
5.20%, 07/07/99 19,000 19,000
Dade County, Florida Expressway
Authority Toll System Revenue Bond
Series 1996
5.10%, 07/07/99 31,200 31,200
The Community Redevelopment
Agency of the City of Los Angeles,
California (Bunker Hill Project )
Subordinate Tax Allocation
Refunding Bonds Series 1997A
5.25%, 07/07/99 10,000 10,000
-----------
72,755
-----------
SECURITIES BROKERAGE - DEALER -- 1.6% (e)
Lehman Commercial Paper, Inc.
5.17%, 07/01/99 167,640 167,640
5.18%, 07/01/99 142,000 142,000
5.20%, 07/06/99 100,000 100,000
Par Value
-------- -----------
5.20%, 07/12/99 $ 23,000 $ 23,000
5.42%, 07/29/99 70,000 70,000
-----------
502,640
-----------
TRADE RECEIVABLES -- 0.3% (a) (g)
Asset Securitization Cooperative Corp.
5.19%, 09/20/99 100,000 100,000
-----------
TOTAL VARIABLE RATE OBLIGATIONS
(Cost $1,459,667) 1,459,667
-----------
BANK NOTES -- 3.5%
BANKING - DOMESTIC -- 3.5%
European American Bank
5.61%, 06/12/00 25,000 24,990
FCC National Bank
4.90%, 07/22/99 100,000 100,000
4.90%, 07/26/99 150,000 150,000
4.90%, 08/23/99 107,000 107,000
First National Bank of Chicago
5.03%, 09/17/99 200,000 200,000
Lasalle National Bank
5.30%, 05/15/00 50,000 49,978
NationsBank N.A.
4.94%, 07/06/99 24,000 24,000
4.94%, 07/07/99 100,000 100,000
4.94%, 07/08/99 100,000 100,000
4.95%, 11/04/99 100,000 100,000
4.95%, 11/09/99 100,000 100,000
4.95%, 11/10/99 50,000 50,000
-----------
TOTAL BANK NOTES
(COST $1,105,968) 1,105,968
-----------
TOTAL INVESTMENTS -- 100.0%
(Cost 31,364,496) 31,364,496
-----------
OTHER ASSETS AND LIABILITIES - 0.0%
Other assets 147,763
Liabilities (135,872)
-----------
11,891
-----------
TOTAL NET ASSETS-- 100.0% $31,376,387
===========
SEE ACCOMPANYING NOTES TO SCHEDULE OF INVESTMENTS AND NOTES TO FINANCIAL
STATEMENTS.
25
<PAGE>
SCHWAB GOVERNMENT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
June 30, 1999 (unaudited)
Par Value
-------- -----------
U.S. GOVERNMENT SECURITIES -- 80.0%
COUPON NOTES -- 12.7%
Federal Home Loan Bank
5.54%, 07/15/99 $ 25,000 $ 24,999
4.93%, 01/19/00 50,000 50,023
4.95%, 01/21/00 20,000 20,009
4.95%, 02/17/00 20,000 19,986
5.16%, 03/08/00 25,000 25,010
5.02%, 05/12/00 25,000 24,967
Federal National Mortgage
Association
8.45%, 07/12/99 8,750 8,757
6.00%, 09/02/99 25,000 25,030
5.81%, 10/01/99 20,600 20,647
5.23%, 06/07/00 20,000 19,984
Student Loan Marketing
Association
4.93%, 02/08/00 50,000 50,000
-----------
289,412
-----------
DISCOUNT NOTES -- 67.3%
Federal Home Loan Bank
5.03%, 11/19/99 21,387 20,976
Federal Home Loan Mortgage
Corporation
4.81%, 07/02/99 7,005 7,004
4.77%, 07/06/99 3,665 3,663
4.81%, 07/08/99 39,699 39,663
4.83%, 07/09/99 24,250 24,224
4.85%, 07/09/99 20,000 19,979
4.86%, 07/09/99 11,570 11,558
4.78%, 07/13/99 42,300 42,234
4.81%, 07/13/99 50,000 49,920
4.81%, 07/14/99 18,675 18,643
4.83%, 07/14/99 16,610 16,581
4.79%, 07/15/99 12,055 12,033
4.85%, 08/05/99 25,000 24,885
4.91%, 08/05/99 4,000 3,981
4.80%, 08/06/99 14,100 14,033
4.91%, 08/06/99 40,000 39,805
4.80%, 08/10/99 6,455 6,421
4.85%, 08/11/99 18,000 17,902
4.80%, 08/13/99 45,170 44,914
4.85%, 08/13/99 37,572 37,357
4.92%, 08/16/99 24,000 23,851
4.86%, 08/19/99 17,200 17,088
4.84%, 08/20/99 106,218 105,519
Par Value
-------- -----------
4.93%, 08/20/99 $ 13,300 $ 13,210
4.84%, 08/23/99 20,945 20,799
4.88%, 08/23/99 31,045 30,825
4.90%, 08/23/99 20,000 19,858
4.99%, 08/23/99 28,000 27,796
4.90%, 08/24/99 22,939 22,772
4.98%, 08/24/99 14,997 14,886
4.92%, 09/03/99 30,205 29,947
4.88%, 09/09/99 1,070 1,060
5.02%, 09/10/99 3,635 3,599
4.97%, 09/15/99 9,880 9,778
5.01%, 09/15/99 20,000 19,791
5.03%, 09/16/99 10,430 10,319
5.06%, 09/17/99 12,550 12,414
5.09%, 09/23/99 20,000 19,766
4.85%, 09/24/99 20,429 20,200
4.92%, 09/30/99 3,395 3,354
5.14%, 09/30/99 29,700 29,319
5.00%, 11/18/99 23,000 22,563
5.55%, 06/13/00 30,000 28,473
Federal National Mortgage
Association
4.84%, 07/21/99 18,975 18,924
4.85%, 08/05/99 14,000 13,935
4.93%, 08/05/99 8,200 8,161
4.90%, 08/10/99 55,015 54,719
4.81%, 08/11/99 45,000 44,759
4.82%, 08/12/99 50,000 49,725
4.83%, 08/12/99 25,000 24,862
4.83%, 08/13/99 30,000 29,831
4.88%, 08/24/99 30,000 29,783
4.87%, 08/27/99 50,000 49,619
4.98%, 08/27/99 7,280 7,223
4.94%, 09/03/99 47,330 46,919
5.03%, 09/10/99 26,390 26,131
4.81%, 09/13/99 3,775 3,739
5.02%, 09/15/99 25,000 24,738
4.87%, 09/17/99 24,000 23,753
4.87%, 11/05/99 20,000 19,665
5.02%, 11/05/99 53,818 52,886
4.95%, 12/15/99 10,000 9,776
4.86%, 12/17/99 10,000 9,778
5.35%, 05/18/00 23,120 22,067
-----------
1,533,956
-----------
TOTAL U.S. GOVERNMENT SECURITIES
(Cost $1,823,368) 1,823,368
-----------
26
<PAGE>
Par Value
-------- -----------
VARIABLE RATE OBLIGATIONS -- 2.2% (b)
Student Loan Marketing Association
5.41%, 07/06/99 $ 50,000 $ 49,997
-----------
TOTAL VARIABLE RATE OBLIGATIONS
(Cost $49,997) 49,997
-----------
Maturity
Value
----------
REPURCHASE AGREEMENTS -- 17.6% (c)
Credit Suisse First Boston Tri Party
Repurchase Agreement Collateralized
by U.S. Government Securities
4.78% Issue 04/19/99
Due 07/07/99 43,210 42,762
4.78% Issue 04/20/99
Due 07/07/99 80,633 79,807
4.78% Issue 04/21/99
Due 07/07/99 69,944 69,236
4.78% Issue 04/22/99
Due 07/07/99 37,468 37,094
4.79% Issue 05/11/99
Due 07/07/99 18,966 18,823
Morgan Stanley Dean Witter & Co.
Tri Party Repurchase Agreement
Collateralized by U.S. Government
Securities
4.90% Issue 06/25/99
Due 07/01/99 12,034 12,024
4.81% Issue 05/7/99
Due 07/07/99 12,259 12,160
4.81% Issue 05/10/99
Due 07/07/99 36,474 36,194
4.81% Issue 05/12/99
Due 07/07/99 46,715 46,368
4.81% Issue 05/13/99
Due 07/07/99 23,303 23,133
Maturity Value Value
-------------- -----------
Salomon Brothers Tri Party
Repurchase Agreement
Collateralized by U.S.
Government Securities
4.95% Issue 06/23/99
Due 07/07/99 $ 25,048 $ 25,000
-----------
TOTAL REPURCHASE AGREEMENTS
(Cost $402,601) 402,601
-----------
TOTAL INVESTMENTS -- 99.8%
(Cost $2,275,966) 2,275,966
-----------
OTHER ASSETS AND LIABILITIES - 0.2%
Other assets 8,692
Liabilities (4,573)
-----------
4,119
-----------
TOTAL NET ASSETS-- 100.0% $ 2,280,085
===========
SEE ACCOMPANYING NOTES TO SCHEDULE OF INVESTMENTS AND NOTES TO FINANCIAL
STATEMENTS.
27
<PAGE>
SCHWAB U.S. TREASURY MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
June 30, 1999 (unaudited)
Par Value
-------- -----------
U.S. GOVERNMENT SECURITIES -- 98.4%
U.S. TREASURY OBLIGATIONS -- 98.4%
U.S. Treasury Bills
4.65%, 09/23/99 $ 2,930 $ 2,899
4.66%, 09/23/99 7,390 7,311
4.78%, 10/14/99 18,290 18,039
U.S. Treasury Notes
5.88%, 07/31/99 15,545 15,560
6.88%, 07/31/99 303,050 303,573
6.00%, 08/15/99 284,865 285,291
8.00%, 08/15/99 100,000 100,399
5.88%, 08/31/99 29,010 29,065
6.88%, 08/31/99 369,660 370,974
5.75%, 09/30/99 389,940 390,853
7.13%, 09/30/99 14,885 14,970
5.63%, 10/31/99 66,625 66,764
7.50%, 10/31/99 323,760 326,345
5.88%, 11/15/99 143,540 144,113
7.75%, 11/30/99 151,985 153,789
-----------
2,229,945
-----------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $2,229,945) 2,229,945
-----------
TOTAL INVESTMENTS -- 98.4%
(Cost $2,229,945) 2,229,945
-----------
OTHER ASSETS AND LIABILITIES - 1.6%
Other assets 40,260
Liabilities (4,184)
-----------
36,076
-----------
TOTAL NET ASSETS-- 100.0% $ 2,266,021
===========
SEE ACCOMPANYING NOTES TO SCHEDULE OF INVESTMENTS AND NOTES TO FINANCIAL
STATEMENTS.
28
<PAGE>
NOTES TO SCHEDULES OF INVESTMENTS
JUNE 30, 1999 (unaudited)
(All dollar amounts are in thousands unless otherwise noted)
Yields shown are effective yields at the time of purchase, except for variable
rate obligations, which are described below, and U.S. government coupon notes
and U.S. Treasury notes, which reflect the coupon rate of the security. Yields
for each type of security are stated according to the market convention for that
security type. For each security, cost (for financial reporting and federal
income tax purposes) and carrying value are the same.
(a) Certain securities purchased by the Schwab Money Market Fund are private
placement securities exempt from registration by Section 4(2) of the
Securities Act of 1933. These securities generally are sold to
institutional investors, such as the Schwab Money Market Fund. Any resale
by the fund must be in an exempt transaction, normally to a qualified
institutional buyer. At June 30, 1999, the aggregate value of private
placement securities held by the Schwab Money Market Fund was $12,024,299,
which represented 38.32% of net assets. Of this total, $11,001,659 or
35.06% of net assets was determined by the investment adviser to be liquid
in accordance with procedures adopted by the Board of Trustees.
(b) Variable rate obligations--Interest rates vary periodically based on
current market rates. Rates shown are the effective rates as of the report
date. Dates shown for securities with scheduled maturities within 397 days
or less, represent the earlier of the demand date or next interest rate
change date. Dates shown for securities with scheduled maturities greater
than 397 days, represent the later of the demand date or next interest
rate change date. For variable rate obligations without demand features,
the next interest reset date is shown. All dates shown are considered the
maturity date for financial reporting purposes.
(c) Repurchase agreements due dates are considered the maturity date.
Repurchase agreements with due dates later than seven days from issue
dates may be subject to seven day putable demand features for liquidity
purposes.
(d) Security traded on a delayed-delivery basis. Payment and delivery is
scheduled for a future time, generally within two weeks of entering into
the transaction. The transaction is subject to market fluctuation and to
the risk that the value may be more or less than the purchase price when
the transaction was initiated. The fund has set aside sufficient
investment securities as collateral for securities purchased on a
delayed-delivery basis.
(e) Security cannot be resold to the general public without prior registration
under the Securities Act of 1933. If the security is subsequently
registered and resold, the issuers would typically bear the expense of all
registrations at no cost to the fund. At June 30, 1999, the aggregate
value of the restricted securities held by Schwab Money Market Fund were
$1,022,640, which represented 3.26% of the net assets. All of these
restricted investments were determined by the investment adviser to be
illiquid in accordance with procedures adopted by the Board of Trustees.
(f) Security has one or more third party credit enhancements.
(g) Asset-backed securities -- backed by underlying assets and categorized by
industry.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
29
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES (in thousands)
June 30, 1999 (unaudited)
<TABLE>
<CAPTION>
Schwab Schwab Schwab
Money Government U.S. Treasury
Market Money Money
Fund Fund Fund
----------- ---------- ----------
<S> <C> <C> <C>
ASSETS
Investments, at value (Cost: $31,364,496, $2,275,966 and
$2,229,945, respectively) $31,364,496 $2,275,966 $2,229,945
Cash -- 3 --
Receivables:
Interest 146,811 8,574 40,177
Prepaid expenses 952 115 83
----------- ---------- ----------
Total assets 31,512,259 2,284,658 2,270,205
----------- ---------- ----------
LIABILITIES
Payables:
Dividends 55,153 3,950 3,756
Investments purchased 75,017 -- --
Investment advisory and administration fees 1,666 124 76
Transfer agency and shareholder service fees 2,713 198 196
Other liabilities 1,323 301 156
----------- ---------- ----------
Total liabilities 135,872 4,573 4,184
----------- ---------- ----------
Net assets applicable to outstanding shares $31,376,387 $2,280,085 $2,266,021
=========== ========== ==========
NET ASSETS CONSIST OF:
Paid-in capital $31,376,766 $2,281,001 $2,267,005
Accumulated net realized loss on investments sold (379) (916) (984)
----------- ---------- ----------
$31,376,387 $2,280,085 $2,266,021
=========== ========== ==========
PRICING OF SHARES
Outstanding shares, $0.00001 par value (unlimited shares
authorized) 31,377,089 2,281,104 2,267,069
Net asset value, offering and redemption price per share $1.00 $1.00 $1.00
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
30
<PAGE>
STATEMENTS OF OPERATIONS (in thousands)
For the six months ended June 30, 1999 (unaudited)
<TABLE>
<CAPTION>
Schwab Schwab Schwab
Money Government U.S. Treasury
Market Money Money
Fund Fund Fund
-------- ---------- -------------
<S> <C> <C> <C>
Interest income $755,422 $56,711 $50,621
-------- ------- -------
Expenses:
Investment advisory and administration fees 53,167 4,617 4,408
Transfer agency and shareholder service fees 66,885 5,094 4,854
Custodian and portfolio accounting fees 952 138 134
Registration fees 1,236 70 100
Professional fees 87 20 18
Shareholder reports 996 48 32
Trustees' fees 26 6 6
Insurance and other expenses 56 7 7
-------- ------- -------
123,405 10,000 9,559
Less: expenses reduced (see Note 4) (11,930) (1,509) (2,548)
-------- ------- -------
Total expenses incurred by fund 111,475 8,491 7,011
-------- ------- -------
Net investment income 643,947 48,220 43,610
Net realized gain (loss) on investments sold 1 (99) (181)
-------- ------- -------
Increase in net assets resulting from operations $643,948 $48,121 $43,429
======== ======= =======
</TABLE>
31
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS (in thousands)
<TABLE>
<CAPTION>
Schwab Schwab Schwab
Money Market Fund Government Money Fund U.S. Treasury Money Fund
---------------------------- ---------------------------- -----------------------------
Six months Year Six months Year Six months Year
ended ended ended ended ended ended
June 30, 1999 December 31, June 30, 1999 December 31, June 30, 1999 December 31,
(unaudited) 1998 (unaudited) 1998 (unaudited) 1998
------------- ------------ ------------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Operations:
Net investment income $ 643,947 $ 1,178,889 $ 48,220 $ 100,463 $ 43,610 $ 86,803
Net realized gain (loss) on
investments sold 1 (45) (99) (118) (181) (385)
----------- ------------ ---------- ----------- ----------- -----------
Increase in net assets
resulting from operations 643,948 1,178,844 48,121 100,345 43,429 86,418
----------- ------------ ---------- ----------- ----------- -----------
Dividends to shareholders from
net investment income
(see Note 2): (643,947) (1,179,212) (48,220) (100,585) (43,610) (86,867)
----------- ------------ ---------- ----------- ----------- -----------
Capital share transactions
(at $1.00 per share):
Proceeds from shares sold 67,607,408 92,667,344 3,972,844 6,438,084 3,559,482 6,122,502
Net asset value of shares
issued in reinvestment
of dividends 726,159 1,130,306 55,570 98,437 49,760 84,289
Less payments for shares
redeemed (64,396,649) (87,779,251) (3,955,681) (6,310,756) (3,473,870) (5,840,957)
----------- ------------ ---------- ----------- ----------- -----------
Increase in net assets from
capital share transactions 3,936,918 6,018,399 72,733 225,765 135,372 365,834
----------- ------------ ---------- ----------- ----------- -----------
Total increase in net assets 3,936,919 6,018,031 72,634 225,525 135,191 365,385
Net assets:
Beginning of period 27,439,468 21,421,437 2,207,451 1,981,926 2,130,830 1,765,445
----------- ------------ ---------- ----------- ----------- -----------
End of period $31,376,387 $ 27,439,468 $2,280,085 $ 2,207,451 $ 2,266,021 $ 2,130,830
=========== ============ ========== =========== =========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
32
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Schwab Money Market Fund
-----------------------------------------------------------------------------
1991 1 1998 1997 1996 1995 1994
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD:
Net asset value at beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
----------- ----------- ----------- ----------- ----------- -----------
From investment operations:
Net investment income 0.02 0.05 0.05 0.05 0.05 0.04
----------- ----------- ----------- ----------- ----------- -----------
Total from investment operations 0.02 0.05 0.05 0.05 0.05 0.04
Less distributions:
Dividends from net investment income (0.02) (0.05) (0.05) (0.05) (0.05) (0.04)
----------- ----------- ----------- ----------- ----------- -----------
Total distributions (0.02) (0.05) (0.05) (0.05) (0.05) (0.04)
----------- ----------- ----------- ----------- ----------- -----------
NET ASSET VALUE AT END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
=========== =========== =========== =========== =========== ===========
Total return (%) 2.17** 4.99 5.04 4.91 5.41 3.68
RATIOS/SUPPLEMENTAL DATA (%)
- ------------------------------------------
Ratio of net operating expenses to average
net assets 0.75* 0.75 0.75 0.75 0.75 0.74
Reductions reflected in above expense ratio 0.08* 0.11 0.12 0.14 0.15 0.16
Ratio of net investment income to average
net assets 4.33* 4.87 4.93 4.80 5.27 3.68
Net assets, end of period (000s) $31,376,387 $27,439,468 $21,421,437 $18,083,671 $14,010,387 $11,227,305
</TABLE>
<TABLE>
<CAPTION>
Schwab Government Money Fund
-----------------------------------------------------------------------------
1991 1 1998 1997 1996 1995 1994
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD:
Net asset value at beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
----------- ----------- ----------- ----------- ----------- -----------
From investment operations:
Net investment income 0.02 0.05 0.05 0.05 0.05 0.04
----------- ----------- ----------- ----------- ----------- -----------
Total from investment operations 0.02 0.05 0.05 0.05 0.05 0.04
Less distributions:
Dividends from net investment income (0.02) (0.05) (0.05) (0.05) (0.05) (0.04)
----------- ----------- ----------- ----------- ----------- -----------
Total distributions (0.02) (0.05) (0.05) (0.05) (0.05) (0.04)
----------- ----------- ----------- ----------- ----------- -----------
NET ASSET VALUE AT END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
=========== =========== =========== =========== =========== ===========
Total return (%) 2.13** 4.88 4.95 4.83 5.34 3.62
RATIOS/SUPPLEMENTAL DATA (%)
- ------------------------------------------
Ratio of net operating expenses to average
net assets 0.75* 0.75 0.75 0.75 0.75 0.74
Reductions reflected in above expense ratio 0.13* 0.17 0.17 0.17 0.17 0.18
Ratio of net investment income to average
net assets 4.26* 4.76 4.84 4.73 5.21 3.56
Net assets, end of period (000s) $ 2,280,085 $ 2,207,451 $ 1,981,926 $ 1,986,862 $ 1,884,569 $ 1,897,328
<FN>
1 For the six months ended June 30, 1999 (unaudited).
* Annualized
** Not annualized
</FN>
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
33
<PAGE>
FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
Schwab U.S. Treasury Money Fund
-----------------------------------------------------------------------------
1999 1 1998 1997 1996 1995 1994
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD:
Net asset value at beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
----------- ----------- ----------- ----------- ----------- -----------
From investment operations:
Net investment income 0.02 0.05 0.05 0.05 0.05 0.04
----------- ----------- ----------- ----------- ----------- -----------
Total from investment operations 0.02 0.05 0.05 0.05 0.05 0.04
Less distributions:
Dividends from net investment income (0.02) (0.05) (0.05) (0.05) (0.05) (0.04)
----------- ----------- ----------- ----------- ----------- -----------
Total distributions (0.02) (0.05) (0.05) (0.05) (0.05) (0.04)
----------- ----------- ----------- ----------- ----------- -----------
NET ASSET VALUE AT END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
=========== =========== =========== =========== =========== ===========
2.02** 4.69 4.85 4.77 5.25 3.52
Total return (%)
RATIOS/SUPPLEMENTAL DATA (%)
- ------------------------------------------
Ratio of net operating expenses to average
net assets 0.65* 0.65 0.65 0.65 0.65 0.65
Reductions reflected in above expense ratio 0.24* 0.26 0.28 0.29 0.31 0.35
Ratio of net investment income to average
net assets 4.04* 4.58 4.75 4.67 5.11 3.60
Net assets, end of period (000s) $ 2,266,021 $ 2,130,830 $ 1,765,445 $ 1,421,672 $ 1,193,689 $ 803,871
<FN>
1 For the six months ended June 30, 1999 (unaudited).
* Annualized
** Not annualized
</FN>
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
34
<PAGE>
NOTES TO FINANCIAL STATEMENTS
For the six months ended June 30, 1999 (unaudited) (All dollar amounts are in
thousands unless otherwise noted.)
1. DESCRIPTION OF THE FUNDS
The Schwab Money Market Fund, Schwab Government Money Fund and Schwab U.S.
Treasury Money Fund (the "funds") are series of The Charles Schwab Family of
Funds (the "Trust"), an open-end investment management company organized as a
Massachusetts business trust on October 20, 1989 and registered under the
Investment Company Act of 1940 (the "Act"), as amended.
In addition to the three funds described above, the Trust also offers the 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
Value Advantage Money Fund,(REGISTRATION MARK) Schwab Institutional Advantage
Money Fund,(REGISTRATION MARK) Schwab Retirement Money Fund,(REGISTRATION MARK)
and Schwab Government Cash Reserves. The assets of each series are segregated
and accounted for separately.
2. SIGNIFICANT ACCOUNTING POLICIES
The following significant accounting policies are in conformity with generally
accepted accounting principles. The preparation of financial statements in
accordance with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those estimates.
SECURITY VALUATION -- Investments are stated at amortized cost, which
approximates market value.
SECURITY TRANSACTIONS, INTEREST INCOME AND REALIZED GAINS (LOSSES) -- Security
transactions are accounted for on a trade date basis (date the order to buy or
sell is executed). Interest income is accrued daily and includes amortization of
premium and accretion of discount on investments. Realized gains and losses from
security transactions are determined on an identified cost basis.
REPURCHASE AGREEMENTS -- Repurchase agreements are fully collateralized by U.S.
government securities. All collateral is held by the funds' custodian, except in
the case of a tri-party agreement, under which the collateral is held by an
agent bank. The collateral is monitored daily to ensure that its market value at
least equals the repurchase price under the agreement.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- Each fund declares a daily
dividend, equal to its net investment income for that day, payable monthly. Net
realized capital gains, if any, are normally distributed annually.
EXPENSES -- Expenses arising in connection with a fund are charged directly to
that fund. Expenses common to all series of the Trust are generally allocated to
each series in proportion to their relative net assets.
35
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
FEDERAL INCOME TAXES -- It is each fund's policy to meet the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all net investment income and realized net capital gains, if any, to
shareholders. Therefore, no federal income tax provision is required. Each fund
is considered a separate entity for federal income tax purposes.
As of December 31, 1998, the unused capital loss carryforwards, for federal
income tax purposes with expiration dates, were as follows:
Schwab Schwab Schwab
Money Government U.S. Treasury
Market Fund Money Fund Money Fund
----------- ---------- ------------
Expiring in:
------------
12/31/99 $209 $ -- $ --
12/31/01 -- 53 28
12/31/02 2 74 23
12/31/03 118 161 49
12/31/04 -- 162 113
12/31/05 -- 226 137
12/31/06 -- 119 89
---- ---- ----
Total capital
loss carryforwards $329 $795 $439
==== ==== ====
3. TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY AND ADMINISTRATION AGREEMENTS -- The Trust has an investment
advisory and administration agreement with Charles Schwab Investment Management,
Inc. (the "investment adviser"). For advisory services and facilities furnished,
each fund pays an annual fee, payable monthly, of 0.38% on the first $1 billion
of average daily net assets, 0.35% on such assets in excess of $1 billion to $10
billion, 0.32% on such assets in excess of $10 billion to $20 billion, and 0.30%
on such assets in excess of $20 billion. Prior to May 1, 1999 the Schwab Money
Market Fund paid an annual fee, payable monthly, of 0.46% on the first $1
billion of average daily net assets, 0.45% on the next $2 billion, 0.40% on the
next $7 billion, 0.37% on the next $10 billion, and 0.34% on such net assets in
excess of $20 billion. Prior to May 1, 1999, the Schwab Government Money Fund
and Schwab Treasury Money Fund each paid an annual fee, payable monthly, of
0.46% on the first $1 billion of each fund's average daily net assets, 0.41% on
the next $1 billion, and 0.40% on such assets in excess of $2 billion. The
investment adviser has reduced a portion of its fee for the six months ended
June 30, 1999 (see Note 4).
TRANSFER AGENCY AND SHAREHOLDER SERVICE AGREEMENTS -- The Trust has transfer
agency and shareholder service agreements with Charles Schwab & Co., Inc.
("Schwab"). For services provided under these agreements, Schwab receives a
combined annual fee, payable monthly, of 0.45% of each fund's average daily net
assets.
36
<PAGE>
OFFICERS AND TRUSTEES -- Certain officers and trustees of the Trust are also
officers and/or directors of the investment adviser and/or Schwab. During the
six months ended June 30, 1999, the Trust made no direct payments to its
officers or trustees who are "interested persons" within the meaning of the
Act, as amended. The funds incurred fees aggregating $38 related to the
Trust's unaffiliated trustees.
INTERFUND TRANSACTIONS -- During the six months ended June 30, 1999, the Schwab
U.S. Treasury Fund engaged in purchase and sale transactions with funds that
have a common investment adviser, common trustees, and common officers.These
transactions, made at current market value pursuant to Rule 17a-7 under the Act,
as amended, aggregated $18,099 for the Schwab U.S. Treasury Money Fund.
4. EXPENSES REDUCED BY THE INVESTMENT ADVISER AND SCHWAB
The investment adviser and Schwab guarantee that, through at least April 30,
2000, the Schwab Money Market Fund, Schwab Government Money Fund and Schwab U.S.
Treasury Money Funds' total operating expenses will not exceed 0.75%, 0.75% and
0.65%, respectively, of each fund's average daily net assets, after reductions.
For the purpose of this guarantee, operating expenses do not include interest
expenses, extraordinary expenses and taxes.
For the six months ended June 30, 1999, the total of such fees reduced by the
investment adviser was $11,930, $1,509 and $2,548 for the Schwab Money Market
Fund, Schwab Government Money Fund and Schwab U.S. Treasury Money Fund,
respectively.
37
<PAGE>
THIS SPACE RESERVED FOR YOUR COMMENTS AND QUESTIONS.
A SCHWAB REPRESENTATIVE WILL BE HAPPY TO ASSIST YOU.
<PAGE>
THIS SPACE RESERVED FOR YOUR COMMENTS AND QUESTIONS.
A SCHWAB REPRESENTATIVE WILL BE HAPPY TO ASSIST YOU.
<PAGE>
THIS SPACE RESERVED FOR YOUR COMMENTS AND QUESTIONS.
A SCHWAB REPRESENTATIVE WILL BE HAPPY TO ASSIST YOU.
<PAGE>
THE SCHWAB FUNDS FAMILY-REGISTERED TRADEMARK-
The Schwab Funds Family includes a variety of funds to help meet your investment
needs. You can diversify your portfolio in a single step with our asset
allocation funds. Or you can customize your portfolio with a combination of our
stock funds as well as our taxable and tax-advantaged bond and money market
funds.
Please call 800-435-4000 for a free prospectus and brochure for any of these
SchwabFunds.-Registered Trademark-
This report must be preceded or accompanied by a current prospectus.
METHODS FOR PLACING ORDERS
The information below outlines how Schwab brokerage account investors can place
orders. If you are investing through a third-party investment provider, methods
for placing orders may be different.
PHONE
Call 800-435-4000, day or night (for TDD service, call 800-345-2550).
INTERNET
www.schwab.com/schwabfunds
MAIL
Write to SchwabFunds at:
P. O. Box 7575, San Francisco, CA 94120-7575
When selling or exchanging shares, be sure to include the signatures of at least
one of the persons whose name is on the account.
IN PERSON
Visit the nearest Charles Schwab office.
SCHWAB ASSET ALLOCATION FUNDS
Schwab MarketTrack All Equity Portfolio
Schwab MarketTrack Growth Portfolio
Schwab MarketTrack Balanced Portfolio
Schwab MarketTrack Conservative Portfolio
Schwab MarketManager Growth Portfolio
Schwab MarketManager Balanced Portfolio
SCHWAB STOCK FUNDS
Schwab S&P 500-Registered Trademark- Fund
Schwab 1000 Fund-Registered Trademark-
Schwab Analytics Fund-Registered Trademark-
Schwab Small-Cap Index Fund-Registered Trademark-
Schwab MarketManager Small Cap Portfolio
Schwab International Index Fund-Registered Trademark-
Schwab MarketManager International Portfolio
Schwab Total Stock Market Index Fund-TM-
SCHWAB BOND FUNDS
Schwab Total Bond Market Index Fund
Schwab Short-Term Bond Market Index Fund
Schwab Long-Term Tax-Free Bond Fund
Schwab Short/Intermediate Tax-Free Bond Fund
Schwab California Long-Term Tax-Free Bond Fund
Schwab California Short/Intermediate
Tax-Free Bond Fund
SCHWAB MONEY FUNDS
Schwab offers an array of money funds that seek high current income consistent
with stability of capital and liquidity.(1) Choose from taxable or
tax-advantaged alternatives. Many can be linked to your Schwab account to
"sweep" cash balances automatically when you're between investments. Or, for
your larger cash reserves, choose one of our Value Advantage
Investments-Registered Trademark-.
(1)Investments in money funds are neither insured nor guaranteed by the Federal
Deposit Insurance Corporation (FDIC) or any other government agency and,
although money funds seek to preserve the value of your investment at $1 per
share, it is possible to lose money.
<PAGE>
[LOGO]
INVESTMENT ADVISER
Charles Schwab Investment Management, Inc.
101 Montgomery, San Francisco, CA 94104
DISTRIBUTOR
Charles Schwab & Co., Inc.
101 Montgomery Street, San Francisco, CA 94104
This report is not authorized for distribution to prospective investors
unless preceded or accompanied by a current prospectus.
-C-1999 Charles Schwab & Co., Inc. All rights reserved.
Member SIPC/NYSE.
Printed on recycled paper. (0099-2264) MKT3857-1 (7/99)
