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From the President

Marie Chandoha is President and CEO of Charles Schwab Investment Management, Inc. and the funds covered in this report.

Dear Shareholder,

As President and CEO of Charles Schwab Investment Management, Inc., I’d like to take this opportunity to thank you for allowing us to serve your investment needs, and for reading this important communication concerning the performance of the Schwab money market funds. Although the investment environment has been challenging, recent signs suggest the potential for improvement.

During the year ended December 31, 2011, geopolitical unrest, natural disasters, legislative gridlock in the U.S., S&P’s downgrade of long-term U.S. sovereign debt, the euro zone’s ongoing debt crisis, and a shifting outlook regarding economic prospects resulted in a frequently volatile investment environment. Amid the market turbulence, bonds generated solid returns and money market securities continued to help investors preserve their hard-earned capital. On the equity side, U.S. stocks finished mixed after a year that generally favored defensive shares, dividend-paying stocks, and some of the largest blue-chip names. Record corporate profits and historically appealing levels for financial metrics such as price-to-earnings ratios served as part of the backdrop for the stock market’s performance, as did a fourth-quarter rally. The Dow Jones Industrial Average returned 8.38%, outpacing the 2.11% return of the S&P 500 Index, and the -4.18% loss posted by the small-cap Russell 2000 Index.

Early year optimism that U.S. economic growth would reach self-sustaining levels ultimately met with disappointing results. Inflation-adjusted U.S. economic activity (real GDP) expanded at a lackluster 0.4% annual pace in the first quarter of 2011. Although growth accelerated to a 2.8% annualized rate in the fourth quarter (advance estimate), the year’s overall level of activity represented a deceleration from the 3.0% pace achieved in 2010. As a result, companies remained reluctant to add employees at a consistently meaningful pace and the unemployment rate hovered around 9.0% for most of 2011, before trending lower during the final months of the year.

Attempting to right the unsettled economic landscape, the Federal Reserve (the Fed) implemented a variety of conventional and unconventional monetary operations. On the more conventional side, the Fed kept the federal funds rate target at a historically low 0-0.25%, where rates have held since they were first cut to that level in December 2008. Less conventionally, the Fed completed a second round of quantitative easing in June, purchasing approximately $600 billion of long-term Treasuries over roughly a 10-month period. This effort was designed to spark a faster rate of expansion by keeping long-term interest rates low. In late September, the Fed began “Operation Twist,” an attempt to further reduce long-term interest rates and help the still-troubled U.S. housing sector, while essentially holding short-term rates steady.

This collective backdrop paved the way for solid returns by fixed-income securities. U.S. Treasuries turned in particularly strong performances, thanks in part to intermittent bouts of investors looking for a safe haven. The U.S. Treasury sector of the Barclays Aggregate U.S. Bond Index returned 9.81% for the 12 months, the U.S. Agency sector returned 4.82%, and the Corporate sector returned 8.15%, while the longer maturities in each of these categories easily outperformed shorter maturities. The rally also pushed down the yield of the 10-year Treasury bond to only 1.89% by

Schwab Retirement Advantage Money Fund & Schwab Investor Money Fund 3

From the President continued

Amid the market turbulence, bonds generated solid returns and money market securities continued to help investors preserve their hard-earned capital.

the end of 2011, marking the first time in more than three decades that the yield on the benchmark bond finished a calendar year below 2.0%.

Money market instruments continued to offer a compelling means of achieving capital preservation for investors, even while posting near-zero returns. The historically low interest rate environment and periodic flights to safety drove up demand for short-term, highly liquid investments, a process that further reduced the already low yields on money market securities.

Thank you for investing in the Schwab money market funds. Please review the following pages for details about each fund’s characteristics, investment performance, and objectives.

We encourage you to review your investment portfolio regularly to make sure it meets your current financial plan. For answers to questions you may have or to consult our website for more information, please visit www.schwabfunds.com. We are also happy to hear from you at 1-800-435-4000.

Sincerely,

Indices are unmanaged, do not incur management fees, costs and expenses, and cannot be invested in directly. Index return figures assume dividends and distributions were reinvested.

4 Schwab Retirement Advantage Money Fund & Schwab Investor Money Fund

Schwab Retirement Advantage Money Fund

The Schwab Retirement Advantage Money Fund (the fund) seeks the highest current income consistent with stability of capital and liquidity. To pursue its goal, the fund invests in high-quality short-term money market investments issued by U.S. and foreign issuers. Examples of these securities include commercial paper, certificates of deposit, repurchase agreements, variable-rate debt securities, and obligations issued by the U.S. government, its agencies, or instrumentalities. Since December 2008, when the Federal Reserve (the Fed) first cut short-term interest rates to present-day levels, yields on money market securities have remained historically low. This trend continued during the report period.

As a result, the fund’s investment adviser and its affiliates voluntarily waived certain fees or expenses for the 12 months ended December 31, 2011, to help the fund maintain a positive net yield.* For more information about the fund’s yield and other important characteristics, please review the charts and footnotes that follow this discussion.

Market Highlights. Robust demand combined with limited supply continued to drive yields on taxable money market securities lower. Concern that the euro zone’s sovereign debt crisis could spread from Greece, Ireland, and Portugal to larger European countries featured prominently in that mix. Additionally, the downgrade of long-term U.S. debt by Standard & Poor’s heightened investors’ appetite for money market instruments, sparking a flight to quality. Amid that backdrop, investors turned to regions such as Canada and Australia as well, pressuring yields lower in these regions in the process.

From a supply standpoint, issuance declined across several money market sectors, including commercial paper, Treasury bills, and government agency discount notes. The Fed concluded its Supplemental Financing Program as the government ran up against budgetary constraints, removing approximately $200 billion of Treasury bills from the market. Issuance of government agency discount notes from the Federal Home Loan Bank System declined sharply as well.

Positioning and Strategies. The fund’s investment adviser focused on stability of capital and ensured robust liquidity amid the volatile market backdrop, and strategically managed the portfolio based upon developing conditions. For example, the fund’s weighted average maturity (WAM) was proactively reduced from roughly 40 days early in the second half of 2011 to approximately 36 days by late September, as the euro zone’s debt crisis again took center stage. In addition, the fund’s holdings in Spain and Italy were eliminated as the crisis began to spread. Exposure to some European banks, most specifically those in the euro zone, were also selectively pared back. As a result of these changes and in an effort to maintain a stable net asset value, the adviser reduced the fund’s WAM to 32 days by the end of 2011.

As of 12/31/11:

Portfolio Composition By Maturity¹


	% of investments

1-15 Days		50.7%
16-30 Days		14.9%
31-60 Days		17.4%
61-90 Days		10.7%
91-120 Days		1.0%
More than 120 Days		5.3%

Statistics


Weighted Average Maturity³		32 Days
Credit Quality Of Holdings⁴% of portfolio		99.99% Tier 1

Portfolio Composition by Security Type


	% of investments

Commercial Paper
Asset Backed		18.5%
Financial Company		11.6%
Other		1.8%
Certificate Of Deposit		25.2%
Government Agency Debt²		17.5%
Other Instrument		1.0%
Other Note		1.1%
Variable Rate Demand Note		1.6%
Other Municipal Debt		0.5%
Repurchase Agreement
Government Agency		19.8%
Other		1.4%
Total		100.0%

An investment in a money fund is neither insured nor guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency. Although money funds seek to preserve the value of your investment at $1 per share, it is possible to lose money by investing in a money fund.

Portfolio holdings may have changed since the report date.


*		The investment adviser and its affiliates may recapture expenses or fees they voluntarily waived until the third anniversary of the end of the fiscal year in which such waiver occurs, subject to certain limitations. For more information on the potential impact of such recapture on future yields, see financial note 4.
¹		As shown in the Portfolio Holdings section of the shareholder report.
²		Includes debt issued by Straight A Funding LLC, which the U.S. Securities and Exchange Commission (SEC) has stated is permissible for money market funds to treat as government securities for the purpose of compliance with the diversification requirements of Rule 2a-7(c)(4)(i).
³		Money funds must maintain a dollar-weighted average maturity of no longer than 60 days and cannot invest in any security whose effective maturity is longer than 397 days (approximately 13 months).
⁴		Based on ratings from Moody’s Investors Service, Standard & Poor’s Corp. and/or Fitch Ratings or, if unrated, is determined to be of comparable quality. The fund may use different ratings provided by other rating agencies for purposes of determining compliance with the fund’s investment policies. The fund itself has not been rated by an independent credit rating agency.

6 Schwab Retirement Advantage Money Fund

Performance and Fund Facts as of 12/31/11

The performance data quoted represents past performance. Past performance does not guarantee future results. Current performance may be lower or higher than performance data quoted. To obtain more current performance information, please visit www.schwabfunds.com/prospectus.

Weighted Average Maturity Trend for previous 12 months

Money funds must maintain a dollar-weighted average maturity of no longer than 60 days, and cannot invest in any security whose effective maturity is longer than 397 days (approximately 13 months).

7-day Average Yield Trend for previous 12 months

Seven-Day Yields

The seven-day yield is the income generated by the fund’s portfolio holdings minus the fund’s operating expenses. The seven-day yields are calculated using standard SEC formulas. The effective yield includes the effect of reinvesting daily dividends. Please remember that money market fund yields fluctuate.


		Schwab Retirement Advantage Money Fund

Ticker Symbol		SWIXX
Minimum Initial Investment¹		$25,000


Seven-Day Yield²		0.01%


Seven-Day Yield–Without Contractual Expense Limitation³		-0.13%


Seven-Day Effective Yield²		0.01%

Portfolio holdings may have changed since the report date.


¹		Please see prospectus for further detail and eligibility requirements.
²		Yield reflects the effect of the fund’s agreement with the investment adviser and its affiliates to limit each share class’s total annual operating expenses to certain levels (contractual expense limitation). In addition, the investment adviser and its affiliates have voluntarily waived expenses in excess of the contractual expense limitation to maintain a positive net yield for the fund (voluntary expense waiver). Without the contractual expense limitation and the voluntary expense waiver, the fund’s yield would have been lower. For additional details, see financial note 4.
³		Yield does not reflect the effect of the contractual expense limitation, but does reflect the effect of the voluntary expense waiver. The voluntary expense waiver added 0.24% to the seven-day yield.

Schwab Retirement Advantage Money Fund 7

Schwab Investor Money Fund

The Schwab Investor Money Fund (the fund) seeks the highest current income consistent with stability of capital and liquidity. To pursue its goal, the fund invests in high-quality short-term money market investments issued by U.S. and foreign issuers. Examples of these securities include commercial paper, certificates of deposit, repurchase agreements, variable-rate debt securities, and obligations issued by the U.S. government, its agencies, or instrumentalities. Since December 2008, when the Federal Reserve (the Fed) first cut short-term interest rates to present-day levels, yields on money market securities have remained historically low. This trend continued during the report period.

Positioning and Strategies. The fund’s investment adviser focused on stability of capital and ensured robust liquidity amid the volatile market backdrop, and strategically managed the portfolio based upon developing conditions. For example, the fund’s weighted average maturity (WAM) was proactively reduced from roughly 41 days in mid-July to approximately 35 days by mid-September, as the euro zone’s debt crisis again took center stage. In addition, the fund’s holdings in Spain and Italy were eliminated as the crisis began to spread. Exposure to some European banks, most specifically those in the euro zone, were also selectively pared back. As a result of these changes and in an effort to maintain a stable net asset value, the adviser reduced the fund’s WAM to 33 days by the end of 2011.

As of 12/31/11:

Portfolio Composition By Maturity¹


	% of investments

1-15 Days		53.1%
16-30 Days		13.8%
31-60 Days		13.0%
61-90 Days		10.4%
91-120 Days		4.4%
More than 120 Days		5.3%

Statistics


Weighted Average Maturity³		33 Days
Credit Quality Of Holdings⁴% of portfolio		99.99% Tier 1

Portfolio Composition by Security Type


	% of investments

Commercial Paper
Asset Backed		18.0%
Financial Company		8.9%
Other		3.2%
Certificate Of Deposit		27.1%
Government Agency Debt²		18.0%
Other Instrument		0.9%
Other Note		3.0%
Variable Rate Demand Note		1.3%
Repurchase Agreement
Government Agency		18.8%
Other		0.8%
Total		100.0%

Portfolio holdings may have changed since the report date.


*		The investment adviser and its affiliates may recapture expenses or fees they voluntarily waived until the third anniversary of the end of the fiscal year in which such waiver occurs, subject to certain limitations. For more information on the potential impact of such recapture on future yields, see financial note 4.
¹		As shown in the Portfolio Holdings section of the shareholder report.
²		Includes debt issued by Straight A Funding LLC, which the U.S. Securities and Exchange Commission (SEC) has stated is permissible for money market funds to treat as government securities for the purpose of compliance with the diversification requirements of Rule 2a-7(c)(4)(i).
³		Money funds must maintain a dollar-weighted average maturity of no longer than 60 days and cannot invest in any security whose effective maturity is longer than 397 days (approximately 13 months).
⁴		Based on ratings from Moody’s Investors Service, Standard & Poor’s Corp. and/or Fitch Ratings or, if unrated, is determined to be of comparable quality. The fund may use different ratings provided by other rating agencies for purposes of determining compliance with the fund’s investment policies. The fund itself has not been rated by an independent credit rating agency.

8 Schwab Investor Money Fund

Performance and Fund Facts as of 12/31/11

Weighted Average Maturity Trend for previous 12 months

Money funds must maintain a dollar-weighted average maturity of no longer than 60 days, and cannot invest in any security whose effective maturity is longer than 397 days (approximately 13 months).

7-day Average Yield Trend for previous 12 months

Seven-Day Yields


		Schwab Investor Money Fund

Ticker Symbol		SWRXX
Minimum Initial Investment¹		$1 Retirement Plan Participants $2,500 Other Investors


Seven-Day Yield²		0.01%


Seven-Day Yield–Without Contractual Expense Limitation³		-0.03%


Seven-Day Effective Yield²		0.01%

Portfolio holdings may have changed since the report date.


¹		Please see prospectus for further detail and eligibility requirements.
²		Yield reflects the effect of the fund’s agreement with the investment adviser and its affiliates to limit each share class’s total annual operating expenses to certain levels (contractual expense limitation). In addition, the investment adviser and its affiliates have voluntarily waived expenses in excess of the contractual expense limitation to maintain a positive net yield for the fund (voluntary expense waiver). Without the contractual expense limitation and the voluntary expense waiver, the fund’s yield would have been lower. For additional details, see financial note 4.
³		Yield does not reflect the effect of the contractual expense limitation, but does reflect the effect of the voluntary expense waiver. The voluntary expense waiver added 0.38% to the seven-day yield.

Schwab Investor Money Fund 9

Fund Expenses (Unaudited)

Examples for a $1,000 Investment

As a fund shareholder, you incur two types of costs: transaction costs, such as redemption fees; and, ongoing costs, such as management fees, transfer agent and shareholder services fees, and other fund expenses.

The expense examples below are intended to help you understand your ongoing cost (in dollars) of investing in a fund and to compare this cost with the ongoing cost of investing in other mutual funds. These examples are based on an investment of $1,000 invested for six months beginning July 1, 2011 and held through December 31, 2011.

Actual Return lines in the table below provide information about actual account values and actual expenses. You may use this information, together with the amount you invested, to estimate the expenses that you paid over the period. To do so, simply divide your account value by $1,000 (for example, an $8,600 account value ¸ $1,000 = 8.6), then multiply the result by the number given for your fund or share class under the heading entitled “Expenses Paid During Period.”

Hypothetical Return lines in the table below provide information about hypothetical account values and hypothetical expenses based on a fund’s or share class’ actual expense ratio and an assumed return of 5% per year before expenses. Because the return used is not an actual return, it may not be used to estimate the actual ending account value or expenses you paid for the period.

You may use this information to compare the ongoing costs of investing in the fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only, and do not reflect any transactional costs, such as redemption fees. If these transactional costs were included, your costs would have been higher.


					Ending
			Beginning		Account Value		Expenses Paid
	Expense Ratio¹		Account Value		(Net of Expenses)		During Period²
	(Annualized)		at 7/1/11		at 12/31/11		7/1/11–12/31/11

Schwab Retirement Advantage Money Fund^®
Actual Return		0.21%	$	1,000	$	1,000.10	$	1.06
Hypothetical 5% Return		0.21%	$	1,000	$	1,024.15	$	1.07


Schwab Investor Money Fund^®
Actual Return		0.21%	$	1,000	$	1,000.10	$	1.06
Hypothetical 5% Return		0.21%	$	1,000	$	1,024.15	$	1.07


¹		Based on the most recent six-month expense ratio; may differ from the expense ratio provided in the Financial Highlights which covers a 12-month period.
²		Expenses for each fund are equal to its annualized expense ratio, multiplied by the average account value over the period, multiplied by 184 days of the period, and divided by 365 days of the fiscal year.

10 Schwab Retirement Advantage Money Fund & Schwab Investor Money Fund

Schwab Retirement Advantage Money Fund^®

Financial Statements

Financial Highlights


	1/1/11–			1/1/10–			1/1/09–			1/1/08–			1/1/07–
	12/31/11			12/31/10			12/31/09			12/31/08			12/31/07


Per-Share Data ($)

Net asset value at beginning of period		1.00			1.00			1.00			1.00			1.00

Income (loss) from investment operations:
Net investment income (loss)		0.00	¹		0.00	¹		0.00	¹		0.03			0.05
Net realized and unrealized gains (losses)		0.00	¹		0.00	^1,2		(0.00	)¹		—			—

Total from investment operations		0.00	¹		0.00	¹		0.00	¹		0.03			0.05
Less distributions:
Distributions from net investment income		(0.00	)¹		(0.00	)¹		(0.00	)¹		(0.03	)		(0.05	)

Net asset value at end of period		1.00			1.00			1.00			1.00			1.00

Total return (%)		0.01			0.01			0.20			2.56			4.96

Ratios/Supplemental Data (%)

Ratios to average net assets:
Net operating expenses		0.25	³		0.34	³		0.44	^3,4		0.48	⁴		0.48
Gross operating expenses		0.60			0.60			0.62			0.60			0.62
Net investment income (loss)		0.01			0.01			0.20			2.52			4.85
Net assets, end of period ($ x 1,000,000)		846			873			954			984			946

¹ Per-share amount was less than $0.01.

² Net realized and unrealized gains (losses) ratio includes payment from affiliate. (See financial note 4)

³ Reflects the effect of a voluntary expense waiver in excess of the contractual expense limitation. (See financial note 4)

⁴ The ratio of net operating expenses would have been 0.41% for 2009 and 0.47% for 2008, respectively, if certain non-routine expenses (participation fees for the Treasury’s Temporary Guarantee Program for Money Market Funds) had not been included.

See financial notes 11

Schwab Retirement Advantage Money Fund

Portfolio Holdings as of December 31, 2011

This section shows all the securities in the fund’s portfolio and their values as of the report date.

The fund files its complete schedule of portfolio holdings with the SEC for the first and third quarter of each fiscal year on Form N-Q. The fund’s Form N-Q is available on the SEC’s website at http://www.sec.gov and may be viewed and copied at the SEC’s Public Reference Room in Washington, D.C. Call 1-800-SEC-0330 for information on the operation of the Public Reference Room. The fund also files a complete schedule of portfolio holdings with the SEC monthly on Form N-MFP which is available 60 days after the end of the month to which the information pertains. A monthly schedule of portfolio holdings is also available by visiting the fund’s website at www.schwabfunds.com/prospectus along with a link to the fund’s Form N-MFP filings on the SEC’s website.

For fixed rate obligations, the rate shown is the coupon rate (the rate established when the obligation was issued) and if the coupon rate is not available, the effective yield at the time of purchase is shown. For variable-rate obligations, the rate shown is the interest rate as of the report date. If the security’s structure includes one of a number of maturity-shortening provisions set forth in Rule 2a-7, such as an interest rate reset, demand feature or put feature, the effective maturity date is disclosed. In addition, the second maturity date shown is either the date on which the principal amount must be paid or the date payment must be made pursuant to a demand feature. If the effective maturity and maturity date are the same, the date will appear in the maturity date column.


				Cost		Value
Holdings by Category				($)		($)

	74	.4%	Fixed-Rate Obligations		629,180,351		629,180,351
	8	.7%	Variable-Rate Obligations		73,709,677		73,709,677
	22	.3%	Repurchase Agreements		188,656,744		188,656,744


	105	.4%	Total Investments		891,546,772		891,546,772
	(5	.4)%	Other Assets and Liabilities, Net				(45,776,999	)


	100	.0%	Net Assets				845,769,773


						Face
			Effective	Maturity		Amount		Value
Issuer	Footnotes	Rate	Maturity	Date		($)		($)

Fixed-Rate Obligations 74.4% of net assets

Asset Backed Commercial Paper 19.5%
Amsterdam Funding Corp	a,b,c	0.32%			01/13/12		5,000,000		4,999,467
	a,b,c	0.30%			01/19/12		1,000,000		999,850

Argento Variable Funding Co, LLC	a,b,c	0.31%			01/03/12		2,000,000		1,999,966
	a,b,c	0.31%			01/05/12		2,000,000		1,999,931

CAFCO, LLC	a,b,c	0.31%			01/23/12		3,000,000		2,999,432
	a,b,c	0.40%			02/01/12		3,000,000		2,998,967
	a,b,c	0.39%			02/03/12		2,000,000		1,999,285

Cancara Asset Securitisation, LLC	a,b,c	0.31%			01/10/12		6,000,000		5,999,535
	a,b,c	0.30%			01/13/12		6,000,000		5,999,400

Chariot Funding, LLC	a,b,c	0.22%			01/09/12		7,000,000		6,999,658
	a,b,c	0.22%			01/24/12		5,000,000		4,999,297
	a,b,c	0.23%			02/03/12		1,000,000		999,789
	a,b,c	0.23%			02/07/12		1,000,000		999,764

Ciesco, LLC	a,b,c	0.31%			01/17/12		2,000,000		1,999,724
	a,b,c	0.40%			02/01/12		5,000,000		4,998,278

CRC Funding, LLC	a,b,c	0.31%			01/18/12		2,000,000		1,999,707
	a,b,c	0.40%			02/01/12		4,000,000		3,998,622
	a,b,c	0.33%			02/14/12		4,000,000		3,998,387
	a,b,c	0.58%			05/17/12		1,000,000		997,793

Crown Point Capital Company, LLC	a,b,c	0.50%			01/05/12		2,000,000		1,999,889

Fairway Finance Co, LLC	a,b,c	0.23%			01/05/12		1,037,000		1,036,973
	a,b,c	0.22%			01/18/12		5,000,000		4,999,480
	a,b,c	0.18%			02/22/12		1,000,000		999,740

Govco, LLC	a,b,c	0.32%			01/09/12		1,000,000		999,929
	a,b,c	0.40%			01/17/12		1,000,000		999,822

12 See financial notes

Schwab Retirement Advantage Money Fund

Portfolio Holdings continued


						Face
			Effective	Maturity		Amount		Value
Issuer	Footnotes	Rate	Maturity	Date		($)		($)
	a,b,c	0.34%			02/15/12		5,000,000		4,997,875
	a,b,c	0.37%			02/16/12		1,000,000		999,527
	a,b,c	0.42%			02/28/12		12,000,000		11,991,880
	a,b,c	0.50%			04/26/12		1,000,000		998,389
	a,b,c	0.60%			06/14/12		1,000,000		997,250

Grampian Funding, LLC	a,b,c	0.31%			01/09/12		1,000,000		999,931
	a,b,c	0.31%			01/10/12		2,000,000		1,999,845
	a,b,c	0.31%			01/23/12		1,000,000		999,810
	a,b,c	0.32%			01/23/12		2,000,000		1,999,609
	a,b,c	0.43%			02/02/12		1,000,000		999,618

Jupiter Securitization Corp	a,b,c	0.22%			01/10/12		1,000,000		999,945
	a,b,c	0.22%			02/07/12		2,000,000		1,999,548
	a,b,c	0.18%			02/08/12		8,000,000		7,998,480
	a,b,c	0.22%			02/16/12		3,000,000		2,999,157
	a,b,c	0.22%			03/05/12		2,000,000		1,999,218

Market Street Funding Corp	a,b,c	0.23%			01/10/12		1,000,000		999,942
	a,b,c	0.23%			02/01/12		1,000,000		999,802
	a,b,c	0.24%			02/21/12		1,000,000		999,660
	a,b,c	0.25%			03/02/12		3,000,000		2,998,729
	a,b,c	0.23%			03/16/12		2,000,000		1,999,042

Old Line Funding, LLC	a,b,c	0.23%			01/20/12		6,000,000		5,999,272

Sheffield Receivables Corp	a,b,c	0.26%			01/05/12		6,000,000		5,999,827

Solitaire Funding, LLC	a,b,c	0.28%			01/11/12		1,000,000		999,922
	a,b,c	0.26%			01/17/12		1,200,000		1,199,861

Thames Asset Global Securitization No. 1, Inc	a,b,c	0.32%			01/12/12		1,000,000		999,902
	a,b,c	0.30%			01/20/12		4,000,000		3,999,367
	a,b,c	0.31%			01/20/12		3,000,000		2,999,509

Thunder Bay Funding, LLC	a,b,c	0.22%			01/20/12		5,000,000		4,999,419
	a,b,c	0.22%			03/14/12		3,000,000		2,998,662

Variable Funding Capital Corp	a,b,c	0.22%			01/24/12		4,000,000		3,999,438
	a,b,c	0.25%			01/25/12		1,000,000		999,833

Windmill Funding Corp	a,b,c	0.30%			01/12/12		1,000,000		999,908
	a,b,c	0.28%			02/02/12		5,000,000		4,998,756

									165,193,618

Financial Company Commercial Paper 10.6%
Australia & New Zealand Banking Group Ltd		0.28%			02/10/12		2,000,000		1,999,389

Barclays US Funding Corp	a	0.21%			01/19/12		5,000,000		4,999,475
	a	0.20%			01/27/12		2,000,000		1,999,711

Commonwealth Bank of Australia	c	0.60%			06/15/12		5,000,000		4,986,167
	c	0.63%			06/15/12		1,000,000		997,095

Danske Corp	a,c	0.30%			01/09/12		2,000,000		1,999,867

General Electric Capital Corp		0.26%			01/11/12		8,000,000		7,999,422
		0.22%			01/18/12		12,000,000		11,998,753
		0.30%			02/27/12		2,000,000		1,999,050

HSBC USA, Inc		0.25%			01/24/12		3,000,000		2,999,521
		0.27%			03/05/12		1,000,000		999,520

See financial notes 13

Schwab Retirement Advantage Money Fund

Portfolio Holdings continued


						Face
			Effective	Maturity		Amount		Value
Issuer	Footnotes	Rate	Maturity	Date		($)		($)

JP Morgan Chase & Co		0.01%			01/03/12		6,000,000		5,999,997

Nordea North America, Inc	a	0.20%			01/20/12		3,947,000		3,946,583
	a	0.15%			02/01/12		3,000,000		2,999,613

RBS Holdings USA Inc	a,c	0.31%			01/05/12		2,000,000		1,999,931

Skandinaviska Enskilda Banken AB		0.25%			01/12/12		1,000,000		999,924

State Street Corp		0.20%			03/13/12		3,000,000		2,998,800

UBS Finance (Delaware), Inc	a	0.17%			01/03/12		6,000,000		5,999,943
	a	0.17%			01/06/12		4,000,000		3,999,908

Westpac Banking Corp	c	0.27%			01/06/12		9,000,000		8,999,662
	c	0.48%			03/16/12		8,000,000		7,992,083
	c	0.47%			03/19/12		1,000,000		998,982

									89,913,396

Other Commercial Paper 1.9%
BHP Billiton Finance (USA) Ltd	a,c	0.19%			02/16/12		1,000,000		999,757

Reckitt Benckiser Treasury Services PLC	a,c	0.46%			02/10/12		3,000,000		2,998,466

Toyota Motor Credit Corp	a	0.28%			03/02/12		3,000,000		2,998,577
	a	0.50%			04/30/12		5,000,000		4,991,667
	a	0.57%			05/16/12		2,000,000		1,995,693

Univ of California
CP Series B		0.27%			02/23/12		2,000,000		1,999,205

									15,983,365

Certificate of Deposit 24.6%
Australia & New Zealand Banking Group Ltd		0.60%			05/30/12		1,000,000		1,000,000

Bank of Montreal		0.16%			01/03/12		1,000,000		1,000,000
		0.12%			01/05/12		2,000,000		2,000,000
		0.25%			01/06/12		4,000,000		4,000,000
		0.07%			01/11/12		3,000,000		3,000,000
		0.23%			03/05/12		4,000,000		4,000,000

Bank of Nova Scotia		0.25%			01/13/12		5,000,000		5,000,000
		0.29%			01/17/12		1,000,000		1,000,000
		0.29%			01/24/12		8,000,000		8,000,000
		0.50%			05/15/12		2,000,000		2,000,000

Bank of the West		0.26%			01/18/12		5,000,000		5,000,000

Bank of Tokyo Mitsubishi UFJ, Ltd		0.08%			01/06/12		3,000,000		3,000,000
		0.22%			02/01/12		5,000,000		5,000,000

Branch Banking & Trust Co		0.29%			02/10/12		5,000,000		5,000,000

Canadian Imperial Bank of Commerce		0.08%			01/20/12		8,000,000		8,000,000
		0.68%			09/27/12		9,000,000		9,000,000

Citibank, NA		0.52%			05/29/12		8,000,000		8,000,000
		0.52%			05/30/12		2,000,000		2,000,000
		0.60%			06/20/12		1,000,000		1,000,000

Credit Suisse AG		0.21%			01/05/12		12,000,000		12,000,000
		0.21%			01/06/12		5,000,000		5,000,000

14 See financial notes

Schwab Retirement Advantage Money Fund

Portfolio Holdings continued


						Face
			Effective	Maturity		Amount		Value
Issuer	Footnotes	Rate	Maturity	Date		($)		($)

Lloyds TSB Bank PLC		0.22%			01/19/12		6,000,000		6,000,000
		0.22%			01/30/12		1,000,000		1,000,000

Mitsubishi UFJ Trust & Banking Corp		0.24%			01/27/12		4,000,000		4,000,000

Mizuho Corporate Bank Ltd		0.14%			01/05/12		4,000,000		4,000,000
		0.20%			01/26/12		3,000,000		3,000,000

National Australia Bank Ltd		0.36%			03/07/12		1,000,000		1,000,005
		0.37%			03/20/12		3,000,000		3,000,000
		0.50%			04/05/12		7,000,000		7,000,000

Royal Bank of Scotland PLC		0.28%			01/04/12		5,000,000		5,000,000
		0.28%			01/05/12		3,000,000		3,000,000
		0.28%			01/12/12		4,000,000		4,000,000
		0.28%			01/24/12		1,000,000		1,000,000

Skandinaviska Enskilda Banken AB		0.32%			02/01/12		1,000,000		1,000,000

State Street Bank & Trust Company, NA		0.10%			01/12/12		6,000,000		6,000,000

Sumitomo Mitsui Banking Corp		0.17%			01/11/12		3,000,000		3,000,000

Sumitomo Trust & Banking Co Ltd		0.17%			01/09/12		9,000,000		9,000,000
		0.24%			01/27/12		3,000,000		3,000,000

Swedbank AB		0.20%			01/05/12		2,000,000		2,000,000

Toronto-Dominion Bank		0.06%			01/03/12		20,000,000		20,000,000
		0.24%			01/10/12		9,000,000		9,000,000
		0.21%			04/02/12		1,000,000		1,000,000
		0.38%			05/01/12		9,000,000		9,000,000

UBS AG		0.20%			01/17/12		2,000,000		2,000,000
		0.21%			01/30/12		4,000,000		4,000,000

Union Bank, NA		0.40%			03/08/12		3,000,000		3,000,000

									208,000,005

Government Agency Debt 16.7%
Fannie Mae		0.04%			02/01/12		10,000,000		9,999,699
		0.02%			02/29/12		3,000,000		2,999,926
		0.02%			03/08/12		7,000,000		6,999,740

Federal Home Loan Bank		0.02%			01/13/12		5,000,000		4,999,975
		0.03%			02/10/12		1,000,000		999,967
		0.03%			02/17/12		5,000,000		4,999,804
		0.02%			03/02/12		3,000,000		2,999,898
		0.02%			03/14/12		10,000,000		9,999,595
		0.02%			03/16/12		10,000,000		9,999,583

Freddie Mac		0.03%			01/03/12		1,000,000		999,998
		0.03%			01/09/12		2,000,000		1,999,987
		0.03%			02/06/12		7,000,000		6,999,790
		0.03%			02/13/12		1,000,000		999,964
		0.04%			02/21/12		2,000,000		1,999,901
		0.02%			03/05/12		12,000,000		11,999,573
		0.01%			03/15/12		2,000,000		1,999,959
		0.02%			03/19/12		6,000,000		5,999,740

Straight A Funding, LLC	a,b,c,f	0.19%			01/04/12		12,000,000		11,999,810
	a,b,c,f	0.19%			01/06/12		10,000,000		9,999,736
	a,b,c,f	0.19%			01/10/12		2,000,000		1,999,905

See financial notes 15

Schwab Retirement Advantage Money Fund

Portfolio Holdings continued

Face

Effective

Maturity

Amount

Value

Issuer

Footnotes

Rate

Maturity

Date

($)

a,b,c,f

0.10%

01/19/12

5,000,000

4,999,750

a,b,c,f

0.19%

02/09/12

12,100,000

12,097,509

a,b,c,f

0.19%

02/13/12

5,000,000

4,998,865

a,b,c,f

0.19%

03/01/12

5,000,000

4,998,417

a,b,c,f

0.19%

03/12/12

3,000,000

2,998,876

141,089,967

Other Instrument 1.1%

Bank of Nova Scotia

0.01%

01/03/12

9,000,000

9,000,000

Total Fixed-Rate Obligations

(Cost $629,180,351)

629,180,351

Variable-Rate Obligations 8.7% of net assets

Financial Company Commercial Paper 1.5%

Commonwealth Bank of Australia

0.49%

02/21/12

05/18/12

13,000,000

13,000,000

Certificate of Deposit 2.0%

Canadian Imperial Bank of Commerce

0.32%

01/03/12

2,000,000

0.35%

01/09/12

07/09/12

1,000,000

Royal Bank of Canada

0.27%

01/03/12

03/27/12

6,000,000

Westpac Banking Corp

0.36%

01/03/12

05/01/12

5,000,000

0.36%

01/03/12

07/03/12

3,000,000

17,000,000

Government Agency Debt 1.8%

Freddie Mac

0.29%

01/10/12

11/09/12

15,000,000

15,000,000

Variable Rate Demand Note 1.7%

New York City IDA

Industrial RB (Allway Tools) Series 1997

0.64%

01/06/12

95,000

Palm Springs, CA

COP (Downtown Parking) Series 2002A

0.36%

01/06/12

7,605,000

Texas

TRAN Series 2011A

c,g

0.07%

01/03/12

6,950,000

14,650,000

Other Note 1.2%

JPMorgan Chase Bank, NA

0.33%

01/23/12

01/18/13

10,000,000

Whistlejacket Capital, LLC

c,d,e

n/a

59,677

10,059,677

Other Municipal Debt 0.5%

Univ of California

General Revenue Bonds Series 2011 Y-1

0.35%

01/01/12

07/01/12

4,000,000

4,000,000

Total Variable-Rate Obligations

(Cost $73,709,677)

73,709,677

16 See financial notes

Schwab Retirement Advantage Money Fund

Portfolio Holdings continued


						Face/
						Maturity
			Effective	Maturity		Amount		Value
Issuer	Footnotes	Rate	Maturity	Date		($)		($)

Repurchase Agreements 22.3% of net assets

Government Agency Repurchase Agreement 20.9%
Barclays Capital, Inc
Tri-Party Repurchase Agreement Collateralized by U.S. Government Agency Securities with a value of $4,178,236, issued 09/26/11, due 01/03/12.		0.17%			01/03/12		4,001,870		4,000,000
Tri-Party Repurchase Agreement Collateralized by U.S. Government Agency Securities with a value of $33,600,001, issued 10/14/11, due 01/13/12.		0.19%			01/06/12		32,014,187		32,000,000

BNP Paribas Securities Corp
Tri-Party Repurchase Agreement Collateralized by U.S. Government Agency Securities with a value of $13,650,000, issued 12/30/11, due 01/03/12.		0.06%			01/03/12		13,000,087		13,000,000
Tri-Party Repurchase Agreement Collateralized by U.S. Government Agency Securities with a value of $2,100,000, issued 11/22/11, due 01/03/12.		0.22%			01/03/12		2,000,513		2,000,000

Credit Suisse Securities (USA), LLC
Tri-Party Repurchase Agreement Collateralized by U.S. Government Agency Securities with a value of $3,729,917, issued 12/30/11, due 01/03/12.		0.04%			01/03/12		3,656,760		3,656,744
Tri-Party Repurchase Agreement Collateralized by U.S. Government Agency Securities with a value of $20,401,117, issued 12/27/2011, due 01/03/2012.		0.06%			01/03/12		20,000,234		20,000,000

Deutsche Bank Securities, Inc
Tri-Party Repurchase Agreement Collateralized by U.S. Government Agency Securities with a value of $62,400,000, issued 12/30/11, due 01/03/12.		0.08%			01/03/12		60,000,533		60,000,000
Tri-Party Repurchase Agreement Collateralized by U.S. Government Agency Securities with a value of $7,263,099, issued 10/26/11, due 01/05/12.		0.18%			01/05/12		7,002,485		7,000,000
Tri-Party Repurchase Agreement Collateralized by U.S. Government Agency Securities with a value of $8,340,776 issued 10/11/11, due 01/09/12.		0.19%			01/06/12		8,003,673		8,000,000
Tri-Party Repurchase Agreement Collateralized by U.S. Government Agency Securities with a value of $8,326,305, issued 12/13/11, due 02/09/12.		0.20%			01/06/12		8,001,067		8,000,000

Merrill Lynch, Pierce, Fenner & Smith, Inc
Tri-Party Repurchase Agreement Collateralized by U.S. Government Agency Securities with a value of $19,570,000, issued 11/28/11, due 01/03/12.		0.23%			01/03/12		19,004,370		19,000,000

									176,656,744

Other Repurchase Agreement 1.4%
Goldman Sachs & Co
Tri-Party Repurchase Agreement Collateralized by common stocks and ETFs with a value of $1,050,017, issued 10/05/11, due 02/02/12	d	0.73%			02/02/12		1,002,433		1,000,000
Tri-Party Repurchase Agreement Collateralized by common stocks and ETFs with a value of $4,200,056, issued 11/01/11, due 02/14/12.	d	0.65%			02/14/12		4,007,583		4,000,000
Tri-Party Repurchase Agreement Collateralized by common stocks and ETFs with a value of $6,300,049, issued 10/24/11, due 02/21/12	d	0.76%			02/21/12		6,015,200		6,000,000

See financial notes 17

Schwab Retirement Advantage Money Fund

Portfolio Holdings continued

Face/

Maturity

Effective

Maturity

Amount

Value

Issuer

Footnotes

Rate

Maturity

Date

($)

Tri-Party Repurchase Agreement Collateralized by common stocks and ETFs with a value of $1,050,017, issued 11/16/11, due 02/29/12.

0.69%

02/29/12

1,002,013

1,000,000

12,000,000

Total Repurchase Agreements

(Cost $188,656,744)

188,656,744

End of Investments.

At 12/31/11, the tax basis cost of the fund’s investments was $891,546,772.


a		Credit-enhanced security.
b		Asset-backed security.
c		Securities exempt from registration under Rule 144A of the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registrations, normally to qualified institutional buyers. At the period end, the value of these amounted to $271,268,173 or 32.1% of net assets.
d		Illiquid security. At the period end, the value of these amounted to $12,059,677 or 1.4% of net assets.
e		Whistlejacket notes are in receivership, and the fund elected to sell all of its Whistlejacket notes at auction (4/29/2009). The remaining investment represents an interest in a small residual fund that is being held to cover any remaining expenses and liabilities associated with receivership.
f		The U.S. Securities and Exchange Commission has stated that it is permissible for money market funds to treat Straight A Funding LLC securities as government securities for the purpose of compliance with the diversification requirements of Rule 2a-7(c)(4)(i).
g		Liquidity-enhanced security.
h		Time Deposit
i		Extendible Note - Investor Option


COP —		Certificate of participation
CP —		Commercial paper
IDA —		Industrial development agency/authority
RB —		Revenue bond
TRAN —		Tax and revenue anticipation note

18 See financial notes

Schwab Investor Money Fund^®

Financial Statements

Financial Highlights


	1/1/11–			1/1/10–			1/1/09–			1/1/08–			1/1/07–
	12/31/11			12/31/10			12/31/09			12/31/08			12/31/07


Per-Share Data ($)

Net asset value at beginning of period		1.00			1.00			1.00			1.00			1.00

Income (loss) from investment operations:
Net investment income (loss)		0.00	¹		0.00	¹		0.00	¹		0.02			0.05
Net realized and unrealized gains (losses)		0.00	¹		0.00	^1,2		(0.00	)¹		—			—

Total from investment operations		0.00	¹		0.00	¹		0.00	¹		0.02			0.05
Less distributions:
Distributions from net investment income		(0.00	)¹		(0.00	)¹		(0.00	)¹		(0.02	)		(0.05	)

Net asset value at end of period		1.00			1.00			1.00			1.00			1.00

Total return (%)		0.01			0.01			0.16			2.41			4.82

Ratios/Supplemental Data (%)

Ratios to average net assets:
Net operating expenses		0.25	³		0.34	³		0.51	^3,4		0.60			0.62
Gross operating expenses		0.62			0.62			0.64			0.62			0.63
Net investment income (loss)		0.01			0.01			0.17			2.37			4.71
Net assets, end of period ($ x 1,000,000)		1,333			1,495			1,832			2,360			2,089

¹ Per-share amount was less than $0.01.

² Net realized and unrealized gains (losses) ratio includes payment from affiliate. (See financial note 4)

³ Reflects the effect of a voluntary expense waiver in excess of the contractual expense limitation. (See financial note 4)

⁴ The ratio of net operating expenses would have been 0.48% if certain non-routine expenses (participation fees for the Treasury’s Temporary Guarantee Program for Money Market Funds) had not been incurred.

22 See financial notes

Schwab Investor Money Fund

Portfolio Holdings as of December 31, 2011

This section shows all the securities in the fund’s portfolio and their values as of the report date.


				Cost		Value
Holdings by Category				($)		($)

	71	.0%	Fixed-Rate Obligations		946,141,946		946,141,946
	9	.3%	Variable-Rate Obligations		123,803,914		123,803,914
	19	.6%	Repurchase Agreements		260,856,856		260,856,856


	99	.9%	Total Investments		1,330,802,716		1,330,802,716
	0	.1%	Other Assets and Liabilities, Net				1,880,366


	100	.0%	Net Assets				1,332,683,082


						Face
			Effective	Maturity		Amount		Value
Issuer	Footnotes	Rate	Maturity	Date		($)		($)

Fixed-Rate Obligations 71.0% of net assets

Asset Backed Commercial Paper 18.0%
Alpine Securitization Corp	a,b,c	0.23%			01/12/12		6,000,000		5,999,578

Amsterdam Funding Corp	a,b,c	0.32%			01/05/12		1,000,000		999,964
	a,b,c	0.32%			01/09/12		4,000,000		3,999,716
	a,b,c	0.32%			01/13/12		3,000,000		2,999,680
	a,b,c	0.30%			01/24/12		3,000,000		2,999,425

Argento Variable Funding Co, LLC	a,b,c	0.31%			01/03/12		1,000,000		999,983
	a,b,c	0.31%			01/05/12		8,000,000		7,999,724

CAFCO, LLC	a,b,c	0.31%			01/18/12		4,000,000		3,999,414
	a,b,c	0.31%			01/23/12		2,000,000		1,999,621
	a,b,c	0.37%			01/25/12		1,000,000		999,753
	a,b,c	0.40%			02/01/12		4,000,000		3,998,622
	a,b,c	0.39%			02/03/12		3,000,000		2,998,928

Cancara Asset Securitisation, LLC	a,b,c	0.40%			01/09/12		3,000,000		2,999,733
	a,b,c	0.31%			01/10/12		6,000,000		5,999,535
	a,b,c	0.30%			01/13/12		7,000,000		6,999,300
	a,b,c	0.31%			01/17/12		3,000,000		2,999,587

Chariot Funding, LLC	a,b,c	0.22%			01/09/12		1,000,000		999,951
	a,b,c	0.22%			01/23/12		3,000,000		2,999,597
	a,b,c	0.22%			01/24/12		3,000,000		2,999,578
	a,b,c	0.23%			02/03/12		1,000,000		999,789
	a,b,c	0.23%			02/07/12		1,000,000		999,764
	a,b,c	0.16%			02/14/12		8,000,000		7,998,436

Ciesco, LLC	a,b,c	0.33%			01/12/12		1,000,000		999,899
	a,b,c	0.40%			02/01/12		10,000,000		9,996,556

CRC Funding, LLC	a,b,c	0.27%			01/17/12		7,000,000		6,999,160
	a,b,c	0.33%			01/17/12		1,000,000		999,853
	a,b,c	0.37%			03/08/12		5,000,000		4,996,557

See financial notes 23

Schwab Investor Money Fund

Portfolio Holdings continued


						Face
			Effective	Maturity		Amount		Value
Issuer	Footnotes	Rate	Maturity	Date		($)		($)
	a,b,c	0.58%			05/17/12		1,000,000		997,793

Fairway Finance Co, LLC	a,b,c	0.22%			01/18/12		2,000,000		1,999,792
	a,b,c	0.18%			02/10/12		7,000,000		6,998,600
	a,b,c	0.18%			02/22/12		1,000,000		999,740

Govco, LLC	a,b,c	0.32%			01/03/12		1,000,000		999,982
	a,b,c	0.32%			01/04/12		1,000,000		999,973
	a,b,c	0.33%			01/10/12		1,000,000		999,918
	a,b,c	0.33%			01/17/12		3,000,000		2,999,560
	a,b,c	0.40%			01/17/12		1,000,000		999,822
	a,b,c	0.32%			01/19/12		1,000,000		999,840
	a,b,c	0.32%			01/20/12		1,000,000		999,831
	a,b,c	0.34%			02/15/12		11,000,000		10,995,325
	a,b,c	0.42%			02/28/12		9,000,000		8,993,910
	a,b,c	0.50%			04/24/12		2,000,000		1,996,833
	a,b,c	0.51%			04/24/12		1,000,000		998,385
	a,b,c	0.62%			06/19/12		1,000,000		997,072

Grampian Funding, LLC	a,b,c	0.31%			01/09/12		1,000,000		999,931
	a,b,c	0.31%			01/10/12		5,000,000		4,999,613
	a,b,c	0.31%			01/23/12		1,000,000		999,811
	a,b,c	0.32%			01/23/12		1,000,000		999,804
	a,b,c	0.43%			02/02/12		3,000,000		2,998,853

Jupiter Securitization Corp	a,b,c	0.23%			01/27/12		3,000,000		2,999,502
	a,b,c	0.23%			02/02/12		1,000,000		999,796
	a,b,c	0.22%			03/15/12		3,000,000		2,998,643

Market Street Funding Corp	a,b,c	0.23%			01/18/12		3,019,000		3,018,672
	a,b,c	0.23%			01/27/12		1,022,000		1,021,830
	a,b,c	0.23%			02/17/12		4,000,000		3,998,799
	a,b,c	0.23%			03/16/12		3,000,000		2,998,563
	a,b,c	0.23%			03/21/12		1,000,000		999,489

Sheffield Receivables Corp	a,b,c	0.26%			01/05/12		2,000,000		1,999,942
	a,b,c	0.25%			01/18/12		9,000,000		8,998,938

Solitaire Funding, LLC	a,b,c	0.28%			01/11/12		15,000,000		14,998,833

Thames Asset Global Securitization No. 1, Inc	a,b,c	0.32%			01/12/12		3,000,000		2,999,707
	a,b,c	0.30%			01/20/12		6,272,000		6,271,007
	a,b,c	0.31%			01/20/12		3,000,000		2,999,509

Thunder Bay Funding, LLC	a,b,c	0.23%			02/02/12		11,000,000		10,997,751
	a,b,c	0.22%			03/14/12		3,000,000		2,998,662

Variable Funding Capital Corp	a,b,c	0.25%			01/25/12		3,000,000		2,999,500

Windmill Funding Corp	a,b,c	0.32%			01/04/12		1,000,000		999,973
	a,b,c	0.30%			01/12/12		6,000,000		5,999,450
	a,b,c	0.30%			01/25/12		3,000,000		2,999,400

									239,254,057

Financial Company Commercial Paper 8.5%
Barclays US Funding Corp	a	0.21%			01/19/12		6,000,000		5,999,370
	a	0.20%			01/27/12		6,000,000		5,999,133

BNZ International Funding Ltd	a	0.34%			01/11/12		1,000,000		999,906

Commonwealth Bank of Australia	c	0.28%			01/04/12		5,000,000		4,999,883
	c	0.31%			01/20/12		1,000,000		999,836
	c	0.63%			06/15/12		4,000,000		3,988,380

24 See financial notes

Schwab Investor Money Fund

Portfolio Holdings continued


						Face
			Effective	Maturity		Amount		Value
Issuer	Footnotes	Rate	Maturity	Date		($)		($)

Danske Corp	a,c	0.30%			01/09/12		4,000,000		3,999,733

General Electric Capital Corp		0.20%			01/09/12		10,000,000		9,999,556
		0.24%			01/11/12		2,000,000		1,999,867
		0.22%			01/18/12		3,000,000		2,999,688
		0.30%			02/27/12		1,000,000		999,525
		0.28%			04/03/12		5,000,000		4,996,383
		0.28%			04/09/12		11,000,000		10,991,530

HSBC USA, Inc		0.27%			03/05/12		4,000,000		3,998,080
		0.27%			03/15/12		1,000,000		999,445

JP Morgan Chase & Co		0.01%			01/03/12		9,000,000		8,999,995

RBS Holdings USA Inc	a,c	0.31%			01/05/12		3,000,000		2,999,897

Skandinaviska Enskilda Banken AB		0.25%			01/12/12		1,000,000		999,924
		0.25%			01/17/12		3,000,000		2,999,667

State Street Corp		0.20%			03/13/12		3,000,000		2,998,800

UBS Finance (Delaware), Inc	a	0.17%			01/03/12		12,000,000		11,999,887
	a	0.17%			01/06/12		7,000,000		6,999,840

Westpac Banking Corp	c	0.48%			03/16/12		1,000,000		999,010
	c	0.47%			03/19/12		11,000,000		10,988,798

									113,956,133

Other Commercial Paper 3.2%
BHP Billiton Finance (USA) Ltd	a,c	0.18%			01/26/12		2,040,000		2,039,745
	a,c	0.19%			02/16/12		5,000,000		4,998,786

General Electric Co		0.14%			03/28/12		1,000,000		999,662

Reckitt Benckiser Treasury Services PLC	a,c	0.46%			02/10/12		5,000,000		4,997,444

Toyota Motor Credit Corp	a	0.28%			03/01/12		14,000,000		13,993,467
	a	0.55%			05/14/12		8,000,000		7,983,622
	a	0.60%			05/24/12		4,000,000		3,990,400

Univ of California
CP Series B		0.23%			01/09/12		1,000,000		999,949
		0.14%			02/15/12		3,000,000		2,999,475

									43,002,550

Certificate of Deposit 24.2%
Australia & New Zealand Banking Group Ltd		0.49%			04/27/12		4,000,000		4,000,000
		0.25%			05/02/12		4,000,000		4,000,000
		0.60%			05/30/12		4,000,000		4,000,000

Bank of Montreal		0.12%			01/05/12		14,000,000		14,000,000
		0.25%			01/06/12		2,000,000		2,000,000
		0.07%			01/11/12		6,000,000		6,000,000

Bank of Nova Scotia		0.25%			01/06/12		4,000,000		4,000,000
		0.29%			01/17/12		3,000,000		3,000,000
		0.29%			01/23/12		8,000,000		8,000,000
		0.29%			01/24/12		2,000,000		2,000,000
		0.27%			03/08/12		7,000,000		7,000,000
		0.47%			05/14/12		5,000,000		5,000,000

Bank of Tokyo Mitsubishi UFJ, Ltd		0.09%			01/04/12		1,000,000		1,000,000

See financial notes 25

Schwab Investor Money Fund

Portfolio Holdings continued


						Face
			Effective	Maturity		Amount		Value
Issuer	Footnotes	Rate	Maturity	Date		($)		($)
		0.08%			01/06/12		9,000,000		9,000,000
		0.22%			02/01/12		8,000,000		8,000,000

Branch Banking & Trust Co		0.29%			02/10/12		4,000,000		4,000,000

Canadian Imperial Bank of Commerce		0.08%			01/20/12		12,000,000		12,000,000
		0.68%			09/27/12		11,000,000		11,000,000

Citibank, NA		0.35%			03/20/12		2,000,000		2,000,000
		0.52%			05/29/12		6,000,000		6,000,000
		0.60%			06/20/12		7,000,000		7,000,000

Commonwealth Bank of Australia		0.25%			01/10/12		2,000,000		2,000,000
		0.33%			02/27/12		2,000,000		2,000,000
		0.36%			04/10/12		7,000,000		7,000,000

Credit Suisse AG		0.21%			01/05/12		13,000,000		13,000,000
		0.21%			01/06/12		6,000,000		6,000,000

Mizuho Corporate Bank Ltd		0.14%			01/05/12		7,000,000		7,000,000
		0.20%			01/26/12		5,000,000		5,000,000

National Australia Bank Ltd		0.37%			03/20/12		7,000,000		7,000,000
		0.50%			04/05/12		11,000,000		11,000,000
		0.51%			05/08/12		1,000,000		1,000,000

Royal Bank of Scotland PLC		0.28%			01/04/12		2,000,000		2,000,000
		0.28%			01/05/12		6,000,000		6,000,000
		0.28%			01/12/12		5,000,000		5,000,000
		0.28%			01/24/12		2,000,000		2,000,000
		0.82%			04/19/12		4,000,000		4,000,000

State Street Bank & Trust Company, NA		0.10%			01/05/12		12,000,000		12,000,000
		0.10%			01/12/12		1,000,000		1,000,000

Sumitomo Mitsui Banking Corp		0.17%			01/11/12		5,000,000		5,000,000

Sumitomo Trust & Banking Co Ltd		0.17%			01/09/12		13,000,000		13,000,000
		0.24%			01/27/12		5,000,000		5,000,000

Svenska Handelsbanken AB		0.15%			01/13/12		18,000,000		18,000,000

Swedbank AB		0.21%			01/09/12		1,000,000		1,000,000

Toronto-Dominion Bank		0.06%			01/03/12		13,000,000		13,000,000
		0.24%			01/10/12		8,000,000		8,000,000
		0.07%			01/17/12		1,000,000		1,000,000
		0.07%			01/19/12		7,000,000		7,000,000
		0.21%			04/02/12		13,000,000		13,000,000
		0.38%			05/01/12		15,000,000		15,000,000

UBS AG		0.21%			01/30/12		3,000,000		3,000,000

Union Bank, NA		0.36%			02/22/12		1,000,000		1,000,000
		0.40%			03/08/12		2,000,000		2,000,000
		0.40%			03/15/12		1,000,000		1,000,000

									322,000,000

Government Agency Debt 16.1%
Fannie Mae		0.04%			02/01/12		10,000,000		9,999,699
		0.02%			03/08/12		3,000,000		2,999,888
		0.03%			03/14/12		5,000,000		4,999,747

26 See financial notes

Schwab Investor Money Fund

Portfolio Holdings continued


							Face
			Effective		Maturity		Amount		Value
Issuer	Footnotes	Rate	Maturity		Date		($)		($)

Federal Home Loan Bank		0.03%				01/06/12		11,000,000		10,999,954
		0.01%				01/13/12		10,745,000		10,744,964
		0.03%				02/10/12		2,000,000		1,999,933
		0.02%				03/14/12		22,000,000		21,999,108
		0.02%				03/16/12		10,000,000		9,999,583

Freddie Mac		0.03%				01/03/12		11,000,000		10,999,982
		0.03%				01/09/12		19,000,000		18,999,873
		0.02%				01/17/12		1,000,000		999,991
		0.03%				02/06/12		6,000,000		5,999,820
		0.04%				02/06/12		1,998,000		1,997,930
		0.02%				03/05/12		3,000,000		2,999,893
		0.01%				03/15/12		2,000,000		1,999,959
		0.02%				03/19/12		15,000,000		14,999,350

Straight A Funding, LLC	a,b,c,f	0.19%				01/04/12		14,000,000		13,999,778
	a,b,c,f	0.19%				01/06/12		20,000,000		19,999,472
	a,b,c,f	0.19%				01/10/12		3,000,000		2,999,858
	a,b,c,f	0.19%				02/09/12		23,000,000		22,995,266
	a,b,c,f	0.19%				02/13/12		12,000,000		11,997,277
	a,b,c,f	0.19%				03/01/12		6,201,000		6,199,037
	a,b,c,f	0.19%				03/14/12		3,000,000		2,998,844

										213,929,206

Other Instrument 0.9%
Australia & New Zealand Banking Group Ltd	j	0.08%				01/05/12		3,000,000		3,000,000

Bank of Nova Scotia	j	0.01%				01/03/12		9,000,000		9,000,000

										12,000,000

Other Note 0.1%
Bank of America, NA	h	0.31%				01/09/12		2,000,000		2,000,000

Total Fixed-Rate Obligations
(Cost $946,141,946)										946,141,946




Variable-Rate Obligations 9.3% of net assets

Financial Company Commercial Paper 0.4%
Commonwealth Bank of Australia	c	0.49%		02/21/12		05/18/12		5,000,000		5,000,000

Certificate of Deposit 2.8%
Canadian Imperial Bank of Commerce		0.32%				01/03/12		5,000,000		5,000,000

Rabobank Nederland		0.37%		01/26/12		03/26/12		7,000,000		7,000,000

Royal Bank of Canada		0.27%		01/03/12		03/27/12		3,000,000		3,000,000
		0.27%		01/03/12		04/09/12		3,000,000		3,000,000

Westpac Banking Corp		0.36%		01/03/12		05/01/12		13,000,000		13,000,000
		0.36%		01/03/12		07/03/12		7,000,000		7,000,000

										38,000,000

Government Agency Debt 1.9%
Freddie Mac	i	0.29%		01/10/12		11/09/12		25,000,000		25,000,000

See financial notes 27

Schwab Investor Money Fund

Portfolio Holdings continued

Face

Effective

Maturity

Amount

Value

Issuer

Footnotes

Rate

Maturity

Date

($)

Variable Rate Demand Note 1.3%

Eagle Cnty, CO

Housing Facilities RB (BC Housing, LLC) Series 1997B

0.25%

01/06/12

1,500,000

Labcon North America

Taxable Demand Bonds Series 2010

0.79%

01/06/12

2,270,000

Texas

TRAN Series 2011A

c,g

0.07%

01/03/12

10,925,000

Veterans Housing Assistance Taxable Refunding Bonds Series 1994A2

0.29%

01/06/12

1,000,000

Veterans Land Taxable Refunding Bonds Series 2006A

0.29%

01/06/12

1,910,000

17,605,000

Other Note 2.9%

JPMorgan Chase Bank, NA

0.33%

01/23/12

01/18/13

38,000,000

Whistlejacket Capital, LLC

c,d,e

n/a

198,914

38,198,914

Total Variable-Rate Obligations

(Cost $123,803,914)

123,803,914

Face/

Maturity

Effective

Maturity

Amount

Value

Issuer

Footnotes

Rate

Maturity

Date

($)

Repurchase Agreements 19.6% of net assets

Government Agency Repurchase Agreement 18.8%

Barclays Capital, Inc

Tri-Party Repurchase Agreement Collateralized by U.S. Government Agency Securities with a value of $14,700,000, issued 09/26/11, due 01/03/12.

0.17%

01/03/12

14,006,545

14,000,000

Tri-Party Repurchase Agreement Collateralized by U.S. Government Agency Securities with a value of $8,321,354, issued 11/04/11, due 01/03/12.

0.18%

01/03/12

8,002,400

8,000,000

Tri-Party Repurchase Agreement Collateralized by U.S. Government Agency Securities with a value of $1,040,545, issued 11/01/11, due 01/03/12.

0.19%

01/03/12

1,000,332

1,000,000

Tri-Party Repurchase Agreement Collateralized by U.S. Government Agency Securities with a value of $20,999,965, issued 10/14/11, due 01/13/12.

0.19%

01/06/12

20,008,867

20,000,000

BNP Paribas Securities Corp

Tri-Party Repurchase Agreement Collateralized by U.S. Government Agency Securities with a value of $16,800,001, issued 12/30/11, due 01/03/12.

0.06%

01/03/12

16,000,107

16,000,000

Tri-Party Repurchase Agreement Collateralized by U.S. Government Agency Securities with a value of $4,200,000, issued 11/22/11, due 01/03/12.

0.22%

01/03/12

4,001,027

4,000,000

Credit Suisse Securities (USA), LLC

Tri-Party Repurchase Agreement Collateralized by U.S. Government Agency Securities with a value of $21,274,507, issued 12/30/11, due 01/03/12.

0.04%

01/03/12

20,856,949

20,856,856

Tri-Party Repurchase Agreement Collateralized by U.S. Government Agency Securities with a value of $5,103,998, issued 12/27/11, due 01/03/12.

0.06%

01/03/12

5,000,058

5,000,000

28 See financial notes

Schwab Investor Money Fund

Portfolio Holdings continued

Face/

Maturity

Effective

Maturity

Amount

Value

Issuer

Footnotes

Rate

Maturity

Date

($)

Deutsche Bank Securities, Inc

Tri-Party Repurchase Agreement Collateralized by U.S. Government Agency Securities with a value of $98,800,000, issued 12/30/11, due 01/03/12.

0.08%

01/03/12

95,000,844

95,000,000

Tri-Party Repurchase Agreement Collateralized by U.S. Government Agency Securities with a value of $7,280,001, issued 11/28/11, due 01/03/12.

0.21%

01/03/12

7,001,470

7,000,000

Tri-Party Repurchase Agreement Collateralized by U.S. Government Agency Securities with a value of $10,400,000, issued 12/16/11, due 01/17/12.

0.17%

01/06/12

10,000,992

10,000,000

Tri-Party Repurchase Agreement Collateralized by U.S. Government Agency Securities with a value of $6,257,478, issued 10/11/11, due 01/09/12.

0.19%

01/06/12

6,002,755

6,000,000

Tri-Party Repurchase Agreement Collateralized by U.S. Government Agency Securities with a value of $15,599,811, issued 12/13/11, due 02/09/12.

0.20%

01/06/12

15,002,000

15,000,000

Merrill Lynch, Pierce, Fenner & Smith, Inc

Tri-Party Repurchase Agreement Collateralized by U.S. Government Agency Securities with a value of $16,480,000, issued 11/28/11, due 01/03/12.

0.23%

01/03/12

16,003,680

16,000,000

UBS Securities LLC

Tri-Party Repurchase Agreement Collateralized by U.S. Government Agency Securities with a value of $13,260,001, issued 10/20/11, due 01/19/12.

0.21%

01/06/12

13,005,915

13,000,000

250,856,856

Other Repurchase Agreement 0.8%

Goldman Sachs & Co

Tri-Party Repurchase Agreement Collateralized by common stocks and ETFs with a value of $10,500,145, issued 11/01/11, due 02/14/12.

0.65%

02/14/12

10,018,958

10,000,000

Total Repurchase Agreements

(Cost $260,856,856)

260,856,856

End of Investments.

At 12/31/11, the tax basis cost of the fund’s investments was $1,330,802,716.


a		Credit-enhanced security.
b		Asset-backed security.
c		Securities exempt from registration under Rule 144A of the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registrations, normally to qualified institutional buyers. At the period end, the value of these amounted to $377,579,015 or 28.3% of net assets.
d		Illiquid security. At the period end, the value of these amounted to $10,198,914 or 0.8% of net assets.
e		Whistlejacket notes are in receivership, and the fund elected to sell all of its Whistlejacket notes at auction (4/29/2009). The remaining investment represents an interest in a small residual fund that is being held to cover any remaining expenses and liabilities associated with receivership.
f		The U.S. Securities and Exchange Commission has stated that it is permissible for money market funds to treat Straight A Funding LLC securities as government securities for the purpose of compliance with the diversification requirements of Rule 2a-7(c)(4)(i).
g		Liquidity-enhanced security.
h		Bank Note
i		Extendible Note - Investor Option
j		Time Deposit


CP —		Commercial paper
RB —		Revenue bond
TRAN —		Tax and revenue anticipation note

See financial notes 29

Schwab Retirement Advantage Money Fund and Schwab Investor Money Fund

Financial Notes

1. Business Structure of the Funds:

Each of the funds discussed in this report is a series of The Charles Schwab Family of Funds (the “trust”), a no-load, open-end management investment company. The trust is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended (the “1940 Act”). The list below shows all the funds in the trust as of the end of the period, including the funds discussed in this report, which are highlighted:



The Charles Schwab Family of Funds (organized October 20, 1989)		Schwab Municipal Money Fund
Schwab Money Market Fund		Schwab AMT Tax-Free Money Fund
Schwab Government Money Fund		Schwab California Municipal Money Fund
Schwab U.S. Treasury Money Fund (closed to new investors)		Schwab California AMT Tax-Free Money Fund
Schwab Value Advantage Money Fund		Schwab New York AMT Tax-Free Money Fund
Schwab Advisor Cash Reserves		Schwab New Jersey AMT Tax-Free Money Fund
Schwab Cash Reserves		Schwab Pennsylvania Municipal Money Fund
Schwab Retirement Advantage Money Fund		Schwab Massachusetts AMT Tax-Free Money Fund
Schwab Investor Money Fund

Schwab Retirement Advantage Money Fund and Schwab Investor Money Fund each offers one share class. Shares are bought and sold at closing net asset value (“NAV”), which is the price of all outstanding shares of the funds. Each share has a par value of 1/1,000 of a cent, and the Board of Trustees may authorize the issuance of as many shares as necessary.

Each fund maintains its own account for purposes of holding assets and accounting, and is considered a separate entity for tax purposes. Within its account, each fund may also keep certain assets in segregated accounts, as required by securities law.

2. Significant Accounting Policies:

The following is a summary of the significant accounting policies the funds use in their preparation of financial statements. The accounting policies are in conformity with accounting principles generally accepted in the United States of America (“GAAP”).

(a) Security Valuation:

Securities in the funds are valued at amortized cost (which approximates market value) as permitted in accordance with Rule 2a-7 of the 1940 Act. In the event that security valuations do not approximate market value, securities may be valued as determined in accordance with procedures adopted by the Board of Trustees.

In accordance with the authoritative guidance on fair value measurements and disclosures under GAAP, the funds disclose the fair value of their investments in a hierarchy that prioritizes the inputs to valuation techniques used to measure the fair value. The hierarchy gives the highest priority to valuations based upon unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to valuations based upon unobservable inputs that are significant to the valuation (Level 3 measurements). If the funds determine that either the volume and/or level of activity for an asset or liability has significantly decreased (from normal conditions for that asset or liability) or price quotations or observable inputs are not associated with orderly transactions, increased analysis and management judgment will be required to estimate fair value.

The three levels of the fair value hierarchy are as follows:


	•	Level 1 — quoted prices in active markets for identical securities — Investments whose values are based on quoted market prices in active markets, and whose values are therefore classified as Level 1 prices, include active listed equities. The funds do not adjust the quoted prices for such investments, even in situations where the funds hold a large position and a sale could reasonably impact the quoted prices.

	•	Level 2 — other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.) — Investments that trade in markets that are not considered to be active, but whose values are based on quoted market prices, dealer quotations or valuations provided by alternative pricing sources supported by observable inputs are classified as Level 2 prices. These generally include U.S. government and sovereign obligations, most government agency securities, investment-grade corporate bonds, certain mortgage products, less liquid listed equities, and state, municipal and provincial obligations. As investments whose values are classified as Level 2 prices include positions that are not traded in active markets and/or are subject to transfer restrictions, valuations may be adjusted to reflect illiquidity and/or non-transferability, which are generally based on available market information. Securities held by money

Schwab Retirement Advantage Money Fund and Schwab Investor Money Fund

Financial Notes (continued)

2. Significant Accounting Policies (continued):


		funds operating under Rule 2a-7 of the 1940 Act are valued at amortized cost which approximates current market value and are considered to be valued using Level 2 inputs.


	•	Level 3 — significant unobservable inputs (including the funds’ own assumptions in determining the fair value of investments) — Investments whose values are classified as Level 3 prices have significant unobservable inputs, as they may trade infrequently or not at all. When observable prices are not available for these securities, the funds use one or more valuation techniques for which sufficient and reliable data is available. The inputs used by the funds in estimating the value of Level 3 prices may include the original transaction price, quoted prices for similar securities or assets in active markets, completed or pending third-party transactions in the underlying investment or comparable issuers, and changes in financial ratios or cash flows. Level 3 prices may also be adjusted to reflect illiquidity and/or non-transferability, with the amount of such discount estimated by the funds in the absence of market information. Assumptions used by the funds due to the lack of observable inputs may significantly impact the resulting fair value and therefore the funds’ results of operations.

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. At December 31, 2011, all of the funds’ investment securities were classified as Level 2. The breakdown of the funds’ investments into major categories is disclosed on the portfolio holdings.

The funds’ policy is to recognize transfers between Level 1, Level 2 and Level 3 as of the beginning of the fiscal year. There were no significant transfers between Level 1, Level 2 and Level 3 for the period ended December 31, 2011.

(b) Accounting Policies for certain Portfolio Investments (if held):

Repurchase Agreements: In a repurchase agreement, a fund buys a security from another party (usually a financial institution) with the agreement that it be sold back in the future. Repurchase agreements subject a fund to counterparty risk, meaning that the fund could lose money if the other party fails to perform under the terms of the agreement. The funds mitigate this risk by ensuring that the funds’ repurchase agreements are collateralized by cash, U.S. government securities, fixed income securities, equity securities or other types of securities. All collateral is held by the funds’ custodian (or, with multi-party agreements, the agent’s bank) and is monitored daily to ensure that its market value is at least equal to the repurchase price under the agreement. Investments in repurchase agreements are also based on a review of the credit quality of the repurchase agreement counterparty.

Delayed-Delivery Transactions: The funds may buy securities at a predetermined price or yield, with payment and delivery taking place after the customary settlement period for that type of security. The funds will assume the rights and risks of ownership at the time of purchase, including the risk of price and yield fluctuations. Typically, no interest will accrue to a fund until the security is delivered. The funds will earmark or segregate appropriate liquid assets to cover its delayed-delivery purchase obligations.

(c) Security Transactions:

Security transactions are recorded as of the date the order to buy or sell the security is executed. Realized gains or losses from security transactions are based on the identified costs of the securities involved.

(d) Investment Income:

Interest income is recorded as it accrues. If a fund buys a debt security at a discount (less than face value) or a premium (more than face value), it amortizes the discount or premium from the current date up to maturity. The fund then increases (in the case of discounts) or reduces (in the case of premiums) the income it records from the security. If the security is callable (meaning that the issuer has the option to pay it off before its maturity date), then the fund amortizes the premium to the security’s call date and price, rather than the maturity date and price.

(e) Expenses:

Expenses that are specific to a fund are charged directly to the fund. Expenses that are common to all funds within the trust generally are allocated among the funds in proportion to their average daily net assets.

Schwab Retirement Advantage Money Fund and Schwab Investor Money Fund

Financial Notes (continued)

2. Significant Accounting Policies (continued):

(f) Distributions to Shareholders:

The funds declare distributions from net investment income, if any, every day they are open for business. These distributions, which are substantially equal to the funds’ net investment income for that day, are paid out to shareholders once a month. The funds make distributions from net realized capital gains, if any, once a year.

(g) Custody Credit:

The funds have an arrangement with their custodian bank, State Street Bank and Trust Company (“State Street”), under which the funds receive a credit for their uninvested cash balance to offset their custody fees and accounting fees. The credit amounts, if any, are disclosed in the Statement of Operations as a reduction to the funds’ operating expenses.

(h) Accounting Estimates:

The accounting policies described in this report conform to accounting principles generally accepted in the United States of America. Notwithstanding this, shareholders should understand that in order to follow these principles, fund management has to make estimates and assumptions that affect the information reported in the financial statements. It’s possible that once the results are known, they may turn out to be different from these estimates and these differences may be material.

(i) Federal Income Taxes:

The funds intend to meet federal income and excise tax requirements for regulated investment companies. Accordingly, the funds distribute substantially all of their net investment income and realized net capital gains, if any, to their respective shareholders each year. As long as a fund meets the tax requirements, it is not required to pay federal income tax.

(j) Indemnification:

Under the funds’ organizational documents, the officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the funds. In addition, in the normal course of business the funds enter into contracts with their vendors and others that provide general indemnifications. The funds’ maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the funds. However, based on experience, the funds expect the risk of loss to be remote.

(k) New Accounting Pronouncements:

In April 2011, the Financial Accounting Standards Board (“FASB”) issued an Accounting Standards Updates (“ASU”) related to accounting for repurchase agreements and similar agreements that both entitle and obligate a transferor to repurchase or redeem financial assets before their maturity. The ASU modifies the criteria for determining effective control of transferred assets and as a result certain agreements may now be accounted for as secured borrowings. The ASU is effective prospectively for new and existing transfers that are modified in the first interim or annual period beginning on or after December 15, 2011.

In May 2011, the FASB issued an update to requirements relating to “Fair Value Measurement which represents amendments to achieve common fair value measurement and disclosure requirements in US GAAP and IFRS.” The amendments include (i) those that clarify the FASB’s intent about the application of existing fair value measurement and disclosure requirements and (ii) those that change a particular principle or requirement for measuring fair value or for disclosing information about fair value measurements. The amendments that change a particular principle or requirement for measuring fair value or disclosing information about fair value measurements relate to (i) measuring the fair value of the financial instruments that are managed within a portfolio; (ii) application of premium and discount in a fair value measurement; and (iii) additional disclosures about fair value measurements. The update is effective for annual periods beginning after December 15, 2011 with early adoption prohibited.

At this time, management is evaluating the implications of these changes and their impact on the financial statements.

Schwab Retirement Advantage Money Fund and Schwab Investor Money Fund

Financial Notes (continued)

3. Risk Factors:

An investment in a fund is not a bank deposit and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the funds seek to preserve the value of a shareholder’s investment at $1 per share, it is possible to lose money by investing in the funds.

Interest rates rise and fall over time. As with any investment whose yield reflects current interest rates, a fund’s yield will change over time. During periods when interest rates are low, a fund’s yield (and total return) also will be low. In addition, to the extent a fund makes any reimbursement payments to the investment adviser and/or its affiliates, the fund’s yield would be lower.

Many of the U.S. government securities that the funds invest in are not backed by the full faith and credit of the United States government, which means they are neither issued nor guaranteed by the U.S. Treasury. There can be no assurance that the U.S. government will provide financial support to securities of its agencies and instrumentalities if it is not obligated to do so under law. Also, any government guarantees on securities a fund owns do not extend to the shares of the fund itself.

A fund’s investments in securities of foreign issuers or securities with credit or liquidity enhancements provided by foreign entities may involve certain risks that are greater than those associated with investments in securities of U.S. issuers or securities with credit or liquidity enhancements provided by U.S. entities. These include risks of adverse changes in foreign economic, political, regulatory and other conditions; differing accounting, auditing, financial reporting and legal standards and practices; differing securities market structures; and higher transaction costs. In addition, sovereign risk, or the risk that a government may become unwilling or unable to meet its loan obligations or guarantees, could increase the credit risk of financial institutions connected to that particular country.

Any actively managed mutual fund is subject to the risk that its investment adviser will make poor security selections. A fund’s investment adviser applies its own investment techniques and risk analyses in making investment decisions for the fund, but there can be no guarantee that they will produce the desired results. The investment adviser’s maturity decisions will also affect a fund’s yield, and in unusual circumstances potentially could affect its share price. To the extent that the investment adviser anticipates interest rate trends imprecisely, a fund’s yield at times could lag those of other money market funds.

Liquidity risk exists when particular investments are difficult to purchase or sell. The market for certain investments may become illiquid due to specific adverse changes in the conditions of a particular issuer or under adverse market or economic conditions independent of the issuer. A fund’s investments in illiquid securities may reduce the returns of the fund because it may be unable to sell the illiquid securities at an advantageous time or price. Further, transactions in illiquid securities may entail transactions costs that are higher than those for transactions in liquid securities.

A fund may experience periods of heavy redemptions that could cause the fund to liquidate its assets at inopportune times or at a loss or depressed value, particularly during periods of declining or illiquid markets. Redemptions by a few large investors in a fund may have a significant adverse effect on the fund’s ability to maintain a stable $1.00 share price. In the event any money market fund fails to maintain a stable net asset value, other money market funds, including the funds, could face a market-wide risk of increased redemption pressures, potentially jeopardizing the stability of their $1.00 share prices.

The funds are not designed to offer capital appreciation. In exchange for their emphasis on stability and liquidity, money market investments may offer lower long-term performance than stock or bond investments.

Please refer to the funds’ prospectus for a more complete description of the principal risks of investing in the funds.

Schwab Retirement Advantage Money Fund and Schwab Investor Money Fund

Financial Notes (continued)

4. Affiliates and Affiliated Transactions:

Charles Schwab Investment Management, Inc. (“CSIM” or the “investment adviser”), a wholly owned subsidiary of The Charles Schwab Corporation, serves as each fund’s investment adviser and administrator pursuant to an Investment Advisory and Administration Agreement (“Advisory Agreement”) between CSIM and the trust.

For its advisory and administrative services to the funds, CSIM is entitled to receive an annual fee, payable monthly, based on a percentage of each fund’s average daily net assets as follows:


Average Daily Net Assets

First $1 billion			0.35%
More than $1 billion but not exceeding $10 billion			0.32%
More than $10 billion but not exceeding $20 billion			0.30%
More than $20 billion but not exceeding $40 billion			0.27%
Over $40 billion			0.25%

The Board of Trustees has adopted a Shareholder Servicing and Sweep Administration Plan (the “Plan”) on behalf of the funds. The Plan enables each fund to bear expenses relating to the provision by service providers, including Charles Schwab & Co., Inc. (a broker-dealer affiliate of CSIM, “Schwab”), of certain account maintenance, customer liaison and shareholder services to the current shareholders of the funds. Schwab serves as the funds’ paying agent under the Plan for making payments of the shareholder service fee due to the service providers (other than Schwab) under the Plan. All shareholder service fees paid by the funds to Schwab in its capacity as the funds’ paying agent will be passed through to the service providers, and Schwab will not retain any portion of such fees.

Pursuant to the Plan, each fund’s shares are subject to an annual shareholder servicing fee up to the amount set forth in the table below. The shareholder servicing fee paid to a particular service provider is made pursuant to its written agreement with Schwab (or, in the case of payments made to Schwab, pursuant to Schwab’s written agreement with the funds), and the funds will pay no more than the amounts listed in the table below of the average daily net asset value of the funds shares owned by shareholders holding shares through such service providers. Payments under the annual Plan are made as described above regardless of Schwab’s or the service provider’s actual cost of providing the services. If the cost of providing the services under the Plan is less than the payments received, the unexpended portion of the fees may be retained as profit by Schwab or the service provider.


	Shareholder Service Fees

Schwab Retirement Advantage Money Fund		0.22%
Schwab Investor Money Fund		0.25%

Contractual Expense Limitations

Although these agreements specify certain fees for these services, CSIM and Schwab have made an additional agreement (“expense limitation”) with the Schwab Retirement Advantage Money Fund to limit the total annual fund operating expenses, excluding interest, taxes, and certain non-routine expenses, to 0.49% through April 29, 2013, which may only be amended or terminated with the approval of the fund’s Board of Trustees.

In addition, effective January 1, 2011 through December 31, 2011, CSIM and Schwab agreed to waive an additional amount of the Schwab Retirement Advantage Money Fund and Schwab Investor Money Fund expenses equal to 0.035% of the funds’ average daily net assets.

Voluntary Expense Waiver/Reimbursement

In addition to the contractual expense limitation agreements noted above, Schwab and the investment adviser also may waive and/or reimburse expenses to the extent necessary to maintain a positive net yield for each fund. Schwab and the investment adviser may recapture from a fund any of these expenses or fees they have waived and/or reimbursed until the third anniversary of the end of the fiscal year in which such waiver and/or reimbursement occurs, subject to certain limitations. The reimbursement payments by a fund to Schwab and/or the investment adviser are considered “non-routine expenses” and are not subject to any net operating expense limitations in effect at the time of such payment. This recapture could negatively affect the

Schwab Retirement Advantage Money Fund and Schwab Investor Money Fund

Financial Notes (continued)

4. Affiliates and Affiliated Transactions (continued):

funds’ future yield. There were no prior year amounts recaptured. As of December 31, 2011, the balance of recoupable expenses is as follows:


	Expiration Date
	December 31, 2012		December 31, 2013		December 31, 2014		Total

Schwab Retirement Advantage Money Fund		$428,510		$1,024,503		$1,817,734		$3,270,747
Schwab Investor Money Fund		$2,068,715		$3,969,429		$4,664,552		$10,702,696

The funds may engage in direct transactions with certain other Schwab Funds when practical. When one fund is seeking to sell a security that another is seeking to buy, an interfund transaction can allow both funds to benefit by reducing transaction costs. This practice is limited to funds that share the same investment adviser, trustees and/or officers. For the period ended December 31, 2011, each fund’s total aggregate security transactions with other Schwab Funds were as follows:


Schwab Retirement Advantage Money Fund			$3,000,000
Schwab Investor Money Fund			—

Pursuant to an exemptive order issued by the SEC, the funds may enter into interfund borrowing and lending transactions with other Schwab Funds. All loans are for temporary or emergency purposes only. The interest rate charged on the loan is the average of the overnight repurchase agreement rate and the short-term bank loan rate. The interfund lending facility is subject to the oversight and periodic review of the Board of Trustees of the Schwab Funds. The funds had no interfund borrowing or lending activity during the period.

On September 14, 2010, The Charles Schwab Corporation made a payment of $471,270 to Schwab Retirement Advantage Fund and $1,351,086 to Schwab Investor Money Fund to cover the net remaining losses recognized as a result of its investment in a single structured investment vehicle that defaulted in 2008. This payment represented 0.1% of the funds’ net assets on that date.

5. Transfer Agent Services:

Boston Financial Data Services, Inc. (“BFDS”) provides transfer agent services for each fund.

6. Board of Trustees:

Trustees may include people who are officers and/or directors of the investment adviser or its affiliates. Federal securities law limits the percentage of such “interested persons” who may serve on a trust’s board, and the trust was in compliance with these limitations throughout the report period. The trust did not pay any of these interested persons for their services as trustees, but it did pay non-interested persons (independent trustees), as noted in each fund’s Statement of Operations.

7. Borrowing from Banks:

The funds have access to custodian overdraft facilities, a committed line of credit of $150 million with State Street Bank and Trust (“State Street”), an uncommitted line of credit of $100 million with Bank of America, N.A. and an uncommitted line of credit of $50 million with Brown Brothers Harriman & Co. The funds pay interest on the amounts they borrow at rates that are negotiated periodically. The funds also pay an annual fee to State Street for the committed line of credit.

There were no borrowings from the lines of credit by the funds during the period. However, the funds may have utilized their overdraft facility and incurred interest expense, which is disclosed in the Statement of Operations, if any. The interest expense is determined based on a negotiated rate above the current Federal Funds Rate.

8. Federal Income Taxes:

As of December 31, 2011, the components of distributable earnings on a tax-basis were as follows:


	Schwab		Schwab
	Retirement Advantage		Investor
	Money Fund		Money Fund

Undistributed ordinary income		$30,505		$—

Schwab Retirement Advantage Money Fund and Schwab Investor Money Fund

Financial Notes (continued)

8. Federal Income Taxes (continued):

Capital loss carryforwards may be used to offset future realized capital gains, for federal income tax purposes. As of December 31, 2011, the following funds had capital loss carryforwards available to offset future net capital gains before the expiration dates:


	Schwab		Schwab
	Retirement Advantage		Investor
Expiration Date	Money Fund		Money Fund

December 31, 2017		$—		$84,641

For tax purposes, realized net capital losses incurred after October 31 may be deferred and treated as occurring on the first day of the following year. For the year ended December 31, 2011, the funds had no capital losses deferred and had capital losses utilized as follows:


	Schwab		Schwab
	Retirement Advantage		Investor
	Money Fund		Money Fund

Capital losses utilized		$—		$392

The tax-basis components of distributions paid during the current and prior fiscal years were:


	Schwab		Schwab
	Retirement Advantage		Investor
	Money Fund		Money Fund

Current period distributions
Ordinary income		$87,958		$138,893

Prior period distributions
Ordinary income		$88,624		$163,480

Distributions paid to shareholders are based on net investment income and net realized gains determined on a tax basis, which may differ from net investment income and net realized gains for financial reporting purposes. These differences are due primarily to differing treatment for items such as short-term capital gains. The fiscal year in which amounts are distributed may differ from the year in which the net investment income and net realized gains are recorded by the funds for financial reporting purposes. The funds may also designate a portion of the amount paid to redeeming shareholders as a distribution for tax purposes.

Permanent book and tax basis differences may result in reclassifications between capital account and other accounts as required. The adjustments will have no impact on net assets or the results of operations. As of December 31, 2011, the funds made the following reclassifications:


	Schwab			Schwab
	Retirement Advantage			Investor
	Money Fund			Money Fund

Capital shares		($1,071	)		$—
Undistributed net investment income		1,266			—
Net realized capital gains and losses		(195	)		—

As of December 31, 2011, management has reviewed the tax positions for open periods (for federal purposes, three years from the date of filing and for state purposes, four years from the date of filing) as applicable to the funds, and has determined that no provision for income tax is required in the funds’ financial statements. The funds recognize interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the Statement of Operations. During the period ended December 31, 2011, the funds did not incur any interest or penalties.

On December 22, 2010, the Regulated Investment Company Modernization Act of 2010 (“the Act”) was signed by the President. The Act is the first major piece of legislation affecting Regulated Investment Companies (“RICs”) since 1986 and it modernizes several of the federal income and excise tax provisions related to RICs.

Schwab Retirement Advantage Money Fund and Schwab Investor Money Fund

Financial Notes (continued)

8. Federal Income Taxes (continued):

Certain of the enacted provisions include:

Post-enactment capital losses may now be carried forward indefinitely, but must retain the character of the original loss. Under pre-enactment law, capital losses could be carried forward for eight years, and carried forward as short-term capital, irrespective of the character of the original loss. The Act contains simplification provisions, which are aimed at preventing disqualification of a RIC for “inadvertent” failures of the asset diversification and/or qualifying income tests. Additionally, the Act exempts RICs from the preferential dividend rule, and repeals the 60-day designation requirement for certain types of pay-through income and gains.

Finally, the Act contains several provisions aimed at preserving the character of distributions made by a fiscal year RIC during the portion of its taxable year ending after October 31 or December 31, reducing the circumstances under which a RIC might be required to file amended Forms 1099 to restate previously reported distributions.

Except for the simplification provisions related to RIC qualification, the Act is effective for taxable years beginning after December 22, 2010. The provisions related to RIC qualification are effective for taxable years for which the extended due date of the tax return is after December 22, 2010.

9. Subsequent Events:

Management has determined there are no subsequent events or transactions through the date the financial statements were issued that would have materially impacted the financial statements as presented.

Report of Independent Registered Public Accounting Firm

To the Board of Trustees and Shareholders of:

Schwab Retirement Advantage Money Fund

Schwab Investor Money Fund

In our opinion, the accompanying statements of assets and liabilities, including the portfolio holdings, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Schwab Retirement Advantage Money Fund and Schwab Investor Money Fund (two of the portfolios constituting The Charles Schwab Family of Funds, hereafter referred to as the “Funds”) at December 31, 2011, and 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 five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the 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, 2011 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

San Francisco, California

February 15, 2012

Trustees and Officers

The tables below give information about the trustees and officers for The Charles Schwab Family of Funds which includes the funds covered in this report. The “Fund Complex” includes The Charles Schwab Family of Funds, Schwab Capital Trust, Schwab Investments, Schwab Annuity Portfolios, Schwab Strategic Trust, Laudus Trust and Laudus Institutional Trust. The Fund Complex includes 87 funds.

The address for all trustees and officers is 211 Main Street, San Francisco, CA 94105. You can find more information about the trustees and officers in the Statement of Additional Information, which is available free by calling 1-800-435-4000.

Independent Trustees


Name, Year of Birth,		Number of
and Position(s) with		Portfolios in
the trust; (Terms of		Fund Complex
office, and length of	Principal Occupations	Overseen by
Time Served¹)	During the Past Five Years	the Trustee	Other Directorships

Mariann Byerwalter 1960 Trustee (Trustee of The Charles Schwab Family of Funds since 2000.)	Chairman of JDN Corporate Advisory LLC.	70	Director, Redwood Trust, Inc. (1998 – present) Director, PMI Group Inc. (2001 – 2009)


John F. Cogan 1947 Trustee (Trustee of The Charles Schwab Family of Funds since 2008.)	Senior Fellow: The Hoover Institution at Stanford University (Oct. 1979 – present); Senior Fellow Stanford Institute for Economic Policy Research; Professor of Public Policy, Stanford University (Sept. 1994 – present).	70	Director, Gilead Sciences, Inc. (2005 – present) Director, Monaco Coach Corporation (2005 – 2009)


William A. Hasler 1941 Trustee (Trustee of The Charles Schwab Family of Funds since 2000.)	Dean Emeritus, Haas School of Business, University of California, Berkeley (July 1998 – present).	70	Director, Ditech Networks Corporation (1997 – present) Director, TOUSA (1998 – present) Director, Mission West Properties (1998 – present) Director, Globalstar, Inc. (2009 – present) Director, Aviat Networks (2001 – present) Director, Aphton Corp. (1991 – 2007) Director, Solectron Corporation (1998 – 2007) Director, Genitope Corporation (2000 – 2009)


David L. Mahoney 1954 Trustee (Trustee of Schwab The Charles Schwab Family of Funds since 2011.)	Private Investor.	70	Director, Symantec Corporation (2003 – present) Director, Corcept Therapeutics Incorporated (2004 – present) Director, Tercica Inc. (2004 – 2008)


Kiran M. Patel 1948 Trustee (Trustee of Schwab The Charles Schwab Family of Funds since 2011.)	Executive Vice President and General Manager of Small Business Group, Intuit, Inc. (financial software and services for consumers and small businesses) (Dec. 2008 – present); Senior Vice President and General Manager of Consumer Group, Intuit, Inc. (June 2007 – Dec. 2008); Senior Vice President and Chief Financial Officer, Intuit, Inc. (Sept. 2005 – Jan. 2008).	70	Director, KLA-Tencor Corporation (2008 – present) Director, BEA Systems, Inc. (2007 – 2008) Director, Eaton Corp. (2003 – 2006)

Independent Trustees (continued)


Name, Year of Birth,		Number of
and Position(s) with		Portfolios in
the trust; (Terms of		Fund Complex
office, and length of	Principal Occupations	Overseen by
Time Served¹)	During the Past Five Years	the Trustee	Other Directorships

Gerald B. Smith 1950 Trustee (Trustee of The Charles Schwab Family of Funds since 2000.)	Chairman, Chief Executive Officer and Founder of Smith Graham & Co. (investment advisors) (1990 – present).	70	Lead Independent Director, Board of Cooper Industries (2002 – present) Director and Chairman of the Audit Committee, Oneok Partners LP (2003 – present) Director, Oneok, Inc (2009 – present)


Joseph H. Wender 1944 Trustee (Trustee of The Charles Schwab Family of Funds since 2008.)	Senior Consultant, Goldman Sachs & Co., Inc. (Jan. 2008- present); Partner, Colgin Partners, LLC (vineyards) (February 1998 – present); Senior Director, Chairman of the Finance Committee, GSC Group (July 2005 – Dec. 2007); General Partner, Goldman Sachs & Co., Inc. (Oct. 1982 – June 2005).	70	Board Member and Chairman of the Audit Committee, Isis Pharmaceuticals (1994 – present)

Interested Trustees


Name, Year of Birth,		Number of
and Position(s) with		Portfolios in
the trust; (Terms of		Fund Complex
office, and length of	Principal Occupations	Overseen by
Time Served )	During the Past Five Years	the Trustee	Other Directorships

Charles R. Schwab²1937 Chairman and Trustee (Chairman and Trustee of The Charles Schwab Family of Funds since 1989.)	Chairman and Director, The Charles Schwab Corporation, Charles Schwab & Co., Inc., Charles Schwab Investment Management, Inc., Charles Schwab Bank, N. A.; Chairman and Chief Executive Officer, Schwab (SIS) Holdings Inc. I, Schwab International Holdings, Inc.; Chief Executive Officer, Schwab Holdings, Inc.; Through June 2007, Director, U.S. Trust Company, N. A., U.S. Trust Corporation, United States Trust Company of New York. Until October 2008, Chief Executive Officer, The Charles Schwab Corporation, Charles Schwab & Co., Inc.	70	None


Walter W. Bettinger II²1960 Trustee (Trustee of The Charles Schwab Family of Funds since 2008.)	As of October 2008, President and Chief Executive Officer, Charles Schwab & Co., Inc. and The Charles Schwab Corporation. Since October 2008, Director, The Charles Schwab Corporation. Since May 2008, Director, Charles Schwab & Co., Inc. and Schwab Holdings, Inc. Since 2006, Director, Charles Schwab Bank. From 2004 through 2007, Executive Vice President and President, Schwab Investor Services. From 2004 through 2005, Executive Vice President and Chief Operating Officer, Individual Investor Enterprise, and from 2002 through 2004, Executive Vice President, Corporate Services. Until October 2008, President and Chief Operating Officer, Charles Schwab & Co., Inc. and The Charles Schwab Corporation.	87	None

Officers of the Trust


Name, Year of Birth, and Position(s)
with the trust; (Terms of office, and
length of Time Served³)		Principal Occupations During the Past Five Years

Marie Chandoha 1961 President and Chief Executive Officer (Officer of The Charles Schwab Family of Funds since 2010.)		Executive Vice President, Charles Schwab & Co., Inc. (Sept. 2010 – present); Director, President and Chief Executive Officer (Dec. 2010 – present), Chief Investment Officer (Sept. 2010 – Oct. 2011), Charles Schwab Investment Management, Inc.; President, Chief Executive Officer (Dec. 2010 – present), and Chief Investment Officer (Sept. 2010 – Oct. 2011), Schwab Funds, Laudus Funds and Schwab ETFs; Global Head of Fixed Income Business Division, BlackRock, Inc. (formerly Barclays Global Investors) (March 2007 – August 2010); Co-Head and Senior Portfolio Manager, Wells Capital Management (June 1999 – March 2007).


George Pereira 1964 Treasurer and Principal Financial Officer (Officer of The Charles Schwab Family of Funds since 2004.)		Senior Vice President and Chief Financial Officer (Nov. 2004 – present); Chief Operating Officer (Jan. 2011 – present), Charles Schwab Investment Management, Inc.; Treasurer and Chief Financial Officer, Laudus Funds (June 2006 – present); Treasurer and Principal Financial Officer, Schwab Funds (Nov. 2004 – present) and Schwab ETFs (Oct. 2009 – present); Director, Charles Schwab Worldwide Fund, PLC and Charles Schwab Asset Management (Ireland) Limited (April 2005 – present); Treasurer, Chief Financial Officer and Chief Accounting Officer, Excelsior Funds Inc., Excelsior Tax-Exempt Funds, Inc., and Excelsior Funds Trust (June 2006 – June 2007).


Omar Aguilar 1970 Senior Vice President and Chief Investment Officer – Equities (Officer of The Charles Schwab Family of Funds since 2011.)		Senior Vice President and Chief Investment Officer — Equities, Charles Schwab Investment Management, Inc. (April 2011 – present); Senior Vice President and Chief Investment Officer — Equities, Schwab Funds and Laudus Funds (June 2011 – present); Head of the Portfolio Management Group and Vice President of Portfolio Management, Financial Engines, Inc. (May 2009 – April 2011); Head of Quantitative Equity, ING Investment Management (July 2004 – Jan. 2009).


Brett Wander 1961 Senior Vice President and Chief Investment Officer – Fixed Income (Officer of The Charles Schwab Family of Funds since 2011.)		Senior Vice President and Chief Investment Officer – Fixed Income, Charles Schwab Investment Management, Inc. (April 2011 – present); Senior Vice President and Chief Investment Officer – Fixed Income, Schwab Funds and Laudus Funds (June 2011 – present); Senior Managing Director, Global Head of Active Fixed-Income Strategies, State Street Global Advisors (Jan. 2008 – Oct. 2010); Director of Alpha Strategies Loomis, Sayles & Company (April 2006 – Jan. 2008); Managing Director, Head of Market-Based Strategies State Street Research (August 2003 – Jan. 2005).


David Lekich 1964 Secretary and Chief Legal Officer (Officer of The Charles Schwab Family of Funds since 2011.)		Senior Vice President, Charles Schwab & Co., Inc. (Sept. 2011 – present); Senior Vice President and Chief Counsel, Charles Schwab Investment Management Inc. (Sept. 2011 – present); Vice President, Charles Schwab & Co., Inc., (March 2004 – Sept. 2011) and Charles Schwab Investment Management, Inc. (Jan 2011 – Sept. 2011); Secretary (April 2011 – present) and Chief Legal Officer (Dec. 2011 – present), Schwab Funds (April 2011 – present); Vice President and Assistant Clerk, Laudus Funds (April 2011 – present); Secretary (May 2011 – present) and Chief Legal Officer (Nov. 2011 – present), Schwab ETFs.

Officers of the Trust (continued)


Name, Year of Birth, and Position(s)
with the trust; (Terms of office, and
length of Time Served³)		Principal Occupations During the Past Five Years

Catherine MacGregor 1964 Vice President (Officer of The Charles Schwab Family of Funds since 2005.)		Vice President, Charles Schwab & Co., Inc., Charles Schwab Investment Management, Inc. (July 2005 – present); Vice President (Dec. 2005 – present), Chief Legal Officer and Clerk, Laudus Funds (March 2007 – present); Vice President and Assistant Clerk, Schwab Funds (Dec. 2005 – present) and Schwab ETFs (Oct. 2009 – present).


Michael Haydel 1972 Vice President (Officer of The Charles Schwab Family of Funds since 2006.)		Senior Vice President (March 2011 – present), Vice President (2004 – March 2011), Asset Management Client Services, Charles Schwab & Co., Inc.; Vice President (Sept. 2005 – present), Anti-Money Laundering Officer (Oct. 2005 – Feb. 2009), Laudus Funds; Vice President, Schwab Funds (June 2007 – present) and Schwab ETFs (Oct. 2009 – present).


¹		Trustees remain in office until they resign, retire or are removed by shareholder vote. The Schwab Funds^® retirement policy requires that independent trustees elected after January 1, 2000 retire at age 72 or after twenty years as a trustee, whichever comes first. In addition, the Schwab Funds retirement policy also requires any independent trustee of the Schwab Funds who also serves as an independent trustee of the Laudus Funds to retire from the Boards of the Schwab Funds upon their required retirement date from either the Boards of Trustees of the Schwab Funds or the Laudus Funds, whichever comes first.
²		Mr. Schwab and Mr. Bettinger are Interested Trustees because they are employees of Schwab and/or the investment adviser. In addition to their employment with Schwab and/or the investment adviser, Messrs. Schwab and Bettinger also own stock of The Charles Schwab Corporation.
³		The President, Treasurer and Secretary hold office until their respective successors are chosen and qualified or until he or she sooner dies, resigns, is removed or becomes disqualified. Each of the other officers serves at the pleasure of the Board.

Glossary

agency discount notes Notes issued by federal agencies—known as Government Sponsored Enterprises, or GSEs—at a discount to their value at maturity. An agency discount note is a short-term investment alternative offering a high degree of credit quality.

asset-backed commercial paper A short-term investment that is typically issued by a bank or other financial institution. The notes represent an interest in financial assets such as trade receivables, credit card receivables, auto receivables, etc. and are generally used for the short-term financing needs of companies.

Barclays Capital U.S. Aggregate Bond Index A broad-based benchmark that measures the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market, including Treasuries, government-related and corporate securities, mortgage-back securities (agency fixed-rate and hybrid ARM passthroughs), asset-backed securities, and commercial mortgage-backed securities.

Barclays Capital U.S. TIPS Index (Series-L) A rules-based, market value-weighted index that tracks inflation-protected securities issued by the U.S. Treasury that have at least one year remaining to maturity, are rated investment grade and have $250 million or more of outstanding face value.

capital gain, capital loss The difference between the amount paid for an investment and its value at a later time. If the investment has been sold, the capital gain or loss is considered a realized gain or loss. If the investment is still held, the gain or loss is still “on paper” and is considered unrealized.

commercial paper Promissory notes issued by banks, corporations and other entities to finance short-term credit needs. These securities generally are structured on a discounted basis but sometimes may be interest-bearing notes. Commercial paper, which may be unsecured, is subject to credit risk.

corporate note An unsecured debt security issued by a corporation that is subject to the credit risk of the issuer.

credit-enhanced securities Securities that are backed by the credit of an entity other than the issuer (such as a financial institution). Credit enhancements, which can equal up to 100% of the security’s value, are designed to help lower the risk of default on a security and may also make the security more liquid.

credit quality The capacity of an issuer to make its interest and principal payments. Federal regulations strictly regulate the credit quality of the securities a money market fund can buy.

credit ratings Debt issuers, including corporations, states and municipalities, may arrange with a recognized independent rating organization, such as Standard & Poor’s, Fitch, Inc. and Moody’s Investor Service, to rate their creditworthiness and/or the creditworthiness of their debt issues. For example, an issuer may obtain a long-term rating within the investment grade rating category, which is, from high to low, AAA, AA, A and BBB for Standard & Poor’s and Fitch, and Aaa, Aa, A and Baa for Moody’s.

credit risk The risk that a debt issuer may be unable to pay interest or repay principal to its debt holders.

dollar-weighted average maturity (DWAM) See weighted average maturity.

effective yield A measurement of a fund’s yield that assumes that all interest income is reinvested in additional shares of the fund.

expense ratio The amount that is taken from a mutual fund’s assets each year to cover the fund’s operating expenses. An expense ratio of 0.50% means that a fund’s expenses amount to half of one percent of its average net assets for the year.

face value The value of a bond, note, mortgage or other security as given on the certificate or instrument. Face value is also referred to as par value or nominal value.

illiquid securities Securities are generally considered illiquid if they cannot be disposed of promptly (typically within seven days) and in the ordinary course of business at approximately the amount at which a fund has valued the instruments.

interest Payments to holders of debt securities as compensation for loaning a security’s principal to the issuer.

liquidity-enhanced security The security’s structure includes a liquidity arrangement that requires an entity other than the issuer (such as a large financial institution) to provide funds to pay a tender under most circumstances. Liquidity enhancements are often used on variable-rate securities where the portfolio manager has an option to tender the securities for repayment within a specified time period (usually one day or one week) at any time prior to their final maturity.

maturity The date a debt security is scheduled to be “retired” and its principal amount repaid. The Maturity of an investment will generally reflect the security’s final maturity date unless the security’s structure includes a maturity-shortening provision such as an interest rate reset, demand feature or put feature (the “Effective Maturity Date”). For those securities with a maturity-shortening provision, including variable-rate demand securities, the Maturity is determined by using the Effective Maturity Date, as permitted by Rule 2a-7.

MSCI EAFE (Europe, Australasia, Far East) Index A free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the US & Canada.

municipal securities Debt securities issued by a state, its counties, municipalities, authorities and other subdivisions, or the territories and possessions of the United States and the District of Columbia, including their subdivisions, agencies and instrumentalities and corporations. These securities may be issued to obtain money for various public purposes, including the construction of a wide range of public facilities such as airports, bridges, highways, housing, hospitals, mass transportation, public utilities, schools, streets, and water and sewer works.

net asset value per share (NAV) The value of one share of a mutual fund. NAV is calculated by taking the fund’s total assets, subtracting liabilities, and dividing by the number of shares outstanding. Money funds seek to maintain a steady NAV of $1.00.

outstanding shares, shares outstanding When speaking of a company or mutual fund, indicates all shares currently held by investors.

restricted securities Securities that are subject to contractual restrictions on resale. These securities are often purchased in private placement transactions.

S&P 500 Index A market capitalization index that is designed to measure the performance of 500 leading publicly held companies in leading industries of the U.S. economy.

section 3c7 securities Section 3c7 of the Investment Company Act of 1940 (the “1940 Act”) exempts certain issuers from many regulatory requirements applicable to investment companies under the 1940 Act. An issuer whose outstanding securities are exclusively owned by “qualified purchasers” and who is not making or proposing to make a public offering of the securities may qualify for this exemption.

section 4(2)/144A securities Securities exempt from registration under Section 4(2) of the Securities Act of 1933. These securities may be sold only to qualified institutional buyers under Securities Act Rule 144A.

taxable-equivalent yield The yield an investor would need to get from a taxable investment in order to match the yield paid by a given tax-exempt investment, once the effect of all applicable taxes is taken into account. For example, if your tax rate were 25%, a tax-exempt investment paying 4.5% would have a taxable-equivalent yield for you of 6.0% (4.5% ¸ [1 − 0.25%] = 6.0%).

Tier 1, Tier 2 Tier 1 is the highest category of credit quality, Tier 2 the second highest. A security’s tier can be established either by an independent rating organization or by a determination of the investment adviser. Money market fund shares and U.S. government securities are automatically considered Tier 1 securities. The Schwab Money Funds only purchase securities which are considered to be Tier 1; however, they may hold Tier 2 securities as a result of a downgrade of a portfolio security.

total return The percentage that an investor would have earned or lost on an investment in the fund assuming dividends and distributions were reinvested.

weighted average life (WAL) For money market mutual funds as per rule 2a-7, the weighted average life calculation takes into account either the final maturity date for each security held in the portfolio or, when relevant, the date of the next demand feature (when the fund is scheduled to receive payment of principal and interest after a demand). Money funds are required to maintain a weighted average life of no more than 120 days. Weighted average life for all Schwab money market funds is available in each fund’s monthly schedule of portfolio holdings at www.schwabfunds.com/prospectus and also available in each fund’s Form N-MFP on the SEC’s website at www.sec.gov 60 days after the end of the month to which the information pertains.

weighted average maturity (WAM) For money market mutual funds as per rule 2a-7, the maturity date or Effective Maturity Date (see definition of maturity) of all the debt securities in its portfolio, or the date the interest rate on those securities is reset, or the date those securities can be redeemed through demand, calculated as a weighted average. As a rule, the longer a fund’s weighted average maturity, the greater its interest rate risk. Money funds are required to maintain a weighted average maturity of no more than 60 days.

yield The income paid out by an investment, expressed as a percentage of the investments market value.

PRIVACY NOTICE
THIS IS NOT PART OF THE SHAREHOLDER REPORT

A Commitment to Your Privacy

Your Privacy Is Not for Sale

We do not and will not sell your personal information to anyone, for any reason.

We are committed to protecting the privacy of information we maintain about you. Below are details about our commitment, including the types of information we collect and how we use and share that information. This Privacy Notice applies to you only if you are an individual who invests directly in the funds by placing orders through the funds’ transfer agent. If you place orders through your brokerage account at Charles Schwab & Co., Inc. or an account with another broker-dealer, investment advisor, 401(k) plan, employee benefit plan, administrator, bank or other financial intermediary, you are covered by the privacy policies of that financial institution and should consult those policies.

How We Collect Information About You

We collect personal information about you in a number of ways.


•	APPLICATION AND REGISTRATION INFORMATION.

We collect personal information from you when you open an account or utilize one of our services. We may also collect information about you from third parties such as consumer reporting agencies to verify your identity. The information we collect may include personal information, including your Social Security number, as well as details about your interests, investments and investment experience.


•	TRANSACTION AND EXPERIENCE INFORMATION.

Once your account has been opened, we collect and maintain personal information about your account activity, including your transactions, balances, positions and history. This information allows us to administer your account and provide the services you have requested.


•	WEBSITE USAGE.

When you visit our websites, we may use devices known as “cookies,” graphic interchange format files (GIFs), or other similar web tools to enhance your web experience. These tools help us to recognize you, maintain your web session, and provide a more personalized experience. To learn more, please click the Privacy link on our website.

How We Share and Use Your Information

We provide access to information about you to our affiliated companies, outside companies and other third parties in certain limited circumstances, including:


•	to help us process transactions for your account;

•	when we use other companies to provide services for us, such as printing and mailing your account statements;

•	when we believe that disclosure is required or permitted under law (for example, to cooperate with regulators or law enforcement, resolve consumer disputes, perform credit/authentication checks, or for risk control).

State Laws

We will comply with state laws that apply to the disclosure or use of information about you.

Safeguarding Your Information — Security Is a Partnership

We take precautions to ensure the information we collect about you is protected and is accessed only by authorized individuals or organizations.

Companies we use to provide support services are not allowed to use information about our shareholders for their own purposes and are contractually obligated to maintain strict confidentiality. We limit their use of information to the performance of the specific services we have requested.

We restrict access to personal information by our employees and agents. Our employees are trained about privacy and are required to safeguard personal information.

We maintain physical, electronic and procedural safeguards that comply with federal standards to guard your nonpublic personal information.

Contact Us

To provide us with updated information, report suspected fraud or identity theft, or for any other questions, please call one of the numbers below.

Schwab Funds^® direct investors: 1-800-407-0256

Schwab Funds^® offers you an extensive family of mutual funds, each one based on a clearly defined investment approach and using disciplined management strategies. The list at right shows all currently available Schwab Funds.

Whether you are an experienced investor or just starting out, Schwab Funds can help you achieve your financial goals. An investor should consider a fund’s investment objectives, risks, charges and expenses carefully before investing or sending money. This and other important information can be found in the fund’s prospectus. Please call 1-800-435-4000 for a prospectus and brochure for any Schwab Fund. Please read the prospectus carefully before you invest. This report must be preceded or accompanied by a current prospectus.

Proxy Voting Policies, Procedures and Results

A description of the proxy voting policies and procedures used to determine how to vote proxies on behalf of the funds is available without charge, upon request, by visiting Schwab’s website at www.schwabfunds.com/prospectus, the SEC’s website at http://www.sec.gov, or by contacting Schwab Funds at 1-800-435-4000.

Information regarding how a fund voted proxies relating to portfolio securities during the most recent twelve-month period ended June 30 is available, without charge, by visiting the fund’s website at www.schwabfunds.com/prospectus or the SEC’s website at http://www.sec.gov.

The Schwab Funds Family^®

Stock Funds

Schwab Premier Equity Fund^®

Schwab Core Equity Fund^tm

Schwab Dividend Equity Fund^tm

Schwab Large-Cap Growth Fund^tm

Schwab Small-Cap Equity Fund^tm

Schwab Hedged Equity Fund^tm

Schwab Financial Services Fund^tm

Schwab Health Care Fund^tm

Schwab^® International Core Equity Fund

Schwab Fundamental US Large* Company Index Fund

Schwab Fundamental US Small-Mid* Company Index Fund

Schwab Fundamental International* Large Company Index Fund

Schwab Fundamental International* Small-Mid Company Index Fund

Schwab Fundamental Emerging Markets* Index Fund

Schwab Global Real Estate Fund^tm

Schwab S&P 500 Index Fund

Schwab 1000 Index^® Fund

Schwab Small-Cap Index Fund^®

Schwab Total Stock Market Index Fund^®

Schwab International Index Fund^®

Asset Allocation Funds

Schwab Balanced Fund^tm

Schwab MarketTrack All Equity Portfolio^tm

Schwab MarketTrack Growth Portfolio^tm

Schwab MarketTrack Balanced Portfolio^tm

Schwab MarketTrack Conservative Portfolio^tm

Schwab Target 2010 Fund

Schwab Target 2015 Fund

Schwab Target 2020 Fund

Schwab Target 2025 Fund

Schwab Target 2030 Fund

Schwab Target 2035 Fund

Schwab Target 2040 Fund

Schwab^® Monthly Income Fund – Moderate Payout

Schwab^® Monthly Income Fund – Enhanced Payout

Schwab^® Monthly Income Fund – Maximum Payout

Bond Funds

Schwab Short-Term Bond Market Fund^tm

Schwab^® Premier Income Fund

Schwab Total Bond Market Fund^tm

Schwab GNMA Fund^tm

Schwab^® Treasury Inflation Protected Securities Fund

Schwab Tax-Free Bond Fund^tm

Schwab California Tax-Free Bond Fund^tm

Schwab Money Funds

Schwab offers an array of money market funds.¹ Choose from taxable or tax-advantaged alternatives. Many can be linked to your eligible Schwab account to “sweep” cash balances automatically, subject to availability, when you’re between investments. Or, for your larger cash reserves, choose one of our Value Advantage Investments^®.


*		SCHWAB is a registered trademark of Charles Schwab & Co., Inc. FUNDAMENTAL INDEX, FUNDAMENTAL US LARGE, FUNDAMENTAL US SMALL-MID, FUNDAMENTAL INTERNATIONAL AND FUNDAMENTAL EMERGING MARKETS are trademarks of Research Affiliates LLC.

¹		Investments in money market funds are neither insured nor guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency and, although they seek to preserve the value of your investment at $1 per share, it is possible to lose money.

From the President

Marie Chandoha is President and CEO of Charles Schwab Investment Management, Inc. and the fund covered in this report.

Dear Shareholder,

Schwab Advisor Cash Reserves 3

From the President continued

Amid the market turbulence, bonds generated solid returns and money market securities continued to help investors preserve their hard-earned capital.

the end of 2011, marking the first time in more than three decades that the yield on the benchmark bond finished a calendar year below 2.0%.

Thank you for investing in the Schwab money market funds. Please review the following pages for details about the fund’s characteristics, investment performance, and objectives.

Sincerely,

Indices are unmanaged, do not incur management fees, costs and expenses, and cannot be invested in directly. Index return figures assume dividends and distributions were reinvested.

4 Schwab Advisor Cash Reserves

Schwab Advisor Cash Reserves

Schwab Advisor Cash Reserves (the fund) seeks the highest current income consistent with stability of capital and liquidity. To pursue its goal, the fund invests in high-quality short-term money market investments issued by U.S. and foreign issuers. Examples of these securities include commercial paper, certificates of deposit, repurchase agreements, variable-rate debt securities, and obligations issued by the U.S. government, its agencies, or instrumentalities. Since December 2008, when the Federal Reserve (the Fed) first cut short-term interest rates to present-day levels, yields on money market securities have remained historically low. This trend continued during the report period.

Positioning and Strategies. The fund’s investment adviser focused on stability of capital and ensured robust liquidity amid the volatile market backdrop, and strategically managed the portfolio based upon developing conditions. For example, the fund’s weighted average maturity (WAM) was proactively reduced from roughly 45 days early in the second half of 2011 to approximately 39 days by mid-September, as the euro zone’s debt crisis again took center stage. In addition, the fund’s holdings in Spain and Italy were eliminated as the crisis began to spread. Exposure to some European banks, most specifically those in the euro zone, were also selectively pared back. As a result of these changes and in an effort to maintain a stable net asset value, the adviser reduced the fund’s WAM to 31 days by the end of 2011.

As of 12/31/11:

Portfolio Composition By Maturity¹


	% of investments

1-15 Days		49.6%
16-30 Days		15.9%
31-60 Days		14.6%
61-90 Days		13.1%
91-120 Days		3.0%
More than 120 Days		3.8%

Statistics


Weighted Average Maturity³		31 Days
Credit Quality Of Holdings⁴% of portfolio		99.98% Tier 1

Portfolio Composition by Security Type


	% of investments

Commercial Paper
Asset Backed		19.0%
Financial Company		9.6%
Other		3.7%
Certificate Of Deposit		28.1%
Government Agency Debt²		16.4%
Other Instrument		2.4%
Other Note		1.9%
Variable Rate Demand Note		1.0%
Other Municipal Debt		0.2%
Repurchase Agreement
Government Agency		16.6%
Treasury		0.7%
Other		0.4%
Total		100.0%

Portfolio holdings may have changed since the report date.


*		The investment adviser and its affiliates may recapture expenses or fees they voluntarily waived until the third anniversary of the end of the fiscal year in which such waiver occurs, subject to certain limitations. For more information on the potential impact of such recapture on future yields, see financial note 4.
¹		As shown in the Portfolio Holdings section of the shareholder report.
²		Includes debt issued by Straight A Funding LLC, which the U.S. Securities and Exchange Commission (SEC) has stated is permissible for money market funds to treat as government securities for the purpose of compliance with the diversification requirements of Rule 2a-7(c)(4)(i).
³		Money funds must maintain a dollar-weighted average maturity of no longer than 60 days and cannot invest in any security whose effective maturity is longer than 397 days (approximately 13 months).
⁴		Based on ratings from Moody’s Investors Service, Standard & Poor’s Corp. and/or Fitch Ratings or, if unrated, is determined to be of comparable quality. The fund may use different ratings provided by other rating agencies for purposes of determining compliance with the fund’s investment policies. The fund itself has not been rated by an independent credit rating agency.

6 Schwab Advisor Cash Reserves

Performance and Fund Facts as of 12/31/11

Weighted Average Maturity Trend for previous 12 months

Money funds must maintain a dollar-weighted average maturity of no longer than 60 days, and cannot invest in any security whose effective maturity is longer than 397 days (approximately 13 months).

7-day Average Yield Trend for previous 12 months*

Seven-Day Yields


	Schwab Advisor Cash Reserves
	Sweep	Premier Sweep
	Shares	Shares

Ticker Symbol	SWQXX	SWZXX
Minimum Initial Investment¹	**	**


Seven-Day Yield²	0.01%	0.01%


Seven-Day Yield–Without Contractual Expense Limitation³	-0.09%	-0.16%


Seven-Day Effective Yield²	0.01%	0.01%

Portfolio holdings may have changed since the report date.


*		The 7-day average yield for the Sweep Shares and Premier Sweep Shares was 0.01% throughout the entire period.
**		Subject to the eligibility terms and conditions of your Schwab account agreement.
¹		Please see prospectus for further detail and eligibility requirements.
²		Yield reflects the effect of the fund’s agreement with the investment adviser and its affiliates to limit each share class’s total annual operating expenses to certain levels (contractual expense limitation). In addition, the investment adviser and its affiliates have voluntarily waived expenses in excess of the contractual expense limitation to maintain a positive net yield for certain share classes of the fund (voluntary expense waiver). Without the contractual expense limitation and the voluntary expense waiver, the fund’s yield would have been lower. For additional details, see financial note 4.
³		Yield does not reflect the effect of the contractual expense limitation, but does reflect the effect of the voluntary expense waiver. The voluntary expense waiver added 0.40% and 0.33% to the seven-day yields of the Sweep Shares and Premier Sweep Shares, respectively.

Schwab Advisor Cash Reserves 7

Fund Expenses (Unaudited)

Examples for a $1,000 Investment


					Ending
			Beginning		Account Value		Expenses Paid
	Expense Ratio¹		Account Value		(Net of Expenses)		During Period²
	(Annualized)		at 7/1/11		at 12/31/11		7/1/11–12/31/11

Schwab Advisor Cash Reserves^®
Sweep Shares
Actual Return		0.22%	$	1,000	$	1,000.10	$	1.11
Hypothetical 5% Return		0.22%	$	1,000	$	1,024.10	$	1.12
Premier Sweep Shares
Actual Return		0.22%	$	1,000	$	1,000.10	$	1.11
Hypothetical 5% Return		0.22%	$	1,000	$	1,024.10	$	1.12


¹		Based on the most recent six-month expense ratio; may differ from the expense ratio provided in the Financial Highlights which covers a 12-month period.
²		Expenses for each share class are equal to its annualized expense ratio, multiplied by the average account value over the period, multiplied by 184 days of the period, and divided by 365 days of the fiscal year.

8 Schwab Advisor Cash Reserves

Schwab Advisor Cash Reserves^®

Financial Statements

Financial Highlights


	1/1/11–			1/1/10–			1/1/09–			1/1/08–			1/1/07–
Sweep Shares	12/31/11			12/31/10			12/31/09			12/31/08			12/31/07


Per-Share Data ($)

Net asset value at beginning of period		1.00			1.00			1.00			1.00			1.00

Income (loss) from investment operations:
Net investment income (loss)		0.00	¹		0.00	¹		0.00	¹		0.02			0.05
Net realized and unrealized gains (losses)		(0.00	)¹		0.00	^1,2		(0.00	)¹		—			—

Total from investment operations		0.00	¹		0.00	¹		0.00	¹		0.02			0.05
Less distributions:
Distributions from net investment income		(0.00	)¹		(0.00	)¹		(0.00	)¹		(0.02	)		(0.05	)

Net asset value at end of period		1.00			1.00			1.00			1.00			1.00

Total return (%)		0.01			0.01			0.13			2.36			4.78

Ratios/Supplemental Data (%)

Ratios to average net assets:
Net operating expenses		0.26	³		0.34	³		0.53	^3,4		0.65	⁵		0.66
Gross operating expenses		0.73			0.73			0.76			0.75			0.75
Net investment income (loss)		0.01			0.01			0.14			2.34			4.67
Net assets, end of period ($ x 1,000,000)		6,035			5,617			5,786			7,286			6,416


	1/1/11–			1/1/10–			1/1/09–			1/1/08–			1/1/07–
Premier Sweep Shares	12/31/11			12/31/10			12/31/09			12/31/08			12/31/07


Per-Share Data ($)

Net asset value at beginning of period		1.00			1.00			1.00			1.00			1.00

Income from investment operations:
Net investment income (loss)		0.00	¹		0.00	¹		0.00	¹		0.02			0.05
Net realized and unrealized gains (losses)		(0.00	)¹		0.00	^1,2		(0.00	)¹		—			—

Total from investment operations		0.00	¹		0.00	¹		0.00	¹		0.02			0.05
Less distributions:
Distributions from net investment income		(0.00	)¹		(0.00	)¹		(0.00	)¹		(0.02	)		(0.05	)

Net asset value at end of period		1.00			1.00			1.00			1.00			1.00

Total Return (%)		0.01			0.01			0.16			2.43			4.86

Ratios/Supplemental Data (%)

Ratios to average net assets:
Net operating expenses		0.26	³		0.34	³		0.50	^3,4		0.58	⁵		0.59
Gross operating expenses		0.73			0.73			0.76			0.75			0.75
Net investment income (loss)		0.01			0.01			0.17			2.42			4.74
Net assets, end of period ($ x 1,000,000)		14,727			15,342			14,132			16,245			15,023

¹ Per-share amount was less than $0.01.

² Net realized and unrealized gains (losses) ratio includes payment from affiliate. (See financial note 4)

³ Reflects the effect of a voluntary expense waiver in excess of the contractual expense limitation. (See financial note 4)

⁴ The ratio of net operating expenses would have been 0.51% for Sweep Shares and 0.47% for Premier Sweep Shares, respectively, if certain non-routine expenses (participation fees for the Treasury’s Temporary Guarantee Program for Money Market Funds) had not been incurred.

⁵ The ratio of net operating expenses would have been 0.64% for Sweep Shares and 0.57% for Premier Sweep Shares, respectively, if certain non-routine expenses (participation fees for the Treasury’s Temporary Guarantee Program for Money Market Funds) had not been incurred.

See financial notes 9

Schwab Advisor Cash Reserves

Portfolio Holdings as of December 31, 2011

This section shows all the securities in the fund’s portfolio and their values as of the report date.

Cost

Value

Holdings by Category

($)

.1%

Fixed-Rate Obligations

15,175,126,781

.2%

Variable-Rate Obligations

1,904,041,199

.7%

Repurchase Agreements

3,678,293,032

100

.0%

Total Investments

20,757,461,012

.0%

Other Assets and Liabilities, Net

4,271,008

100

.0%

Net Assets

20,761,732,020


						Face
			Effective	Maturity		Amount		Value
Issuer	Footnotes	Rate	Maturity	Date		($)		($)

Fixed-Rate Obligations 73.1% of net assets

Asset Backed Commercial Paper 19.0%
Alpine Securitization Corp	a,b,c	0.23%			01/03/12		4,000,000		3,999,949
	a,b,c	0.23%			01/06/12		27,000,000		26,999,137
	a,b,c	0.23%			01/12/12		132,000,000		131,990,723
	a,b,c	0.23%			01/18/12		3,000,000		2,999,674

Amsterdam Funding Corp	a,b,c	0.32%			01/05/12		30,000,000		29,998,933
	a,b,c	0.32%			01/09/12		17,000,000		16,998,791
	a,b,c	0.30%			01/18/12		30,000,000		29,995,750
	a,b,c	0.30%			01/20/12		45,000,000		44,992,875
	a,b,c	0.30%			01/25/12		35,000,000		34,993,000

Argento Variable Funding Co, LLC	a,b,c	0.31%			01/03/12		83,000,000		82,998,571
	a,b,c	0.31%			01/09/12		55,000,000		54,996,211
	a,b,c	0.31%			01/19/12		29,000,000		28,995,505
	a,b,c	0.44%			02/06/12		55,000,000		54,975,800

CAFCO, LLC	a,b,c	0.31%			01/23/12		37,000,000		36,992,991
	a,b,c	0.40%			02/01/12		22,000,000		21,992,422
	a,b,c	0.39%			02/03/12		78,000,000		77,972,115
	a,b,c	0.40%			02/07/12		22,000,000		21,990,956
	a,b,c	0.43%			03/06/12		22,000,000		21,982,919
	a,b,c	0.51%			04/10/12		4,000,000		3,994,333

Cancara Asset Securitisation, LLC	a,b,c	0.31%			01/09/12		10,000,000		9,999,311
	a,b,c	0.31%			01/10/12		48,000,000		47,996,280
	a,b,c	0.30%			01/11/12		5,000,000		4,999,583
	a,b,c	0.30%			01/13/12		20,000,000		19,998,000
	a,b,c	0.31%			01/17/12		132,000,000		131,981,813

Chariot Funding, LLC	a,b,c	0.22%			01/05/12		50,000,000		49,998,778
	a,b,c	0.23%			01/06/12		6,000,000		5,999,808
	a,b,c	0.22%			01/09/12		86,000,000		85,995,796
	a,b,c	0.22%			01/13/12		59,000,000		58,995,673
	a,b,c	0.22%			01/20/12		4,000,000		3,999,536

10 See financial notes

Schwab Advisor Cash Reserves

Portfolio Holdings continued


						Face
			Effective	Maturity		Amount		Value
Issuer	Footnotes	Rate	Maturity	Date		($)		($)
	a,b,c	0.22%			01/23/12		49,000,000		48,993,412
	a,b,c	0.23%			01/23/12		13,000,000		12,998,173
	a,b,c	0.15%			02/03/12		7,300,000		7,298,996
	a,b,c	0.22%			02/07/12		11,000,000		10,997,513
	a,b,c	0.23%			02/07/12		23,000,000		22,994,563
	a,b,c	0.22%			02/08/12		15,000,000		14,996,517
	a,b,c	0.22%			02/21/12		2,000,000		1,999,377

Ciesco, LLC	a,b,c	0.31%			01/17/12		32,000,000		31,995,591
	a,b,c	0.40%			02/01/12		100,000,000		99,965,556
	a,b,c	0.40%			02/21/12		4,000,000		3,997,733
	a,b,c	0.50%			04/09/12		8,000,000		7,989,000
	a,b,c	0.55%			05/16/12		19,000,000		18,960,522

CRC Funding, LLC	a,b,c	0.31%			01/18/12		2,000,000		1,999,707
	a,b,c	0.40%			02/01/12		188,000,000		187,935,244
	a,b,c	0.58%			05/17/12		73,000,000		72,838,873

Crown Point Capital Company, LLC	a,b,c	0.50%			01/05/12		18,000,000		17,999,000

Fairway Finance Co, LLC	a,b,c	0.23%			01/05/12		10,000,000		9,999,744
	a,b,c	0.19%			01/19/12		11,000,000		10,998,955
	a,b,c	0.18%			02/22/12		6,000,000		5,998,440

Govco, LLC	a,b,c	0.32%			01/03/12		53,000,000		52,999,058
	a,b,c	0.32%			01/04/12		1,000,000		999,973
	a,b,c	0.32%			01/09/12		24,000,000		23,998,293
	a,b,c	0.33%			01/10/12		64,000,000		63,994,720
	a,b,c	0.32%			01/17/12		47,000,000		46,993,316
	a,b,c	0.33%			01/17/12		52,000,000		51,992,373
	a,b,c	0.32%			01/19/12		13,000,000		12,997,920
	a,b,c	0.32%			01/24/12		66,000,000		65,986,507
	a,b,c	0.34%			01/30/12		124,000,000		123,966,038
	a,b,c	0.35%			02/03/12		6,000,000		5,998,075
	a,b,c	0.37%			02/16/12		27,000,000		26,987,235
	a,b,c	0.43%			02/16/12		7,000,000		6,996,154
	a,b,c	0.40%			02/22/12		5,000,000		4,997,111
	a,b,c	0.42%			02/28/12		24,000,000		23,983,760
	a,b,c	0.52%			05/07/12		20,000,000		19,963,311
	a,b,c	0.63%			06/20/12		1,000,000		997,007
	a,b,c	0.62%			06/21/12		10,000,000		9,970,378

Grampian Funding, LLC	a,b,c	0.30%			01/06/12		30,000,000		29,998,750
	a,b,c	0.31%			01/10/12		19,000,000		18,998,527
	a,b,c	0.31%			01/11/12		30,000,000		29,997,417
	a,b,c	0.32%			01/23/12		58,000,000		57,988,658
	a,b,c	0.43%			02/02/12		44,000,000		43,983,182

Jupiter Securitization Corp	a,b,c	0.20%			01/12/12		49,000,000		48,997,006
	a,b,c	0.22%			01/13/12		10,000,000		9,999,267
	a,b,c	0.12%			01/18/12		1,200,000		1,199,932
	a,b,c	0.23%			02/06/12		10,000,000		9,997,700
	a,b,c	0.22%			02/07/12		16,000,000		15,996,382
	a,b,c	0.18%			02/08/12		15,000,000		14,997,150
	a,b,c	0.18%			02/10/12		43,000,000		42,991,400
	a,b,c	0.22%			02/16/12		30,000,000		29,991,567
	a,b,c	0.22%			02/21/12		15,000,000		14,995,325
	a,b,c	0.22%			03/05/12		30,000,000		29,988,267
	a,b,c	0.22%			03/06/12		30,000,000		29,988,083
	a,b,c	0.22%			03/07/12		30,000,000		29,987,900
	a,b,c	0.22%			03/15/12		6,000,000		5,997,287
	a,b,c	0.25%			04/04/12		115,000,000		114,924,931

Market Street Funding Corp	a,b,c	0.23%			01/10/12		4,000,000		3,999,770

See financial notes 11

Schwab Advisor Cash Reserves

Portfolio Holdings continued


						Face
			Effective	Maturity		Amount		Value
Issuer	Footnotes	Rate	Maturity	Date		($)		($)
	a,b,c	0.23%			01/11/12		10,031,000		10,030,359
	a,b,c	0.23%			01/18/12		30,023,000		30,019,739
	a,b,c	0.23%			01/26/12		10,035,000		10,033,397
	a,b,c	0.23%			01/27/12		10,000,000		9,998,339
	a,b,c	0.23%			03/14/12		32,000,000		31,985,076
	a,b,c	0.23%			03/16/12		47,000,000		46,977,479
	a,b,c	0.23%			03/20/12		3,040,000		3,038,466
	a,b,c	0.23%			03/21/12		49,000,000		48,974,956
	a,b,c	0.22%			03/28/12		9,000,000		8,995,215

Old Line Funding, LLC	a,b,c	0.23%			01/20/12		23,000,000		22,997,208

Sheffield Receivables Corp	a,b,c	0.26%			01/05/12		84,000,000		83,997,573

Solitaire Funding, LLC	a,b,c	0.31%			01/03/12		65,000,000		64,998,881
	a,b,c	0.26%			01/17/12		4,000,000		3,999,538

Thames Asset Global Securitization No. 1, Inc	a,b,c	0.32%			01/12/12		18,434,000		18,432,198
	a,b,c	0.31%			01/17/12		29,000,000		28,996,004
	a,b,c	0.31%			01/19/12		41,000,000		40,993,645
	a,b,c	0.30%			01/20/12		22,000,000		21,996,517
	a,b,c	0.31%			01/20/12		93,000,000		92,984,784

Thunder Bay Funding, LLC	a,b,c	0.23%			01/09/12		30,815,000		30,813,425
	a,b,c	0.23%			01/20/12		41,202,000		41,196,998
	a,b,c	0.25%			01/23/12		31,000,000		30,995,264
	a,b,c	0.23%			01/24/12		17,000,000		16,997,502
	a,b,c	0.23%			02/01/12		18,030,000		18,026,429
	a,b,c	0.23%			02/02/12		23,437,000		23,432,208
	a,b,c	0.23%			02/06/12		47,487,000		47,476,078
	a,b,c	0.22%			03/20/12		15,000,000		14,992,758

Variable Funding Capital Corp	a,b,c	0.22%			01/24/12		24,000,000		23,996,627
	a,b,c	0.25%			01/25/12		57,000,000		56,990,500
	a,b,c	0.22%			02/02/12		25,000,000		24,995,111

Windmill Funding Corp	a,b,c	0.27%			01/03/12		8,000,000		7,999,880
	a,b,c	0.30%			01/03/12		92,000,000		91,998,467
	a,b,c	0.30%			01/12/12		26,000,000		25,997,617
	a,b,c	0.30%			01/18/12		6,000,000		5,999,150
	a,b,c	0.30%			01/19/12		27,000,000		26,995,950
	a,b,c	0.28%			02/02/12		4,000,000		3,999,004

									3,941,974,221

Financial Company Commercial Paper 7.8%
Barclays US Funding Corp	a	0.20%			01/27/12		97,000,000		96,985,989
	a	0.20%			01/30/12		62,000,000		61,990,011

BNZ International Funding Ltd	a	0.34%			01/11/12		34,000,000		33,996,789

Commonwealth Bank of Australia	c	0.63%			06/15/12		25,000,000		24,927,375

Danske Corp	a,c	0.30%			01/09/12		9,000,000		8,999,400
	a,c	0.31%			01/09/12		71,000,000		70,995,109

General Electric Capital Corp		0.25%			01/04/12		105,000,000		104,997,812
		0.26%			01/11/12		111,000,000		110,991,983
		0.22%			01/18/12		223,000,000		222,976,833
		0.27%			03/26/12		41,000,000		40,973,862
		0.28%			04/03/12		18,000,000		17,986,980
		0.28%			04/12/12		6,000,000		5,995,240
		0.26%			04/18/12		8,000,000		7,993,760
		0.21%			04/27/12		5,000,000		4,996,588

12 See financial notes

Schwab Advisor Cash Reserves

Portfolio Holdings continued


						Face
			Effective	Maturity		Amount		Value
Issuer	Footnotes	Rate	Maturity	Date		($)		($)

HSBC USA, Inc		0.25%			01/24/12		7,000,000		6,998,882
		0.27%			03/15/12		92,000,000		91,948,940

JP Morgan Chase & Co		0.01%			01/03/12		54,000,000		53,999,970

Lloyds TSB Bank PLC		0.20%			01/03/12		64,000,000		63,999,289

RBS Holdings USA Inc	a,c	0.31%			01/05/12		62,000,000		61,997,864
	a,c	0.31%			01/12/12		7,000,000		6,999,337

Skandinaviska Enskilda Banken AB		0.25%			01/17/12		13,000,000		12,998,556

Societe Generale North America, Inc	a	0.54%			02/13/12		39,000,000		38,974,845

UBS Finance (Delaware), Inc	a	0.17%			01/03/12		84,000,000		83,999,207
	a	0.17%			01/06/12		130,000,000		129,997,021
	a	0.19%			01/10/12		27,000,000		26,998,717

Westpac Banking Corp	c	0.39%			02/21/12		180,000,000		179,901,825
	c	0.25%			03/19/12		50,000,000		49,972,917

									1,623,595,101

Other Commercial Paper 3.7%
BHP Billiton Finance (USA) Ltd	a,c	0.18%			01/26/12		4,000,000		3,999,500
	a,c	0.19%			02/16/12		56,000,000		55,986,404

General Electric Co		0.14%			03/28/12		207,000,000		206,929,965

Illinois Regional Transportation Auth
GO CP Sub Working Cash Notes	a	0.27%			01/05/12		7,500,000		7,500,000
	a	0.20%			01/30/12		5,000,000		5,000,000

Reckitt Benckiser Treasury Services PLC	a,c	0.12%			01/04/12		9,185,000		9,184,908
	a,c	0.35%			01/23/12		25,000,000		24,994,653
	a,c	0.52%			02/24/12		7,000,000		6,994,540
	a,c	0.60%			06/01/12		27,000,000		26,931,600
	a,c	0.60%			07/02/12		2,000,000		1,993,900

Toyota Motor Credit Corp	a	0.28%			03/01/12		180,000,000		179,916,000
	a	0.28%			03/02/12		20,000,000		19,990,511
	a	0.50%			04/30/12		74,000,000		73,876,667
	a	0.55%			05/14/12		80,000,000		79,836,222
	a	0.60%			05/23/12		43,000,000		42,897,517

Univ of California
CP Series B		0.17%			01/12/12		20,500,000		20,498,935

									766,531,322

Certificate of Deposit 24.3%
Australia & New Zealand Banking Group Ltd		0.25%			05/02/12		71,000,000		71,000,000

Bank of Montreal		0.16%			01/03/12		179,000,000		179,000,000
		0.12%			01/05/12		111,000,000		111,000,000
		0.25%			01/06/12		15,000,000		15,000,000
		0.07%			01/11/12		75,000,000		75,000,000
		0.07%			01/12/12		54,000,000		54,000,000
		0.23%			03/05/12		42,000,000		42,000,000

Bank of Nova Scotia		0.25%			01/06/12		85,000,000		85,000,000
		0.29%			01/17/12		4,000,000		4,000,000
		0.29%			01/23/12		27,000,000		27,000,000
		0.29%			01/24/12		100,000,000		100,000,000

See financial notes 13

Schwab Advisor Cash Reserves

Portfolio Holdings continued


						Face
			Effective	Maturity		Amount		Value
Issuer	Footnotes	Rate	Maturity	Date		($)		($)
		0.31%			02/07/12		21,000,000		21,000,000
		0.47%			05/14/12		33,000,000		33,000,000
		0.50%			05/15/12		123,000,000		123,000,000
		0.50%			05/23/12		5,000,000		5,000,000

Bank of the West		0.26%			01/18/12		26,000,000		26,000,000

Bank of Tokyo Mitsubishi UFJ, Ltd		0.09%			01/04/12		22,000,000		22,000,000
		0.08%			01/06/12		63,000,000		63,000,000
		0.20%			01/10/12		61,000,000		61,000,000
		0.20%			01/23/12		99,000,000		99,000,000
		0.22%			01/27/12		12,000,000		12,000,000
		0.22%			02/01/12		33,000,000		33,000,000

Barclays Bank PLC		0.47%			02/06/12		80,000,000		80,000,000

BNP Paribas		0.58%			02/09/12		24,000,000		24,000,000
		0.57%			02/17/12		13,000,000		13,000,000
		0.56%			03/08/12		21,000,000		21,000,000

Branch Banking & Trust Co
		0.29%			02/10/12		34,000,000		34,000,000
		0.30%			03/23/12		38,000,000		38,000,000
		0.31%			04/19/12		50,000,000		50,000,000

Canadian Imperial Bank of Commerce		0.10%			01/04/12		177,000,000		177,000,000
		0.08%			01/20/12		2,000,000		2,000,000

Citibank, NA		0.35%			03/20/12		134,000,000		134,000,000
		0.52%			05/29/12		54,000,000		54,000,000
		0.52%			05/30/12		5,000,000		5,000,000
		0.60%			06/20/12		2,000,000		2,000,000

Commonwealth Bank of Australia		0.36%			04/10/12		186,000,000		186,000,000

Credit Suisse AG		0.20%			01/03/12		240,000,000		240,000,000

Mitsubishi UFJ Trust & Banking Corp		0.24%			01/27/12		20,000,000		20,000,000

Mizuho Corporate Bank Ltd		0.14%			01/05/12		104,000,000		104,000,000
		0.20%			01/26/12		102,000,000		102,000,000

National Australia Bank Ltd		0.32%			02/21/12		72,000,000		72,000,000
		0.36%			03/07/12		101,000,000		101,000,463
		0.50%			04/05/12		8,000,000		8,000,000
		0.50%			04/10/12		65,000,000		65,000,000
		0.50%			04/13/12		2,000,000		2,000,000
		0.63%			05/29/12		23,000,000		23,000,000

Royal Bank of Scotland PLC		0.28%			01/04/12		79,000,000		79,000,000
		0.28%			01/06/12		35,000,000		35,000,000
		0.28%			01/12/12		26,000,000		26,000,000
		0.28%			01/18/12		13,000,000		13,000,000
		0.28%			01/24/12		1,000,000		1,000,000
		0.23%			01/26/12		12,000,000		12,000,000
		0.58%			02/17/12		16,000,000		16,000,000
		0.82%			04/19/12		61,000,000		61,000,000
		0.82%			04/27/12		35,000,000		35,000,000

Skandinaviska Enskilda Banken AB		0.32%			02/01/12		21,000,000		21,000,000

State Street Bank & Trust Company, NA		0.10%			01/12/12		253,000,000		253,000,000

Sumitomo Mitsui Banking Corp		0.17%			01/11/12		86,000,000		86,000,000

14 See financial notes

Schwab Advisor Cash Reserves

Portfolio Holdings continued


						Face
			Effective	Maturity		Amount		Value
Issuer	Footnotes	Rate	Maturity	Date		($)		($)
		0.21%			01/30/12		3,000,000		3,000,000

Sumitomo Trust & Banking Co Ltd		0.15%			01/06/12		208,000,000		208,000,000
		0.24%			01/27/12		102,000,000		102,000,000

Svenska Handelsbanken AB		0.15%			01/13/12		86,000,000		86,000,000
		0.12%			01/17/12		64,000,000		64,000,000
		0.12%			01/19/12		108,000,000		108,000,000

Swedbank AB		0.20%			01/05/12		79,000,000		79,000,000

Toronto-Dominion Bank		0.22%			01/04/12		50,000,000		50,000,000
		0.07%			01/11/12		305,000,000		305,000,000
		0.07%			01/17/12		33,000,000		33,000,000
		0.21%			01/19/12		188,000,000		188,000,000
		0.21%			02/13/12		73,000,000		73,000,000
		0.21%			04/02/12		36,000,000		36,000,000
		0.38%			05/01/12		100,000,000		100,000,000

UBS AG		0.19%			01/06/12		23,000,000		23,000,000
		0.20%			01/17/12		3,000,000		3,000,000
		0.20%			01/18/12		35,000,000		35,000,000

Union Bank, NA		0.36%			02/22/12		40,000,000		40,000,000
		0.40%			03/08/12		15,000,000		15,000,000
		0.40%			03/15/12		24,000,000		24,000,000
		0.45%			04/11/12		1,000,000		1,000,000

									5,032,000,463

Government Agency Debt 15.9%
Fannie Mae		0.02%			01/03/12		52,357,000		52,356,942
		0.04%			01/04/12		100,000,000		99,999,708
		0.04%			01/11/12		4,000,000		3,999,961
		0.03%			01/17/12		17,600,000		17,599,796
		0.05%			01/17/12		1,200,000		1,199,973
		0.03%			02/22/12		50,000,000		49,997,833
		0.03%			02/23/12		18,000,000		17,999,205
		0.02%			02/29/12		85,000,000		84,997,296
		0.04%			02/29/12		2,250,000		2,249,871
		0.02%			03/08/12		43,000,000		42,998,399

Federal Home Loan Bank		0.04%			01/04/12		1,250,000		1,249,996
		0.03%			01/06/12		121,000,000		120,999,496
		0.05%			01/06/12		1,000,000		999,994
		0.05%			01/18/12		16,100,000		16,099,620
		0.02%			01/27/12		24,500,000		24,499,646
		0.04%			02/03/12		30,000,000		29,999,038
		0.03%			02/08/12		205,000,000		204,993,508
		0.04%			02/08/12		31,000,000		30,998,855
		0.03%			02/10/12		62,000,000		61,997,933
		0.04%			02/15/12		9,850,000		9,849,569
		0.02%			02/29/12		45,000,000		44,998,525
		0.02%			03/02/12		55,000,000		54,998,136
		0.04%			03/02/12		5,000,000		4,999,661
		0.02%			03/07/12		40,000,000		39,998,900
		0.02%			03/14/12		50,000,000		49,997,972
		0.02%			03/16/12		85,000,000		84,996,458
		0.03%			03/21/12		100,000,000		99,994,444

Freddie Mac		0.03%			01/03/12		3,000,000		2,999,995
		0.01%			01/09/12		10,000,000		9,999,978
		0.03%			01/09/12		102,000,000		101,999,320
		0.04%			01/09/12		18,000,000		17,999,860

See financial notes 15

Schwab Advisor Cash Reserves

Portfolio Holdings continued


							Face
			Effective		Maturity		Amount		Value
Issuer	Footnotes	Rate	Maturity		Date		($)		($)
		0.01%				01/10/12		5,000,000		4,999,988
		0.02%				01/17/12		17,391,000		17,390,845
		0.03%				02/06/12		85,000,000		84,997,450
		0.04%				02/06/12		50,000,000		49,998,250
		0.03%				02/13/12		85,000,000		84,997,313
		0.03%				02/15/12		25,900,000		25,899,029
		0.02%				03/05/12		92,308,000		92,304,718
		0.02%				03/06/12		175,000,000		174,993,681
		0.02%				03/07/12		30,000,000		29,999,175
		0.02%				03/12/12		2,000,000		1,999,921
		0.01%				03/15/12		39,000,000		38,999,198
		0.02%				03/19/12		301,500,000		301,486,935

Straight A Funding, LLC	a,b,c,f	0.19%				01/04/12		22,031,000		22,030,651
	a,b,c,f	0.19%				01/10/12		80,000,000		79,996,200
	a,b,c,f	0.19%				01/24/12		114,000,000		113,986,162
	a,b,c,f	0.15%				02/08/12		75,000,000		74,988,125
	a,b,c,f	0.19%				02/09/12		81,000,000		80,983,327
	a,b,c,f	0.19%				02/10/12		69,558,000		69,543,315
	a,b,c,f	0.19%				02/13/12		30,902,000		30,894,987
	a,b,c,f	0.19%				02/14/12		50,000,000		49,988,389
	a,b,c,f	0.19%				02/22/12		47,000,000		46,987,101
	a,b,c,f	0.19%				02/23/12		95,000,000		94,973,426
	a,b,c,f	0.19%				03/01/12		85,000,000		84,973,083
	a,b,c,f	0.19%				03/02/12		92,012,000		91,982,378
	a,b,c,f	0.19%				03/06/12		10,000,000		9,996,570
	a,b,c,f	0.19%				03/12/12		154,621,000		154,563,061

										3,302,023,166

Other Instrument 2.4%
Australia & New Zealand Banking Group Ltd	j	0.08%				01/05/12		98,000,000		98,000,000

Bank of Nova Scotia	j	0.01%				01/03/12		80,000,000		80,000,000

Chase Bank USA, NA	j	0.00%				01/03/12		45,000,000		45,000,000

Citibank, NA	j	0.06%				01/03/12		30,000,000		30,000,000

Royal Bank of Canada	j	0.01%				01/03/12		250,000,000		250,000,000

										503,000,000

Treasury Debt 0.0%
United States Treasury Department		1.13%				01/15/12		6,000,000		6,002,508

Total Fixed-Rate Obligations
(Cost $15,175,126,781)										15,175,126,781




Variable-Rate Obligations 9.2% of net assets

Financial Company Commercial Paper 1.8%
Commonwealth Bank of Australia	c	0.49%		02/21/12		05/18/12		135,000,000		135,000,000
	c	0.61%		03/22/12		06/22/12		123,000,000		122,952,635

JP Morgan Chase & Co		0.31%		01/13/12		03/13/12		114,000,000		114,000,000

										371,952,635

Certificate of Deposit 3.9%
Canadian Imperial Bank of Commerce		0.38%		01/23/12		07/23/12		92,000,000		92,000,000

Rabobank Nederland		0.34%		01/03/12		05/02/12		100,000,000		100,000,000

16 See financial notes

Schwab Advisor Cash Reserves

Portfolio Holdings continued


							Face
			Effective		Maturity		Amount		Value
Issuer	Footnotes	Rate	Maturity		Date		($)		($)

Royal Bank of Canada		0.32%		01/05/12		03/05/12		79,000,000		79,000,000
		0.27%		01/03/12		03/27/12		234,000,000		234,000,000
		0.27%		01/03/12		04/09/12		52,000,000		52,000,000
		0.32%		01/03/12		04/12/12		69,000,000		69,000,000

Westpac Banking Corp		0.36%				01/10/12		20,000,000		20,000,000
		0.36%		01/03/12		05/01/12		158,000,000		158,000,000

										804,000,000

Government Agency Debt 0.5%
Freddie Mac	i	0.29%		01/10/12		11/09/12		100,000,000		100,000,000

GFRE Holdings, LLC	a	0.30%				01/06/12		2,885,000		2,885,000

										102,885,000

Variable Rate Demand Note 1.0%
Breckenridge Terrace, LLC
Housing Facilities Revenue Notes Series 1999B	a	0.25%				01/06/12		1,000,000		1,000,000

Cleveland
Airport System Taxable Revenue Bonds Series 2008F	a	0.14%				01/06/12		29,000,000		29,000,000

Eagle Cnty, CO
Housing Facilities RB (The Tarnes at BC, LLC) Series 1999B	a	0.25%				01/06/12		2,000,000		2,000,000

Indiana Health & Educational Facility Financing Auth
Taxable Variable Rate Demand Revenue Bonds (Union Hospital) Series 2006B	a	0.15%				01/06/12		12,545,000		12,545,000

Tenderfoot Seasonal Housing, LLC
Taxable Housing Facilities Revenue Notes Series 2000B	a	0.25%				01/06/12		2,885,000		2,885,000

Texas
TRAN Series 2011A	c,g	0.07%				01/03/12		139,035,000		139,035,000
Veterans Taxable Refunding Bonds Series 2010B	g	0.15%				01/06/12		12,930,000		12,930,000
Veterans Housing Assistance Taxable Refunding Bonds Series 1994A2		0.29%				01/06/12		6,900,000		6,900,000
Veterans Land Taxable Refunding Bonds Series 2006A		0.29%				01/06/12		1,070,000		1,070,000

										207,365,000

Other Note 1.9%
Bank of America, NA	h	0.77%		01/23/12		08/22/12		147,000,000		147,000,000

JPMorgan Chase Bank, NA	i	0.33%		01/23/12		01/18/13		47,000,000		47,000,000
	i	0.43%		01/18/12		01/18/13		90,000,000		90,000,000

Westpac Banking Corp	c,i	0.57%		01/30/12		01/25/13		100,000,000		100,000,000

Whistlejacket Capital, LLC	c,d,e	n/a		n/a		n/a		3,838,564		3,838,564

										387,838,564

Other Municipal Debt 0.1%
Univ of California
General Revenue Bonds Series 2011 Y-2		0.33%		01/01/12		07/01/12		30,000,000		30,000,000

Total Variable-Rate Obligations
(Cost $1,904,041,199)										1,904,041,199

See financial notes 17

Schwab Advisor Cash Reserves

Portfolio Holdings continued


						Face/
						Maturity
			Effective	Maturity		Amount		Value
Issuer	Footnotes	Rate	Maturity	Date		($)		($)

Repurchase Agreements 17.7% of net assets

Government Agency Repurchase Agreement 16.6%
Barclays Capital, Inc
Tri-Party Repurchase Agreement Collateralized by U.S. Government Agency Securities with a value of $13,557,755, issued 11/04/11, due 01/03/12.		0.18%			01/03/12		13,003,900		13,000,000
Tri-Party Repurchase Agreement Collateralized by U.S. Government Agency Securities with a value of $176,400,000, issued 10/14/11, due 01/13/12.		0.19%			01/06/12		168,074,480		168,000,000
Tri-Party Repurchase Agreement Collateralized by U.S. Government Agency Securities with a value of $380,023,333, issued 11/23/11, due 01/23/12.		0.23%			01/06/12		365,102,606		365,000,000

BNP Paribas Securities Corp
Tri-Party Repurchase Agreement Collateralized by U.S. Government Agency Securities with a value of $455,260,000, issued 12/30/11, due 01/03/12.		0.06%			01/03/12		442,002,947		442,000,000
Tri-Party Repurchase Agreement Collateralized by U.S. Government Agency Securities with a value of $60,900,001, issued 11/22/11, due 01/03/12.		0.22%			01/03/12		58,014,887		58,000,000

Credit Suisse Securities (USA), LLC
Tri-Party Repurchase Agreement Collateralized by U.S. Government Agency Securities with a value of $414,419,891, issued 12/30/11, due 01/03/12.		0.04%			01/03/12		406,294,838		406,293,032

Deutsche Bank Securities, Inc
Tri-Party Repurchase Agreement Collateralized by U.S. Government Agency Securities with a value of $130,000,000, issued 12/30/11, due 01/03/12.		0.08%			01/03/12		125,001,111		125,000,000
Tri-Party Repurchase Agreement Collateralized by U.S. Government Agency Securities with a value of $100,936,510, issued 11/29/11, due 01/03/12.		0.22%			01/03/12		97,020,747		97,000,000
Tri-Party Repurchase Agreement Collateralized by U.S. Government Agency Securities with a value of $47,954,845, issued 10/26/11, due 01/05/12.		0.18%			01/05/12		46,016,330		46,000,000
Tri-Party Repurchase Agreement Collateralized by U.S. Government Agency Securities with a value of $212,158,168, issued 12/16/11, due 01/17/12.		0.17%			01/06/12		204,020,230		204,000,000
Tri-Party Repurchase Agreement Collateralized by U.S. Government Agency Securities with a value of $507,254,515 issued 10/11/11, due 01/09/12.		0.19%			01/06/12		488,224,073		488,000,000
Tri-Party Repurchase Agreement Collateralized by U.S. Government Agency Securities with a value of $67,600,001, issued 12/02/11, due 03/01/12.		0.22%			01/06/12		65,013,903		65,000,000

JP Morgan Securities, LLC
Tri-Party Repurchase Agreement Collateralized by U.S. Government Agency Securities with a value of $206,000,001, issued 12/30/11, due 01/03/12.		0.05%			01/03/12		200,001,111		200,000,000

Merrill Lynch, Pierce, Fenner & Smith, Inc
Tri-Party Repurchase Agreement Collateralized by U.S. Government Agency Securities with a value of $206,000,001, issued 12/30/11, due 01/03/12.		0.05%			01/03/12		200,001,111		200,000,000
Tri-Party Repurchase Agreement Collateralized by U.S. Government Agency Securities with a value of $370,800,000, issued 11/28/11, due 01/03/12.		0.23%			01/03/12		360,082,800		360,000,000

18 See financial notes

Schwab Advisor Cash Reserves

Portfolio Holdings continued

Face/

Maturity

Effective

Maturity

Amount

Value

Issuer

Footnotes

Rate

Maturity

Date

($)

UBS Securities LLC

Tri-Party Repurchase Agreement Collateralized by U.S. Government Agency Securities with a value of $183,600,000, issued 12/30/11, due 01/03/12.

0.06%

01/03/12

180,001,200

180,000,000

Tri-Party Repurchase Agreement Collateralized by U.S. Government Agency Securities with a value of $25,500,000, issued 10/20/11, due 01/19/12.

0.21%

01/06/12

25,011,375

25,000,000

3,442,293,032

Treasury Repurchase Agreement 0.7%

Barclays Capital, Inc

Tri-Party Repurchase Agreement Collateralized by U.S. Treasury Securities with a value of $51,000,022, issued 12/30/11, due 01/03/12.

0.01%

01/03/12

50,000,056

50,000,000

Tri-Party Repurchase Agreement Collateralized by U.S. Treasury Securities with a value of $96,900,021, issued 12/30/11, due 01/03/12.

0.02%

01/03/12

95,000,211

95,000,000

145,000,000

Other Repurchase Agreement 0.4%

Deutsche Bank Securities, Inc

Tri-Party Repurchase Agreement Collateralized by common stocks and ETFs with a value of $26,250,001, issued 12/30/2011, due 01/03/12.

0.24%

01/03/12

25,000,667

25,000,000

Goldman Sachs & Co

Tri-Party Repurchase Agreement Collateralized by common stocks and ETFs with a value of $19,950,001, issued 11/01/11, due 02/14/12.

0.65%

02/14/12

19,036,021

19,000,000

Tri-Party Repurchase Agreement Collateralized by common stocks and ETFs with a value of $36,750,002, issued 10/18/11, due 02/15/12.

0.75%

02/15/12

35,087,500

35,000,000

Tri-Party Repurchase Agreement Collateralized by common stocks and ETFs with a value of $12,600,000, issued 11/16/11, due 02/29/12.

0.69%

02/29/12

12,024,150

12,000,000

91,000,000

Total Repurchase Agreements

(Cost $3,678,293,032)

3,678,293,032

End of Investments.

At 12/31/11, the tax basis cost of the fund’s investments was $20,757,461,012.


a		Credit-enhanced security.
b		Asset-backed security.
c		Securities exempt from registration under Rule 144A of the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registrations, normally to qualified institutional buyers. At the period end, the value of these amounted to $5,982,566,527 or 28.8% of net assets.
d		Illiquid security. At the period end, the value of these amounted to $69,838,564 or 0.3% of net assets.
e		Whistlejacket notes are in receivership, and the fund elected to sell all of its Whistlejacket notes at auction (April 29, 2009). The remaining investment represents an interest in a small residual fund that is being held to cover any remaining expenses and liabilities associated with receivership.
f		The U.S. Securities and Exchange Commission has stated that it is permissible for money market funds to treat Straight A Funding LLC securities as government securities for the purpose of compliance with the diversification requirements of Rule 2a-7(c)(4)(i).
g		Liquidity-enhanced security.
h		Bank Note
i		Extendible Note - Investor Option
j		Time Deposit

See financial notes 19

Schwab Advisor Cash Reserves

Statements of

Changes in Net Assets

For the current and prior report periods



Operations


1/1/11-12/31/11				1/1/10-12/31/10
Net investment income		$2,054,071			$1,997,903
Net realized gains (losses)	+	(616	)		26,795,521	¹

Increase in net assets from operations		2,053,455			28,793,424

Distributions to Shareholders

Distributions from net investment income
Sweep Shares		(573,256	)		(565,291	)
Premier Sweep Shares	+	(1,480,815	)		(1,432,612	)

Total distributions from net investment income		(2,054,071	)		(1,997,903	)

Transactions in Fund Shares*

Shares Sold
Sweep Shares		21,703,474,701			20,396,254,662
Premier Sweep Shares	+	69,113,644,043			66,618,285,602

Total shares sold		90,817,118,744			87,014,540,264


Shares Reinvested
Sweep Shares		493,334			486,309
Premier Sweep Shares	+	1,384,993			1,350,058

Total shares reinvested		1,878,327			1,836,367


Shares Redeemed
Sweep Shares		(21,286,232,784	)		(20,573,914,470	)
Premier Sweep Shares	+	(69,729,967,805	)		(65,428,925,307	)

Total shares redeemed		(91,016,200,589	)		(86,002,839,777	)

Net transactions in fund shares		(197,203,518	)		1,013,536,854

Net Assets

Beginning of period		20,958,936,154			19,918,603,779
Total increase or decrease	+	(197,204,134	)		1,040,332,375

End of period		$20,761,732,020			$20,958,936,154


*		Transactions took place at $1.00 per share; figures for share quantities are the same as for dollars.
¹		Net realized gains (losses) includes payment from affiliate. (See financial note 4)

See financial notes 23

Schwab Advisor Cash Reserves

Financial Notes

1. Business Structure of the Fund:

Schwab Advisor Cash Reserves is a series of The Charles Schwab Family of Funds (the “trust”), a no-load, open-end management investment company. The trust is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended (the “1940 Act”). The list below shows all the funds in the trust as of the end of the period, including the fund discussed in this report, which is highlighted:



The Charles Schwab Family of Funds (organized October 20, 1989)		Schwab Municipal Money Fund
Schwab Money Market Fund		Schwab AMT Tax-Free Money Fund
Schwab Government Money Fund		Schwab California Municipal Money Fund
Schwab U.S. Treasury Money Fund (closed to new investors)		Schwab California AMT Tax-Free Money Fund
Schwab Value Advantage Money Fund		Schwab New York AMT Tax-Free Money Fund
Schwab Advisor Cash Reserves		Schwab New Jersey AMT Tax-Free Money Fund
Schwab Cash Reserves		Schwab Pennsylvania Municipal Money Fund
Schwab Retirement Advantage Money Fund		Schwab Massachusetts AMT Tax-Free Money Fund
Schwab Investor Money Fund

Schwab Advisor Cash Reserves offers two share classes: Sweep Shares and Premier Sweep Shares. Shares of each class represent interest in the same portfolio, but each class has different expenses and investment minimums.

Shares are bought and sold at closing net asset value (“NAV”), which is the price for all outstanding shares of the fund. Each share has a par value of 1/1,000 of a cent, and the Board of Trustees may authorize the issuance of as many shares as necessary.

The fund maintains its own account for purposes of holding assets and accounting, and is considered a separate entity for tax purposes. Within its account, the fund may also keep certain assets in segregated accounts, as required by securities law.

2. Significant Accounting Policies:

The following is a summary of the significant accounting policies the fund uses in its preparation of financial statements. The accounting policies are in conformity with accounting principles generally accepted in the United States of America (“GAAP”).

(a) Security Valuation:

Securities in the fund are valued at amortized cost (which approximates market value) as permitted in accordance with Rule 2a-7 of the 1940 Act. In the event that security valuations do not approximate market value, securities may be valued as determined in accordance with procedures adopted by the Board of Trustees.

In accordance with the authoritative guidance on fair value measurements and disclosures under GAAP, the fund discloses the fair value of its investments in a hierarchy that prioritizes the inputs to valuation techniques used to measure the fair value. The hierarchy gives the highest priority to valuations based upon unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to valuations based upon unobservable inputs that are significant to the valuation (Level 3 measurements). If the fund determines that either the volume and/or level of activity for an asset or liability has significantly decreased (from normal conditions for that asset or liability) or price quotations or observable inputs are not associated with orderly transactions, increased analysis and management judgment will be required to estimate fair value.

The three levels of the fair value hierarchy are as follows:


	•	Level 1 — quoted prices in active markets for identical securities — Investments whose values are based on quoted market prices in active markets, and whose values are therefore classified as Level 1 prices, include active listed equities. The fund does not adjust the quoted prices for such investments, even in situations where the fund holds a large position and a sale could reasonably impact the quoted price.

	•	Level 2 — other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.) — Investments that trade in markets that are not considered to be active, but whose values are based on quoted market prices, dealer quotations or valuations provided by alternative pricing sources supported by observable inputs are classified as Level 2 prices. These generally include U.S. government and sovereign obligations, most government agency securities, investment-grade corporate bonds, certain mortgage products, less liquid listed equities, and state, municipal and provincial obligations. As investments whose values are classified as Level 2 prices include positions

Schwab Advisor Cash Reserves

Financial Notes (continued)

2. Significant Accounting Policies (continued):


		that are not traded in active markets and/or are subject to transfer restrictions, valuations may be adjusted to reflect illiquidity and/or non-transferability, which are generally based on available market information. Securities held by money funds operating under Rule 2a-7 of the 1940 Act are valued at amortized cost which approximates current market value and are considered to be valued using Level 2 inputs.


	•	Level 3 — significant unobservable inputs (including the fund’s own assumption in determining the fair value of investments) — Investments whose values are classified as Level 3 prices have significant unobservable inputs, as they may trade infrequently or not at all. When observable prices are not available for these securities, the fund uses one or more valuation techniques for which sufficient and reliable data is available. The inputs used by the fund in estimating the value of Level 3 prices may include the original transaction price, quoted prices for similar securities or assets in active markets, completed or pending third-party transactions in the underlying investment or comparable issuers, and changes in financial ratios or cash flows. Level 3 prices may also be adjusted to reflect illiquidity and/or non-transferability, with the amount of such discount estimated by the fund in the absence of market information. Assumptions used by the fund due to the lack of observable inputs may significantly impact the resulting fair value and therefore the fund’s results of operations.

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. At December 31, 2011, all of the fund’s investment securities were classified as Level 2. The breakdown of the fund’s investments into major categories is disclosed on the portfolio holdings.

The fund’s policy is to recognize transfers between Level 1, Level 2 and Level 3 as of the beginning of the fiscal year. There were no significant transfers between Level 1, Level 2 and Level 3 for the period ended December 31, 2011.

(b) Accounting Policies for certain Portfolio Investments (if held):

Repurchase Agreements: In a repurchase agreement, a fund buys a security from another party (usually a financial institution) with the agreement that it be sold back in the future. Repurchase agreements subject a fund to counterparty risk, meaning that the fund could lose money if the other party fails to perform under the terms of the agreement. The fund mitigates this risk by ensuring that a fund’s repurchase agreements are collateralized by cash, U.S. government securities, fixed income securities, equity securities or other types of securities. All collateral is held by the fund’s custodian (or, with tri-party agreements, the agent’s bank) and is monitored daily to ensure that its market value is at least equal to the repurchase price under the agreement. Investments in repurchase agreements are also based on a review of the credit quality of the repurchase agreement counterparty.

Delayed-Delivery Transactions: The fund may buy securities at a predetermined price or yield, with payment and delivery taking place after the customary settlement period for that type of security. The fund will assume the rights and risks of ownership at the time of purchase, including the risk of price and yield fluctuations. Typically, no interest will accrue to a fund until the security is delivered. The fund will earmark or segregate appropriate liquid assets to cover its delayed-delivery purchase obligations.

(c) Security Transactions:

(d) Investment Income:

(e) Expenses:

Schwab Advisor Cash Reserves

Financial Notes (continued)

2. Significant Accounting Policies (continued):

For funds offering multiple share classes, the net investment income, other than class specific expenses, and the realized and unrealized gains or losses, are allocated daily to each class in proportion to their average daily net assets.

(f) Distributions to Shareholders:

The fund declares distributions from net investment income, if any, every day it is open for business. These distributions, which are substantially equal to a fund’s net investment income for that day, are paid out to shareholders once a month. The fund declares distributions from net realized capital gains, if any, once a year.

(g) Custody Credit:

The fund has an arrangement with its custodian bank, State Street Bank and Trust Company (“State Street”), under which the fund receives a credit for its uninvested cash balance to offset its custody fees and accounting fees. The credit amounts, if any, are disclosed in the Statement of Operations as a reduction to the fund’s operating expenses.

(h) Accounting Estimates:

(i) Federal Income Taxes:

The fund intends to meet federal income and excise tax requirements for regulated investment companies. Accordingly, the fund distributes substantially all of its net investment income and realized net capital gains, if any, to its respective shareholders each year. As long as a fund meets the tax requirements, it is not required to pay federal income tax.

(j) Indemnification:

Under the fund’s organizational documents, the officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the fund. In addition, in the normal course of business the fund enters into contracts with its vendors and others that provide general indemnifications. The fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the fund. However, based on experience, the fund expects the risk of loss to be remote.

(k) New Accounting Pronouncements:

At this time, management is evaluating the implications of these changes and their impact on the financial statements.

Schwab Advisor Cash Reserves

Financial Notes (continued)

3. Risk Factors:

An investment in the fund is not a bank deposit and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the fund seeks to preserve the value of a shareholder’s investment at $1 per share, it is possible to lose money by investing in the fund.

Interest rates rise and fall over time. As with any investment whose yield reflects current interest rates, the fund’s yield will change over time. During periods when interest rates are low, the fund’s yield (and total return) also will be low. In addition, to the extent the fund makes any reimbursement payments to the investment adviser and/or its affiliates, the fund’s yield would be lower.

The fund is subject to the risk that a decline in the credit quality of a portfolio investment could cause the fund to lose money or underperform. The fund could lose money if the issuer of a portfolio investment fails to make timely principal or interest payments or if a guarantor, liquidity provider or counterparty of a portfolio investment fails to otherwise honor its obligations. Even though the fund’s investments in repurchase agreements are collateralized at all times, there is some risk to the fund if the other party should default on its obligations and the fund is delayed or prevented from recovering or disposing of the collateral. The negative perceptions of the ability of an issuer, guarantor, liquidity provider or counterparty to make payments or otherwise honor its obligations, as applicable, could also cause the price of that investment to decline. The credit quality of a fund’s portfolio holdings can change rapidly in certain market environments and any downgrade or default on the part of a single portfolio investment could cause the fund’s share price or yield to fall.

Many of the U.S. government securities that the fund invests in are not backed by the full faith and credit of the United States government, which means they are neither issued nor guaranteed by the U.S. Treasury. There can be no assurance that the U.S. government will provide financial support to securities of its agencies and instrumentalities if it is not obligated to do so under law. Also, any government guarantees on securities a fund owns do not extend to the shares of the fund itself.

The fund’s investments in securities of foreign issuers or securities with credit or liquidity enhancements provided by foreign entities may involve certain risks that are greater than those associated with investments in securities of U.S. issuers or securities with credit or liquidity enhancements provided by U.S. entities. These include risks of adverse changes in foreign economic, political, regulatory and other conditions; differing accounting, auditing, financial reporting and legal standards and practices; differing securities market structures; and higher transaction costs. In addition, sovereign risk, or the risk that a government may become unwilling or unable to meet its loan obligations or guarantees, could increase the credit risk of financial institutions connected to that particular country.

Any actively managed mutual fund is subject to the risk that its investment adviser will make poor security selections. The fund’s investment adviser applies its own investment techniques and risk analyses in making investment decisions for the fund, but there can be no guarantee that they will produce the desired results. The investment adviser’s maturity decisions will also affect the fund’s yield, and in unusual circumstances potentially could affect its share price. To the extent that the investment adviser anticipates interest rate trends imprecisely, the fund’s yield at times could lag those of other money market funds.

Liquidity risk exists when particular investments are difficult to purchase or sell. The market for certain investments may become illiquid due to specific adverse changes in the conditions of a particular issuer or under adverse market or economic conditions independent of the issuer. The fund’s investments in illiquid securities may reduce the returns of the fund because it may be unable to sell the illiquid securities at an advantageous time or price. Further, transactions in illiquid securities may entail transaction costs that are higher than those for transactions in liquid securities.

The fund may experience periods of heavy redemptions that could cause the fund to liquidate its assets at inopportune times or at a loss or depressed value, particularly during periods of declining or illiquid markets. Redemptions by a few large investors in the fund may have a significant adverse effect on the fund’s ability to maintain a stable $1.00 share price. In the event any money market fund fails to maintain a stable net asset value, other money market funds, including the fund, could face a market-wide risk of increased redemption pressures, potentially jeopardizing the stability of their $1.00 share prices.

The fund is not designed to offer capital appreciation. In exchange for their emphasis on stability and liquidity, money market investments may offer lower long-term performance than stock or bond investments.

Please refer to the fund’s prospectus for a more complete description of the principal risks of investing in the fund.

Schwab Advisor Cash Reserves

Financial Notes (continued)

4. Affiliates and Affiliated Transactions:

Charles Schwab Investment Management, Inc. (“CSIM” or the “investment adviser”), a wholly owned subsidiary of The Charles Schwab Corporation, serves as the fund’s investment adviser and administrator pursuant to an Investment Advisory and Administration Agreement (“Advisory Agreement”) between CSIM and the trust.

For its advisory and administrative services to the fund, CSIM is entitled to receive an annual fee, payable monthly, based on a percentage of the fund’s average daily net assets as follows:


Average Daily Net Assets

First $1 billion			0.35%
More than $1 billion but not exceeding $10 billion			0.32%
More than $10 billion but not exceeding $20 billion			0.30%
More than $20 billion but not exceeding $40 billion			0.27%
Over $40 billion			0.25%

The Board of Trustees has adopted a Shareholder Servicing and Sweep Administration Plan (the “Plan”) on behalf of the fund. The Plan enables the fund to bear expenses relating to the provision by service providers, including Charles Schwab & Co., Inc. (a broker-dealer affiliate of CSIM, “Schwab”), of certain account maintenance, customer liaison and shareholder services to the current shareholders of the fund. Schwab serves as the fund’s paying agent under the Plan for making payments of the shareholder service fee due to the service providers (other than Schwab) under the Plan. All shareholder service fees paid by the fund to Schwab in its capacity as the fund’s paying agent will be passed through to the service providers, and Schwab will not retain any portion of such fees. The Plan also enables the fund to pay Schwab for certain sweep administration services, such as processing of automatic purchases and redemptions it provides to fund shareholders invested in the fund.

Pursuant to the Plan, the fund’s shares are subject to an annual shareholder servicing fee of up to 0.25%. The shareholder servicing fee paid to a particular service provider is made pursuant to its written agreement with Schwab (or, in the case of payments made to Schwab, pursuant to Schwab’s written agreement with the fund), and the fund will pay no more than 0.25% of the average annual daily net asset value of the fund shares owned by shareholders holding shares through Schwab. Pursuant to the Plan, the fund’s shares are subject to an annual sweep administration fee of up to 0.15%. The sweep administration fee paid to Schwab is based on the average daily net asset value of the fund shares owned by shareholders holding shares through Schwab. Payments under the Plan are made as described above regardless of Schwab’s or the service provider’s actual cost of providing the services. If the cost of providing the services under the Plan is less than the payment received, the unexpended portion of the fees may be retained as profit by Schwab or the service provider.

Contractual Expense Limitation

Although these agreements specify certain fees for these services, CSIM and Schwab have made an additional agreement (“expense limitation”) with the fund, for so long as CSIM serves as the investment adviser to the fund, which may only be amended or terminated with the approval of the fund’s Board of Trustees, to limit the total annual fund operating expenses, excluding interest, taxes and certain non-routine expenses as follows:


Sweep Shares			0.66%
Premier Sweep Shares			0.59%

In addition, effective January 1, 2011 through December 31, 2011, CSIM and Schwab agreed to waive an additional amount of the fund’s expenses equal to 0.035% of the fund’s average daily net assets.

Voluntary Expense Waiver/Reimbursement

In addition to the contractual expense limitation agreements noted above, Schwab and the investment adviser also may waive and/or reimburse expenses to the extent necessary to maintain a positive net yield for each share class of the fund. Schwab and the investment adviser may recapture from the fund any of these expenses or fees they have waived and/or reimbursed until the third anniversary of the end of the fiscal year in which such waiver and/or reimbursement occurs, subject to certain limitations. These reimbursement payments by the fund to Schwab and/or the investment adviser are considered “non-routine expenses” and are not subject to any net operating expense limitations in effect at the time of such payment. This recapture could

Schwab Advisor Cash Reserves

Financial Notes (continued)

4. Affiliates and Affiliated Transactions (continued):

negatively affect the fund’s future yield. There were no prior year amounts recaptured. As of December 31, 2011, the balance of recoupable expenses is as follows:


	Expiration Date
	December 31, 2012		December 31, 2013		December 31, 2014		Total

Schwab Advisor Cash Reserves
Sweep Shares		$7,890,129		$15,882,287		$21,168,260		$44,940,676
Premier Sweep Shares		$13,137,784		$30,275,610		$44,182,521		$87,595,915

The fund may engage in direct transactions with certain other Schwab Funds when practical. When one fund is seeking to sell a security that another is seeking to buy, an interfund transaction can allow both funds to benefit by reducing transaction costs. This practice is limited to funds that share the same investment adviser, trustees and/or officers. For the period ended December 31, 2011, the fund’s aggregate security transactions with other Schwab Funds were $147,000,000.

Pursuant to an exemptive order issued by the SEC, the fund may enter into interfund borrowing and lending transactions with other Schwab Funds. All loans are for temporary or emergency purposes only. The interest rate charged on the loan is the average of the overnight repurchase agreement rate and the short-term bank loan rate. The interfund lending facility is subject to the oversight and periodic review of the Board of Trustees of the Schwab Funds. The fund had no interfund borrowing or lending activity during the period.

On September 14, 2010, The Charles Schwab Corporation made a payment of $25,575,062 to Schwab Advisor Cash Reserves to cover the net remaining losses recognized as a result of its investment in a single structured investment vehicle that defaulted in 2008. This payment represented 0.1% of the fund’s net assets on that date.

5. Transfer Agent Services:

Boston Financial Data Services, Inc. (“BFDS”) provides transfer agent services for the fund.

6. Board of Trustees:

7. Borrowing from Banks:

The fund has access to custodian overdraft facilities, a committed line of credit of $150 million with State Street Bank and Trust (“State Street”), an uncommitted line of credit of $100 million with Bank of America, N.A. and an uncommitted line of credit of $50 million with Brown Brothers Harriman & Co. The fund pays interest on the amount it borrows at rates that are negotiated periodically. The fund also pays an annual fee to State Street for the committed line of credit.

There were no borrowings from the lines of credit by the fund during the period. However, the fund may have utilized its overdraft facility and incurred interest expense, which is disclosed in the Statement of Operations, if any. The interest expense is determined based on a negotiated rate above the current Federal Funds Rate.

8. Federal Income Taxes:

As of December 31, 2011, the fund had no distributable earnings on a tax basis.

Capital loss carryforwards may be used to offset future realized capital gains for federal income tax purposes. As of December 31, 2011, the fund had capital loss carryforwards of $1,402,713 available to offset future net capital gains before the expiration date of December 31, 2017 and $616 with no expiration.

Schwab Advisor Cash Reserves

Financial Notes (continued)

8. Federal Income Taxes (continued):

For tax purposes, realized net capital losses incurred after October 31 may be deferred and treated as occurring on the first day of the following year. For the year ended December 31, 2011, the fund had no capital losses deferred and no capital losses utilized.

The tax-basis components of distributions paid during the current and prior fiscal years were:


Current period distributions
Ordinary income			$2,054,071

Prior period distributions
Ordinary income			$1,997,903

Distributions paid to shareholders are based on net investment income and net realized gains determined on a tax basis, which may differ from net investment income and net realized gains for financial reporting purposes; there were no such differences in the current year. The fiscal year in which amounts are distributed may differ from the year in which the net investment income and net realized gains are recorded by the fund for financial reporting purposes. The fund may also designate a portion of the amount paid to redeeming shareholders as a distribution for tax purposes.

As of December 31, 2011, management has reviewed the tax positions for open periods (for federal purposes, three years from the date of filing and for state purposes, four years from the date of filing) as applicable to the fund, and has determined that no provision for income tax is required in the fund’s financial statements. The fund recognizes interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the Statement of Operations. During the period ended December 31, 2011, the fund did not incur any interest or penalties.

Certain of the enacted provisions include:

9. Subsequent Events:

Report of Independent Registered Public Accounting Firm

To the Board of Trustees and Shareholders of:

Schwab Advisor Cash Reserves

In our opinion, the accompanying statement of assets and liabilities, including the portfolio holdings, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Schwab Advisor Cash Reserves (one of the portfolios constituting The Charles Schwab Family of Funds, hereafter referred to as the “Fund”) at December 31, 2011, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the 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, 2011 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

San Francisco, California

February 15, 2012

Trustees and Officers

The tables below give information about the trustees and officers for The Charles Schwab Family of Funds which includes the fund covered in this report. The “Fund Complex” includes The Charles Schwab Family of Funds, Schwab Capital Trust, Schwab Investments, Schwab Annuity Portfolios, Schwab Strategic Trust, Laudus Trust and Laudus Institutional Trust. The Fund Complex includes 87 funds.

Independent Trustees


Name, Year of Birth,		Number of
and Position(s) with		Portfolios in
the trust; (Terms of		Fund Complex
office, and length of	Principal Occupations	Overseen by
Time Served¹)	During the Past Five Years	the Trustee	Other Directorships

Mariann Byerwalter 1960 Trustee (Trustee of The Charles Schwab Family of Funds since 2000.)	Chairman of JDN Corporate Advisory LLC.	70	Director, Redwood Trust, Inc. (1998 – present) Director, PMI Group Inc. (2001 – 2009)


John F. Cogan 1947 Trustee (Trustee of The Charles Schwab Family of Funds since 2008.)	Senior Fellow: The Hoover Institution at Stanford University (Oct. 1979 – present); Senior Fellow Stanford Institute for Economic Policy Research; Professor of Public Policy, Stanford University (Sept. 1994 – present).	70	Director, Gilead Sciences, Inc. (2005 – present) Director, Monaco Coach Corporation (2005 – 2009)


William A. Hasler 1941 Trustee (Trustee of The Charles Schwab Family of Funds since 2000.)	Dean Emeritus, Haas School of Business, University of California, Berkeley (July 1998 – present).	70	Director, Ditech Networks Corporation (1997 – present) Director, TOUSA (1998 – present) Director, Mission West Properties (1998 – present) Director, Globalstar, Inc. (2009 – present) Director, Aviat Networks (2001 – present) Director, Aphton Corp. (1991 – 2007) Director, Solectron Corporation (1998 – 2007) Director, Genitope Corporation (2000 – 2009)


David L. Mahoney 1954 Trustee (Trustee of Schwab The Charles Schwab Family of Funds since 2011.)	Private Investor.	70	Director, Symantec Corporation (2003 – present) Director, Corcept Therapeutics Incorporated (2004 – present) Director, Tercica Inc. (2004 – 2008)


Kiran M. Patel 1948 Trustee (Trustee of Schwab The Charles Schwab Family of Funds since 2011.)	Executive Vice President and General Manager of Small Business Group, Intuit, Inc. (financial software and services for consumers and small businesses) (Dec. 2008 – present); Senior Vice President and General Manager of Consumer Group, Intuit, Inc. (June 2007 – Dec. 2008); Senior Vice President and Chief Financial Officer, Intuit, Inc. (Sept. 2005 – Jan. 2008).	70	Director, KLA-Tencor Corporation (2008 – present) Director, BEA Systems, Inc. (2007 – 2008) Director, Eaton Corp. (2003 – 2006)

Independent Trustees (continued)


Name, Year of Birth,		Number of
and Position(s) with		Portfolios in
the trust; (Terms of		Fund Complex
office, and length of	Principal Occupations	Overseen by
Time Served¹)	During the Past Five Years	the Trustee	Other Directorships

Gerald B. Smith 1950 Trustee (Trustee of The Charles Schwab Family of Funds since 2000.)	Chairman, Chief Executive Officer and Founder of Smith Graham & Co. (investment advisors) (1990 – present).	70	Lead Independent Director, Board of Cooper Industries (2002 – present) Director and Chairman of the Audit Committee, Oneok Partners LP (2003 – present) Director, Oneok, Inc (2009 – present)


Joseph H. Wender 1944 Trustee (Trustee of The Charles Schwab Family of Funds since 2008.)	Senior Consultant, Goldman Sachs & Co., Inc. (Jan. 2008- present); Partner, Colgin Partners, LLC (vineyards) (February 1998 – present); Senior Director, Chairman of the Finance Committee, GSC Group (July 2005 – Dec. 2007); General Partner, Goldman Sachs & Co., Inc. (Oct. 1982 – June 2005).	70	Board Member and Chairman of the Audit Committee, Isis Pharmaceuticals (1994 – present)

Interested Trustees


Name, Year of Birth,		Number of
and Position(s) with		Portfolios in
the trust; (Terms of		Fund Complex
office, and length of	Principal Occupations	Overseen by
Time Served )	During the Past Five Years	the Trustee	Other Directorships

Charles R. Schwab²1937 Chairman and Trustee (Chairman and Trustee of The Charles Schwab Family of Funds since 1989.)	Chairman and Director, The Charles Schwab Corporation, Charles Schwab & Co., Inc., Charles Schwab Investment Management, Inc., Charles Schwab Bank, N. A.; Chairman and Chief Executive Officer, Schwab (SIS) Holdings Inc. I, Schwab International Holdings, Inc.; Chief Executive Officer, Schwab Holdings, Inc.; Through June 2007, Director, U.S. Trust Company, N. A., U.S. Trust Corporation, United States Trust Company of New York. Until October 2008, Chief Executive Officer, The Charles Schwab Corporation, Charles Schwab & Co., Inc.	70	None


Walter W. Bettinger II²1960 Trustee (Trustee of The Charles Schwab Family of Funds since 2008.)	As of October 2008, President and Chief Executive Officer, Charles Schwab & Co., Inc. and The Charles Schwab Corporation. Since October 2008, Director, The Charles Schwab Corporation. Since May 2008, Director, Charles Schwab & Co., Inc. and Schwab Holdings, Inc. Since 2006, Director, Charles Schwab Bank. From 2004 through 2007, Executive Vice President and President, Schwab Investor Services. From 2004 through 2005, Executive Vice President and Chief Operating Officer, Individual Investor Enterprise, and from 2002 through 2004, Executive Vice President, Corporate Services. Until October 2008, President and Chief Operating Officer, Charles Schwab & Co., Inc. and The Charles Schwab Corporation.	87	None

Officers of the Trust


Name, Year of Birth, and Position(s)
with the trust; (Terms of office, and
length of Time Served³)		Principal Occupations During the Past Five Years

Marie Chandoha 1961 President and Chief Executive Officer (Officer of The Charles Schwab Family of Funds since 2010.)		Executive Vice President, Charles Schwab & Co., Inc. (Sept. 2010 – present); Director, President and Chief Executive Officer (Dec. 2010 – present), Chief Investment Officer (Sept. 2010 – Oct. 2011), Charles Schwab Investment Management, Inc.; President, Chief Executive Officer (Dec. 2010 – present), and Chief Investment Officer (Sept. 2010 – Oct. 2011), Schwab Funds, Laudus Funds and Schwab ETFs; Global Head of Fixed Income Business Division, BlackRock, Inc. (formerly Barclays Global Investors) (March 2007 – August 2010); Co-Head and Senior Portfolio Manager, Wells Capital Management (June 1999 – March 2007).


George Pereira 1964 Treasurer and Principal Financial Officer (Officer of The Charles Schwab Family of Funds since 2004.)		Senior Vice President and Chief Financial Officer (Nov. 2004 – present); Chief Operating Officer (Jan. 2011 – present), Charles Schwab Investment Management, Inc.; Treasurer and Chief Financial Officer, Laudus Funds (June 2006 – present); Treasurer and Principal Financial Officer, Schwab Funds (Nov. 2004 – present) and Schwab ETFs (Oct. 2009 – present); Director, Charles Schwab Worldwide Fund, PLC and Charles Schwab Asset Management (Ireland) Limited (April 2005 – present); Treasurer, Chief Financial Officer and Chief Accounting Officer, Excelsior Funds Inc., Excelsior Tax-Exempt Funds, Inc., and Excelsior Funds Trust (June 2006 – June 2007).


Omar Aguilar 1970 Senior Vice President and Chief Investment Officer – Equities (Officer of The Charles Schwab Family of Funds since 2011.)		Senior Vice President and Chief Investment Officer — Equities, Charles Schwab Investment Management, Inc. (April 2011 – present); Senior Vice President and Chief Investment Officer — Equities, Schwab Funds and Laudus Funds (June 2011 – present); Head of the Portfolio Management Group and Vice President of Portfolio Management, Financial Engines, Inc. (May 2009 – April 2011); Head of Quantitative Equity, ING Investment Management (July 2004 – Jan. 2009).


Brett Wander 1961 Senior Vice President and Chief Investment Officer – Fixed Income (Officer of The Charles Schwab Family of Funds since 2011.)		Senior Vice President and Chief Investment Officer – Fixed Income, Charles Schwab Investment Management, Inc. (April 2011 – present); Senior Vice President and Chief Investment Officer – Fixed Income, Schwab Funds and Laudus Funds (June 2011 – present); Senior Managing Director, Global Head of Active Fixed-Income Strategies, State Street Global Advisors (Jan. 2008 – Oct. 2010); Director of Alpha Strategies Loomis, Sayles & Company (April 2006 – Jan. 2008); Managing Director, Head of Market-Based Strategies State Street Research (August 2003 – Jan. 2005).


David Lekich 1964 Secretary and Chief Legal Officer (Officer of The Charles Schwab Family of Funds since 2011.)		Senior Vice President, Charles Schwab & Co., Inc. (Sept. 2011 – present); Senior Vice President and Chief Counsel, Charles Schwab Investment Management Inc. (Sept. 2011 – present); Vice President, Charles Schwab & Co., Inc., (March 2004 – Sept. 2011) and Charles Schwab Investment Management, Inc. (Jan 2011 – Sept. 2011); Secretary (April 2011 – present) and Chief Legal Officer (Dec. 2011 – present), Schwab Funds (April 2011 – present); Vice President and Assistant Clerk, Laudus Funds (April 2011 – present); Secretary (May 2011 – present) and Chief Legal Officer (Nov. 2011 – present), Schwab ETFs.

Officers of the Trust (continued)


Name, Year of Birth, and Position(s)
with the trust; (Terms of office, and
length of Time Served³)		Principal Occupations During the Past Five Years

Catherine MacGregor 1964 Vice President (Officer of The Charles Schwab Family of Funds since 2005.)		Vice President, Charles Schwab & Co., Inc., Charles Schwab Investment Management, Inc. (July 2005 – present); Vice President (Dec. 2005 – present), Chief Legal Officer and Clerk, Laudus Funds (March 2007 – present); Vice President and Assistant Clerk, Schwab Funds (Dec. 2005 – present) and Schwab ETFs (Oct. 2009 – present).


Michael Haydel 1972 Vice President (Officer of The Charles Schwab Family of Funds since 2006.)		Senior Vice President (March 2011 – present), Vice President (2004 – March 2011), Asset Management Client Services, Charles Schwab & Co., Inc.; Vice President (Sept. 2005 – present), Anti-Money Laundering Officer (Oct. 2005 – Feb. 2009), Laudus Funds; Vice President, Schwab Funds (June 2007 – present) and Schwab ETFs (Oct. 2009 – present).


¹		Trustees remain in office until they resign, retire or are removed by shareholder vote. The Schwab Funds^® retirement policy requires that independent trustees elected after January 1, 2000 retire at age 72 or after twenty years as a trustee, whichever comes first. In addition, the Schwab Funds retirement policy also requires any independent trustee of the Schwab Funds who also serves as an independent trustee of the Laudus Funds to retire from the Boards of the Schwab Funds upon their required retirement date from either the Boards of Trustees of the Schwab Funds or the Laudus Funds, whichever comes first.
²		Mr. Schwab and Mr. Bettinger are Interested Trustees because they are employees of Schwab and/or the investment adviser. In addition to their employment with Schwab and/or the investment adviser, Messrs. Schwab and Bettinger also own stock of The Charles Schwab Corporation.
³		The President, Treasurer and Secretary hold office until their respective successors are chosen and qualified or until he or she sooner dies, resigns, is removed or becomes disqualified. Each of the other officers serves at the pleasure of the Board.