0000950149-95-000569.txt : 19950914
0000950149-95-000569.hdr.sgml : 19950914
ACCESSION NUMBER: 0000950149-95-000569
CONFORMED SUBMISSION TYPE: N-30D
PUBLIC DOCUMENT COUNT: 1
CONFORMED PERIOD OF REPORT: 19950630
FILED AS OF DATE: 19950908
SROS: NONE
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: SCHWAB CHARLES FAMILY OF FUNDS
CENTRAL INDEX KEY: 0000857156
STANDARD INDUSTRIAL CLASSIFICATION: []
STATE OF INCORPORATION: MA
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: N-30D
SEC ACT: 1940 Act
SEC FILE NUMBER: 811-05954
FILM NUMBER: 95572083
BUSINESS ADDRESS:
STREET 1: 101 MONTGOMERY ST
CITY: SAN FRANCISCO
STATE: CA
ZIP: 94104
BUSINESS PHONE: 4156277000
MAIL ADDRESS:
STREET 1: 101 MONTGOMERY ST
CITY: SAN FRANCISCO
STATE: CA
ZIP: 94104
N-30D
1
SCHWAB VALUE ADVANTAGE MONEY FUND SEMI-A/R
1
SCHWABFUNDS(R)
[LOGO]
SCHWAB
VALUE ADVANTAGE
MONEY FUND(R)
SEMI-ANNUAL REPORT
JUNE 30, 1995
[Photo of the Schwab Building, San Francisco, California]
2
Dear Fellow Shareholder,
This year, the SchwabFunds Family(TM) celebrates its fifth
anniversary as a mutual fund complex. This celebration follows an
[Photo exciting 1994 when the organization experienced tremendous growth
of -- the third largest asset growth of all mutual fund companies.
Charles By placing your trust in SchwabFunds,(R) you've helped total
R.Schwab] assets under management reach $27 billion, ranking SchwabFunds in
the top 6% of all mutual fund complexes in just a few years.
We believe much of this success can be traced to the Schwab commitment to
serving the needs of Fund shareholders, a commitment demonstrated by the entire
SchwabFunds staff and, in particular, by our experienced team of portfolio
managers.
The 20 professionals who make up our growing portfolio management team are
devoted to monitoring the financial markets for you. Through careful and
disciplined selection of securities, they strive to construct optimal portfolios
that provide shareholders with competitive returns that meet their investment
goals. Shareholders continue to signal their trust in the 175 years of combined
experience behind our SchwabFunds portfolio management by keeping their money
invested in SchwabFunds. In fact, a large number of the 1.5 million shareholders
have been investing in the SchwabFunds Family since its first year of operation.
We believe an important part of serving your needs is keeping you informed about
your investments. For example, we've added the question and answer section of
this report, developed to address what our portfolio managers feel have been the
most pressing questions we've heard from shareholders over the period. It is one
way we hope to keep communication open between you and the people managing your
investments. In addition, now that Charles Schwab Investment Management, Inc.
will be managing the day-to-day portfolio management of the three Schwab equity
funds, we will be even better able to meet your service needs and respond to
your questions.
The SchwabFunds Family has grown to include a solid selection of funds that meet
the "core" needs of investors. The 16 funds available to retail investors offer
effective diversification of the U.S. and international equity markets, both
taxable and tax-free bonds, and a variety of money market investments. With this
level of diversification, you may use the SchwabFunds to create an efficient,
well-rounded portfolio. Or, they can serve as building blocks to an overall
investment program that includes more specialized investments.
To receive a brochure and prospectus for any of the SchwabFunds, you can call
Schwab's toll-free number, 1-800-2 NO-LOAD, or visit any one of the over 200
Schwab offices. The prospectus includes more complete information on the Funds,
including charges and expenses. Please read it carefully before investing.
I'd like to extend my personal gratitude for your trust in the SchwabFunds
Family. You should feel confident that the outstanding efforts of all those who
are part of the SchwabFunds organization will continue going forward. And, we
expect these efforts to help us meet even higher standards of excellence in the
years ahead.
/s/Charles R. Schwab
Charles R. Schwab
Chairman
Cover: The Schwab Building, San Francisco, California
3
YES! I'D LIKE TO TAKE
ADVANTAGE OF AN EASY WAY
TO EFFECTIVELY DIVERSIFY MY EQUITY PORTFOLIO.
PLEASE SEND ME MORE INFORMATION, INCLUDING
PROSPECTUSES, FOR THE THREE SCHWABFUNDS(R) EQUITY INDEX FUNDS LISTED BELOW.
SCHWAB 1000 Fund(R) is designed to match the total return of the Schwab 1000
Index,(R) Schwab's own benchmark of America s 1,000 largest companies, based on
market capitalization.
SCHWAB SMALL-CAP INDEX FUND(TM) seeks to track the total return of the Schwab
Small-Cap Index(TM), comprised of the second 1,000 largest U.S. companies,
ranked by market capitalization.
SCHWAB INTERNATIONAL INDEX FUND (TM) seeks to track the total return of the
Schwab International Index(TM), comprised of 350 of the ADDRESS largest publicly
traded companies (based on market CITY STATE ZIP capitalization) in countries
with developed securities markets outside of the U.S.
The prospectus provides more complete information, including charges and
expenses. Please read it carefully before investing.
-------------------------------------------------------------------------------
NAME
-------------------------------------------------------------------------------
ADDRESS
-------------------------------------------------------------------------------
CITY STATE ZIP
See the back page for more information.
[SCHWABFUNDS FAMILY LOGO]
VALS5
4
-------------
NO POSTAGE
NECESSARY IF
MAILED IN THE
UNITED STATES
-------------
----------------------------------------------------
BUSINESS REPLY MAIL
FIRST CLASS MAIL PERMIT NO. 18125 SAN FRANCISCO, CA
----------------------------------------------------
POSTAGE WILL BE PAID BY ADDRESSEE
CHARLES SCHWAB & CO., INC.
P O BOX 7780
SAN FRANCISCO CA 94120-9588
[BARCODE]
5
COMMENTS FROM THE INVESTMENT ADVISER
We're pleased to report to you on the performance of the Schwab Value Advantage
Money Fund(R) for the six-month period ended June 30, 1995. During the first
half of this year, the Fund once again proved successful at providing above
average money market returns on the long-term cash reserves you have invested,
while maintaining the value and liquidity of your investment.
RECORD-BREAKING ASSET GROWTH
The Schwab Value Advantage Money Fund experienced exceptionally strong growth
during the period, when both net assets and number of shareholders increased to
record levels. On June 30, 1995, the Fund's total net assets grew 49% to $5.5
billion in the six-month reporting period since the end of 1994. During the same
period, more than 20,000 new shareholders came into the Fund, pushing the total
number of shareholders over 58,000. We believe this substantial growth
underscores the Fund's success to date at providing shareholders with yields
that have been consistently higher than that of most money market funds for the
first six months of 1995.
PERFORMANCE REVIEW
Generally speaking, short-term interest rates declined slightly during the first
half of 1995, but our defensive strategy of lengthening portfolio maturity
effectively delayed a corresponding decrease in the Fund's yield. The table
below presents the Fund's seven-day average yields at the end of the period. As
with all money market funds, past performance is no guarantee of future results.
================================================================================
7-DAY AVERAGE YIELDS
(As of 6/30/95)
Simple Compound
--------------------------------------------------------------------------------
Schwab Value Advantage Money Fund 5.71% 5.87%
--------------------------------------------------------------------------------
HIGHER YIELDS ON LARGER BALANCES
The Schwab Value Advantage Money Fund is designed to provide higher yields than
most money market funds by keeping operating expenses low and spreading total
operating costs across accounts with higher balances. The Fund's lower expenses
can then be passed through to shareholders in the form of higher yields. For
example, although past performance is no guarantee of future results, the Fund's
average 7-day simple yield of 5.73% on June 27, 1995 compared very favorably
with the 5.41% average 7-day simple
6
yield for the 254 retail taxable money funds tracked by IBC/Donoghue.1 In fact,
the Fund's 7-day yield consistently outperformed these other retail money market
funds during the six-month reporting period, as the chart below illustrates.
SCHWAB VALUE ADVANTAGE MONEY FUND'S(R) YIELD CONSISTENTLY OUTPERFORMED ITS
CATEGORY AVERAGE* THROUGHOUT THE FIRST SIX MONTHS OF 1995
[Graph of Schwab Value Advantage Money Fund and IBC Donoghue's Money Fund
Averages]
SCHWAB IBC/
VALUE DONOGHUE'S
ADVANTAGE MONEY
MONEY FUND
DATE FUND AVERAGES
1/3/95 5.56% 5.18%
1/10/95 5.58% 5.19%
1/17/95 5.62% 5.19%
24-Jan 5.66% 5.20%
1/31/95 5.69% 5.35%
2/14/95 5.76% 5.40%
2/21/95 5.79% 5.44%
2/28/95 5.80% 5.46%
3/7/95 5.80% 5.45%
3/14/95 5.82% 5.46%
3/21/95 5.83% 5.48%
3/28/95 5.83% 5.49%
4/4/95 5.82% 5.51%
4/11/95 5.85% 5.48%
4/18/95 5.86% 5.49%
4/25/95 5.85% 5.47%
5/2/95 5.83% 5.48%
5/9/95 5.84% 5.47%
5/16/95 5.83% 5.47%
5/23/95 5.82% 5.46%
5/30/95 5.79% 5.45%
6/6/95 5.78% 5.44%
6/13/95 5.75% 5.43%
6/20/95 5.74% 5.42%
6/27/95 5.73% 5.41%
7-Day Ending
* First Tier Taxable Money Funds
Source: IBC/Donoghue, Inc.'s MONEY FUND REPORT, 1995. Average 7-day
current yield of the funds in IBC/Donoghue's First Tier category of
the Taxable Money Funds for each week in the first six months of
1995. Weekly number of funds in the category ranged from 245 to 254.
The Schwab Value Advantage Money Fund offers you a simple, effective way to keep
all of your money working as hard as possible, whether you use it as a stand
alone investment for your long-term cash reserves or as a complement to one of
our money market fund "sweep shares" linked to your Schwab account. For example,
you can invest larger cash balances in the Schwab Value Advantage Money Fund for
higher potential yields, and invest ready cash in the "sweep" investments to
settle transactions.
KEY GOAL: CAPITAL STABILITY
If you're like most money market fund investors, preserving the value of your
investment is an important concern. That's why the Schwab Value Advantage Money
Fund is managed with stability of capital as a fundamental objective. To protect
your principal, the Fund seeks to maintain a stable $1 share price. As with all
money market funds, of course, there can be no assurance that the Fund will be
able to maintain a $1 net asset value, and your investment is neither insured
nor guaranteed by the U.S. Government.
1. Source: IBC/Donoghue, average current seven-day yield for the 254 funds in
the First Tier category of Taxable Money Funds as of June 27, 1995.
7
HIGH-QUALITY PORTFOLIO
The Schwab Value Advantage Money Fund(R) seeks to invest in a diversified
portfolio of short-term debt securities issued by the U.S. Government and its
agencies, banks and other financial institutions, and creditworthy corporations.
To limit credit risk, the Fund primarily invests in high-quality securities
rated in the top two rating categories by national rating agencies. We maintain
strict credit quality standards for the Fund's portfolio, while actively
managing portfolio maturity to help protect and enhance your returns. The chart
below illustrates the Fund's portfolio composition on June 30, 1995. In
addition, you'll find a complete listing of the securities in the Fund's
portfolio as of June 30, 1995 later in this report.
SCHWAB VALUE ADVANTAGE MONEY FUND PORTFOLIO COMPOSITION
JUNE 30, 1995
[Pie chart indicating percentages as of June 30, 1995 for Value Advantage Money
Fund]
Commercial Paper 73%
Certificates of Deposit 13%
Bank Notes 7%
Variable Rate Notes 5%
Other 2%
The Schwab Value Advantage Money Fund invests in bank certificates of
deposit, time deposits, bankers' acceptances, highly rated commercial paper
and notes, repurchase agreements, U.S. Treasury securities and other
obligations of the U.S. and Canadian Governments, their agencies and
instrumentalities.
To enhance your understanding of the Schwab Value Advantage Money Fund's
performance, the portfolio management team offers insights into economic trends
and the Fund's investment strategy in the following section. If you want more
information on the Fund, or any of the mutual funds in the SchwabFunds
Family(TM), visit your local Schwab office or call 1-800-2 NO-LOAD.
LOOKING FORWARD IN 1995
While the outlook for interest rates in the second half of the year is
uncertain, we remain confident that the Schwab Value Advantage Money Fund will
continue to strive to offer you an effective cash management tool that can help
you earn above average money market returns on your investment without
sacrificing safety and liquidity.
At SchwabFunds(R), we recognize that we earn your trust day by day. We
appreciate your continued confidence in our efforts, and we look forward to
helping you achieve your financial goals in the future.
CHARLES SCHWAB INVESTMENT MANAGEMENT, INC.
8
QUESTIONS TO THE PORTFOLIO MANAGEMENT TEAM OF CHARLES SCHWAB INVESTMENT
MANAGEMENT, INC.
Stephen B. Ward - Senior Vice President and Chief Investment Officer
Linda Klingman - Portfolio Manager
Q. WHAT HAS BEEN THE ECONOMIC CLIMATE IN THE FIRST SIX MONTHS OF 1995?
A. Following an impressive 4.1% growth rate of the Gross Domestic Product (GDP)
during 1994, the highest annual growth rate in ten years, economic activity is
showing increasing signs of slowing. Recent evidence of this trend includes
slowdowns in auto sales, consumer spending and retail sales, home building and
home sales, and a somewhat dramatic slowdown in the labor markets. The GDP
growth rate for the first quarter of 1995 was 2.7%, and 0.5% for the second
quarter.
The primary reason for the slowdown in the GDP growth rate has been a series of
increases in the federal funds rate implemented by the Federal Reserve ("the
Fed") throughout 1994 and into 1995. With the high rate of growth in 1994 and a
falling civilian unemployment rate, potential inflation emerged as a major
concern at the Fed. As a result, the Fed initiated a series of increases in the
federal funds rate, resulting in a rise from 3.0% in January 1994 to 6.0% in
February 1995. As evidenced by the Fed's recent 0.25% reduction in the federal
funds rate in July 1995, these increases appear to have accomplished their
desired effect of slowing the rate of economic growth to more moderate levels
and reducing the likelihood of increases in the rate of inflation.
Q. HOW HAVE THE ECONOMIC EVENTS OF THE LAST SIX MONTHS IMPACTED SHORT-TERM
INTEREST RATES?
A. As shown on the chart below, short-term interest rates have been declining
slowly since the beginning of 1995. This decline has been a result of both
anticipation that the Fed will lower interest rates, a practice known as
"easing," as well as the economic slowdown that was brought on by prior
increases in interest rates, a practice known as "tightening."
INTEREST RATES DECLINED IN THE FIRST HALF OF 1995
YIELDS
90-Day Commercial Paper
January 6, 1995 - June 30, 1995
[Graph of 90-Day Commercial Paper]
90-DAY
DATE COMMERCIAL PAPER
---- ----------------
1/6 6.29
1/13 6.17
1/20 6.17
1/27 6.24
2/3 6.23
2/10 6.14
2/17 6.16
2/24 6.12
3/3 6.13
3/10 6.19
3/17 6.15
3/24 6.14
3/31 6.15
4/7 6.15
4/14 6.13
4/21 6.09
4/28 6.09
5/5 6.11
5/12 6.05
5/19 6.06
5/26 6.04
6/2 5.98
6/9 5.91
6/16 5.96
6/23 5.94
6/30 5.94
Source: Bloomberg L.P.
9
Q. HOW HAVE YOU POSITIONED THE FUND'S PORTFOLIO TO RESPOND TO THE CURRENT
INTEREST RATE ENVIRONMENT?
A. In response to the softer economic environment and the uncertainty
surrounding the Fed's next monetary move, the Fund's average maturity was
lengthened during the sixmonth reporting period. For example, from 12/31/94 to
6/30/95, the Schwab Value Advantage Money Fund(R) increased its average maturity
from 40 days to 64 days. In a declining interest rate environment, lengthening
maturity helps protect the Fund from reinvesting at lower rates. Although the
Fund's yield has decreased recently in response to the decrease in market
interest rates, our strategy of lengthening maturities was successful in
delaying the decline in the Fund's yield.
Q. WHAT STANDARDS DOES THE INVESTMENT ADVISER USE IN SELECTING SECURITIES FOR
THE PORTFOLIO?
A. Money market funds are required to hold high-quality securities in their
portfolios. For the Schwab Value Advantage Money Fund, we have taken the
additional step of only investing in what are referred to as First Tier
securities. In general, a First Tier security is one that is within certain
maturity limits and carries the top rating from the requisite number of
Nationally Recognized Statistical Rating Organizations (NRSROs), or is deemed to
be of comparable quality by the Trust's Board of Trustees if unrated.
One other method we utilize to increase the overall quality of the Schwab Value
Advantage Money Fund's portfolio is to selectively purchase securities which are
insured or backed by a letter of credit from a highly rated financial
institution. These arrangements are frequently referred to as "credit
enhancements" because they provide an incremental level of creditworthiness, in
addition to the strength of the underlying issuer. Schwab's thorough credit
review of the portfolio's securities includes ongoing review of the issuer as
well as the insurance company or financial institution providing any credit
enhancement to the security. Banks which provide enhancements on securities we
purchase represent some of the highest rated U.S., Japanese, and British banks.
Recently there has been a fair amount of news coverage concerning the health of
the Japanese economy in general and Japanese banks in particular. As a result of
our continuous monitoring of the situation in Japan, we are confident that we
have selected the Japanese banks that are among the highest rated in the world.
Selected carefully, these banks appear to represent excellent opportunities to
provide credit enhancements which improve the overall quality of the portfolios.
Q. WE CONTINUE TO READ ABOUT PROBLEMS WITH DERIVATIVES. DOES THE SCHWAB VALUE
ADVANTAGE MONEY FUND INVEST IN THE DERIVATIVE SECURITIES WHICH HAVE CAUSED
PROBLEMS FOR OTHER MONEY FUNDS?
A. No. Unlike some well-publicized examples, it has always been our position
that such securities are inappropriate for use in money market funds. Therefore,
the Fund has never purchased these types of securities. The Fund only invests in
securities appropriate for money market funds, such as fixed rate notes and
simple variable rate notes or variable rate demand notes. These types of
securities are used in virtually all money market funds.
10
Q. HOW DOES THE SCHWAB VALUE ADVANTAGE MONEY FUND(R) ACHIEVE SUCH A COMPETITIVE
YIELD WHILE STILL MAINTAINING SUCH A HIGH-QUALITY INVESTMENT PORTFOLIO?
A. The Fund is able to maintain a higher yield relative to many other money
market funds primarily because of its relatively low level of operating
expenses. The Fund is able to achieve low operating expense levels because it
requires higher initial and ongoing balances than most other money funds. Also,
unlike many other money market funds (and most other Schwab Money Funds) this
Fund does not offer a "sweep" feature in which shareholders automatically invest
free cash balances held in their Schwab account on a regular basis, which adds
to the expense of operating a fund. The Value Advantage Money Fund's lower
operating expenses translate directly into higher yields for investors.
Q. DOES THE FUND OWN ANY ORANGE COUNTY SECURITIES?
A. No. When we last reported to you in the December 31, 1994 annual report, the
Fund owned several notes issued by cities or school districts which had made
investments in the Orange County Investment Pool. Since that time, all of these
notes have been paid back, in full and on time.
Q. WHAT IS THE CURRENT STATUS OF THE ORANGE COUNTY SITUATION AND WHAT IMPACT IS
IT LIKELY TO HAVE ON THE FUND?
A. Since we last reported to you in the December 31, 1994 annual report, a
settlement was approved by the Federal bankruptcy court for Orange County which
allowed for the distribution of most of the County's investment pool to its
former participants. Since that time, all of the cities, school districts and
other municipal entities that had invested in the pool, and also had outstanding
notes that have reached their maturity dates, have paid off those notes in full.
On June 27, 1995, the voters of Orange County rejected County Measure R which
would have provided additional sales tax revenue to assist the County in meeting
its obligations. On July 7, 1995, the owners of the Orange County direct
securities which remain outstanding agreed to extend the maturity of their
outstanding notes to June 30, 1996, in order to provide more time for the County
to develop a financial recovery plan. County officials have proposed a plan
which requires certain changes in state laws, and diverts for the County's use
certain tax revenues which would otherwise go to local cities and public
agencies. This proposal has not been adopted by the County, the State of
California, or the bankruptcy court, and any solution must survive serious
opposition before it can result in a plan which can actually pay note holders.
In the event the County officials are not successful in adopting a viable plan,
the State of California may require that a bankruptcy trustee be appointed.
Since the Fund currently owns no Orange County securities, there should be no
further impact on the Fund resulting from the Orange County bankruptcy.
11
SchwabFunds(R)
--------------------------------------------------------------------------------
SCHWAB VALUE ADVANTAGE MONEY FUND(R)
PORTFOLIO SUMMARY
(Unaudited)
--------------------------------------------------------------------------------
ASSET GROWTH
Total Total Percentage
Net Assets Net Assets Growth Over
as of 6/30/95 as of 12/31/94 Reporting
(000s) (000s) Period
------------------------------------------------
$ 5,549,807 $3,731,629 49%
------------------------------------------------
AVERAGE YIELDS FOR THE PERIODS ENDED ON
JUNE 30, 1995
Last Last Last
Seven Days Three Months Twelve Months
---------------------------------------------
5.71% 5.80% 5.22%
---------------------------------------------
MATURITY SCHEDULE
PERCENT OF TOTAL INVESTMENTS
Maturity Range 9/30/94 12/31/94 3/31/95 6/30/95
----------------------------------------------------------------
0 - 15 Days 18.7% 24.9% 22.3% 11.1%
16 - 30 Days 16.6% 23.6% 13.4% 17.2%
31 - 60 Days 29.9% 28.2% 33.4% 29.4%
61 - 90 Days 21.3% 13.3% 26.2% 21.8%
91 - 120 Days 2.1% 9.4% 2.5% 6.2%
Over 120 Days 11.4% 0.6% 2.2% 14.3%
Weighted Average 53 Days 40 Days 44 Days 64 Days
----------------------------------------------------------------
PORTFOLIO QUALITY
Percent of
SEC Tier Net Assets
Rating 6/30/95
-----------------------
Tier 1 100.0%
Tier 2 0.0%
-----------------------
12
SchwabFunds(R) 1
--------------------------------------------------------------------------------
SCHWAB VALUE ADVANTAGE MONEY FUND(R)
SCHEDULE OF INVESTMENTS (in thousands)
June 30, 1995 (Unaudited)
--------------------------------------------------------------------------------
Par Value
------- ----------
CORPORATE
OBLIGATIONS--73.3%(A)
ASSET BACKED SECURITIES--16.1%
Apreco, Inc.
6.15%, 07/17/95 $ 9,700 $ 9,674
6.04%, 08/18/95 5,000 4,960
Asset Securitization
Cooperative Corp.
6.08%, 07/28/95 21,999 21,899
5.87%, 08/14/95 13,000 12,908
Barton Capital Corp.
5.94%, 09/25/95 34,000 33,525
Beta Finance, Inc.
6.23%, 08/04/95 3,000 2,983
6.04%, 08/22/95 33,000 32,717
5.92%, 09/18/95 8,500 8,391
5.72%, 11/20/95 11,000 10,758
5.72%, 11/27/95 10,000 9,769
Broadway Capital Corp.
6.10%, 07/21/95 7,719 7,693
6.04%, 08/14/95 5,000 4,964
6.03%, 08/29/95 5,516 5,462
5.92%, 09/13/95 5,000 4,940
5.92%, 09/14/95 20,000 19,757
Budget Funding Corp.
6.11%, 07/19/95 29,000 28,913
6.05%, 07/24/95 15,000 14,943
6.05%, 07/25/95 25,000 24,900
6.05%, 07/27/95 25,000 24,892
6.07%, 08/03/95 13,000 12,929
Corporate Receivables Corp.
6.11%, 07/20/95 19,000 18,940
5.89%, 08/17/95 30,000 29,772
5.92%, 09/13/95 5,000 4,940
5.93%, 09/20/95 23,000 22,697
5.92%, 09/20/95 20,000 19,737
ESC Securitization, Inc.
6.15%, 07/19/95 25,000 24,924
6.10%, 07/27/95 25,000 24,892
6.13%, 08/01/95 20,000 19,896
6.19%, 08/02/95 32,000 31,827
Enterprise Funding Corp.
6.23%, 07/05/95 8,263 8,257
6.17%, 07/12/95 12,000 11,978
6.11%, 07/12/95 15,382 15,354
6.03%, 07/28/95 5,302 5,278
5.88%, 08/30/95 6,650 6,586
5.89%, 09/07/95 36,677 36,275
5.94%, 09/26/95 10,146 10,003
Falcon Asset
Securitization Corp.
6.02%, 07/21/95 15,150 15,100
First Deposit Master Trust
Series 1993-3
6.17%, 07/13/95 14,000 13,972
6.01%, 08/28/95 24,990 24,752
5.79%, 09/06/95 10,000 9,894
5.94%, 09/12/95 7,120 7,036
5.99%, 09/20/95 4,925 4,860
6.01%, 09/22/95 15,720 15,505
Preferred Receivables Corp.
6.15%, 07/18/95 27,000 26,923
5.88%, 08/03/95 15,300 15,218
Par Value
------- ----------
Ranger Funding Corp.
6.05%, 07/24/95 $ 7,000 $ 6,973
6.05%, 08/09/95 10,000 9,935
6.07%, 08/14/95 5,000 4,963
6.07%, 08/16/95 5,000 4,962
6.06%, 08/18/95 10,000 9,920
6.07%, 08/21/95 4,000 3,966
6.05%, 08/22/95 10,000 9,914
5.99%, 09/08/95 5,000 4,943
5.96%, 09/19/95 10,000 9,870
5.94%, 09/27/95 25,000 24,643
Receivables Capital Corp.
6.11%, 07/27/95 6,221 6,194
WCP Funding, Inc.
6.11%, 07/17/95 15,400 15,359
6.11%, 07/19/95 18,000 17,946
6.04%, 07/26/95 33,200 33,062
5.99%, 09/21/95 14,000 13,812
----------
898,055
----------
AUTOMOTIVE--8.1%
Ford Credit Europe PLC
6.27%, 07/18/95 27,600 27,520
6.13%, 07/20/95 13,300 13,258
6.01%, 08/02/95 35,000 34,815
5.86%, 08/31/95 17,700 17,527
Ford Motor Credit Co.
6.18%, 07/21/95 24,000 23,919
6.01%, 07/24/95 8,000 7,970
General Motors
Acceptance Corp.
6.44%, 07/06/95 5,000 4,996
6.33%, 07/14/95 5,000 4,989
6.33%, 07/24/95 5,000 4,980
6.35%, 08/01/95 11,000 10,941
6.31%, 08/07/95 9,000 8,943
6.12%, 08/15/95 75,000 74,435
6.09%, 08/24/95 40,000 39,640
6.25%, 08/30/95 10,000 9,898
Hertz Corp.
6.00%, 07/20/95 26,000 25,918
6.02%, 07/21/95 10,000 9,967
Renault Credit
International SA Banque
6.19%, 07/05/95 34,200 34,177
6.15%, 07/31/95 31,000 30,844
6.14%, 07/31/95 15,700 15,621
6.13%, 08/03/95 7,400 7,359
6.11%, 08/08/95 37,000 36,765
5.97%, 09/26/95 8,700 8,576
----------
453,058
----------
BANKING--AUSTRALIA--0.1%
ANZ (Delaware), Inc.
6.09%, 07/26/95 8,000 7,967
----------
BANKING--BELGIUM--2.4%
Cregem North America, Inc.
5.82%, 12/13/95 10,000 9,741
5.84%, 12/18/95 7,000 6,813
5.74%, 12/28/95 20,000 19,443
13
SchwabFunds(R) 2
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Par Value
------- ----------
Generale Bank, Inc.
6.39%, 09/27/95 $35,000 $ 34,470
6.36%, 10/03/95 25,000 24,598
6.05%, 10/18/95 37,000 36,339
----------
131,404
----------
BANKING--CANADA--0.8%
Bank of Nova Scotia
6.02%, 08/11/95 45,000 44,696
----------
BANKING--DOMESTIC BANK
HOLDING COMPANY--4.7%
Bankers Trust New York Corp.
6.22%, 07/03/95 32,000 31,989
6.20%, 07/03/95 14,000 13,995
6.20%, 07/06/95 22,000 21,981
Chemical Banking Corp.
6.28%, 07/11/95 15,000 14,974
5.94%, 09/13/95 4,000 3,952
5.93%, 09/13/95 50,000 49,399
NationsBank Corp.
6.15%, 08/17/95 11,000 10,913
6.37%, 10/04/95 20,000 19,674
6.37%, 10/05/95 47,000 46,227
6.29%, 10/10/95 50,000 49,144
----------
262,248
----------
BANKING--FRANCE--0.3%
Indosuez N.A. Inc.
6.10%, 07/26/95 18,000 17,925
----------
BANKING--GERMANY--0.3%
Commerzbank U.S.
Finance, Inc.
6.35%, 09/19/95 17,000 16,767
----------
BANKING--JAPAN--5.7%
Anchor Funding Corp./(Dai-Ichi
Kangyo Bank LOC)
6.15%, 07/18/95 5,000 4,986
6.07%, 08/08/95 10,000 9,937
6.00%, 09/27/95 8,864 8,736
Bancal Tri-State Corp./
(Mitsubishi Bank
Keepwell Agreement)
6.07%, 08/09/95 10,000 9,935
DIC Americas, Inc./
(Mitsubishi Bank LOC)
6.06%, 08/14/95 14,000 13,898
Deerfield Capital Corp./
(Sumitomo Bank LOC)
6.02%, 08/11/95 18,000 17,878
5.92%, 09/06/95 19,250 19,041
Ridge Capital II/(Dai-Ichi
Kangyo Bank LOC)
6.19%, 07/13/95 20,300 20,259
6.14%, 07/19/95 10,000 9,970
6.14%, 07/28/95 39,000 38,823
6.11%, 08/04/95 18,000 17,898
6.02%, 08/10/95 6,000 5,960
5.92%, 09/05/95 16,550 16,373
5.97%, 09/13/95 36,380 35,940
5.97%, 09/14/95 35,000 34,571
5.92%, 09/22/95 19,250 18,991
Par Value
------- ----------
Tri-Lateral Capital
(U.S.A.), Inc./(Industrial
Bank of Japan LOC)
6.11%, 07/12/95 $27,271 $ 27,220
6.06%, 07/21/95 10,100 10,066
----------
320,482
----------
BANKING--NETHERLANDS--1.9%
Internationale Nederlanden
(U.S.) Funding
6.11%, 07/18/95 76,000 75,784
6.11%, 07/26/95 20,300 20,215
6.04%, 08/16/95 10,000 9,924
----------
105,923
----------
BANKING--SPAIN--3.7%
Central Hispano N.A.
Capital Corp.
6.16%, 07/06/95 6,000 5,995
6.03%, 08/09/95 25,000 24,839
5.96%, 09/06/95 38,000 37,585
5.96%, 09/07/95 38,000 37,579
6.00%, 09/08/95 50,000 49,434
6.00%, 09/11/95 50,000 49,409
----------
204,841
----------
BANKING--UNITED KINGDOM--5.6%
Abbey National
Treasury Services
6.60%, 12/15/95 15,000 15,046
Banco Nacional de Mexico S.A./
(Barclays Bank LOC)
5.89%, 09/05/95 3,000 2,968
5.89%, 09/07/95 14,000 13,847
Cheltenham & Gloucester
Building Society
6.09%, 07/25/95 49,000 48,804
6.04%, 08/18/95 20,000 19,841
Hanson Finance (UK) PLC
6.09%, 07/26/95 10,000 9,958
6.05%, 08/10/95 35,000 34,768
6.03%, 08/15/95 10,000 9,926
6.03%, 08/17/95 15,000 14,884
6.04%, 08/21/95 40,000 39,663
6.04%, 08/23/95 25,000 24,781
6.04%, 08/24/95 36,000 35,679
5.91%, 09/05/95 6,253 6,186
5.92%, 09/13/95 7,000 6,916
Yorkshire Building Society
5.98%, 09/08/95 27,000 26,695
----------
309,962
----------
COMPUTER AND OFFICE
EQUIPMENT--0.8%
CSC Enterprises
6.07%, 08/10/95 14,000 13,907
6.07%, 08/18/95 26,500 26,289
5.96%, 09/21/95 4,000 3,946
----------
44,142
----------
DATA PROCESSING--1.0%
Electronic Data Systems
6.00%, 09/15/95 17,000 16,788
6.00%, 09/28/95 37,000 36,472
----------
53,260
----------
14
SchwabFunds(R) 3
--------------------------------------------------------------------------------
SCHWAB VALUE ADVANTAGE MONEY FUND(R)
SCHEDULE OF INVESTMENTS (in thousands)
June 30, 1995 (Unaudited)
--------------------------------------------------------------------------------
Par Value
------- ----------
ELECTRICAL AND ELECTRONICS--0.7%
MCA Funding Corp.
6.28%, 07/07/95 $10,000 $ 9,990
Panasonic Finance, Inc.
6.20%, 08/16/95 20,000 19,845
6.03%, 09/06/95 10,000 9,890
----------
39,725
----------
FINANCE (CONSUMER)--2.2%
American Express Credit Corp.
6.11%, 07/17/95 18,000 17,952
5.84%, 12/06/95 50,000 48,754
5.71%, 12/15/95 25,000 24,358
5.76%, 12/20/95 35,000 34,064
----------
125,128
----------
FINANCE (COMMERCIAL)--3.7%
CIT Group Holdings, Inc.
6.04%, 08/25/95 37,000 36,664
General Electric Capital
Corp.
6.12%, 08/04/95 16,000 15,909
5.79%, 09/15/95 25,000 24,699
5.76%, 12/22/95 54,000 52,538
General Electric
Capital Services
6.39%, 10/03/95 40,000 39,353
6.39%, 10/04/95 40,000 39,347
----------
208,510
----------
FOOD PROCESSING--0.4%
Philip Morris Capital Corp.
6.09%, 08/02/95 20,000 19,893
----------
MEDICAL SUPPLY--1.1%
Sherwood Medical Company
6.09%, 08/03/95 62,268 61,926
----------
MORTGAGE BANKING--1.5%
Fleet Mortgage Group, Inc.
6.03%, 07/20/95 40,000 39,874
5.97%, 07/24/95 46,000 45,826
----------
85,700
----------
PAPER AND WOOD PRODUCTS--0.8%
Bowater PLC
6.17%, 07/03/95 23,600 23,592
6.10%, 07/28/95 15,000 14,933
6.04%, 08/16/95 6,256 6,208
----------
44,733
----------
PHARMACEUTICALS--0.7%
A.H. Robins Company, Inc.
5.90%, 08/01/95 19,500 19,402
6.01%, 09/12/95 20,000 19,759
----------
39,161
----------
SECURITIES
BROKERAGE-DEALER--10.7%
BT Securities Corp.
6.22%, 07/05/95 21,000 20,986
5.99%, 09/18/95 26,000 25,663
6.00%, 09/20/95 6,000 5,920
Bear Stearns Companies Inc.
6.02%, 08/01/95 12,000 11,939
6.12%, 08/02/95 17,000 16,909
Par Value
------- ----------
6.01%, 08/23/95 $27,000 $ 26,764
5.91%, 09/01/95 15,000 14,849
5.92%, 09/05/95 35,000 34,625
CS First Boston, Inc.
6.18%, 07/11/95 9,000 8,985
Goldman Sachs Group, LP
6.29%, 08/01/95 27,000 26,857
6.00%, 08/08/95 35,000 34,781
6.00%, 08/09/95 50,000 49,679
6.00%, 08/10/95 34,000 33,776
6.42%, 09/05/95 27,000 26,692
6.01%, 09/08/95 50,000 49,434
5.88%, 11/17/95 19,000 18,579
5.85%, 11/20/95 11,000 10,753
Lehman Brothers Holdings Inc.
6.09%, 07/11/95 4,000 3,993
Morgan Stanley Group Inc.
6.01%, 07/07/95 7,000 6,993
6.01%, 08/07/95 29,000 28,823
6.35%, 09/20/95 5,000 4,931
Nomura Holdings America, Inc.
6.08%, 07/05/95 25,000 24,983
6.10%, 07/06/95 7,000 6,994
6.09%, 07/24/95 13,000 12,950
5.96%, 09/07/95 21,000 20,767
Paine Webber Group Inc.
6.19%, 07/13/95 15,000 14,970
6.20%, 07/19/95 24,000 23,927
6.12%, 07/27/95 16,000 15,930
6.06%, 07/31/95 10,000 9,950
Salomon Inc.
6.40%, 07/03/95 1,729 1,728
----------
594,130
----------
TOTAL CORPORATE OBLIGATIONS
(Cost $4,089,636) 4,089,636
----------
VARIABLE RATE
OBLIGATIONS--4.8%(B)
ASSET BACKED SECURITIES--0.4%
Advanta Credit Card
Master Trust
6.12%, 07/07/95 21,200 21,200
----------
BANKING--DOMESTIC BANK
HOLDING COMPANY--0.4%
Bankers Trust New York Corp.
6.45%, 07/01/95 25,000 25,000
----------
BANKING--DOMESTIC--1.2%
American Express
Centurion Bank
6.06%, 07/14/95 20,000 20,000
Comerica Bank
5.62%, 07/04/95 8,000 7,997
Keystone Health Resources
Corp. Variable Rate
Taxable Demand
Notes Series 1993/
(PNC Bank LOC)
6.10%, 07/07/95 3,400 3,400
----------
15
SchwabFunds(R) 4
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Par Value
------- ----------
PNC Bank, N.A.
5.64%, 07/04/95 $10,000 $ 10,000
6.06%, 07/17/95 25,000 25,000
----------
66,397
----------
BANKING--FRANCE--0.4%
City of New York General
Obligation Bonds
Fiscal 1995 Series F-8
(Societe Generale LOC)
6.05%, 07/07/95 19,500 19,500
----------
BANKING--JAPAN--0.2%
Missouri Economic
Development Export &
Infrastructure Board
Adjustable Rate Taxable
Securities (Biocraft
Laboratories, Inc.
Project) Series 1989/
(Bank of Tokyo LOC)
6.30%, 07/07/95 5,000 5,000
----------
New York City Industrial
Development Authority
GAF Seelig Series 1993/
(IBJ Schroder Bank and
Trust LOC)
6.50%, 07/07/95 2,325 2,325
Town of Islip Industrial
Development Agency
1992 Taxable Adjustable
Rate Industrial Revenue
Bonds (Nussdorf
Associates/Quality King
Distributors, Inc.
Facility)/ (Bank of Tokyo
LOC)
6.27%, 07/06/95 1,710 1,710
----------
9,035
----------
BANKING--UNITED KINGDOM--0.2%
Abbey National Treasury
Services PLC
5.61%, 07/04/95 10,000 9,997
----------
HEALTHCARE--0.3%
Catholic Healthcare West
Taxable Variable Rate
Demand Bonds
Series 1993A
6.00%, 07/07/95 17,900 17,900
----------
INSURANCE--0.2%
Commonwealth Life
Insurance Co.
6.28%, 09/28/95 10,000 10,000
----------
MONOLINE INSURANCE--0.0%
New Orleans Aviation
Board Taxable Refunding
Bonds Series 1993A/
(MBIA Insurance)
6.25%, 07/07/95 1,700 1,700
----------
Par Value
------- ----------
SECURITIES
BROKERAGE-DEALER--1.5%
Bear Stearns Companies Inc.
6.16%, 07/24/95 $20,000 $ 20,000
6.10%, 09/21/95 45,000 45,000
Lehman Brothers
Holdings, Inc.
6.21%, 07/30/95 20,000 20,000
----------
85,000
----------
TOTAL VARIABLE RATE OBLIGATIONS
(Cost $265,729) 265,729
----------
BANKER'S
ACCEPTANCES--0.4%
BANKING--JAPAN--0.4%
Bank of Tokyo, Ltd.
6.02%, 08/22/95 13,000 12,888
Fuji Bank, Ltd.
6.05%, 08/01/95 9,000 8,954
----------
TOTAL BANKER'S ACCEPTANCES
(Cost $21,842) 21,842
----------
BANK NOTES--6.9%
BANKING--DOMESTIC--6.9%
Fifth Third Bank
6.08%, 11/07/95 25,000 25,000
6.02%, 11/10/95 25,000 25,005
NationsBank of Georgia,
N.A.
6.08%, 11/07/95 25,000 25,000
6.08%, 11/08/95 33,000 33,000
NationsBank of Texas, N.A.
6.09%, 11/21/95 57,000 57,000
5.65%, 12/04/95 30,000 30,000
5.83%, 12/11/95 36,000 36,000
5.83%, 12/12/95 50,000 50,000
PNC Bank, N.A.
6.39%, 10/06/95 55,000 55,000
6.09%, 11/08/95 46,000 46,008
----------
TOTAL BANK NOTES
(Cost $382,013) 382,013
----------
CERTIFICATES OF
DEPOSIT--12.8%
BANKING--CANADA--0.5%
Canadian Imperial Bank
of Commerce
6.03%, 08/11/95 20,000 20,000
6.04%, 08/15/95 8,000 8,000
----------
28,000
----------
16
SchwabFunds(R) 5
--------------------------------------------------------------------------------
SCHWAB VALUE ADVANTAGE MONEY FUND(R)
SCHEDULE OF INVESTMENTS (in thousands)
June 30, 1995 (Unaudited)
--------------------------------------------------------------------------------
Par Value
------- ----------
BANKING--DOMESTIC--1.8%
Chemical Bank
5.74%, 12/08/95 $65,000 $ 65,000
MBNA America Bank N.A.
6.00%, 10/19/95 34,000 34,000
----------
99,000
----------
BANKING--FRANCE--0.4%
Societe Generale
6.00%, 07/31/95 20,000 20,000
----------
BANKING--GERMANY--1.8%
Bayerische Landesbank
Girozentrale
6.88%, 04/02/96 25,000 25,000
6.44%, 05/03/96 50,000 50,000
Commerzbank, AG
5.96%, 09/08/95 25,000 24,997
----------
99,997
----------
BANKING--JAPAN--5.2%
Fuji Bank, Ltd.
5.95%, 07/31/95 30,000 30,002
Mitsubishi Bank, Ltd.
6.03%, 09/06/95 25,000 24,988
Sanwa Bank, Ltd.
6.11%, 08/07/95 5,000 5,000
6.04%, 08/14/95 13,000 12,999
Sumitomo Bank, Ltd.
6.02%, 07/05/95 40,000 40,000
6.02%, 07/11/95 30,000 30,000
6.08%, 07/27/95 25,000 25,000
6.03%, 08/02/95 33,000 33,000
6.03%, 08/07/95 33,000 33,000
6.04%, 08/14/95 11,000 11,000
6.02%, 08/30/95 43,000 43,001
----------
287,990
----------
BANKING--UNITED KINGDOM--3.1%
Abbey National PLC
6.04%, 08/16/95 57,000 56,998
6.04%, 08/22/95 50,000 50,000
Par Value
------- ----------
Midland Bank PLC
5.80%, 12/15/95 $50,000 $ 50,002
5.80%, 12/15/95 3,000 3,000
National Westminster
Bank PLC
5.79%, 02/06/96 14,000 13,991
5.72%, 02/06/96 7,000 7,001
----------
180,992
----------
TOTAL CERTIFICATES OF DEPOSIT
(Cost $715,979) 715,979
----------
REMARKETED
CERTIFICATES--1.7%
ASSET BACKED SECURITIES--1.7%
Black & Decker RECOP Trust
6.05%, 07/24/95 10,000 10,000
6.05%, 08/07/95 25,000 25,000
6.00%, 09/19/95 8,000 8,000
Circuit City RECOP Trust
6.17%, 07/10/95 26,000 26,000
6.16%, 07/10/95 26,500 26,500
----------
TOTAL REMARKETED CERTIFICATES (Cost
$95,500) 95,500
----------
TAXABLE BONDS--0.1%
BANKING--JAPAN--0.1%
Oklahoma Industrial
Finance Authority
Taxable General
Obligation Industrial
Finance Bonds Series P/
(Mitsubishi Bank LOC)
6.35%, 08/01/95 6,250 6,250
----------
TOTAL TAXABLE BONDS
(Cost $6,250) 6,250
----------
TOTAL INVESTMENTS--100.0%
(Cost $5,576,949) $5,576,949
============
17
SchwabFunds(R) 6
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NOTES TO SCHEDULE OF INVESTMENTS.
Yields shown are effective yields at the time of purchase, except for
variable rate securities which are described below. Yields for each type of
security are stated according to the market convention for that security
type. For each security, cost (for financial reporting and federal income
tax purposes) and carrying value are the same.
(a) Certain securities purchased by the Fund are private placement
securities exempt from registration by Section 4(2) of the Securities Act
of 1933. These securities generally are issued to institutional investors,
such as the Schwab Value Advantage Money Fund(R). Any resale by the Fund
must be in an exempt transaction, normally to a qualified institutional
buyer. At June 30, 1995, the aggregate value of private placement
securities held by the Fund was $1,301,308,000 which represented 23.45% of
net assets. Of this total, $1,175,808,000 or 21.19% of net assets, was
determined by the Investment Manager to be liquid in accordance with a
resolution adopted by the Board of Trustees relating to Rule 144A,
promulgated under the Securities Act of 1933.
(b) Variable rate securities. Interest rates vary periodically based on
current market rates. Rates shown are the effective rates on June 30, 1995.
Dates shown represent the latter of the demand date or next interest rate
change date, which is considered the maturity date for financial reporting
purposes. For variable rate securities without demand features the next
interest reset date is shown.
Abbreviations
---------------------------------------------------------------
LOC Letter of Credit
MBIA Municipal Bond Investors Assurance Corporation
RECOP Remarketed Certificates of Participation
See accompanying Notes to Financial Statements.
18
SchwabFunds(R) 7
--------------------------------------------------------------------------------
SCHWAB VALUE ADVANTAGE MONEY FUND(R)
STATEMENT OF ASSETS AND LIABILITIES (in thousands)
June 30, 1995 (Unaudited)
--------------------------------------------------------------------------------
ASSETS
Investments, at value (Cost: $5,576,949) $5,576,949
Interest receivable 9,772
Receivable for fund shares sold 51,614
Prepaid expenses 130
Deferred organization costs 40
----------
Total assets 5,638,505
----------
LIABILITIES
Payable for:
Dividends 3,433
Fund shares redeemed 21,464
Investments purchased 61,497
Investment advisory and administration fee 485
Transfer agency and shareholder service fees 1,103
Other 716
----------
Total liabilities 88,698
----------
Net assets applicable to outstanding shares $5,549,807
==========
NET ASSETS CONSIST OF:
Capital paid in $5,549,933
Accumulated net realized loss on investments sold (126)
----------
$5,549,807
==========
THE PRICING OF SHARES
Outstanding shares, $0.00001 par value
(unlimited shares authorized) 5,549,933
Net asset value, offering and redemption
price per share $1.00
See accompanying Notes to Financial Statements.
19
SchwabFunds(R) 8
--------------------------------------------------------------------------------
SCHWAB VALUE ADVANTAGE MONEY FUND(R)
STATEMENT OF OPERATIONS (in thousands)
For the six months ended June 30, 1995 (Unaudited)
--------------------------------------------------------------------------------
Interest income $142,402
--------
Expenses:
Investment advisory and administration fee 10,068
Transfer agency and shareholder service fees 5,765
Custodian fees 217
Registration fees 674
Professional fees 46
Shareholder reports 48
Trustees' fees 7
Amortization of deferred organization costs 11
Insurance and other expenses 30
--------
16,866
Less expenses reduced (7,648)
--------
Total expenses incurred by Fund 9,218
--------
Net investment income 133,184
Net realized loss on investments sold --
--------
Increase in net assets resulting from operations $133,184
========
See accompanying Notes to Financial Statements.
20
SchwabFunds(R) 9
--------------------------------------------------------------------------------
SCHWAB VALUE ADVANTAGE MONEY FUND(R)
STATEMENT OF CHANGES IN NET ASSETS (in thousands)
--------------------------------------------------------------------------------
For the six For the
months ended year ended
June 30, 1995 December 31,
(Unaudited) 1994
------------- ------------
Operations:
Net investment income $ 133,184 $ 85,792
Net realized loss on investments sold -- (124)
---------- ----------
Increase in net assets resulting
from operations 133,184 85,668
---------- ----------
Dividends to shareholders from
net investment income (133,184) (85,792)
---------- ----------
Capital Share Transactions (dollar amounts
and number of shares are the same):
Proceeds from shares sold 5,232,178 6,042,841
Net asset value of shares issued in
reinvestment of dividends 138,143 63,079
Less payments for shares redeemed (3,552,143) (3,103,523)
---------- ----------
Increase in net assets from capital
share transactions 1,818,178 3,002,397
---------- ----------
Total increase in net assets 1,818,178 3,002,273
Net Assets:
Beginning of period 3,731,629 729,356
---------- ----------
End of period $ 5,549,807 $3,731,629
========== ==========
See accompanying Notes to Financial Statements.
21
SchwabFunds(R) 10
--------------------------------------------------------------------------------
SCHWAB VALUE ADVANTAGE MONEY FUND(R)
NOTES TO FINANCIAL STATEMENTS
For the six months ended June 30, 1995 (Unaudited)
--------------------------------------------------------------------------------
1. DESCRIPTION OF THE FUND
The Schwab Value Advantage Money Fund (the "Fund") is a series of The Charles
Schwab Family of Funds (the "Trust"), an open-end, management investment company
organized as a Massachusetts business trust on October 20, 1989 and registered
under the Investment Company Act of 1940, as amended.
In addition to the Fund, the Trust also offers -- the Schwab Money Market Fund,
the Schwab Government Money Fund, the Schwab U.S. Treasury Money Fund, the
Schwab Tax-Exempt Money Fund, the Schwab California Tax-Exempt Money Fund, the
Schwab New York Tax-Exempt Money Fund, the Schwab Institutional Advantage Money
FundTM and the Schwab Retirement Money FundTM. The assets of each series are
segregated and accounted for separately.
The Schwab Value Advantage Money Fund invests primarily in a diversified
portfolio of short-term obligations of major banks and corporations.
2. SIGNIFICANT ACCOUNTING POLICIES
Security valuation -- Investments are stated at amortized cost which
approximates market value.
Security transactions and interest income -- Security transactions, in the
accompanying financial statements, are accounted for on a trade date basis (date
the order to buy or sell is executed). Interest income is recorded on the
accrual basis and includes amortization of premium and accretion of discount on
investments. Realized gains and losses from security transactions are determined
on an identified cost basis.
Repurchase agreements -- Repurchase agreements are fully collateralized by U.S.
Treasury or Government agency securities. All collateral is held by the Fund's
custodian and is monitored daily to ensure that its market value at least equals
the repurchase price under the agreement.
Dividends to shareholders -- The Fund declares a daily dividend, equal to its
net investment income for that day, payable monthly.
Deferred organization costs -- Costs incurred in connection with the
organization of the Fund, its initial registration with the Securities and
Exchange Commission and with various states are amortized on a straight-line
basis over a five year period from the Fund's commencement of operations.
Expenses -- Expenses arising in connection with the Fund are charged directly to
the Fund. Expenses common to all series of the Trust are allocated to each
series in proportion to their relative net assets.
Federal income taxes -- It is the Fund's policy to meet the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its net investment income and realized net capital gains, if
any, to shareholders. Therefore, no federal income tax provision is required.
The Fund is considered a separate entity for tax purposes.
22
SchwabFunds(R) 11
--------------------------------------------------------------------------------
SCHWAB VALUE ADVANTAGE MONEY FUND(R)
NOTES TO FINANCIAL STATEMENTS
For the six months ended June 30, 1995 (Unaudited)
--------------------------------------------------------------------------------
3. TRANSACTIONS WITH AFFILIATES
Investment advisory and administration agreements -- The Trust has investment
advisory and administration agreements with Charles Schwab Investment
Management, Inc. (the "Investment Manager"). For advisory services and
facilities furnished, the Fund pays an annual fee, payable monthly, of .46% of
the first $2 billion of average daily net assets, .45% of such assets over $2
billion, and .40% of such assets in excess of $3 billion. Under these
agreements, the Fund incurred investment advisory and administration fees of
$10,068,000 during the six months ended June 30, 1995, before the Investment
Manager reduced its fee (see Note 4).
Transfer agency and shareholder service agreements -- The Trust has transfer
agency and shareholder service agreements with Charles Schwab & Co., Inc.
("Schwab"). For services provided under these agreements, Schwab receives an
annual fee, payable monthly, of .25% of average daily net assets. In addition,
Schwab receives a fee of $5.00 for redemptions in amounts less than $5,000 and
may impose a $5.00 fee for monthly balances below the minimum required. For the
six months ended June 30, 1995, the Fund incurred transfer agency and
shareholder service fees of $5,765,000 before Schwab reduced its fees (see Note
4).
Officers and trustees -- Certain officers and trustees of the Trust are also
officers or directors of the Investment Manager and/or Schwab. During the six
months ended June 30, 1995, the Trust made no direct payments to its officers or
trustees who are "interested persons" within the meaning of the Investment
Company Act of 1940, as amended. The Fund incurred fees of $7,000 related to the
Trust's unaffiliated trustees.
4. EXPENSES REDUCED BY THE INVESTMENT MANAGER AND SCHWAB
The Investment Manager and Schwab reduced a portion of their fees in order to
limit the Fund's ratio of operating expenses to average net assets. For the six
months ended June 30, 1995, the total of such fees reduced by the Investment
Manager and Schwab was $7,531,000 and $117,000, respectively.
5. INVESTMENT TRANSACTIONS
Purchases, sales and maturities of investment securities for the six months
ended June 30, 1995, aggregated (in thousands) $11,724,983 and $9,901,083,
respectively.
23
SchwabFunds(R) 12
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
6. FINANCIAL HIGHLIGHTS
Per share income and capital changes for a share outstanding throughout the
period:
For the period
April 30, 1992
For the six (commencement
months ended For the year ended of operations) to
June 30, 1995 December 31, December 31,
(Unaudited) 1994 1993 1992
-------------------------------------------------
Net asset value at
beginning of period $1.00 $1.00 $1.00 $1.00
Income from Investment Operations
-----------------------------------
Net investment income .03 .04 .03 .02
Net realized and unrealized gain
(loss) on investments -- -- -- --
---------- ---------- -------- --------
Total from investment operations .03 .04 .03 .02
Less Distributions
-----------------
Dividends from net investment
income (.03) (.04) (.03) (.02)
Distributions from realized gains
on investments -- -- -- --
---------- ---------- -------- --------
Total distributions (.03) (.04) (.03) (.02)
---------- ---------- -------- --------
Net asset value at
end of period $1.00 $1.00 $1.00 $1.00
========== ========== ======== ========
Total return (%) 2.90 4.09 3.02 2.33
----------------
Ratios/Supplemental Data
--------------------------
Net assets, end of period (000s) $ 5,549,807 $3,731,629 $729,356 $ 319,024
Ratio of expenses to average
net assets (%) .40* .40 .39 .29*
Ratio of net investment income to
average net assets (%) 5.77* 4.40 2.97 3.27*
The Investment Manager and Schwab have reduced a portion of their fees and
absorbed certain expenses in order to limit the Fund's ratio of operating
expenses to average net assets. Had these fees and expenses not been reduced and
absorbed, the ratio of expenses to average net assets for the periods ended June
30, 1995, December 31, 1994, 1993 and 1992 would have been .73%*, .79%, .82% and
.94%*, respectively, and the ratio of net investment income to average net
assets would have been 5.44%*, 4.01%, 2.54% and 2.62%*, respectively.
* Annualized
24
THIS SPACE IS RESERVED FOR YOUR COMMENTS AND QUESTIONS.
A SCHWAB REPRESENTATIVE WILL BE HAPPY TO ASSIST YOU.
25
CAPTURING GROWTH OPPORTUNITIES DOESN'T HAVE TO BE GUESSWORK.
Large-cap stocks, small-cap stocks, or international stocks? It's difficult to
predict which stock market segment will come out ahead during given time
periods, especially since these markets do not always move in tandem. While one
market segment may be experiencing only moderate growth, others, at the same
time, may be expanding rapidly.
SchwabFunds(R) three equity index funds help you take some of the guesswork out
of equity investing. These Funds provide a way for you to put the growth
potential of all three markets into your portfolio -- rather than relying on
just one market. The Funds offer an easy and efficient way to achieve a broad
level of effective equity diversification. In fact, they provide market coverage
that could require investments in many more funds.
[FIGUIRE 1] Schwab 1000 Fund(R) is designed to match the total return of the
Schwab 1000 Index,(R) which is comprised of the largest 1,000
publicly traded U.S. companies -- the stocks of which represent
about 91% of the total market capitalization of the U.S. stock
market. 1
[FIGUIRE 2] Schwab Small-Cap Index Fund(TM) is designed to track the total
return of the Schwab Small-Cap Index,(TM) which tracks the
performance of smaller-capitalization companies. The Schwab
Small-Cap Index is comprised of the second 1,000 largest publicly
traded companies in the U.S. 1
[FIGUIRE 3] Schwab International Index Fund(TM) is designed to track the total
return of the Schwab International Index,(TM) which is comprised
of 350 of the largest companies, based on market capitalization,
in foreign countries with developed securities markets. 2
You can begin building your diversified equity investment portfolio with the
three SchwabFunds equity index funds by calling Schwab at the toll-free number
below, or by sending back the enclosed postcard. We'll be happy to provide you
with a free prospectus and brochure for the Funds.
EACH PROSPECTUS PROVIDES MORE COMPLETE INFORMATION, INCLUDING CHARGES AND
EXPENSES. PLEASE READ IT CAREFULLY BEFORE INVESTING.
--------------------------------------------------------------------------------
SCHWAB'S FUNDMAP(TM) SOFTWARE MAKES FUND
SELECTION EASIER.
FundMap Mutual Fund Selection Software for Windows(R) allows you to calculate
your long-term investment needs and can help you to decide how much you may need
to invest in each of the three SchwabFunds equity index funds. 3 You can explore
ways to allocate your assets, even re-evaluate your current strategy and set up
several "what if" scenarios. SchwabFunds and FundMap make it easy for you to
build a diversified portfolio today.
--------------------------------------------------------------------------------
1-800-2 NO-LOAD
1-800-266-5623
1 Each Index consists of publicly traded companies ranked by market
capitalization. Each Index does not include privately held companies,
investment companies and companies incorporated outside of the United
States.
2 The Index is comprised of publicly traded companies ranked by market
capitalization in countries with developed securities markets around the
world. It does not include privately held companies, investment companies,
or companies from the United States.
3 FundMap is available for Schwab customers only. Please allow 2 - 4 weeks for
delivery.
Windows is a registered trademark of Microsoft Corporation.
26
--------------
BULK RATE
U.S. POSTAGE
PAID
CHARLES SCHWAB
--------------
[SCHWAB FUNDS FAMILY (TM) LOGO]
101 Montgomery Street
San Francisco, California 94104
INVESTMENT ADVISER
Charles Schwab Investment Management, Inc.
101 Montgomery Street, San Francisco, CA 94104
DISTRIBUTOR
Charles Schwab & Co., Inc.
101 Montgomery Street, San Francisco, CA 94104
This report is not authorized for distribution to prospective investors unless
preceded or accompanied by a current prospectus.
CRS 3849 TF3631R (8/95) Printed on recycled paper.