<PAGE> 1
SCHWABFUNDS(R)
[LOGO]
SCHWAB MONEY
MARKET FUND
SCHWAB
GOVERNMENT
MONEY FUND
SCHWAB
U.S. TREASURY
MONEY FUND
SEMI-ANNUAL REPORT
JUNE 30, 1996
[Photo of the Schwab Building, San Francisco, California]
<PAGE> 2
Dear Shareholder,
[Photo of I'd like to take this opportunity to share some thoughts on
Charles mutual fund investing and tell you how we're working to expand
R. Schwab] our services to keep pace with your changing needs.
First, however, I want to extend a personal welcome to the many thousands of new
shareholders who've joined the SchwabFunds Family(R) in the past six months.
With your support, we've become one of the largest and fastest-growing
organizations in the mutual fund industry. Today, Charles Schwab Investment
Management, Inc. serves over 1.8 million shareholders with total assets under
management in excess of $38 billion. In six years, SchwabFunds(R) has grown from
just a few funds to a mutual fund complex offering retail investors 21 funds
covering a broad range of financial markets and investing approaches.
NEW INVESTING STRATEGIES. Over the past year, we've introduced five new funds,
each built on specific, time-tested strategies. The Schwab Asset Director(R)
Funds help you diversify your portfolio through asset allocation, the Schwab S&P
500 Fund seeks to track U.S. stock market performance through indexing, and the
Schwab Analytics Fund(TM) uses advanced quantitative methods to identify
attractive investment opportunities. Along with our other offerings, these new
funds give you powerful tools you can use to help construct a custom investment
portfolio that matches your individual goals. And, of course, they also allow
you to tap into the combined investing expertise of our highly experienced team
of professional portfolio managers.
TIME-TESTED INVESTING STRATEGIES THAT OFFER YOU AN EXPANDING RANGE OF
OPPORTUNITIES
ENHANCING SHAREHOLDER COMMUNICATIONS. Our commitment to shareholders goes beyond
simply offering you new investment opportunities. We also want to help you
become a more-informed mutual fund investor by providing the in-depth
information you need to help manage your portfolio more effectively. Toward that
end, we've changed the format of this report to make it more accessible and
informative.
If you'd like more information on any of the funds in the SchwabFunds Family,
call 1-800-2 NO-LOAD (1-800-266-5623). Our representatives will be happy to
provide you with a free prospectus, which contains more complete information on
fund risks, charges and expenses. Please read it carefully before investing.
Thank you for placing your trust in us. We value your confidence in our efforts
to date, and we'll continue working hard to offer you an even broader range of
strategic investment opportunities in the future.
/s/ Charles R. Schwab
Charles R. Schwab
Cover: The Schwab Building, San Francisco, California
<PAGE> 3
[The following is the front of the attached envelope.]
Attn: Dept. FP 333-7 -------------
NO POSTAGE
NECESSARY IF
MAILED IN THE
UNITED STATES
-------------
-------------------------------------------------------
BUSINESS REPLY MAIL
FIRST-CLASS MAIL PERMIT NO. 18125 SAN FRANCISCO, CA
-------------------------------------------------------
POSTAGE WILL BE PAID BY ADDRESSEE
CHARLES SCHWAB & CO., INC.
P O BOX 7783
SAN FRANCISCO CA 94120-9330
<PAGE> 4
[The following is the under flap of the envelope.]
SCHWAB MONEYFUNDER
TAKE ADVANTAGE OF THIS OPPORTUNITY TO
ADD TO YOUR SCHWAB MONEY FUND INVESTMENT.
Your Schwab Money Fund earns money market returns and gives you
direct access to many investment opportunities available through
Schwab. By funding your account now, you'll be able to quickly
respond to changing market conditions with just a phone call to your
Schwab representative. And you keep every dollar working for you.
SO DON'T DELAY. USE THIS CONVENIENT
SCHWAB MONEYFUNDER TO SEND YOUR CHECK TODAY!
PLEASE DETACH HERE
SCHWAB MONEYFUNDER
- ------------------
PLEASE ENCLOSE YOUR CHECK AND THIS COMPLETED MONEYFUNDER SLIP
IN THE ATTACHED POSTAGE-PAID ENVELOPE.
- --------------------------------------------- -------------------------
NAME [ ][ ][ ][ ]-[ ][ ][ ][ ]
SCHWAB ACCOUNT NUMBER
$
- ----------------------------------------------
AMOUNT OF INVESTMENT*
[ ] CHECK HERE IF YOU WOULD LIKE MORE SCHWAB MONEYFUNDERS FOR FUTURE USE.
*MINIMUM INITIAL INVESTMENT $1,000, SUBSEQUENT MINIMUM $100, CUSTODIAN & IRA
ACCOUNTS $1. AS INVESTMENT CONSTITUTES THE PURCHASE OF SHARES IN THE MONEY
FUND YOU HAVE PREVIOUSLY CHOSEN AS THE PRIMARY FUND FOR YOUR BROKERAGE ACCOUNT.
SMF MEMBER SIPC (C) 1996 CHARLES SCHWAB & CO., INC. 1280-3 (7/96) PRINTED ON
RECYCLED PAPER.
(LIFT HERE FOR MORE INFORMATION)
<PAGE> 5
[The following is the inside of the envelope.]
CHARLES SCHWAB
JUST FOLLOW THESE EASY STEPS TO INVEST IN YOUR SCHWAB MONEY FUND:
1. Fill out the Schwab MoneyFunder slip completely, including your name,
account number and the amount of your check. Please use one slip for
each account.
2. Make your check payable to CHARLES SCHWAB & CO., INC., and enclose
your check with the completed slip in this postage-paid envelope.
3. Then just drop your Schwab MoneyFunder in the mail today-and start
putting your money to work! If you have any questions, don't
hesitate to call your local Schwab office or 1-800-2 NO LOAD.
THIS ENVELOPE MUST BE PRECEDED OR
ACCOMPANIED BY A CURRENT SCHWAB
MONEY FUND PROSPECTUS. AN INVESTMENT
IN A FUND IS NEITHER INSURED NOR GUARANTEED
BY THE U.S. GOVERNMENT. THERE CAN BE
NO ASSURANCE THAT A FUND WILL BE ABLE
TO MAINTAIN A STABLE NET ASSET VALUE
OF $1.00 PER SHARE.
<PAGE> 6
[The following is the outside flap of the envelope.]
SCHWAB MONEYFUNDER
KEEP YOUR
MONEY WORKING
HARDER!
Use this envelope to easily add to
your Schwab Money Fund.
CHARLES SCHWAB
<PAGE> 7
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
OVERVIEW .............................................................. 1
SCHWAB MONEY MARKET FUND SUMMARY ...................................... 2
SCHWAB GOVERNMENT MONEY FUND SUMMARY .................................. 4
SCHWAB U.S. TREASURY MONEY FUND SUMMARY ............................... 6
QUESTIONS TO THE PORTFOLIO MANAGEMENT TEAM ............................ 8
GLOSSARY OF TERMS ..................................................... 12
PORTFOLIO SUMMARY ..................................................... 13
FINANCIAL STATEMENTS AND NOTES ........................................ 16
</TABLE>
OVERVIEW
We're pleased to report on the performance of your investment in the Schwab
Money Funds for the six-month reporting period ended June 30, 1996. This report
covers three Funds:
- Schwab Money Market Fund
- Schwab Government Money Fund
- Schwab U.S. Treasury Money Fund
During the reporting period, all three Schwab Money Funds provided competitive
money market returns, combined with capital stability and ready access to your
money.
The Schwab Money Funds seek to maintain a stable $1 share price to protect your
principal. As with all money funds, however, there can be no assurance that the
Funds will be able to maintain a $1 net asset value per share. It is also
important to understand that your investment is not insured or guaranteed by the
U.S. government.
1
<PAGE> 8
SCHWAB MONEY MARKET FUND SUMMARY
PERFORMANCE REVIEW
The table below presents the Fund's 7-day average yields at the end of the
reporting period. Of course, money market yields fluctuate, and past performance
is no guarantee of future results.
================================================================================
7-Day Average Yields 1
(as of 6/30/96)
<TABLE>
<CAPTION>
Simple Compound
- -------------------------------------------------------------------------------
<S> <C> <C>
Schwab Money Market Fund 4.82% 4.94%
- -------------------------------------------------------------------------------
</TABLE>
PORTFOLIO COMPOSITION
The chart at the right illustrates the composition of the Fund's portfolio as of
the June 30, 1996 report date. In addition, you'll find a complete listing of
the securities in the Fund's portfolio on June 30, 1996 later in this report.
The Schwab Money Market Fund invests in bank certificates of deposit, time
deposits, bankers' acceptances, high-quality commercial paper and notes, and
other high-quality corporate obligations; as well as repurchase agreements, U.S.
Treasury securities, and other obligations or securities guaranteed by the U.S.
or Canadian governments, their agencies, and instrumentalities.
1 A portion of the Fund's fees were waived or reimbursed during the reporting
period. Without the waivers or reimbursements, the 7-day simple yield would have
been 4.68% and the 7-day compound yield would have been 4.79% at June 30, 1996.
2
<PAGE> 9
SCHWAB MONEY MARKET FUND
PORTFOLIO COMPOSITION - JUNE 30,1996
[The following is a pie chart depicting
Schwab Money Market Fund Portfolio
Composition as of June 30, 1996.]
<TABLE>
<S> <C>
Commercial Paper 62%
Certificates of Deposit 27%
Bank Notes 1%
Variable Rate Notes 6%
Other 4%
</TABLE>
GROWTH IN FUND ASSETS AND SHAREHOLDERS
The table below illustrates the growth in the Schwab Money Market Fund's total
net assets and number of shareholders during the six-month reporting period.
<TABLE>
<CAPTION>
6/30/96 12/31/95 Change
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Total Net Assets (000s) $15,693,126 $14,010,387 +12%
- --------------------------------------------------------------------------------
Shareholder Accounts 1,607,667 1,395,695 +15%
- --------------------------------------------------------------------------------
</TABLE>
3
<PAGE> 10
SCHWAB GOVERNMENT MONEY FUND SUMMARY
PERFORMANCE REVIEW
The table below presents the Fund's 7-day average yields at the end of the
reporting period. Of course, money market yields fluctuate, and past performance
is no guarantee of future results.
- -------------------------------------------------------------------------------
7-DAY AVERAGE YIELDS 2
(as of 6/30/96)
<TABLE>
<CAPTION>
Simple Compound
- -------------------------------------------------------------------------------
<S> <C> <C>
Schwab Government Money Fund 4.69% 4.80%
- -------------------------------------------------------------------------------
</TABLE>
PORTFOLIO COMPOSITION
The chart at the right illustrates the composition of the Fund's portfolio as of
the June 30, 1996 report date. In addition, you'll find a complete listing of
the securities in the Fund's portfolio on June 30, 1996 later in this report.
The Schwab Government Money Fund invests exclusively in U.S. Treasury bills,
notes, bonds, and other obligations issued or guaranteed by the U.S. government,
its agencies, and instrumentalities, as well as in repurchase agreements
covering such obligations.
2 A portion of the Fund's fees were waived or reimbursed during the reporting
period. Without the waivers or reimbursements, the 7-day simple yield would have
been 4.53% and the 7-day compound yield would have been 4.63% at June 30, 1996.
4
<PAGE> 11
SCHWAB GOVERNMENT MONEY FUND
PORTFOLIO COMPOSITION - JUNE 30, 1996
[The following is a pie chart depicting
Schwab Government Money Fund Portfolio
Composition as of June 30, 1996.]
<TABLE>
<S> <C>
Repurchase Agreements 33%
U.S. Treasury Notes 9%
Agency Variable Rate Notes 18%
Agency Coupon Notes 17%
Agency Discount Notes 23%
</TABLE>
GROWTH IN FUND ASSETS AND SHAREHOLDERS
The table below illustrates changes in the Schwab Government Money Fund's total
net assets and number of shareholders during the six-month reporting period.
<TABLE>
<CAPTION>
6/30/96 12/31/95 Change
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Total Net Assets (000s) $1,928,362 $1,884,569 +2%
- ---------------------------------------------------------------------------------
Shareholder Accounts 130,975 130,422 --
- ---------------------------------------------------------------------------------
</TABLE>
5
<PAGE> 12
SCHWAB U.S. TREASURY MONEY FUND SUMMARY
PERFORMANCE REVIEW
The table below presents the Fund's 7-day average yields at the end of the
reporting period. Of course, money market yields fluctuate, and past performance
is no guarantee of future results.
- --------------------------------------------------------------------------------
7-DAY AVERAGE YIELDS 3
(as of 6/30/96)
<TABLE>
<CAPTION>
Simple Compound
- --------------------------------------------------------------------------------
<S> <C> <C>
Schwab U.S. Treasury Money Fund 4.58% 4.68%
- --------------------------------------------------------------------------------
</TABLE>
PORTFOLIO COMPOSITION
The chart at the right illustrates the composition of the Fund's portfolio as of
the June 30, 1996 report date. In addition, you'll find a complete listing of
the securities in the Fund's portfolio on June 30, 1996 later in this report.
As illustrated on the following page, the Schwab U.S. Treasury Money Fund
invests exclusively in U.S. Treasury bills and notes.
3 A portion of the Fund's fees were waived or reimbursed during the reporting
period. Without the waivers or reimbursements, the 7-day simple yield would have
been 4.30% and the 7-day compound yield would have been 4.39% at June 30, 1996.
6
<PAGE> 13
SCHWAB U.S. TREASURY MONEY FUND
PORTFOLIO COMPOSITION - JUNE 30, 1996
[The following is a pie chart depicting
the Schwab U.S. Treasury Money Fund Portfolio
Composition as of June 30, 1996.]
<TABLE>
<S> <C>
U.S. Treasury Notes 73%
U.S. Treasury Bills 27%
</TABLE>
GROWTH IN FUND ASSETS AND SHAREHOLDERS
The table below illustrates changes in the Schwab U.S. Treasury Money Fund's
total net assets and number of shareholders during the six-month reporting
period.
<TABLE>
<CAPTION>
6/30/96 12/31/95 Change
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Total Net Assets (000s) $1,224,790 $1,193,689 +3%
- --------------------------------------------------------------------------------
Shareholder Accounts 54,922 51,384 +7%
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
KEEP YOUR MONEY WORKING
The Schwab Money Funds can be linked to your Schwab account to keep all of
your money invested and working for you. With this special "sweep" feature, a
balance of $100 or more in your account can be automatically invested, or
"swept," on a regular basis into the Schwab Money Fund you select, where it
will be available to settle trades and cover other day-to-day transactions.
- --------------------------------------------------------------------------------
7
<PAGE> 14
QUESTIONS TO THE PORTFOLIO MANAGEMENT TEAM OF CHARLES SCHWAB INVESTMENT
MANAGEMENT, INC.
Stephen B. Ward: Senior Vice President and Chief Investment Officer Linda
Klingman: Portfolio Manager, Schwab Money Market Fund Andrea Regan and Amy
Treanor: Portfolio Managers, Schwab Government Money Fund and Schwab U.S.
Treasury Money Fund
Q. WHAT HAS BEEN THE ECONOMIC CLIMATE DURING THE FIRST SIX MONTHS OF 1996?
A. At the beginning of the reporting period, market participants were primarily
concerned about the likelihood of an economic recession. However, as the
six-month reporting period progressed, the economic climate changed, and by June
30, 1996, concern was focused on excessive growth and its potential impact on
future inflation. Following the first quarter of 1996, many economic observers
were surprised by both the size of the increase in the Real Gross Domestic
Product (GDP) growth rate and the strength of the labor market. The Real GDP
growth rate was 2.0% for the first quarter in 1996 and 4.2% for the second
quarter, based on the advance estimate. The average monthly increase in payroll
employment jumped from 185,000 in 1995 to 232,000 during the first six months of
1996. The June hourly wage increase was the largest recorded in history. These
developments have led most market observers to anticipate that the Federal
Reserve (the Fed) may increase the federal funds rate in the near term.
The economy continues to exhibit signs of strong economic growth as evidenced by
strong growth in jobs, retail sales, auto sales, and strong construction
spending despite higher mortgage rates. Although inflation has remained
relatively low, as evidenced by the 2.8% Consumer Price Index (CPI) increase on
a year-over-year basis as of June 1996, there remains a concern that the economy
is performing at or near its employment and manufacturing capacity. As a result,
the Fed is expected to remain diligent in its effort to prevent future increases
in inflation.
8
<PAGE> 15
Q. HOW HAVE THIS YEAR'S ECONOMIC EVENTS AFFECTED SHORT-TERM INTEREST RATES?
A. Short-term interest rates continued their year long decline during the first
six weeks of 1996. As shown on the graph below, the 90-day commercial paper rate
fell from 5.50% on January 2 to 5.12% on February 16. This short-lived decline
in interest rates reflected continuing doubts about the strength of the economy,
as well as the Fed's announcement of a 0.25% reduction in the federal funds rate
following its Open Market Committee meeting in late January. Since mid-February,
evidence of increased productivity and strength in the labor market has led to
an upward trend in short-term interest rates. By June 28, the last business day
of the period, the 90-day commercial paper rate was 5.52%. Many economists
believe that sustained GDP growth and potential inflationary pressures will lead
the Fed to increase the federal funds rate, and current market rates incorporate
this expectation.
SHORT-TERM INTEREST RATES IN THE
FIRST HALF OF 1996
YIELDS
90-Day Commercial Paper and 3-Month Treasury Bills
January 2, 1996 - June 28, 1996
[The following is a line graph comparing the Short-Term
Interest Rates in the First Half of 1996 for 90-Day
Commercial Paper and 3-Month Treasury Bills.]
<TABLE>
3-Month 90-Day
Treasury Bills Commercial Paper
<S> <C> <C>
1/2/96 5.12% 5.50%
1/3/96 5.21% 5.51%
1/4/96 5.19% 5.49%
1/5/96 5.18% 5.46%
1/8/96 5.17% 5.48%
1/9/96 5.15% 5.47%
1/10/96 5.17% 5.45%
1/11/96 5.17% 5.44%
1/12/96 5.17% 5.43%
1/15/96 5.17% 5.43%
1/16/96 5.14% 5.42%
1/17/96 5.13% 5.41%
1/18/96 5.11% 5.39%
1/19/96 5.11% 5.38%
1/22/96 5.13% 5.37%
1/23/96 5.12% 5.36%
1/24/96 5.11% 5.35%
1/25/96 5.13% 5.34%
1/26/96 5.10% 5.34%
1/29/96 5.15% 5.32%
1/30/96 5.12% 5.31%
1/31/96 5.05% 5.27%
2/1/96 5.00% 5.21%
2/2/96 4.98% 5.17%
2/5/96 5.00% 5.17%
2/6/96 4.99% 5.16%
2/7/96 4.93% 5.16%
2/8/96 4.91% 5.15%
2/9/96 4.93% 5.14%
2/12/96 4.93% 5.13%
2/13/96 4.92% 5.13%
2/14/96 4.93% 5.12%
2/15/96 4.90% 5.12%
2/16/96 4.89% 5.12%
2/20/96 4.96% 5.14%
2/21/96 4.96% 5.16%
2/22/96 4.94% 5.14%
2/23/96 4.95% 5.13%
2/26/96 4.98% 5.14%
2/27/96 5.02% 5.16%
2/28/96 5.01% 5.16%
2/29/96 5.03% 5.19%
3/1/96 5.00% 5.19%
3/4/96 5.03% 5.17%
3/5/96 5.03% 5.18%
3/6/96 5.03% 5.19%
3/7/96 5.03% 5.19%
3/8/96 5.03% 5.31%
3/11/96 5.10% 5.31%
3/12/96 5.10% 5.32%
3/13/96 5.12% 5.34%
3/14/96 5.12% 5.34%
3/15/96 5.15% 5.34%
3/18/96 5.18% 5.36%
3/19/96 5.21% 5.36%
3/20/96 5.14% 5.36%
3/21/96 5.06% 5.35%
3/22/96 5.11% 5.35%
3/25/96 5.07% 5.37%
3/26/96 5.15% 5.36%
3/27/96 5.16% 5.37%
3/28/96 5.19% 5.39%
3/29/96 5.14% 5.38%
4/1/96 5.16% 5.36%
4/2/96 5.17% 5.36%
4/3/96 5.15% 5.36%
4/4/96 5.12% 5.36%
4/5/96 5.16% 5.36%
4/8/96 5.16% 5.40%
4/9/96 5.09% 5.41%
4/10/96 5.09% 5.41%
4/11/96 5.10% 5.41%
4/12/96 5.08% 5.41%
4/15/96 5.00% 5.41%
4/16/96 4.97% 5.40%
4/17/96 4.96% 5.39%
4/18/96 5.00% 5.39%
4/19/96 5.03% 5.38%
4/22/96 5.00% 5.38%
4/23/96 5.11% 5.38%
4/24/96 5.14% 5.38%
4/25/96 5.10% 5.38%
4/26/96 5.12% 5.38%
4/29/96 5.16% 5.38%
4/30/96 5.15% 5.39%
5/1/96 5.11% 5.40%
5/2/96 5.13% 5.41%
5/3/96 5.14% 5.41%
5/6/96 5.12% 5.41%
5/7/96 5.15% 5.41%
5/8/96 5.13% 5.41%
5/9/96 5.14% 5.40%
5/10/96 5.14% 5.39%
5/13/96 5.17% 5.38%
5/14/96 5.13% 5.38%
5/15/96 5.14% 5.38%
5/16/96 5.16% 5.38%
5/17/96 5.16% 5.38%
5/20/96 5.16% 5.38%
5/21/96 5.19% 5.37%
5/22/96 5.19% 5.37%
5/23/96 5.19% 5.37%
5/24/96 5.18% 5.37%
5/27/96 5.18% 5.37%
5/28/96 5.18% 5.37%
5/29/96 5.19% 5.37%
5/30/96 5.18% 5.39%
5/31/96 5.18% 5.40%
6/3/96 5.22% 5.43%
6/4/96 5.22% 5.42%
6/5/96 5.21% 5.42%
6/6/96 5.19% 5.41%
6/7/96 5.25% 5.50%
6/10/96 5.27% 5.51%
6/11/96 5.27% 5.50%
6/12/96 5.25% 5.49%
6/13/96 5.23% 5.49%
6/14/96 5.20% 5.49%
6/17/96 5.18% 5.50%
6/18/96 5.23% 5.50%
6/19/96 5.24% 5.50%
6/20/96 5.28% 5.50%
6/21/96 5.28% 5.50%
6/24/96 5.28% 5.51%
6/25/96 5.23% 5.50%
6/26/96 5.22% 5.50%
6/27/96 5.19% 5.51%
6/28/96 5.16% 5.52%
</TABLE>
Source: Bloomberg L.P.
Note: Treasury Bills are guaranteed by the U.S. government
and, if held to maturity, offer both a fixed rate of return
and fixed principal value. Past performance does not
indicate future results.
9
<PAGE> 16
Q. HOW HAS THE PORTFOLIO MANAGEMENT TEAM ADJUSTED EACH FUND'S PORTFOLIO TO
RESPOND TO CHANGES IN THE INTEREST RATE ENVIRONMENT?
A. During the six-month reporting period, the portfolio managers adjusted the
weighted average maturity of each Fund in an effort to capitalize on
opportunities to buy money market instruments resulting from market
fluctuations. Specifically, periodic uncertainties about the future direction of
the economy led the market to overreact to reports of economic growth -- in this
case, strong employment figures. The resulting increases in short-term rates
presented us with opportunities to moderately extend each Fund's average
maturity and lock in higher yields at different points throughout the six-month
period.
The chart below shows each of the Funds' weighted average maturities at the
beginning and end of the reporting period.
<TABLE>
<CAPTION>
Beginning of End of
Period Period
- -----------------------------------------------------------------
<S> <C> <C>
Schwab Money Market Fund 60 Days 57 Days
- -----------------------------------------------------------------
Schwab Government Money Fund 55 Days 62 Days
- -----------------------------------------------------------------
Schwab U.S. Treasury Money Fund 80 Days 81 Days
- -----------------------------------------------------------------
</TABLE>
Q. WHAT STANDARDS DOES THE PORTFOLIO MANAGEMENT TEAM USE IN SELECTING
SECURITIES FOR THE SCHWAB MONEY MARKET FUND?
A. Money market funds are required by law to hold high-quality securities in
their portfolios. For the Schwab Money Market Fund, we have continued to take
the additional step of only investing in what are referred to as First Tier
securities. In general, a First Tier security is a security that provides
certain maturity limits and carries the highest credit rating from the required
number of Nationally Recognized Statistical Rating Organizations (NRSROs); if
unrated, it must be deemed to be of comparable quality according to guidelines
approved by the Board of Trustees of The Charles Schwab Family of Funds.
10
<PAGE> 17
Certain securities owned by the Schwab Money Market Fund are insured or are
backed by a letter of credit issued by a First Tier financial institution. These
arrangements are frequently referred to as "credit enhancements" because they
provide incremental levels of creditworthiness in addition to the underlying
strength of the primary issuer. Insurance companies and financial institutions
providing credit enhancements are reviewed by Charles Schwab Investment
Management as a regular part of our thorough credit review procedures for all
portfolio securities and issuers.
The U.S. government, agency, or Treasury securities owned by the Schwab
Government Money Fund and the Schwab U.S. Treasury Money Fund are all considered
to be First Tier securities.
11
<PAGE> 18
GLOSSARY OF TERMS
COMMERCIAL PAPER Short-term, interest-paying obligations with maturities ranging
up to 270 days, issued by banks, corporations, and other borrowers.
CREDIT ENHANCEMENTS A bank letter of credit, purchase agreement, insurance, or
line of credit that provides an additional level of creditworthiness for debt
securities to supplement the financial strength of the issuer.
DOLLAR-WEIGHTED AVERAGE MATURITY A measure of the average maturity of a mutual
fund's entire portfolio, weighted by the value of its individual holdings.
FEDERAL FUNDS RATE A key interest rate charged by banks when lending money to
other banks overnight.
FEDERAL RESERVE The central bank of the United States that establishes policies
on bank reserves and regulations, determines the discount rate, and tightens or
loosens the availability of credit.
FIRST TIER SECURITY A security that matures within certain recognized limits and
carries the top credit rating from the requisite number of NRSROs, or if
unrated, is of equivalent credit quality.
HIGH-QUALITY SECURITY A security ranked in the highest two rating categories by
an NRSRO, or if unrated, is of equivalent credit quality.
MATURITY The length of time before which the issuer of a debt security must
repay the principal amount.
NRSRO A Nationally Recognized Statistical Rating Organization, such as Standard
& Poor's or Moody's Investor Services, which evaluates and rates the credit
quality of securities.
YIELD The rate of return, usually dividend or interest payments, on an
investment, expressed as a percentage of market price.
12
<PAGE> 19
SCHWAB MONEY MARKET FUND
- ------------------------------------------------------------------------------
PORTFOLIO SUMMARY (Unaudited)
ASSET GROWTH
<TABLE>
<CAPTION>
Total Total Percentage
Net Assets Net Assets Growth Over
as of 6/30/96 as of 12/31/95 Reporting
(000s) (000s) Period
- -------------------------------------------------
<S> <C> <C>
$15,693,126 $14,010,387 12%
- -------------------------------------------------
</TABLE>
AVERAGE YIELDS FOR THE PERIODS ENDED JUNE 30, 1996
<TABLE>
<CAPTION>
Last
Last Last Twelve
Seven Days Three Months Months
- ---------------------------------------------
<S> <C> <C>
4.82% 4.70% 4.98%
- ---------------------------------------------
</TABLE>
MATURITY SCHEDULE
PERCENT OF TOTAL INVESTMENTS
<TABLE>
<CAPTION>
Maturity Range 9/30/95 12/31/95 3/31/96 6/30/96
- -----------------------------------------------------------------
<S> <C> <C> <C> <C>
0 - 15 Days 20.1% 19.4% 27.0% 18.4%
16 - 30 Days 18.1 18.2 12.9 18.6
31 - 60 Days 25.9 26.6 22.6 34.1
61 - 90 Days 21.9 12.8 22.0 14.4
91 - 120 Days 6.2 4.9 6.9 5.0
Over 120 Days 7.8 18.1 8.6 9.5
Weighted Average 55 Days 60 Days 58 Days 57 Days
- -----------------------------------------------------------------
</TABLE>
PORTFOLIO QUALITY
<TABLE>
<CAPTION>
SEC Tier Percent of Net Assets
Rating 6/30/96
- ----------------------------------
<S> <C>
Tier 1 100.00%
Tier 2 0.00
- ----------------------------------
</TABLE>
13
<PAGE> 20
SCHWAB GOVERNMENT MONEY FUND
- ------------------------------------------------------------------------------
PORTFOLIO SUMMARY (Unaudited)
ASSET GROWTH
<TABLE>
<CAPTION>
Total Total Percentage
Net Assets Net Assets Growth Over
as of 6/30/96 as of 12/31/95 Reporting
(000s) (000s) Period
- ---------------------------------------------
<S> <C> <C>
$1,928,362 $1,884,569 2%
- ---------------------------------------------
</TABLE>
AVERAGE YIELDS FOR THE PERIODS ENDED JUNE 30, 1996
<TABLE>
<CAPTION>
Last
Last Last Twelve
Seven Days Three Months Months
- ---------------------------------------------
<S> <C> <C>
4.69% 4.66% 4.92%
- ---------------------------------------------
</TABLE>
MATURITY SCHEDULE
PERCENT OF TOTAL INVESTMENTS
<TABLE>
<CAPTION>
Maturity Range 9/30/95 12/31/95 3/31/96 6/30/96
- -----------------------------------------------------------------
<S> <C> <C> <C> <C>
0 - 15 Days 57.6% 64.1% 54.8% 53.3%
16 - 30 Days 8.8 3.9 5.3 0.6
31 - 60 Days 6.4 5.6 4.6 7.1
61 - 90 Days 8.0 7.7 10.3 17.7
91 - 120 Days 1.5 0.8 3.6 3.3
Over 120 Days 17.7 17.9 21.4 18.0
Weighted Average 58 Days 55 Days 65 Days 62 Days
- -----------------------------------------------------------------
</TABLE>
14
<PAGE> 21
SCHWAB U.S. TREASURY MONEY FUND
- ------------------------------------------------------------------------------
PORTFOLIO SUMMARY (Unaudited)
ASSET GROWTH
<TABLE>
<CAPTION>
Total Total Percentage
Net Assets Net Assets Growth Over
as of 6/30/96 as of 12/31/95 Reporting
(000s) (000s) Period
- -----------------------------------------------------
<S> <C> <C>
$1,224,790 $1,193,689 3%
- -----------------------------------------------------
</TABLE>
AVERAGE YIELDS FOR THE PERIODS ENDED JUNE 30, 1996
<TABLE>
<CAPTION>
Last Last Last
Seven Days Three Months Twelve Months
- --------------------------------------------------
<S> <C> <C>
4.58% 4.56% 4.83%
- --------------------------------------------------
</TABLE>
MATURITY SCHEDULE
PERCENT OF TOTAL INVESTMENTS
<TABLE>
<CAPTION>
Maturity Range 9/30/95 12/31/95 3/31/96 6/30/96
- -----------------------------------------------------------------
<S> <C> <C> <C> <C>
0 - 15 Days 12.5% 10.0% 1.8% 6.4%
16 - 30 Days 11.3 2.7 30.9 0.2
31 - 60 Days 36.5 45.1 26.9 39.9
61 - 90 Days 6.9 11.1 8.7 19.7
91 - 120 Days 6.0 5.1 4.1 13.5
Over 120 Days 26.8 26.0 27.6 20.3
Weighted Average 72 Days 80 Days 77 Days 81 Days
- -----------------------------------------------------------------
</TABLE>
15
<PAGE> 22
SCHWAB MONEY MARKET FUND
- ------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (in thousands)
June 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
Par Value
-------- -----------
<S> <C> <C>
CORPORATE OBLIGATIONS--61.5%(a)
ASSET BACKED SECURITIES--16.5%
Alamo Funding, LP
5.46%, 08/13/96 $ 40,250 $ 39,990
Alpha Finance Corp.
5.36%, 08/15/96 10,000 9,934
Alpine Securitization Corp.
5.37%, 07/02/96 36,226 36,221
Apreco, Inc.
5.39%, 07/16/96 21,300 21,253
5.40%, 07/19/96 18,500 18,451
Asset Securitization Cooperative Corp.
5.37%, 08/15/96 25,000 24,834
5.44%, 08/27/96 12,500 12,393
5.50%, 09/30/96 110,000 108,493
Barton Capital Corp.
5.46%, 08/16/96 38,319 38,054
Beta Finance, Inc.
5.43%, 07/15/96 74,000 73,846
5.40%, 07/15/96 30,000 29,938
5.39%, 07/18/96 30,000 29,925
5.09%, 07/19/96 10,000 9,975
5.51%, 09/13/96 20,000 19,777
CXC Inc.
5.38%, 07/03/96 54,600 54,584
5.36%, 07/12/96 20,000 19,968
5.39%, 07/15/96 15,000 14,969
5.37%, 07/16/96 25,000 24,945
5.39%, 07/17/96 25,000 24,941
5.37%, 07/18/96 30,800 30,723
5.50%, 09/09/96 23,000 22,757
5.53%, 09/10/96 15,000 14,839
5.53%, 09/16/96 35,000 34,592
5.50%, 09/18/96 25,000 24,703
5.49%, 09/19/96 35,000 34,578
5.51%, 09/27/96 16,000 15,788
Ciesco, LP
5.37%, 07/19/96 16,800 16,755
Corporate Asset Funding Corp.
5.37%, 07/25/96 15,000 14,947
5.36%, 08/26/96 44,900 44,531
</TABLE>
16
<PAGE> 23
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
-------- -----------
<S> <C> <C>
Corporate Receivables Corp.
5.39%, 07/12/96 $30,000 $29,951
5.36%, 07/12/96 48,800 48,721
5.39%, 07/15/96 10,000 9,979
5.37%, 07/17/96 41,000 40,904
5.35%, 07/30/96 40,000 39,830
5.35%, 08/01/96 24,000 23,891
5.35%, 08/02/96 18,000 17,915
5.37%, 08/13/96 60,000 59,620
5.36%, 08/14/96 25,000 24,838
5.36%, 08/15/96 25,000 24,835
5.36%, 08/26/96 34,300 34,018
5.37%, 09/03/96 25,000 24,765
5.50%, 09/12/96 19,000 18,791
5.50%, 09/13/96 13,400 13,251
5.50%, 09/17/96 25,000 24,706
ESC Securitization, Inc.
5.50%, 09/18/96 50,000 49,405
5.52%, 10/01/96 20,000 19,722
5.51%, 10/03/96 20,000 19,716
Enterprise Funding Corp.
5.42%, 07/01/96 24,029 24,029
5.37%, 07/01/96 11,863 11,863
5.41%, 07/08/96 10,192 10,181
5.38%, 07/18/96 17,085 17,042
5.35%, 07/23/96 50,000 49,838
5.44%, 08/02/96 17,009 16,927
5.43%, 08/02/96 25,000 24,880
5.40%, 08/08/96 25,898 25,752
5.37%, 08/12/96 12,668 12,590
5.38%, 08/13/96 14,336 14,245
5.37%, 08/15/96 15,194 15,093
5.37%, 08/29/96 50,000 49,566
5.43%, 09/09/96 25,000 24,740
5.53%, 10/01/96 21,000 20,708
Eureka Securitization, Inc.
5.39%, 07/17/96 50,000 49,882
5.47%, 08/15/96 17,000 16,885
5.52%, 09/19/96 30,000 29,637
5.51%, 09/24/96 15,000 14,808
5.52%, 09/27/96 29,000 28,614
Falcon Asset Securitization Corp.
5.43%, 07/11/96 26,300 26,261
First Deposit Master Trust Series 1993-3
5.47%, 08/12/96 15,000 14,905
</TABLE>
17
<PAGE> 24
SCHWAB MONEY MARKET FUND
- ------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (in thousands)
June 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
Par Value
-------- -----------
<S> <C> <C>
McKenna Triangle National Corp.
5.39%, 08/12/96 $35,000 $ 34,783
5.40%, 08/14/96 25,000 24,837
5.37%, 08/15/96 50,000 49,669
5.37%, 08/16/96 25,000 24,831
5.48%, 09/26/96 25,000 24,674
New Center Asset Trust
5.44%, 07/10/96 50,000 49,933
5.44%, 07/11/96 46,000 45,932
Preferred Receivables Funding Corp.
5.40%, 08/07/96 48,925 48,657
Ranger Funding Corp.
5.43%, 07/12/96 17,000 16,972
5.40%, 07/16/96 11,000 10,976
5.43%, 07/18/96 10,000 9,975
5.52%, 09/10/96 10,000 9,893
5.50%, 09/11/96 15,000 14,837
Receivables Capital Corp.
5.40%, 08/05/96 10,345 10,291
5.45%, 08/14/96 35,305 35,072
5.50%, 09/13/96 50,523 49,959
5.51%, 09/16/96 13,359 13,204
5.51%, 09/25/96 10,375 10,241
Salts (II) Cayman Islands Corp.
5.76%, 09/20/96 25,000 25,000
Stellar Capital Corp.
5.50%, 07/15/96 35,488 35,413
5.61%, 09/09/96 20,284 20,066
WCP Funding, Inc.
5.45%, 08/15/96 24,800 24,633
5.46%, 08/21/96 30,000 29,771
5.51%, 09/12/96 20,100 19,879
Windmill Funding
5.41%, 07/19/96 55,818 55,669
---------
2,585,175
---------
AUTOMOTIVE--6.9%
Chrysler Financial Corp.
5.50%, 08/27/96 25,000 24,784
5.50%, 08/29/96 25,000 24,777
Ford Credit Europe PLC
5.37%, 07/18/96 23,000 22,942
5.38%, 07/19/96 24,000 23,936
5.36%, 07/24/96 15,900 15,846
5.36%, 07/25/96 45,000 44,841
5.36%, 07/26/96 57,800 57,588
5.35%, 08/01/96 36,000 35,836
</TABLE>
18
<PAGE> 25
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
-------- -----------
<S> <C> <C>
Ford Motor Credit
5.36%, 07/22/96 $ 38,000 $ 37,883
5.36%, 07/23/96 125,000 124,596
5.32%, 07/30/96 20,000 19,915
5.33%, 07/31/96 30,000 29,868
5.40%, 08/02/96 16,200 16,123
5.47%, 09/23/96 19,000 18,761
5.48%, 09/24/96 50,000 49,363
5.48%, 09/25/96 50,000 49,355
General Motors Acceptance Corp.
5.40%, 07/23/96 100,000 99,674
5.41%, 07/30/96 70,000 69,699
5.49%, 08/12/96 35,000 34,780
5.45%, 09/13/96 55,000 54,395
5.69%, 12/04/96 21,000 20,497
5.77%, 12/19/96 90,000 87,602
5.74%, 12/20/96 20,000 19,467
Hertz Corp.
5.36%, 07/22/96 40,000 39,877
Renault Credit International SA Banque
5.44%, 08/12/96 23,200 23,055
5.56%, 09/06/96 31,000 30,684
---------
1,076,144
---------
BANKING--AUSTRALIA--0.2%
Westpac Capital Corp.
5.16%, 08/30/96 25,000 24,790
---------
BANKING--BELGIUM--0.7%
Cregem North America, Inc.
5.37%, 07/03/96 30,000 29,991
5.12%, 08/23/96 25,000 24,817
Generale Bank, Inc.
5.33%, 07/03/96 22,000 21,994
5.37%, 08/09/96 17,000 16,902
5.40%, 08/29/96 15,000 14,869
---------
108,573
---------
BANKING--CANADA--0.4%
Toronto-Dominion Holdings
5.51%, 07/10/96 60,000 59,920
---------
BANKING--DENMARK--0.3%
Den Danske Corp.
5.46%, 08/20/96 12,000 11,910
Unifunding, Inc.
5.40%, 07/10/96 14,000 13,981
5.36%, 07/30/96 29,000 28,876
---------
54,767
---------
</TABLE>
19
<PAGE> 26
SCHWAB MONEY MARKET FUND
- ------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (in thousands)
June 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
Par Value
-------- -----------
<S> <C> <C>
BANKING--DOMESTIC--5.6%
Bankers Trust New York Corp.
5.37%, 07/03/96 $ 50,000 $ 49,985
5.42%, 07/10/96 20,000 19,973
5.37%, 07/24/96 45,000 44,848
5.37%, 07/26/96 50,000 49,816
5.48%, 10/30/96 119,000 116,868
5.70%, 12/18/96 11,000 10,712
5.70%, 12/20/96 73,000 71,064
Chase Manhattan Corp.
5.37%, 08/16/96 24,000 23,837
5.38%, 08/21/96 45,000 44,662
5.51%, 10/07/96 10,000 9,852
5.51%, 10/08/96 100,000 98,507
5.50%, 11/01/96 50,000 49,086
Fleet Financial Group, Inc.
5.40%, 07/25/96 56,000 55,801
5.41%, 08/01/96 20,000 19,908
NationsBank Corp.
5.42%, 07/19/96 50,000 49,867
5.38%, 08/02/96 50,000 49,764
5.36%, 08/05/96 37,000 36,810
5.48%, 10/08/96 50,000 49,261
5.47%, 11/18/96 25,000 24,483
-------
875,104
-------
BANKING--FRANCE--0.2%
Societe Generale, N.A.
5.07%, 08/20/96 25,000 24,828
-------
BANKING--GERMANY--0.1%
Banco Boavista S.A./(Bayerische Vereinsbank LOC)
5.42%, 07/10/96 10,000 9,987
-------
BANKING--ITALY--0.2%
Cariplo Finance, Inc.
5.39%, 07/18/96 25,000 24,937
-------
BANKING--JAPAN--0.4%
Ridge Capital II/(Dai-Ichi Kangyo Bank LOC)
5.51%, 07/17/96 20,000 19,951
5.51%, 07/19/96 20,000 19,945
5.61%, 09/24/96 17,000 16,778
-------
56,674
-------
</TABLE>
20
<PAGE> 27
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
-------- -----------
<S> <C> <C>
BANKING--SWEDEN--1.7%
Svenska Handelsbanken Inc.
5.36%, 07/22/96 $ 70,000 $ 69,784
5.36%, 07/24/96 50,000 49,831
5.38%, 07/29/96 72,000 71,703
5.38%, 07/31/96 30,000 29,867
5.35%, 08/30/96 50,000 49,560
-------
270,745
-------
BANKING--UNITED KINGDOM--1.1%
Banco Nacional de Mexico S.A./
(Barclays Bank LOC)
5.40%, 08/06/96 20,000 19,894
5.61%, 10/31/96 20,000 19,627
Cheltenham & Gloucester PLC
5.38%, 08/09/96 30,000 29,828
5.48%, 09/24/96 50,000 49,363
Woolwich Equitable Building Society
5.36%, 07/08/96 50,000 49,949
-------
168,661
-------
COMPUTER AND OFFICE EQUIPMENT--0.2%
CSC Enterprises
5.41%, 08/21/96 25,000 24,811
5.53%, 09/23/96 9,000 8,886
-------
33,697
-------
ELECTRICAL AND ELECTRONICS--0.1%
Panasonic Finance, Inc.
5.37%, 08/12/96 10,000 9,938
-------
FINANCE--COMMERCIAL--10.3%
CIT Group Holdings, Inc.
5.39%, 07/18/96 60,000 59,849
5.36%, 07/24/96 50,000 49,831
5.36%, 07/25/96 33,000 32,884
5.40%, 08/07/96 100,000 99,452
5.43%, 08/15/96 13,000 12,913
5.45%, 08/23/96 20,000 19,841
5.45%, 08/26/96 80,000 79,329
5.44%, 08/28/96 33,000 32,714
5.44%, 08/29/96 33,000 32,709
</TABLE>
21
<PAGE> 28
SCHWAB MONEY MARKET FUND
- ------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (in thousands)
June 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
Par Value
-------- -----------
<S> <C> <C>
General Electric Capital Corp.
5.38%, 07/02/96 $73,000 $ 72,989
5.03%, 07/18/96 23,000 22,947
5.53%, 07/26/96 50,000 49,815
5.37%, 08/19/96 76,000 75,453
5.43%, 08/20/96 20,000 19,851
5.37%, 08/20/96 40,000 39,706
5.43%, 08/21/96 30,000 29,772
5.43%, 08/23/96 20,000 19,842
5.43%, 08/27/96 26,000 25,779
5.48%, 09/25/96 50,000 49,355
5.48%, 09/26/96 50,000 49,348
5.48%, 09/27/96 40,000 39,472
General Electric Capital Services
5.38%, 07/01/96 50,000 50,000
5.03%, 07/18/96 50,000 49,884
5.38%, 08/02/96 50,000 49,764
5.38%, 08/05/96 50,000 49,742
5.38%, 08/06/96 50,000 49,735
5.41%, 08/09/96 30,000 29,825
5.39%, 08/13/96 50,000 49,683
5.37%, 08/14/96 30,000 29,806
5.43%, 08/27/96 25,000 24,787
5.43%, 08/28/96 80,000 79,308
5.43%, 08/29/96 50,000 49,560
Heller Financial Inc.
5.48%, 07/29/96 20,000 19,916
5.48%, 07/30/96 38,000 37,835
5.48%, 07/31/96 28,000 27,874
5.48%, 08/02/96 20,000 19,904
5.63%, 10/21/96 52,000 51,107
USL Capital Corp.
5.33%, 07/12/96 32,000 31,948
---------
1,614,529
---------
FINANCE--CONSUMER--5.8%
Associates Corp. of North America
5.37%, 07/09/96 28,000 27,967
5.36%, 07/09/96 50,000 49,941
5.37%, 07/10/96 34,000 33,955
5.36%, 07/11/96 50,000 49,926
5.33%, 07/31/96 50,000 49,780
5.38%, 08/05/96 50,000 49,742
5.43%, 08/15/96 73,000 72,509
5.45%, 08/20/96 20,000 19,850
5.13%, 08/22/96 40,000 39,711
5.45%, 08/23/96 18,000 17,857
5.13%, 08/23/96 41,000 40,698
</TABLE>
22
<PAGE> 29
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
-------- -----------
<S> <C> <C>
5.46%, 08/27/96 $ 82,000 $ 81,299
5.36%, 08/28/96 100,000 99,148
5.50%, 10/02/96 50,000 49,300
5.50%, 10/03/96 50,000 49,292
Sears Roebuck Acceptance Corp.
5.46%, 07/12/96 35,000 34,942
5.40%, 07/30/96 44,000 43,811
5.47%, 08/27/96 50,000 49,572
5.47%, 08/28/96 50,000 49,564
-------
908,864
-------
FOOD PROCESSING--0.8%
Philip Morris Capital Corp.
5.38%, 08/06/96 43,200 42,971
Philip Morris Companies, Inc.
5.38%, 08/07/96 34,000 33,814
5.37%, 08/14/96 50,000 49,676
-------
126,461
-------
MINING AND MINERAL RESOURCES--0.1%
BHP Finance (U.S.A.), Inc.
5.36%, 07/16/96 22,800 22,750
-------
MORTGAGE BANKING--0.8%
Countrywide Home Loans, Inc.
5.41%, 07/22/96 30,000 29,906
5.41%, 07/24/96 47,000 46,839
5.46%, 08/22/96 57,600 57,150
-------
133,895
-------
PAPER AND WOOD PRODUCTS--0.2%
Rexam PLC
5.40%, 08/06/96 27,250 27,104
-------
PHARMACEUTICALS--0.5%
American Home Products Corp.
5.38%, 08/09/96 20,000 19,885
5.47%, 08/27/96 14,690 14,564
Glaxo Wellcome PLC
5.37%, 07/24/96 12,000 11,959
5.37%, 08/14/96 15,000 14,903
Whitehall Robins Co.
5.37%, 07/29/96 27,000 26,888
-------
88,199
-------
SECURITIES BROKERAGE-DEALER--8.2%
BT Securities Corp.
5.40%, 07/29/96 25,000 24,897
5.40%, 08/02/96 16,000 15,924
5.38%, 08/14/96 20,000 19,870
</TABLE>
23
<PAGE> 30
SCHWAB MONEY MARKET FUND
- ------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (in thousands)
June 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
Par Value
-------- -----------
<S> <C> <C>
Bear Stearns Companies, Inc.
5.38%, 07/17/96 $ 70,000 $ 69,835
Goldman Sachs Group, LP
5.38%, 07/24/96 27,000 26,908
5.38%, 07/26/96 25,000 24,907
5.39%, 08/12/96 50,000 49,689
5.39%, 08/13/96 50,000 49,682
5.39%, 08/16/96 21,000 20,857
5.35%, 08/21/96 152,000 150,863
5.35%, 08/23/96 75,000 74,417
5.48%, 10/15/96 93,000 91,530
Lehman Brothers Holdings, Inc.
5.42%, 07/25/96 50,000 49,822
5.42%, 07/31/96 88,000 87,608
5.44%, 08/02/96 13,000 12,938
5.50%, 10/28/96 50,000 49,116
5.66%, 12/02/96 27,000 26,365
5.72%, 12/16/96 109,000 106,172
5.71%, 12/17/96 33,000 32,140
Morgan Stanley Group, Inc.
5.38%, 07/30/96 22,000 21,906
5.39%, 08/01/96 25,000 24,885
5.43%, 08/09/96 28,000 27,838
Nomura Holdings America, Inc.
5.36%, 07/15/96 11,000 10,977
5.40%, 08/15/96 16,000 15,893
5.51%, 08/19/96 25,000 24,815
5.51%, 09/10/96 25,000 24,731
PaineWebber Group, Inc.
5.43%, 07/02/96 18,000 17,997
5.51%, 08/29/96 45,000 44,598
Salomon, Inc.
5.65%, 07/01/96 18,850 18,850
5.62%, 08/16/96 79,000 78,441
---------
1,294,471
---------
STUDENT LOANS--0.1%
Student Loan Corp.
5.36%, 07/25/96 15,000 14,947
---------
WASTE MANAGEMENT--0.1%
WMX Technologies, Inc.
5.51%, 09/04/96 10,000 9,906
---------
TOTAL CORPORATE OBLIGATIONS
(Cost $9,625,066) 9,625,066
---------
</TABLE>
24
<PAGE> 31
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
-------- -----------
<S> <C> <C>
VARIABLE RATE OBLIGATIONS--6.1%(b)
ASSET BACKED SECURITIES--0.7%
Short Term Credit Card Account Trust 1995-1
Floating Rate Asset Backed Notes, Class A-1
5.51%, 07/15/96 $100,000 $100,000
-------
BANKING--DOMESTIC--0.5%
6700 Cherry Avenue Partners Variable Rate Demand
Bonds Series 1993/(Wells Fargo Bank LOC)
5.75%, 07/07/96 10,500 10,500
Bankers Trust New York Corp.
5.75%, 07/01/96 40,000 40,000
FCC National Bank
5.34%, 07/01/96 25,000 24,996
-------
75,496
-------
BANKING--FRANCE--0.2%
New Jersey Economic Development Authority Taxable
Adjustable Rate Money Market Securities (GE
Aerospace Camden Development Project) Series A/
(Banque Nationale de Paris LOC)
5.48%, 07/07/96 27,200 27,200
New Jersey Economic Development Authority Taxable
Adjustable Rate Money Market Securities (GE
Aerospace Camden Development Project) Series B/
(Banque Nationale de Paris LOC)
5.48%, 07/07/96 10,000 10,000
-------
37,200
-------
BANKING--GERMANY--0.2%
General Obligation Refunding Bonds of the County of
Hudson (State of New Jersey) (Variable Rate Demand
Obligations) Taxable Series 1995/(Landesbank
Hessen-Thuringen Girozentrale LOC)
5.60%, 07/07/96 22,540 22,540
-------
BANKING--JAPAN--0.1%
Baldwin Park Redevelopment Agency 1993 Refunding
Revenue Bonds (Baldwin Park Hotel Project)/
(Sumitomo Bank LOC)
5.64%, 07/09/96 14,500 14,500
Town of Islip Industrial Development Agency 1992
Taxable Adjustable Rate Industrial Development
Revenue Bonds (Nussdorf Associates/Quality King
Distributors, Inc. Facility)/(Bank of
Tokyo-Mitsubishi LOC)
5.72%, 07/07/96 6,275 6,275
-------
20,775
-------
</TABLE>
25
<PAGE> 32
SCHWAB MONEY MARKET FUND
- ------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (in thousands)
June 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
Par Value
-------- -----------
<S> <C> <C>
BANKING--NETHERLANDS--0.2%
New Jersey Economic Development Authority Adjustable
Rate Lease Revenue Taxable Bonds (Barnes & Noble,
Inc. Distribution & Freight Consolidation Center
Project) Series 1995A /(Rabobank Nederland LOC)
5.48%, 07/07/96 $ 21,700 $ 21,700
New Jersey Economic Development Authority Adjustable
Rate Lease Revenue Taxable Bonds (Barnes & Noble,
Inc. Distribution & Freight Consolidation Center
Project) Series 1995B/(Rabobank Nederland LOC)
5.48%, 07/07/96 10,000 10,000
-------
31,700
-------
EDUCATION--0.2%
Development Authority of Dekalb County Taxable
Variable Rate Revenue Bonds (Emory University
Project) Series 1995B
5.60%, 07/07/96 36,415 36,415
-------
FINANCE--COMMERCIAL--0.2%
Heller Financial Inc.
5.38%, 07/01/96 30,000 29,999
-------
INSURANCE--0.7%
Commonwealth Life Insurance Co.
5.58%, 07/01/96 100,000 100,000
-------
MONOLINE INSURANCE--0.2%
Baptist Health Systems of South Florida, Inc.
Taxable Variable Rate Direct Note Obligations
Series 1995A / (MBIA Insurance)
5.60%, 07/07/96 13,000 13,000
Baptist Health Systems of South Florida, Inc.
Taxable Variable Rate Direct Note Obligations
Series 1995B/(MBIA Insurance)
5.60%, 07/07/96 19,000 19,000
New Orleans Aviation Board Taxable Refunding Bonds
Series 1993A /(MBIA Insurance)
5.66%, 07/07/96 3,800 3,800
-------
35,800
-------
SECURITIES BROKERAGE-DEALER--2.9%
Bear Stearns Companies, Inc.
5.49%, 07/05/96 175,000 175,000
5.51%, 07/08/96 50,000 50,000
5.50%, 07/08/96 35,000 35,000
5.53%, 08/01/96 100,000 100,000
Lehman Brothers Holdings, Inc.
5.49%, 07/30/96 100,000 100,000
-------
460,000
-------
TOTAL VARIABLE RATE OBLIGATIONS
(Cost $949,925) $949,925
-------
</TABLE>
26
<PAGE> 33
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
-------- -----------
<S> <C> <C>
AGENCY OBLIGATIONS--1.1%
COUPON NOTES--1.1%
Federal National Mortgage Assoc.
5.62%, 07/02/96 $ 72,000 $ 72,000
5.91%, 08/19/96 100,000 100,033
-------
TOTAL AGENCY OBLIGATIONS
(Cost $172,033) 172,033
-------
BANK NOTES--1.4%
BANKING--DOMESTIC--1.4%
FCC National Bank
5.48%, 10/07/96 107,000 107,000
First National Bank of Chicago
5.49%, 10/04/96 25,000 25,001
Mellon Bank N.A.
5.80%, 10/17/96 30,000 29,995
NationsBank N.A.
5.42%, 09/12/96 50,000 50,000
-------
TOTAL BANK NOTES
(Cost $211,996) 211,996
-------
CERTIFICATES OF DEPOSIT--26.7%
BANKING--BELGIUM--0.1%
Generale Bank SA
5.06%, 07/08/96 20,000 20,000
-------
BANKING--CANADA--2.0%
Bank of Montreal
5.51%, 09/12/96 50,000 50,000
Bank of Nova Scotia
5.03%, 07/08/96 50,000 50,000
5.15%, 09/04/96 50,000 50,003
Canadian Imperial Bank of Commerce
5.38%, 08/29/96 61,000 61,000
Royal Bank of Canada
5.07%, 07/01/96 100,000 100,000
-------
311,003
-------
BANKING--DOMESTIC--3.9%
American Express Centurion Bank
5.48%, 09/10/96 50,000 50,001
</TABLE>
27
<PAGE> 34
SCHWAB MONEY MARKET FUND
- ------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (in thousands)
June 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
Par Value
-------- -----------
<S> <C> <C>
Bankers Trust Co.
5.36%, 08/21/96 $ 50,000 $ 50,000
5.36%, 08/22/96 100,000 100,000
Chase Manhattan Bank U.S.A.
5.39%, 08/08/96 55,000 55,000
5.42%, 09/03/96 90,000 90,000
5.42%, 09/05/96 100,000 100,000
MBNA America Bank N.A.
5.50%, 07/11/96 52,000 52,000
5.45%, 07/24/96 25,000 25,000
5.45%, 08/09/96 24,000 24,000
5.56%, 09/25/96 20,000 20,000
Morgan Guaranty Trust Co. New York
5.22%, 02/28/97 50,000 49,952
-------
615,953
-------
BANKING--FRANCE--3.6%
Banque Nationale de Paris
5.35%, 08/13/96 48,000 48,001
5.04%, 08/22/96 25,000 25,000
5.47%, 09/16/96 90,000 90,034
Societe Generale
5.48%, 11/15/96 20,000 19,993
5.54%, 03/14/97 50,000 50,003
5.55%, 03/26/97 25,000 25,000
5.65%, 03/31/97 50,000 49,974
5.60%, 04/03/97 50,000 50,004
5.80%, 04/11/97 50,000 49,993
5.90%, 05/30/97 40,000 39,989
6.10%, 06/10/97 36,000 35,987
6.09%, 06/10/97 50,000 49,986
6.10%, 06/13/97 25,000 24,998
-------
558,962
-------
BANKING--GERMANY--2.1%
Bayerische Hypotheken und Wechsel Bank
5.38%, 08/07/96 50,000 50,000
5.35%, 08/07/96 15,000 15,000
Bayerische Landesbank Girozentrale
4.94%, 01/13/97 35,000 35,049
Bayerische Vereinsbank AG
5.34%, 07/05/96 95,000 95,000
5.35%, 07/09/96 47,000 47,000
5.34%, 07/09/96 50,000 50,000
Commerzbank, AG
5.18%, 02/21/97 20,000 19,989
</TABLE>
28
<PAGE> 35
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
-------- -----------
<S> <C> <C>
Landesbank Hessen-Thuringen Girozentrale
6.10%, 06/13/97 $ 25,000 $ 24,989
-------
337,027
-------
BANKING--ITALY--0.2%
Cariplo SPA
5.36%, 08/27/96 25,000 25,000
-------
BANKING--JAPAN--11.8%
Bank of Tokyo-Mitsubishi, Ltd.
5.59%, 09/23/96 75,000 75,000
Dai-Ichi Kangyo Bank, Ltd.
5.46%, 07/23/96 12,000 12,000
5.46%, 07/25/96 50,000 50,000
5.46%, 07/26/96 40,000 40,000
5.46%, 07/31/96 40,000 40,000
5.47%, 08/07/96 25,000 25,001
5.55%, 08/30/96 40,500 40,492
5.59%, 09/16/96 100,000 100,002
5.59%, 09/26/96 75,000 75,002
Industrial Bank of Japan, Ltd.
5.53%, 07/09/96 50,000 50,000
5.53%, 07/10/96 84,000 84,000
5.53%, 07/11/96 43,000 43,000
5.50%, 08/01/96 60,000 60,000
5.50%, 08/06/96 122,000 122,000
5.50%, 08/08/96 111,000 111,000
5.50%, 08/09/96 100,000 100,000
5.60%, 09/11/96 159,000 159,000
Sanwa Bank, Ltd.
5.50%, 07/15/96 87,000 87,001
Sumitomo Bank, Ltd.
5.50%, 07/03/96 50,000 50,000
5.50%, 07/08/96 25,000 25,000
5.56%, 07/09/96 54,000 54,000
5.50%, 07/16/96 61,000 61,000
5.50%, 07/17/96 62,000 62,000
5.46%, 07/23/96 34,000 33,995
5.50%, 07/29/96 50,000 49,999
5.53%, 08/05/96 35,000 34,999
5.50%, 08/08/96 85,000 85,001
5.47%, 08/19/96 20,000 20,000
5.47%, 08/30/96 50,000 50,002
5.55%, 09/03/96 50,000 49,998
---------
1,849,492
---------
</TABLE>
29
<PAGE> 36
SCHWAB MONEY MARKET FUND
- ------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (in thousands)
June 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
Par Value
-------- -----------
<S> <C> <C>
BANKING--NETHERLANDS--1.1%
ABN-AMRO Bank N.V.
5.02%, 08/20/96 $ 86,000 $ 86,001
4.95%, 02/14/97 49,000 48,981
5.55%, 03/18/97 30,000 29,994
---------
164,976
---------
BANKING--SWEDEN--0.3%
Svenska Handelsbanken
5.33%, 07/16/96 25,000 25,000
5.35%, 08/16/96 25,000 25,000
---------
50,000
---------
BANKING--UNITED KINGDOM--1.6%
Abbey National PLC
5.24%, 07/08/96 25,000 25,000
5.34%, 07/16/96 100,000 100,000
5.13%, 02/20/97 50,000 50,003
5.08%, 02/26/97 25,000 25,002
Bank of Scotland
5.34%, 07/11/96 50,000 50,000
----------
250,005
----------
TOTAL CERTIFICATES OF DEPOSIT
(Cost $4,182,418) 4,182,418
----------
MUNICIPAL TAXABLE BONDS--0.6%
BANKING--FRANCE--0.6%
City of New York General Obligation Bonds Fiscal
1995 Series F-8 / (Societe Generale LOC)
5.39%, 08/20/96 51,000 51,000
City of New York General Obligation Bonds Fiscal
1996 Series F / (Societe Generale LOC)
5.39%, 08/20/96 50,500 50,500
----------
TOTAL MUNICIPAL TAXABLE BONDS
(Cost $101,500) 101,500
----------
U.S. TREASURY OBLIGATIONS--1.4%
U.S. Treasury Notes
7.50%, 01/31/97 175,000 177,526
6.88%, 02/28/97 49,000 49,525
----------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $227,051) 227,051
----------
</TABLE>
30
<PAGE> 37
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Maturity Value
-------- -----------
<S> <C> <C>
REPURCHASE AGREEMENT--1.2% (c)
Salomon Brothers, Inc. 5.53%, Issue Date 06/28/96
Due 07/01/96; Collateralized By:
FNMA: $27,950 Par; 8.50%, Due 02/01/25
FNMA: $50,000 Par; 8.50%, Due 07/01/25
FNMA: $80,000 Par; 9.00%, Due 04/01/25
FNMA: $16,792 Par; 8.50%, Due 03/01/25
FNMA: $22,479 Par; 5.50%, Due 04/01/11
FNMA: $40,222 Par; 9.00%, Due 05/01/25
U.S. Treasury Bonds: $6,535 Par; 11.25%, Due
02/15/15
U.S. Treasury Bonds: $1,270 Par; 10.38%, Due
11/15/12 $185,085 $185,000
----------
TOTAL REPURCHASE AGREEMENT
(Cost $185,000) 185,000
----------
TOTAL INVESTMENTS--100.0%
(Cost $15,654,989) $15,654,989
==========
</TABLE>
See accompanying Notes to Schedules of Investments.
31
<PAGE> 38
SCHWAB GOVERNMENT MONEY FUND
- ------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (in thousands)
June 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
Par Value
-------- -----------
<S> <C> <C>
VARIABLE RATE OBLIGATIONS--18.3%(b)
Federal Farm Credit Bank
5.33%, 07/01/96 $ 20,000 $ 19,990
Federal Home Loan Bank
5.31%, 08/14/96 20,000 20,000
Federal Home Loan Mortgage Corp.
5.42%, 07/02/96 25,000 24,985
Student Loan Marketing Assoc.
5.69%, 07/02/96 29,010 29,016
5.64%, 07/02/96 9,165 9,176
5.62%, 07/02/96 21,675 21,687
5.59%, 07/02/96 100,330 100,309
5.56%, 07/02/96 25,000 25,005
5.45%, 07/02/96 40,000 40,000
5.43%, 07/02/96 20,000 19,955
5.41%, 07/02/96 40,000 39,943
-------
TOTAL VARIABLE RATE OBLIGATIONS
(Cost $350,066) 350,066
-------
AGENCY OBLIGATIONS--39.6%
COUPON NOTES--17.1%
Federal Farm Credit Bank
5.88%, 09/03/96 25,000 25,001
5.55%, 05/02/97 20,000 19,956
Federal Home Loan Bank
7.81%, 07/17/96 11,240 11,249
5.43%, 01/10/97 37,000 36,999
Federal National Mortgage Assoc.
5.59%, 07/01/96 13,085 13,085
5.62%, 07/02/96 25,000 25,000
8.00%, 07/10/96 19,980 19,990
5.91%, 08/19/96 25,000 25,008
5.64%, 09/09/96 30,000 29,994
5.60%, 09/20/96 20,000 19,994
5.50%, 09/23/96 10,000 9,994
5.68%, 10/07/96 40,000 39,996
5.31%, 12/11/96 15,565 15,551
5.37%, 12/18/96 20,000 19,995
Tennessee Valley Authority
6.00%, 01/15/97 15,330 15,354
-------
327,166
-------
DISCOUNT NOTES--22.5%
Federal Home Loan Bank
5.32%, 08/13/96 18,460 18,344
5.39%, 09/04/96 15,210 15,064
</TABLE>
32
<PAGE> 39
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
-------- -----------
<S> <C> <C>
Federal Home Loan Mortgage Corp.
5.31%, 08/01/96 $18,605 $ 18,521
5.41%, 09/05/96 20,000 19,804
5.41%, 09/11/96 25,000 24,733
5.42%, 09/16/96 23,755 23,484
5.41%, 09/16/96 16,000 15,817
5.40%, 09/18/96 27,000 26,684
5.40%, 09/24/96 27,610 27,263
Federal National Mortgage Assoc.
5.32%, 08/20/96 55,000 54,600
5.39%, 09/06/96 5,065 5,015
5.42%, 09/10/96 9,215 9,118
5.39%, 09/12/96 27,885 27,584
5.40%, 09/18/96 23,525 23,250
5.34%, 09/24/96 20,000 19,758
5.32%, 09/26/96 16,190 15,987
5.42%, 10/10/96 20,000 19,704
5.32%, 10/11/96 3,085 3,040
5.38%, 10/30/96 25,000 24,568
5.51%, 12/02/96 20,000 19,540
5.36%, 12/13/96 20,000 19,527
-------
431,405
-------
TOTAL AGENCY OBLIGATIONS
(Cost $758,571) 758,571
-------
U.S. TREASURY OBLIGATIONS--9.1%
U.S. Treasury Notes
8.00%, 01/15/97 25,000 25,334
7.50%, 01/31/97 71,535 72,541
6.50%, 04/30/97 40,000 40,236
6.50%, 05/15/97 35,000 35,182
-------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $173,293) 173,293
-------
<CAPTION>
Maturity
--------
<S> <C> <C>
REPURCHASE AGREEMENTS--33.0% (c)
CS First Boston Corp. 5.35%, Issue Date 05/09/96;
Last Put Date 06/30/96; Due 07/07/96; Collateralized By:
FHLMC: $62,000 Par; 6.40%, Due 03/25/23
FNMA: $2,690 Par; 7.50%, Due 09/25/20
FHLMC: $2,840 Par; 10.00%, Due 06/15/19 29,361 29,106
CS First Boston Corp. 5.40%, Issue Date 06/20/96;
Last Put Date 06/28/96; Due 07/05/96; Collateralized By:
FHLMC: $15,881 Par; 6.15%, Due 11/15/23
FHLMC: $13,395 Par; 6.70%, Due 12/15/23 27,061 27,000
</TABLE>
33
<PAGE> 40
SCHWAB GOVERNMENT MONEY FUND
- ------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (in thousands)
June 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
Maturity Value
-------- -----------
<S> <C> <C>
Donaldson, Lufkin & Jenrette Securities Corp. 5.30%
Issue Date 04/23/96; Last Put Date 06/30/96;
Due 07/07/96; Collateralized By:
FHLMC: $39,375 Par; 6.26%, Due 05/15/23
FNMA: $9,675 Par; 7.50%, Due 04/25/26 $41,121 $40,672
Donaldson, Lufkin & Jenrette Securities Corp. 5.31%
Issue Date 04/29/96; Last Put Date 06/30/96;
Due 07/07/96; Collateralized By:
FHLMC: $25,060 Par; 6.09%, Due 12/15/23
FNMA: $30,000 Par; 6.18%, Due 05/25/23
FNMA: $12,010 Par; 6.03%, Due 07/25/23 46,333 45,866
Donaldson, Lufkin & Jenrette Securities Corp. 5.31%
Issue Date 04/18/96; Last Put Date 06/30/96;
Due 07/07/96; Collateralized By:
FNMA: $50,000 Par; 6.50%, Due 11/25/17
FHLMC: $8,940 Par; 6.00%, Due 02/15/06 40,472 40,000
Donaldson, Lufkin & Jenrette Securities Corp. 5.32%
Issue Date 04/30/96; Last Put Date 06/24/96;
Due 07/01/96; Collateralized By:
FNMA: $34,045 Par; 6.75%, Due 02/25/22 34,354 34,042
Donaldson, Lufkin & Jenrette Securities Corp. 5.33%
Issue Date 04/12/96; Last Put Date 06/30/96;
Due 07/07/96; Collateralized By:
FHLMC: $25,000 Par; 6.51%, Due 02/15/21
FHLMC: $7,940 Par; 6.39%, Due 10/15/21 32,863 32,450
Donaldson, Lufkin & Jenrette Securities Corp. 5.33%
Issue Date 05/07/96; Last Put Date 06/30/96;
Due 07/07/96; Collateralized By:
FNMA: $7,800 Par; 6.75%, Due 07/25/23
FNMA: $15,260 Par; 5.92%, Due 12/25/23
FHLMC: $12,530 Par; 5.79%, Due 03/15/24 32,430 32,140
Donaldson, Lufkin & Jenrette Securities Corp. 5.33%
Issue Date 05/17/96; Last Put Date 06/30/96;
Due 07/07/96; Collateralized By:
FHLMC: $27,175 Par; 9.30%, Due 06/15/17 28,727 28,512
Donaldson, Lufkin & Jenrette Securities Corp. 5.33%
Issue Date 06/03/96; Last Put Date 06/26/96;
Due 07/03/96; Collateralized By:
FHLMC: $29,450 Par; 6.79%, Due 04/25/24 28,275 28,150
Donaldson, Lufkin & Jenrette Securities Corp. 5.35%
Issue Date 05/02/96; Last Put Date 06/30/96;
Due 07/07/96; Collateralized By:
FNMA: $10,140 Par; 5.92%, Due 07/25/23
FHLMC: $30,000 Par; 6.50%, Due 08/15/08
FHLMC: $1,005 Par; 6.38%, Due 01/15/17
FHLMC: $5,200 Par; 6.79%, Due 04/25/24 30,175 29,882
</TABLE>
34
<PAGE> 41
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Maturity Value
-------- -----------
<S> <C> <C>
Donaldson, Lufkin & Jenrette Securities Corp. 5.39%
Issue Date 06/17/96; Last Put Date 06/30/96;
Due 07/07/96; Collateralized By:
FNMA: $19,760 Par; 6.44%, Due 03/25/23
FNMA: $10,435 Par; 7.50%, Due 04/25/26 $22,533 $ 22,466
Lehman Brothers, Inc. 5.31%
Issue Date 04/25/96; Last Put Date 06/30/96;
Due 07/07/96; Collateralized By:
FNMA: $36,856 Par; 7.00%, Due 02/01/26
FNMA: $30,541 Par; 8.50%, Due 05/01/25 56,657 56,053
Lehman Brothers, Inc. 5.32%
Issue Date 05/16/96; Last Put Date 06/30/96;
Due 07/07/96; Collateralized By:
FHLMC: $13,918 Par; 7.50%, Due 07/15/22
FNMA: $18,007 Par; 6.25%, Due 08/25/19
FNMA: $18,870 Par; 6.00%, Due 08/25/22 48,297 47,929
Lehman Brothers, Inc. 5.33%
Issue Date 04/09/96; Last Put Date 06/30/96;
Due 07/07/96; Collateralized By:
FNMA: $35,205 Par; 7.00%, Due 02/01/26
FNMA: $11,662 Par; 6.50%, Due 09/25/23 43,874 43,303
Lehman Brothers, Inc. 5.36%
Issue Date 06/05/96; Last Put Date 06/30/96;
Due 07/07/96; Collateralized By:
FNMA: $41,595 Par; 6.50%, Due 07/25/23
FHLMC: $14,400 Par; 6.00%, Due 11/15/08 40,822 40,628
Lehman Brothers, Inc. 5.43%
Issue Date 06/21/96; Last Put Date 06/30/96;
Due 07/07/96; Collateralized By:
FNMA: $18,896 Par; 7.00%, Due 05/01/08
FNMA: $12,588 Par; 7.50%, Due 06/01/09
FNMA: $4,036 Par; 7.00%, Due 03/25/24 25,267 25,206
Nomura Securities International 5.41%
Issue Date 06/24/96; Due 07/08/96;
Collateralized By:
FHLMC: $22,700 Par; 8.50%, Due 08/15/21
FHLMC: $8,010 Par; 6.50%, Due 06/01/99 28,991 28,930
---------
TOTAL REPURCHASE AGREEMENTS
(Cost $632,335) 632,335
---------
TOTAL INVESTMENTS--100.0%
(Cost $1,914,265) $1,914,265
==========
</TABLE>
See accompanying Notes to Schedules of Investments.
35
<PAGE> 42
SCHWAB U. S. TREASURY MONEY FUND
- ------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (in thousands)
June 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
Par Value
-------- -----------
<S> <C> <C>
U.S. TREASURY OBLIGATIONS--100.0%
U.S. Treasury Bills
5.03%-5.05%, 07/25/96 $ 2,565 $ 2,556
5.04%, 08/01/96 100 100
4.91%, 08/08/96 90 90
5.06%, 08/15/96 8,995 8,939
5.04%-5.09%, 08/22/96 56,825 56,415
5.10%, 08/29/96 150,000 148,759
5.11%-5.17%, 09/05/96 25,645 25,406
5.10%-5.13%, 09/12/96 40,130 39,720
5.18%-5.19%, 09/19/96 45,925 45,402
5.28%, 11/07/96 3,420 3,357
U.S. Treasury Notes
7.88%, 07/15/96 77,255 77,330
6.13%-7.88%, 07/31/96 157,585 157,866
4.38%, 08/15/96 110,000 109,895
6.25%-7.25%, 08/31/96 127,305 127,479
6.50%-7.00%, 09/30/96 112,315 112,674
8.00%, 10/15/96 50,000 50,370
6.88%, 10/31/96 63,000 63,301
7.25%, 11/15/96 15,000 15,093
7.25%, 11/30/96 82,855 83,445
6.88%, 02/28/97 70,000 70,586
6.63%, 03/31/97 10,000 10,102
---------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $1,208,885) 1,208,885
---------
TOTAL INVESTMENTS--100.0%
(Cost $1,208,885) $1,208,885
==========
</TABLE>
See accompanying Notes to Schedules of Investments.
36
<PAGE> 43
- ------------------------------------------------------------------------------
NOTES TO SCHEDULES OF INVESTMENTS
June 30, 1996 (Unaudited)
Yields shown are effective yields at the time of purchase, except for variable
rate securities which are described below and Treasury and Agency coupon notes
which reflect the coupon rate of the security. Yields for each type of security
are stated according to the market convention for that security type. For each
security, cost (for financial reporting and federal income tax purposes) and
carrying value are the same.
(a) Certain securities purchased by the Schwab Money Market Fund are private
placement securities exempt from registration by Section 4(2) of the
Securities Act of 1933. These securities generally are sold to institutional
investors, such as the Schwab Money Market Fund. Any resale by the Fund must
be in an exempt transaction, normally to a qualified institutional buyer. At
June 30, 1996, the aggregate value of private placement securities held by
the Schwab Money Market Fund was $2,815,932,000 which represented 17.94% of
net assets. Of this total, $2,615,932,000 or 16.67% of net assets, was
determined by the Investment Manager to be liquid in accordance with a
resolution adopted by the Board of Trustees relating to Rule 144A,
promulgated under the Securities Act of 1933.
(b) Variable rate securities. Interest rates vary periodically based on current
market rates. Rates shown are the effective rates on June 30, 1996. Dates
shown represent the latter of the demand date or next interest rate change
date, which is considered the maturity date for financial reporting
purposes. For variable rate securities without demand features, the next
interest reset date is shown.
(c) Due dates shown for repurchase agreements represent either the final
maturity date or put date, which is considered the maturity date for
financial reporting purposes.
<TABLE>
<CAPTION>
Abbreviations
----------------------------------------------------------
<S> <C>
FHLMC Federal Home Loan Mortgage Corporation
FNMA Federal National Mortgage Association
LOC Letter of Credit
MBIA Municipal Bond Investors Assurance Corporation
</TABLE>
See accompanying Notes to Financial Statements.
37
<PAGE> 44
- ------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES (in thousands)
June 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
Schwab Schwab Schwab
Money Government U.S. Treasury
Market Money Money
Fund Fund Fund
----------- ---------- -------------
<S> <C> <C> <C>
ASSETS
Investments, at value (Cost:
$15,654,989, $1,914,265 and
$1,208,885, respectively) $15,654,989 $1,914,265 $ 1,208,885
Cash 1 4 4
Interest receivable 68,873 17,785 18,119
Deferred organization costs -- -- 4
Prepaid expenses 500 74 36
----------- ---------- ----------
Total assets 15,724,363 1,932,128 1,227,048
----------- ---------- ----------
LIABILITIES
Payable for:
Dividends 27,404 3,290 2,018
Investment advisory and
administration fee 930 114 47
Transfer agency and
shareholder service fees 1,388 169 107
Other 1,515 193 86
----------- ---------- ----------
Total liabilities 31,237 3,766 2,258
----------- ---------- ----------
Net assets applicable to
outstanding shares $15,693,126 $1,928,362 $ 1,224,790
=========== ========== ==========
NET ASSETS CONSIST OF:
Capital paid in $15,693,476 $1,928,682 $ 1,225,002
Accumulated net realized
loss on investments sold (350) (320) (212)
----------- ---------- ----------
$15,693,126 $1,928,362 $ 1,224,790
=========== ========== ==========
PRICING OF SHARES
Outstanding shares,
$0.00001 par value
(unlimited shares
authorized) 15,693,476 1,928,682 1,225,002
Net asset value, offering
and redemption price per
share $1.00 $1.00 $1.00
</TABLE>
See accompanying Notes to Financial Statements.
38
<PAGE> 45
- ------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS (in thousands)
Six months ended June 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
Schwab Schwab Schwab
Money Government U.S. Treasury
Market Money Money
Fund Fund Fund
-------- ---------- -------------
<S> <C> <C> <C>
Interest income $411,940 $52,405 $32,237
-------- ------- -------
Expenses:
Investment advisory and
administration fee 30,671 4,176 2,748
Transfer agency and
shareholder service fees 33,554 4,310 2,744
Custodian fees 505 132 108
Registration fees 793 54 70
Professional fees 146 25 14
Shareholder reports 515 77 38
Trustees' fees 40 6 3
Amortization of deferred
organization costs -- -- 7
Insurance and other expenses 173 25 12
-------- ------- -------
66,397 8,805 5,744
Less expenses reduced (10,473) (1,621) (1,782)
-------- ------- -------
Total expenses incurred
by Fund 55,924 7,184 3,962
-------- ------- -------
Net investment income 356,016 45,221 28,275
Net realized gain (loss) on
investments sold -- (51) (80)
-------- ------- -------
Increase in net assets
resulting from operations $356,016 $45,170 $28,195
======== ======= =======
</TABLE>
See accompanying Notes to Financial Statements.
39
<PAGE> 46
- ------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS (in thousands)
<TABLE>
<CAPTION>
Schwab Money Schwab Government Schwab U.S. Treasury
Market Fund Money Fund Money Fund
-------------------------- ------------------------- -------------------------
Six months Six months Six months
ended Year ended Year ended Year
June 30, ended June 30, ended June 30, ended
1996 December 31, 1996 December 31, 1996 December 31,
(Unaudited) 1995 (Unaudited) 1995 (Unaudited) 1995
------------ ------------ ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Operations:
Net investment income $ 356,016 $ 666,138 $ 45,221 $ 98,873 $ 28,275 $ 51,132
Net realized gain (loss)
on investments sold -- 4 (51) (162) (80) (60)
------------ ----------- ----------- ----------- ----------- -----------
Increase in net assets
resulting from
operations 356,016 666,142 45,170 98,711 28,195 51,072
------------ ----------- ----------- ----------- ----------- -----------
Dividends to
shareholders from
net investment income (356,016) (666,138) (45,221) (98,873) (28,275) (51,132)
------------ ----------- ----------- ----------- ----------- -----------
Capital share transactions
(at $1.00 per share):
Proceeds from
shares sold 24,667,723 35,277,474 2,410,680 4,120,476 1,804,674 2,979,266
Net asset value of
shares issued in
reinvestment of
dividends 409,893 630,347 53,185 95,940 31,910 46,352
Less payments for
shares redeemed (23,394,877) (33,124,743) (2,420,021) (4,229,013) (1,805,403) (2,635,740)
------------ ----------- ----------- ----------- ----------- -----------
Increase (decrease)
in net assets from
capital share
transactions 1,682,739 2,783,078 43,844 (12,597) 31,181 389,878
------------ ----------- ----------- ----------- ----------- -----------
Total increase (decrease)
in net assets 1,682,739 2,783,082 43,793 (12,759) 31,101 389,818
Net assets:
Beginning of period 14,010,387 11,227,305 1,884,569 1,897,328 1,193,689 803,871
------------ ----------- ----------- ----------- ----------- -----------
End of period $ 15,693,126 $ 14,010,387 $ 1,928,362 $ 1,884,569 $ 1,224,790 $ 1,193,689
------------ ----------- ----------- ----------- ----------- -----------
</TABLE>
See accompanying Notes to Financial Statements.
40
<PAGE> 47
- ------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
Six months ended June 30, 1996 (Unaudited)
1. DESCRIPTION OF THE FUNDS
The Schwab Money Market Fund, the Schwab Government Money Fund and the Schwab
U.S. Treasury Money Fund (the "Funds") are series of The Charles Schwab Family
of Funds (the "Trust"), a no-load, open-end investment management company
organized as a Massachusetts business trust on October 20, 1989 and registered
under the Investment Company Act of 1940, as amended.
In addition to the three funds described above, the Trust also offers -- the
Schwab Tax-Exempt Money Fund (Sweep and Value Advantage Shares), Schwab
California Tax-Exempt Money Fund (Sweep and Value Advantage Shares), Schwab New
York Tax-Exempt Money Fund (Sweep and Value Advantage Shares), Schwab Value
Advantage Money Fund(R), Schwab Institutional Advantage Money Fund(R) and Schwab
Retirement Money Fund(R). The assets of each series are segregated and accounted
for separately.
The Schwab Money Market Fund invests primarily in a diversified portfolio of
short-term obligations of major banks and corporations. The Schwab Government
Money Fund invests exclusively in a diversified portfolio of obligations issued
or guaranteed by the U.S. Government, its agencies or instrumentalities and
repurchase agreements thereon. The Schwab U.S. Treasury Money Fund invests
solely in United States Treasury notes, bills and other direct obligations of
the United States Treasury, backed by the full faith and credit of the United
States Government.
2. SIGNIFICANT ACCOUNTING POLICIES
The following significant accounting policies are in conformity with generally
accepted accounting principles for investment companies. The preparation of
financial statements in accordance with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could differ
from those estimates.
Security valuation -- Investments are stated at amortized cost which
approximates market value.
41
<PAGE> 48
- ------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
Six months ended June 30, 1996 (Unaudited)
Security transactions and interest income -- Security transactions are accounted
for on a trade date basis (date the order to buy or sell is executed). Interest
income is recorded on the accrual basis and includes amortization of premium and
accretion of discount on investments. Realized gains and losses from security
transactions are determined on an identified cost basis.
Repurchase agreements -- Repurchase agreements are fully collateralized by U.S.
Treasury or government agency securities. All collateral is held by the Funds'
custodian and is monitored daily to ensure that its market value at least equals
the repurchase price under the agreement.
Dividends to shareholders -- Each Fund declares a daily dividend, equal to its
net investment income for that day, payable monthly.
Deferred organization costs -- Costs incurred in connection with the
organization of the Funds and their initial registration with the Securities and
Exchange Commission and with various states are amortized on a straight-line
basis over a five-year period from the Fund's commencement of operations.
Expenses -- Expenses arising in connection with a Fund are charged directly to
that Fund. Expenses common to all series of the Trust are allocated to each
series in proportion to their relative net assets.
Federal income taxes -- It is each Fund's policy to meet the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all net investment income and realized net capital gains, if any, to
shareholders. Therefore, no federal income tax provision is required. Each Fund
is considered a separate entity for tax purposes.
3. TRANSACTIONS WITH AFFILIATES
Investment advisory and administration agreements -- The Trust has investment
advisory and administration agreements with Charles Schwab Investment
Management, Inc. (the "Investment Manager"). For advisory services and
facilities furnished, the Schwab Money Market Fund pays an
42
<PAGE> 49
- ------------------------------------------------------------------------------
annual fee, payable monthly, of .46% of the first $2 billion of average daily
net assets, .45% of such assets over $2 billion, and .40% of such assets in
excess of $3 billion. For advisory services and facilities furnished, the Schwab
Government Money Fund and the Schwab U.S. Treasury Money Fund each pay an annual
fee, payable monthly, of .46% of the first $1 billion of each Fund's average
daily net assets, .41% of such assets over $1 billion, and .40% of such assets
in excess of $2 billion. Under these agreements, the Schwab Money Market Fund,
Schwab Government Money Fund and Schwab U.S. Treasury Money Fund incurred
investment advisory and administration fees of $30,671,000, $4,176,000 and
$2,748,000, respectively, for the six months ended June 30, 1996, before the
Investment Manager reduced its fee (see Note 4).
Transfer agency and shareholder service agreements -- The Trust has transfer
agency and shareholder service agreements with Charles Schwab & Co., Inc.
("Schwab"). For services provided under these agreements, Schwab receives an
annual fee, payable monthly, of .45% of each Fund's average daily net assets.
For the six months ended June 30, 1996, the Schwab Money Market Fund, Schwab
Government Money Fund and Schwab U.S. Treasury Money Fund incurred transfer
agency and shareholder service fees of $33,554,000, $4,310,000 and $2,744,000,
respectively, before Schwab reduced its fees (see Note 4).
Officers and trustees -- Certain officers and trustees of the Trust are also
officers and/or directors of the Investment Manager and/or Schwab. During the
six months ended June 30, 1996, the Trust made no direct payments to its
officers or trustees who are "interested persons" within the meaning of the
Investment Company Act of 1940, as amended. The Schwab Money Market Fund, Schwab
Government Money Fund and Schwab U.S. Treasury Money Fund incurred fees of
$40,000, $6,000 and $3,000, respectively, related to the Trust's unaffiliated
trustees.
4. EXPENSES REDUCED BY THE INVESTMENT MANAGER AND SCHWAB
The Investment Manager and Schwab reduced a portion of their fees in order to
limit each Fund's ratio of operating expenses to average net assets. For the six
months ended June 30, 1996, the total of such fees reduced by
43
<PAGE> 50
- ------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
Six months ended June 30, 1996 (Unaudited)
the Investment Manager was $9,048,000, $1,398,000 and $1,590,000 for the Schwab
Money Market Fund, Schwab Government Money Fund and Schwab U.S. Treasury Money
Fund, respectively, and the total of such fees reduced by Schwab was $1,425,000,
$223,000 and $192,000 for the Schwab Money Market Fund, Schwab Government Money
Fund and Schwab U.S. Treasury Money Fund, respectively.
5. INVESTMENT TRANSACTIONS
Purchases, sales and maturities of investment securities during the six months
ended June 30, 1996, were as follows (in thousands):
<TABLE>
<CAPTION>
Schwab Schwab Schwab
Money Government U.S. Treasury
Market Money Money
Fund Fund Fund
------------ ----------- -------------
<S> <C> <C> <C>
Purchases $29,924,557 $5,090,953 $2,946,829
Proceeds of sales and
maturities $28,304,536 $5,057,374 $2,918,147
</TABLE>
44
<PAGE> 51
- ------------------------------------------------------------------------------
6. FINANCIAL HIGHLIGHTS
Per share income and capital changes for a share outstanding throughout the
period:
<TABLE>
<CAPTION>
Schwab Money Market Fund
------------------------------------------------------------------------------
Six months
ended
June 30, ----------------------Year ended December 31,-------------------
1996
(Unaudited) 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------
Net asset value at beginning of
period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from investment operations
- ---------------------------------
Net investment income .02 .05 .04 .03 .03 .06
Net realized and unrealized
gain (loss) on investments -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations .02 .05 .04 .03 .03 .06
Less distributions
- ------------------
Dividends from net investment
income (.02) (.05) (.04) (.03) (.03) (.06)
Distributions from realized gain
on investments -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ----------
Total distributions (.02) (.05) (.04) (.03) (.03) (.06)
---------- ---------- ---------- ---------- ---------- ----------
Net asset value at end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========== ========== ========== ========== ==========
Total return (%) 2.40 5.41 3.68 2.67 3.48 5.70
- ----------------
Ratios/Supplemental data
- ------------------------
Net assets, end of period (000s) $15,693,126 $14,010,387 $11,227,305 $8,164,599 $6,134,167 $4,866,584
Ratio of expenses to
average net assets (%) .75* .75 .74 .73 .70 .78
Ratio of net investment income to
average net assets (%) 4.78* 5.27 3.68 2.64 3.40 5.52
</TABLE>
The Investment Manager and Schwab have reduced a portion of their fees and
absorbed certain expenses in order to limit each Fund's ratio of operating
expenses to average net assets. Had these fees and expenses not been reduced and
absorbed, the ratio of expenses to average net assets for the Schwab Money
Market Fund for the periods ended June 30, 1996, December 31, 1995, 1994, 1993,
1992 and 1991 would have been .89%*, .90%, .90%, .91%, .92% and .94%,
respectively, and the ratio of net investment income to average net assets would
have been 4.64%*, 5.12%, 3.52%, 2.46%, 3.18% and 5.36%, respectively.
- ---------------
* Annualized
45
<PAGE> 52
- ------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
Six months ended June 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
Schwab Government Money Fund
---------------------------------------------------------------------------
Six months
ended
June 30, ---------------------Year ended December 31,------------------
1996
(Unaudited) 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------
Net asset value at beginning of
period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from investment operations
- ---------------------------------
Net investment income .02 .05 .04 .03 .03 .05
Net realized and unrealized
gain (loss) on investments -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations .02 .05 .04 .03 .03 .05
Less distributions
- ------------------
Dividends from net investment income (.02 ) (.05) (.04) (.03) (.03) (.05)
Distributions from realized gain
on investments -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ----------
Total distributions (.02 ) (.05) (.04) (.03) (.03) (.05)
---------- ---------- ---------- ---------- ---------- ----------
Net asset value at end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========== ========== ========== ========== ==========
Total return (%) 2.37 5.34 3.62 2.66 3.42 5.53
- ----------------
Ratios/Supplemental data
- ------------------------
Net assets, end of period (000s) $1,928,362 $1,884,569 $1,897,328 $1,744,603 $1,592,793 $1,458,705
Ratio of expenses to
average net assets (%) .75* .75 .74 .73 .72 .70
Ratio of net investment income to
average net assets (%) 4.72* 5.21 3.56 2.63 3.36 5.38
</TABLE>
The Investment Manager and Schwab have reduced a portion of their fees and
absorbed certain expenses in order to limit each Fund's ratio of operating
expenses to average net assets. Had these fees and expenses not been reduced and
absorbed, the ratio of expenses to average net assets for the Schwab Government
Money Fund for the periods ended June 30, 1996, December 31, 1995, 1994, 1993,
1992 and 1991 would have been .92%*, .92%, .92%, .93%, .94% and .95%,
respectively, and the ratio of net investment income to average net assets would
have been 4.55%*, 5.04%, 3.38%, 2.43%, 3.14% and 5.13%, respectively.
- ---------------
* Annualized
46
<PAGE> 53
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Schwab U.S. Treasury Money Fund
-------------------------------------------------------------------------
Six months
ended Period
June 30, -----------Year ended December 31,--------- ended
1996 December 31,
(Unaudited) 1995 1994 1993 1992 1991(1)
<S> <C> <C> <C> <C> <C> <C>
-------------------------------------------------------------------------
Net asset value at beginning of
period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from investment operations
- ---------------------------------
Net investment income .02 .05 .04 .03 .03 .01
Net realized and unrealized
gain (loss) on investments -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations .02 .05 .04 .03 .03 .01
Less distributions
- ------------------
Dividends from net investment
income (.02) (.05) (.04) (.03) (.03) (.01)
Distributions from realized gain
on investments -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ----------
Total distributions (.02) (.05) (.04) (.03) (.03) (.01)
---------- ---------- ---------- ---------- ---------- ----------
Net asset value at end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========== ========== ========== ========== ==========
Total return (%) 2.33 5.25 3.52 2.54 3.26 .68
- ----------------
Ratios/Supplemental data
- ------------------------
Net assets, end of period (000s) $1,224,790 $1,193,689 $803,871 $378,143 $178,895 $ 16,906
Ratio of expenses to
average net assets (%) .65* .65 .65 .65 .59 .24*
Ratio of net investment income to
average net assets (%) 4.64* 5.11 3.60 2.50 2.91 4.11*
</TABLE>
The Investment Manager and Schwab have reduced a portion of their fees and
absorbed certain expenses in order to limit each Fund's ratio of operating
expenses to average net assets. Had these fees and expenses not been reduced and
absorbed, the ratio of expenses to average net assets for the Schwab U.S.
Treasury Money Fund for the periods ended June 30, 1996, December 31, 1995,
1994, 1993, 1992 and 1991 would have been .94%*, .96%, 1.00%, 1.05%, 1.15% and
4.11%*, respectively, and the ratio of net investment income to average net
assets would have been 4.35%*, 4.80%, 3.25%, 2.10%, 2.35% and .24%*,
respectively.
- ---------------
(1) For the period November 6, 1991 (commencement of operations) to December 31,
1991.
* Annualized
47
<PAGE> 54
THIS SPACE RESERVED FOR YOUR COMMENTS AND QUESTIONS.
A SCHWAB REPRESENTATIVE WILL BE HAPPY TO ASSIST YOU.
<PAGE> 55
SCHWABFUNDS FAMILY(R)
The SchwabFunds Family includes a variety of funds to help meet your investment
needs. You can diversify your portfolio with one investment in any of our three
asset allocation funds, or choose from several equity markets with our equity
funds. You can also select from different maturities with our bond fund choices,
and take advantage of an array of money market funds.
SCHWAB ASSET ALLOCATION FUNDS
Schwab Asset Director(R)--High Growth Fund
Schwab Asset Director--Balanced Growth Fund
Schwab Asset Director--Conservative Growth Fund
SCHWAB EQUITY FUNDS
Schwab 1000 Fund(R)
Schwab International Index Fund(TM)
Schwab Small-Cap Index Fund(R)
Schwab S&P 500 Fund
Schwab Analytics Fund(TM)
SCHWAB BOND FUNDS
Schwab Government Bond Funds--Long-Term
and Short/Intermediate
Schwab Tax-Free Bond Funds--Long-Term and Short/Intermediate
Schwab California Tax-Free Bond Funds--Long-Term
and Short/Intermediate
SCHWAB MONEY MARKET FUNDS
Schwab offers an array of money market funds that seek high current income with
safety and liquidity. Choose from taxable or tax-exempt alternatives. Many can
be linked to your Schwab account to "sweep" cash balances automatically when
you're between investments. Or, for your larger cash reserves, choose one of our
Value Advantage Investments(TM).1
PLEASE CALL 1-800-2 NO-LOAD for a free prospectus and brochure for any of the
Schwabfunds(R).
Each prospectus provides more complete information, including charges and
expenses. Please read it carefully before investing.
This report is not authorized for distribution to prospective investors unless
preceded or accompanied by a current prospectus.
1 Investments in money market funds are neither insured nor guaranteed by the
U.S. government, and there is no assurance that the Funds will be able to
maintain a stable share price of $1.
<PAGE> 56
=======================
[SCHWABFUNDS BULK RATE
FAMILY LOGO]
U.S. POSTAGE
101 Montgomery Street
San Francisco, California 94104 PAID
CHARLES SCHWAB
=======================
INVESTMENT ADVISER
Charles Schwab Investment Management, Inc.
101 Montgomery Street, San Francisco, CA 94104
DISTRIBUTOR
Charles Schwab & Co., Inc.
101 Montgomery Street, San Francisco, CA 94104
This report is not authorized for distribution to prospective investors unless
preceded or accompanied by a current prospectus.
(C)1996 Charles Schwab & Co., Inc. All rights reserved.
Member SIPC/NYSE.
TF4219R(8/96) CRS 6794 Printed on recycled paper.
