nvcsrs

Transfer Agent Fees

Shareholder Service Fees

From the Chairman

Charles Schwab

Chairman

Dear Shareholder,

I’ve always believed that an asset allocation plan and a diversified portfolio are the foundation of a well designed investment plan.

In fact, research has indicated that spreading your money across, and equally important, within, different asset classes, such as stocks, bond, and cash equivalents, can be the most important factor in determining overall portfolio performance.

With a broad range of investment strategies and styles, Schwab Funds^® provides an uncomplicated, effective way to build a well diversified portfolio. You can choose from an array of funds across a range of investment objectives and styles to develop your own asset allocation strategy. Or, if you prefer a single investment solution, we offer asset allocation funds based on either risk tolerance or time horizon.

Here at Schwab, our goal is to help you reach your financial goals. With some of the highest quality funds and services, backed by the guidance and support you need—whatever type of investor you are—we can help you be financially fit today and in the future.

Thank you for investing with us.

Sincerely,

Schwab Money Market Fund 1

From the President

Evelyn Dilsaver, President and CEO of Charles Schwab Investment Management, Inc. and the fund covered in this report. She joined the firm in 1992 and has held a variety of executive positions at Schwab.

Dear Shareholder,

I’m pleased to bring you the semiannual report for your Schwab money fund for the six-month period ended June 30, 2007. During the period, our money funds performed as designed, providing you with current income, stability of capital and convenient access to your money.

At this time, I’d like to take the opportunity to remind you that Schwab offers a range of money funds, including our purchased money funds, Schwab Value Advantage Investments^®. These funds are designed for investors who have larger balances and don’t require frequent access to their cash. They require a minimum initial investment of $25,000 ($15,000 for IRA and custodial accounts) and include various taxable and tax-free investment strategies.

Further down the maturity spectrum, our ultrashort bond fund, Schwab YieldPlus Fund^®, offers higher yield potential with higher risk than a money fund. And, because taxes are always a concern, Schwab also offers funds that can help you manage tax impact and your exposure to the alternative minimum tax (AMT)—the Schwab AMT Tax-Free Money Fund and the two Schwab Tax-Free YieldPlus Funds.

In closing, I speak for all of Schwab Funds when I say we want Schwab to be the place where investors can find useful, quality financial products and services to help them succeed.

Thank you for investing in Schwab Funds^®.

Sincerely,

Investors should consider carefully information contained in the prospectus,

including investment objectives, risks, charges and expenses. You can request

a prospectus by calling Schwab at 1-800-435-4000. Please read the prospectus

carefully before investing.

Please remember that with Schwab YieldPlus and Tax-Free YieldPlus Funds,

investment value will fluctuate, and shares, when redeemed, may be worth

more or less than original cost. Bond funds are subject to increased loss of

principal during periods of rising interest rates.

Investment income may be subject to certain state and local taxes and, depending

on your tax status, the federal alternative minimum tax. Capital gains are not

exempt from federal income tax.

2 Schwab Money Market Fund

The Investment Environment and the Fund

Linda Klingman (middle), managing director and portfolio manager, has overall responsibility for the management of the fund.

Mike Neitzke (right), managing director and portfolio manager, has day-to-day responsibility for management of the fund.

Michael Lin (left), portfolio manager, has day-to-day responsibility for management of the fund.

Although the U.S. economy grew at a sub-par pace during the report period, the markets remained resilient, aided by a continuation in relatively attractive equity valuations, stable earnings growth, and global liquidity. Strong employment data in June, coupled with an improved outlook on economic growth and tame inflation, suggested that the U.S. economy was healthy enough to diminish the possibility of a rate cut in the near future. However, several key issues continued to weigh on investors, namely, continued weakening of the housing market, rising energy prices, and uncertainty of the Federal Reserve (the Fed) in its outlook on the broader economy.

The U.S. economy had been slowing down, as GDP readings for the first quarter of 2007 came in at a mere 0.7% annually adjusted rate, as compared to 2.5% in the fourth quarter of 2006. As any growth rate below 3% is generally considered to be sub-par, the economy has underperformed for the fourth straight quarter. The recent reading is also at the lowest level since 2002, and reflected a number of factors, including a deceleration in exports, an increase in imports, and a decrease in government spending. Higher food and energy costs continue to be a concern, as they have the potential to weigh down on consumer spending. Furthermore, the housing market and sub-prime mortgage woes have the potential to dampen near term consumer spending.

The housing market remains a significant headwind for economic growth and continued to provide mixed signals with regards to a recovery. Existing home sales, which account for roughly 85% of the market, fell 0.3% to a seasonally adjusted annual rate of 5.99 million units in May, its lowest level since June 2003. Concurrently, new home sales declined by 1.6% to a seasonally adjusted annual rate of 915,000 units. According to the National Association of Realtors, buyer psychology has been the main factor behind sluggish home sales, in addition to tighter lending standards in the wake of subprime woes. Although a further decline in home prices may restore a sense of affordability, it also threatens to reduce equity values, an important source of wealth and leverage.

Commodity prices continue to pose a threat to economic growth as well. Although prices at the pump have slightly moderated, the national average remains above $3 a gallon, continuing to squeeze the pockets of many investors. Increasing global demand remains ever present, and will likely continue to put upward pressures on prices. Nevertheless, it is projected that global oil consumption will grow at a rate of 1.5 million barrels per day in 2007 and 1.6 million barrels per day in 2008, with half of the consumption growth stemming from China and the U.S., according to the Energy Information Administration. Though elevated commodity prices might have less upward pressure on inflation, their tax-like effect threatens to weigh down on spending and discretionary income.

In its June 2007 statement, the Fed noted that despite ongoing adjustments in the housing sector, the economy will likely maintain its course of expanding at a moderate pace. Given an upbeat employment picture, improvements in manufacturing, and continued strength in the stock market, the U.S. economy has the potential to grow near its long-term trend of 3%. In June, nonfarm payroll employment increased by 132,000, while unemployment remained unchanged at 4.5%. Bear in mind that employment conditions react with a lag to changes in monetary policy, and thus are not fully reflective of current conditions. The Fed still regarded the labor market as tight, thus noting that “the high level of resource utilization” could cause upward pressures on wages.

Schwab Money Market Fund 3

The Investment Environment and the Fund continued

Although readings of core inflation improved, the Fed’s predominant concern remains the risk that inflation will fail to moderate. Core Personal Consumption Expenditures (PCE), the Fed’s primary index used to monitor inflation, rose at an annualized rate of 2.3% in the first quarter of 2007, up from 1.8% in the fourth quarter of 2006. While their unofficial comfort zone for core inflation remains at 1% to 2%, performance of the economy in the near term could determine the outcome of inflationary pressures; if U.S. economic growth remains moderate, inflation will likely remain contained. However, if a recovery of economic growth ensues, upward pressures in wage inflation run the risk of pressuring inflationary expectations.

During the report period, the Fed maintained the Fed funds target rate at 5.25%. The June meeting marked the eighth straight meeting without a rate hike, following 17 consecutive meetings, during which the Fed raised the target rate from 1% to the current 5.25%. While the Fed indicated that they were predominantly concerned about inflation if it fails to moderate as expected, they also expressed concerns about the downside risks to growth from a slowing housing sector.

The money market curve was inverted for the first quarter of 2007, as investors anticipated the Fed would lower interest rates due to slow growth and moderate inflation. However, as job growth continued to be strong, business activity remained healthy, and the Fed indicated their primary concern was inflation, the money market curve shifted to a positive slope late in the second quarter. As the curve became positively sloped, we felt the longer end of the curve represented value and provided a good opportunity to add yield to the portfolio. To that end, we extended the fund and maintained a weighted average maturity (WAM) longer than other funds with similar investment objectives.

Nothing in this report represents a recommendation of a security by the investment adviser.

Manager views and portfolio holdings may have changed since the report date.

4 Schwab Money Market Fund

Performance and Fund Facts as of 6/30/07

Seven-Day Yields

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 Money Market Fund^tm	Ticker Symbol: SWMXX


Seven-Day Yield¹		4.64%

Seven-Day Yield—No Waiver²		4.63%

Seven-Day Effective Yield¹		4.74%

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.schwab.com/schwabfunds.

Statistics

Money funds must maintain a dollar-weighted average maturity of no longer than 90 days, and cannot invest in any security whose effective maturity is longer than 397 days (approximately 13 months).


Schwab Money Market Fund^tm		Ticker Symbol: SWMXX


Weighted Average Maturity		57 days

Credit Quality of Holdings % of portfolio		100% Tier 1

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.


¹	Fund expenses have been partially absorbed by CSIM and Schwab.
²	Yield if fund expenses had not been partially absorbed by CSIM and Schwab.

Schwab Money Market Fund 5

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 January 1, 2007 and held through June 30, 2007.

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 Ratio ¹		Account Value		(Net of Expenses)		During Period ²
	(Annualized)		at 1/1/07		at 6/30/07		1/1/07 - 6/30/07



Schwab Money Market Fund^tm
Actual Return		0.72%	$	1,000	$	1,023.20	$	3.61
Hypothetical 5% Return		0.72%	$	1,000	$	1,021.22	$	3.61


¹	Based on the most recent six-month expense ratio; may differ from the expense ratio provided in Financial Highlights.


²	Expenses for the fund are equal to its annualized expense ratio, multiplied by the average account value over the period, multiplied by 181 days of the period, and divided by 365 days of the fiscal year.

6 Schwab Money Market Fund

Schwab Money Market Fund

Portfolio Holdings as of June 30, 2007 (Unaudited)

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

The fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters 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 schedule of portfolio holdings filed on a fund’s most recent Form N-Q is also available by visiting Schwab’s website at www.schwab.com/schwabfunds.

For fixed rate obligations, the rate shown is the effective yield at the time of purchase, except U.S. Treasury notes, for which the rate shown is the interest rate (the rate established when the obligation was issued). For variable-rate obligations, the rate shown is the rate as of the report date and the maturity date shown is the next interest rate change date.

Cost

Value

Holdings by Category

($ x 1,000)

.3%

Fixed-Rate Obligations

15,612,183

.7%

Variable-Rate Obligations

3,494,687

.0%

Other Investments

596,021

100

.0%

Total Investments

19,702,891

.0)%

Other Assets and Liabilities

(109

)

100

.0%

Net Assets

19,702,782


Issuer	Face Amount		Value
Rate, Maturity Date	($ x 1,000)		($ x 1,000)





Fixed-Rate Obligations 79.3% of net assets




Bank Notes 1.1%


Bank of America, N.A.
5.31%, 08/29/07		214,000		214,000


Certificates of Deposit 26.8%


Abbey National Treasury Services PLC
5.27%, 08/09/07 (a)		13,000		13,000
5.35%, 10/24/07 (a)		92,000		92,000
ABN AMRO Bank N.V.
5.29%, 08/13/07		26,000		26,000
5.30%, 10/31/07		126,000		126,000
5.34%, 11/29/07		154,000		154,000
Banco Bilbao Vizcaya Argentaria S.A.
5.29%, 07/17/07		49,000		49,000
5.31%, 08/08/07		50,000		50,000
5.34%, 03/17/08		63,000		63,032
Bank of Montreal
5.32%, 01/22/08		55,000		55,000
Barclays Bank PLC
5.31%, 07/12/07		191,000		191,000
5.30%, 10/24/07		27,000		27,000
5.33%, 02/29/08		236,000		236,000
Bayerische Hypo- und Vereinsbank AG
5.31%, 08/03/07		45,000		45,000
Bayerische Landesbank
5.29%, 07/11/07		50,000		50,000
BNP Paribas
5.34%, 07/25/07		199,000		199,000
5.35%, 08/08/07		50,000		50,000
5.30%, 10/23/07		20,000		20,000
5.31%, 11/01/07		92,000		92,000
5.31%, 11/14/07		47,000		47,000
5.31%, 11/15/07		103,000		103,000
5.34%, 11/30/07		175,000		174,993
Calyon
5.27%, 08/09/07		67,000		67,000
5.31%, 01/31/08		150,000		150,000
Commerzbank AG
5.33%, 10/03/07		9,000		9,000
Credit Agricole S.A.
5.33%, 07/11/07		14,000		14,000
5.31%, 10/12/07		95,000		95,000
5.33%, 11/19/07		34,000		33,995
Credit Suisse
5.31%, 07/26/07		53,000		53,000
5.31%, 08/10/07		165,000		165,000
5.33%, 11/27/07		78,000		78,000
DePfa Bank PLC
5.31%, 08/03/07		10,000		10,000
Deutsche Bank AG
5.41%, 02/11/08		100,000		100,000
5.34%, 07/24/07		189,000		189,000
5.35%, 08/07/07		94,000		94,000
5.35%, 08/08/07		25,000		25,000
5.33%, 10/09/07		273,000		273,000
Dresdner Bank AG
5.31%, 07/19/07		105,000		105,000
First Tennessee Bank, N.A.
5.29%, 07/10/07		40,000		40,000
Fortis Bank
5.29%, 07/18/07		155,000		155,000
HBOS Treasury Services
5.30%, 07/02/07 (a)		37,000		37,000
5.31%, 11/13/07 (a)		65,000		65,000
5.30%, 02/13/08 (a)		58,000		58,000
ING Bank N.V.
5.32%, 08/02/07		133,000		133,000
5.34%, 08/21/07		56,000		56,000
Intesa Sanpaolo
5.30%, 09/24/07		32,000		32,000
5.33%, 11/26/07		137,000		137,000
Landesbank Baden-Wurttemberg
5.34%, 07/25/07		118,000		118,000
5.33%, 11/19/07		83,000		83,000
Landesbank Hessen-Thuringen Girozentrale
5.30%, 07/27/07		18,000		18,000
Mitsubishi UFJ Trust & Banking Corp.
5.34%, 09/06/07		40,000		40,000
5.37%, 09/25/07		50,000		50,000
5.32%, 10/31/07		20,000		20,000
Rabobank Nederland
5.29%, 09/12/07		26,000		25,998
Societe Generale
5.30%, 08/03/07		8,000		8,000
5.30%, 10/23/07		59,000		59,000
5.33%, 02/25/08		154,000		154,000

8 See financial notes

Schwab Money Market Fund

Portfolio Holdings (Unaudited) continued

Issuer
Face Amount
Value

Rate, Maturity Date ($ x 1,000) ($ x 1,000)

5.39%, 03/12/08
31,000 31,000

5.37%, 03/26/08
18,000 18,000

Sumitomo Trust & Banking Co.

5.35%, 08/20/07
91,000 91,000

Toronto Dominion Bank

5.30%, 10/12/07
32,000 32,000

5.34%, 03/28/08
85,000 85,000

Unicredito Italiano S.p.A.

5.31%, 07/11/07
113,000 112,998

5.34%, 10/02/07
46,000 46,000

5.35%, 12/27/07
18,000 18,000

Union Bank of California

5.33%, 08/17/07
39,000 39,000

Washington Mutual Bank

5.33%, 07/18/07
94,000 94,000

5.33%, 08/16/07
62,000 62,000

5.30%, 10/19/07
9,000 9,000

Wilmington Trust Co.

5.31%, 10/05/07
20,000 19,999

5,271,015

Commercial Paper & Other Corporate Obligations 51.4%

Alliance & Leicester PLC

5.31%, 07/16/07 (c)
100,000 99,782

Allied Irish Banks North America, Inc.

5.30%, 10/24/07 (a)
29,000 28,521

Alpine Securitization Corp.

5.31%, 07/20/07 (a)(b)(c)
100,000 99,721

Amstel Funding Corp.

5.31%, 07/18/07 (b)(c)
20,000 19,950

5.32%, 08/15/07 (b)(c)
7,000 6,954

5.31%, 10/29/07 (b)(c)
80,077 78,697

Amsterdam Funding Corp.

5.30%, 07/09/07 (a)(b)(c)
37,000 36,957

5.30%, 07/11/07 (a)(b)(c)
37,000 36,946

Anglo Irish Bank Corp., PLC

5.31%, 08/03/07 (c)
10,000 9,952

Aquinas Funding, L.L.C.

5.35%, 07/23/07 (a)(b)(c)
18,543 18,484

5.33%, 08/30/07 (a)(b)(c)
39,000 38,657

5.36%, 12/19/07 (a)(b)(c)
7,000 6,826

5.36%, 12/20/07 (a)(b)(c)
25,685 25,044

Atlantic Asset Securitization, L.L.C.

5.31%, 07/09/07 (a)(b)(c)
72,000 71,916

5.29%, 07/13/07 (a)(b)(c)
80,368 80,227

5.31%, 07/20/07 (a)(b)(c)
25,511 25,440

5.31%, 07/30/07 (a)(b)(c)
33,000 32,860

Atlantis One Funding Corp.

5.32%, 07/05/07 (b)(c)
32,000 31,982

5.35%, 07/23/07 (b)(c)
37,295 37,176

5.35%, 08/09/07 (b)(c)
75,000 74,577

5.35%, 08/14/07 (b)(c)
13,000 12,917

5.33%, 08/20/07 (b)(c)
3,000 2,978

5.34%, 09/24/07 (b)(c)
120,000 118,534

5.33%, 09/27/07 (b)(c)
47,000 46,396

5.37%, 02/14/08 (b)(c)
37,000 35,786

5.33%, 02/15/08 (b)(c)
64,000 61,913

Bank of America Corp.

5.31%, 07/06/07
109,000 108,922

5.30%, 08/20/07
92,000 91,335

5.31%, 08/31/07
18,000 17,840

5.31%, 09/04/07
41,000 40,612

5.32%, 09/13/07
214,000 211,693

5.29%, 09/21/07
148,000 146,266

5.33%, 09/27/07
75,000 74,036

Bank of Ireland

5.34%, 07/19/07 (c)
148,000 147,620

Barclays US Funding Corp.

5.33%, 08/17/07 (a)
149,000 147,991

Bear Stearns Companies., Inc.

5.35%, 08/03/07
42,000 41,799

Beta Finance, Inc.

5.34%, 07/23/07 (b)(c)
49,000 48,844

5.32%, 09/13/07 (b)(c)
13,500 13,354

Cancara Asset Securitization, L.L.C.

5.31%, 07/17/07 (a)(b)(c)
50,000 49,884

CC (USA), Inc.

5.31%, 07/02/07 (b)(c)
29,000 28,996

5.33%, 09/14/07 (b)(c)
2,000 1,978

Citigroup Funding, Inc.

5.35%, 07/02/07 (a)
245,000 244,964

5.31%, 07/12/07 (a)
70,000 69,888

5.31%, 07/20/07 (a)
200,000 199,442

5.31%, 07/23/07 (a)
125,000 124,600

5.31%, 08/01/07 (a)
34,000 33,847

5.30%, 08/07/07 (a)
48,000 47,742

5.33%, 09/20/07 (a)
25,000 24,704

5.33%, 09/27/07 (a)
42,000 41,460

Clipper Receivables Co., L.L.C.

5.30%, 07/18/07 (a)(b)(c)
16,500 16,459

5.31%, 07/18/07 (a)(b)(c)
50,000 49,875

5.31%, 07/26/07 (a)(b)(c)
9,000 8,967

Cobbler Funding, L.L.C.

5.34%, 07/16/07 (b)(c)
30,000 29,933

5.33%, 07/27/07 (b)(c)
22,697 22,611

5.35%, 09/28/07 (b)(c)
13,000 12,830

Dakota CP Notes of Citibank Credit Card Issuance Trust

5.31%, 07/03/07 (b)(c)
36,600 36,589

5.31%, 07/12/07 (b)(c)
180,000 179,712

5.31%, 07/13/07 (b)(c)
53,000 52,907

5.31%, 08/07/07 (b)(c)
14,000 13,925

5.32%, 09/11/07 (b)(c)
49,000 48,485

5.33%, 09/20/07 (b)(c)
50,000 49,408

DnB NOR Bank ASA

5.30%, 10/26/07
80,000 78,658

Dorada Finance, Inc.

5.30%, 08/06/07 (b)(c)
28,000 27,854

5.32%, 09/13/07 (b)(c)
36,000 35,611

Fairway Finance Co., L.L.C.

5.30%, 07/10/07 (a)(b)(c)
22,000 21,971

5.31%, 07/25/07 (a)(b)(c)
71,353 71,104

Falcon Asset Securitization Corp.

5.30%, 07/09/07 (a)(b)(c)
50,000 49,941

5.29%, 07/13/07 (a)(b)(c)
101,465 101,287

5.31%, 07/18/07 (a)(b)(c)
16,896 16,854

5.31%, 07/19/07 (a)(b)(c)
64,897 64,725

5.31%, 07/20/07 (a)(b)(c)
95,000 94,735

Five Finance, Inc.

5.33%, 08/17/07 (b)(c)
15,500 15,395

5.32%, 09/04/07 (b)(c)
32,500 32,192

5.33%, 09/27/07 (b)(c)
14,000 13,820

5.32%, 10/15/07 (b)(c)
28,000 27,573

5.31%, 11/01/07 (b)(c)
13,000 12,771

Fortis Funding, L.L.C.

5.31%, 08/03/07 (a)
45,000 44,784

See financial notes 9

Schwab Money Market Fund

Portfolio Holdings (Unaudited) continued

Issuer
Face Amount
Value

Rate, Maturity Date ($ x 1,000) ($ x 1,000)

Galaxy Funding, Inc.

5.31%, 08/08/07 (b)(c)
35,000 34,807

General Electric Capital Corp.

5.35%, 07/02/07
100,000 99,985

5.33%, 10/12/07
158,000 155,681

5.32%, 02/19/08
126,000 121,825

5.33%, 03/20/08
12,000 11,550

General Electric Capital Services

5.29%, 11/28/07
192,000 187,896

General Electric Co.

5.34%, 09/28/07
40,000 39,489

Grampian Funding, L.L.C.

5.34%, 08/06/07 (a)(b)(c)
16,000 15,917

5.31%, 10/26/07 (a)(b)(c)
25,000 24,580

5.36%, 12/18/07 (a)(b)(c)
57,000 55,596

HBOS Treasury Services PLC

5.31%, 08/28/07 (a)
35,000 34,704

HSBC U.S.A., Inc.

5.35%, 07/25/07
83,000 82,712

HSH Nordbank AG

5.30%, 10/26/07
79,000 77,675

ING (U. S.) Funding, L.L.C.

5.32%, 08/24/07 (a)
12,000 11,907

Irish Life & Permanent PLC

5.31%, 07/13/07 (c)
8,000 7,986

5.35%, 08/13/07 (c)
28,000 27,826

5.33%, 08/22/07 (c)
12,000 11,910

5.31%, 10/16/07 (c)
27,000 26,585

Jupiter Securitization Corp.

5.30%, 07/16/07 (a)(b)(c)
51,303 51,190

5.31%, 07/19/07 (a)(b)(c)
125,558 125,226

K2 (USA), L.L.C.

5.32%, 10/17/07 (b)(c)
61,000 60,053

5.30%, 10/25/07 (b)(c)
55,000 54,086

5.40%, 06/13/08 (b)(c)
23,000 23,000

Kitty Hawk Funding Corp.

5.31%, 07/17/07 (a)(b)(c)
248,000 247,417

Links Finance, L.L.C.

5.31%, 07/25/07 (b)(c)
16,000 15,944

5.33%, 08/28/07 (b)(c)
26,000 25,783

Mane Funding Corp.

5.31%, 07/17/07 (b)(c)
151,105 150,753

Merrill Lynch & Co., Inc.

5.31%, 11/09/07
100,000 98,122

Morgan Stanley

5.31%, 10/26/07
18,000 17,698

Nationwide Building Society U.S.

5.32%, 07/10/07
94,000 93,878

5.30%, 10/15/07
46,000 45,300

Natixis Commercial Paper Corp. (CNCE)

5.31%, 08/30/07 (a)
72,000 71,371

5.32%, 09/28/07 (a)
115,000 113,526

Nieuw Amsterdam Receivables Corp.

5.30%, 07/09/07 (a)(b)(c)
30,000 29,965

5.30%, 07/18/07 (a)(b)(c)
30,000 29,925

5.32%, 07/27/07 (a)(b)(c)
29,000 28,889

5.31%, 08/01/07 (a)(b)(c)
23,065 22,961

5.32%, 08/24/07 (a)(b)(c)
7,254 7,197

Northern Rock PLC

5.35%, 08/09/07
65,000 64,633

5.33%, 09/25/07
13,000 12,837

Park Avenue Receivables Co., L.L.C.

5.31%, 07/18/07 (a)(b)(c)
278,304 277,609

Picaros Funding, L.L.C.

5.31%, 07/06/07 (a)(b)(c)
52,000 51,963

5.33%, 09/12/07 (a)(b)(c)
56,500 55,897

5.31%, 10/30/07 (a)(b)(c)
20,000 19,652

Scaldis Capital Ltd.

5.31%, 07/16/07 (a)(b)(c)
29,000 28,936

Sedna Finance, Inc.

5.35%, 07/30/07 (b)(c)
4,000 3,983

5.35%, 08/06/07 (b)(c)
60,000 59,687

5.34%, 08/28/07 (b)(c)
20,000 19,833

5.41%, 06/13/08 (b)(c)
56,000 56,000

Sheffield Receivables Corp.

5.31%, 07/19/07 (a)(b)(c)
27,677 27,604

Sigma Finance, Inc.

5.33%, 07/02/07 (b)(c)
38,000 37,994

5.31%, 07/09/07 (b)(c)
49,000 48,944

5.30%, 08/06/07 (b)(c)
61,000 60,682

5.35%, 08/06/07 (b)(c)
10,000 9,948

5.33%, 11/30/07 (b)(c)
13,000 12,715

5.36%, 12/21/07 (b)(c)
21,000 20,473

5.40%, 03/12/08 (b)(c)
5,000 4,816

5.37%, 03/20/08 (b)(c)
24,000 23,096

Societe Generale North America, Inc.

5.34%, 08/08/07 (a)
106,000 105,418

Solitaire Funding, L.L.C.

5.30%, 07/06/07 (a)(b)(c)
97,000 96,930

5.31%, 07/12/07 (a)(b)(c)
163,000 162,739

5.30%, 07/16/07 (a)(b)(c)
25,000 24,945

Stadshypotek Delaware, Inc.

5.31%, 08/24/07 (a)(c)
50,000 49,607

Stanfield Victoria Funding

5.32%, 07/23/07 (b)(c)
32,000 31,897

Swedbank AB

5.31%, 09/05/07
175,000 173,319

Swedbank Mortgage AB

5.31%, 08/23/07
24,900 24,708

Thunder Bay Funding, L.L.C.

5.31%, 07/16/07 (a)(b)(c)
99,000 98,784

Ticonderoga Funding, L.L.C.

5.30%, 07/11/07 (a)(b)(c)
125,000 124,817

5.30%, 07/24/07 (a)(b)(c)
17,964 17,903

5.32%, 08/30/07 (a)(b)(c)
50,000 49,562

UBS Finance (Delaware), Inc.

5.30%, 07/02/07 (a)
15,000 14,998

5.35%, 07/02/07 (a)
75,000 74,989

5.31%, 07/03/07 (a)
50,000 49,986

5.32%, 07/13/07 (a)
14,000 13,976

5.33%, 07/16/07 (a)
68,000 67,853

5.34%, 08/02/07 (a)
206,000 205,048

5.35%, 08/10/07 (a)
131,200 130,441

5.35%, 08/13/07 (a)
43,000 42,733

5.33%, 08/14/07 (a)
57,700 57,334

5.31%, 08/15/07 (a)
7,000 6,955

Unicredito Italiano Bank (Ireland) PLC

5.30%, 07/05/07 (a)(c)
84,000 83,951

5.31%, 08/03/07 (a)(c)
11,000 10,947

5.30%, 08/28/07 (a)(c)
56,000 55,534

Variable Funding Capital Corp.

5.38%, 07/02/07 (a)(b)(c)
50,000 49,993

5.40%, 07/02/07 (a)(b)(c)
65,000 64,990

5.30%, 07/17/07 (a)(b)(c)
143,000 142,665

Westpac Banking Corp.

5.32%, 07/27/07 (c)
42,200 42,039

10 See financial notes

Schwab Money Market Fund

Portfolio Holdings (Unaudited) continued

Issuer
Face Amount
Value

Rate, Maturity Date ($ x 1,000) ($ x 1,000)

Westpac Trust Securities NZ Ltd.

5.30%, 10/18/07 (a)(c)
9,000 8,859

5.33%, 11/26/07 (a)(c)
47,000 45,997

5.33%, 11/26/07 (a)(c)
28,000 27,402

Whistlejacket Capital, L.L.C.

5.31%, 07/02/07 (b)(c)
26,940 26,936

5.31%, 07/23/07 (b)(c)
16,000 15,949

5.31%, 07/25/07 (b)(c)
14,264 14,214

5.31%, 07/30/07 (b)(c)
10,781 10,735

5.31%, 08/02/07 (b)(c)
20,063 19,970

5.32%, 08/28/07 (b)(c)
7,322 7,260

5.31%, 10/29/07 (b)(c)
18,795 18,471

5.42%, 06/16/08 (b)(c)
13,000 13,000

Windmill Funding Corp.

5.30%, 07/11/07 (a)(b)(c)
8,710 8,697

5.30%, 07/19/07 (a)(b)(c)
81,000 80,787

Yorktown Capital, L.L.C.

5.30%, 07/20/07 (a)(b)(c)
188,150 187,627

10,127,168

Total Fixed-Rate Obligations
(Cost $15,612,183) 15,612,183

Variable-Rate Obligations 17.7% of net assets

ABAG Financial Authority for Nonprofit Corps., California

5.32%, 07/05/07 (a)
17,735 17,735

ABN AMRO Bank N.V.

5.35%, 07/11/07
20,000 20,000

Albuquerque, New Mexico Airport Series B

5.40%, 07/05/07 (a)
14,800 14,800

Bank of Ireland

5.32%, 07/20/07 (c)
50,000 50,000

Bank of New York Co., Inc.

5.38%, 07/27/07 (c)
75,000 75,000

Canadian Imperial Bank of Commerce

5.40%, 07/13/07
100,000 100,000

5.32%, 07/23/07
65,000 65,000

5.36%, 07/30/07
140,000 140,000

CFM International, Inc.

5.41%, 07/02/07 (a)(c)
9,980 9,980

City of Santa Rosa, California

5.32%, 07/05/07 (a)
9,200 9,200

Commonwealth Bank of Australia

5.32%, 07/24/07 (c)
50,000 50,000

Cook County, IL

5.34%, 07/05/07 (a)
30,000 30,000

Deutsche Bank AG

5.40%, 07/06/07
75,000 75,002

5.38%, 07/23/07
75,000 75,000

General Electric Capital Corp.

5.45%, 07/09/07
175,000 175,000

5.45%, 07/17/07
75,000 75,000

Genworth Life & Annuity

5.38%, 07/01/07 (d)
50,000 50,000

5.40%, 07/01/07 (d)
100,000 100,000

J.P. Morgan Securities, Inc.

5.29%, 07/01/07 (c)
100,000 100,000

Liberty Lighthouse U.S. Capital Co., L.L.C.

5.32%, 08/15/07 (b)(c)
16,000 15,997

5.32%, 09/17/07 (b)(c)
65,000 64,993

Links Finance, L.L.C.

5.32%, 07/20/07 (b)(c)
50,000 50,005

LoanStar Assets Partners II, L.P.

5.36%, 07/05/07 (a)
45,000 45,000

Lowndes Corp., Georgia

5.44%, 07/05/07 (a)(c)
1,350 1,350

Merlot 2000 B

5.49%, 07/05/07 (a)(c)
32,630 32,630

Merlot 2001 A67

5.49%, 07/05/07 (a)(c)
5,360 5,360

Merlot 2001 A7

5.49%, 07/05/07 (a)(c)
15,470 15,470

Merrill Lynch & Co., Inc.

5.33%, 07/16/07
100,000 100,000

Met Life Insurance Co. of CT

5.34%, 07/27/07 (d)
100,000 100,000

Metropolitan Life Insurance Co.

5.36%, 07/02/07 (d)
100,000 100,000

Morgan Stanley

5.36%, 07/03/07
240,000 240,000

New Jersey Economic Development Authority

5.29%, 07/02/07 (a)
58,685 58,685

Nordea Bank AB

5.31%, 07/09/07 (c)
50,000 50,000

5.33%, 07/11/07 (c)
45,000 45,000

Royal Bank of Canada

5.37%, 07/10/07
60,000 60,000

Royal Bank of Scotland PLC

5.33%, 07/23/07 (c)
185,000 185,000

5.42%, 10/11/07
200,000 200,000

SE Christian Church, Jefferson County, Kentucky

5.32%, 07/05/07 (a)
6,765 6,765

Sisters of Mercy of the Americas Regional Community of Omaha, Nebraska

5.32%, 07/05/07 (a)
11,860 11,860

Societe Generale

5.31%, 07/02/07 (c)
60,000 60,000

The Goldman Sachs Group, Inc.

5.34%, 07/02/07 (d)
150,000 150,000

5.37%, 07/09/07 (c)(d)
225,000 225,000

Wachovia Asset Securitization Issuance, L.L.C.

5.31%, 07/25/07 (a)(b)(c)
23,847 23,847

Wells Fargo & Co.

5.38%, 07/02/07 (c)
75,000 75,000

5.33%, 07/16/07 (c)
165,000 165,004

Whistlejacket Capital, L.L.C.

5.28%, 07/23/07 (b)(c)
59,000 58,992

5.36%, 07/23/07 (b)(c)
100,000 100,014

5.32%, 08/17/07 (b)(c)
17,000 16,998

Total Variable-Rate Obligations
(Cost $3,494,687) 3,494,687

See financial notes 11

Schwab Money Market Fund

Portfolio Holdings (Unaudited) continued

Maturity Amount
Value

Security ($ x 1,000) ($ x 1,000)

Other Investments 3.0% of net assets

Repurchase Agreements 3.0%

Bear Stearns & Co., Inc.

Tri-Party Repurchase Agreement dated 06/2907, due 07/02/07 at 5.40%, fully collateralized by U.S. Government Securities with a value of $204,003.
200,090 200,000

Credit Suisse Securities (USA), L.L.C.

Tri-Party Repurchase Agreement dated 06/2907, due 07/02/07 at 5.38%, fully collateralized by U.S. Government Securities with a value of $16,343.
16,029 16,021

Deutsche Bank Securities, Inc.

Tri-Party Repurchase Agreement issued 06/29/07, due 07/02/07 at 5.35%, fully collateralized by U.S. Government Securities with a value of $204,000.
200,089 200,000

UBS Financial Services, Inc.

Tri-Party Repurchase Agreement dated 06/29/07, due 07/02/07 at 5.37%, fully collateralized by U.S. Government Securities with a value of $183,602.
180,080 180,000

Total Other Investments
(Cost $596,021) 596,021

End of Investments.

At 06/30/07, the tax basis cost of the fund’s investments was $19,702,891.

At 06/30/07, portfolio holdings included illiquid and/or restricted securities as follows:

Issuer

Rate, Acquisition Date
Face Amount
Cost/Value

Maturity Date ($ x 1,000) ($ x 1,000)

Genworth Life & Annuity

5.38%, 02/01/07, 07/01/07
50,000 50,000

5.40%, 06/01/07, 07/01/07
100,000 100,000

150,000

Met Life Insurance Co. of CT

5.34%, 10/27/06, 07/27/07
100,000 100,000

Metropolitan Life Insurance Co.

5.36%, 02/01/07, 07/02/07
100,000 100,000

The Goldman Sachs Group, Inc.

5.34%, 03/02/07, 07/02/07
150,000 150,000

5.37%, 08/09/06, 07/09/07
225,000 225,000

375,000


(a)		Credit-enhanced security.
(b)		Asset-backed security.
(c)		Securities exempt from registration under Rule 144A of the Securities Act of 1933. 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 $7,475,156 or 37.9% of net assets.
(d)		Illiquid and/or restricted security.

12 See financial notes

Schwab Money Market Fund

Financial Notes, unaudited

1. Business Structure of the Fund:

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



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

Schwab Money Market Fund offers one share class. Shares are bought and sold at $1.00 per share. Each share has a par value of 1/1,000 of a cent, and the trustees may authorize the issuance of as many shares as necessary.

2. Significant Accounting Policies:

The following is a summary of the significant accounting policies the fund used in the preparation of financial statements. The accounting policies are in conformity with accounting principles generally accepted in the United States of America.

(a) Security Valuation:

The fund values the securities in its portfolio at amortized cost, which approximates market value.

(b) Portfolio Investments:

Repurchase Agreements: The fund may enter into repurchase agreements. In a repurchase agreement, the fund buys a security from another party (usually a financial institution) with the agreement that it be sold back in the future. The date, price and other conditions are all specified when the agreement is created. Any repurchase agreements with due dates later than seven days from issue dates may be subject to seven day put features for liquidity purposes.

The fund’s repurchase agreements will be fully collateralized by U.S. government securities. All collateral is held by the fund’s custodian (or, in the case of 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.

Delayed-Delivery: The fund may buy securities on a delayed-delivery basis. In these transactions, the fund agrees to buy a security for a stated price, with settlement generally occurring within two weeks. If the security’s value falls before settlement occurs, the fund could end up paying more for the security than its market value at the time of settlement. The fund has set aside sufficient securities as collateral for those securities bought on a delayed-delivery basis.

(c) Security Transactions:

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

(d) Investment Income:

Interest income is recorded as it accrues. If the fund buys a debt security at a discount (that is, for less than face value) or a premium (more than face value), it amortizes the discount or premium from the current date 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.

Schwab Money Market Fund

Financial Notes, unaudited (continued)

2. Significant Accounting Policies (continued):

(e) Expenses:

Expenses that are specific to a fund within the trust are charged directly to that 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.

(f) Distributions to Shareholders:

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

(g) Custody Credit:

Each fund has an arrangement with its custodian bank 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:

The accounting policies described in this report conform with 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.

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 also keeps certain assets in segregated accounts, as may be required by securities law.

(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 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 fund’s organizational documents, the officers and trustees are indemnified against certain liability arising out of the performance of their duties to the funds. 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 Standards:

Financial Accounting Standards Board Interpretation (FIN) No. 48 — Accounting for Uncertainty in Income Taxes — an interpretation of SFAS No. 109, was issued in July 2006 and is effective for fiscal years beginning after December 15, 2006. This Interpretation provides new requirements for the recognition, measurement, and disclosure in the financial statements of a tax position taken or expected to be taken in a tax return when there is uncertainty about whether that tax position will ultimately be sustained. As of June 30, 2007, management reviewed the tax positions for open tax years (December 31, 2003 through December 31, 2006), has evaluated the implication of FIN 48 and determined that there is no impact to the fund’s financial statements.

In September 2006, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 157, “Fair Value Measurements” (SFAS No. 157). SFAS No. 157 defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles and expands disclosure about fair value measurements. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007. Management is currently evaluating the impact the adoption of SFAS No. 157 will have on the Fund’s financial statement disclosures.

Schwab Money Market Fund

Financial Notes, unaudited (continued)

3. Affiliates and Affiliated Transactions:

(All dollar amounts are x 1,000)

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 it and the trust. Charles Schwab & Co., Inc. (“Schwab”) is an affiliate of the investment adviser and is the trust’s shareholder services agent and transfer agent.

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


Average daily net assets

First $1 billion			0.35%
Over $1 billion			0.32%
Over $10 billion			0.30%
Over $20 billion			0.27%
Over $40 billion			0.25%

For its transfer agent and shareholder services, Schwab is entitled to receive an annual fee payable monthly based on the fund’s average daily net assets described as follows:

Although these agreements specify certain fees for these services, CSIM and Schwab have made additional agreements with the fund to limit the total expenses charged, excluding interest, taxes and certain non-routine expenses to 0.73% for so long as CSIM serves as the adviser to the fund.

The fund may make 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 officers. As of June 30, 2007, the fund’s total security transactions with other Schwab Funds were $450,000.

Pursuant to an exemptive order issued by the SEC, the fund may enter into interfund borrowing and lending transactions within the 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. There was no interfund borrowing or lending activity for the fund during the period.

Trustees

Trustees may include people who are officers and/or directors of the investment adviser or Schwab. 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 persons for their service as trustees, but it did pay non-interested persons (independent trustees), as disclosed in the fund’s Statement of Operations.

4. Borrowing from Banks:

The fund may borrow money from banks and custodians. The fund may obtain temporary bank loans through the trust to which it belongs, to use for meeting shareholder redemptions or for extraordinary or emergency purposes. The Schwab Funds have custodian overdraft facilities and uncommitted line of credit arrangements of $150 million and $100 million with State Street Corporation and Bank of America, N.A., respectively. The fund pays interest on the amounts it borrows at rates that are negotiated periodically. There was no borrowing from the lines of credit for the fund during the period.

Investment Advisory Agreement Approval

The Investment Company Act of 1940 (the “1940 Act”) requires that initial approval of, as well as the continuation of, a fund’s investment advisory agreement must be specifically approved (1) by the vote of the trustees or by a vote of the shareholders of the fund, and (2) by the vote of a majority of the trustees who are not parties to the investment advisory agreement or “interested persons” of any party (the “Independent Trustees”), cast in person at a meeting called for the purpose of voting on such approval. In connection with such approvals, the fund’s trustees must request and evaluate, and the investment adviser is required to furnish, such information as may be reasonably necessary to evaluate the terms of the advisory agreement. In addition, the Securities and Exchange Commission (the “SEC”) takes the position that, as part of their fiduciary duties with respect to fund fees, fund boards are required to evaluate the material factors applicable to a decision to approve an investment advisory agreement.

Consistent with these responsibilities, the Board of Trustees (the “Board”) calls and holds one or more meetings each year that are dedicated, in whole or in part, to considering whether to renew the investment advisory agreement between The Charles Schwab Family of Funds (the “Trust”) and CSIM (the “Agreement”) with respect to existing funds in the Trust, including the Schwab Money Market Fund, and to review certain other agreements pursuant to which CSIM provides investment advisory services to certain other registered investment companies. In preparation for the meeting(s), the Board requests and reviews a wide variety of materials provided by CSIM, including information about CSIM’s affiliates, personnel and operations. The Board also receives extensive data provided by third parties. This information is in addition to the detailed information about the funds that the Board reviews during the course of each year, including information that relates to fund operations and fund performance. The trustees also receive a memorandum from fund counsel regarding the responsibilities of trustees for the approval of investment advisory contracts. In addition, the Independent Trustees receive advice from independent counsel to the Independent Trustees, meet in executive session outside the presence of fund management and participate in question and answer sessions with representatives of CSIM.

The Board, including a majority of the Independent Trustees, considered information specifically relating to its consideration of the continuance of the Agreement at meetings held on May 2, 2007, and June 5, 2007, and approved the renewal of the Agreement for an additional one year term at the meeting held on June 5, 2007. The Board’s approval of the Agreement was based on consideration and evaluation of a variety of specific factors discussed at these meetings and at prior meetings, including:


1.	the nature, extent and quality of the services provided to the funds under the Agreement, including the resources of CSIM and its affiliates dedicated to the funds;

2.	each fund’s investment performance and how it compared to that of certain other comparable mutual funds;

3.	each fund’s expenses and how those expenses compared to those of certain other comparable mutual funds;

4.	the profitability of CSIM and its affiliates, including Charles Schwab & Co., Inc. (“Schwab”), with respect to each fund, including both direct and indirect benefits accruing to CSIM and its affiliates; and

5.	the extent to which economies of scale would be realized as the funds grow and whether fee levels in the Agreement reflect those economies of scale for the benefit of fund investors.

Nature, Extent and Quality of Services. The Board considered the nature, extent and quality of the services provided by CSIM to the funds and the resources of CSIM and its affiliates dedicated to the funds. In this regard, the trustees evaluated, among other things, CSIM’s personnel, experience, track record and compliance program. The information considered by the trustees included specific information concerning changes in the nature, extent and quality of services provided by CSIM since the trustees had last considered approval of the Agreement. The trustees also considered the fact that Schwab’s extensive branch network, Internet access, investment and research tools, telephone services, and array of account features benefit the funds and their shareholders. The trustees also considered Schwab’s excellent reputation as a full service brokerage firm and its overall financial condition. Finally, the trustees considered that the vast majority of the funds’ shareholders are also brokerage clients of Schwab. Following such evaluation, the Board concluded, within the context of its full deliberations, that the nature, extent and quality of services provided by CSIM to the funds and the resources of CSIM and its affiliates dedicated to the funds supported renewal of the Agreement.

Fund Performance. The Board considered fund performance in determining whether to renew the Agreement. Specifically, the trustees considered each fund’s performance relative to a peer group of other mutual funds and appropriate indices/benchmarks, in light of total return, yield, when applicable, and market trends. As part of this review, the trustees considered the composition of the peer group, selection criteria and the reputation of the third party who prepared the peer group analysis. In evaluating

the performance of each fund, the trustees considered both risk and shareholder risk expectations for such fund and the appropriateness of the benchmark used to compare the performance of each fund. The trustees further considered the level of fund performance in the context of its review of fund expenses and adviser profitability discussed below. Following such evaluation the Board concluded, within the context of its full deliberations, that the performance of the funds supported renewal of the Agreement.

Fund Expenses. With respect to the funds’ expenses, the trustees considered the rate of compensation called for by the Agreement, and each fund’s net operating expense ratio, in each case, in comparison to those of other comparable mutual funds, such peer groups and comparisons having been selected and calculated by an independent third party. The trustees considered the effects of CSIM’s and Schwab’s historical practice of voluntarily waiving management and other fees to prevent total fund expenses from exceeding a specified cap. The trustees also considered fees charged by CSIM to other mutual funds and to other types of accounts, such as wrap accounts and offshore funds, but, with respect to such other types of accounts, accorded less weight to such comparisons due to the different legal, regulatory, compliance and operating features of mutual funds as compared to these other types of accounts. Following such evaluation, the Board concluded, within the context of its full deliberations, that the expenses of the funds are reasonable and supported renewal of the Agreement.

Profitability. With regard to profitability, the trustees considered the compensation flowing to CSIM and its affiliates, directly or indirectly. In this connection, the trustees reviewed management’s profitability analyses, together with certain commentary thereon from an independent accounting firm. The trustees also considered any other benefits derived by CSIM from its relationship with the funds, such as whether, by virtue of its management of the Funds, CSIM obtains investment information or other research resources that aid it in providing advisory services to other clients. The trustees considered whether the varied levels of compensation and profitability under the Agreement and other service agreements were reasonable and justified in light of the quality of all services rendered to each fund by CSIM and its affiliates. The Board also considered information relating to changes to CSIM’s business operations and how these changes affected CSIM’s profitability under the Agreement. Based on this evaluation, the Board concluded, within the context of its full deliberations, that the profitability of CSIM is reasonable and supported renewal of the Agreement.

Economies of Scale. The trustees considered the existence of any economies of scale and whether those are passed along to a fund’s shareholders through a graduated investment advisory fee schedule or other means, including any fee waivers by CSIM and its affiliates. In this regard, and consistent with their consideration of fund expenses, the trustees considered that CSIM and Schwab have previously committed resources to minimize the effects on shareholders of diseconomies of scale during periods when fund assets were relatively small through their contractual expense waivers. For example, such diseconomies of scale may particularly affect newer funds or funds with investment strategies that are from time to time out of favor, but shareholders may benefit from the continued availability of such funds at subsidized expense levels. The trustees also considered CSIM’s agreement to contractual investment advisory fee schedules that include lower fees at higher graduated asset levels. The Board also considered certain commitments by CSIM and Schwab that are designed to pass along potential economies of scale to fund shareholders. Specifically, the Board considered CSIM and Schwab’s commitments, which may be changed only with Board approval, relating to: (i) reductions of contractual advisory fees or addition of breakpoints for certain funds, (ii) implementation, by means of expense limitation agreement, of additional reductions in net overall expenses for certain funds, (iii) reductions of administrative “sweep” fees paid to Schwab in connection with money market fund shares that are used for automatic investment of cash held in customer brokerage accounts, and (iv) future net total operating expense reductions for taxable money funds as a group and non-taxable money funds as a group when aggregate assets of such group of funds exceed certain levels. Based on this evaluation, and in consideration of the commitments made by CSIM and Schwab as discussed above, the Board concluded, within the context of its full deliberations, that the funds obtain reasonable benefit from economies of scale.

In the course of their deliberations, the trustees did not identify any particular information or factor that was all-important or controlling. Based on the trustees’ deliberation and their evaluation of the information described above, the Board, including all of the Independent Trustees, unanimously approved the continuation of the Agreement and concluded that the compensation under the Agreement is fair and reasonable in light of such services and expenses and such other matters as the trustees have considered to be relevant in the exercise of their reasonable judgment.

Trustees and Officers

The tables below give information as of June 30, 2007, 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, and Laudus Trust. As of June 30, 2007, the Fund Complex included 72 funds.

The address for all trustees and officers is 101 Montgomery Street, San Francisco, CA 94104. 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.		72	Board 1—Director, Redwood Trust, Inc. Board 2—Director, PMI Group, Inc.


Donald F. Dorward 1931 Trustee (Trustee of The Charles Schwab Family of Funds since 1989.)	Chief Executive Officer, Dorward & Associates (corporate management, marketing and communications consulting firm). From 1996-1999, Executive Vice President and Managing Director, Grey Advertising. Prior to 1996, President and Chief Executive Officer, Allen & Dorward Advertising.		61	None.


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. Until February 2004, Co-Chief Executive Officer, Aphton Corp. (bio-pharmaceuticals).		72	Board 1—Director, Mission West Properties Board 2—Director, TOUSA Board 3—Director, Harris-Stratex Networks Board 4—Director, Genitope Corp. Board 5—Director & Non-Executive Chairman, Solectron Corp. Board 6—Director, Ditech Networks


Robert G. Holmes 1931 (Trustee of The Charles Schwab Family of Funds since 1989.)	Chairman, Chief Executive Officer and Director, Semloh Financial, Inc. (international financial services and investment advisory firm).		61	None.


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).		61	Board 1—Board of Cooper Industries Board 2—Chairman of the Audit Committee of Oneok Partners LP


Donald R. Stephens 1938 Trustee (Trustee of The Charles Schwab Family of Funds since 1989.)	Managing Partner, D. R. Stephens & Company (investments).		61	None.


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


Michael W. Wilsey 1943 Trustee (Trustee of The Charles Schwab Family of Funds since 1989.)	Chairman, Chief Executive Officer, Wilsey Bennett, Inc. (real estate investment and management, and other investments).		61	None.


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


Charles R. Schwab²1937 Chairman and Trustee (Chairman and Trustee of The Charles Schwab Family of Funds since 1989.)	Chairman, Chief Executive Officer and Director, The Charles Schwab Corporation, Charles Schwab & Co., Inc.; Chairman and Director, Charles Investment Management, Inc., Charles Schwab Bank, N.A.; Chairman and Chief Executive Officer, Schwab (SIS) Holdings Inc. I, Schwab International Holdings, Inc.; Chief Executive Officers and Director, Schwab Holdings Inc. Through June 2007, Director, U.S. Trust Company, N.A., U.S. Trust Company of New York. Until May 2003, Co-Chief Executive Officer, The Charles Schwab Corporation.		61	None


Randall W. Merk²1954 Trustee (Trustee of The Charles Schwab Family of Funds since 2005.)	Executive Vice President and President, Schwab Financial Products, Charles Schwab & Co. Inc.; Director, Charles Schwab Asset Management (Ireland) Limited and Charles Schwab Worldwide Funds PLC. From September 2002 to July 2004, Chief Executive Officer and President, Charles Schwab Investment Management, Inc. and Executive Vice President, Charles Schwab & Co., Inc. Prior to September 2002, President and Chief Investment Management and Director, American Century Companies, Inc.		72	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


Evelyn Dilsaver 1955 President and Chief Executive Officer (Officer of The Charles Schwab Family of Funds since 2004.)		President, Chief Executive Officer, and Director, Charles Schwab Investment Management, Inc.; Executive Vice President, Charles Schwab & co., Inc.; President and Chief Executive Officer, Laudus Trust and Laudus Variable Insurance Trust. Through June 2007, President Excelsior Funds Inc., Excelsior Tax-Exempt Funds, Inc. and Excelsior Funds Trust; President Mutual Fund Division, UST Advisors, Inc. From June 2003 to July 2004, Senior Vice President, Asset Management Products and Services, Charles Schwab & Co., Inc. Prior to June 2003, Executive Vice President, Chief Financial Officer, and Chief Administrative Officer, U.S. Trust, a subsidiary of The Charles Schwab Corporation.


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, Charles Schwab Investment Management, Inc. Chief Financial Officer, Laudus Trust and Laudus Variable Insurance Trust. Director, Charles Schwab Worldwide Fund, PLC and Charles Schwab Asset Management (Ireland) limited. Through June 2007, Treasurer, Chief Financial Officer and Chief Accounting Officer, Excelsior Funds Inc. Excelsior tax-Exempt Funds, Inc. and Excelsior Funds Trust, Chief Financial Officer, Mutual Fund Division, UST Advisors, Inc. From December 1999 to November 2004, Sr. Vice President, Financial Reporting, Charles Schwab & Co. Inc.


Kimon Daifotis 1959 Senior Vice President and Chief Investment Officer-Fixed Income (Officer of The Charles Schwab Family of Funds since 2004.)		Senior Vice President and Chief Investment Officer-Fixed Income, Charles Schwab Investment Management, Inc. Prior to 2004, Vice President and Sr. Portfolio Manager, Charles Schwab Investment Management Inc.


Jeffrey Mortimer 1963 Senior Vice President and Chief Investment Officer-Equities (Officer of The Charles Schwab Family of Funds since 2004.)		Senior Vice President and Chief Investment Officer-Equities, Charles Schwab Investment Management, Inc.; Vice President and Chief Investment Officer, Laudus Trust and Laudus Variable Insurance Trust. Prior to 2004, Vice President and Sr. Portfolio Manager, Charles Schwab Investment Management, Inc.


Randall Fillmore 1960 Chief Compliance Officer and AML Officer (Officer of The Charles Schwab Family of Funds since 2002.)		Senior Vice President and Chief Compliance Officer, Charles Schwab Investment Management, Inc.; Senior Vice President Charles Schwab & Co. Inc., Chief Compliance Officer, Laudus Trust and Laudus Variable Insurance Trust. Through June 2007, Chief Compliance Officer, Excelsior Funds Inc., Excelsior Tax-Exempt Funds, Inc., Excelsior Funds Trust. From 2002 to 2003, Vice President, Charles Schwab & Co., Inc., and Charles Schwab Investment Management, Inc.


Koji E. Felton 1961 Secretary and Chief Legal Officer (Officer of The Charles Schwab Family of Funds since 1998.)		Senior Vice President, Chief Counsel and Corporate Secretary, Charles Schwab Investment Management, Inc.; senior Vice President and Deputy General Counsel, Charles Schwab & Co., Inc. Through June 2007, Chief Legal Officer, Excelsior Funds Inc., Excelsior Tax Exempt Funds, Inc. and Excelsior Funds Trust.


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., Laudus Trust and Laudus Variable Insurance Trust; since 2006, Chief Counsel, Laudus Trust and Variable Insurance Trust. Until July 2005, Senior Associate, Paul Hastings Janofsky & Walker LLP.


Cathy Sabo 1964 Vice President (Officer of The Charles Schwab Family of Funds since 2005.)		Vice President, Compliance, Charles Schwab Investment Management, Inc., Laudus Trust and Laudus Variable Insurance Trust. Until 2004, Vice President, Client, Sales & Services Controls, Charles Schwab & Co., Inc.


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


Michael Haydel 1972 Vice President (Officer of The Charles Schwab Family of Funds since 2006.)		Vice President, Asset Management Client Services, Charles Schwab & Co., Inc.; Vice President and AML Officer, Laudus Trust and Laudus Variable Insurance Trust. Until March 2004, Director Charles Schwab & Co., Inc.


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 20 years of service as a trustee, whichever comes first. Independent trustees elected prior to January 1, 2000 will retire on the following schedule: Messrs. Holmes and Dorward will retire on December 31, 2007, and Messrs. Stephens and Wilsey will retire on December 31, 2010.

²	In addition to their employment with the investment advisor and the distributor, Messrs. Schwab and Merk also own stock of The Charles Schwab Corporation. Mr. Schwab and Mr. Merk are Interested Trustees because they are employees of Schwab and/or the advisor.

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 other officer 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.

Alternative Minimum Tax (AMT) A federal income tax designed to limit the extent to which high-income taxpayers (including individuals, estates, trusts and corporations) can benefit from certain deductions and exemptions. For example, some types of income that are exempt from regular federal income tax are not exempt from the AMT.

asset-backed securities Bonds or other debt securities that represent ownership in a pool of assets such as credit card debt.

bond A security representing a loan from the investor to the issuer. A bond typically pays interest at a fixed rate (the “coupon rate”) until a specified date (the “maturity date”), at which time the issuer returns the money borrowed (“principal” or “face value”) to the bondholder. Because of their structure, bonds are sometimes called “fixed income securities” or “debt securities.” An individual bond is subject to the credit risk of the issuer. Changes in interest rates can affect a bond’s market value prior to call or maturity. There is no guarantee that a bond’s yield to call or maturity will provide a positive return over the rate of inflation.

bond fund A bond fund is subject to the same credit, interest rate, and inflation risks as bonds. In addition, a bond fund incurs ongoing fees and expenses. A bond fund’s net asset value will fluctuate with the price of the underlying bonds and the portfolio turnover activity; return of principal is not guaranteed.

bond anticipation notes Obligations sold by a municipality on an interim basis in anticipation of the municipality’s issuance of a longer-term bond in the future.

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, state and local governments 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.

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 limit 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 principal to its debtholders.

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

effective yield A measurement of a fund’s yield that assumes that all dividends were 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 a year.

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

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

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

liquidity-enhanced security A security that when tendered is paid from funds advanced by an entity other than the issuer (such as a large financial institution). Liquidity enhancements are often used on variable-rate securities where the portfolio manager has an option to tender the securities prior to their final maturity.

maturity The date a debt security is scheduled to be “retired” and its principal amount returned to the bondholder.

money market securities High-quality, short-term debt securities that may be issued by entities such as the U.S. government,

Portfolio terms

To help reduce the space occupied by the portfolio holdings, we use the following terms. Most of them appear within descriptions of individual securities in municipal funds, and describe features of the issuer or the security. Some of these are more fully defined elsewhere in the Glossary.


ACES		Adjustable convertible extendable security
BAN		Bond anticipation note
COP		Certificate of participation
GAN		Grant anticipation note
GO		General obligation
HDA		Housing Development Authority
HFA		Housing Finance Agency
IDA		Industrial Development Authority
IDB		Industrial Development Board
IDRB		Industrial Development Revenue Bond
M/F		Multi-family
RAN		Revenue anticipation note
RB		Revenue bond
S/F		Single-family
TAN		Tax anticipation note
TECP		Tax-exempt commercial paper
TRAN		Tax and revenue anticipation note
VRD		Variable-rate demand

corporations and financial institutions (such as banks). Money market securities include commercial paper, promissory notes, certificates of deposit, bankers acceptances, notes and time deposits.

muni, municipal bonds, 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.

revenue anticipation notes Obligations that are issued in expectation of the receipt of revenue, such as income taxes, property taxes, etc.

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%).

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

tax anticipation notes Notes that typically are sold to finance the cash flow needs of municipalities in anticipation of the receipt of taxes on a future date.

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.

weighted average maturity For mutual funds, the maturity of all the debt securities in its portfolio, 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 90 days.

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

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.schwab.com/schwabfunds, the SEC’s website at 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 Schwab’s website at www.schwab.com/schwabfunds or the SEC’s website at http://www.sec.gov.

The Schwab Funds Family^®

Stock Funds

Schwab Premier Equity Fund^tm

Schwab Core Equity Fund^tm

Schwab Dividend Equity Fund^tm

Schwab Large-Cap Growth Fund^tm

Schwab Small-Cap Equity Fund^tm

Schwab Hedge Equity Fund^tm

Schwab Financial Services Fund^tm

Schwab Health Care Fund^tm

Schwab Technology Fund^tm

Schwab Fundamental US Large Company Index Fund^tm

Schwab Fundamental US Small-Mid Company Index Fund^tm

Schwab Fundamental International Large Company Index Fund^tm

Schwab Global Real Estate Fund^tm

Schwab Institutional Select^® S&P 500 Fund

Schwab S&P 500 Index Fund

Schwab 1000 Index^® Fund

Schwab Small-Cap Index Fund^®

Schwab Total Stock Market Index Fund^®

Schwab International Index Fund^®

Asset Allocation Funds

Schwab Viewpoints 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 2020 Fund

Schwab Target 2030 Fund

Schwab Target 2040 Fund

Schwab Retirement Income Fund

Bond Funds

Schwab YieldPlus Fund^®

Schwab Short-Term Bond Market Fund^tm

Schwab Total Bond Market Fund^tm

Schwab GNMA Fund^tm

Schwab Inflation Protected Fund^tm

Schwab Tax-Free YieldPlus Fund^tm

Schwab Short/Intermediate Tax-Free Bond Fund^tm

Schwab Long-Term Tax-Free Bond Fund^tm

Schwab California Tax-Free YieldPlus Fund^tm

Schwab California Short/Intermediate Tax-Free Bond Fund^tm

Schwab California Long-Term Tax-Free Bond Fund^tm

Schwab Money Funds

Schwab offers an array of money market funds that seek high current income consistent with safety and liquidity.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^®.


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 Chairman

Charles Schwab

Chairman

Dear Shareholder,

I’ve always believed that an asset allocation plan and a diversified portfolio are the foundation of a well designed investment plan.

Thank you for investing with us.

Sincerely,

Schwab Retirement Advantage Money Fund & Schwab Investor Money Fund 1

From the President

Evelyn Dilsaver, President and CEO of Charles Schwab Investment Management, Inc. and of each of the funds covered in this report. She joined the firm in 1992 and has held a variety of executive positions at Schwab.

Dear Shareholder,

In closing, I speak for all of Schwab Funds when I say we want Schwab to be the place where investors can find useful, quality financial products and services to help them succeed.

Thank you for investing in Schwab Funds^®.

Sincerely,

Investors should consider carefully information contained in the prospectus,

including investment objectives, risks, charges and expenses. You can request

a prospectus by calling Schwab at 1-800-435-4000. Please read the prospectus

carefully before investing.

Please remember that with Schwab YieldPlus and Tax-Free YieldPlus Funds,

investment value will fluctuate, and shares, when redeemed, may be worth

more or less than original cost. Bond funds are subject to increased loss of

principal during periods of rising interest rates.

Investment income may be subject to certain state and local taxes and, depending

on your tax status, the federal alternative minimum tax. Capital gains are not

exempt from federal income tax.

2 Schwab Retirement Advantage Money Fund & Schwab Investor Money Fund

The Investment Environment and the Funds

Linda Klingman (middle), managing director and portfolio manager, has overall responsibility for the management of the funds.

Mike Neitzke (right), managing director and portfolio manager, has day-to-day responsibility for management of the funds.

Michael Lin (left), portfolio manager, has day-to-day responsibility for management of the funds.

Schwab Retirement Advantage Money Fund & Schwab Investor Money Fund 3

The Investment Environment and the Funds continued

The money market curve was inverted for the first quarter of 2007, as investors anticipated the Fed would lower interest rates due to slow growth and moderate inflation. However, as job growth continued to be strong, business activity remained healthy, and the Fed indicated their primary concern was inflation, the money market curve shifted to a positive slope late in the second quarter. As the curve became positively sloped, we felt the longer end of the curve represented value and provided a good opportunity to add yield to the portfolios. To that end, we extended the funds and maintained a weighted average maturity (WAM) longer than other funds with similar investment objectives.

Nothing in this report represents a recommendation of a security by the investment adviser.

Manager views and portfolio holdings may have changed since the report date.

4 Schwab Retirement Advantage Money Fund & Schwab Investor Money Fund

Performance and Fund Facts as of 6/30/07

Seven-Day Yields

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.


	Retirement
	Advantage		Investor
	Money Fund		Money Fund

Ticker Symbol	SWIXX		SWRXX


Seven-Day Yield¹		4.87%		4.74%

Seven-Day Yield—No Waiver²		4.74%		n/a

Seven-Day Effective Yield¹		4.99%		4.85%

Statistics

Money funds must maintain a dollar-weighted average maturity of no longer than 90 days, and cannot invest in any security whose effective maturity is longer than 397 days (approximately 13 months).


	Retirement
	Advantage	Investor
	Money Fund	Money Fund


Weighted Average Maturity	57 days	57 days

Credit Quality of Holdings % of portfolio	100% Tier 1	100% Tier 1

Minimum Initial Investment³	$25,000	$1 Retirement Plan Participants
		$2500 Other Investors

Portfolio holdings may have changed since the report date.


¹	Fund expenses have been partially absorbed by CSIM and Schwab.
²	Yield if fund expenses had not been partially absorbed by CSIM and Schwab.
³	Please see prospectus for further detail and eligibility requirements.

Schwab Retirement Advantage Money Fund & Schwab Investor Money Fund 5

Fund Expenses (Unaudited)

Examples for a $1,000 Investment


					Ending
			Beginning		Account Value		Expenses Paid
	Expense Ratio ¹		Account Value		(Net of Expenses)		During Period ²
	(Annualized)		at 1/1/07		at 6/30/07		1/1/07 - 6/30/07



Schwab Retirement Advantage Money Fund^tm
Actual Return		0.48%	$	1,000	$	1,024.40	$	2.41
Hypothetical 5% Return		0.48%	$	1,000	$	1,022.41	$	2.41


Schwab Investor Money Fund^tm
Actual Return		0.62%	$	1,000	$	1,023.70	$	3.11
Hypothetical 5% Return		0.62%	$	1,000	$	1,021.72	$	3.11


¹	Based on the most recent six-month expense ratio; may differ from the expense ratio provided in Financial Highlights.


²	Expenses for each fund are equal to its annualized expense ratio, multiplied by the average account value over the period, multiplied by 181 days of the period, and divided by 365 days of the fiscal year.

6 Schwab Retirement Advantage Money Fund & Schwab Investor Money Fund

Schwab Retirement Advantage Money Fund

Portfolio Holdings as of June 30, 2007 (Unaudited)

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

Cost

Value

Holdings by Category

($ x 1,000)

.0%

Fixed-Rate Obligations

594,506

.7%

Variable-Rate Obligations

132,789

.3%

Other Investments

49,821

.0%

Total Investments

777,116

.0%

Other Assets and Liabilities

16,133

100

.0%

Net Assets

793,249


Issuer	Face Amount		Value
Rate, Maturity Date	($ x 1,000)		($ x 1,000)





Fixed-Rate Obligations 75.0% of net assets




Bank Notes 2.0%


Bank of America, N.A.
5.31%, 08/27/07		2,000		2,000
5.31%, 08/29/07		7,000		7,000
5.31%, 10/17/07		5,000		5,000
5.30%, 11/14/07		2,000		2,000

				16,000


Certificates of Deposit 21.1%


Abbey National Treasury Services PLC
5.29%, 07/13/07 (a)		3,000		3,000
ABN AMRO Bank N.V.
5.30%, 12/11/07		9,000		9,000
Alliance & Leicester PLC
5.34%, 03/04/08		2,000		2,000
Allied Irish Banks PLC
5.33%, 09/26/07		2,000		2,000
Banco Bilbao Vizcaya Argentaria S.A.
5.29%, 07/17/07		5,000		5,000
5.37%, 03/11/08		6,000		6,000
Barclays Bank PLC
5.30%, 07/06/07		6,000		6,000
5.30%, 10/24/07		1,000		1,000
5.33%, 02/29/08		7,000		7,000
Bayerische Hypo-und Vereinsbank AG
5.31%, 08/22/07		1,000		1,000
BNP Paribas
5.31%, 11/14/07		3,000		3,000
Canadian Imperial Bank of Commerce
5.32%, 07/12/07		2,000		2,000
Credit Agricole S.A.
5.33%, 07/11/07		1,000		1,000
5.31%, 10/12/07		6,000		6,000
5.31%, 10/25/07		4,000		4,000
Credit Suisse
5.33%, 07/11/07		8,000		8,000
5.31%, 11/07/07		6,000		6,000
5.37%, 03/20/08		1,000		1,000
DePfa Bank PLC
5.37%, 02/20/08		3,000		3,000
Deutsche Bank AG
5.31%, 07/09/07		5,000		5,000
5.35%, 08/07/07		3,000		3,000
5.30%, 10/10/07		3,000		3,000
5.32%, 11/19/07		5,000		4,999
5.41%, 02/11/08		6,000		6,000
Fortis Bank
5.29%, 07/18/07		4,000		4,000
HBOS Treasury Services PLC
5.33%, 08/20/07 (a)		3,000		3,000
5.30%, 02/13/08 (a)		2,000		2,000
ING Bank N.V.
5.32%, 08/02/07		3,000		3,000
Intesa Sanpaolo
5.30%, 09/24/07		14,000		14,000
Mitsubishi UFJ Trust & Banking Corp.
5.33%, 08/10/07		6,000		6,000
5.34%, 09/27/07		1,000		1,000
5.32%, 02/14/08		4,000		4,000
Mizuho Corporate Bank Ltd.
5.33%, 08/21/07		3,000		3,000
Skandinaviska Enskilda Banken AB
5.31%, 07/06/07		3,000		3,000
Societe Generale
5.30%, 10/23/07		3,000		3,000
Toronto Dominion Bank
5.31%, 07/09/07		9,000		9,000
5.32%, 07/10/07		1,000		1,000
5.37%, 02/21/08		1,000		1,000
Unicredito Italiano S.p.A.
5.35%, 08/13/07		2,000		2,000
5.31%, 11/13/07		2,000		2,000
5.35%, 12/27/07		1,000		1,000
Washington Mutual Bank
5.30%, 10/19/07		3,000		3,000
Wilmington Trust Co.
5.31%, 07/05/07		3,000		3,000
5.31%, 10/05/07		1,000		1,000

				166,999


Commercial Paper & Other Corporate Obligations 51.9%


Alliance & Leicester PLC
5.32%, 09/11/07 (c)		3,000		2,968
Allied Irish Banks North America, Inc.
5.34%, 08/09/07 (a)		2,000		1,989

8 See financial notes

Schwab Retirement Advantage Money Fund

Portfolio Holdings (Unaudited) continued

Issuer
Face Amount
Value

Rate, Maturity Date ($ x 1,000) ($ x 1,000)

Amstel Funding Corp.

5.31%, 08/02/07 (b)(c)
4,121 4,102

Aquinas Funding, L.L.C.

5.33%, 07/06/07 (a)(b)(c)
2,000 1,999

5.33%, 09/14/07 (a)(b)(c)
1,500 1,484

Atlantic Asset Securitization, L.L.C.

5.30%, 07/05/07 (a)(b)(c)
3,581 3,579

5.31%, 07/23/07 (a)(b)(c)
1,000 997

Atlantis One Funding Corp.

5.32%, 07/05/07 (b)(c)
2,000 1,999

5.30%, 07/20/07 (b)(c)
6,000 5,984

5.35%, 08/09/07 (b)(c)
1,000 994

5.33%, 08/20/07 (b)(c)
2,000 1,986

5.30%, 10/19/07 (b)(c)
1,000 984

5.31%, 11/19/07 (b)(c)
4,000 3,919

Bank of America Corp.

5.31%, 08/31/07
4,000 3,964

5.32%, 09/13/07
6,000 5,935

5.33%, 09/27/07
6,000 5,923

5.30%, 02/01/08
10,000 9,695

Bank of Ireland

5.34%, 08/06/07 (c)
1,000 995

Bear Stearns Companies, Inc.

5.30%, 07/12/07
2,000 1,997

5.35%, 08/03/07
6,000 5,971

Beethoven Funding Corp.

5.32%, 07/25/07 (a)(b)(c)
5,000 4,982

Cancara Asset Securitisation, L.L.C.

5.31%, 07/17/07 (a)(b)(c)
3,000 2,993

5.33%, 07/17/07 (a)(b)(c)
6,000 5,986

5.30%, 11/16/07 (a)(b)(c)
1,000 980

CC (USA), Inc.

5.24%, 07/02/07 (b)(c)
3,000 3,000

Citigroup Funding, Inc.

5.31%, 07/12/07 (a)
7,000 6,989

5.31%, 07/17/07 (a)
15,000 14,965

5.31%, 07/24/07 (a)
7,000 6,977

5.33%, 09/19/07 (a)
1,000 988

5.32%, 11/14/07 (a)
1,000 980

Cobbler Funding, L.L.C.

5.34%, 07/16/07 (b)(c)
2,390 2,385

5.32%, 07/25/07 (b)(c)
1,000 996

Concord Minutemen Capital Co., Class C

5.30%, 07/03/07 (a)(b)(c)
5,000 4,999

Concord Minutemen Capital Co., Series A

5.30%, 07/09/07 (a)(b)(c)
2,000 1,998

5.31%, 07/09/07 (a)(b)(c)
7,000 6,992

Crown Point Capital Co., L.L.C.

5.31%, 07/16/07 (a)(b)(c)
5,000 4,989

5.31%, 07/25/07 (a)(b)(c)
5,000 4,983

5.31%, 08/07/07 (a)(b)(c)
2,000 1,989

Dakota CP Notes of Citibank Credit Card Issuance Trust

5.31%, 07/02/07 (b)(c)
1,000 1,000

5.31%, 08/23/07 (b)(c)
9,000 8,931

5.32%, 09/07/07 (b)(c)
3,000 2,970

5.33%, 09/13/07 (b)(c)
2,000 1,978

Danske Corp.

5.30%, 02/22/08 (a)(c)
12,000 11,600

DnB NOR Bank ASA

5.32%, 10/12/07
7,000 6,896

Edison Asset Securitization Corp., L.L.C.

5.30%, 07/03/07 (a)(b)(c)
1,023 1,023

Fairway Finance Co., L.L.C.

5.30%, 07/10/07 (a)(b)(c)
1,000 999

5.31%, 08/20/07 (a)(b)(c)
1,000 993

Falcon Asset Securitization Corp.

5.32%, 07/24/07 (a)(b)(c)
7,380 7,355

5.33%, 07/26/07 (a)(b)(c)
6,000 5,978

Five Finance, Inc.

5.31%, 07/06/07 (b)(c)
1,932 1,931

Fortis Funding, L.L.C.

5.30%, 07/09/07 (a)(c)
1,000 999

Galaxy Funding, Inc.

5.33%, 09/18/07 (b)(c)
2,000 1,977

Gemini Securitization Corp., L.L.C.

5.31%, 08/20/07 (a)(b)(c)
3,000 2,978

5.33%, 09/10/07 (a)(b)(c)
1,000 990

5.33%, 09/17/07 (a)(b)(c)
1,000 989

General Electric Capital Corp.

5.32%, 02/19/08
3,000 2,901

5.38%, 03/04/08
5,500 5,305

5.33%, 03/20/08
3,000 2,888

General Electric Capital Services

5.31%, 07/05/07
5,000 4,997

Grampian Funding, L.L.C.

5.34%, 08/06/07 (a)(b)(c)
3,000 2,984

5.36%, 12/18/07 (a)(b)(c)
5,000 4,877

HBOS Treasury Services PLC

5.31%, 08/28/07 (a)
1,000 992

ING (US) Funding, L.L.C.

5.31%, 07/12/07 (a)
7,000 6,989

5.32%, 08/24/07 (a)
3,000 2,977

Intesa Funding, L.L.C.

5.31%, 10/16/07 (a)
3,000 2,954

Irish Life & Permanent PLC

5.34%, 09/24/07 (c)
2,000 1,975

5.28%, 09/26/07 (c)
2,000 1,975

K2 (USA), L.L.C.

5.31%, 07/23/07 (b)(c)
3,000 2,990

5.40%, 06/13/08 (b)(c)
1,000 1,000

KBC Financial Products International, Ltd.

5.31%, 08/06/07 (a)(c)
3,000 2,984

Kitty Hawk Funding Corp.

5.34%, 08/01/07 (a)(b)(c)
2,000 1,991

Mane Funding Corp.

5.33%, 09/21/07 (b)(c)
2,000 1,976

Morgan Stanley

5.35%, 07/27/07
2,000 1,992

Nationwide Building Society

5.32%, 07/10/07
1,000 999

Nieuw Amsterdam Receivables Corp.

5.32%, 08/24/07 (a)(b)(c)
4,000 3,968

Northern Rock PLC

5.35%, 08/09/07
2,000 1,989

5.33%, 09/25/07
1,000 987

Park Avenue Receivables Co., L.L.C.

5.34%, 07/25/07 (a)(b)(c)
2,000 1,993

Picaros Funding, L.L.C.

5.32%, 07/06/07 (a)(b)(c)
3,000 2,998

5.33%, 09/12/07 (a)(b)(c)
1,500 1,484

Scaldis Capital Ltd.

5.33%, 08/17/07 (a)(b)(c)
5,326 5,289

5.30%, 10/15/07 (a)(b)(c)
3,223 3,174

Sedna Finance, Inc.

5.35%, 07/30/07 (b)(c)
1,000 996

See financial notes 9

Schwab Retirement Advantage Money Fund

Portfolio Holdings (Unaudited) continued

Issuer
Face Amount
Value

Rate, Maturity Date ($ x 1,000) ($ x 1,000)

5.32%, 10/11/07 (b)(c)
2,000 1,971

Sheffield Receivables Corp.

5.29%, 07/03/07 (a)(b)(c)
1,000 1,000

5.31%, 07/19/07 (a)(b)(c)
4,000 3,989

Sigma Finance, Inc.

5.36%, 12/21/07 (b)(c)
1,500 1,462

5.37%, 03/20/08 (b)(c)
4,000 3,849

Societe Generale North America, Inc.

5.32%, 07/12/07 (a)
2,000 1,997

5.33%, 09/17/07 (a)
3,100 3,065

5.35%, 10/01/07 (a)
2,500 2,466

Solitaire Funding, L.L.C.

5.31%, 08/13/07 (a)(b)(c)
6,000 5,962

5.33%, 09/21/07 (a)(b)(c)
1,500 1,482

Stadshypotek Delaware, Inc.

5.31%, 08/23/07 (a)(c)
4,000 3,969

Swebbank Mortgage AB

5.32%, 08/15/07
1,000 993

5.31%, 08/22/07
2,000 1,985

Swedbank AB

5.30%, 08/09/07
4,000 3,977

Thames Asset Global Securitisation No. 1, Inc.

5.33%, 08/15/07 (a)(b)(c)
1,000 993

Thunder Bay Funding, L.L.C.

5.31%, 07/16/07 (a)(b)(c)
6,000 5,987

Ticonderoga Funding, L.L.C.

5.35%, 08/02/07 (a)(b)(c)
7,000 6,967

Tulip Funding Corp.

5.31%, 07/16/07 (a)(b)(c)
6,821 6,806

UBS Finance (Delaware), Inc.

5.30%, 07/02/07 (a)
1,000 1,000

5.32%, 07/13/07 (a)
14,000 13,976

5.31%, 07/18/07 (a)
1,000 997

5.35%, 08/14/07 (a)
6,000 5,962

Unicredito Italiano Bank (Ireland) PLC

5.36%, 07/31/07 (a)(c)
3,000 2,987

5.36%, 08/07/07 (a)(c)
5,000 4,973

Variable Funding Capital Corp.

5.38%, 07/02/07 (a)(b)(c)
10,000 9,998

5.30%, 07/17/07 (a)(b)(c)
1,000 998

Westpac Banking Corp.

5.30%, 07/11/07 (c)
3,000 2,996

5.35%, 08/08/07 (c)
8,000 7,956

Westpac Trust Securities NZ Ltd.

5.34%, 10/09/07 (a)(c)
1,000 985

Whistlejacket Capital, L.L.C.

5.31%, 07/20/07 (b)(c)
1,000 997

5.31%, 11/13/07 (b)(c)
2,000 1,961

Windmill Funding Corp.

5.30%, 07/09/07 (a)(b)(c)
2,000 1,998

5.30%, 07/19/07 (a)(b)(c)
1,000 997

Yorktown Capital, L.L.C.

5.30%, 07/20/07 (a)(b)(c)
6,000 5,983

5.31%, 08/09/07 (a)(b)(c)
4,000 3,977

411,507

Total Fixed-Rate Obligations
(Cost $594,506) 594,506

Variable-Rate Obligations 16.7% of net assets

Bank of Nova Scotia

5.26%, 07/05/07
8,000 7,999

Beta Finance, Inc.

5.32%, 07/25/07 (b)(c)
3,000 3,000

BMC Special Care Facilities Financing Authority of the City of Montgomery, Alabama

5.32%, 07/05/07 (a)
1,660 1,660

BNP Paribas

5.27%, 07/02/07
5,000 5,000

5.26%, 07/03/07
9,000 8,999

Canadian Imperial Bank of Commerce

5.36%, 07/30/07
6,000 6,000

5.39%, 08/15/07
2,000 2,000

CC (USA), Inc.

5.32%, 07/25/07 (b)(c)
10,000 10,000

City of New Britain, Connecticut

5.35%, 07/05/07 (a)
2,100 2,100

City of Palm Springs, California

5.32%, 07/05/07 (a)
8,000 8,000

Deutsche Bank AG

5.39%, 07/12/07
4,000 4,000

K2 (USA), L.L.C.

5.39%, 08/01/07 (b)(c)
5,000 5,002

Lexington Parker Capital Co., L.L.C.

5.27%, 07/05/07 (a)(b)(c)
2,000 2,000

Liberty Lighthouse U.S. Capital Co., L.L.C.

5.29%, 07/02/07 (b)(c)
2,000 2,000

5.32%, 08/15/07 (b)(c)
1,000 1,000

Links Finance, L.L.C.

5.32%, 07/16/07 (b)(c)
2,000 2,000

5.29%, 07/25/07 (b)(c)
4,000 4,000

LoanStar Assets Partners II, L.P.

5.36%, 07/05/07 (a)
5,000 5,000

New York City IDA

5.37%, 07/05/07 (a)
145 145

Royal Bank of Canada

5.27%, 07/05/07
10,000 9,998

Royal Bank of Scotland PLC

5.36%, 09/21/07 (c)
1,000 1,000

5.41%, 10/09/07 (c)
10,000 10,000

5.36%, 07/11/07 (c)
3,000 3,001

Sedna Finance, Inc.

5.29%, 07/12/07 (b)(c)
2,000 2,000

Sigma Finance, Inc.

5.29%, 07/16/07 (b)(c)
6,000 6,000

5.33%, 09/25/07 (b)(c)
3,000 3,000

Sumitomo Trust & Banking Co.

5.32%, 07/16/07
4,000 4,000

The Goldman Sachs Group, Inc.

5.34%, 07/11/07 (d)
7,000 7,000

Wachovia Asset Securitization Issuance, L.L.C.

5.31%, 07/25/07 (a)(b)(c)
885 885

Whistlejacket Capital, L.L.C.

5.28%, 07/16/07 (b)(c)
2,000 2,000

5.28%, 07/20/07 (b)(c)
3,000 3,000

5.32%, 08/17/07 (b)(c)
1,000 1,000

Total Variable-Rate Obligations
(Cost $132,789) 132,789

10 See financial notes

Schwab Retirement Advantage Money Fund

Portfolio Holdings (Unaudited) continued

Maturity Amount
Value

Security ($ x 1,000) ($ x 1,000)

Other Investments 6.3% of net assets

Repurchase Agreements 6.3%

Credit Suisse Securities (USA), L.L.C.

Tri-Party Repurchase Agreement dated 06/29/07, due 07/02/07 at 5.38%, fully collateralized by U.S. Government Securities with a value of $50,821.
49,843 49,821

Total Other Investments
(Cost $49,821) 49,821

End of Investments.

At 06/30/07, the tax basis cost of the fund’s investments was $777,116.

At 06/30/07, portfolio holdings included illiquid and/or restricted securities as follows

Issuer

Rate, Acquisition Date
Face Amount
Value

Maturity Date ($ x 1,000) ($ x 1,000)

The Goldman Sachs Group, Inc.

5.34%, 04/11/07, 07/11/07
7,000 7,000


(a)		Credit-enhanced security.
(b)		Asset-backed security.
(c)		Securities exempt from registration under Rule 144A of the Securities Act of 1933. 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 $326,738 or 41.2% of net assets.
(d)		Illiquid and/or restricted security.

IDA — Industrial development authority

See financial notes 11

Schwab Investor Money Fund

Portfolio Holdings as of June 30, 2007 (Unaudited)

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

Cost

Value

Holdings by Category

($ x 1,000)

.0%

Fixed-Rate Obligations

1,335,236

.7%

Variable-Rate Obligations

275,346

.0%

Other Investments

140,526

.7%

Total Investments

1,751,108

.3%

Other Assets and Liabilities

5,057

100

.0%

Net Assets

1,756,165


Issuer	Face Amount		Value
Rate, Maturity Date	($ x 1,000)		($ x 1,000)





Fixed-Rate Obligations 76.0% of net assets




Bank Notes 1.1%


Bank of America, N.A.
5.29%, 07/13/07		7,000		7,000
5.30%, 08/20/07		2,000		2,000
5.31%, 08/27/07		8,000		8,000
5.31%, 08/29/07		2,000		2,000

				19,000


Certificates of Deposit 25.4%


Abbey National Treasury Services PLC
5.29%, 07/13/07 (a)		7,000		7,000
ABN AMRO Bank N.V.
5.34%, 02/04/08		2,000		2,000
5.36%, 03/04/08		9,000		9,000
Alliance & Leicester PLC
5.31%, 07/24/07		7,000		7,000
Allied Irish Banks PLC
5.33%, 09/26/07 (a)		3,000		3,000
Banco Bilbao Vizcaya Argentaria S.A.
5.30%, 08/10/07		2,000		2,000
Bank of America, N.A.
5.29%, 09/12/07		4,000		4,000
Bank of Ireland
5.35%, 08/09/07		1,000		1,000
Bank of Montreal
5.32%, 11/20/07		6,000		6,000
Barclays Bank PLC
5.30%, 07/24/07		3,000		3,000
5.31%, 08/01/07		1,000		1,000
5.31%, 08/08/07		3,000		3,000
5.30%, 10/24/07		1,000		1,000
5.34%, 12/03/07		1,000		1,000
5.33%, 02/29/08		13,000		13,000
Bayerische Hypo- und Vereinsbank AG
5.31%, 08/03/07		4,000		4,000
5.32%, 08/29/07		6,000		6,000
Bayerische Landesbank
5.31%, 07/16/07		6,000		6,000
BNP Paribas
5.32%, 10/15/07		20,000		20,000
5.30%, 10/23/07		2,000		2,000
Calyon
5.31%, 01/31/08		11,000		11,000
Canadian Imperial Bank of Commerce
5.32%, 07/10/07		5,000		5,000
5.32%, 07/12/07		10,000		10,000
5.33%, 10/12/07		4,000		4,000
Citibank, N.A.
5.33%, 09/21/07		20,000		20,000
Commerzbank AG
5.32%, 09/13/07		6,000		6,000
5.33%, 10/03/07		1,000		1,000
Credit Agricole S.A.
5.33%, 07/11/07		6,000		6,000
5.31%, 10/12/07		12,000		12,000
Credit Suisse
5.33%, 07/11/07		1,000		1,000
5.31%, 07/26/07		1,000		1,000
5.31%, 08/10/07		4,000		4,000
5.32%, 11/26/07		2,500		2,500
5.37%, 03/20/08		6,000		6,000
DePfa Bank PLC
5.31%, 07/05/07		5,000		5,000
Deutsche Bank AG
5.34%, 07/24/07		8,000		8,000
5.35%, 08/07/07		5,000		5,000
5.33%, 10/09/07		7,000		7,000
5.31%, 10/11/07		9,000		9,000
5.41%, 02/11/08		10,000		10,000
Dresdner Bank AG
5.29%, 07/11/07		9,000		9,000
Fortis Bank
5.31%, 11/16/07		1,000		1,000
5.34%, 03/04/08		15,000		15,000
HBOS Treasury Services PLC
5.33%, 08/20/07 (a)		6,000		6,000
HSBC BANK PLC
5.31%, 08/08/07		6,000		6,000
ING Bank N.V.
5.32%, 08/02/07		6,000		6,000
5.34%, 08/21/07		5,000		5,000
5.33%, 09/05/07		1,000		1,000
Intesa Sanpaolo
5.33%, 07/18/07		1,000		1,000
5.32%, 11/26/07		20,000		20,000

16 See financial notes

Schwab Investor Money Fund

Portfolio Holdings (Unaudited) continued

Issuer
Face Amount
Value

Rate, Maturity Date ($ x 1,000) ($ x 1,000)

Landesbank Baden-Wurttemberg

5.30%, 09/06/07
6,000 5,999

Mitsubishi UFJ Trust & Banking Corp.

5.34%, 09/06/07
10,000 10,000

5.34%, 09/27/07
1,000 1,000

5.33%, 10/15/07
8,000 8,000

5.32%, 10/31/07
7,000 7,000

Mizuho Corporate Bank Ltd.

5.31%, 07/17/07
24,000 24,000

5.33%, 08/21/07
2,000 2,000

Rabobank

5.32%, 07/23/07
10,000 10,000

Royal Bank of Canada

5.34%, 02/04/08
5,000 5,000

Skandinaviska Enskilda Banken AB

5.28%, 09/28/07
1,000 1,000

5.34%, 12/03/07
9,000 9,000

Societe Generale

5.32%, 07/02/07
1,000 1,000

5.30%, 08/03/07
8,000 8,000

5.33%, 10/16/07
1,000 1,000

5.30%, 10/23/07
15,000 15,000

5.34%, 10/29/07
3,000 3,000

Sumitomo Trust & Banking Co.

5.35%, 08/20/07
1,000 1,000

Svenska Handelsbanken AB

5.34%, 10/26/07
6,000 5,999

Toronto Dominion Bank

5.31%, 07/09/07
1,000 1,000

Unicredito Italiano S.p.A.

5.35%, 08/13/07
3,000 3,000

5.31%, 11/13/07
2,000 2,000

5.33%, 11/26/07
2,000 2,000

Washington Mutual Bank

5.33%, 07/18/07
6,000 6,000

5.33%, 08/16/07
1,000 1,000

5.33%, 08/20/07
2,000 2,000

5.30%, 10/19/07
3,000 3,000

Wilmington Trust Co.

5.31%, 07/05/07
1,000 1,000

5.31%, 10/05/07
3,000 3,000

446,498

Commercial Paper & Other Corporate Obligations 49.5%

Alliance & Leicester PLC

5.32%, 09/11/07 (c)
6,500 6,432

Allied Irish Banks North America, Inc.

5.34%, 08/09/07 (a)
1,000 994

5.30%, 10/24/07 (a)
3,000 2,950

Alpine Securitization Corp.

5.30%, 10/19/07 (a)(b)(c)
1,000 984

Amstel Funding Corp.

5.31%, 10/29/07 (b)(c)
15,000 14,741

Amsterdam Funding Corp.

5.30%, 10/25/07 (a)(b)(c)
7,000 6,884

Anglo Irish Bank Corp. PLC

5.33%, 09/26/07 (c)
5,000 4,936

Aquinas Funding, L.L.C.

5.33%, 07/06/07 (a)(b)(c)
6,000 5,996

5.31%, 10/23/07 (a)(b)(c)
1,172 1,153

Atlantic Asset Securitization, L.L.C.

5.30%, 07/02/07 (a)(b)(c)
4,000 3,999

5.31%, 07/23/07 (a)(b)(c)
2,613 2,605

5.32%, 08/27/07 (a)(b)(c)
4,000 3,967

5.34%, 09/17/07 (a)(b)(c)
7,000 6,920

Atlantis One Funding Corp.

5.35%, 07/23/07 (b)(c)
4,000 3,987

5.35%, 08/09/07 (b)(c)
6,000 5,966

5.33%, 09/24/07 (b)(c)
5,000 4,938

5.30%, 10/19/07 (b)(c)
1,000 984

5.37%, 02/14/08 (b)(c)
6,000 5,803

5.34%, 02/25/08 (b)(c)
8,000 7,727

Bank of America Corp.

5.31%, 08/31/07
3,000 2,973

5.32%, 09/13/07
8,000 7,914

5.33%, 09/27/07
10,000 9,871

5.31%, 10/17/07
12,000 11,813

Bank of Ireland

5.31%, 08/16/07 (c)
4,000 3,973

Barclays US Funding Corp.

5.30%, 07/19/07 (a)
8,000 7,979

5.33%, 08/17/07 (a)
2,000 1,986

Barton Capital, L.L.C.

5.30%, 07/09/07 (a)(b)(c)
1,000 999

Bear Stearns Companies, Inc.

5.30%, 07/12/07
7,000 6,989

5.35%, 08/03/07
6,000 5,971

Beethoven Funding Corp.

5.32%, 07/25/07 (a)(b)(c)
4,000 3,986

5.34%, 09/25/07 (a)(b)(c)
4,000 3,950

Beta Finance, Inc.

5.31%, 10/22/07 (b)(c)
9,000 8,854

Cancara Asset Securitisation, L.L.C.

5.32%, 10/11/07 (a)(b)(c)
6,000 5,912

CC (USA), Inc.

5.30%, 07/09/07 (b)(c)
3,000 2,996

5.31%, 08/15/07 (b)(c)
3,500 3,477

Citigroup Funding, Inc.

5.31%, 07/17/07 (a)
6,000 5,986

5.31%, 07/27/07 (a)
13,000 12,951

5.30%, 08/07/07 (a)
1,000 995

5.31%, 08/07/07 (a)
9,000 8,952

5.31%, 08/13/07 (a)
9,000 8,944

5.30%, 08/17/07 (a)
1,000 993

5.33%, 09/13/07 (a)
8,000 7,914

5.33%, 09/19/07 (a)
14,000 13,836

5.33%, 09/21/07 (a)
2,000 1,976

Cobbler Funding, L.L.C.

5.32%, 07/25/07 (b)(c)
1,000 996

5.34%, 09/24/07 (b)(c)
2,000 1,975

5.35%, 09/28/07 (b)(c)
1,316 1,299

Concord Minutemen Capital Co., Class C

5.30%, 07/03/07 (a)(b)(c)
5,000 4,999

Concord Minutemen Capital Co., Series A

5.31%, 08/14/07 (a)(b)(c)
7,000 6,955

Crown Point Capital Co., L.L.C.

5.31%, 07/16/07 (a)(b)(c)
9,000 8,980

5.31%, 07/18/07 (a)(b)(c)
2,000 1,995

5.31%, 07/25/07 (a)(b)(c)
11,000 10,962

5.31%, 08/07/07 (a)(b)(c)
5,000 4,973

Dakota CP Notes of Citibank Credit Card Issuance Trust

5.31%, 07/02/07 (b)(c)
5,000 4,999

5.31%, 07/12/07 (b)(c)
5,000 4,992

5.31%, 08/07/07 (b)(c)
1,000 995

5.32%, 09/11/07 (b)(c)
6,000 5,937

See financial notes 17

Schwab Investor Money Fund

Portfolio Holdings (Unaudited) continued

Issuer
Face Amount
Value

Rate, Maturity Date ($ x 1,000) ($ x 1,000)

5.33%, 09/18/07 (b)(c)
7,000 6,919

5.33%, 09/20/07 (b)(c)
9,000 8,893

Danske Corp.

5.31%, 08/20/07 (a)(c)
2,374 2,357

DnB NOR Bank ASA

5.31%, 07/11/07
1,000 999

5.32%, 10/18/07
1,000 984

5.30%, 10/26/07
10,000 9,832

Falcon Asset Securitization Corp.

5.31%, 07/18/07 (a)(b)(c)
7,000 6,982

5.31%, 07/20/07 (a)(b)(c)
6,000 5,983

Five Finance, Inc.

5.33%, 08/17/07 (b)(c)
1,000 993

5.32%, 10/15/07 (b)(c)
1,000 985

5.33%, 11/20/07 (b)(c)
7,000 6,857

Gemini Securitization Corp., L.L.C.

5.30%, 07/06/07 (a)(b)(c)
7,000 6,995

5.32%, 08/13/07 (a)(b)(c)
1,000 994

5.31%, 08/20/07 (a)(b)(c)
2,000 1,985

5.33%, 09/10/07 (a)(b)(c)
1,000 990

General Electric Capital Corp.

5.32%, 02/19/08
2,000 1,934

5.38%, 03/04/08
1,500 1,447

General Electric Capital Services

5.31%, 07/05/07
11,000 10,994

5.29%, 11/28/07
9,000 8,808

Grampian Funding, L.L.C.

5.28%, 09/21/07 (a)(b)(c)
6,000 5,930

5.31%, 10/26/07 (a)(b)(c)
5,000 4,916

5.36%, 12/18/07 (a)(b)(c)
2,000 1,951

Greenwich Capital Holdings, Inc.

5.35%, 12/14/07 (a)
1,000 976

HBOS Treasury Services PLC

5.33%, 07/18/07 (a)
1,000 998

5.31%, 08/14/07 (a)
1,000 994

5.31%, 08/28/07 (a)
2,000 1,983

HSBC U.S.A., Inc.

5.30%, 10/23/07
1,000 984

HSH Nordbank AG

5.30%, 10/26/07
1,000 983

Intesa Funding, L.L.C.

5.32%, 07/05/07 (a)
9,000 8,995

Irish Life & Permanent

5.33%, 08/22/07 (c)
2,000 1,985

K2 (USA), L.L.C.

5.35%, 08/14/07 (b)(c)
2,000 1,987

5.33%, 08/16/07 (b)(c)
3,000 2,980

5.30%, 10/25/07 (b)(c)
3,000 2,950

Kitty Hawk Funding Corp.

5.31%, 07/17/07 (a)(b)(c)
8,000 7,981

5.31%, 07/25/07 (a)(b)(c)
4,953 4,936

5.31%, 08/13/07 (a)(b)(c)
7,945 7,895

Lexington Parker Capital Co., L.L.C.

5.35%, 08/09/07 (a)(b)(c)
5,428 5,397

5.33%, 08/21/07 (a)(b)(c)
7,463 7,408

5.34%, 09/14/07 (a)(b)(c)
2,000 1,978

Links Finance, L.L.C.

5.32%, 11/09/07 (b)(c)
3,000 2,943

Mane Funding Corp.

5.31%, 07/17/07 (b)(c)
1,000 998

5.32%, 08/28/07 (b)(c)
3,000 2,975

5.33%, 09/21/07 (b)(c)
10,000 9,880

5.34%, 09/27/07 (b)(c)
3,000 2,961

Merrill Lynch & Co., Inc.

5.30%, 08/08/07
7,000 6,961

Mont Blanc Capital Corp.

5.31%, 08/15/07 (a)(b)(c)
5,000 4,967

Morgan Stanley

5.31%, 08/24/07
11,000 10,914

Nationwide Building Society U.S.

5.32%, 07/10/07
5,000 4,994

5.30%, 10/15/07
1,000 985

Natixis Commercial Paper Corp. (CNCE)

5.29%, 08/10/07 (a)
1,000 994

5.31%, 08/10/07 (a)
1,000 994

5.31%, 08/30/07 (a)
9,000 8,921

Nieuw Amsterdam Receivables Corp.

5.30%, 07/10/07 (a)(b)(c)
3,000 2,996

5.32%, 08/24/07 (a)(b)(c)
3,000 2,976

Nordea North America, Inc.

5.30%, 08/03/07 (a)
10,000 9,952

Northern Rock PLC

5.30%, 08/06/07
2,000 1,990

5.35%, 08/09/07
3,000 2,983

Park Granada, L.L.C.

5.30%, 07/06/07 (b)(c)
10,000 9,993

5.31%, 09/25/07 (b)(c)
1,000 988

Picaros Funding, L.L.C.

5.32%, 07/06/07 (a)(b)(c)
2,000 1,999

5.31%, 10/30/07 (a)(b)(c)
1,000 983

Ranger Funding Co., L.L.C.

5.31%, 07/23/07 (a)(b)(c)
10,000 9,968

Scaldis Capital Ltd.

5.33%, 07/25/07 (a)(b)(c)
9,000 8,968

5.31%, 08/01/07 (a)(b)(c)
3,413 3,398

5.31%, 08/02/07 (a)(b)(c)
3,280 3,265

5.31%, 08/21/07 (a)(b)(c)
2,849 2,828

5.32%, 08/31/07 (a)(b)(c)
5,000 4,956

5.34%, 09/17/07 (a)(b)(c)
6,000 5,931

Sedna Finance, Inc.

5.34%, 09/24/07 (b)(c)
6,000 5,927

5.41%, 06/13/08 (b)(c)
2,000 2,000

Sheffield Receivables Corp.

5.31%, 07/19/07 (a)(b)(c)
15,000 14,960

Sigma Finance, Inc.

5.35%, 08/01/07 (b)(c)
7,000 6,969

5.30%, 08/06/07 (b)(c)
2,000 1,990

5.33%, 09/13/07 (b)(c)
2,000 1,978

5.36%, 12/21/07 (b)(c)
7,000 6,824

Skandinaviska Enskilda Banken AB

5.31%, 07/25/07
2,900 2,890

5.35%, 08/02/07
3,000 2,986

5.30%, 10/22/07
1,000 984

Societe Generale North America, Inc.

5.33%, 09/20/07 (a)
3,400 3,360

Solitaire Funding, L.L.C.

5.30%, 07/06/07 (a)(b)(c)
3,000 2,998

5.31%, 08/28/07 (a)(b)(c)
8,000 7,933

Stadshypotek Delaware, Inc.

5.31%, 08/14/07 (a)(c)
6,000 5,962

5.31%, 08/23/07 (a)(c)
4,000 3,969

Stanfield Victoria Funding

5.31%, 08/21/07 (b)(c)
1,000 993

5.35%, 09/25/07 (b)(c)
4,000 3,950

Swedbank AB

5.30%, 08/09/07
11,000 10,938

18 See financial notes

Schwab Investor Money Fund

Portfolio Holdings (Unaudited) continued

Issuer
Face Amount
Value

Rate, Maturity Date ($ x 1,000) ($ x 1,000)

5.35%, 08/16/07
1,000 993

5.31%, 09/05/07
1,000 990

Thunder Bay Funding, L.L.C.

5.33%, 09/14/07 (a)(b)(c)
5,000 4,945

5.33%, 09/21/07 (a)(b)(c)
2,716 2,683

Ticonderoga Funding, L.L.C.

5.35%, 08/02/07 (a)(b)(c)
8,000 7,962

Tulip Funding Corp.

5.31%, 07/16/07 (a)(b)(c)
8,000 7,983

UBS Finance (Delaware), Inc.

5.30%, 07/02/07 (a)
7,000 6,999

5.30%, 07/03/07 (a)
9,000 8,997

5.29%, 07/17/07 (a)
1,000 998

5.31%, 07/18/07 (a)
1,000 998

5.31%, 08/02/07 (a)
1,400 1,393

5.34%, 08/02/07 (a)
7,000 6,968

5.30%, 08/08/07 (a)
3,200 3,182

5.35%, 08/13/07 (a)
1,000 994

5.30%, 08/20/07 (a)
3,000 2,978

5.31%, 10/10/07 (a)
5,000 4,927

5.32%, 10/16/07 (a)
11,000 10,831

Unicredito Italiano Bank (Ireland) PLC

5.31%, 08/02/07 (a)(c)
10,000 9,953

5.36%, 08/07/07 (a)(c)
6,000 5,968

Variable Funding Capital Corp.

5.30%, 07/17/07 (a)(b)(c)
19,000 18,955

Westpac Banking Corp.

5.31%, 07/09/07 (c)
1,000 999

5.34%, 08/08/07 (c)
9,000 8,951

5.35%, 08/08/07 (c)
4,000 3,978

5.30%, 11/16/07 (c)
8,000 7,842

Westpac Trust Securities NZ Ltd.

5.34%, 10/09/07 (a)(c)
2,000 1,971

5.30%, 10/15/07 (a)(c)
1,000 985

5.30%, 10/18/07 (a)(c)
1,000 984

5.33%, 11/26/07 (a)(c)
2,000 1,957

Whistlejacket Capital, L.L.C.

5.31%, 07/24/07 (b)(c)
2,000 1,993

5.30%, 07/30/07 (b)(c)
3,000 2,987

5.32%, 10/15/07 (b)(c)
6,000 5,908

5.42%, 06/16/08 (b)(c)
2,000 2,000

Windmill Funding Corp.

5.30%, 07/11/07 (a)(b)(c)
9,000 8,987

5.31%, 07/16/07 (a)(b)(c)
1,000 998

Yorktown Capital, L.L.C.

5.30%, 07/20/07 (a)(b)(c)
10,000 9,972

5.32%, 08/16/07 (a)(b)(c)
14,000 13,906

869,738

Total Fixed-Rate Obligations
(Cost $1,335,236) 1,335,236

Variable-Rate Obligations 15.7% of net assets

Bank of Nova Scotia

5.26%, 07/05/07
25,000 24,997

Barclays Bank PLC

5.28%, 07/05/07
5,000 5,000

5.28%, 07/16/07
10,000 9,999

Beta Finance, Inc.

5.32%, 07/25/07 (b)(c)
16,000 16,002

BNP Paribas

5.32%, 07/02/07
11,000 11,000

5.26%, 07/03/07
2,000 1,999

5.26%, 07/03/07
7,000 6,999

California Pollution Control Financing Authority

5.37%, 07/05/07 (a)
1,760 1,760

Deutsche Bank AG

5.39%, 07/12/07
19,000 19,000

Development Authority of Columbus, GA

5.34%, 07/05/07 (a)
1,515 1,515

Eagle County, Colorado Taxable Housing Facilities

5.32%, 07/05/07 (a)
1,500 1,500

K2 (USA), L.L.C.

5.39%, 08/01/07 (b)(c)
10,000 10,005

Lexington Parker Capital Co., L.L.C.

5.27%, 07/05/07 (a)(b)(c)
9,000 9,000

Liberty Lighthouse U.S. Capital Co., L.L.C.

5.29%, 07/02/07 (b)(c)
2,000 2,000

5.28%, 07/02/07 (b)(c)
2,000 2,000

5.31%, 07/02/07 (b)(c)
1,000 1,000

Links Finance, L.L.C.

5.29%, 07/25/07 (b)(c)
4,000 4,000

LP Pinewoods SPV

5.32%, 07/05/07 (a)
15,000 15,000

Royal Bank of Canada

5.27%, 07/05/07
25,000 24,994

Royal Bank of Scotland PLC

5.36%, 07/11/07 (c)
7,000 7,002

5.26%, 07/16/07
8,000 8,000

5.27%, 07/26/07
18,000 17,996

Sedna Finance, Inc.

5.29%, 07/12/07 (b)(c)
1,000 1,000

5.33%, 08/15/07 (b)(c)
3,000 3,000

Sigma Finance, Inc.

5.29%, 07/16/07 (b)(c)
17,000 16,999

5.33%, 09/25/07 (b)(c)
5,000 5,000

Societe Generale

5.35%, 07/17/07
4,000 4,000

Sumitomo Trust & Banking Co.

5.32%, 07/16/07
6,000 6,000

5.32%, 07/16/07
4,000 4,000

5.32%, 07/23/07
2,000 2,000

Swedbank AB

5.32%, 09/17/07
4,000 4,000

The Goldman Sachs Group, Inc.

5.34%, 07/11/07 (d)
15,000 15,000

Village of Sturtevant, WI

5.40%, 07/05/07 (a)
580 580

Whistlejacket Capital, L.L.C.

5.28%, 07/16/07 (b)(c)
4,000 3,999

5.28%, 07/20/07 (b)(c)
5,000 5,000

5.28%, 07/25/07 (b)(c)
2,000 2,000

5.32%, 08/17/07 (b)(c)
2,000 2,000

Total Variable-Rate Obligations
(Cost $275,346) 275,346

See financial notes 19

Schwab Investor Money Fund

Portfolio Holdings (Unaudited) continued

Maturity Amount
Value

Security ($ x 1,000) ($ x 1,000)

Other Investments 8.0% of net assets

Repurchase Agreements 8.0%

Credit Suisse Securities (USA), L.L.C.

Tri-Party Repurchase Agreement dated 06/29/07, due 07/02/07 at 5.38%, fully collateralized by U.S. Government Securities with a value of $20,937.
20,535 20,526

UBS Financial Services, Inc.

Tri-Party Repurchase Agreement dated 06/29/07, due 07/02/07 at 5.37%, fully collateralized by U.S. Government Securities with a value of $122,400.
120,054 120,000

Total Other Investments
(Cost $140,526) 140,526

End of Investments.

At 06/30/07, the tax basis cost of the fund’s investments was $1,751,108.

At 06/30/07, portfolio holdings included illiquid and/or restricted securities as follows

Issuer

Rate, Acquisition Date
Face Amount
Value

Maturity Date ($ x 1,000) ($ x 1,000)

The Goldman Sachs Group, Inc.

5.34%, 04/11/07 07/11/07
15,000 15,000


(a)		Credit-enhanced security.
(b)		Asset-backed security.
(c)		Securities exempt from registration under Rule 144A of the Securities Act of 1933. 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 $664,753 or 37.9% of net assets.
(d)		Illiquid and/or restricted security.

20 See financial notes

Schwab Retirement Advantage Money Fund^tm and Schwab Investor Money Fund^tm

Financial Notes, unaudited

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 company is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended. The list below shows all the funds in the trust including the funds discussed in this report, which are highlighted:



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

Schwab Retirement Advantage Money Fund and Schwab Investor Money Fund each offers one share class. Shares are bought and sold at $1.00 per share. Each share has a par value of 1/1,000 of a cent, and the trustees may authorize the issuance of as many shares as necessary.

2. Significant Accounting Policies:

The following is a summary of the significant accounting policies the funds used in the preparation of financial statements. The accounting policies are in conformity with accounting principles generally accepted in the United States of America.

(a) Security Valuation:

The funds value the securities in their portfolios at amortized cost, which approximates market value.

(b) Portfolio Investments:

Repurchase Agreements: The funds may enter into 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. The date, price and other conditions are all specified when the agreement is created. Any repurchase agreements with due dates later than seven days from issue dates may be subject to seven day put features for liquidity purposes.

The funds’ repurchase agreements will be fully collateralized by U.S. government securities. All collateral is held by the funds’ custodian (or, in the case of 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.

Delayed-Delivery: The funds may buy securities on a delayed-delivery basis. In these transactions, a fund agrees to buy a security for a stated price, with settlement generally occurring within two weeks. If the security’s value falls before settlement occurs, the fund could end up paying more for the security than its market value at the time of settlement. The fund has set aside sufficient securities as collateral for those securities bought on a delayed-delivery basis.

(c) Security Transactions:

(d) Investment Income:

Interest income is recorded as it accrues. If a fund buys a debt security at a discount (that is, for less than face value) or a premium (more than face value), it amortizes the discount or premium from the current date 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.

Schwab Retirement Advantage Money Fund^tm and Schwab Investor Money Fund^tm

Financial Notes, unaudited (continued)

2. Significant Accounting Policies (continued):

(e) Expenses:

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

(f) Distributions to Shareholders:

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

(g) Custody Credit:

Each fund has an arrangement with its custodian bank 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:

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 also keeps certain assets in segregated accounts, as may be required by securities law.

(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 liability 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 Standards:

Financial Accounting Standards Board Interpretation (FIN) No. 48 — Accounting for Uncertainty in Income Taxes — an Interpretation of SFAS No. 109, was issued in July 2006 and is effective for fiscal years beginning after December 15, 2006. This Interpretation provides new requirements for the recognition, measurement, and disclosure in the financial statements of a tax position taken or expected to be taken in a tax return when there is uncertainty about whether that tax position will ultimately be sustained. As of June 30, 2007, management has reviewed the tax positions for open tax year (December 31, 2003 through December 31, 2006), evaluated the implications of FIN 48 and determined that there is no impact to the funds’ financial statements.

Schwab Retirement Advantage Money Fund^tm and Schwab Investor Money Fund^tm

Financial Notes, unaudited (continued)

3. Affiliates and Affiliated Transactions:

(All dollar amounts are x 1,000)

For its advisory and administrative services to the funds, the investment adviser is entitled to receive an annual fee payable monthly based on the funds’ average daily net assets described as follows:


Average daily net assets

First $1 billion			0.35%
Over $1 billion			0.32%
Over $10 billion			0.30%
Over $20 billion			0.27%
Over $40 billion			0.25%

For its transfer agent and shareholder services, Schwab is entitled to receive an annual fee payable monthly based on the funds’ average daily net assets described as follows:


	Transfer Agent Fees		Shareholder Service Fees

Retirement Advantage Money Fund		0.05%		0.17%
Investor Money Fund		0.05%		0.20%

Although these agreements specify certain fees for these services, CSIM and Schwab have made additional agreements with the Retirement Advantage Money Fund to limit the total expenses charged, excluding interest, taxes and certain non-routine expenses to 0.49% through April 29, 2009.

The funds may make 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 officers. For the period ended June 30, 2007, the funds had no security transactions with other Schwab Funds.

Pursuant to an exemptive order issued by the SEC, the funds may enter into interfund borrowing and lending transactions within the 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. There was no interfund borrowing or lending activity for any fund during the period.

Trustees

4. Borrowing from Banks:

The funds may borrow money from banks and custodians. The funds may obtain temporary bank loans through the trusts to which they belong, to use for meeting shareholder redemptions or for extraordinary or emergency purposes. The Schwab Funds have custodian overdraft facilities and uncommitted line of credit arrangements of $150 million and $100 million with State Street Corporation and Bank of America, N.A., respectively. The funds pay interest on the amounts they borrow at rates that are negotiated periodically. There was no borrowing for any funds from the line of credit during the period.

Investment Advisory Agreement Approval

Consistent with these responsibilities, the Board of Trustees (the “Board”) calls and holds one or more meetings each year that are dedicated, in whole or in part, to considering whether to renew the investment advisory agreement between The Charles Schwab Family of Funds (the “Trust”) and CSIM (the “Agreement”) with respect to existing funds in the Trust, including the Schwab Retirement Advantage Money Fund and Schwab Investor Money Fund, and to review certain other agreements pursuant to which CSIM provides investment advisory services to certain other registered investment companies. In preparation for the meeting(s), the Board requests and reviews a wide variety of materials provided by CSIM, including information about CSIM’s affiliates, personnel and operations. The Board also receives extensive data provided by third parties. This information is in addition to the detailed information about the funds that the Board reviews during the course of each year, including information that relates to fund operations and fund performance. The trustees also receive a memorandum from fund counsel regarding the responsibilities of trustees for the approval of investment advisory contracts. In addition, the Independent Trustees receive advice from independent counsel to the Independent Trustees, meet in executive session outside the presence of fund management and participate in question and answer sessions with representatives of CSIM.


1.	the nature, extent and quality of the services provided to the funds under the Agreement, including the resources of CSIM and its affiliates dedicated to the funds;

2.	each fund’s investment performance and how it compared to that of certain other comparable mutual funds;

3.	each fund’s expenses and how those expenses compared to those of certain other comparable mutual funds;

4.	the profitability of CSIM and its affiliates, including Charles Schwab & Co., Inc. (“Schwab”), with respect to each fund, including both direct and indirect benefits accruing to CSIM and its affiliates; and

5.	the extent to which economies of scale would be realized as the funds grow and whether fee levels in the Agreement reflect those economies of scale for the benefit of fund investors.

Trustees and Officers

The tables below give information as of June 30, 2007, 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, and Laudus Trust. As of June 30, 2007, the Fund Complex included 72 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.		72	Board 1—Director, Redwood Trust, Inc. Board 2—Director, PMI Group, Inc.


Donald F. Dorward 1931 Trustee (Trustee of The Charles Schwab Family of Funds since 1989.)	Chief Executive Officer, Dorward & Associates (corporate management, marketing and communications consulting firm). From 1996-1999, Executive Vice President and Managing Director, Grey Advertising. Prior to 1996, President and Chief Executive Officer, Allen & Dorward Advertising.		61	None.


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. Until February 2004, Co-Chief Executive Officer, Aphton Corp. (bio-pharmaceuticals).		72	Board 1—Director, Mission West Properties Board 2—Director, TOUSA Board 3—Director, Harris-Stratex Networks Board 4—Director, Genitope Corp. Board 5—Director & Non-Executive Chairman, Solectron Corp. Board 6—Director, Ditech Networks


Robert G. Holmes 1931 (Trustee of The Charles Schwab Family of Funds since 1989.)	Chairman, Chief Executive Officer and Director, Semloh Financial, Inc. (international financial services and investment advisory firm).		61	None.


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).		61	Board 1—Board of Cooper Industries Board 2—Chairman of the Audit Committee of Oneok Partners LP


Donald R. Stephens 1938 Trustee (Trustee of The Charles Schwab Family of Funds since 1989.)	Managing Partner, D. R. Stephens & Company (investments).		61	None.


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


Michael W. Wilsey 1943 Trustee (Trustee of The Charles Schwab Family of Funds since 1989.)	Chairman, Chief Executive Officer, Wilsey Bennett, Inc. (real estate investment and management, and other investments).		61	None.


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


Charles R. Schwab²1937 Chairman and Trustee (Chairman and Trustee of The Charles Schwab Family of Funds since 1989.)	Chairman, Chief Executive Officer and Director, The Charles Schwab Corporation, Charles Schwab & Co., Inc.; Chairman and Director, Charles Investment Management, Inc., Charles Schwab Bank, N.A.; Chairman and Chief Executive Officer, Schwab (SIS) Holdings Inc. I, Schwab International Holdings, Inc.; Chief Executive Officers and Director, Schwab Holdings Inc. Through June 2007, Director, U.S. Trust Company, N.A., U.S. Trust Company of New York. Until May 2003, Co-Chief Executive Officer, The Charles Schwab Corporation.		61	None


Randall W. Merk²1954 Trustee (Trustee of The Charles Schwab Family of Funds since 2005.)	Executive Vice President and President, Schwab Financial Products, Charles Schwab & Co. Inc.; Director, Charles Schwab Asset Management (Ireland) Limited and Charles Schwab Worldwide Funds PLC. From September 2002 to July 2004, Chief Executive Officer and President, Charles Schwab Investment Management, Inc. and Executive Vice President, Charles Schwab & Co., Inc. Prior to September 2002, President and Chief Investment Management and Director, American Century Companies, Inc.		72	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


Evelyn Dilsaver 1955 President and Chief Executive Officer (Officer of The Charles Schwab Family of Funds since 2004.)		President, Chief Executive Officer, and Director, Charles Schwab Investment Management, Inc.; Executive Vice President, Charles Schwab & co., Inc.; President and Chief Executive Officer, Laudus Trust and Laudus Variable Insurance Trust. Through June 2007, President Excelsior Funds Inc., Excelsior Tax-Exempt Funds, Inc. and Excelsior Funds Trust; President Mutual Fund Division, UST Advisors, Inc. From June 2003 to July 2004, Senior Vice President, Asset Management Products and Services, Charles Schwab & Co., Inc. Prior to June 2003, Executive Vice President, Chief Financial Officer, and Chief Administrative Officer, U.S. Trust, a subsidiary of The Charles Schwab Corporation.


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, Charles Schwab Investment Management, Inc. Chief Financial Officer, Laudus Trust and Laudus Variable Insurance Trust. Director, Charles Schwab Worldwide Fund, PLC and Charles Schwab Asset Management (Ireland) limited. Through June 2007, Treasurer, Chief Financial Officer and Chief Accounting Officer, Excelsior Funds Inc. Excelsior tax-Exempt Funds, Inc. and Excelsior Funds Trust, Chief Financial Officer, Mutual Fund Division, UST Advisors, Inc. From December 1999 to November 2004, Sr. Vice President, Financial Reporting, Charles Schwab & Co. Inc.


Kimon Daifotis 1959 Senior Vice President and Chief Investment Officer-Fixed Income (Officer of The Charles Schwab Family of Funds since 2004.)		Senior Vice President and Chief Investment Officer-Fixed Income, Charles Schwab Investment Management, Inc. Prior to 2004, Vice President and Sr. Portfolio Manager, Charles Schwab Investment Management Inc.


Jeffrey Mortimer 1963 Senior Vice President and Chief Investment Officer-Equities (Officer of The Charles Schwab Family of Funds since 2004.)		Senior Vice President and Chief Investment Officer-Equities, Charles Schwab Investment Management, Inc.; Vice President and Chief Investment Officer, Laudus Trust and Laudus Variable Insurance Trust. Prior to 2004, Vice President and Sr. Portfolio Manager, Charles Schwab Investment Management, Inc.


Randall Fillmore 1960 Chief Compliance Officer and AML Officer (Officer of The Charles Schwab Family of Funds since 2002.)		Senior Vice President and Chief Compliance Officer, Charles Schwab Investment Management, Inc.; Senior Vice President Charles Schwab & Co. Inc., Chief Compliance Officer, Laudus Trust and Laudus Variable Insurance Trust. Through June 2007, Chief Compliance Officer, Excelsior Funds Inc., Excelsior Tax-Exempt Funds, Inc., Excelsior Funds Trust. From 2002 to 2003, Vice President, Charles Schwab & Co., Inc., and Charles Schwab Investment Management, Inc.


Koji E. Felton 1961 Secretary and Chief Legal Officer (Officer of The Charles Schwab Family of Funds since 1998.)		Senior Vice President, Chief Counsel and Corporate Secretary, Charles Schwab Investment Management, Inc.; senior Vice President and Deputy General Counsel, Charles Schwab & Co., Inc. Through June 2007, Chief Legal Officer, Excelsior Funds Inc., Excelsior Tax Exempt Funds, Inc. and Excelsior Funds Trust.


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., Laudus Trust and Laudus Variable Insurance Trust; since 2006, Chief Counsel, Laudus Trust and Variable Insurance Trust. Until July 2005, Senior Associate, Paul Hastings Janofsky & Walker LLP.


Cathy Sabo 1964 Vice President (Officer of The Charles Schwab Family of Funds since 2005.)		Vice President, Compliance, Charles Schwab Investment Management, Inc., Laudus Trust and Laudus Variable Insurance Trust. Until 2004, Vice President, Client, Sales & Services Controls, Charles Schwab & Co., Inc.


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


Michael Haydel 1972 Vice President (Officer of The Charles Schwab Family of Funds since 2006.)		Vice President, Asset Management Client Services, Charles Schwab & Co., Inc.; Vice President and AML Officer, Laudus Trust and Laudus Variable Insurance Trust. Until March 2004, Director Charles Schwab & Co., Inc.


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 20 years of service as a trustee, whichever comes first. Independent trustees elected prior to January 1, 2000 will retire on the following schedule: Messrs. Holmes and Dorward will retire on December 31, 2007, and Messrs. Stephens and Wilsey will retire on December 31, 2010.

²	In addition to their employment with the investment advisor and the distributor, Messrs. Schwab and Merk also own stock of The Charles Schwab Corporation. Mr. Schwab and Mr. Merk are Interested Trustees because they are employees of Schwab and/or the advisor.

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 other officer serves at the pleasure of the Board.