<PAGE> 1
SCHWABFUNDS(R)
LOGO]
SCHWAB MONEY
MARKET FUND
____________
SCHWAB
GOVERNMENT
MONEY FUND
____________
SCHWAB
U.S. TREASURY
MONEY FUND
SEMI-ANNUAL REPORT
JUNE 30, 1997
<PAGE> 2
Dear Shareholder,
With the support of investors like you, SchwabFunds(R)
continues to be among the largest and fastest-growing mutual
fund families in the nation. Charles Schwab Investment
[PHOTO OF Management, Inc. (CSIM) manages over $50 billion in assets
CHARLES R. for more than 2.5 million SchwabFunds shareholders and
SCHWAB] offers 30 funds spanning a spectrum of financial markets and
investing styles.
LONG-TERM INVESTMENT STRATEGIES
When it comes to investing, patience is a virtue. Given the market
volatility of recent months, it is important to maintain the discipline to
adhere to your asset allocation plan--and to ensure you have a diversified
investment portfolio. We created the SchwabFunds Family(R) to offer time-tested
strategies for long-term investing--Indexing, Asset Allocation, Quantitative
Models, and Fund-of-Funds--and to provide investors with easy, cost-efficient
options to help achieve portfolio diversification.
COMMITMENT TO VALUE
In our ongoing commitment to provide cost-efficient ways for you to invest, we
recently introduced a new class of shares--Select Shares(TM)--for each of
our four index funds. Select Shares can offer investors even greater savings
through significantly lower expense ratios.
EXPANDING CHANNELS OF COMMUNICATION
If you're among the millions of people exploring the Internet, I encourage you
to visit our Web site at www.schwab.com/funds. There you'll find a wealth of
online information on SchwabFunds as well as other resources available at
Schwab. You can also access mutual fund performance data, chart daily net asset
values, request a free fund prospectus, trade fund shares and more--24 hours a
day. Continuing our efforts to provide you with up-to-date, useful information,
we have recently added monthly portfolio manager commentaries on selected
SchwabFunds to our Web site. In these commentaries, our expert portfolio
managers give insights into market activity and translate the effects of that
activity on fund performance.
Thank you for placing your trust in SchwabFunds. We will continue to explore new
strategies to help meet your investment needs.
/s/ Charles R. Schwab
Charles R. Schwab
<PAGE> 3
[SCHWAB MONEYFUNDER GRAPHIC BANNER]
MAKE YOUR
MONEY WORK
HARDER!
Use this envelope to easily add
to your Schwab Money Market Funds.
Charles Schwab
<PAGE> 4
[SCHWAB MONEYFUNDER GRAPHIC BANNER]
TAKE ADVANTAGE OF THIS OPPORTUNITY TO ADD TO YOUR SCHWAB MONEY MARKET FUNDS.
Now you can add to your investment by using this convenient envelope and slip
below. Please note that this envelope may not be used for any initial
investments in Schwab Money Market Funds. Please call 1-800-2 NO-LOAD for a
prospectus containing more information including fees and expenses. Be sure to
read the prospectus carefully before investing.
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
X
- ------------------------------------------------------------------------------
Signature
/ / Check here if you would like more Schwab MoneyFunders for future use.
* SUBSEQUENT MINIMUM $100, CUSTODIAN & IRA ACCOUNTS $1. AN INVESTMENT
CONSTITUTES THE PURCHASE OF SHARES IN THE MONEY FUND YOU HAVE PREVIOUSLY
CHOSEN AS THE PRIMARY FUND FOR YOUR BROKERAGE ACCOUNT.
+ THIS ENVELOP MAY NOT BE USED FOR INITIAL PURCHASES OF VALUE ADVANTAGE
INVESTMENTS(R). SUBSEQUENT INVESTMENT MINIMUM IS $5,000 ($2,000 FOR IRA'S AND
OTHER RETIREMENT ACCOUNTS). IF YOU WOULD LIKE MORE INFORMATION, PLEASE CALL
1-800-2 NO-LOAD.
(C) 1997 CHARLES SCHWAB & CO., INC. ALL RIGHTS RESERVED. MEMBER SIPC/NYSE.
Printed on recycled paper. TF4827(8/97) CRS 20110
--
----------------------- ------------------------
SCHWAB ACCOUNT NUMBER
PLEASE INDICATE HOW YOUR INVESTMENT SHOULD BE ALLOCATED:
/ / Add to my sweep money market fund.* $
-----------
/ / Schwab Value Advantage Money Fund(R)+ $
-----------
/ / Schwab Municipal Money Fund--Value $
Advantage Shares(TM)+ -----------
/ / Schwab California Municipal Money Fund--Value $
Advantage Shares(TM) (for California taxpayers only)+ -----------
/ / Schwab New York Municipal Money Fund--Value Advantage $
Shares(TM) (for New York taxpayers only)+ -----------
TOTAL AMOUNT ENCLOSED $
-----------
IF NO FUND IS INDICATED, OR YOUR INVESTMENT IS BELOW THE SUBSEQUENT MINIMUM FOR
THE VALUE ADVANTAGE INVESTMENTS,+ YOUR INVESTMENT WILL GO INTO THE SWEEP MONEY
FUND YOU'VE DESIGNATED IN YOUR SCHWAB ACCOUNT.
(LIFT HERE FOR MORE INFORMATION)
<PAGE> 5
CHARLES SCHWAB
JUST FOLLOW THESE EASY STEPS:
1. Fill out the attached Schwab MoneyFunder slip completely, including your
name, account number, signature and the amount of your check. Please use a
separate 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 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
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
PO BOX 7783
SAN FRANCISCO CA 94120-9330
<PAGE> 7
TABLE OF CONTENTS
<TABLE>
<S> <C>
A WORD FROM SCHWABFUNDS(R) .................................. 2
SCHWAB MONEY MARKET FUND .................................... 4
SCHWAB GOVERNMENT MONEY FUND ................................ 6
SCHWAB U.S. TREASURY MONEY FUND ............................. 8
THE PORTFOLIO MANAGEMENT TEAM ............................... 10
MARKET OVERVIEW ............................................. 11
QUESTIONS TO THE PORTFOLIO MANAGEMENT TEAM .................. 16
GLOSSARY OF TERMS ........................................... 18
PORTFOLIO SUMMARIES ......................................... 19
FINANCIAL STATEMENTS AND NOTES .............................. 22
</TABLE>
1
<PAGE> 8
A WORD FROM SCHWABFUNDS(R)
We're pleased to report on the performance of the three Schwab Money Funds
listed below (the Funds) for the six-month period ended June 30, 1997:
- - Schwab Money Market Fund
- - Schwab Government Money Fund
- - Schwab U.S. Treasury Money Fund
During the reporting period, the Funds continued to provide competitive money
market returns, combined with capital stability and liquidity. The following
pages contain information on the Funds' performances during the reporting period
and on their portfolios. Please remember that while each Fund seeks to maintain
a stable $1.00 share price to protect your principal, as with all money funds,
there can be no assurance that a Fund will be able to maintain a $1.00 net asset
value. It is also important to understand that your investment in a Fund is not
insured or guaranteed by the U.S. Government.
The Funds presented in this report are sweep money fund products which are
designed for cash balances requiring frequent access. These shares can be linked
to your Schwab account and contain a feature which automatically "sweeps" your
uninvested cash balances of at least $100 into the fund you designate - a smart,
convenient way to manage your short-term cash. If you're in a high tax bracket,
the Sweep Shares of our three tax-advantaged municipal money funds may provide
you with higher returns after taxes. 1
1 Income may be subject to state and local taxes and to the federal
alternative minimum tax (AMT)
2
<PAGE> 9
For your larger cash balances, and to help fill the cash equivalent sector of
your asset allocation plan, you may wish to consider the Value Advantage
Investments(R), which include both taxable and tax-advantaged alternatives. The
Value Advantage Investments were designed as money market investment vehicles
for larger, longer-term balances that do not require frequent access. The Value
Advantage Investments have minimum balance requirements and transaction
restrictions designed to minimize operating expenses, thereby resulting in
higher yields. It is important to note that unlike the sweep money fund
products, the Value Advantage Investments are not designed to transfer cash
balances for checks, margin calls, and other debit balances in your Schwab
account.
If you would like more information on the Value Advantage Investments or on
other Schwab Money Market Funds, please call our toll-free line, 1-800-435-4000,
and request a free prospectus which contains more information, including fees
and expenses. Please be sure to read the prospectus before investing.
3
<PAGE> 10
SCHWAB MONEY MARKET FUND
PERFORMANCE REVIEW
The table below presents 7-day average yields as of the end of the reporting
period. Please remember that money market fund yields fluctuate and past
performance is no guarantee of future results.
<TABLE>
<CAPTION>
YIELD SUMMARY AS OF 6/30/97 2
<S> <C>
7-day Current Yield 5.00%
7-day Effective Yield 5.13%
</TABLE>
PORTFOLIO COMPOSITION
Schwab Money Market Fund invests primarily in highly-rated commercial paper and
other corporate obligations, bank certificates of deposit, time deposits, and
bankers' acceptances, as well as in repurchase agreements and U.S. Government
obligations. The chart at the right illustrates the composition of the Fund's
portfolio as of June 30, 1997 and is not indicative of holdings after that date.
A complete listing of securities in the Fund's portfolio as of June 30, 1997 is
provided in the Schedule of Investments later in this report.
2 A portion of the Fund's fees were waived or reimbursed during the reporting
period. Without the waivers or reimbursements, as of 6/30/97, the 7-day current
and 7-day effective yields would have been 4.88% and 5.00%, respectively.
4
<PAGE> 11
SCHWAB MONEY MARKET FUND
PORTFOLIO COMPOSITION AS OF JUNE 30, 1997
[PIE CHART]
<TABLE>
<S> <C>
Commercial Paper & Other Corporate Obligations 72%
Certificates of Deposit 19%
Variable Rate Obligations 6%
Repurchase Agreements 2%
Other 1%
</TABLE>
5
<PAGE> 12
SCHWAB GOVERNMENT MONEY FUND
PERFORMANCE REVIEW
The table below presents 7-day average yields as of the end of the reporting
period. Please remember that money market fund yields fluctuate and past
performance is no guarantee of future results.
<TABLE>
<CAPTION>
YIELD SUMMARY AS OF 6/30/97 3
<S> <C>
7-day Current Yield 4.87%
7-day Effective Yield 4.99%
</TABLE>
PORTFOLIO COMPOSITION
Schwab Government Money Fund invests exclusively in U.S. Treasury bills, notes,
and 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. The chart at the right illustrates the composition of the
Fund's portfolio as of June 30, 1997 and is not indicative of holdings after
that date. A complete listing of securities in the Fund's portfolio as of June
30, 1997 is provided in the Schedule of Investments later in this report.
3 A portion of the Fund's fees were waived or reimbursed during the reporting
period. Without the waivers or reimbursements, as of 6/30/97, the 7-day current
and 7-day effective yields would have been 4.70% and 4.81%, respectively.
6
<PAGE> 13
SCHWAB GOVERNMENT MONEY FUND
PORTFOLIO COMPOSITION AS OF JUNE 30, 1997
[PIE CHART]
<TABLE>
<S> <C>
Agency Coupon Notes 10%
Agency Discount Notes 40%
Repurchase Agreements 32%
U.S. Treasury Notes 5%
Variable Rate Obligations 13%
</TABLE>
7
<PAGE> 14
SCHWAB U.S. TREASURY MONEY FUND
PERFORMANCE REVIEW
The table below presents 7-day average yields as of the end of the reporting
period. Please remember that money market fund yields fluctuate and past
performance is no guarantee of future results.
<TABLE>
<CAPTION>
YIELD SUMMARY AS OF 6/30/97 4
<S> <C>
7-day Current Yield 4.80%
7-day Effective Yield 4.91%
</TABLE>
PORTFOLIO COMPOSITION
Schwab U.S. Treasury Money Fund invests exclusively in U.S. Treasury notes,
bills, and other direct obligations of the U.S. Treasury that are backed by the
full faith and credit of the U.S. Government. The chart at the right illustrates
the composition of the Fund's portfolio as of June 30, 1997 and is not
indicative of holdings after that date. A complete listing of securities in the
Fund's portfolio as of June 30, 1997 is provided in the Schedule of Investments
later in this report.
4 A portion of the Fund's fees were waived or reimbursed during the reporting
period. Without the waivers or reimbursements, as of 6/30/97, the 7-day current
and 7-day effective yields would have been 4.52% and 4.62%, respectively.
8
<PAGE> 15
SCHWAB U.S. TREASURY MONEY FUND
PORTFOLIO COMPOSITION AS OF JUNE 30, 1997
[PIE CHART]
<TABLE>
<S> <C>
U.S. Treasury Bills 1%
U.S. Treasury Notes 99%
</TABLE>
9
<PAGE> 16
THE PORTFOLIO MANAGEMENT TEAM
STEPHEN B. WARD - Senior Vice President and Chief Investment Officer, has
overall responsibility for management of the Funds' portfolios. Steve joined
Charles Schwab Investment Management (CSIM) as Vice President and Portfolio
Manager in April 1991 and was promoted to his current position in August 1993.
Prior to joining CSIM, Steve was Vice President and Portfolio Manager at
Federated Investors.
LINDA KLINGMAN - Vice President and Senior Portfolio Manager, has managed Schwab
Money Market Fund since 1991. Linda joined CSIM as Portfolio Manager in 1990 and
was promoted to her current position in August 1996. Prior to joining CSIM,
Linda was Senior Money Market Trader with AIM Management.
ANDREA REGAN - Vice President and Senior Portfolio Manager, has managed Schwab
Government Money Fund and Schwab U.S. Treasury Money Fund since 1991. Andrea
joined CSIM in 1991 as Portfolio Manager and was promoted to her current
position in December 1996. Prior to joining CSIM, Andrea was Vice President and
Manager of Trading for Merus Capital Management, the investment management
division of the Bank of California.
AMY TREANOR - Portfolio Manager, has day-to-day portfolio management
responsibilities for Schwab Government Money Fund and Schwab U.S. Treasury Money
Fund. Amy joined CSIM in 1992 as Associate Portfolio Trader and was promoted to
her current position in May 1997. Prior to joining CSIM, Amy was Portfolio
Manager and Assistant Vice President with Capitalcorp Asset Management.
The following Market Overview and answers to questions are provided by the
Portfolio Management Team. A Glossary of Terms is provided for your reference on
page 18.
10
<PAGE> 17
MARKET OVERVIEW
[Bar Graph]
<TABLE>
<CAPTION>
REAL GDP GROWTH RATE
----------------------------------------
<S> <C>
Q1-90 0.041%
Q2-90 0.013%
Q3-90 -0.019%
Q4-90 -0.041%
Q1-91 -0.022%
Q2-91 0.017%
Q3-91 0.01%
Q4-91 0.01%
Q1-92 0.047%
Q2-92 0.025%
Q3-92 0.03%
Q4-92 0.043%
Q1-93 -0.001%
Q2-93 0.019%
Q3-93 0.023%
Q4-93 0.048%
Q1-94 0.025%
Q2-94 0.049%
Q3-94 0.035%
Q4-94 0.03%
Q1-95 0.004%
Q2-95 0.007%
Q3-95 0.038%
Q4-95 0.003%
Q1-96 0.02%
Q2-96 0.047%
Q3-96 0.021%
Q4-96 0.038%
Q1-97 0.049%
Q2-97 0.022%
</TABLE>
Source: Bloomberg L.P.
- - The economy, as measured by the growth of real GDP, continues to expand at a
healthy rate. The real GDP growth rate was 3.6% for the first six months of
1997.
- - The apparent strength of the economy continues to lead to speculation
regarding the potential impact on future inflation and whether more
restrictive Federal Reserve policy is imminent.
- - At the time of this writing, the economy appears poised for growth,
continuing the current economic expansion which began in 1991.
11
<PAGE> 18
U.S. UNEMPLOYMENT RATE
[LINE GRAPH]
Jan-90 0.053%
Feb-90 0.053%
Mar-90 0.052%
Apr-90 0.054%
May-90 0.053%
Jun-90 0.051%
Jul-90 0.054%
Aug-90 0.056%
Sep-90 0.057%
Oct-90 0.058%
Nov-90 0.06%
Dec-90 0.062%
Jan-91 0.063%
Feb-91 0.065%
Mar-91 0.068%
Apr-91 0.066%
May-91 0.068%
Jun-91 0.068%
Jul-91 0.067%
Aug-91 0.068%
Sep-91 0.068%
Oct-91 0.069%
Nov-91 0.069%
Dec-91 0.071%
Jan-92 0.071%
Feb-92 0.073%
Mar-92 0.073%
Apr-92 0.073%
May-92 0.074%
Jun-92 0.077%
Jul-92 0.076%
Aug-92 0.076%
Sep-92 0.075%
Oct-92 0.074%
Nov-92 0.073%
Dec-92 0.073%
Jan-93 0.071%
Feb-93 0.07%
Mar-93 0.07%
Apr-93 0.07%
May-93 0.069%
Jun-93 0.069%
Jul-93 0.068%
Aug-93 0.067%
Sep-93 0.067%
Oct-93 0.067%
Nov-93 0.065%
Dec-93 0.064%
Jan-94 0.067%
Feb-94 0.066%
Mar-94 0.065%
Apr-94 0.064%
May-94 0.06%
Jun-94 0.06%
Jul-94 0.061%
Aug-94 0.061%
Sep-94 0.059%
Oct-94 0.056%
Nov-94 0.056%
Dec-94 0.054%
Jan-95 0.056%
Feb-95 0.054%
Mar-95 0.058%
Apr-95 0.057%
May-95 0.057%
Jun-95 0.056%
Jul-95 0.057%
Aug-95 0.053%
Sep-95 0.056%
Oct-95 0.055%
Nov-95 0.056%
Dec-95 0.056%
Jan-96 0.058%
Feb-96 0.055%
Mar-96 0.056%
Apr-96 0.054%
May-96 0.056%
Jun-96 0.053%
Jul-96 0.054%
Aug-96 0.051%
Sep-96 0.052%
Oct-96 0.052%
Nov-96 0.053%
Dec-96 0.053%
Jan-97 0.054%
Feb-97 0.053%
Mar-97 0.052%
Apr-97 0.049%
May-97 0.048%
Jun-97 0.05%
Source: Bloomberg L.P.
- The employment rate during 1996 remained near its lowest point in the
decade. This declining trend continued into 1997, with the May 1997 rate of
4.8% representing the lowest rate since December 1973. Low unemployment rates
typically lead many economists to question whether continued low levels of
unemployment can persist without generating inflationary pressures on wages
and, ultimately, prices.
12
<PAGE> 19
MEASURES OF INFLATION
Source: Bloomberg L.P.
[BAR CHART]
QUARTERLY EMPLOYMENT COST INDEX MONTHLY CONSUMER PRICE INDEX
- ------------------------------- -----------------------------
Jan-90 0.053 Jan-90 0.052
Feb-90 0.053 Feb-90 0.053
Mar-90 0.053 Mar-90 0.052
Apr-90 0.054 Apr-90 0.047
May-90 0.054 May-90 0.044
Jun-90 0.054 Jun-90 0.047
Jul-90 0.051 Jul-90 0.048
Aug-90 0.051 Aug-90 0.056
Sep-90 0.051 Sep-90 0.062
Oct-90 0.048 Oct-90 0.063
Nov-90 0.048 Nov-90 0.063
Dec-90 0.048 Dec-90 0.061
Jan-91 0.046 Jan-91 0.057
Feb-91 0.046 Feb-91 0.053
Mar-91 0.046 Mar-91 0.049
Apr-91 0.045 Apr-91 0.049
May-91 0.045 May-91 0.05
Jun-91 0.045 Jun-91 0.047
Jul-91 0.043 Jul-91 0.044
Aug-91 0.043 Aug-91 0.038
Sep-91 0.043 Sep-91 0.034
Oct-91 0.042 Oct-91 0.029
Nov-91 0.042 Nov-91 0.03
Dec-91 0.042 Dec-91 0.031
Jan-92 0.041 Jan-92 0.026
Feb-92 0.041 Feb-92 0.028
Mar-92 0.041 Mar-92 0.032
Apr-92 0.035 Apr-92 0.032
May-92 0.035 May-92 0.03
Jun-92 0.035 Jun-92 0.031
Jul-92 0.034 Jul-92 0.032
Aug-92 0.034 Aug-92 0.031
Sep-92 0.034 Sep-92 0.03
Oct-92 0.035 Oct-92 0.032
Nov-92 0.035 Nov-92 0.03
Dec-92 0.035 Dec-92 0.029
Jan-93 0.034 Jan-93 0.033
Feb-93 0.034 Feb-93 0.032
Mar-93 0.034 Mar-93 0.031
Apr-93 0.036 Apr-93 0.032
May-93 0.036 May-93 0.032
Jun-93 0.036 Jun-93 0.03
Jul-93 0.036 Jul-93 0.028
Aug-93 0.036 Aug-93 0.028
Sep-93 0.036 Sep-93 0.027
Oct-93 0.034 Oct-93 0.028
Nov-93 0.034 Nov-93 0.027
Dec-93 0.034 Dec-93 0.027
Jan-94 0.032 Jan-94 0.025
Feb-94 0.032 Feb-94 0.025
Mar-94 0.032 Mar-94 0.025
Apr-94 0.031 Apr-94 0.024
May-94 0.031 May-94 0.023
Jun-94 0.031 Jun-94 0.025
Jul-94 0.031 Jul-94 0.028
Aug-94 0.031 Aug-94 0.029
Sep-94 0.031 Sep-94 0.03
Oct-94 0.03 Oct-94 0.026
Nov-94 0.03 Nov-94 0.027
Dec-94 0.03 Dec-94 0.027
Jan-95 0.03 Jan-95 0.028
Feb-95 0.03 Feb-95 0.029
Mar-95 0.03 Mar-95 0.029
Apr-95 0.03 Apr-95 0.031
May-95 0.03 May-95 0.032
Jun-95 0.03 Jun-95 0.03
Jul-95 0.028 Jul-95 0.028
Aug-95 0.028 Aug-95 0.026
Sep-95 0.028 Sep-95 0.025
Oct-95 0.028 Oct-95 0.028
Nov-95 0.028 Nov-95 0.026
Dec-95 0.028 Dec-95 0.025
Jan-96 0.029 Jan-96 0.027
Feb-96 0.029 Feb-96 0.027
Mar-96 0.029 Mar-96 0.028
Apr-96 0.029 Apr-96 0.029
May-96 0.029 May-96 0.029
Jun-96 0.029 Jun-96 0.028
Jul-96 0.029 Jul-96 0.03
Aug-96 0.029 Aug-96 0.029
Sep-96 0.029 Sep-96 0.03
Oct-96 0.03 Oct-96 0.03
Nov-96 0.03 Nov-96 0.033
Dec-96 0.03 Dec-96 0.033
Jan-97 0.028 Jan-97 0.03
Feb-97 0.028 Feb-97 0.03
Mar-97 0.028 Mar-97 0.028
Apr-97 0.028 Apr-97 0.025
May-97 0.028 May-97 0.022
Jun-97 0.028 Jun-97 0.023
- - Both the Employment Cost Index and Consumer Price Index (CPI) continued to
remain in check throughout the first half of 1997, reflecting continued low
levels of inflation.
- - For the 12 months ended June 1997, the CPI rose 2.3%, the lowest rate since
February 1987. Its core rate (which excludes the more volatile food and
energy components) rose 2.4%, the lowest rate since 1965.
- - The Federal Reserve has indicated that the economy continues to remain in the
zone where inflation risks are on the upside and that it is poised to act
preemptively by raising interest rates if necessary. The Federal Reserve did
take action in March, increasing the Federal Funds Rate by 0.25% to 5.50%,
yet left rates unchanged at the recent July 1997 Federal Open Market
Committee meeting.
13
<PAGE> 20
YIELDS ON 90-DAY COMMERCIAL PAPER
AND 3-MONTH TREASURY BILLS
FOR THE PERIOD FROM 1/2-6/30/97
[LINE GRAPH]
<TABLE>
<CAPTION>
3-MONTH 90-DAY
TREASURY BILL COMMERCIAL PAPER
YIELD YIELD
---------------- -------------
<S> <C> <C>
Jan 2, 97 0.0518 0.0547
Jan 3, 97 0.0516 0.0546
Jan 6, 97 0.0517 0.0544
Jan 7, 97 0.0515 0.0545
Jan 8, 97 0.0515 0.0545
Jan 9, 97 0.0512 0.0544
Jan 10, 97 0.0516 0.0548
Jan 13, 97 0.0517 0.055
Jan 14, 97 0.0516 0.0548
Jan 15, 97 0.0514 0.0546
Jan 16, 97 0.0516 0.0545
Jan 17, 97 0.0515 0.0544
Jan 20, 97 0.0515 0.0544
Jan 21, 97 0.0515 0.0545
Jan 22, 97 0.0516 0.0544
Jan 23, 97 0.0516 0.0544
Jan 24, 97 0.0516 0.0544
Jan 27, 97 0.0519 0.0545
Jan 28, 97 0.0519 0.0545
Jan 30, 97 0.0517 0.0545
Jan 31, 97 0.0515 0.0545
Feb 3, 97 0.0511 0.0544
Feb 4, 97 0.0513 0.0542
Feb 5, 97 0.0512 0.0543
Feb 6, 97 0.0513 0.0542
Feb 7, 97 0.0512 0.054
Feb 10, 97 0.0513 0.054
Feb 11, 97 0.0514 0.054
Feb 12, 97 0.0514 0.054
Feb 13, 97 0.0512 0.0539
Feb 14, 97 0.0508 0.0538
Feb 17, 97 0.0509 0.0538
Feb 18, 97 0.0509 0.0538
Feb 19, 97 0.051 0.0538
Feb 20, 97 0.0508 0.0537
Feb 21, 97 0.0509 0.0537
Feb 24, 97 0.0511 0.0537
Feb 25, 97 0.0515 0.0537
Feb 26, 97 0.0518 0.0539
Feb 27, 97 0.052 0.0544
Feb 28, 97 0.0522 0.0545
Mar 3, 97 0.0523 0.0543
Mar 4, 97 0.0523 0.0546
Mar 5, 97 0.0519 0.0546
Mar 6, 97 0.0521 0.0548
Mar 7, 97 0.0521 0.0548
Mar 10, 97 0.0519 0.0541
Mar 11, 97 0.0517 0.0545
Mar 12, 97 0.0519 0.0546
Mar 13, 97 0.0523 0.0547
Mar 14, 97 0.0523 0.0548
Mar 17, 97 0.0525 0.055
Mar 18, 97 0.0529 0.0552
Mar 19, 97 0.0529 0.0553
Mar 20, 97 0.0534 0.0557
Mar 21, 97 0.054 0.0565
Mar 24, 97 0.0538 0.0566
Mar 25, 97 0.0539 0.0568
Mar 26, 97 0.0534 0.057
Mar 27, 97 0.0537 0.0571
Mar 31, 97 0.0532 0.0577
Apr 1, 97 0.053 0.0572
Apr 2, 97 0.0529 0.0571
Apr 3, 97 0.0525 0.057
Apr 4, 97 0.0527 0.057
Apr 7, 97 0.0527 0.057
Apr 8, 97 0.0523 0.0569
Apr 9, 97 0.0522 0.0569
Apr 10, 97 0.0529 0.0568
Apr 11, 97 0.0528 0.057
Apr 14, 97 0.0529 0.0571
Apr 15, 97 0.0529 0.0571
Apr 16, 97 0.0529 0.0571
Apr 17, 97 0.0529 0.057
Apr 18, 97 0.0528 0.057
Apr 21, 97 0.0526 0.057
Apr 22, 97 0.0532 0.057
Apr 23, 97 0.0534 0.057
Apr 24, 97 0.053 0.0574
Apr 25, 97 0.0531 0.0572
Apr 28, 97 0.053 0.0574
Apr 29, 97 0.0526 0.0572
Apr 30, 97 0.0523 0.0572
May 1, 97 0.0521 0.0571
May 2, 97 0.0522 0.057
May 5, 97 0.0511 0.057
May 6, 97 0.0517 0.0569
May 7, 97 0.0522 0.057
May 8, 97 0.0521 0.0571
May 12, 97 0.0515 0.0569
May 13, 97 0.052 0.0569
May 14, 97 0.0516 0.0569
May 15, 97 0.0511 0.057
May 16, 97 0.0518 0.057
May 19, 97 0.053 0.0572
May 20, 97 0.052 0.0577
May 21, 97 0.0512 0.0569
May 22, 97 0.0517 0.0567
May 23, 97 0.0516 0.0566
May 26, 97 0.0516 0.0566
May 27, 97 0.0511 0.0566
May 28, 97 0.0513 0.0567
May 29, 97 0.0501 0.0567
May 30, 97 0.0494 0.0568
Jun 2, 97 0.0484 0.0568
Jun 3, 97 0.0507 0.0567
Jun 4, 97 0.0507 0.0567
Jun 5, 97 0.0511 0.0567
Jun 6, 97 0.0504 0.0569
Jun 9, 97 0.0503 0.0568
Jun 10, 97 0.0503 0.0567
Jun 11, 97 0.0496 0.0567
Jun 12, 97 0.0495 0.0566
Jun 13, 97 0.0496 0.0564
Jun 16, 97 0.0497 0.0564
Jun 17, 97 0.0504 0.0564
Jun 18, 97 0.0507 0.0564
Jun 19, 97 0.0507 0.0564
Jun 23, 97 0.0515 0.0563
Jun 24, 97 0.0518 0.0563
Jun 25, 97 0.051 0.0563
Jun 26, 97 0.0512 0.0563
Jun 27, 97 0.0514 0.0563
Jun 30, 97 0.0517 0.0563
</TABLE>
Source: Bloomberg L.P.
- - Although short-term rates were relatively stable during the first quarter of
1997, the spread between commercial paper and U.S. Treasury bill yields
widened significantly during the second quarter. This widening, making
Treasury bill yields relatively less attractive than commercial paper yields,
was a result of the reduced U.S. Treasury bill supply, caused by unexpectedly
large April federal tax receipts, which led to lower government financing
needs. In other words, the spread widening was the result of supply and
demand conditions in the U.S. Treasury bill market, not the result of credit
concerns in the commercial paper market.
14
<PAGE> 21
90-DAY MUNICIPAL COMMERCIAL PAPER YIELDS
FOR THE PERIOD FROM 1/7-6/24/97
----------------------------------------
Jan 7, 97 0.0325%
Jan 14, 97 0.0345%
Jan 21, 97 0.0345%
Jan 28, 97 0.0355%
Feb 4, 97 0.034%
Feb 11, 97 0.0345%
Feb 18, 97 0.0335%
Feb 25, 97 0.034%
Mar 4, 97 0.0335%
Mar 11, 97 0.033%
Mar 18, 97 0.034%
Mar 25, 97 0.035%
Apr 1, 97 0.0345%
Apr 8, 97 0.0365%
Apr 15, 97 0.036%
Apr 22, 97 0.037%
Apr 29, 97 0.037%
May 6, 97 0.0365%
May 13, 97 0.0375%
May 20, 97 0.037%
May 27, 97 0.037%
Jun 3, 97 0.0365%
Jun 10, 97 0.037%
Jun 17, 97 0.0375%
Jun 24, 97 0.037%
- - Short-term municipal commercial paper yields exhibited a pattern similar to
that of taxable commercial paper yields during the reporting period.
Source: Lehman Brothers, Inc.
15
<PAGE> 22
QUESTIONS TO THE PORTFOLIO MANAGEMENT TEAM
Q. HOW HAS THE PORTFOLIO MANAGEMENT TEAM ADJUSTED EACH FUND'S PORTFOLIO TO
RESPOND TO CHANGES IN INTEREST RATES?
A. During the reporting period, the portfolio managers adjusted the
dollar-weighted average maturities (DWAM) of the portfolios as needed in order
to capitalize on opportunities to buy higher yielding money market instruments
resulting from market fluctuations. For example, while most economists had
accurately predicted the 0.25% increase in the Federal Funds Rate prior to the
Federal Open Market Committee meeting held on March 25, 1997, the commercial
paper market had "priced in" or anticipated an even larger increase. We believed
the likelihood of an increase greater than 0.25% was fairly remote and seized
the opportunity to add securities with longer maturities (and higher yields) to
the Funds' portfolios throughout the month of March. We maintained slightly
longer maturities throughout the end of the reporting period in all three Funds.
Additionally, the Funds, particularly the Government and U.S. Treasury Money
Funds, continued to take advantage of anomalies in the pricing of money market
instruments that arose from supply and demand imbalances affecting the market.
Q. WHAT CREDIT STANDARDS DOES THE PORTFOLIO MANAGEMENT TEAM USE IN SELECTING
SECURITIES FOR THE FUNDS?
A. Money market funds are required by law to hold only high-quality securities
which meet certain maturity requirements in their portfolios. Certain of those
securities, known as "first-tier securities," carry the highest credit ratings.
For Schwab Money Market Fund, we continue to take the additional step of
investing only in first-tier securities.
Schwab Money Market Fund invests primarily in securities issued by banks or
corporations, such as commercial paper, certificates of deposit, time deposits,
bank notes, and bankers' acceptances. Certain securities owned by the Fund are
insured or are backed by a letter of credit issued by first-tier financial
institutions. These arrangements are frequently referred to as "credit
16
<PAGE> 23
enhancements" because they provide incremental levels of creditworthiness. As
part of our regular credit review process, we continually monitor the credit
quality of both the enhancement providers and the issuers of the Fund's
portfolio securities.
All U.S. Government and U.S. Treasury securities are first-tier securities.
Schwab U.S. Treasury Money Fund invests exclusively in U.S. Treasury securities
which are backed by the full faith and credit of the U.S. Government. Schwab
Government Money Fund invests exclusively in obligations issued or guaranteed by
the U.S. Government, its agencies and instrumentalities, and in repurchase
agreements covering such obligations. Even though securities issued by
government agencies carry the highest credit ratings, unlike U.S. Treasury
securities, they are not guaranteed by the U.S. Government and are perceived to
have somewhat more credit risk than comparable U.S. Treasury securities. Both
government agency and U.S. Treasury securities, however, are considered to have
relatively low levels of credit risk. Please bear in mind that shares of a money
market fund are not insured or guaranteed by the U.S. Government.
17
<PAGE> 24
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, line
of credit, or other instrument that provides an additional level of financial
support for debt securities to supplement the creditworthiness of the issuer.
DOLLAR-WEIGHTED AVERAGE MATURITY (DWAM) A measure of the average maturity of a
mutual fund's entire portfolio, weighted by the 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 rated in the highest short-term credit rating
category.
MATURITY The length of time before which the issuer of a debt security must
repay the principal amount.
REAL GDP The national Gross Domestic Product (GDP)--the total value of all
goods and services produced in the U.S. over a specific period of time and
adjusted for the rate of inflation to allow meaningful year-to-year comparisons.
YIELD The rate of return, usually dividend or interest payments, on an
investment, expressed as a percentage of market price.
18
<PAGE> 25
SCHWAB MONEY MARKET FUND
- ------------------------------------------------------------------------------
PORTFOLIO SUMMARY
ASSET GROWTH
<TABLE>
<CAPTION>
Total Total Percentage
Net Assets Net Assets Growth Over
as of 6/30/97 as of 12/31/96 Reporting
(000s) (000s) Period
- -----------------------------------------------------------------
<S> <C> <C>
$19,654,583 $ 18,083,671 9%
- -----------------------------------------------------------------
</TABLE>
AVERAGE YIELDS FOR THE PERIODS ENDED JUNE 30, 1997*
<TABLE>
<CAPTION>
Last Last Last
Seven Days Three Months Twelve Months
- -----------------------------------------------------------------
<S> <C> <C>
5.00% 4.92% 4.83%
- -----------------------------------------------------------------
</TABLE>
MATURITY SCHEDULE
PERCENT OF TOTAL INVESTMENTS
<TABLE>
<CAPTION>
Maturity Range 9/30/96 12/31/96 3/31/97 6/30/97
- ----------------------------------------------------------------
<S> <C> <C> <C> <C>
0 - 15 Days 21.4% 16.8% 20.1% 21.2%
16 - 30 Days 19.3 15.4 16.1 18.1
31 - 60 Days 27.2 29.0 26.1 19.5
61 - 90 Days 15.9 22.2 17.9 23.5
91 - 120 Days 2.8 9.4 10.2 4.7
Over 120 Days 13.4 7.2 9.6 13.0
Weighted Average 56 Days 56 Days 57 Days 59 Days
- ----------------------------------------------------------------
</TABLE>
PORTFOLIO QUALITY
<TABLE>
<CAPTION>
Percent of
SEC Tier Net Assets
Rating 6/30/97
---------------------------------------
<S> <C>
Tier 1 100.0%
Tier 2 0.0%
---------------------------------------
</TABLE>
- ---------------
* A portion of the Fund's expenses were reduced during the periods. Had these
expenses not been reduced, yields would have been lower.
19
<PAGE> 26
SCHWAB GOVERNMENT MONEY FUND
- ----------------------------------------------------------------
PORTFOLIO SUMMARY
ASSET GROWTH
<TABLE>
<CAPTION>
Total Total Percentage
Net Assets Net Assets Decline Over
as of 6/30/97 as of 12/31/96 Reporting
(000s) (000s) Period
- ----------------------------------------------------------------
<S> <C> <C>
$ 1,945,073 $1,986,862 -2%
- ----------------------------------------------------------------
</TABLE>
AVERAGE YIELDS FOR THE PERIODS ENDED JUNE 30, 1997*
<TABLE>
<CAPTION>
Last Last Last
Seven Days Three Months Twelve Months
- ----------------------------------------------------------------
<S> <C> <C>
4.87% 4.86% 4.76%
- ----------------------------------------------------------------
</TABLE>
MATURITY SCHEDULE
PERCENT OF TOTAL INVESTMENTS
<TABLE>
<CAPTION>
Maturity Range 9/30/96 12/31/96 3/31/97 6/30/97
- ----------------------------------------------------------------
<S> <C> <C> <C> <C>
0 - 15 Days 46.4% 57.5% 56.2% 51.7%
16 - 30 Days 7.7 9.5 3.2 0.1
31 - 60 Days 4.7 11.4 4.5 15.7
61 - 90 Days 13.2 6.5 9.9 8.8
91 - 120 Days 14.9 4.5 0.5 8.4
Over 120 Days 13.1 10.6 25.7 15.3
Weighted Average 57 Days 46 Days 64 Days 58 Days
- ----------------------------------------------------------------
</TABLE>
- ---------------
* A portion of the Fund's expenses were reduced during the periods. Had these
expenses not been reduced, yields would have been lower.
20
<PAGE> 27
SCHWAB U.S. TREASURY MONEY FUND
- ----------------------------------------------------------------
PORTFOLIO SUMMARY
ASSET GROWTH
[CAPTION]
<TABLE>
Total
Net Percentage
Total Assets Growth
Net Assets as of Over
as of 6/30/97 12/31/96 Reporting
(000s) (000s) Period
- ----------------------------------------------------------------
<S> <C> <C>
$ 1,497,433 $1,421,672 5%
- ----------------------------------------------------------------
</TABLE>
AVERAGE YIELDS FOR THE PERIODS ENDED JUNE 30, 1997*
<TABLE>
<CAPTION>
Last Last Last
Seven Days Three Months Twelve Months
- ----------------------------------------------------------------
<S> <C> <C>
4.80% 4.78% 4.70%
- ----------------------------------------------------------------
</TABLE>
MATURITY SCHEDULE
PERCENT OF TOTAL INVESTMENTS
<TABLE>
<CAPTION>
Maturity Range 9/30/96 12/31/96 3/31/97 6/30/97
- ----------------------------------------------------------------
<S> <C> <C> <C> <C>
0 - 15 Days 13.2% 0.4% 0.0% 2.8%
16 - 30 Days 1.6 0.0 25.5 0.0
31 - 60 Days 32.3 58.4 19.6 36.3
61 - 90 Days 11.2 6.6 21.3 23.7
91 - 120 Days 2.9 6.6 1.8 18.7
Over 120 Days 38.8 28.0 31.8 18.5
Weighted Average 84 Days 83 Days 76 Days 75 Days
- ----------------------------------------------------------------
</TABLE>
- ---------------
* A portion of the Fund's expenses were reduced during the periods. Had these
expenses not been reduced, yields would have been lower.
21
<PAGE> 28
SCHWAB MONEY MARKET FUND
- ------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (in thousands)
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Par Value
-------- -----------
<S> <C> <C>
COMMERCIAL PAPER AND OTHER CORPORATE OBLIGATIONS--72.5%(a)
ASSET BACKED SECURITIES--22.3%
Alamo Funding, LP
5.65%, 08/04/97 $ 20,000 $ 19,894
5.66%, 08/05/97 22,200 22,079
5.66%, 08/06/97 55,000 54,691
5.66%, 08/07/97 26,200 26,049
5.64%, 08/19/97 10,000 9,924
Alpha Finance Corp.
5.66%, 09/16/97 12,000 11,857
5.80%, 09/24/97 7,000 6,907
Asset Securitization Cooperative Corp.
5.74%, 07/21/97 24,000 23,925
5.74%, 07/23/97 55,000 54,810
5.70%, 08/01/97 40,000 39,806
5.68%, 08/21/97 50,000 49,603
5.63%, 08/21/97 50,000 49,605
5.63%, 08/22/97 50,000 49,597
5.64%, 08/27/97 46,750 46,337
5.68%, 08/28/97 45,000 44,594
5.71%, 09/04/97 70,000 69,290
5.71%, 09/05/97 65,000 64,330
5.71%, 09/09/97 50,000 49,454
5.70%, 09/09/97 77,000 76,160
5.71%, 09/10/97 40,000 39,557
5.78%, 12/16/97 20,000 19,476
Barton Capital Corp.
5.71%, 07/29/97 81,683 81,325
5.64%, 07/30/97 24,557 24,447
5.67%, 08/07/97 20,188 20,072
5.63%, 08/20/97 26,161 25,958
5.63%, 08/21/97 15,588 15,465
5.67%, 09/12/97 39,656 39,206
Beta Finance, Inc.
5.74%, 07/14/97 35,500 35,427
5.73%, 07/14/97 28,000 27,943
5.73%, 07/22/97 45,000 44,852
5.56%, 07/29/97 14,000 13,941
5.75%, 08/18/97 28,500 28,285
5.74%, 08/18/97 14,000 13,895
5.50%, 08/26/97 28,000 27,767
5.66%, 09/16/97 20,000 19,761
5.66%, 09/25/97 12,000 11,840
5.67%, 09/26/97 8,000 7,892
5.69%, 09/30/97 12,000 11,830
5.68%, 09/30/97 11,000 10,844
5.67%, 09/30/97 12,000 11,830
5.89%, 11/17/97 30,000 29,337
</TABLE>
22
<PAGE> 29
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
-------- -----------
<S> <C> <C>
CC (USA), Inc.
5.50%, 07/07/97 $ 5,000 $ 4,996
5.73%, 07/21/97 23,000 22,928
5.75%, 07/25/97 50,000 49,811
5.72%, 08/13/97 60,000 59,596
5.71%, 08/26/97 8,000 7,930
5.69%, 09/12/97 9,000 8,898
5.66%, 09/12/97 33,000 32,626
5.67%, 09/26/97 9,000 8,878
Corporate Asset Funding Corp.
5.68%, 08/19/97 75,000 74,428
5.66%, 09/26/97 70,000 69,058
Corporate Receivables Corp.
5.71%, 07/08/97 20,000 19,978
5.74%, 07/10/97 20,000 19,972
5.73%, 07/17/97 8,000 7,980
5.74%, 07/18/97 44,000 43,882
5.73%, 07/24/97 50,000 49,820
5.71%, 07/24/97 30,000 29,892
5.75%, 07/29/97 15,000 14,934
5.77%, 08/06/97 10,000 9,943
5.65%, 08/08/97 30,000 29,823
5.64%, 08/13/97 35,000 34,766
5.67%, 08/18/97 50,000 49,627
5.66%, 08/26/97 40,000 39,652
5.66%, 09/08/97 8,000 7,914
5.65%, 09/08/97 20,000 19,786
5.71%, 09/09/97 25,000 24,727
5.85%, 11/25/97 15,000 14,651
CXC, Inc.
5.71%, 07/08/97 19,000 18,979
5.74%, 07/14/97 20,000 19,959
5.73%, 07/22/97 15,000 14,951
5.77%, 08/01/97 30,000 29,853
5.72%, 08/13/97 50,000 49,663
5.63%, 08/18/97 50,000 49,628
5.66%, 08/19/97 50,000 49,619
5.63%, 08/21/97 17,000 16,866
5.64%, 08/28/97 50,000 49,551
5.66%, 08/29/97 40,000 39,633
5.66%, 09/15/97 30,000 29,647
5.68%, 09/16/97 50,000 49,401
5.66%, 09/16/97 25,000 24,702
5.66%, 09/18/97 19,400 19,162
5.66%, 09/19/97 60,000 59,256
</TABLE>
23
<PAGE> 30
SCHWAB MONEY MARKET FUND
- ------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (in thousands)
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Par Value
-------- -----------
<S> <C> <C>
Delaware Funding Corp.
5.73%, 07/18/97 $ 44,972 $ 44,852
5.73%, 07/24/97 50,272 50,091
5.70%, 08/29/97 10,694 10,596
Enterprise Funding Corp.
5.72%, 07/02/97 21,734 21,731
5.68%, 07/10/97 29,977 29,935
Eureka Securitization, Inc.
5.73%, 07/09/97 30,000 29,962
5.72%, 07/11/97 13,000 12,980
5.69%, 07/15/97 23,000 22,950
5.74%, 07/21/97 25,000 24,922
5.71%, 07/22/97 25,000 24,918
5.73%, 07/23/97 25,000 24,914
5.71%, 07/23/97 23,000 22,921
5.66%, 08/27/97 10,000 9,911
5.66%, 09/15/97 19,000 18,776
5.67%, 09/17/97 20,000 19,758
5.66%, 09/17/97 33,000 32,601
5.67%, 09/18/97 10,000 9,877
Falcon Asset Securitization Corp.
5.73%, 07/09/97 8,775 8,764
5.73%, 07/28/97 30,000 29,873
5.74%, 08/19/97 25,000 24,808
5.63%, 08/20/97 24,925 24,732
5.68%, 08/25/97 55,390 54,916
Kitty Hawk Funding Corp.
5.70%, 07/15/97 27,316 27,256
5.68%, 09/17/97 50,000 49,393
Market Street Funding Corp.
5.69%, 07/29/97 93,000 92,593
5.66%, 08/15/97 16,344 16,230
Preferred Receivables Funding Corp.
5.64%, 08/25/97 41,940 41,582
5.66%, 09/17/97 18,440 18,217
5.66%, 09/18/97 10,000 9,878
Providian Master Trust Series 1993-3
5.74%, 07/21/97 35,500 35,389
Ranger Funding Corp.
5.71%, 07/02/97 17,000 16,997
5.75%, 07/29/97 25,000 24,890
5.65%, 08/25/97 12,000 11,898
5.69%, 09/09/97 12,000 11,869
5.67%, 09/18/97 15,000 14,816
</TABLE>
24
<PAGE> 31
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
-------- -----------
<S> <C> <C>
Receivables Capital Corp.
5.74%, 07/02/97 $ 14,739 $ 14,737
5.72%, 07/02/97 29,145 29,140
5.72%, 07/03/97 27,670 27,661
5.67%, 07/31/97 54,884 54,626
5.75%, 08/01/97 121,780 121,179
Sheffield Receivables Corp.
5.66%, 09/15/97 18,300 18,084
5.66%, 09/22/97 21,300 21,026
WCP Funding, Inc.
5.72%, 07/11/97 11,000 10,983
5.75%, 07/18/97 19,000 18,949
5.74%, 07/18/97 24,000 23,936
5.74%, 07/25/97 20,000 19,925
5.75%, 08/12/97 11,800 11,722
5.70%, 08/29/97 15,000 14,862
5.66%, 09/10/97 15,000 14,835
5.67%, 09/19/97 38,200 37,725
Windmill Funding
5.72%, 07/09/97 39,386 39,337
5.73%, 07/17/97 13,000 12,967
5.76%, 07/30/97 73,067 72,732
5.74%, 08/14/97 36,335 36,084
5.70%, 08/29/97 17,357 17,197
5.71%, 09/09/97 35,665 35,275
5.71%, 09/12/97 10,401 10,282
5.69%, 09/17/97 19,000 18,769
5.69%, 09/24/97 54,300 53,581
Wood Street Funding Corp.
5.61%, 07/29/97 15,684 15,616
5.66%, 08/25/97 12,000 11,897
5.66%, 08/26/97 9,000 8,922
5.66%, 08/29/97 24,500 24,275
5.66%, 09/16/97 25,000 24,702
5.68%, 09/17/97 25,000 24,697
5.66%, 09/17/97 25,000 24,698
-----------
4,403,445
-----------
AUTOMOTIVE--5.2%
American Honda Finance Corp.
5.61%, 07/17/97 35,000 34,913
5.61%, 07/21/97 25,000 24,923
5.76%, 07/22/97 40,000 39,868
</TABLE>
25
<PAGE> 32
SCHWAB MONEY MARKET FUND
- ------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (in thousands)
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Par Value
-------- -----------
<S> <C> <C>
Chrysler Financial Corp.
5.66%, 08/04/97 $ 40,000 $ 39,788
Ford Credit Europe PLC
5.71%, 07/11/97 25,000 24,961
5.71%, 07/17/97 32,000 31,920
5.53%, 07/30/97 14,000 13,939
5.68%, 08/27/97 14,100 13,975
5.68%, 09/11/97 50,000 49,440
5.66%, 09/24/97 50,000 49,342
Ford Motor Credit
5.90%, 11/10/97 90,000 88,106
General Motors Acceptance Corp.
5.58%, 07/10/97 12,000 11,984
5.59%, 08/01/97 76,000 75,644
5.57%, 08/08/97 109,400 108,774
5.55%, 08/12/97 100,000 99,371
5.55%, 08/13/97 15,000 14,903
5.49%, 08/28/97 86,000 85,261
6.00%, 10/08/97 100,000 98,400
6.00%, 10/10/97 15,000 14,755
6.00%, 11/17/97 119,000 116,326
-----------
1,036,593
-----------
BANKING--AUSTRALIA--0.5%
Westpac Capital Corp.
5.55%, 07/17/97 50,000 49,880
5.53%, 07/21/97 40,000 39,880
-----------
89,760
-----------
BANKING--BELGIUM--2.4%
BBL North America
5.72%, 07/08/97 87,000 86,905
5.76%, 08/05/97 50,000 49,724
5.65%, 09/05/97 35,000 34,642
Cregem North America, Inc.
5.50%, 07/02/97 25,000 24,996
5.55%, 07/14/97 22,000 21,957
5.74%, 08/11/97 99,500 98,859
5.74%, 08/18/97 13,000 12,902
5.68%, 08/25/97 50,000 49,572
5.66%, 09/22/97 25,000 24,679
Generale Bank, Inc.
5.55%, 07/24/97 73,000 72,749
-----------
476,985
-----------
</TABLE>
26
<PAGE> 33
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
-------- -----------
<S> <C> <C>
BANKING--CANADA--1.5%
Bank of Nova Scotia
5.68%, 08/27/97 $100,000 $ 99,114
5.65%, 09/16/97 55,000 54,345
5.66%, 09/25/97 78,000 76,962
Royal Bank of Canada
5.55%, 07/31/97 32,850 32,702
5.94%, 11/07/97 27,062 26,504
-----------
289,627
-----------
BANKING--DENMARK--1.2%
Den Danske Corp.
5.69%, 09/12/97 50,000 49,432
Unifunding Inc.
5.71%, 07/07/97 25,000 24,977
5.73%, 07/16/97 63,000 62,852
5.68%, 08/22/97 70,000 69,433
5.66%, 09/15/97 37,000 36,564
-----------
243,258
-----------
BANKING--DOMESTIC--2.6%
Bankers Trust New York Corp.
5.95%, 10/29/97 103,000 101,020
International Securitization Corp./
(First National Bank of Chicago LOC)
5.72%, 07/10/97 44,000 43,938
5.71%, 07/21/97 30,300 30,205
5.77%, 07/25/97 9,000 8,966
5.74%, 07/25/97 76,255 75,968
5.73%, 07/28/97 30,810 30,680
5.55%, 08/04/97 18,816 18,720
5.77%, 08/08/97 21,122 20,995
5.74%, 08/12/97 6,080 6,040
5.70%, 08/26/97 19,000 18,834
5.67%, 09/22/97 44,625 44,050
Nationsbank Corp.
5.69%, 09/15/97 50,000 49,409
Nationsbank Corp.(d)
5.61%, 08/01/97 25,000 24,880
Secured Short Term Notes 97-11
5.86%, 09/18/97 30,000 30,000
-----------
503,705
-----------
BANKING--FRANCE--0.1%
Banco Nacional de Comercio Exterior
(Societe Generale LOC)
5.75%, 11/25/97 11,000 10,748
-----------
</TABLE>
27
<PAGE> 34
SCHWAB MONEY MARKET FUND
- ------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (in thousands)
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Par Value
-------- -----------
<S> <C> <C>
BANKING--GERMANY--0.5%
Comision Federal de Electricidad/
(Westdeutsche Landesbank LOC)
5.75%, 07/22/97 $ 30,000 $ 29,901
5.71%, 07/22/97 20,000 19,934
5.71%, 08/29/97 15,000 14,862
5.73%, 09/10/97 25,000 24,722
-----------
89,419
-----------
BANKING--JAPAN--0.4%
Anchor Funding Corp./(Dai-Ichi Kangyo Bank LOC)
5.86%, 08/14/97 14,000 13,901
Gotham Funding Corp./(Bank of
Tokyo - Mitsubishi LOC)
5.85%, 08/13/97 10,000 9,931
5.85%, 08/14/97 25,363 25,184
5.82%, 08/22/97 15,000 14,876
Mitsubishi Motors Credit of America, Inc./
(Bank of Tokyo - Mitsubishi LOC)
5.73%, 08/12/97 20,000 19,868
-----------
83,760
-----------
BANKING--NETHERLANDS--0.8%
Internationale Nederlanden (U.S.) Funding
Corp.
5.50%, 07/03/97 163,000 162,952
-----------
BANKING--SPAIN--0.3%
BEX America Finance, Inc.
5.68%, 08/19/97 50,000 49,619
-----------
BANKING--SWEDEN--0.9%
Nordbanken of North America, Inc.
5.68%, 08/20/97 39,500 39,193
5.68%, 08/26/97 35,000 34,695
5.68%, 09/08/97 22,000 21,764
Svenska Handelsbanken Inc.
5.74%, 07/11/97 35,500 35,444
5.66%, 09/26/97 50,000 49,326
-----------
180,422
-----------
BANKING--UNITED KINGDOM--2.0%
Abbey National N.A. Corp.
5.50%, 07/11/97 75,000 74,888
Abbey National Treasury Services PLC
6.26%, 04/02/98 50,000 49,939
Bradford & Bingley Building Society
5.51%, 07/14/97 25,000 24,951
5.69%, 09/12/97 13,000 12,852
</TABLE>
28
<PAGE> 35
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
-------- -----------
<S> <C> <C>
Cheltenham & Gloucester PLC
5.50%, 07/16/97 $ 80,000 $ 79,820
5.53%, 07/25/97 35,000 34,875
Halifax PLC
5.60%, 09/11/97 110,000 108,803
-----------
386,128
-----------
COMPUTERS AND OFFICE EQUIPMENT--0.3%
CSC Enterprises
5.66%, 08/05/97 20,000 19,891
5.67%, 08/12/97 30,000 29,804
-----------
49,695
-----------
DATA PROCESSING--0.1%
Electronic Data Systems
5.72%, 07/10/97 15,000 14,979
-----------
ELECTRICAL AND ELECTRONICS--0.3%
General Electric Company
6.20%, 07/01/97 66,699 66,699
-----------
FINANCE--COMMERCIAL--5.4%
CIT Group Holdings, Inc.
5.70%, 07/23/97 58,000 57,800
Finova Capital Corp.
5.69%, 09/18/97 73,000 72,101
General Electric Capital Corp.
5.51%, 07/14/97 78,000 77,849
5.51%, 07/15/97 20,000 19,958
5.73%, 07/17/97 65,000 64,837
5.68%, 09/18/97 25,000 24,693
5.95%, 11/04/97 190,000 186,162
5.85%, 11/26/97 50,000 48,832
5.85%, 11/28/97 50,000 48,817
General Electric Capital Services
5.49%, 07/02/97 42,000 41,994
5.74%, 07/18/97 50,000 49,867
5.73%, 07/23/97 59,000 58,797
5.68%, 09/18/97 50,000 49,387
5.95%, 11/05/97 50,000 48,982
</TABLE>
29
<PAGE> 36
SCHWAB MONEY MARKET FUND
- ------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (in thousands)
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Par Value
-------- -----------
<S> <C> <C>
Heller Financial Inc.
5.56%, 07/08/97 $ 25,000 $ 24,974
5.66%, 07/17/97 18,000 17,956
5.94%, 09/02/97 26,000 25,735
5.90%, 09/02/97 10,000 9,899
5.92%, 10/06/97 23,000 22,641
5.92%, 10/07/97 30,000 29,526
5.92%, 10/10/97 48,000 47,219
5.92%, 10/24/97 55,000 53,981
-----------
1,082,007
-----------
FINANCE--CONSUMER--4.2%
Associates Corp. of North America
5.68%, 07/01/97 28,000 28,000
5.71%, 07/07/97 50,000 49,953
5.71%, 07/08/97 75,000 74,918
5.71%, 07/10/97 100,000 99,857
5.71%, 07/11/97 100,000 99,844
5.73%, 07/29/97 35,000 34,847
5.64%, 08/15/97 61,000 60,575
5.68%, 09/19/97 58,000 57,280
5.64%, 09/29/97 50,000 49,305
5.65%, 09/30/97 56,000 55,213
5.65%, 10/01/97 50,000 49,290
5.65%, 10/03/97 60,000 59,129
Household Finance Corp.
5.70%, 09/10/97 50,000 49,447
5.70%, 09/11/97 50,000 49,439
-----------
817,097
-----------
MISCELLANEOUS MANUFACTURING--0.4%
Newell Company
5.66%, 08/18/97 25,000 24,812
5.65%, 08/21/97 13,000 12,897
5.69%, 09/18/97 20,000 19,754
5.69%, 09/22/97 25,000 24,677
-----------
82,140
-----------
MISCELLANEOUS SERVICES--1.8%
PHH Corp.
5.68%, 08/07/97 109,000 108,370
5.62%, 08/20/97 15,000 14,884
5.70%, 08/22/97 18,000 17,854
5.72%, 09/10/97 50,000 49,445
5.72%, 09/12/97 73,500 72,661
5.67%, 09/18/97 25,000 24,693
5.68%, 09/19/97 60,000 59,253
-----------
347,160
-----------
</TABLE>
30
<PAGE> 37
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
-------- -----------
<S> <C> <C>
MORTGAGE BANKING--0.6%
Countrywide Home Loans, Inc.
5.68%, 09/09/97 $ 50,000 $ 49,455
5.68%, 09/18/97 67,000 66,175
-----------
115,630
-----------
PAPER AND WOOD PRODUCTS--0.2%
Rexam PLC
5.73%, 07/09/97 10,000 9,987
5.71%, 09/02/97 27,300 27,032
-----------
37,019
-----------
PHARMACEUTICALS--0.2%
Glaxo Wellcome PLC
5.66%, 09/23/97 11,000 10,857
5.66%, 09/26/97 22,000 21,703
-----------
32,560
-----------
SAVINGS AND LOAN--0.2%
Bank of America, FSB
5.69%, 09/02/97 30,000 29,706
-----------
SECURITIES BROKERAGE--DEALER--18.1%
Bear Stearns & Co., Inc.
5.71%, 09/11/97 35,000 34,607
5.71%, 09/12/97 50,000 49,430
5.70%, 09/17/97 20,000 19,757
5.69%, 09/18/97 15,000 14,816
5.66%, 09/24/97 36,000 35,527
5.66%, 09/26/97 13,000 12,825
BT Securities Corp.
5.61%, 09/05/97 22,000 21,780
5.72%, 10/16/97 17,000 16,717
Credit Suisse First Boston, Inc.
5.71%, 07/10/97 55,000 54,923
5.68%, 08/21/97 33,000 32,738
5.60%, 09/10/97 50,000 49,464
Goldman Sachs Group, LP
5.53%, 07/14/97 100,000 99,806
5.53%, 07/15/97 32,000 31,933
5.98%, 10/30/97 50,000 49,026
5.90%, 11/10/97 106,000 103,777
5.90%, 11/12/97 100,000 97,871
5.90%, 11/13/97 129,000 126,233
5.90%, 11/14/97 205,000 200,568
5.89%, 11/25/97 150,000 146,503
</TABLE>
31
<PAGE> 38
SCHWAB MONEY MARKET FUND
- ------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (in thousands)
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Par Value
-------- -----------
<S> <C> <C>
Lehman Brothers Holdings, Inc.
5.57%, 08/08/97 $ 35,000 $ 34,800
5.48%, 08/08/97 29,000 28,837
5.79%, 09/22/97 59,000 58,236
5.87%, 09/23/97 75,000 74,003
5.94%, 09/24/97 17,000 16,768
5.95%, 11/12/97 60,000 58,712
5.92%, 12/04/97 50,000 48,754
5.83%, 12/17/97 74,000 72,034
5.83%, 12/18/97 53,000 51,583
5.82%, 12/22/97 38,000 36,962
Merrill Lynch & Co., Inc.
5.72%, 07/10/97 90,000 89,873
5.53%, 07/22/97 132,000 131,586
5.55%, 07/23/97 100,000 99,670
5.66%, 09/24/97 20,000 19,737
5.66%, 10/01/97 140,000 138,004
5.86%, 12/09/97 50,000 48,730
5.86%, 12/10/97 57,000 55,543
5.86%, 12/11/97 50,000 48,714
Morgan Stanley, Dean Witter, Discover & Co.
5.70%, 09/12/97 30,000 29,658
5.70%, 09/17/97 108,000 106,687
5.66%, 09/23/97 118,000 116,466
Morgan Stanley Group, Inc.
5.67%, 07/09/97 40,000 39,950
5.68%, 07/16/97 45,000 44,895
5.69%, 07/22/97 50,000 49,836
5.69%, 07/23/97 45,000 44,845
5.69%, 07/24/97 48,000 47,827
5.69%, 07/25/97 25,000 24,906
5.70%, 07/28/97 25,000 24,894
5.70%, 07/30/97 150,000 149,320
5.70%, 07/31/97 150,000 149,296
PaineWebber Group, Inc.
5.79%, 07/11/97 32,000 31,949
5.81%, 08/13/97 10,000 9,932
Salomon, Inc.
5.95%, 07/21/97 25,000 24,919
5.94%, 08/25/97 50,000 49,553
5.91%, 08/26/97 30,000 29,728
5.92%, 08/29/97 50,000 49,522
5.86%, 09/23/97 15,000 14,798
</TABLE>
32
<PAGE> 39
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
-------- -----------
<S> <C> <C>
Smith Barney Inc.
5.69%, 07/01/97 $ 62,000 $ 62,000
5.71%, 07/08/97 45,000 44,951
5.72%, 07/09/97 50,000 49,937
5.71%, 07/24/97 80,000 79,712
-----------
3,586,428
-----------
TOTAL COMMERCIAL PAPER AND OTHER CORPORATE
OBLIGATIONS
(Cost $14,267,541) 14,267,541
-----------
CERTIFICATES OF DEPOSIT--19.1%
BANKING--AUSTRALIA--0.5%
Australia & New Zealand Bank Group
5.54%, 07/02/97 50,000 50,000
5.55%, 07/29/97 25,000 25,000
Westpac Banking Corp.
5.60%, 09/08/97 30,000 30,000
-----------
105,000
-----------
BANKING--BELGIUM--0.3%
BBL North America
5.75%, 08/04/97 14,000 14,000
5.75%, 08/05/97 50,000 50,000
-----------
64,000
-----------
BANKING--CANADA--0.7%
Bank of Montreal
5.56%, 07/16/97 50,000 50,000
5.56%, 07/17/97 87,000 87,000
-----------
137,000
-----------
BANKING--DOMESTIC--4.1%
Bankers Trust Company
5.53%, 07/09/97 123,000 123,000
5.72%, 07/15/97 100,000 100,000
5.72%, 07/16/97 45,000 45,000
5.72%, 07/17/97 25,000 25,000
5.72%, 07/18/97 50,000 50,000
Chase Manhattan Bank USA
5.65%, 09/08/97 10,000 10,000
5.65%, 10/02/97 112,000 112,000
Crestar Bank
5.71%, 07/07/97 47,000 47,000
MBNA America Bank N.A.
5.80%, 10/07/97 85,000 85,000
</TABLE>
33
<PAGE> 40
SCHWAB MONEY MARKET FUND
- ------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (in thousands)
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Par Value
-------- -----------
<S> <C> <C>
Mellon Bank N.A.
5.68%, 08/21/97 $ 43,000 $ 43,000
5.63%, 09/04/97 23,000 23,000
5.78%, 12/12/97 94,000 94,000
Wilmington Trust Company
5.70%, 08/27/97 14,000 14,000
5.92%, 11/06/97 25,000 25,000
-----------
796,000
-----------
BANKING--FRANCE--3.5%
Banque Nationale de Paris
5.54%, 07/07/97 25,000 25,000
5.72%, 07/15/97 25,000 25,000
5.73%, 07/21/97 37,000 37,000
5.66%, 09/16/97 25,000 25,001
5.67%, 10/02/97 7,000 7,000
5.99%, 10/27/97 25,000 24,998
5.80%, 02/26/98 75,000 74,976
Societe Generale
5.58%, 07/28/97 65,000 65,013
5.83%, 08/20/97 75,000 74,995
5.57%, 09/04/97 50,000 50,001
5.80%, 01/05/98 85,000 84,978
6.22%, 03/10/98 97,500 97,274
6.14%, 03/10/98 50,000 49,916
6.25%, 03/25/98 13,000 12,985
5.98%, 05/26/98 39,000 39,031
-----------
693,168
-----------
BANKING--GERMANY--1.5%
Bayerische Hypotheken und Wechsel Bank
5.54%, 07/07/97 50,000 49,999
Deutsche Bank
5.50%, 09/03/97 200,000 200,000
Landesbank Hessen-Thuringen Girozentrale
6.20%, 09/05/97 49,000 49,001
-----------
299,000
-----------
BANKING--JAPAN--4.6%
Bank of Tokyo - Mitsubishi, Ltd.
5.82%, 07/02/97 60,000 60,000
5.71%, 08/06/97 24,000 24,003
Dai-Ichi Kangyo Bank, Ltd.
5.83%, 07/03/97 58,000 58,000
5.85%, 07/15/97 55,000 55,001
5.81%, 09/02/97 17,000 17,001
</TABLE>
34
<PAGE> 41
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
-------- -----------
<S> <C> <C>
Industrial Bank of Japan, Ltd.
5.83%, 07/11/97 $ 28,000 $ 28,000
5.84%, 07/16/97 50,000 50,000
5.84%, 07/17/97 50,000 50,000
Sanwa Bank, Ltd.
5.83%, 07/01/97 138,000 138,001
5.83%, 07/16/97 35,000 35,000
5.85%, 08/05/97 65,000 65,001
5.76%, 09/17/97 49,000 49,002
5.77%, 09/19/97 17,000 17,000
Sumitomo Bank, Ltd.
5.78%, 07/15/97 45,000 45,000
5.84%, 07/25/97 60,000 60,000
5.73%, 08/06/97 33,000 33,000
5.75%, 08/13/97 50,000 50,001
5.77%, 09/16/97 60,000 60,001
-----------
894,011
-----------
BANKING--NETHERLANDS--0.5%
ABN-AMRO Bank N.V.
5.53%, 07/15/97 35,000 35,000
5.60%, 09/02/97 64,000 64,000
-----------
99,000
-----------
BANKING--SWEDEN--0.1%
Svenska Handelsbanken
5.68%, 10/01/97 29,000 29,000
-----------
BANKING--SWITZERLAND--0.4%
Credit Suisse First Boston
6.24%, 04/08/98 85,000 85,000
-----------
BANKING--UNITED KINGDOM--2.4%
Abbey National Treasury Services PLC
5.50%, 07/07/97 100,000 99,999
5.55%, 07/24/97 50,000 50,000
5.55%, 09/03/97 50,000 50,000
5.60%, 09/15/97 75,000 75,000
National Westminster Bank PLC
5.60%, 09/05/97 69,000 69,000
5.60%, 09/08/97 79,000 78,999
6.20%, 05/20/98 49,000 48,971
-----------
471,969
-----------
</TABLE>
35
<PAGE> 42
SCHWAB MONEY MARKET FUND
- ------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (in thousands)
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Par Value
-------- -----------
<S> <C> <C>
SAVINGS AND LOAN--0.5%
World Savings Bank, FSB
5.66%, 09/16/97 $ 40,000 $ 39,998
5.66%, 09/19/97 50,000 49,998
-----------
89,996
-----------
TOTAL CERTIFICATES OF DEPOSIT
(Cost $3,763,144) 3,763,144
-----------
VARIABLE RATE OBLIGATIONS--5.5%(b)
BANKING--DOMESTIC--0.1%
6700 Cherry Avenue Partners Variable Rate
Taxable Demand Bonds Series 1993/(Wells
Fargo Bank LOC)
5.85%, 07/07/97 10,500 10,500
-----------
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)
5.63%, 07/07/97 24,025 24,025
New Jersey Economic Development Authority
Taxable Adjustable Rate Money Market
Securities (GE Aerospace Camden Development
Project) Series B/(Banque Nationale de
Paris LOC)
5.63%, 07/07/97 10,000 10,000
-----------
34,025
-----------
BANKING--GERMANY--0.1%
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%, 07/07/97 20,940 20,940
-----------
BANKING--NETHERLANDS--0.2%
New Jersey Economic Development Authority
Adjustable Rate Lease Revenue (Taxable)
Bonds (Barnes & Noble, Inc. Distribution
and Freight Consolidation Center Project)
1995 Series A/ (Rabobank Nederland N.V.
LOC)
5.64%, 07/07/97 21,700 21,700
</TABLE>
36
<PAGE> 43
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
-------- -----------
<S> <C> <C>
New Jersey Economic Development Authority
Adjustable Rate Lease Revenue (Taxable)
Bonds (Barnes & Noble, Inc. Distribution
and Freight Consolidation Center Project)
1995 Series B/(Rabobank Nederland N.V.
LOC)
5.64%, 07/07/97 $ 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%, 07/07/97 35,415 35,415
-----------
INSURANCE--2.2%
Commonwealth Life Insurance Company
5.83%, 07/01/97 100,000 100,000
General American Life Insurance Company
5.89%, 07/07/97 100,000 100,000
Jackson National Life Insurance Company
5.77%, 07/01/97 60,000 60,000
Pacific Mutual Life Insurance Company
5.68%, 07/01/97 100,000 100,000
Transamerica Life Insurance & Annuity Company
5.69%, 07/07/97 75,000 75,000
-----------
435,000
-----------
MONOLINE INSURANCE--0.3%
Baptist Health Systems of South Florida, Inc.
Taxable Variable Rate Direct Note
Obligations Series 1995A/(MBIA Insurance)
5.60%, 07/07/97 13,000 13,000
Baptist Health Systems of South Florida, Inc.
Taxable Variable Rate Direct Note
Obligations Series 1995B/(MBIA Insurance)
5.60%, 07/07/97 19,000 19,000
Dade County, Expressway Authority (Florida)
Toll System Revenue Bonds, Series 1996/
(FGIC Insurance)
5.60%, 07/07/97 31,200 31,200
New Orleans Aviation Board Taxable Refunding
Bonds, Series 1993A/(MBIA Insurance)
5.77%, 07/07/97 3,500 3,500
-----------
66,700
-----------
</TABLE>
37
<PAGE> 44
SCHWAB MONEY MARKET FUND
- ------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (in thousands)
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Par Value
-------- -----------
<S> <C> <C>
SECURITIES BROKERAGE--DEALER--2.2%
Bear Stearns Companies, Inc.
5.72%, 07/07/97 $ 90,000 $ 90,000
5.72%, 07/07/97 150,000 150,000
5.74%, 07/18/97 100,000 100,000
Lehman Brothers Holdings, Inc.
5.74%, 07/30/97 100,000 100,000
-----------
440,000
-----------
TOTAL VARIABLE RATE OBLIGATIONS
(Cost $1,074,280) 1,074,280
-----------
BANK NOTES--1.1 %
BANKING--DOMESTIC--1.1%
FCC National Bank
5.53%, 07/07/97 4,000 4,000
Fifth Third Bank
5.50%, 07/09/97 50,000 50,000
First National Bank of Boston
5.72%, 07/08/97 75,000 75,000
5.72%, 07/15/97 53,000 53,000
LaSalle National Bank
5.52%, 07/28/97 25,000 25,000
-----------
TOTAL BANK NOTES
(Cost $207,000) 207,000
-----------
BANKER'S ACCEPTANCES--0.1%
BANKING--DOMESTIC--0.1%
Mellon Bank N.A.
5.91%, 10/31/97 10,400 10,198
-----------
TOTAL BANKER'S ACCEPTANCES
(Cost $10,198) 10,198
-----------
</TABLE>
38
<PAGE> 45
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Maturity Value
-------- -----------
<S> <C> <C>
REPURCHASE AGREEMENTS--1.8%(c)
Salomon Brothers, Inc. 6.15%, Issue Date
06/30/97 Due 7/01/97*; Tri-Party Repurchase
Agreement; Collateralized By: U.S.
Government Agency Obligations $349,060 $ 349,000
-----------
TOTAL REPURCHASE AGREEMENTS
(Cost $349,000) 349,000
-----------
TOTAL INVESTMENTS--100%,
(Cost $19,671,163) $19,671,163
===========
</TABLE>
See accompanying Notes to Schedules of Investments.
39
<PAGE> 46
SCHWAB GOVERNMENT MONEY FUND
- ------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (in thousands)
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Par Value
-------- ----------
<S> <C> <C>
AGENCY OBLIGATIONS--50.0%
COUPON NOTES--10.3%
Federal Farm Credit Bank
5.85%, 08/01/97 $31,000 $ 31,007
5.62%, 09/03/97 20,000 19,999
5.40%, 12/02/97 50,000 49,974
5.45%, 03/03/98 55,000 54,883
5.90%, 06/02/98 25,000 25,012
Student Loan Marketing Assoc.
5.99%, 09/18/97 20,000 20,014
----------
200,889
----------
DISCOUNT NOTES--39.7%
Federal Home Loan Bank
5.59%, 07/03/97 25,000 24,992
5.58%, 07/03/97 4,015 4,014
5.71%, 09/18/97 21,945 21,677
5.56%, 10/07/97 25,000 24,637
5.58%, 11/26/97 25,000 24,449
5.80%, 06/12/98 25,000 24,984
5.82%, 06/16/98 25,000 24,990
Federal Home Loan Mortgage Corp.
5.59%, 07/01/97 25,000 25,000
5.59%, 07/02/97 25,000 24,996
5.59%, 07/08/97 20,000 19,979
5.60%, 07/10/97 25,000 24,966
5.60%, 07/11/97 25,000 24,962
5.63%, 07/23/97 2,550 2,541
5.60%, 07/31/97 17,180 17,101
5.62%, 08/01/97 24,840 24,721
5.62%, 08/05/97 45,000 44,758
5.63%, 08/07/97 20,000 19,886
5.55%, 08/13/97 22,000 21,856
5.65%, 08/15/97 20,000 19,861
5.61%, 08/15/97 20,000 19,862
5.58%, 09/04/97 12,415 12,292
</TABLE>
40
<PAGE> 47
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
-------- ----------
<S> <C> <C>
Federal National Mortgage Assoc.
5.59%, 07/03/97 $20,000 $19,994
5.61%, 07/11/97 10,780 10,763
5.62%, 08/04/97 10,455 10,400
5.54%, 08/04/97 13,665 13,594
5.65%, 08/21/97 30,000 29,765
5.64%, 08/21/97 25,000 24,804
5.53%, 08/26/97 2,080 2,062
5.71%, 09/16/97 22,000 21,738
5.66%, 09/18/97 26,220 25,903
5.59%, 09/29/97 25,000 24,657
5.81%, 10/02/97 20,000 19,708
5.83%, 10/14/97 20,000 19,670
5.80%, 10/20/97 25,000 24,565
5.80%, 10/21/97 25,000 24,561
5.80%, 10/22/97 25,000 24,557
5.59%, 12/08/97 25,000 24,404
----------
773,669
----------
TOTAL AGENCY OBLIGATIONS
(Cost $974,558) 974,558
----------
VARIABLE RATE OBLIGATIONS--12.5%(b)
Federal Farm Credit Bank
5.46%, 09/01/97 50,000 50,005
Student Loan Marketing Assoc.
5.42%, 07/01/97 25,000 25,000
5.42%, 07/01/97 25,330 25,328
5.42%, 07/01/97 50,000 49,994
5.31%, 07/01/97 20,000 19,991
5.26%, 07/01/97 42,150 42,104
5.24%, 07/01/97 30,000 29,988
----------
TOTAL VARIABLE RATE OBLIGATIONS
(Cost $242,410) 242,410
----------
U.S. TREASURY OBLIGATIONS--4.8%
TREASURY NOTES--4.8%
U.S. Treasury Notes
6.50%, 08/15/97 25,000 25,017
7.38%, 11/15/97 47,000 47,284
7.25%, 02/15/98 20,000 20,180
----------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $92,481) 92,481
----------
</TABLE>
41
<PAGE> 48
SCHWAB MONEY MARKET FUND
- ------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (in thousands)
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Maturity Value
-------- ----------
<S> <C> <C>
REPURCHASE AGREEMENTS--32.5%(c)
DLJ Securities Corp. 5.53%, Issue Date 06/23/97
Due 07/21/97; Tri-Party Repurchase Agreement;
Collateralized By: U.S. Government Agency
Obligations $45,715 $ 45,519
DLJ Securities Corp. 5.60%, Issue Date 05/27/97
Due 07/25/97; Tri-Party Repurchase Agreement;
Collateralized By: U.S. Government Agency
Obligations 35,780 35,455
Lehman Brothers, Inc. 5.59%, Issue Date
06/16/97
Due 09/15/97; Tri-Party Repurchase Agreement;
Collateralized By: U.S. Government Agency
Obligations 40,565 40,000
Lehman Brothers, Inc. 5.59%, Issue Date
06/17/97
Due 09/12/97; Tri-Party Repurchase Agreement;
Collateralized By: U.S. Government Agency
Obligations 30,405 30,000
Lehman Brothers, Inc. 5.59%, Issue Date
06/18/97
Due 09/10/97; Tri-Party Repurchase Agreement;
Collateralized By: U.S. Government Agency
Obligations 35,457 35,000
Salomon Brothers, Inc. 5.56%, Issue Date
06/09/97
Due 07/09/97; Tri-Party Repurchase Agreement;
Collateralized By: U.S. Government Agency
Obligations 50,755 50,521
Salomon Brothers, Inc. 5.56%, Issue Date
06/10/97
Due 07/14/97; Tri-Party Repurchase Agreement;
Collateralized By: U.S. Government Agency
Obligations 28,267 28,119
Salomon Brothers, Inc. 5.56%, Issue Date
06/11/97
Due 07/15/97; Tri-Party Repurchase Agreement;
Collateralized By: U.S. Government Agency
Obligations 43,219 42,993
Salomon Brothers, Inc. 5.57%, Issue Date
06/03/97
Due 07/16/97; Tri-Party Repurchase Agreement;
Collateralized By: U.S. Government Agency
Obligations 56,423 56,051
Salomon Brothers, Inc. 5.57%, Issue Date
06/04/97
Due 07/22/97; Tri-Party Repurchase Agreement;
Collateralized By: U.S. Government Agency
Obligations 29,900 29,680
Salomon Brothers, Inc. 5.57%, Issue Date
06/05/97
Due 07/18/97; Tri-Party Repurchase Agreement;
Collateralized By: U.S. Government Agency
Obligations 22,521 22,372
Salomon Brothers, Inc. 5.59%, Issue Date
06/24/97
Due 09/22/97; Tri-Party Repurchase Agreement;
Collateralized By: U.S. Government Agency
Obligations 31,433 31,000
Salomon Brothers, Inc. 5.59%, Issue Date
06/24/97
Due 09/23/97; Tri-Party Repurchase Agreement;
Collateralized By: U.S. Government Agency
Obligations 31,330 30,894
Salomon Brothers, Inc. 5.61%, Issue Date
06/02/97
Due 09/02/97; Tri-Party Repurchase Agreement;
Collateralized By: U.S. Government Agency
Obligations 34,135 33,653
Salomon Brothers, Inc. 6.15%, Issue Date
06/30/97
Due 07/01/97; Tri-Party Repurchase Agreement;
Collateralized By: U.S. Government Agency
Obligations 4,366 4,365
</TABLE>
42
<PAGE> 49
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Maturity Value
-------- ----------
<S> <C> <C>
Smith Barney 5.55%, Issue Date 06/13/97
Due 07/07/97*; Collateralized By:
FNMA: $27,570 Par; 7.00%, Due 02/25/22
FHLMC: $6,651 Par; 5.00%, Due 08/15/03
FNMA: $13,000 Par; 5.00%, Due 03/25/02
FHLMC: $770 Par; 9.50%, Due 01/15/ $34,996 $ 34,867
Smith Barney 5.55%, Issue Date 06/18/97
Due 07/02/97; Collateralized By:
FHLMC: $14,200 Par; 7.50%, Due 11/15/22
FHLMC: $8,250 Par; 7.15%, Due 12/15/22 19,144 19,103
Smith Barney 5.55%, Issue Date 06/19/97
Due 07/01/97; Collateralized By:
FNMA: $38,700 Par; 7.50%, Due 01/25/23
FHLMC: $13,000 Par; 6.15%, Due 12/15/22 46,844 46,757
Smith Barney 5.55%, Issue Date 06/20/97
Due 07/07/97; Collateralized By:
FHLMC: $11,000 Par; 6.10%, Due 05/15/01
FHLMC: $6,950 Par; 10.00%, Due 05/15/06 15,239 15,199
----------
TOTAL REPURCHASE AGREEMENTS
(Cost $631,548) 631,548
----------
TOTAL INVESTMENTS--100%
(Cost $1,940,997) $1,940,997
==========
</TABLE>
See accompanying Notes to Schedules of Investments.
43
<PAGE> 50
SCHWAB U.S. TREASURY MONEY FUND
- ------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (in thousands)
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Par Value
-------- ----------
<S> <C> <C>
U.S. TREASURY OBLIGATIONS--100.0%
U.S. Treasury Bills
5.39%, 08/21/97 $ 4,485 $ 4,451
5.27%, 08/21/97 345 342
4.97%, 08/21/97 625 621
4.96%, 08/21/97 2,810 2,790
5.34%, 09/04/97 1,390 1,377
5.27%, 09/04/97 5,045 4,999
5.17%, 09/04/97 945 936
U.S. Treasury Notes
8.50%, 07/15/97 41,715 41,763
5.88%, 07/31/97 265,370 265,478
6.50%, 08/15/97 260,990 261,304
6.00%, 08/31/97 340,590 340,722
5.75%, 09/30/97 106,985 107,024
5.50%, 09/30/97 92,840 92,822
8.75%, 10/15/97 75,000 75,698
8.88%, 11/15/97 50,000 50,587
7.38%, 11/15/97 111,520 112,237
6.00%, 11/30/97 84,260 84,411
5.13%, 02/28/98 25,000 24,910
----------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $1,472,472) 1,472,472
----------
TOTAL INVESTMENTS--100%
(Cost $1,472,472) $1,472,472
==========
</TABLE>
44
<PAGE> 51
- ------------------------------------------------------------------------------
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 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, 1997, the aggregate value of
private placement securities held by the Schwab Money Market Fund was
$5,360,993,000 which represented 27.28% of net assets. Of this total,
$5,000,993,000 or 25.44% of net assets, was determined by the
Investment Manager to be liquid in accordance with procedures adopted
by the Board of Trustees.
(b) Variable rate securities. Interest rates vary periodically based on
current market rates. Rates shown are the effective rates on June 30,
1997. 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 represent the final maturity which is considered the
maturity date for financial reporting purposes.
* Repurchase Agreements are payable on seven-day demand.
(d) Security traded on a delayed-delivery basis. Payment and delivery is
scheduled for a future time, generally within two weeks of entering
into the transaction. The transaction is subject to market fluctuation
and to the risk that the value may be more or less than the purchase
price when the transaction was initiated. The Fund has set aside
sufficient investment securities as collateral for securities purchased
on a delayed-delivery basis.
45
<PAGE> 52
<TABLE>
<CAPTION>
Abbreviations
- --------------------------------------------------------
<S> <C>
LOC Letter of Credit
MBIA Municipal Bond Investors Assurance Corporation
FGIC Financial Guaranty Insurance Company
</TABLE>
See accompanying Notes to Financial Statements.
46
<PAGE> 53
- ------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES (in thousands)
June 30, 1997 (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: $19,671,163, $1,940,997
and $1,472,472 respectively) $19,671,163 $1,940,997 $1,472,472
Cash 0 0 3
Interest receivable 69,739 8,108 27,987
Prepaid expenses 273 79 45
----------- ---------- ----------
Total assets 19,741,175 1,949,184 1,500,507
----------- ---------- ----------
LIABILITIES
Payable for:
Dividends 38,423 3,712 2,791
Investments purchased 43,711 0 0
Investment advisory and
administration fee 868 85 40
Transfer agency and shareholder
service fees 1,448 88 111
Other 2,142 226 132
----------- ---------- ----------
Total liabilities 86,592 4,111 3,074
----------- ---------- ----------
Net assets applicable to
outstanding shares $19,654,583 $1,945,073 $1,497,433
=========== ========== ==========
NET ASSETS CONSIST OF:
Paid-in-capital $19,654,919 $1,945,689 $1,497,747
Accumulated net realized loss
on investments sold (336) (616) (314)
----------- ---------- ----------
$19,654,583 $1,945,073 $1,497,433
=========== ========== ==========
PRICING OF SHARES
Outstanding shares, $0.00001
par value (unlimited shares
authorized) 19,654,919 1,945,689 1,497,747
Net asset value, offering and
redemption price per share $ 1.00 $ 1.00 $ 1.00
</TABLE>
See accompanying Notes to Financial Statements.
47
<PAGE> 54
- ------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS (in thousands)
Six months ended June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Schwab Schwab Schwab
Money Government U.S. Treasury
Market Money Money
Fund Fund Fund
-------- ---------- -------------
<S> <C> <C> <C>
Interest income $532,300 $ 55,007 $39,716
Expenses:
Investment advisory and
administration fee 38,367 4,314 3,278
Transfer agency and shareholder
service fees 42,772 4,463 3,325
Custodian fees 720 132 115
Registration fees 848 66 51
Professional fees 130 27 20
Shareholder reports 710 57 25
Trustees' fees 32 7 6
Insurance and other expenses 129 20 12
-------- ------- -------
83,708 9,086 6,832
Less: expenses reduced (see Note 4) (12,421) (1,648) (2,029)
-------- ------- -------
Total expenses incurred by Fund 71,287 7,438 4,803
-------- ------- -------
Net investment income 461,013 47,569 34,913
-------- ------- -------
Net realized gain (loss) on
investments sold 1 (160) (57)
-------- ------- -------
Increase in net assets resulting from
operations $461,014 $ 47,409 $34,856
======== ======= =======
</TABLE>
See accompanying Notes to Financial Statements.
48
<PAGE> 55
- ------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS (in thousands)
<TABLE>
<CAPTION>
Schwab Schwab Schwab
Money Market Fund Government Money Fund U.S. Treasury Money Fund
--------------------------- -------------------------- --------------------------
Six months Six months Six months
ended Year ended Year ended Year
June 30, ended June 30, ended June 30, ended
1997 December 31, 1997 December 31, 1997 December 31,
(Unaudited) 1996 (Unaudited) 1996 (Unaudited) 1996
------------ ------------ ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Operations:
Net investment income $ 461,013 $ 765,391 $ 47,569 $ 92,486 $ 34,913 $ 59,450
Net realized gain (loss)
on investments sold 1 14 (160) (187) (57) (125)
------------ ------------ ------------ ----------- ------------ -----------
Increase in net assets
resulting from
operations 461,014 765,405 47,409 92,299 34,856 59,325
------------ ------------ ------------ ----------- ------------ -----------
Dividends to shareholders
from net investment
income (461,013) (765,391) (47,569) (92,486) (34,913) (59,450)
------------ ------------ ------------ ----------- ------------ -----------
Capital share
transactions
(at $1.00 per share):
Proceeds from shares
sold 32,573,280 50,575,596 2,526,931 4,805,031 2,226,556 3,744,370
Net asset value of
shares issued in
reinvestment of
dividends 518,681 733,559 54,745 91,224 39,348 56,622
Less payments for shares
redeemed (31,521,050) (47,235,885) (2,623,305) (4,793,775) (2,190,086) (3,572,884)
------------ ------------ ------------ ----------- ------------ -----------
Increase (decrease) in
net assets from
capital share
transactions 1,570,911 4,073,270 (41,629) 102,480 75,818 228,108
------------ ------------ ------------ ----------- ------------ -----------
Total increase (decrease)
in net assets 1,570,912 4,073,284 (41,789) 102,293 75,761 227,983
Net assets:
Beginning of period 18,083,671 14,010,387 1,986,862 1,884,569 1,421,672 1,193,689
------------ ------------ ------------ ----------- ------------ -----------
End of period $ 19,654,583 $18,083,671 $ 1,945,073 $ 1,986,862 $ 1,497,433 $ 1,421,672
============ ============ ============ =========== ============ ===========
</TABLE>
See accompanying Notes to Financial Statements.
49
<PAGE> 56
- ------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
Six months ended June 30, 1997 (Unaudited)
1. DESCRIPTION OF THE FUNDS
The Schwab Money Market Fund, Schwab Government Money Fund and Schwab U.S.
Treasury Money Fund (the "Funds") are series of The Charles Schwab Family of
Funds (the "Trust"), an open-end, 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 Municipal Money Fund, Schwab California Municipal Money, Schwab New York
Municipal Money Fund, 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.
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, interest income and realized gains (losses) -- Security
transactions are accounted for on a trade date basis (date the order to buy or
sell is executed). Interest income is accrued daily and includes amortization of
premium and accretion of discount on investments. Realized gains and losses from
security transactions are determined on an identified cost basis.
Repurchase agreements -- Repurchase agreements are fully collateralized by U.S.
Treasury or U.S. Government obligations. All collateral is held by the Funds'
custodian, except in the case of a tri-party agreement, the collateral is held
by an agent bank. The collateral is monitored daily to ensure that its market
value at least equals the repurchase price under the agreement.
Dividends to shareholders -- Each Fund declares a daily dividend, equal to its
net investment income for that day, payable monthly.
50
<PAGE> 57
- ------------------------------------------------------------------------------
Expenses -- Expenses arising in connection with a Fund are charged directly to
that Fund. Expenses common to all series of the Trust are generally allocated to
each series in proportion to their relative net assets.
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, Schwab Money Market Fund pays an annual fee, payable
monthly, of 0.46% of the first $1 billion of average daily net assets, 0.45% of
the next $2 billion, 0.40% of the next $7 billion, 0.37% of the next $10
billion, and 0.34% of such assets in excess of $20 billion. For advisory
services and facilities furnished, the Schwab Government Money Fund and Schwab
U.S. Treasury Money Fund each pay an annual fee, payable monthly, of 0.46% of
the first $1 billion of each Fund's average daily net assets, 0.41% of the next
$1 billion, and 0.40% of such assets in excess of $2 billion. The Investment
Manager has reduced a portion of its fees for the six months ended June 30, 1997
(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 0.45% of each Fund's average daily net assets.
Schwab has reduced a portion of its fees for the six months ended June 30, 1997
(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, 1997, 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
51
<PAGE> 58
- ------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
Fund incurred fees aggregating $46,000, 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, 1997, the total of such fees reduced by the Investment
Manager was $11,456,000, $1,512,000 and $1,933,000 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 $965,000,
$136,000 and $96,000 for the Schwab Money Market Fund, Schwab Government Money
Fund and Schwab U.S. Treasury Money Fund, respectively (see Note 6).
5. INVESTMENT TRANSACTIONS
Purchases and sales, including maturities of investment securities during the
six months ended June 30, 1997, were as follows (in thousands):
<TABLE>
<CAPTION>
Schwab Schwab Schwab
Money Market Government U.S. Treasury
Fund Money Fund Money Fund
------------ ---------- -------------
<S> <C> <C> <C>
Purchases $35,165,017 $5,631,105 $ 2,900,815
Proceeds of sales and
maturities $33,631,942 $5,676,408 $ 2,832,845
</TABLE>
52
<PAGE> 59
- ------------------------------------------------------------------------------
6. FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period:
<TABLE>
<CAPTION>
Schwab Money Market Fund
----------------------------------------------------------------------------
Six months
ended Year ended December 31,
June 30, 1997 \-------------------------------------------------------------\
(Unaudited) 1996 1995 1994 1993 1992
------------- ----------- ----------- ----------- ---------- ----------
<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 0.02 0.05 0.05 0.04 0.03 0.03
Net realized and unrealized gain
(loss) on investments -- -- -- -- -- --
----------- ----------- ----------- ----------- ---------- ----------
Total from investment operations 0.02 0.05 0.05 0.04 0.03 0.03
Less distributions
- ------------------
Dividends from net investment
income (0.02) (0.05) (0.05) (0.04) (0.03) (0.03)
Distributions from realized gain
on investments -- -- -- -- -- --
----------- ----------- ----------- ----------- ---------- ----------
Total distributions (0.02) (0.05) (0.05) (0.04) (0.03) (0.03)
----------- ----------- ----------- ----------- ---------- ----------
Net asset value at end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
=========== =========== =========== =========== ========== ==========
Total return 2.43% 4.91% 5.41% 3.68% 2.67% 3.48%
- ------------
Ratios/Supplemental data
- ------------------------
Net assets, end of period (000s) $19,654,583 $18,083,671 $14,010,387 $11,227,305 $8,164,599 $6,134,167
Ratio of expenses to average net
assets+ 0.75%* 0.75% 0.75% 0.74% 0.73% 0.70%
Ratio of net investment income to
average net assets+ 4.85%* 4.80% 5.27% 3.68% 2.64% 3.40%
</TABLE>
- ---------------
+ The information contained in the above table is based on actual expenses for
the periods, after giving effect to the portion expenses reduced and absorbed
by the Investment Manager and Schwab. Had these expenses not been reduced and
absorbed, the Fund's expense and net investment income ratios would have been:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Ratio of expenses to average net
assets 0.88%* 0.89% 0.90% 0.90% 0.91% 0.92%
Ratio of net investment income to
average net assets 4.72%* 4.66% 5.12% 3.52% 2.46% 3.18%
</TABLE>
* Annualized
53
<PAGE> 60
- ------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
For a share outstanding throughout each period:
<TABLE>
<CAPTION>
Schwab Government Money Fund
------------------------------------------------------------------------------
Six months
ended Year ended December 31,
June 30, 1997 \--------------------------------------------------------------\
(Unaudited) 1996 1995 1994 1993 1992
------------- ---------- ---------- ---------- ---------- ----------
<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 0.02 0.05 0.05 0.04 0.03 0.03
Net realized and unrealized gain
(loss) on investments -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations 0.02 0.05 0.05 0.04 0.03 0.03
Less distributions
- ------------------
Dividends from net investment
income (0.02) (0.05) (0.05) (0.04) (0.03) (0.03)
Distributions from realized gain on
investments -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ----------
Total distributions (0.02) (0.05) (0.05) (0.04) (0.03) (0.03)
---------- ---------- ---------- ---------- ---------- ----------
Net asset value at end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========== ========== ========== ========== ==========
Total return 2.40% 4.83% 5.34% 3.62% 2.66% 3.42%
- ------------
Ratios/Supplemental data
- ------------------------
Net assets, end of period (000s) $ 1,945,073 $1,986,862 $1,884,569 $1,897,328 $1,744,603 $1,592,793
Ratio of expenses to average net
assets+ 0.75%* 0.75% 0.75% 0.74% 0.73% 0.72%
Ratio of net investment income to
average net assets+ 4.80%* 4.73% 5.21% 3.56% 2.63% 3.36%
</TABLE>
- ---------------
+ The information contained in the above table is based on actual expenses for
the periods, after giving effect to the portion of expenses reduced and
absorbed by the Investment Manager and Schwab. Had these expenses not been
reduced and absorbed, the Fund's expense and net investment income ratios
would have been:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Ratio of expenses to average net
assets 0.92%* 0.92% 0.92% 0.92% 0.93% 0.94%
Ratio of net investment income to
average net assets 4.63%* 4.56% 5.04% 3.38% 2.43% 3.14%
</TABLE>
* Annualized
54
<PAGE> 61
- ------------------------------------------------------------------------------
For a share outstanding throughout each period:
<TABLE>
<CAPTION>
Schwab U.S. Treasury Money Fund
------------------------------------------------------------------------
Six months
ended Year ended December 31,
June 30, 1997 \--------------------------------------------------------\
(Unaudited) 1996 1995 1994 1993 1992
------------- ---------- ---------- -------- -------- --------
<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 0.02 0.05 0.05 0.04 0.03 0.03
Net realized and unrealized gain (loss)
on investments -- -- -- -- -- --
Total from investment operations 0.02 0.05 0.05 0.04 0.03 0.03
Less distributions
- ------------------
Dividends from net investment income (0.02) (0.05) (0.05) (0.04) (0.03) (0.03)
Distributions from realized gain on
investments -- -- -- -- -- --
---------- ---------- ---------- -------- -------- --------
Total distributions (0.02) (0.05) (0.05) (0.04) (0.03) (0.03)
---------- ---------- ---------- -------- -------- --------
Net asset value at end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========== ========== ======== ======== ========
Total return 2.37% 4.77% 5.25% 3.52% 2.54 3.26%
- ------------
Ratios/Supplemental data
- ------------------------
Net assets, end of period (000s) $ 1,497,433 $1,421,672 $1,193,689 $803,871 $378,143 $178,895
Ratio of expenses to average net
assets+ 0.65%* 0.65% 0.65% 0.65% 0.65% 0.59%
Ratio of net investment income to
average net assets+ 4.72%* 4.67% 5.11% 3.60% 2.50% 2.91%
</TABLE>
- ---------------
+ The information contained in the above table is based on actual expenses for
the periods, after giving effect to the portion of expenses reduced and
absorbed by the Investment Manager and Schwab. Had these expenses not been
reduced and absorbed, the Fund's expense and net investment income ratios
would have been:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Ratio of expenses to average net assets 0.92%* 0.94% 0.96% 1.00% 1.05% 1.15%
Ratio of net investment income to
average net assets 4.45%* 4.38% 4.80% 3.25% 2.10% 2.35%
</TABLE>
* Annualized
55
<PAGE> 62
THIS SPACE RESERVED FOR YOUR COMMENTS AND QUESTIONS.
A SCHWAB REPRESENTATIVE WILL BE HAPPY TO ASSIST YOU.
<PAGE> 63
THIS SPACE RESERVED FOR YOUR COMMENTS AND QUESTIONS.
A SCHWAB REPRESENTATIVE WILL BE HAPPY TO ASSIST YOU.
<PAGE> 64
THIS SPACE RESERVED FOR YOUR COMMENTS AND QUESTIONS.
A SCHWAB REPRESENTATIVE WILL BE HAPPY TO ASSIST YOU.
<PAGE> 65
THIS SPACE RESERVED FOR YOUR COMMENTS AND QUESTIONS.
A SCHWAB REPRESENTATIVE WILL BE HAPPY TO ASSIST YOU.
<PAGE> 66
THIS SPACE RESERVED FOR YOUR COMMENTS AND QUESTIONS.
A SCHWAB REPRESENTATIVE WILL BE HAPPY TO ASSIST YOU.
<PAGE> 67
SCHWABFUNDS FAMILY(R)
The SchwabFunds Family includes a variety of funds to help meet your investment
needs. You can diversify your portfolio in a single step with our asset
allocation funds. Or you can customize your portfolio with a combination of our
stock funds as well as our taxable and tax-advantaged bond and money 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 OneSource Portfolios--Growth Allocation
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SCHWAB STOCK FUNDS
Schwab 1000 Fund(R)
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Schwab International Index Fund(R)
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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-advantaged alternatives. Many
can be linked to your Schwab account to "sweep" cash balances automatically when
you're between investments. Or, for your larger cash reserves, choose one of our
Value Advantage Investments(R).
Please call 1-800-435-4000 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 must be preceded or accompanied by a current prospectus.
*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> 68
--------------
BULK RATE
U.S. POSTAGE
PAID
CHARLES SCHWAB
---------------
[SCHWAB FUNDS FAMILY LOGO]
101 Montgomery Street
San Francisco, California 94104
INVESTMENT ADVISOR
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)1997 Charles Schwab & Co., Inc. All rights reserved.
Member SIPC/NYSE.
TF4822R (7/97) CRS 20110 Printed on recycled paper.
- -FOLD-
