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Annual Report | December 31, 2016 Schwab Advisor Cash Reserves® Current performance may be substantially different from what is contained in this report. Please click here for more current fund performance and other information. This report is not authorized for distribution to prospective investors unless preceded or accompanied by a current prospectus. This page is intentionally left blank. In This Report From the President The Investment Environment Fund Management Performance and Fund Facts Fund Expenses Financial Statements and Portfolio Holdings Financial Notes Report of Independent Registered Public Accounting Firm Trustees and Officers Glossary 2 3 4 5 7 8 24 32 33 37 Fund investment adviser: Charles Schwab Investment Management, Inc. (CSIM). Distributor: Charles Schwab & Co., Inc. (Schwab). Schwab Advisor Cash Reserves | Annual Report 1 Schwab Advisor Cash Reserves From the President Dear Shareholder, At this time of the year, many of us set personal intentions and make resolutions for the New Year. Along those same lines, at Charles Schwab Investment Management, we also look to the year ahead and at ways we can continue to help you achieve your financial goals. In 2017, we intend to keep making your investing experience with us as positive and transparent as we can, continuing to put you, our investors, first. The 12-months ended December 31, 2016, brought some notable changes to most money market funds. Final implementation of Money Market Fund Reform went into effect in October, causing uncertainty in much of the industry. Then, in December, the Federal Reserve raised interest rates for the first time in a year, resulting in rising yields for many money market funds. Marie Chandoha President and CEO of Charles Schwab Investment Management, Inc. and the fund covered in this report. “Money market funds remain in the spotlight amid expectations for further rate increases in the coming year.” Money market funds remain in the spotlight amid expectations for further rate increases in the coming year. Generally, the search for places to put savings—either temporarily or as part of a permanent cash allocation—has led investors to opt for the highest-yielding option. But we believe it’s important to remember that yield is only one facet of owning such investments. Schwab Advisor Cash Reserves (the fund) is designed to offer investors stability of capital and liquidity, along with yield. Our investment risk team regularly conducts tests to evaluate the impact of various factors on fund holdings, including increases and decreases in short-term rates, widening of credit spreads, downgrades and defaults of issuers, fund cash flow, and shareholder activity. The fund’s portfolio managers may adjust the investment holdings as a result of these findings, for example, by shortening or lengthening the average maturity of the assets in the fund’s portfolio. We also work hard to give you the best online investor experience we can, providing access to industry insights, fund performance, and much more. Earlier this year, we further bolstered our online resources for the Schwab Money Funds. Our website includes information on the daily and weekly liquid assets, net inflows and outflows for the funds, and the current NAV and market-based NAV per share. These reporting and disclosure changes are intended to provide additional information and transparency, so that you can better track your investments. Within the Schwab Money Funds lineup, there are several different options for investors to choose from, including Schwab Purchased Money Funds. The Schwab Purchased Money Funds are designed to offer a number of notable benefits, including capital preservation for existing or upcoming obligations or to reduce the risk of an investor’s portfolio, and investment options for both retail and institutional accounts. If an investor is able to meet fund minimums and is willing to buy and sell positions to manage his/her cash investments, the Schwab Purchased Money Funds could be a great option for an investor’s portfolio. Thank you for investing with Charles Schwab Investment Management, and for trusting us to help you achieve your financial goals. For more information about the fund, please continue reading this report. In addition, you can find further details about this fund by visiting our website at www.csimfunds.com. We are also happy to hear from you at 1-877-824-5615. Sincerely, 2 Schwab Advisor Cash Reserves | Annual Report Schwab Advisor Cash Reserves The Investment Environment Over the reporting period ended December 31, 2016, yields on taxable money market funds generally remained low as the Federal Reserve (Fed) left the federal funds rate unchanged for most of 2016. Slowing global growth and inconsistent U.S. economic data contributed to the Fed’s decision to hold short-term interest rates steady through November, as did spikes in volatility tied to the United Kingdom’s decision in June to leave the European Union (Brexit) and the U.S. presidential election. However, as the U.S. economy began to pick up and show signs of lasting stability, the Fed unanimously voted to raise rates at its last meeting of the year in December. Yields on short-term securities rose soon after, including the yields on many taxable money market funds. Outside the U.S., many countries continued to face weak economic growth and inflation below targeted levels. In response, central banks in both Asia and Europe took steps to stimulate their respective economies, and maintained or increased accommodative monetary policy measures. Early in the reporting period, the European Central Bank (ECB) expanded its quantitative easing program and launched a program that provides cheap funding to European banks, while also maintaining a negative overnight deposit facility rate. At the end of the year, the ECB announced that it would cut the amount of bonds it was purchasing, but would extend the bond buying program through December of 2017. In Asia, the Bank of Japan launched negative interest rates in February to encourage lending, and later in the reporting period introduced yield curve management as a policy tool, targeting interest rates on government bonds to achieve its inflation goal. Facing slowing growth, the People’s Bank of China (PBOC) lowered the reserve requirement for banks which increased the funds available for banks to make loans. The PBOC also flooded the economy with credit during the reporting period, hoping to further encourage financial institutions to increase lending. Overall, yields on U.S. Treasuries remained low for much of 2016 and did not increase until the end of the reporting period. Short-term rates, which are directly influenced by Fed policy, rose as expectations for a December Fed rate hike increased. Longer-term yields, which are generally driven by growth and inflation expectations, rose in the second half of 2016 and climbed further following the unexpected outcome of the U.S. presidential election. The yields on many international government-backed securities also remained lower than those in the U.S., with some in negative territory, further increasing the appeal of U.S. Treasuries. Index figures assume dividends and distributions were reinvested, and do not include trading and management costs, which would lower performance. Indices are unmanaged, do not incur management fees, costs or expenses, and you cannot invest in them directly. For index definitions, please see the Glossary. Management views may have changed since the report date. Past performance cannot guarantee future results Schwab Advisor Cash Reserves | Annual Report 3 Schwab Advisor Cash Reserves Fund Management Linda Klingman, Vice President and Head of Taxable Money Market Strategies, leads the portfolio management team of Schwab’s prime and government taxable money funds. Ms. Klingman also has overall responsibility for all aspects of the management of the fund. Prior to joining CSIM in 1990, Ms. Klingman was a senior money market trader with AIM Management. She has managed money market funds since 1988. Michael Lin, Managing Director and Senior Portfolio Manager, is responsible for the day-to-day co-management of the fund. Mr. Lin has been a portfolio manager with CSIM since 2006, and also worked in CSIM’s Fund Administration group for nearly four years, where he focused on security pricing and valuation of Schwab Funds. Prior to joining CSIM, he spent three years at American Century Investments, most recently as a senior trader of the taxable money market funds. Jonathan Roman, Portfolio Manager, is responsible for the day-to-day co-management of the fund. Mr. Roman has been a portfolio manager with CSIM since 2010, and has held a number of positions at the firm since beginning his tenure in 2005. In 2009, he joined the Portfolio Management group as a Trader, and prior to that he worked in the Portfolio Operations and Analytics group providing trading support to the taxable money market desk. Jonathan Feske, CFA, Portfolio Manager, is responsible for the day-to-day co-management of the fund. He previously was responsible for credit and investment research for global banks for CSIM’s taxable bond and money funds. Prior to joining CSIM in 2011, Mr. Feske was a high-yield bond analyst for more than two years at Miller Tabak Roberts Securities, a boutique corporate bond broker-dealer, which is now part of GMP Capital. He covered both U.S. and emerging market credits, focusing on distressed situations in various industrial sectors. Previously, Mr. Feske was employed in the securities industry as an equity trader for three years. 4 Schwab Advisor Cash Reserves | Annual Report Schwab Advisor Cash Reserves Performance and Fund Facts as of 12/31/16 Schwab Advisor Cash Reserves (the fund) seeks the highest current income consistent with stability of capital and liquidity. To pursue its goal, the fund invests in high-quality, short-term money market investments issued by U.S. and foreign issuers. Examples of these securities include commercial paper, certificates of deposit, repurchase agreements, variable- and floating-rate debt securities, and obligations issued by the U.S. government, its agencies, or instrumentalities. For more information concerning the fund’s investment objective, strategy, and risks, please see the fund’s prospectus. As yields on money market securities remained historically low, the fund’s investment adviser and its affiliates voluntarily waived certain fees or expenses during the 12-month reporting period ended December 31, 2016, to help the fund maintain a positive net yield. For more information about the fund’s yield and other important characteristics, please review the charts and footnotes that follow this discussion. Market Highlights. For the 12-month reporting period ended December 31, 2016, many global markets experienced bouts of heightened volatility. Early in the year, concerns surrounding China’s decelerating economy and sharp fluctuations in the price of oil contributed to market uncertainty, while the United Kingdom’s vote to leave the European Union (Brexit) and the U.S. presidential election added to volatility later in the reporting period. Throughout the year, speculation around the timing of another short-term interest rate increase by the Federal Reserve (Fed) caused investor uncertainty and played a role in market movements. The Fed left the federal funds rate unchanged for most of 2016, only raising it at the Fed’s last meeting of the year in December. The increase in short-term interest rates was expected, and most markets remained orderly as a result. The implementation of Money Market Fund Reform played a key role in the steepness of the prime money market yield curve over the reporting period, as well as in the large outflows and inflows that the money market fund industry experienced in the months prior to final implementation. During the 12-month reporting period, the industry saw an approximate $1 trillion shift in assets from prime money market funds to government money market funds, most of which took place in June through October. The shift in assets went very smoothly, in large part due to the Fed’s Reverse Repurchase Facility providing much needed supply for the government money market funds. As investors shifted assets from prime money market funds to government money market funds, spreads widened between these two types of securities. Due to this shift in investor demand, yields on prime securities rose while yields on government securities declined. Performance, Positioning, and Strategies. Throughout the reporting period, the fund’s investment adviser remained focused on ensuring liquidity and stability of capital as market conditions evolved. Rates on short-term securities fluctuated during the period, largely driven by the impact of Money Market Fund Reform implementation as well as the uncertainty surrounding future Fed interest rate hikes. In this environment, the weighted average maturity (WAM) of the fund started the reporting period at 36 days and ended at 47 days. PORTFOLIO COMPOSITION BY MATURITY % OF INVESTMENTS1 38.9% 10.3% 15.9% 16.2% 17.5% 1.2% PORTFOLIO COMPOSITION BY SECURITY TYPE % OF INVESTMENTS 1-7 Days 8-30 Days 31-60 Days 61-90 Days 91-180 Days More than 180 Days 21.5% Commercial Paper Asset-Backed 14.3% Financial Company 4.4% Non-Financial Company 2.8% 44.8% Certificate Of Deposit 4.7% Non-Negotiable Time Deposits 1.2% U.S. Treasury Debt 1.4% Other Instruments 2.8% Variable Rate Demand Note 23.6% Repurchase Agreement U.S. Government Agency 2.5% U.S. Treasury 14.8% Other 6.3% STATISTICS Weighted Average Maturity2 47 Days Management views and portfolio holdings may have changed since the report date. 1 As shown in the Portfolio Holdings section of the shareholder report. 2 Money funds must maintain a dollar-weighted average maturity of no longer than 60 days and cannot invest in any security whose effective maturity is longer than 397 days (approximately 13 months). Schwab Advisor Cash Reserves | Annual Report 5 Schwab Advisor Cash Reserves Performance and Fund Facts as of 12/31/16 (continued) The performance data quoted represents past performance. Past performance does not guarantee future results. Current performance may be lower or higher than performance data quoted. To obtain more current performance information, please visit www.csimfunds.com/schwabfunds_prospectus. SEVEN-DAY AVERAGE YIELD TREND FOR PREVIOUS 12 MONTHS 0.5% 0.4% 0.3% Sweep Shares Premier Sweep Shares 0.2% 0.1% 0.0% 12/31/15 2/25 4/28 6/30 8/25 10/27 12/31/16 SEVEN-DAY YIELDS The seven-day yield is the income generated by the fund’s portfolio holdings minus the fund’s operating expenses. The seven-day yields are calculated using standard SEC formulas. The effective yield includes the effect of reinvesting daily dividends. Please remember that money market fund yields fluctuate. SCHWAB ADVISOR CASH RESERVES TICKER SYMBOL MINIMUM INITIAL INVESTMENT 1 SWEEP SHARES PREMIER SWEEP SHARES SWQXX SWZXX * * Seven-Day Yield (with waivers) 0.35% 0.42% Seven-Day Yield (without waivers)1 0.25% 0.25% Seven-Day Effective Yield (with waivers)1 0.35% 0.42% You could lose money by investing in the fund. Although the fund seeks to preserve the value of your investment at $1.00 per share, it cannot guarantee it will do so. The fund may impose a fee upon the sale of your shares or may temporarily suspend your ability to sell shares if the fund's liquidity falls below required minimums because of market conditions or other factors. An investment in the fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The fund's sponsor has no legal obligation to provide financial support to the fund, and you should not expect that the sponsor will provide financial support to the fund at any time. * Subject to the eligibility terms and conditions of your Schwab account agreement. 1 The Seven-Day Yield (with waivers) is the average income paid out over the previous seven days assuming interest income is not reinvested and it reflects the effect of any applicable waivers. Absent such waivers, the fund’s yield would have been lower. The Seven-Day Yield (without waivers) is the yield without the effect of any applicable waivers. The Seven-Day Effective Yield is the yield with waivers assuming that all interest income is reinvested in additional shares of the fund. For additional details, see financial note 4. 6 Schwab Advisor Cash Reserves | Annual Report Schwab Advisor Cash Reserves Fund Expenses (Unaudited) EXAMPLES FOR A $1,000 INVESTMENT As a fund shareholder, you may incur two types of costs: (1) transaction costs, such as redemption fees; and (2) ongoing costs, including management fees, transfer agent and shareholder services fees, and other fund expenses. The expense examples below are intended to help you understand your ongoing cost (in dollars) of investing in the fund and to compare this cost with the ongoing cost of investing in other mutual funds. These examples are based on an investment of $1,000 invested for six months beginning July 1, 2016 and held through December 31, 2016. Actual Return lines in the table below provide information about actual account values and actual expenses. You may use this information, together with the amount you invested, to estimate the expenses that you paid over the period. To do so, simply divide your account value by $1,000 (for example, an $8,600 account value ÷ $1,000 = 8.6), then multiply the result by the number given for your fund or share class under the heading entitled “Expenses Paid During Period.” Hypothetical Return lines in the table below provide information about hypothetical account values and hypothetical expenses based on a fund’s or share class’ actual expense ratio and an assumed return of 5% per year before expenses. Because the return used is not an actual return, it may not be used to estimate the actual ending account value or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only, and do not reflect any transactional costs, such as redemption fees. Therefore, the hypothetical return lines of the table are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. EXPENSE RATIO (ANNUALIZED) BEGINNING ACCOUNT VALUE AT 7/1/16 ENDING ACCOUNT VALUE (NET OF EXPENSES) AT 12/31/16 EXPENSES PAID DURING PERIOD2 7/1/16–12/31/16 0.62% 0.62% $1,000.00 $1,000.00 $1,000.80 $1,021.98 $3.12 $3.15 0.55% 0.55% $1,000.00 $1,000.00 $1,001.20 $1,022.33 $2.77 $2.80 1 Schwab Advisor Cash Reserves Sweep Shares Actual Return Hypothetical 5% Return Premier Sweep Shares Actual Return Hypothetical 5% Return 1 2 Based on the most recent six-month expense ratio; may differ from the expense ratio provided in the Financial Highlights which covers a 12-month period. This ratio does not include certain non-routine expenses. Expenses for each share class are equal to its annualized expense ratio, multiplied by the average account value over the period, multiplied by 184 days of the period, and divided by 366 days of the fiscal year. Schwab Advisor Cash Reserves | Annual Report 7 Schwab Advisor Cash Reserves Financial Statements FINANCIAL HIGHLIGHTS Sweep Shares Per-Share Data Net asset value at beginning of period Income (loss) from investment operations: Net investment income (loss) Net realized and unrealized gains (losses) Total from investment operations Less distributions: Distributions from net investment income Distributions from net realized gains Total distributions Net asset value at end of period Total return Ratios/Supplemental Data Ratios to average net assets: Net operating expenses Gross operating expenses Net investment income (loss) Net assets, end of period (x 1,000,000) Premier Sweep Shares Per-Share Data Net asset value at beginning of period Income from investment operations: Net investment income (loss) Net realized and unrealized gains (losses) Total from investment operations Less distributions: Distributions from net investment income Distributions from net realized gains Total distributions Net asset value at end of period Total Return Ratios/Supplemental Data Ratios to average net assets: Net operating expenses Gross operating expenses Net investment income (loss) Net assets, end of period (x 1,000,000) 1 2 3 4 1/1/16– 12/31/16 1/1/15– 12/31/15 1/1/14– 12/31/14 1/1/13– 12/31/13 1/1/12– 12/31/12 $1.00 $1.00 $1.00 $1.00 $1.00 0.001,2 0.002 0.002 0.001,2 (0.00)2 0.002 0.002 0.002 0.002 0.002 0.002 0.002 0.002 0.002 0.002 (0.00)2 (0.00)2 (0.00)2 $1.00 0.09% (0.00)2 — (0.00)2 $1.00 0.01% (0.00)2 — (0.00)2 $1.00 0.01% (0.00)2 — (0.00)2 $1.00 0.01% (0.00)2 — (0.00)2 $1.00 0.01% 0.59%3 0.72% 0.08% $4,484 0.28%3 0.72% 0.01% $5,206 0.21%3 0.72% 0.01% $6,027 0.25%3 0.72% 0.01% $6,134 0.28%3,4 0.72%4 0.01% $6,207 1/1/16– 12/31/16 1/1/15– 12/31/15 1/1/14– 12/31/14 1/1/13– 12/31/13 1/1/12– 12/31/12 $1.00 $1.00 $1.00 $1.00 $1.00 0.001,2 0.002 0.002 0.001,2 (0.00)2 0.002 0.002 0.002 0.002 0.002 0.002 0.002 0.002 0.002 0.002 (0.00)2 (0.00)2 (0.00)2 $1.00 0.13% (0.00)2 — (0.00)2 $1.00 0.01% (0.00)2 — (0.00)2 $1.00 0.01% (0.00)2 — (0.00)2 $1.00 0.01% (0.00)2 — (0.00)2 $1.00 0.01% 0.55%3 0.72% 0.11% $12,338 0.28%3 0.72% 0.01% $18,223 0.21%3 0.72% 0.01% $17,952 0.25%3 0.72% 0.01% $17,525 0.28%3,4 0.72%4 0.01% $17,575 Calculated based on the average shares outstanding during the period. Per-share amount was less than $0.005. Reflects the effect of a voluntary yield waiver in excess of the contractual expense limitation. (See financial note 4) The ratio of gross operating expenses would have been 0.73%, if the State filing fee reimbursement had not been included. There was no impact on the ratio of net operating expenses. 8 Schwab Advisor Cash Reserves | Annual Report See financial notes Schwab Advisor Cash Reserves Portfolio Holdings as of December 31, 2016 This section shows all the securities in the fund's portfolio and their values as of the report date. The fund files its complete schedule of portfolio holdings with the SEC for the first and third quarter of each fiscal year on Form N-Q. The fund's Form N-Q is available on the SEC's website at www.sec.gov and may be viewed and copied at the SEC's Public Reference Room in Washington, D.C. Call 1-800-SEC-0330 for information on the operation of the Public Reference Room. The fund also files a complete schedule of portfolio holdings with the SEC monthly on Form N-MFP which is available immediately upon filing. The fund also makes available its complete schedule of portfolio holdings 5 business days after month end on the fund's website at www.csimfunds.com/schwabfunds_prospectus along with a link to the fund's Form N-MFP filings on the SEC's website. For fixed-rate obligations and repurchase agreements, the rate shown is the coupon rate (the rate established when the obligation was issued) and if the coupon rate is not available, the effective yield at the time of purchase is shown. For variable-rate obligations, the rate shown is the interest rate as of the report date. The date shown in the maturity date column below is either the date on which the principal amount must be paid or the date payment must be made pursuant to a demand feature. If the security's structure includes one of a number of maturity-shortening provisions set forth in Rule 2a-7, such as an interest rate reset, demand feature or put feature, the effective maturity date is also disclosed. If the effective maturity and maturity date are the same, the date will only appear in the maturity date column. HOLDINGS BY CATEGORY COST ($) VALUE ($) 62.1% 14.3% 23.5% Fixed-Rate Obligations Variable-Rate Obligations Repurchase Agreements 10,452,160,069 2,399,831,118 3,957,005,893 10,452,160,069 2,399,831,118 3,957,005,893 99.9% 0.1% Total Investments Other Assets and Liabilities, Net 16,808,997,080 16,808,997,080 13,428,886 100.0% Net Assets ISSUER 16,822,425,966 EFFECTIVE MATURITY MATURITY DATE FACE AMOUNT ($) FOOTNOTES RATE VALUE ($) ATLANTIC ASSET SECURITIZATION LLC a,b 1.06% 03/09/17 28,000,000 27,944,762 BARTON CAPITAL SA a,b a,b 0.75% 1.05% 01/09/17 03/06/17 4,500,000 47,000,000 4,499,250 46,912,267 BEDFORD ROW FUNDING CORP a,b a,b 1.26% 1.16% 03/20/17 04/05/17 5,000,000 31,000,000 4,986,458 30,906,914 BENNINGTON STARK CAPITAL COMPANY LLC a,b a,b 0.85% 1.10% 01/03/17 01/09/17 16,000,000 66,000,000 15,999,244 65,983,867 CAFCO LLC a,b a,b a,b 0.95% 1.00% 1.21% 03/15/17 03/28/17 06/07/17 2,000,000 30,000,000 60,000,000 1,996,147 29,928,333 59,686,000 CHARTA LLC a,b a,b a,b a,b 0.95% 1.06% 1.21% 1.26% 03/14/17 03/21/17 06/07/17 06/12/17 85,000,000 27,000,000 50,000,000 6,000,000 84,838,500 26,937,195 49,738,333 5,966,250 COLLATERALIZED COMMERCIAL PAPER CO LLC a a 1.26% 1.22% 04/12/17 04/26/17 123,000,000 1,000,000 122,568,646 996,135 COLLATERALIZED COMMERCIAL PAPER II CO LLC a,b a,b a,b a,b 1.00% 1.21% 1.24% 1.31% 03/13/17 04/19/17 04/25/17 06/22/17 100,000,000 4,000,000 59,000,000 5,000,000 99,802,778 3,985,600 58,770,195 4,968,944 CRC FUNDING LLC a,b a,b 0.95% 0.95% 03/10/17 03/14/17 5,000,000 30,000,000 4,991,028 29,943,000 FIXED-RATE OBLIGATIONS 62.1% OF NET ASSETS ASSET-BACKED COMMERCIAL PAPER 13.9% See financial notes Schwab Advisor Cash Reserves | Annual Report 9 Schwab Advisor Cash Reserves Portfolio Holdings as of December 31, 2016 (continued) EFFECTIVE MATURITY MATURITY DATE FACE AMOUNT ($) ISSUER FOOTNOTES RATE VALUE ($) GOTHAM FUNDING CORP a,b a,b 0.80% 0.80% 01/06/17 01/09/17 99,085,000 35,000,000 99,073,991 34,993,778 KELLS FUNDING LLC a,b a,b a,b a,b a,b 1.04% 1.04% 0.98% 0.98% 1.04% 01/20/17 01/23/17 03/21/17 03/24/17 04/13/17 123,000,000 40,000,000 110,000,000 67,000,000 83,000,000 122,943,147 39,980,356 109,778,411 66,855,913 82,762,620 LMA AMERICAS LLC a,b a,b a,b 1.04% 0.90% 1.08% 02/02/17 02/17/17 03/09/17 122,000,000 39,000,000 3,000,000 121,887,218 38,954,175 2,993,970 MANHATTAN ASSET FUNDING CO LLC a,b 0.90% 03/01/17 40,000,000 39,941,000 METLIFE SHORT TERM FUNDING LLC a,b a,b a,b a,b 0.92% 0.97% 0.94% 1.02% 01/03/17 01/24/17 02/13/17 03/20/17 29,000,000 69,000,000 20,000,000 44,000,000 28,998,518 68,957,239 19,977,544 43,902,760 NIEUW AMSTERDAM RECEIVABLES CORP a,b a,b a,b 1.16% 1.23% 0.99% 02/13/17 02/17/17 03/07/17 6,000,000 55,000,000 5,000,000 5,991,758 54,912,397 4,991,062 OLD LINE FUNDING LLC a,b 0.85% 02/14/17 30,000,000 29,968,833 RIDGEFIELD FUNDING COMPANY LLC a,b a,b 1.05% 1.05% 01/03/17 03/06/17 79,000,000 2,000,000 78,995,392 1,996,267 SHEFFIELD RECEIVABLES COMPANY LLC a,b a,b a,b a,b a,b 1.07% 0.95% 0.97% 1.05% 1.03% 01/17/17 02/15/17 02/21/17 03/08/17 03/13/17 44,000,000 1,000,000 12,000,000 173,000,000 16,000,000 43,979,076 998,812 11,983,510 172,666,975 15,967,498 THUNDER BAY FUNDING LLC a,b 0.97% 03/10/17 101,000,000 100,814,946 VERSAILLES COMMERCIAL PAPER LLC a,b 0.90% 01/17/17 9,000,000 8,996,400 VICTORY RECEIVABLES CORP a,b a,b 0.75% 1.00% 01/04/17 01/05/17 20,000,000 79,000,000 19,998,750 78,991,222 2,335,603,384 FINANCIAL COMPANY COMMERCIAL PAPER 4.1% BPCE SA b b 0.88% 0.90% 02/03/17 02/14/17 83,000,000 2,000,000 82,933,047 1,997,800 DNB BANK ASA b 0.59% 01/10/17 90,000,000 89,986,837 HSBC USA INC b b b 1.24% 1.14% 1.16% 04/06/17 05/01/17 05/15/17 5,000,000 74,000,000 35,000,000 4,983,705 73,721,267 34,850,181 ING US FUNDING LLC a 1.22% 03/01/17 7,000,000 6,986,119 MACQUARIE BANK LTD b 1.15% 03/17/17 2,000,000 1,995,208 NATIONWIDE BUILDING SOCIETY b b b b 0.90% 0.91% 0.93% 0.99% 02/02/17 02/21/17 03/01/17 03/06/17 11,000,000 38,000,000 66,000,000 48,000,000 10,991,200 37,951,012 65,899,405 47,915,520 10 Schwab Advisor Cash Reserves | Annual Report See financial notes Schwab Advisor Cash Reserves Portfolio Holdings as of December 31, 2016 (continued) EFFECTIVE MATURITY MATURITY DATE FACE AMOUNT ($) ISSUER FOOTNOTES RATE VALUE ($) OVERSEA-CHINESE BANKING CORPORATION LTD b 1.10% 05/15/17 20,000,000 19,918,855 UNITED OVERSEAS BANK LTD b b b b 0.99% 1.06% 1.22% 1.21% 02/17/17 04/03/17 04/06/17 04/13/17 1,000,000 48,000,000 59,000,000 38,000,000 998,707 47,869,973 58,811,610 37,870,800 WESTPAC BANKING CORP b 1.06% 04/28/17 58,000,000 57,800,190 683,481,436 CERTIFICATES OF DEPOSIT 36.1% ABBEY NATIONAL TREASURY SERVICES PLC (STAMFORD BRANCH) a a 1.00% 0.66% 01/03/17 01/05/17 97,000,000 71,000,000 97,000,000 71,000,000 AUSTRALIA AND NEW ZEALAND BANKING GROUP LTD (LONDON BRANCH) 1.15% 04/25/17 39,000,000 39,000,000 BANK OF MONTREAL (CHICAGO BRANCH) 0.93% 0.92% 0.90% 1.06% 1.08% 1.11% 02/01/17 02/03/17 02/16/17 03/20/17 03/20/17 04/17/17 53,000,000 48,000,000 58,000,000 31,000,000 9,000,000 66,000,000 53,000,000 48,000,000 58,000,000 31,000,000 9,000,000 66,000,000 BANK OF NOVA SCOTIA (HOUSTON BRANCH) 1.25% 1.24% 03/08/17 07/03/17 120,000,000 50,000,000 120,000,000 50,000,000 BANK OF THE WEST 0.71% 01/05/17 13,000,000 13,000,000 BANK OF TOKYO-MITSUBISHI UFJ LTD (NEW YORK BRANCH) 1.23% 1.22% 1.30% 1.24% 1.27% 1.26% 02/24/17 02/27/17 04/24/17 05/22/17 05/26/17 06/05/17 47,000,000 119,000,000 82,000,000 1,000,000 42,000,000 3,000,000 47,000,000 119,000,000 82,000,000 1,000,000 42,000,000 3,000,000 BARCLAYS BANK PLC (NEW YORK BRANCH) 1.05% 03/16/17 97,000,000 97,000,000 BNP PARIBAS FORTIS SA/NV (NEW YORK BRANCH) 0.96% 0.95% 02/01/17 03/08/17 99,000,000 15,000,000 99,000,000 15,000,000 BNP PARIBAS SA (SAN FRANCISCO BRANCH) 1.23% 1.27% 1.27% 1.27% 02/21/17 03/02/17 03/15/17 03/16/17 8,000,000 63,000,000 15,000,000 60,000,000 8,000,000 63,000,000 15,000,000 60,000,000 CANADIAN IMPERIAL BANK OF COMMERCE (NEW YORK BRANCH) 1.23% 1.07% 02/21/17 05/16/17 170,000,000 113,000,000 170,000,000 113,000,000 CITIBANK NA (NEW YORK BRANCH) 0.90% 1.07% 1.06% 1.12% 1.22% 1.18% 02/21/17 03/22/17 04/12/17 04/28/17 06/05/17 06/06/17 20,000,000 69,000,000 79,000,000 120,000,000 49,000,000 167,000,000 20,000,000 69,000,000 79,000,000 120,000,000 49,000,000 167,000,000 COMMONWEALTH BANK OF AUSTRALIA (LONDON BRANCH) 0.96% 1.16% 01/09/17 03/29/17 180,000,000 65,000,000 180,000,000 65,000,000 See financial notes Schwab Advisor Cash Reserves | Annual Report 11 Schwab Advisor Cash Reserves Portfolio Holdings as of December 31, 2016 (continued) MATURITY DATE FACE AMOUNT ($) VALUE ($) 1.16% 1.19% 04/03/17 04/19/17 100,000,000 16,000,000 100,001,270 16,000,238 1.17% 1.18% 02/10/17 02/21/17 154,000,000 184,000,000 154,000,000 184,000,000 0.90% 0.92% 02/17/17 02/21/17 20,000,000 66,000,000 20,000,000 66,000,000 CREDIT SUISSE AG (NEW YORK BRANCH) 1.36% 1.43% 1.51% 05/08/17 05/22/17 06/16/17 15,000,000 30,000,000 93,000,000 15,000,000 30,000,000 93,000,000 DANSKE BANK A/S (LONDON BRANCH) 0.94% 0.96% 03/07/17 03/17/17 91,000,000 73,000,000 91,000,820 73,000,758 0.95% 01/03/17 66,000,000 66,000,000 ING BANK NV (AMSTERDAM BRANCH) 1.24% 1.22% 1.27% 04/04/17 04/05/17 06/14/17 50,000,000 91,000,000 66,000,000 50,000,000 91,000,000 66,000,000 LANDESBANK BADEN-WURTTEMBERG (NEW YORK BRANCH) 0.62% 01/06/17 84,000,000 84,000,000 0.68% 0.93% 01/03/17 01/30/17 78,000,000 58,000,000 78,000,000 58,000,000 0.90% 1.23% 1.12% 1.25% 02/22/17 02/27/17 04/03/17 04/17/17 46,000,000 1,000,000 115,000,000 93,000,000 46,000,000 1,000,000 115,000,000 93,000,000 0.70% 0.90% 0.95% 01/03/17 02/15/17 03/07/17 69,000,000 40,000,000 13,000,000 69,000,000 40,000,000 13,000,000 ROYAL BANK OF CANADA (NEW YORK BRANCH) 1.26% 07/05/17 130,000,000 130,000,000 SUMITOMO MITSUI BANKING CORP (NEW YORK BRANCH) 1.25% 1.25% 02/03/17 04/03/17 180,000,000 24,000,000 180,000,000 24,000,000 SUMITOMO MITSUI TRUST BANK LTD (NEW YORK BRANCH) 0.69% 0.90% 0.90% 0.90% 01/04/17 02/07/17 02/17/17 02/27/17 175,000,000 38,000,000 7,000,000 33,000,000 175,000,000 38,000,000 7,000,000 33,000,000 SWEDBANK AB (NEW YORK BRANCH) 0.55% 01/06/17 252,000,000 252,000,000 TORONTO DOMINION BANK (LONDON BRANCH) 1.16% 1.19% 02/13/17 02/23/17 100,000,000 240,500,000 100,000,594 240,501,759 TORONTO-DOMINION BANK (NEW YORK BRANCH) 1.01% 0.93% 0.95% 0.97% 1.08% 02/13/17 03/01/17 03/13/17 03/17/17 04/07/17 41,000,000 44,000,000 8,000,000 75,000,000 10,000,000 41,000,000 44,000,000 8,000,000 75,000,000 10,000,000 ISSUER FOOTNOTES COOPERATIEVE RABOBANK UA (NEW YORK BRANCH) CREDIT AGRICOLE CORPORATE AND INVESTMENT BANK (NEW YORK BRANCH) DZ BANK AG DEUTSCHE ZENTRAL GENOSSENSCHAFTSBANK (NEW YORK BRANCH) MITSUBISHI UFJ TRUST AND BANKING CORP (NEW YORK BRANCH) MIZUHO BANK LTD (NEW YORK BRANCH) OVERSEA CHINESE BANKING CORPORATION LTD (NEW YORK BRANCH) 12 Schwab Advisor Cash Reserves | Annual Report RATE EFFECTIVE MATURITY See financial notes Schwab Advisor Cash Reserves Portfolio Holdings as of December 31, 2016 (continued) ISSUER FOOTNOTES RATE EFFECTIVE MATURITY MATURITY DATE FACE AMOUNT ($) VALUE ($) UBS AG (STAMFORD BRANCH) 1.19% 1.27% 02/02/17 03/09/17 172,000,000 80,000,000 172,000,000 80,000,000 WELLS FARGO BANK NA 1.10% 1.09% 05/01/17 05/12/17 246,000,000 117,000,000 246,000,000 117,000,000 WESTPAC BANKING CORP (NEW YORK BRANCH) 1.05% 04/20/17 50,000,000 50,000,000 6,072,505,439 NON-FINANCIAL COMPANY COMMERCIAL PAPER 2.7% CAISSE DES DEPOTS ET CONSIGNATIONS b 0.96% 03/02/17 80,000,000 79,872,000 DANAHER CORPORATION b 0.72% 01/03/17 8,000,000 7,999,680 0.57% 01/09/17 20,000,000 19,997,467 0.64% 0.60% 01/03/17 01/06/17 51,000,000 26,000,000 50,998,187 25,997,833 GENERAL ELECTRIC CO 0.60% 01/04/17 112,000,000 111,994,400 TOYOTA MOTOR CREDIT CORP 1.11% 1.26% 05/31/17 07/10/17 150,000,000 15,500,000 149,312,500 15,397,743 EXXON MOBIL CORP GE CAPITAL TREASURY SERVICES (US) LLC a a 461,569,810 NON-NEGOTIABLE TIME DEPOSITS 4.7% AUSTRALIA AND NEW ZEALAND BANKING GROUP LTD (CAYMAN ISLANDS BRANCH) 0.61% 01/06/17 153,000,000 153,000,000 AUSTRALIA AND NEW ZEALAND BANKING GROUP LTD (LONDON BRANCH) 0.70% 01/04/17 123,000,000 123,000,000 DZ BANK AG DEUTSCHE ZENTRAL GENOSSENSCHAFTSBANK (NEW YORK BRANCH) 0.51% 01/03/17 100,000,000 100,000,000 NATIONAL AUSTRALIA BANK LTD (CAYMAN ISLANDS BRANCH) 0.51% 01/03/17 211,000,000 211,000,000 NATIONAL BANK OF CANADA (MONTREAL BRANCH) 0.67% 01/03/17 23,000,000 23,000,000 SKANDINAVISKA ENSKILDA BANKEN AB (GRAND CAYMAN BRANCH) 0.51% 01/03/17 99,000,000 99,000,000 SUNTRUST BANK (CAYMAN ISLANDS BRANCH) 0.53% 01/03/17 84,000,000 84,000,000 793,000,000 OTHER INSTRUMENTS 0.6% BANK OF AMERICA NA 1.14% 1.08% 04/17/17 05/11/17 41,000,000 65,000,000 41,000,000 65,000,000 106,000,000 TOTAL FIXED-RATE OBLIGATIONS (COST $10,452,160,069) See financial notes 10,452,160,069 Schwab Advisor Cash Reserves | Annual Report 13 Schwab Advisor Cash Reserves Portfolio Holdings as of December 31, 2016 (continued) FOOTNOTES RATE EFFECTIVE MATURITY MATURITY DATE BEDFORD ROW FUNDING CORP a,b 1.12% 01/09/17 04/07/17 25,000,000 25,000,000 OLD LINE FUNDING LLC a,b 1.22% 01/09/17 02/08/17 50,000,000 50,000,000 ISSUER FACE AMOUNT ($) VALUE ($) VARIABLE-RATE OBLIGATIONS 14.3% OF NET ASSETS ASSET-BACKED COMMERCIAL PAPER 0.5% 75,000,000 FINANCIAL COMPANY COMMERCIAL PAPER 0.3% CANADIAN IMPERIAL BANK OF COMMERCE b 1.21% 01/27/17 07/27/17 24,000,000 24,000,000 COMMONWEALTH BANK OF AUSTRALIA b 1.27% 01/10/17 03/10/17 32,000,000 32,000,000 56,000,000 CERTIFICATES OF DEPOSIT 8.6% BANK OF MONTREAL (CHICAGO BRANCH) 0.96% 01/03/17 06/01/17 146,000,000 146,000,000 BANK OF NOVA SCOTIA (HOUSTON BRANCH) 1.22% 01/10/17 02/10/17 132,000,000 132,000,000 COMMONWEALTH BANK OF AUSTRALIA (LONDON BRANCH) 0.97% 01/03/17 06/01/17 16,000,000 16,000,000 MITSUBISHI UFJ TRUST AND BANKING CORP (NEW YORK BRANCH) 1.27% 01/09/17 06/08/17 10,000,000 10,000,000 MIZUHO BANK LTD (NEW YORK BRANCH) 1.58% 1.35% 02/17/17 01/23/17 05/17/17 05/22/17 57,000,000 15,000,000 57,056,148 15,000,000 SKANDINAVISKA ENSKILDA BANKEN AB (NEW YORK BRANCH) 1.04% 01/04/17 05/04/17 82,000,000 82,000,000 STATE STREET BANK AND TRUST COMPANY 1.31% 01/25/17 198,000,000 198,000,000 SUMITOMO MITSUI BANKING CORP (NEW YORK BRANCH) 1.44% 1.20% 1.34% 01/17/17 01/03/17 01/19/17 02/17/17 05/02/17 06/19/17 6,000,000 39,000,000 143,000,000 6,000,000 39,000,000 143,000,000 TORONTO-DOMINION BANK (NEW YORK BRANCH) 1.17% 01/03/17 02/01/17 82,000,000 82,000,000 WELLS FARGO BANK NA 1.07% 1.30% 01/09/17 01/17/17 05/09/17 10/16/17 15,000,000 210,000,000 15,000,000 210,000,000 WESTPAC BANKING CORP (NEW YORK BRANCH) 1.04% 1.43% 03/06/17 03/27/17 06/05/17 09/27/17 91,000,000 210,000,000 91,000,000 210,000,000 1,452,056,148 U.S. TREASURY DEBT 1.2% UNITED STATES TREASURY 0.64% 0.72% 01/03/17 01/03/17 01/31/17 10/31/17 85,000,000 120,000,000 84,999,971 119,999,999 204,999,970 VARIABLE RATE DEMAND NOTES 2.9% BRECKENRIDGE TERRACE, LLC CO HOUSING FACILITIES REVENUE NOTES SERIES 1999B (LOC: BANK OF AMERICA NA) 0.86% 01/06/17 1,000,000 1,000,000 CALIFORNIA HEALTH FACILITIES FINANCING AUTH RB (KAISER PERMANENTE) SERIES 2006C 0.69% 01/06/17 15,000,000 15,000,000 14 Schwab Advisor Cash Reserves | Annual Report See financial notes Schwab Advisor Cash Reserves Portfolio Holdings as of December 31, 2016 (continued) ISSUER FOOTNOTES RATE EFFECTIVE MATURITY MATURITY DATE FACE AMOUNT ($) VALUE ($) CALIFORNIA MUNICIPAL FINANCE AUTH REFUNDING RB (EXXONMOBIL) SERIES 2007 0.65% 01/03/17 5,105,000 5,105,000 CALIFORNIA STATEWIDE COMMUNITIES DEVELOPMENT AUTH RB (KAISER PERMANENTE) SERIES 2002B RB (KAISER PERMANENTE) SERIES 2002E RB SERIES 2003D RB SERIES 2008B 0.69% 0.69% 0.68% 0.69% 01/06/17 01/06/17 01/06/17 01/06/17 12,000,000 19,000,000 8,000,000 28,000,000 12,000,000 19,000,000 8,000,000 28,000,000 EAGLE CNTY RB (TARNES AT BC) SERIES 1999B (LOC: WELLS FARGO BANK NA) 0.86% 01/06/17 2,410,000 2,410,000 GFRE HOLDINGS, LLC VARIABLE RATE DEMAND NOTES SERIES 2009A (LOC: FEDERAL HOME LOAN BANK OF CHICAGO) 0.76% 01/06/17 1,900,000 1,900,000 HOWARD UNIVERSITY TAXABLE BONDS SERIES 2016 (LOC: BARCLAYS BANK PLC) 0.83% 01/06/17 43,000,000 43,000,000 LINCOLN CNTY POLLUTION CTRL REFUNDING RB (EXXONMOBIL) SERIES 2014 0.67% 01/03/17 11,000,000 11,000,000 MAINE STATE HOUSING AUTH TAXABLE RB SERIES 2013G (LIQ: BARCLAYS BANK PLC) 0.83% 01/06/17 10,000,000 10,000,000 NEW YORK CITY GO BONDS FISCAL 2010 SERIES G4 (LIQ: BARCLAYS BANK PLC) GO BONDS FISCAL 2014 SERIES D4 (LOC: TD BANK NA) 0.75% 0.73% 01/06/17 01/03/17 18,000,000 18,400,000 18,000,000 18,400,000 NEW YORK STATE HFA RB (625 W 57TH ST) SERIES 2016A (LOC: BANK OF NEW YORK MELLON/THE) 0.74% 01/06/17 6,000,000 6,000,000 0.72% 01/06/17 10,000,000 10,000,000 0.72% 01/06/17 10,000,000 10,000,000 b 0.84% 01/06/17 25,000,000 25,000,000 b 0.84% 01/06/17 3,000,000 3,000,000 b 0.86% 01/06/17 7,000,000 7,000,000 b 0.87% 01/06/17 5,200,000 5,200,000 b 0.88% 01/06/17 11,000,000 11,000,000 b 0.87% 01/06/17 18,400,000 18,400,000 b 0.87% 01/06/17 14,000,000 14,000,000 NEW YORK STATE URBAN DEVELOPMENT CORP STATE PERSONAL INCOME TAX RB SERIES 2004A3C (LIQ: JPMORGAN CHASE BANK NA) STATE PERSONAL INCOME TAX RB SERIES 2004A3D (LIQ: JPMORGAN CHASE BANK NA) NUVEEN AMT-FREE QUALITY MUNICIPAL INCOME FUND VARIABLE RATE DEMAND PREFERRED SHARES SERIES 4 (LOC: BARCLAYS BANK PLC) NUVEEN CALIFORNIA DIVIDEND ADVANTAGE MUNICIPAL FUND VARIABLE RATE DEMAND PREFERRED SHARES SERIES 4 (LOC: ROYAL BANK OF CANADA) VARIABLE RATE DEMAND PREFERRED SHARES SERIES 6 (LOC: CITIBANK NA) VARIABLE RATE DEMAND PREFERRED SHARES SERIES 8 (LOC: BARCLAYS BANK PLC) NUVEEN DIVIDEND ADVANTAGE MUNICIPAL FUND VARIABLE RATE DEMAND PREFERRED SHARES SERIES 1 (LOC: BARCLAYS BANK PLC) VARIABLE RATE DEMAND PREFERRED SHARES SERIES 1 (LOC: JPMORGAN CHASE BANK NA) VARIABLE RATE DEMAND PREFERRED SHARES SERIES 2 (LOC: JPMORGAN CHASE BANK NA) See financial notes Schwab Advisor Cash Reserves | Annual Report 15 Schwab Advisor Cash Reserves Portfolio Holdings as of December 31, 2016 (continued) EFFECTIVE MATURITY MATURITY DATE FACE AMOUNT ($) ISSUER FOOTNOTES RATE VALUE ($) NUVEEN ENHANCED AMT-FREE MUNICIPAL CREDIT OPPORTUNITIES FUND VARIABLE RATE DEMAND PREFERRED SHARES SERIES 2 (LOC: JPMORGAN CHASE BANK NA) b 0.82% 01/06/17 36,000,000 36,000,000 NUVEEN QUALITY INCOME MUNICIPAL FUND VARIABLE RATE DEMAND PREFERRED SHARES SERIES 3 (LOC: BARCLAYS BANK PLC) b 0.88% 01/06/17 5,000,000 5,000,000 NUVEEN SELECT QUALITY MUNICIPAL FUND VARIABLE RATE DEMAND PREFERRED SHARES SERIES 2 (LOC: BARCLAYS BANK PLC) b 0.88% 01/06/17 15,000,000 15,000,000 TENDERFOOT SEASONAL HOUSING, LLC TAXABLE NOTES SERIES 2000B (LOC: WELLS FARGO BANK NA) 0.86% 01/06/17 2,885,000 2,885,000 TEXAS GO BONDS SERIES 2016 (LIQ: LANDESBANK HESSEN THUERINGEN GIROZENTRALE) 0.76% 01/06/17 24,475,000 24,475,000 UNIV HOSPITAL HEALTH SYSTEMS TAXABLE HOSPITAL RB SERIES 2013C (LOC: BARCLAYS BANK PLC) 0.75% 01/06/17 30,000,000 30,000,000 UNIV OF TEXAS FINANCING SYSTEM RB SERIES 2016G1 FINANCING SYSTEM RB SERIES 2016G2 0.68% 0.68% 01/06/17 01/06/17 20,000,000 5,000,000 20,000,000 5,000,000 WESTERN ASSET INTERMEDIATE MUNI FUND VARIABLE RATE DEMAND PREFERRED STOCK SERIES 1 (LOC: CITIBANK NA) b 0.86% 01/06/17 6,000,000 6,000,000 WESTERN ASSET MANAGED MUNICIPALS FUND VARIABLE RATE DEMAND PREFERRED SHARES SERIES 1 (LOC: CITIBANK NA) b 0.86% 01/06/17 26,000,000 26,000,000 WESTERN ASSET MUNICIPAL PARTNERS FUND VARIABLE RATE DEMAND PREFERRED SHARES SERIES 1 (LOC: CITIBANK NA) b 0.86% 01/06/17 4,000,000 4,000,000 476,775,000 OTHER INSTRUMENT 0.8% BANK OF AMERICA NA 1.06% 01/09/17 05/08/17 135,000,000 TOTAL VARIABLE-RATE OBLIGATIONS (COST $2,399,831,118) ISSUER 135,000,000 2,399,831,118 FOOTNOTES RATE EFFECTIVE MATURITY MATURITY DATE MATURITY AMOUNT ($) VALUE ($) REPURCHASE AGREEMENTS 23.5% OF NET ASSETS U.S. GOVERNMENT AGENCY REPURCHASE AGREEMENTS* 2.5% BANK OF NOVA SCOTIA Issued 12/30/16, repurchase date 01/03/17 (Collateralized by U.S. Government Agency Securities valued at $40,172,232, 2.50% - 4.50%, due 07/01/28 12/01/46) 16 Schwab Advisor Cash Reserves | Annual Report 0.50% 01/03/17 39,002,167 39,000,000 See financial notes Schwab Advisor Cash Reserves Portfolio Holdings as of December 31, 2016 (continued) MATURITY DATE MATURITY AMOUNT ($) VALUE ($) 0.50% 01/03/17 145,008,056 145,000,000 DEUTSCHE BANK SECURITIES INC Issued 12/30/16, repurchase date 01/03/17 (Collateralized by U.S. Treasury Securities valued at $71,400,035, 1.13%, due 07/31/21) 0.51% 01/03/17 70,003,967 70,000,000 MERRILL LYNCH PIERCE FENNER & SMITH INC Issued 12/30/16, repurchase date 01/03/17 (Collateralized by U.S. Government Agency Securities valued at $24,720,000, 3.00%, due 12/15/39 - 11/15/40) 0.50% 01/03/17 24,001,333 24,000,000 0.50% 01/03/17 42,002,333 42,000,000 0.50% 01/03/17 96,005,333 96,000,000 ISSUER FOOTNOTES BNP PARIBAS SA Issued 12/30/16, repurchase date 01/03/17 (Collateralized by U.S. Treasury and U.S. Government Agency Securities valued at $149,021,107, 0.00% - 8.00%, due 01/05/17 - 06/01/46) MIZUHO SECURITIES USA INC Issued 12/30/16, repurchase date 01/03/17 (Collateralized by U.S. Government Agency Securities valued at $43,260,001, 3.00% - 3.50%, due 12/01/26 09/01/46) WELLS FARGO SECURITIES LLC Issued 12/30/16, repurchase date 01/03/17 (Collateralized by U.S. Government Agency Securities valued at $99,845,547, 3.00% - 6.50%, due 05/01/18 12/01/45) RATE EFFECTIVE MATURITY 416,000,000 U.S. TREASURY REPURCHASE AGREEMENTS 14.8% BARCLAYS CAPITAL INC Issued 12/30/16, repurchase date 01/03/17 (Collateralized by U.S. Treasury Securities valued at $5,106,097, 0.00% - 1.25%, due 01/05/17 - 10/31/19) 0.50% 01/03/17 5,006,171 5,005,893 FEDERAL RESERVE BANK OF NEW YORK Issued 12/30/16, repurchase date 01/03/17 (Collateralized by U.S. Treasury Securities valued at $2,483,137,977, 3.13%, due 05/15/21 - 11/15/41) 0.50% 01/03/17 2,483,137,944 2,483,000,000 2,488,005,893 OTHER REPURCHASE AGREEMENTS** 6.2% BNP PARIBAS SA Issued 12/28/16, repurchase date 01/04/17 (Collateralized by commons stocks, ETFs, corporate bonds, ABS, or non-agency collateralized mortgage obligations valued at $173,677,688, 2.61% - 7.44%, due 10/17/24 12/24/33) CREDIT SUISSE SECURITIES (USA) LLC Issued 12/28/16, repurchase date 01/04/17 (Collateralized by commons stocks, ETFs, corporate bonds, ABS, or non-agency collateralized mortgage obligations valued at $49,454,522, 0.15% - 9.68%, due 07/02/26 09/15/40) See financial notes a 0.82% 01/04/17 151,024,076 151,000,000 0.86% 01/04/17 43,007,191 43,000,000 Schwab Advisor Cash Reserves | Annual Report 17 Schwab Advisor Cash Reserves Portfolio Holdings as of December 31, 2016 (continued) ISSUER Issued 09/07/16, repurchase date 03/07/17 (Collateralized by commons stocks, ETFs, corporate bonds, ABS, or non-agency collateralized mortgage obligations valued at $372,602,220, 0.16% - 7.42%, due 03/11/21 03/15/59) JP MORGAN SECURITIES LLC Issued 11/30/16, repurchase date 05/30/17 (Collateralized by commons stocks, ETFs, corporate bonds, ABS, or non-agency collateralized mortgage obligations valued at $74,837,250, 0.00% - 6.50%, due 06/04/17 12/10/49) Issued 12/20/16, repurchase date 06/19/17 (Collateralized by commons stocks, ETFs, corporate bonds, ABS, or non-agency collateralized mortgage obligations valued at $154,162,925, 0.00% - 6.65%, due 08/15/17 12/10/49) MERRILL LYNCH PIERCE FENNER & SMITH INC Issued 12/09/16, repurchase date 03/09/17 (Collateralized by commons stocks, ETFs, corporate bonds, ABS, or non-agency collateralized mortgage obligations valued at $119,600,000, 0.00%, due 08/03/20 - 11/01/21) WELLS FARGO SECURITIES LLC Issued 12/30/16, repurchase date 01/03/17 (Collateralized by commons stocks, ETFs, corporate bonds, ABS, or non-agency collateralized mortgage obligations valued at $13,801,242, 3.96% - 17.93%, due 07/26/35 12/25/52) Issued 12/27/16, repurchase date 01/03/17 (Collateralized by commons stocks, ETFs, corporate bonds, ABS, or non-agency collateralized mortgage obligations valued at $97,765,586, 2.70% - 6.13%, due 03/20/22 04/26/55) Issued 12/28/16, repurchase date 01/04/17 (Collateralized by commons stocks, ETFs, corporate bonds, ABS, or non-agency collateralized mortgage obligations valued at $48,307,702, 2.97% - 6.00%, due 09/26/35 09/17/57) Issued 12/29/16, repurchase date 01/05/17 (Collateralized by commons stocks, ETFs, corporate bonds, ABS, or non-agency collateralized mortgage obligations valued at $49,457,885, 3.85% - 5.74%, due 10/20/25 01/17/59) 18 Schwab Advisor Cash Reserves | Annual Report MATURITY DATE MATURITY AMOUNT ($) VALUE ($) 1.46% 03/07/17 326,378,340 324,000,000 c 1.40% 03/30/17 65,303,333 65,000,000 c 1.47% 03/30/17 134,547,167 134,000,000 c 1.19% 02/03/17 104,192,516 104,000,000 0.81% 01/03/17 12,001,080 12,000,000 0.82% 01/03/17 85,013,553 85,000,000 0.82% 01/04/17 42,006,697 42,000,000 0.82% 01/05/17 43,006,856 43,000,000 FOOTNOTES RATE a,c EFFECTIVE MATURITY See financial notes Schwab Advisor Cash Reserves Portfolio Holdings as of December 31, 2016 (continued) ISSUER Issued 11/01/16, repurchase date 05/01/17 (Collateralized by commons stocks, ETFs, corporate bonds, ABS, or non-agency collateralized mortgage obligations valued at $5,790,764, 3.60% - 6.49%, due 09/15/23 04/26/55) Issued 11/22/16, repurchase date 05/22/17 (Collateralized by commons stocks, ETFs, corporate bonds, ABS, or non-agency collateralized mortgage obligations valued at $52,127,272, 3.72% - 5.24%, due 12/21/20 01/17/59) EFFECTIVE MATURITY MATURITY DATE MATURITY AMOUNT ($) FOOTNOTES RATE VALUE ($) c 1.41% 04/04/17 5,030,158 5,000,000 c 1.45% 04/04/17 45,241,063 45,000,000 1,053,000,000 TOTAL REPURCHASE AGREEMENTS (COST $3,957,005,893) 3,957,005,893 End of Investments. At 12/31/16, the tax basis cost of the fund's investments was $16,808,997,080. a Credit-enhanced or liquidity-enhanced. b Securities exempt from registration under Rule 144A of the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registrations, normally to qualified institutional buyers. At the period end, the value of these amounted to $3,283,005,600 or 19.5% of net assets. c Illiquid security. At the period end, the value of these amounted to $677,000,000 or 4.0% of net assets. * Collateralized via U.S. Government Agency Securities or less frequently by higher rated U.S. Treasury Securities. ** Collateralized via common stocks, ETFs, corporate bonds, ABS, or non-agency collateralized mortgage obligations or less frequently by higher rated U.S. Government Agency Securities and/ or U.S. Treasury Securities. ABS — Asset-backed securities AUTH — Authority BAN — Bond anticipation note CCD — Community college district CNTY — County COP — Certificate of participation CP — Commercial paper CSD — Central school district ETF — Exchange-traded fund GO — General obligation GTY — Guaranty agreement HFA — Housing finance agency/authority HSD — High school district IDA — Industrial development agency/authority IDB — Industrial development bond IDC — Industrial development corporation IDRB — Industrial development revenue bond IRB — Industrial revenue bond ISD — Independent school district LIQ — Liquidity agreement LOC — Letter of credit LT — Limited tax M/F — Multi-family PFC — Passenger facility charge RAN — Revenue anticipation note RB — Revenue bond SD — School district S/F — Single-family TAN — Tax anticipation note TRAN — Tax and revenue anticipation note UFSD — Union free school district ULT — Unlimited tax USD — Unified school district See financial notes Schwab Advisor Cash Reserves | Annual Report 19 Schwab Advisor Cash Reserves Portfolio Holdings as of December 31, 2016 (continued) At December 31, 2016, all of the fund's investment securities were classified as Level 2. The fund's policy is to recognize transfers between Level 1, Level 2 and Level 3 as of the beginning of the fiscal year. There were no transfers between Level 1, Level 2 and Level 3 for the period ended December 31, 2016. The breakdown of the fund's investments into major categories is disclosed on the Portfolio Holdings. (See financial note 2(a) for additional information) 20 Schwab Advisor Cash Reserves | Annual Report See financial notes Schwab Advisor Cash Reserves Statement of Assets and Liabilities As of December 31, 2016 ASSETS Investments, at cost and value Repurchase agreements, at cost and value Total investments, at cost and value (Note 2a) Receivables: Interest Prepaid expenses Total assets + $12,851,991,187 3,957,005,893 16,808,997,080 + 19,299,559 291,767 16,828,588,406 LIABILITIES Payables: Investment adviser and administrator fees Shareholder service fees Distributions to shareholders Accrued expenses Total liabilities + 4,434,285 1,026,432 106,479 595,244 6,162,440 NET ASSETS Total assets Total liabilities Net assets – Net Assets by Source Capital received from investors 16,828,588,406 6,162,440 $16,822,425,966 16,822,425,966 Net Asset Value (NAV) by Shares Class Share Class Sweep Shares Premier Sweep Shares See financial notes Net Assets $4,484,483,380 $12,337,942,586 ÷ Shares Outstanding 4,484,140,141 12,336,747,000 = NAV $1.00 $1.00 Schwab Advisor Cash Reserves | Annual Report 21 Schwab Advisor Cash Reserves Statement of Operations For the period January 1, 2016 through December 31, 2016 INVESTMENT INCOME Interest $131,015,300 EXPENSES Investment adviser and administrator fees Shareholder service fees: Sweep Shares Premier Sweep Shares Custodian fees Portfolio accounting fees Registration fees Shareholder reports Professional fees Transfer agent fees Independent trustees' fees Other expenses Total expenses Expense reduction by CSIM and its affiliates Net expenses Net investment income 61,329,603 + – – 18,972,780 60,278,193 525,841 340,602 289,008 143,253 137,392 117,596 104,080 309,222 142,547,570 32,112,174 110,435,396 20,579,904 REALIZED GAINS (LOSSES) Net realized gains on investments Increase in net assets resulting from operations 22 Schwab Advisor Cash Reserves | Annual Report 1,669,294 $22,249,198 See financial notes Schwab Advisor Cash Reserves Statement of Changes in Net Assets For the current and prior report periods OPERATIONS Net investment income Net realized gains (losses) Increase in net assets from operations 1/1/16-12/31/16 $20,579,904 + 1,669,294 22,249,198 1/1/15-12/31/15 $2,186,948 (102,935) 2,084,013 DISTRIBUTIONS TO SHAREHOLDERS Distributions from net investment income Sweep Shares Premier Sweep Shares Total distributions from net investment income + (3,759,761) (16,820,143) (20,579,904) (538,737) (1,648,211) (2,186,948) Distributions from net realized gains Sweep Shares Premier Sweep Shares Total distributions from net realized gains + (22,279) (61,288) (83,567) — — — (20,663,471) (2,186,948) Total distributions TRANSACTIONS IN FUND SHARES* Shares Sold Sweep Shares Premier Sweep Shares Total shares sold + 13,081,303,244 48,870,327,549 61,951,630,793 17,223,019,813 62,893,508,743 80,116,528,556 Shares Reinvested Sweep Shares Premier Sweep Shares Total shares reinvested + 3,715,910 16,570,953 20,286,863 469,437 1,570,469 2,039,906 Shares Redeemed Sweep Shares Premier Sweep Shares Total shares redeemed + (13,806,526,765) (54,772,836,710) (68,579,363,475) (18,044,718,047) (62,624,204,045) (80,668,922,092) (6,607,445,819) (550,353,630) 23,428,286,058 (6,605,860,092) $16,822,425,966 23,978,742,623 (550,456,565) $23,428,286,058 Net transactions in fund shares NET ASSETS Beginning of period Total decrease End of period + * Transactions took place at $1.00 per share; figures for share quantities are the same as for dollars. See financial notes Schwab Advisor Cash Reserves | Annual Report 23 Schwab Advisor Cash Reserves Financial Notes 1. Business Structure of the Fund: Schwab Advisor Cash Reserves is a series of The Charles Schwab Family of Funds (the trust), a no-load, open-end management investment company. The trust is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended (the 1940 Act). The list below shows all the funds in the trust as of the end of the period, including the fund discussed in this report, which is highlighted: THE CHARLES SCHWAB FAMILY OF FUNDS (ORGANIZED OCTOBER 20, 1989) Schwab Money Market Fund™ Schwab Government Money Fund™ Schwab U.S. Treasury Money Fund™ Schwab Treasury Obligations Money Fund™ Schwab Value Advantage Money Fund® Schwab Advisor Cash Reserves Schwab Cash Reserves™ Schwab Retirement Advantage Money Fund® Schwab Investor Money Fund® Schwab Variable Share Price Money Fund™ Schwab Retirement Government Money Fund™ Schwab Municipal Money Fund™ Schwab AMT Tax-Free 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 Massachusetts Municipal Money Fund™ Schwab Advisor Cash Reserves offers two share classes: Sweep Shares and Premier Sweep Shares. Shares of each class represent interest in the same portfolio, but each class has different expenses and investment minimums. Shares are bought and sold at closing net asset value per share (NAV), which is the price for all outstanding shares of the fund. Each share has a par value of 1/1,000 of a cent, and the fund's Board of Trustees (the Board) may authorize the issuance of as many shares as necessary. The fund maintains its own account for purposes of holding assets and accounting, and is considered a separate entity for tax purposes. Within its account, the fund may also keep certain assets in segregated accounts, as required by securities law. 2. Significant Accounting Policies: The following is a summary of the significant accounting policies the fund uses in its preparation of financial statements. The fund follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board Accounting Standard Codification Topic 946 Financial Services — Investment Companies. The accounting policies are in conformity with accounting principles generally accepted in the United States of America (GAAP). (a) Security Valuation: Under procedures approved by the Board, the investment adviser has formed a Pricing Committee to administer the pricing and valuation of portfolio securities and other assets and to ensure that prices used for internal purposes or provided by third parties reasonably reflect fair market value. Among other things, these procedures allow the fund to utilize independent pricing services, quotations from securities and financial instrument dealers and other market sources to determine fair value. Securities in the fund are valued at amortized cost (which approximates market value) as permitted in accordance with Rule 2a-7 of the 1940 Act. In the event that security valuations do not approximate market value, securities may be fair valued as determined in accordance with procedures adopted by the Board. The Pricing Committee considers a number of factors, including unobservable market inputs when arriving at fair value. The Pricing Committee may employ techniques such as the review of related or comparable assets or liabilities, related market activities, recent transactions, market multiples, book values, transactional back-testing, disposition analysis and other relevant information. The Pricing Committee regularly reviews these inputs and assumptions to calibrate the valuations. Due to the subjective and variable nature of fair value pricing, there can be no assurance that a fund could obtain the fair value assigned to the security upon the sale of such security. The Board convenes on a regular basis to review fair value determinations made by the fund pursuant to the valuation procedures. In accordance with the authoritative guidance on fair value measurements and disclosures under GAAP, the fund discloses the fair value of its investments in a hierarchy that prioritizes the significant inputs to valuation techniques used to measure the fair value. The hierarchy gives the highest priority to valuations based upon unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to valuations based upon unobservable inputs that are significant to the valuation (Level 3 measurements). If inputs used to measure the financial instruments fall within different levels of the hierarchy, the 24 Schwab Advisor Cash Reserves | Annual Report Schwab Advisor Cash Reserves Financial Notes (continued) 2. Significant Accounting Policies (continued): categorization is based on the lowest level input that is significant to the valuation. If the fund determines that either the volume and/or level of activity for an asset or liability has significantly decreased (from normal conditions for that asset or liability) or price quotations or observable inputs are not associated with orderly transactions, increased analysis and management judgment will be required to estimate fair value. The three levels of the fair value hierarchy are as follows: • Level 1 — quoted prices in active markets for identical securities — Investments whose values are based on quoted market prices in active markets, and whose values are therefore classified as Level 1 prices, include active listed equities. • Level 2 — other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.) — Investments that trade in markets that are not considered to be active, but whose values are based on quoted market prices, dealer quotations or valuations provided by alternative pricing sources supported by observable inputs are classified as Level 2 prices. These generally include U.S. government and sovereign obligations, most government agency securities, investment-grade corporate bonds, certain mortgage products, less liquid listed equities, and state, municipal and provincial obligations. Securities held by stable NAV money funds operating under Rule 2a-7 of the 1940 Act are valued at amortized cost which approximates current market value and are considered to be valued using Level 2 inputs. • Level 3 — significant unobservable inputs (including the fund's own assumptions in determining the fair value of investments) — Investments whose values are classified as Level 3 prices have significant unobservable inputs, as they may trade infrequently or not at all. When observable prices are not available for these securities, the fund uses one or more valuation techniques for which sufficient and reliable data is available. The inputs used by the fund in estimating the value of Level 3 prices may include the original transaction price, quoted prices for similar securities or assets in active markets, completed or pending third-party transactions in the underlying investment or comparable issuers, and changes in financial ratios or cash flows. Level 3 prices may also be adjusted to reflect illiquidity and/or non-transferability, with the amount of such discount estimated by the fund in the absence of market information. Assumptions used by the fund due to the lack of observable inputs may significantly impact the resulting fair value and therefore the fund's results of operations. The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. (b) Accounting Policies for certain Portfolio Investments (if held): Repurchase Agreements: In a repurchase agreement, a fund buys a security from another party (the counterparty), usually a financial institution, with the agreement that it be sold back in the future. Repurchase agreements subject a fund to counterparty risk, meaning that the fund could lose money if the other party fails to perform under the terms of the agreement. The fund mitigates this risk by ensuring that a fund's repurchase agreements are collateralized by cash and/or U.S. government securities, fixed income securities, equity securities or other types of securities. These risks are magnified to the extent that a repurchase agreement is secured by collateral other than cash and U.S. government securities, such as debt securities, equity securities and high yield securities that are rated below investment grade. All collateral is held by the fund's custodian (or, with multi-party agreements, the agent's bank) and is monitored daily to ensure that its market value is at least equal to the repurchase price under the agreement. In the event of a default by the counterparty, realization of the collateral proceeds could be delayed or limited and the value of the collateral may decline. Investments in repurchase agreements are also based on a review of the credit quality of the repurchase agreement counterparty. As of December 31, 2016, the fund had investments in repurchase agreements with a gross value of $3,957,005,893 as disclosed in the Portfolio Holdings and the Statement of Assets and Liabilities. The value of the related collateral disclosed in the Portfolio Holdings exceeded the value of the repurchase agreements at period end. Delayed-Delivery Transactions: The fund may buy securities at a predetermined price or yield, with payment and delivery taking place after the customary settlement period for that type of security. The fund will assume the rights and risks of ownership at the time of purchase, including the risk of price and yield fluctuations. Typically, no interest will accrue to the fund until the security is delivered. The fund will earmark or segregate appropriate liquid assets to cover its delayed-delivery purchase obligations, if any. (c) Security Transactions: Security transactions are recorded as of the date the order to buy or sell the security is executed. Realized gains and losses from security transactions are based on the identified costs of the securities involved. Schwab Advisor Cash Reserves | Annual Report 25 Schwab Advisor Cash Reserves Financial Notes (continued) 2. Significant Accounting Policies (continued): (d) Investment Income: Interest income is recorded as it accrues. If the fund buys a debt security at a discount (less than face value) or a premium (more than face value), it amortizes premiums and accretes discounts from the purchase settlement date up to maturity. The fund then increases (in the case of discounts) or reduces (in the case of premiums) the income it records from the security. If the security is callable (meaning that the issuer has the option to pay it off before its maturity date), then the fund amortizes the premium and accretes discounts to the security’s call date and price, rather than the maturity date and price. (e) Expenses: Expenses that are specific to the fund are charged directly to the fund. Expenses that are common to all funds within the trust generally are allocated among the funds in proportion to their average daily net assets. For funds offering multiple share classes, the net investment income, other than class specific expenses, and the realized and unrealized gains or losses, are allocated daily to each class in proportion to their average daily net assets. (f) Distributions to Shareholders: The fund declares distributions from net investment income, if any, every day it is open for business. These distributions, which are substantially equal to the fund's net investment income for that day, are paid out to shareholders once a month. The fund makes distributions from net realized capital gains, if any, once a year. (g) Custody Credit: The fund has an arrangement with its custodian bank, State Street Bank and Trust Company (State Street), under which the fund may receive a credit for its uninvested cash balance to offset its custody fees and accounting fees. The credit amounts, if any, are disclosed in the Statement of Operations as a reduction to the fund’s operating expenses. (h) Accounting Estimates: The accounting policies described in this report conform to GAAP. Notwithstanding this, shareholders should understand that in order to follow these principles, fund management has to make estimates and assumptions that affect the information reported in the financial statements. It’s possible that once the results are known, they may turn out to be different from these estimates and these differences may be material. (i) Federal Income Taxes: The fund intends to meet federal income and excise tax requirements for regulated investment companies under subchapter M of the Internal Revenue Code, as amended. Accordingly, the fund distributes substantially all of its net investment income and net realized capital gains, if any, to its respective shareholders each year. As long as the fund meets the tax requirements, it is not required to pay federal income tax. (j) Indemnification: Under the fund’s organizational documents, the officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the fund. In addition, in the normal course of business the fund enters into contracts with its vendors and others that provide general indemnifications. The fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the fund. However, based on experience, the fund expects the risk of loss attributable to these arrangements to be remote. 3. Risk Factors: Investment Risk. You could lose money by investing in the fund. Although the fund seeks to preserve the value of your investment at $1.00 per share, it cannot guarantee it will do so. The fund may impose a fee upon the sale of your shares or may temporarily suspend your ability to sell shares if the fund’s liquidity falls below required minimums because of market conditions or other factors. An investment in the fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The fund’s sponsor has no legal obligation to provide financial support to the fund, and you should not expect that the sponsor will provide financial support to the fund at any time. 26 Schwab Advisor Cash Reserves | Annual Report Schwab Advisor Cash Reserves Financial Notes (continued) 3. Risk Factors (continued): Retail Money Market Fund Risk. The fund qualifies as a “retail money market fund,” as such term is defined or interpreted under the rules governing money market funds. A “retail money market fund” is a money market fund that has policies and procedures reasonably designed to limit all beneficial owners of the fund to natural persons. Prior to and upon conversion to a “retail money market fund,” the fund may involuntarily redeem any investor who is not a natural person. The fund will provide advance notice of its intent to make any such involuntary redemption. Neither the fund nor the investment adviser will be responsible for any loss or tax liability in an investor’s account resulting from such involuntary redemption. As a “retail money market fund,” the fund will be permitted to continue to value its securities using the amortized cost method to seek to maintain a stable $1.00 share price. The fund may be subject to liquidity fees and/or redemption gates on fund redemptions if the fund’s liquidity falls below required minimums because of market conditions or other factors. Interest Rate Risk. Interest rates rise and fall over time. As with any investment whose yield reflects current interest rates, the fund’s yield will change over time. During periods when interest rates are low, the fund’s yield (and total return) also will be low or may even be negative, which may make it difficult for the fund to pay expenses out of fund assets or maintain a stable $1.00 share price. Because interest rates in the United States are near historically low levels, a change in a central bank’s monetary policy or improving economic conditions may result in an increase in interest rates. A sudden or unpredictable rise in interest rates may cause volatility in the market and may decrease liquidity in the money market securities markets, making it more difficult for the fund to sell its money market investments at a time when the investment adviser might wish to sell such investments. Decreased market liquidity also may make it more difficult to value some or all of the fund’s money market securities holdings. Stable Net Asset Value Risk. If the fund or another money market fund fails to maintain a stable net asset value (or such perception exists in the market place), the fund could experience increased redemptions, which may adversely impact the fund’s share price. The fund is permitted, among other things, to reduce or withhold any income and/or gains generated from its portfolio to maintain a stable $1.00 share price. Repurchase Agreements Risk. When the fund enters into a repurchase agreement, the fund is exposed to the risk that the other party (i.e., the counterparty) will not fulfill its contractual obligation. In a repurchase agreement, there exists the risk that, when the fund buys a security from a counterparty that agrees to repurchase the security at an agreed upon price (usually higher) and time, the counterparty will not repurchase the security. These risks are magnified to the extent that a repurchase agreement is secured by collateral other than cash and government securities, such as debt securities, equity securities and high-yield securities that are rated below investment grade (Alternative Collateral). High-yield securities that are used as Alternative Collateral are subject to greater levels of credit and liquidity risk, and are considered primarily speculative with respect to the issuer’s continuing ability to make principal and interest payments. Alternative Collateral may be subject to greater price volatility and may be more volatile or less liquid than other types of collateral, increasing the risk that the fund will be unable to recover fully in the event of a counterparty’s default. Credit Risk. The fund is subject to the risk that a decline in the credit quality of a portfolio investment could cause the fund to lose money or underperform. The fund could lose money if the issuer of a portfolio investment fails to make timely principal or interest payments or if a guarantor, liquidity provider or counterparty of a portfolio investment fails to honor its obligations. Even though the fund's investments in repurchase agreements are collateralized at all times, there is some risk to the fund if the other party should default on its obligations and the fund is delayed or prevented from recovering or disposing of the collateral. Negative perceptions of the ability of an issuer, guarantor, liquidity provider or counterparty to make payments or otherwise honor its obligations, as applicable, could also cause the price of that investment to decline. The credit quality of the fund's portfolio holdings can change rapidly in certain market environments and any downgrade or default on the part of a single portfolio investment could cause the fund's share price or yield to fall. Many of the U.S. government securities that the fund invests in are not backed by the full faith and credit of the U.S. government, which means they are neither issued nor guaranteed by the U.S. Treasury. Although maintained in conservatorship by the Federal Housing Finance Agency since September 2008, the Federal National Mortgage Association (Fannie Mae) and Federal Home Loan Mortgage Corporation (Freddie Mac) maintain only lines of credit with the U.S. Treasury. The Federal Home Loan Banks maintain limited access to credit lines from the U.S. Treasury. Other securities, such as obligations issued by the Federal Farm Credit Banks Funding Corporation, are supported solely by the credit of the issuer. There can be no assurance that the U.S. government will provide financial support to securities of its agencies and instrumentalities if it is not obligated to do so under law. Also, any government guarantees on securities the fund owns do not extend to the shares of the fund itself. Credit and Liquidity Enhancements Risk. The fund may invest in securities with credit or liquidity enhancements provided by a bank or other financial institution, and the existence and nature of such enhancements may be a significant factor in the investment adviser’s decision-making process. Generally, these enhancements are employed by the issuers of the securities to reduce credit risk and provide enhanced or back-up liquidity for the purchaser, such as the fund. Adverse developments affecting these banks and Schwab Advisor Cash Reserves | Annual Report 27 Schwab Advisor Cash Reserves Financial Notes (continued) 3. Risk Factors (continued): financial institutions could therefore have a negative effect on the value of the fund’s holdings. For example, a rating agency downgrade of a credit or liquidity enhancement provider may adversely affect the value of securities held by the fund. Any decline in the value of the securities held by the fund could cause the fund’s share price or yield to fall. To the extent that a portion of the fund’s underlying investments are enhanced by the same bank or financial institution, these risks may be increased. Foreign Investment Risk. Although the fund may invest only in U.S. dollar denominated securities, the fund’s investments in securities of foreign issuers or securities with credit or liquidity enhancements provided by foreign entities may involve certain risks that are greater than those associated with investments in securities of U.S. issuers or securities with credit or liquidity enhancements provided by U.S. entities. These include risks of adverse changes in foreign economic, political, regulatory and other conditions; the imposition of economic sanctions or other government restrictions; differing accounting, auditing, financial reporting and legal standards and practices; differing securities market structures; and higher transaction costs. In addition, sovereign risk, or the risk that a government may become unwilling or unable to meet its loan obligations or guarantees, could increase the credit risk of financial institutions connected to that particular country. Management Risk. Any actively managed mutual fund is subject to the risk that its investment adviser will select investments or allocate assets in a manner that could cause the fund to underperform or otherwise not meet its objective. The fund’s investment adviser applies its own investment techniques and risk analyses in making investment decisions for the fund, but there can be no guarantee that they will produce the desired results. The investment adviser’s maturity decisions will also affect the fund’s yield, and could affect its share price. To the extent that the investment adviser anticipates interest rate trends imprecisely, the fund’s yield at times could lag the yields of other money market funds. Liquidity Risk. Liquidity risk exists when particular investments are difficult to purchase, sell or value, especially during stressed market conditions. The market for certain investments may become illiquid due to specific adverse changes in the conditions of a particular issuer or under adverse market or economic conditions independent of the issuer. In addition, dealer inventories of certain securities — an indication of the ability of dealers to engage in “market making” — are at, or near, historic lows in relation to market size, which could potentially lead to decreased liquidity. In such cases, the fund, due to limitations on investments in illiquid securities and the difficulty in readily purchasing and selling such securities at favorable times or prices, may decline in value, experience lower returns and/or be unable to achieve its desired level of exposure to a certain issuer or sector. Further, transactions in illiquid securities may entail transaction costs that are higher than those for transactions in liquid securities. Redemption Risk. The fund may experience periods of heavy redemptions that could cause the fund to liquidate its assets at inopportune times or at a loss or depressed value, particularly during periods of declining or illiquid markets. Redemptions by a few large investors in the fund may have a significant adverse effect on the fund’s ability to maintain a stable $1.00 share price. In the event any money market fund fails to maintain a stable net asset value, other money market funds, including the fund, could face a market-wide risk of increased redemption pressures, potentially jeopardizing the stability of their $1.00 share prices. Money Market Fund Risk. The fund is not designed to offer capital appreciation. In exchange for their emphasis on stability and liquidity, money market investments may offer lower long-term performance than stock or bond investments. Please refer to the fund’s prospectus for a more complete description of the principal risks of investing in the fund. 4. Affiliates and Affiliated Transactions: Charles Schwab Investment Management, Inc. (CSIM or the investment adviser), a wholly owned subsidiary of The Charles Schwab Corporation, serves as the fund's investment adviser and administrator pursuant to an Investment Advisory and Administration Agreement between CSIM and the trust. For its advisory and administrative services to the fund, CSIM is entitled to receive an annual fee, payable monthly, based on a percentage of the fund’s average daily net assets as follows: AVERAGE DAILY NET ASSETS First $1 billion More than $1 billion but not exceeding $10 billion More than $10 billion but not exceeding $20 billion More than $20 billion but not exceeding $40 billion Over $40 billion 28 Schwab Advisor Cash Reserves | Annual Report 0.35% 0.32% 0.30% 0.27% 0.25% Schwab Advisor Cash Reserves Financial Notes (continued) 4. Affiliates and Affiliated Transactions (continued): For the period ended December 31, 2016, the aggregate advisory fee paid to CSIM by the fund was 0.31%, as a percentage of the fund's average daily net assets. The Board has adopted a Shareholder Servicing and Sweep Administration Plan (the Plan) on behalf of the fund. The Plan enables the fund to bear expenses relating to the provision by financial intermediaries, including Charles Schwab & Co., Inc. (a broker-dealer affiliate of CSIM, Schwab) (together, service providers), of certain account maintenance, customer liaison and shareholder services to the current shareholders of the fund. The Plan also enables the fund to pay Schwab for certain sweep administration services, such as processing of automatic purchases and redemptions it provides to fund shareholders invested in the fund. Pursuant to the Plan, the fund’s shares are subject to an annual shareholder servicing fee of up to 0.25%. The shareholder servicing fee paid to a particular service provider is made pursuant to its written agreement with Schwab as distributor of the fund (or, in the case of payments made to Schwab acting as a service provider, pursuant to Schwab's written agreement with the fund), and the fund will pay no more than 0.25% of the average annual daily net asset value of the fund shares owned by shareholders holding shares through such service providers. Pursuant to the Plan, the fund’s shares are subject to an annual sweep administration fee of up to 0.15%. The sweep administration fee paid to Schwab is based on the average daily net asset value of the fund's shares owned by shareholders holding shares through Schwab. Payments under the Plan are made as described above without regard to whether the fee is more or less than the service provider's actual cost of providing the services, and if more, such excess may be retained as profit by the service provider. Contractual Expense Limitation CSIM and its affiliates have made an additional agreement with the fund, for so long as CSIM serves as the investment adviser to the fund, which may only be amended or terminated with the approval of the Board, to limit the total annual fund operating expenses charged, excluding interest, taxes and certain non-routine expenses (expense limitation), as follows: Sweep Shares Premier Sweep Shares 0.66% 0.59% In addition, effective January 1, 2016 through December 31, 2016, CSIM and its affiliates agreed to waive an additional amount of the fund's expenses equal to 0.035% of the fund's average daily net assets. During the period ended December 31, 2016, the fund waived $32,112,174 in expenses of which $29,266,414 was waived in accordance with the contractual expense limitation agreement noted above. Voluntary Yield Waiver/Reimbursement CSIM and its affiliates also may waive and/or reimburse expenses to the extent necessary to maintain a positive net yield for each share class of the fund. Pursuant to an exemptive order issued by the U.S. Securities and Exchange Commission (SEC), the fund may enter into interfund borrowing and lending transactions with other funds in the Fund Complex (for definition refer to Trustees and Officers section). All loans are for temporary or emergency purposes and the interest rate to be charged will be the average of the overnight repurchase agreement rate and the short-term bank loan rate. All loans are subject to numerous conditions designed to ensure fair and equitable treatment of all participating funds. The interfund lending facility is subject to the oversight and periodic review by the Board. The fund had no interfund borrowing or lending activity during the period. 5. Board of Trustees: The Board may include people who are officers and/or directors of CSIM or its affiliates. Federal securities law limits the percentage of such “interested persons” who may serve on a trust’s board, and the trust was in compliance with these limitations throughout the report period. The trust did not pay any of these interested persons for their services as trustees, but it did pay non-interested persons (independent trustees), as noted on the fund’s Statement of Operations. For information regarding the trustees, please refer to the Trustees and Officers table at the end of this report. Schwab Advisor Cash Reserves | Annual Report 29 Schwab Advisor Cash Reserves Financial Notes (continued) 6. Borrowing from Banks: During the period, the fund was a participant with other U.S. registered investment companies managed by CSIM in a joint, syndicated, committed $530 million line of credit (the Credit Facility), which matured on October 6, 2016. Under the terms of the Credit Facility, in addition to the interest charged on any borrowings by a fund, the fund paid a commitment fee of 0.125% per annum on its proportionate share of the unused portion of the Credit Facility. On October 6, 2016, the Credit Facility was amended to run for a new 364 day period with an increased line of $555 million and a commitment fee of 0.15% per annum. There were no borrowings from the line of credit during the period. The fund also has access to custodian overdraft facilities. The fund may have utilized the overdraft facility and incurred an interest expense, which is disclosed on the fund’s Statement of Operations, if any. The interest expense is determined based on a negotiated rate above the current Federal Funds Rate. 7. Federal Income Taxes: As of December 31, 2016, the fund had no undistributed earnings on a tax basis. Capital loss carryforwards may be used to offset future realized capital gains for federal income tax purposes. As of December 31, 2016, the fund had no capital loss carryforwards. For tax purposes, net realized capital losses and late-year ordinary losses incurred after October 31 may be deferred and treated as occurring on the first day of the following fiscal year. For the year ended December 31, 2016, the fund had no capital losses deferred and had $1,457,155 capital loss carryforwards utilized. The tax-basis components of distributions paid during the current and prior fiscal years were as follows: Current period distributions Ordinary income Prior period distributions Ordinary income $20,663,471 $2,186,948 Distributions paid to shareholders are based on net investment income and net realized gains determined on a tax basis, which may differ from net investment income and net realized gains for financial reporting purposes. These differences reflect the differing character of certain income items and net realized gains and losses for financial statement and tax purposes, and may result in reclassification among certain capital accounts on the financial statements. The fund may also designate a portion of the amount paid to redeeming shareholders as a distribution for tax purposes. Permanent book and tax basis differences may result in reclassifications between components of net assets as required. The adjustments will have no impact on net assets or the results of operations. As of December 31, 2016, the fund made the following reclassifications: Capital shares Net realized capital gains and losses $128,572 (128,572) As of December 31, 2016, management has reviewed the tax positions for open periods (for federal purposes, three years from the date of filing and for state purposes, four years from the date of filing) as applicable to the fund, and has determined that no provision for income tax is required in the fund’s financial statements. The fund recognizes interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the Statement of Operations. During the period ended December 31, 2016, the fund did not incur any interest or penalties. 8. Recent Regulatory Development: In October 2016, the SEC adopted new rules and amended existing rules (together, final rules) intended to modernize the reporting and disclosure of information by registered investment companies. In part, the final rules amend Regulation S-X and require standardized, enhanced disclosure about derivatives in investment company financial statements, as well as other amendments. The compliance date for the amendments to Regulation S-X is August 1, 2017. Management is currently evaluating the impact that the adoption of the amendments to Regulation S-X will have on the fund's financial statements and related disclosures. 30 Schwab Advisor Cash Reserves | Annual Report Schwab Advisor Cash Reserves Financial Notes (continued) 9. Subsequent Events: Management has determined there are no subsequent events or transactions through the date the financial statements were issued that would have materially impacted the financial statements as presented. Schwab Advisor Cash Reserves | Annual Report 31 Schwab Advisor Cash Reserves Report of Independent Registered Public Accounting Firm To the Board of Trustees and Shareholders of: Schwab Advisor Cash Reserves In our opinion, the accompanying statement of assets and liabilities, including the portfolio holdings, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Schwab Advisor Cash Reserves (one of the funds constituting The Charles Schwab Family of Funds, hereafter referred to as the “Fund”) at December 31, 2016, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2016 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP San Francisco, California February 16, 2017 32 Schwab Advisor Cash Reserves | Annual Report Schwab Advisor Cash Reserves Trustees and Officers The tables below give information about the trustees and officers of The Charles Schwab Family of Funds, which includes the fund covered in this report. The “Fund Complex” includes The Charles Schwab Family of Funds, Schwab Capital Trust, Schwab Investments, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust. The Fund Complex includes 110 funds. The address for all trustees and officers is 211 Main Street, San Francisco, CA 94105. You can find more information about the trustees and officers in the fund's Statement of Additional Information, which is available free by calling 1-877-824-5615. INDEPENDENT TRUSTEES NAME, YEAR OF BIRTH, AND POSITION(S) WITH THE TRUST (TERMS OF OFFICE, AND LENGTH OF TIME SERVED1) PRINCIPAL OCCUPATIONS DURING THE PAST FIVE YEARS Retired/Private Investor (Jan. 2009 – present). Formerly, Robert W. Burns Managing Director, Pacific Investment Management 1959 Company, LLC (PIMCO) and President, PIMCO Funds. Trustee (Trustee of Schwab Strategic Trust since 2009; The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust since 2016) NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY THE TRUSTEE OTHER DIRECTORSHIPS 110 Director, PS Business Parks, Inc. (2005 – 2012) John F. Cogan 1947 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust and Schwab Annuity Portfolios since 2008; Laudus Trust since 2010; Schwab Strategic Trust since 2016) Senior Fellow, The Hoover Institution at Stanford University (Oct. 1979 – present); Senior Fellow, Stanford Institute for Economic Policy Research (2000 – present); Professor of Public Policy, Stanford University (1994 – 2015). 110 Director, Gilead Sciences, Inc. (2005 – present) Stephen Timothy Kochis 1946 Trustee (Trustee of Schwab Strategic Trust since 2012; The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust since 2016) CEO and Owner, Kochis Global (wealth management consulting) (May 2012 – present); Chairman and CEO, Aspiriant, LLC (wealth management) (Jan. 2008 – Apr. 2012). 110 None 110 Director, Symantec Corporation (2003 – present) Director, Corcept Therapeutics Incorporated (2004 – present) Director, Adamas Pharmaceuticals, Inc. (2009 – present) Private Investor. David L. Mahoney 1954 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust since 2011; Schwab Strategic Trust since 2016) Schwab Advisor Cash Reserves | Annual Report 33 Schwab Advisor Cash Reserves INDEPENDENT TRUSTEES (CONTINUED) NAME, YEAR OF BIRTH, AND POSITION(S) WITH THE TRUST (TERMS OF OFFICE, AND LENGTH OF TIME SERVED1) PRINCIPAL OCCUPATIONS DURING THE PAST FIVE YEARS NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY THE TRUSTEE OTHER DIRECTORSHIPS Kiran M. Patel 1948 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust since 2011; Schwab Strategic Trust since 2016) Retired. Executive Vice President and General Manager of Small Business Group, Intuit, Inc. (financial software and services firm for consumers and small businesses) (Dec. 2008 – Sept. 2013). 110 Director, KLA-Tencor Corporation (2008 – present) Kimberly S. Patmore 1956 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2016) Consultant, Patmore Management Consulting (management consulting) (2008 – present). 110 None Charles A. Ruffel 1956 Trustee (Trustee of Schwab Strategic Trust since 2009; The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust since 2015) Co-Chief Executive Officer, Kudu Investment Management, LLC (financial services) (Jan. 2015 – present); Partner, Kudu Advisors, LLC (financial services) (June 2008 – Jan. 2015); Advisor, Asset International, Inc. (publisher of financial services information) (Aug. 2008 – Jan. 2015). 110 None Gerald B. Smith 1950 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust and Schwab Annuity Portfolios since 2000; Laudus Trust since 2010; Schwab Strategic Trust since 2016) Chairman, Chief Executive Officer and Founder of Smith Graham & Co. (investment advisors) (Mar. 1990 – present). 110 Director, Eaton (2012 – present) Director and Chairman of the Audit Committee, Oneok Partners LP (2003 – 2013) Director, Oneok, Inc. (2009 – 2013) Lead Independent Director, Board of Cooper Industries (2002 – 2012) Joseph H. Wender 1944 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust and Schwab Annuity Portfolios since 2008; Laudus Trust since 2010; Schwab Strategic Trust since 2016) Senior Consultant, Goldman Sachs & Co., Inc. (investment banking and securities firm) (Jan. 2008 – present); Partner, Colgin Partners, LLC (vineyards) (Feb. 1998 – present). 110 Board Member and Chairman of the Audit Committee, Ionis Pharmaceuticals (1994 – present) Lead Independent Director and Chair of Audit Committee, OUTFRONT Media Inc. (2014 – present) 34 Schwab Advisor Cash Reserves | Annual Report Schwab Advisor Cash Reserves INTERESTED TRUSTEES NAME, YEAR OF BIRTH, AND POSITION(S) WITH THE TRUST (TERMS OF OFFICE, AND LENGTH OF TIME SERVED1) 2 NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY THE TRUSTEE PRINCIPAL OCCUPATIONS DURING THE PAST FIVE YEARS OTHER DIRECTORSHIPS Walter W. Bettinger II 1960 Chairman and Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust and Schwab Annuity Portfolios since 2008; Schwab Strategic Trust since 2009; Laudus Trust since 2010) Director, President and Chief Executive Officer, The Charles Schwab Corporation (Oct. 2008 – present); President and Chief Executive Officer (Oct. 2008 – present), Director (May 2008 – present), Charles Schwab & Co., Inc.; Director, Charles Schwab Bank (Apr. 2006 – present); Director, Schwab Holdings, Inc. (May 2008 – present); and Director, Charles Schwab Investment Management, Inc. (July 2016 – present). 110 Director, The Charles Schwab Corporation (2008 – present) Marie A. Chandoha2 1961 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2016) Director, President and Chief Executive Officer (Dec. 2010 – present), Chief Investment Officer (Sept. 2010 – Oct. 2011), Charles Schwab Investment Management, Inc.; Trustee (Jan. 2016 – present), President, Chief Executive Officer (Dec. 2010 – present), and Chief Investment Officer (Sept. 2010 – Oct. 2011), Schwab Funds, Laudus Funds and Schwab ETFs; Director, Charles Schwab Worldwide Funds plc and Charles Schwab Asset Management (Ireland) Limited (Jan. 2011 – present); Global Head of Fixed Income Business Division, BlackRock, Inc. (formerly Barclays Global Investors) (Mar. 2007 – Aug. 2010). 110 None Joseph R. Martinetto2 1962 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2016) Senior Executive Vice President and Chief Financial Officer, The Charles Schwab Corporation and Charles Schwab & Co., Inc. (July 2015 – present); Executive Vice President and Chief Financial Officer of The Charles Schwab Corporation and Charles Schwab & Co., Inc. (May 2007 – July 2015); Director, Charles Schwab & Co., Inc. (May 2007 – present); Director (Apr. 2010 – present) and Chief Executive Officer (July 2013 – Apr. 2015), Charles Schwab Bank; Director, Executive Vice President and Chief Financial Officer (May 2007 – present), Senior Executive Vice President (Feb. 2016 – present), and Executive Vice President (May 2007 - Feb. 2016), Schwab Holdings, Inc. 110 None OFFICERS OF THE TRUST NAME, YEAR OF BIRTH, AND POSITION(S) WITH THE TRUST (TERMS OF OFFICE, AND LENGTH OF TIME SERVED3) PRINCIPAL OCCUPATIONS DURING THE PAST FIVE YEARS Marie A. Chandoha 1961 President and Chief Executive Officer (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2010) Director, President and Chief Executive Officer (Dec. 2010 – present), Chief Investment Officer (Sept. 2010 – Oct. 2011), Charles Schwab Investment Management, Inc.; Trustee (Jan. 2016 – present), President, Chief Executive Officer (Dec. 2010 – present), and Chief Investment Officer (Sept. 2010 – Oct. 2011), Schwab Funds, Laudus Funds and Schwab ETFs; Director, Charles Schwab Worldwide Funds plc and Charles Schwab Asset Management (Ireland) Limited (Jan. 2011 – present); Global Head of Fixed Income Business Division, BlackRock, Inc. (formerly Barclays Global Investors) (Mar. 2007 – Aug. 2010). Mark Fischer 1970 Treasurer and Chief Financial Officer (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2013) Treasurer and Chief Financial Officer, Schwab Funds, Laudus Funds and Schwab ETFs (Jan. 2016 – present); Assistant Treasurer, Schwab Funds and Laudus Funds (Dec. 2013 – Dec. 2015), Schwab ETFs (Nov. 2013 – Dec. 2015); Vice President, Charles Schwab Investment Management, Inc. (Oct. 2013 – present); Executive Director, J.P. Morgan Investor Services (Apr. 2011 – Sept. 2013); Assistant Treasurer, Massachusetts Financial Service Investment Management (May 2005 – Mar. 2011). Schwab Advisor Cash Reserves | Annual Report 35 Schwab Advisor Cash Reserves OFFICERS OF THE TRUST (CONTINUED) NAME, YEAR OF BIRTH, AND POSITION(S) WITH THE TRUST (TERMS OF OFFICE, AND LENGTH OF TIME SERVED3) PRINCIPAL OCCUPATIONS DURING THE PAST FIVE YEARS George Pereira 1964 Senior Vice President and Chief Operating Officer (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust and Schwab Annuity Portfolios since 2004; Laudus Trust since 2006; Schwab Strategic Trust since 2009) Senior Vice President and Chief Financial Officer (Nov. 2004 – present), Chief Operating Officer (Jan. 2011 – present), Charles Schwab Investment Management, Inc.; Senior Vice President and Chief Operating Officer (Jan. 2016 – present), Treasurer and Chief Financial Officer, Laudus Funds (June 2006 – Dec. 2015); Treasurer and Principal Financial Officer, Schwab Funds (Nov. 2004 – Dec. 2015) and Schwab ETFs (Oct. 2009 – Dec. 2015); Director, Charles Schwab Worldwide Funds plc and Charles Schwab Asset Management (Ireland) Limited (Apr. 2005 – present). Omar Aguilar 1970 Senior Vice President and Chief Investment Officer – Equities and Multi-Asset Strategies (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2011) Senior Vice President and Chief Investment Officer – Equities and Multi-Asset Strategies, Charles Schwab Investment Management, Inc. (Apr. 2011 – present); Senior Vice President and Chief Investment Officer – Equities, Schwab Funds, Laudus Funds and Schwab ETFs (June 2011 – present); Head of the Portfolio Management Group and Vice President of Portfolio Management, Financial Engines, Inc. (May 2009 – Apr. 2011); Head of Quantitative Equity, ING Investment Management (July 2004 – Jan. 2009). Brett Wander 1961 Senior Vice President and Chief Investment Officer – Fixed Income (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2011) Senior Vice President and Chief Investment Officer – Fixed Income, Charles Schwab Investment Management, Inc. (Apr. 2011 – present); Senior Vice President and Chief Investment Officer – Fixed Income, Schwab Funds, Laudus Funds and Schwab ETFs (June 2011 – present); Senior Managing Director, Global Head of Active Fixed-Income Strategies, State Street Global Advisors (Jan. 2008 – Oct. 2010); Director of Alpha Strategies Loomis, Sayles & Company (Apr. 2006 – Jan. 2008). David Lekich 1964 Chief Legal Officer and Secretary, Schwab Funds and Schwab ETFs Vice President and Assistant Clerk, Laudus Funds (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2011) Senior Vice President (Sept. 2011 – present), Vice President (Mar. 2004 – Sept. 2011), Charles Schwab & Co., Inc.; Senior Vice President and Chief Counsel (Sept. 2011 – present), Vice President (Jan. 2011 – Sept. 2011), Charles Schwab Investment Management, Inc.; Secretary (Apr. 2011 – present) and Chief Legal Officer (Dec. 2011 – present), Schwab Funds; Vice President and Assistant Clerk, Laudus Funds (Apr. 2011 – present); Secretary (May 2011 – present) and Chief Legal Officer (Nov. 2011 – present), Schwab ETFs. Catherine MacGregor 1964 Vice President and Assistant Secretary, Schwab Funds and Schwab ETFs Chief Legal Officer, Vice President and Clerk, Laudus Funds (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust since 2005; Schwab Strategic Trust since 2009) Vice President, Charles Schwab & Co., Inc., Charles Schwab Investment Management, Inc. (July 2005 – present); Vice President (Dec. 2005 – present), Chief Legal Officer and Clerk (Mar. 2007 – present), Laudus Funds; Vice President (Nov. 2005 – present) and Assistant Secretary (June 2007 – present), Schwab Funds; Vice President and Assistant Secretary, Schwab ETFs (Oct. 2009 – present). 1 2 3 Each Trustee shall hold office until the election and qualification of his or her successor, or until he or she dies, resigns or is removed. The retirement policy requires that each independent trustee retire by December 31 of the year in which the Trustee turns 74 or the Trustee’s twentieth year of service as an independent trustee on any trust in the Fund Complex, whichever occurs first. Mr. Bettinger, Ms. Chandoha, and Mr. Martinetto are Interested Trustees because they own stock of The Charles Schwab Corporation, the parent company of the investment adviser. The President, Treasurer and Secretary/Clerk hold office until their respective successors are chosen and qualified or until he or she sooner dies, resigns, is removed or becomes disqualified. Each of the other officers serves at the pleasure of the Board. 36 Schwab Advisor Cash Reserves | Annual Report Schwab Advisor Cash Reserves Glossary 144A securities These securities may be sold only to qualified institutional buyers under Securities Act Rule 144A. agency discount notes Notes issued by federal agencies—known as Government Sponsored Enterprises, or GSEs—at a discount to their value at maturity. An agency discount note is a short-term investment offering a high degree of credit quality. asset-backed commercial paper A short-term investment that is typically issued by a bank or other financial institution. The notes represent an interest in financial assets such as trade receivables, credit card receivables, auto receivables, etc. and are generally used for the short-term financing needs of companies. capital gain, capital loss The difference between the amount paid for an investment and its value at a later time. If the investment has been sold, the capital gain or loss is considered a realized gain or loss. If the investment is still held, the gain or loss is still “on paper” and is considered unrealized. collateralized mortgage obligation (CMO) A type of security that is collateralized by pools of mortgages backed by government agencies or private issuers (non-agency). The streams of principal and interest payments on the mortgages are distributed to the different classes of CMO interests, known as tranches. Each tranche may have different principal balances, coupon rates, prepayment risks, and maturity dates. commercial paper Promissory notes issued by banks, corporations and other entities to finance short-term credit needs. These securities generally are structured on a discounted basis but sometimes may be interest-bearing notes. Commercial paper, which may be unsecured, is subject to credit risk. corporate note An unsecured debt security issued by a corporation that is subject to the credit risk of the issuer. credit-enhanced securities Securities that are backed by the credit of an entity other than the issuer (such as a financial institution). Credit enhancements, which can equal up to 100% of the security’s value, are designed to help lower the risk of default on a security and may also make the security more liquid. credit quality The capacity of an issuer to make its interest and principal payments. Federal regulations strictly regulate the credit quality of the securities a money market fund can buy. credit ratings Debt issuers, including corporations, states and municipalities, may arrange with a recognized independent rating organization, such as Standard & Poor’s, Fitch, Inc., Moody’s Investor Service, and DBRS, to rate their creditworthiness and/or the creditworthiness of their debt issues. For example, an issuer may obtain a long-term rating within the investment grade rating category, which is, from high to low, AAA, AA, A and BBB for Standard & Poor’s, Fitch, and DBRS; and Aaa, Aa, A and Baa for Moody’s. credit risk The risk that a debt issuer may be unable to pay interest or repay principal to its debt holders. dollar-weighted average maturity See weighted average maturity. effective yield A measurement of a fund’s yield that assumes that all interest income is reinvested in additional shares of the fund. exchange-traded fund (ETF) An investment fund that tracks an index, a commodity or a basket of assets, and trades on an exchange. expense ratio The amount that is taken from a mutual fund’s assets each year to cover the fund’s operating expenses. An expense ratio of 0.50% means that a fund’s expenses amount to half of one percent of its average net assets a year. face value The value of a bond, note, mortgage or other security as given on the certificate or instrument. Face value is also referred to as par value or nominal value. illiquid securities Securities are generally considered illiquid if they cannot be disposed of promptly (typically within seven days) and in the ordinary course of business at approximately the amount at which a fund has valued the instruments. interest Payments to holders of debt securities as compensation for loaning a security’s principal to the issuer. liquidity-enhanced security The security’s structure includes a liquidity arrangement that requires an entity other than the issuer (such as a large financial institution) to provide funds to pay a tender under most circumstances. Liquidity enhancements are often used on variable-rate securities where the portfolio manager has an option to tender the securities for repayment within a specified time period (usually one day or one week) at any time prior to their final maturity. maturity The date a debt security is scheduled to be “retired” and its principal amount repaid. The Maturity of an investment will generally reflect the security’s final maturity date unless the security’s structure includes a maturity-shortening provision such as an interest rate reset, demand feature or put feature (the “Effective Maturity Date”). For those securities with a maturity-shortening provision, including variable-rate demand securities, the Maturity is determined by using the Effective Maturity Date, as permitted by Rule 2a-7. municipal securities Debt securities issued by a state, its counties, municipalities, authorities and other subdivisions, or the territories and possessions of the United States and the District of Columbia, including their subdivisions, agencies and instrumentalities and corporations. These securities may be issued to obtain money for various public purposes, including the construction of a wide range of public facilities such as airports, bridges, highways, housing, hospitals, mass transportation, public utilities, schools, streets, and water and sewer works. net asset value per share (NAV) The value of one share of a mutual fund. NAV is calculated by taking the fund’s total assets, subtracting liabilities, and dividing by the number of shares outstanding. Certain money funds seek to maintain a steady NAV of $1.00. outstanding shares, shares outstanding When speaking of a company or mutual fund, indicates all shares currently held by investors. repurchase agreement (also known as a “repo”) The sale of a security combined with a simultaneous agreement to repurchase it at a predetermined date and price. restricted securities Securities that are subject to contractual restrictions on resale. These securities are often purchased in private placement transactions. total return The percentage that an investor would have earned or lost on an investment in the fund assuming dividends and distributions were reinvested. Schwab Advisor Cash Reserves | Annual Report 37 Schwab Advisor Cash Reserves variable rate demand obligations (VRDOs) Securities that have long maturities but which, because of their structure, require them to repay principal plus accrued interest within a specified timeframe (usually one or seven days) upon the demand of the bond holder. Depending on their structure, the repayment may be made by the bond issuer or by a financial institution, such as a highly rated bank. weighted average life (WAL) For money market mutual funds as per rule 2a-7, the weighted average life calculation takes into account either the final maturity date for each security held in the portfolio or, when relevant, the date of the next demand feature (when the fund is scheduled to receive payment of principal and interest after a demand). Money funds are required to maintain a weighted average life of no more than 120 days. Weighted average life for all Schwab money market funds is available in each fund’s monthly schedule of portfolio holdings at www.schwabfunds.com/prospectus and also available in each fund’s Form N-MFP on the SEC’s website at www.sec.gov immediately upon filing. 38 Schwab Advisor Cash Reserves | Annual Report weighted average maturity (WAM) For money market mutual funds as per rule 2a-7, the maturity date or Effective Maturity Date (see definition of maturity) of all the debt securities in its portfolio, or the date the interest rate on those securities is reset, or the date those securities can be redeemed through demand, calculated as a weighted average. As a rule, the longer a fund’s weighted average maturity, the greater its interest rate risk. Money funds are required to maintain a weighted average maturity of no more than 60 days. yield The income paid out by an investment, expressed as a percentage of the investment’s market value. Schwab Advisor Cash Reserves PRIVACY NOTICE THIS IS NOT PART OF THE SHAREHOLDER REPORT A Commitment to Your Privacy Your Privacy Is Not for Sale We do not and will not sell your personal information to anyone, for any reason. We are committed to protecting the privacy of information we maintain about you. Below are details about our commitment, including the types of information we collect and how we use and share that information. This Privacy Notice applies to you only if you are an individual who invests directly in the funds by placing orders through the funds’ transfer agent. If you place orders through your brokerage account at Charles Schwab & Co., Inc. or an account with another broker-dealer, investment advisor, 401(k) plan, employee benefit plan, administrator, bank or other financial intermediary, you are covered by the privacy policies of that financial institution and should consult those policies. How We Collect Information About You We collect personal information about you in a number of ways. • APPLICATION AND REGISTRATION INFORMATION. We collect personal information from you when you open an account or utilize one of our services. We may also collect information about you from third parties such as consumer reporting agencies to verify your identity. The information we collect may include personal information, including your Social Security number, as well as details about your interests, investments and investment experience. • TRANSACTION AND EXPERIENCE INFORMATION. Once your account has been opened, we collect and maintain personal information about your account activity, including your transactions, balances, positions and history. This information allows us to administer your account and provide the services you have requested. • WEBSITE USAGE. When you visit our websites, we may use devices known as “cookies,” graphic interchange format files (GIFs), or other similar web tools to enhance your web experience. These tools help us to recognize you, maintain your web session, and provide a more personalized experience. To learn more, please go to www.schwab.com/privacy. How We Share and Use Your Information We provide access to information about you to our affiliated companies, outside companies and other third parties in certain limited circumstances, including: • to help us process transactions for your account; • when we use other companies to provide services for us, such as printing and mailing your account statements; • when we believe that disclosure is required or permitted under law (for example, to cooperate with regulators or law enforcement, resolve consumer disputes, perform credit/authentication checks, or for risk control). State Laws We will comply with state laws that apply to the disclosure or use of information about you. Safeguarding Your Information — Security Is a Partnership We take precautions to ensure the information we collect about you is protected and is accessed only by authorized individuals or organizations. Companies we use to provide support services are not allowed to use information about our shareholders for their own purposes and are contractually obligated to maintain strict confidentiality. We limit their use of information to the performance of the specific services we have requested. We restrict access to personal information by our employees and agents. Our employees are trained about privacy and are required to safeguard personal information. We maintain physical, electronic and procedural safeguards that comply with federal standards to guard your nonpublic personal information. Contact Us To provide us with updated information, report suspected fraud or identity theft, or for any other questions, please call the number below. Schwab Funds® direct investors: 1-800-407-0256 © 2016 Schwab Funds. All rights reserved. Schwab Advisor Cash Reserves | Annual Report 39 Schwab Advisor Cash Reserves Our straightforward approach sets us apart. As one of the nation’s largest asset managers, our goal is to provide investors with a diverse selection of foundational products that aim to deliver consistent performance at a competitive cost. The list below shows all currently available Schwab Funds. An investor should consider a fund’s investment objectives, risks, charges and expenses carefully before investing or sending money. This and other important information can be found in the fund’s prospectus, or if available, the summary prospectus. Please call 1-877-824-5615 for a prospectus and brochure for any Schwab Fund. Please read the prospectus carefully before you invest. This report must be preceded or accompanied by a current prospectus. Proxy Voting Policies, Procedures and Results A description of the proxy voting policies and procedures used to determine how to vote proxies on behalf of the funds is available without charge, upon request, by visiting the Schwab Funds’ website at www.csimfunds.com/schwabfunds_prospectus, the SEC’s website at www.sec.gov, or by contacting Schwab Funds at 1-877-824-5615. Information regarding how a fund voted proxies relating to portfolio securities during the most recent twelve-month period ended June 30 is available, without charge, by visiting the fund’s website at www.csimfunds.com/schwabfunds_prospectus or the SEC’s website at www.sec.gov. The Schwab Funds Family® Stock Funds Bond Funds Schwab Core Equity Fund™ Schwab Dividend Equity Fund™ Schwab Large-Cap Growth Fund™ Schwab Small-Cap Equity Fund™ Schwab Hedged Equity Fund™ Schwab Health Care Fund™ Schwab® International Core Equity Fund Schwab Fundamental US Large Company Index Fund Schwab Fundamental US Small Company Index Fund Schwab Fundamental International Large Company Index Fund Schwab Fundamental International Small Company Index Fund Schwab Fundamental Emerging Markets Large Company Index Fund Schwab Fundamental Global Real Estate Index Fund Schwab Global Real Estate Fund™ Schwab® S&P 500 Index Fund Schwab 1000 Index® Fund Schwab Small-Cap Index Fund® Schwab Total Stock Market Index Fund® Schwab International Index Fund® Schwab Short-Term Bond Market Fund™ Schwab Intermediate-Term Bond Fund™ Schwab Total Bond Market Fund™ Schwab GNMA Fund™ Schwab® Treasury Inflation Protected Securities Index Fund Schwab Tax-Free Bond Fund™ Schwab California Tax-Free Bond Fund™ Schwab® U.S. Aggregate Bond Index Fund Schwab® Short-Term Bond Index Fund Asset Allocation Funds Schwab Balanced Fund™ Schwab MarketTrack All Equity Portfolio™ Schwab MarketTrack Growth Portfolio™ Schwab MarketTrack Balanced Portfolio™ Schwab MarketTrack Conservative Portfolio™ Schwab Target Funds Schwab Target Index Funds Schwab® Monthly Income Fund – Moderate Payout Schwab® Monthly Income Fund – Enhanced Payout Schwab® Monthly Income Fund – Maximum Payout 1 Schwab Money Funds Schwab offers an array of money market funds1. Choose from taxable or tax-advantaged alternatives. Some are linked to your eligible Schwab account to “sweep” cash balances automatically, subject to availability, when you’re between investments. Or, for your larger cash reserves, choose one of our Value Advantage Investments®. Investment Adviser Charles Schwab Investment Management, Inc. 211 Main Street, San Francisco, CA 94105 Funds Schwab Funds® 1-877-824-5615 © 2017 Charles Schwab & Co., Inc. All rights reserved. Member SIPC® Printed on recycled paper. You could lose money by investing in a money market fund. All Schwab Money Funds with the exception of Schwab Variable Share Price Money Fund seek to preserve the value of your investment at $1.00 per share, but cannot guarantee they will do so. All Schwab Money Funds with the exception of Schwab Government Money Fund, Schwab Retirement Government Money Fund, Schwab U.S. Treasury Money Fund, Schwab Treasury Obligations Money Fund and Schwab Government Money Market Portfolio may impose a fee upon the sale of your shares or may temporarily suspend your ability to sell shares if the fund’s liquidity falls below required minimums because of market conditions or other factors. An investment in a money market fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The money market fund's sponsor has no legal obligation to provide financial support to the fund, and you should not expect that the sponsor will provide financial support to the fund at any time. This page is intentionally left blank. MFR31382-12 00189426