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