-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Oo3Jb6k4y85wSEPrpQZia7wVyz9bvXp8EWaGnHBLT7bvjd0ppT5m0YF7RwwP4N/l 2u42qf94dGkvwUmBn0si3g== 0000950149-01-501308.txt : 20010828 0000950149-01-501308.hdr.sgml : 20010828 ACCESSION NUMBER: 0000950149-01-501308 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010630 FILED AS OF DATE: 20010827 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: 1723995 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 f74279n-30d.txt SEMIANNUAL REPORT DATED JUNE 30, 2001 1 IMPORTANT NOTICE REGARDING DELIVERY OF SHAREHOLDER DOCUMENTS SCHWAB INSTITUTIONAL ADVANTAGE MONEY FUND(R) SCHWAB RETIREMENT MONEY FUND(R) June 30, 2001 Semiannual Report enclosed [CHARLES SCHWAB LOGO] 2 IMPORTANT NOTICE REGARDING DELIVERY OF SHAREHOLDER DOCUMENTS The Securities and Exchange Commission (SEC) permits mutual funds to deliver only one copy of shareholder documents, including prospectuses and shareholder reports, to fund investors with multiple accounts at the same residential or post office box address. This practice is commonly called "householding" and is intended to eliminate duplicate mailings of shareholder documents. MAILING OF YOUR SCHWABFUNDS(R) SHAREHOLDER DOCUMENTS MAY BE HOUSEHOLDED INDEFINITELY UNLESS YOU INSTRUCT US OTHERWISE. ADDITIONAL COPIES OF SHAREHOLDER DOCUMENTS All SchwabFunds prospectuses and shareholder reports are available free of charge and may be requested at any time by calling Schwab as indicated below. SchwabFunds prospectuses and shareholder reports are also available on our Web site at www.schwab.com/schwabfunds. If you would prefer that your SchwabFunds mailings not be householded, please contact: SCHWAB SIGNATURE SERVICES(TM) CLIENTS Schwab Signature Services. INVESTMENT MANAGER CLIENTS Schwab at 800-515-2157, or your investment manager. ALL OTHER CLIENTS Schwab at 800-435-4000. Your instructions that householding not apply to your accounts holding SchwabFunds will be effective within 30 days of receipt by Schwab. 3 SCHWAB INSTITUTIONAL ADVANTAGE MONEY FUND(R) RETIREMENT MONEY FUND(R) June 30, 2001 SEMIANNUAL REPORT [CHARLES SCHWAB LOGO] 4 SCHWAB INSTITUTIONAL ADVANTAGE MONEY FUND(R) RETIREMENT MONEY FUND(R) [PHOTO OF CHARLES SCHWAB] Dear Shareholder, We're pleased to bring you the first report for these funds that uses our new "plain English" format. This format is part of a major initiative to make SchwabFunds(R) materials easier to use. We've given the report a simpler organization and a new look. Our goal has been to focus on presenting information clearly and explaining what it means to shareholders. For example, we've found ways to make the financial statements and notes more accessible. We will continue to actively look for ways to improve these reports even further. We hope you find this report helpful and we welcome your feedback. Thank you for choosing SchwabFunds. Sincerely, /s/ Charles Schwab Charles Schwab SEMIANNUAL REPORT January 1, 2001 - June 30, 2001 1 Market Overview 5 Schwab Institutional Advantage Money Fund 16 Schwab Retirement Money Fund 26 Financial Notes -------------------------------------------------------------------------- 29 GLOSSARY 5 MARKET OVERVIEW SLOWING PACE OF GROWTH PUTS PRESSURE ON U.S. ECONOMY. Although the U.S. economy continued to grow during the reporting period, there were signs everywhere that the unprecedented ten-plus year growth period might be ending. During the second quarter of 2001, the nation's Gross Domestic Product (GDP; see chart, page 2) logged its slowest growth rate in over eight years. Meanwhile, equity markets, which set record highs in early 2000, fell dramatically, and continued to fall in the first half of 2001. The Federal Reserve Bank (the Fed) responded by aggressively lowering interest rates, seeking to keep a suddenly fragile economy from slipping into recession. During the first half of 2001, the Fed cut the Federal Funds rate six times, for a total reduction of 2.75%. While GDP grew slightly during the first half of 2001, it's still unclear whether a recession has been averted. Many parts of the economy remain weak, particularly technology and industrial production. Another key factor is consumer spending, which is almost certain to decline as the job layoffs reported over the past several months begin to take their toll in the marketplace. [PHOTO OF MAN WORKING] - -------------------------------------------------------------------------------- ASSET CLASS PERFORMANCE COMPARISON % returns during the reporting period - -------------------------------------------------------------------------------- This graph compares the performance of various asset classes during the reporting period. These figures assume dividends and distributions were reinvested. Index figures don't include trading and management costs, which would lower performance. Indices are unmanaged and you can't invest in them directly. Remember that past performance isn't an indication of future results. Data source: Charles Schwab & Co., Inc. (Schwab). [ASSET CLASS PERFORMANCE COMPARISON LINE GRAPH]
Lehman Aggregate MSCI Russell 2000 S&P 500 3-Mo Bond Index EAFE Index Index Index T-Bills 12/29/00 0 0 0 0 0 01/05/01 1.37 0.2 -4.21 -1.66 0.25 01/12/01 0.36 -1.4 0.49 -0.13 0.29 01/19/01 0.96 -0.57 0.99 1.69 0.39 01/26/01 0.88 -1.07 3.19 2.63 0.52 02/02/01 1.62 -0.82 3.7 2.29 0.62 02/09/01 1.73 -3.77 2.91 -0.34 0.69 02/16/01 1.46 -5.07 5.4 -1.35 0.77 02/23/01 1.62 -8.22 -1.09 -5.57 0.88 03/02/01 2.32 -7.98 -1.19 -6.33 0.99 03/09/01 2.6 -7.18 -1.83 -6.39 1.11 03/16/01 3.32 -14.53 -8.4 -12.68 1.22 03/23/01 3.34 -15.35 -8.07 -13.49 1.31 03/30/01 3.03 -13.67 -6.5 -11.85 1.39 04/06/01 3.41 -12.43 -9.77 -14.27 1.54 04/13/01 2.52 -10.82 -5.52 -10.09 1.59 04/20/01 2.51 -8.72 -3.08 -5.57 1.72 04/27/01 2.51 -8.14 0.54 -4.8 1.77 05/04/01 3.44 -7.15 2.43 -3.7 1.88 05/11/01 2.29 -8.42 1.32 -5.29 1.95 05/18/01 2.92 -8.15 5.28 -1.76 2.05 05/25/01 2.64 -9.07 5.79 -2.83 2.05 06/01/01 3.42 -11.45 4.38 -3.99 2.18 06/08/01 3.56 -11.18 6.47 -3.66 2.24 06/15/01 4.14 -13.96 3.08 -7.52 2.35 06/22/01 4.72 -14.63 1.75 -6.69 2.44 06/29/01 3.62 -14.87 6.96 -6.7 2.47
1 === 6 MARKET OVERVIEW Continued UNEMPLOYMENT HITS HIGHEST LEVEL SINCE 1998; INFLATION REMAINS LOW. - -------------------------------------------------------------------------------- Job losses have affected almost every industry, which means that it may be difficult for the economy to rebound quickly. - -------------------------------------------------------------------------------- For much of 2000, the main concern about unemployment was that it had fallen so low--under 4% --that it might help bring on inflation. That fear has now been replaced by its opposite: concern that unemployment may be rising rapidly. As of the report date, unemployment was at its highest level since 1998, and was more than half a percent above the notable lows of just seven months earlier. Among economic forecasters, the consensus is that unemployment is likely to keep on rising as the economy softens and companies put into effect the layoffs they announced earlier this year. On a positive note, the soft economy and falling interest rates suggest that the risk of inflation is currently very low. Employers continue to benefit from strong worker productivity, which has helped control labor costs, and consumer prices have been relatively stable. At the same time, consumers are facing steep increases in gas and energy prices. Economists will be keeping a sharp eye on these prices throughout the summer as demand for these resources rises. ECONOMIC FACTORS AND THEIR EFFECTS ON THESE FUNDS. - -------------------------------------------------- The following charts show recent figures for several common measures of the state of the U.S. economy and the interest rate environment. While the relationship of each of these factors to the performance of the funds is complex, the captions over each chart and the discussion above include analysis of how we believe these factors may have influenced market behavior during the reporting period. REAL GDP GROWTH Annualized growth rate for each quarter shown The U.S. economy has grown steadily for more than 10 years, but has slowed in each of the last four quarters. Real GDP grew just 0.7% in the second quarter of 2001, its lowest level since 1993. [REAL GDP GROWTH BAR GRAPH] Q3 1991 1.3 Q4 1991 2.5 Q1 1992 3.8 Q2 1992 3.8 Q3 1992 3.1 Q4 1992 5.4 Q1 1993 0.1 Q2 1993 2.5 Q3 1993 1.8 Q4 1993 6.2 Q1 1994 3.4 Q2 1994 5.7 Q3 1994 2.2 Q4 1994 5 Q1 1995 1.5 Q2 1995 0.8 Q3 1995 3.1 Q4 1995 3.2 Q1 1996 2.9 Q2 1996 6.8 Q3 1996 2 Q4 1996 4.6 Q1 1997 4.4 Q2 1997 5.9 Q3 1997 4.2 Q4 1997 2.8 Q1 1998 6.1 Q2 1998 2.2 Q3 1998 4.1 Q4 1998 6.7 Q1 1999 3.1 Q2 1999 1.7 Q3 1999 4.7 Q4 1999 8.3 Q1 2000 2.3 Q2 2000 5.7 Q3 2000 1.3 Q4 2000 1.9 Q1 2001 1.3 Q2 2001 0.7
Gross domestic product (GDP), a broad measure of the goods and services produced in the United States during a given time period, is a prime indicator of the health of the country's economy. Typically, investors see increases in GDP as a positive, since it indicates stronger demand, production and corporate earnings. The figures shown here are adjusted for inflation. Data source: Bloomberg L.P. 2 === 7 STOCKS TUMBLE WHILE BONDS POST HEALTHY RETURNS. [PHOTO OF HUNDRED DOLLAR BILL] The dramatic decline of equity markets during the reporting period left stocks in bear market territory for the first time in years. In the U.S. as well as overseas, stocks of all sizes posted negative returns for the period. The biggest declines were in the technology sector, where the dot-com boom of the past several years had driven market valuations to historic highs. As many of these new Internet start-ups began to down-size or go under, the technology sector collapsed, with the Nasdaq composite index losing more than a third of its value from January to April of this year. Stocks did rebound somewhat as the period came to a close, with most major indices recovering some of the ground lost earlier in the year. The bond market continued to perform relatively strongly, with positive returns for the report period. Bonds benefited from the U.S. Treasury's decision to - -------------------------------------------------------------------------------- The Fed's interest rate cuts, while potentially healthy for the economy overall, drove down yields for money market funds. - -------------------------------------------------------------------------------- U.S. UNEMPLOYMENT RATE Adjusted for seasonal variations Unemployment hit a three-decade low of 3.9% in April 2000. At the close of the reporting period, unemployment reached 4.5%, its highest level since 1998. [U.S. UNEMPLOYMENT RATE LINE GRAPH] Jun-91 6.9 Jul-91 6.8 Aug-91 6.9 Sep-91 6.9 Oct-91 7 Nov-91 7 Dec-91 7.3 Jan-92 7.3 Feb-92 7.4 Mar-92 7.4 Apr-92 7.4 May-92 7.6 Jun-92 7.8 Jul-92 7.7 Aug-92 7.6 Sep-92 7.6 Oct-92 7.3 Nov-92 7.4 Dec-92 7.4 Jan-93 7.3 Feb-93 7.1 Mar-93 7 Apr-93 7.1 May-93 7.1 Jun-93 7 Jul-93 6.9 Aug-93 6.8 Sep-93 6.7 Oct-93 6.8 Nov-93 6.6 Dec-93 6.5 Jan-94 6.8 Feb-94 6.6 Mar-94 6.5 Apr-94 6.4 May-94 6.1 Jun-94 6.1 Jul-94 6.3 Aug-94 6 Sep-94 5.8 Oct-94 5.8 Nov-94 5.6 Dec-94 5.5 Jan-95 5.6 Feb-95 5.4 Mar-95 5.3 Apr-95 5.8 May-95 5.8 Jun-95 5.6 Jul-95 5.6 Aug-95 5.7 Sep-95 5.6 Oct-95 5.5 Nov-95 5.7 Dec-95 5.6 Jan-96 5.6 Feb-96 5.5 Mar-96 5.6 Apr-96 5.5 May-96 5.6 Jun-96 5.3 Jul-96 5.5 Aug-96 5.1 Sep-96 5.2 Oct-96 5.2 Nov-96 5.3 Dec-96 5.4 Jan-97 5.3 Feb-97 5.3 Mar-97 5.1 Apr-97 5 May-97 4.7 Jun-97 5 Jul-97 4.7 Aug-97 4.9 Sep-97 4.7 Oct-97 4.7 Nov-97 4.6 Dec-97 4.7 Jan-98 4.5 Feb-98 4.6 Mar-98 4.6 Apr-98 4.3 May-98 4.3 Jun-98 4.5 Jul-98 4.5 Aug-98 4.5 Sep-98 4.5 Oct-98 4.5 Nov-98 4.4 Dec-98 4.3 Jan-99 4.3 Feb-99 4.4 Mar-99 4.2 Apr-99 4.3 May-99 4.2 Jun-99 4.3 Jul-99 4.3 Aug-99 4.2 Sep-99 4.2 Oct-99 4.1 Nov-99 4.1 Dec-99 4.1 Jan-00 4 Feb-00 4.1 Mar-00 4.1 Apr-00 3.9 May-00 4.1 Jun-00 4 Jul-00 4 Aug-00 4.1 Sep-00 3.9 Oct-00 3.9 Nov-00 4 Dec-00 4 Jan-01 4.2 Feb-01 4.2 Mar-01 4.3 Apr-01 4.5 May-01 4.4 Jun-01 4.5
This measures the portion of the U.S. labor force that is unemployed and is either seeking a job or waiting to return to one. Low unemployment often accompanies prosperity and is generally a positive factor for investors, although very low unemployment may boost inflation as employers raise pay to compete for workers. Rising unemployment may mean a softening economy. Data source: Bloomberg L.P. MEASURES OF INFLATION Annualized figures for the Consumer Price Index (monthly) and Employment Cost Index (quarterly) CPI was up 3.2% for the 12 months ended June 30, 2001 (2.7% if food and energy are excluded). ECI rose 3.9% for the 12 months ended June 30, 2001. [MEASURES OF INFLATION LINE GRAPH]
Date CPI ECI Jun-91 4.7 4.6 Jul-91 4.4 4.6 Aug-91 3.8 4.6 Sep-91 3.4 4.3 Oct-91 2.9 4.3 Nov-91 3 4.3 Dec-91 3.1 4.3 Jan-92 2.6 4.3 Feb-92 2.8 4.3 Mar-92 3.2 4 Apr-92 3.2 4 May-92 3 4 Jun-92 3.1 3.6 Jul-92 3.2 3.6 Aug-92 3.1 3.6 Sep-92 3 3.5 Oct-92 3.2 3.5 Nov-92 3 3.5 Dec-92 2.9 3.5 Jan-93 3.3 3.5 Feb-93 3.2 3.5 Mar-93 3.1 3.5 Apr-93 3.2 3.5 May-93 3.2 3.5 Jun-93 3 3.6 Jul-93 2.8 3.6 Aug-93 2.8 3.6 Sep-93 2.7 3.6 Oct-93 2.8 3.6 Nov-93 2.7 3.6 Dec-93 2.7 3.5 Jan-94 2.5 3.5 Feb-94 2.5 3.5 Mar-94 2.5 3.2 Apr-94 2.4 3.2 May-94 2.3 3.2 Jun-94 2.5 3.2 Jul-94 2.8 3.2 Aug-94 2.9 3.2 Sep-94 3 3.2 Oct-94 2.6 3.2 Nov-94 2.7 3.2 Dec-94 2.7 3 Jan-95 2.8 3 Feb-95 2.9 3 Mar-95 2.9 2.9 Apr-95 3.1 2.9 May-95 3.2 2.9 Jun-95 3 2.9 Jul-95 2.8 2.9 Aug-95 2.6 2.9 Sep-95 2.5 2.7 Oct-95 2.8 2.7 Nov-95 2.6 2.7 Dec-95 2.5 2.7 Jan-96 2.7 2.7 Feb-96 2.7 2.7 Mar-96 2.8 2.8 Apr-96 2.9 2.8 May-96 2.9 2.8 Jun-96 2.8 2.9 Jul-96 3 2.9 Aug-96 2.9 2.9 Sep-96 3 2.8 Oct-96 3 2.8 Nov-96 3.3 2.8 Dec-96 3.3 2.9 Jan-97 3 2.9 Feb-97 3 2.9 Mar-97 2.8 2.9 Apr-97 2.5 2.9 May-97 2.2 2.9 Jun-97 2.3 2.8 Jul-97 2.2 2.8 Aug-97 2.2 2.8 Sep-97 2.2 3 Oct-97 2.1 3 Nov-97 1.8 3 Dec-97 1.7 3.3 Jan-98 1.6 3.3 Feb-98 1.4 3.3 Mar-98 1.4 3.3 Apr-98 1.5 3.3 May-98 1.7 3.3 Jun-98 1.6 3.5 Jul-98 1.7 3.5 Aug-98 1.7 3.5 Sep-98 1.4 3.7 Oct-98 1.4 3.7 Nov-98 1.5 3.7 Dec-98 1.6 3.4 Jan-99 1.7 3.4 Feb-99 1.7 3.4 Mar-99 1.8 3 Apr-99 2.3 3 May-99 2.1 3 Jun-99 2 3.2 Jul-99 2.1 3.2 Aug-99 2.3 3.2 Sep-99 2.6 3.1 Oct-99 2.6 3.1 Nov-99 2.6 3.1 Dec-99 2.7 3.4 Jan-00 2.7 3.4 Feb-00 3.2 3.4 Mar-00 3.8 4.3 Apr-00 3.1 4.3 May-00 3.2 4.3 Jun-00 3.7 4.4 Jul-00 3.7 4.4 Aug-00 3.4 4.4 Sep-00 3.5 4.3 Oct-00 3.4 4.3 Nov-00 3.4 4.3 Dec-00 3.4 4.1 Jan-01 3.7 4.1 Feb-01 3.5 4.1 Mar-01 2.9 4.1 Apr-01 3.3 4.1 May-01 3.6 4.1 Jun-01 3.2 3.9
The Consumer Price Index (CPI) tracks changes in the cost of goods and services and is the most common measure of inflation. The Employment Cost Index (ECI) measures the cost of employing workers, including benefits costs. Financial markets are very sensitive to increases in inflation because of the potentially negative impact on corporate earnings, investors and consumers. Data source: Bloomberg L.P. 3 === 8 MARKET OVERVIEW Continued use part of the national budget surplus to buy back its bonds. This reduced supply and helped increase returns on current bond investments. Bond performance was further enhanced as investor demand for fixed income securities increased, boosting prices for most bonds. The Fed's reduction of short-term interest rates also helped to lift bond prices. On the other hand, money market yields were hurt by the Fed's rate cuts. The rate cuts had the direct effect of reducing yields for money market investors. ON THE HORIZON: SLOWER GROWTH. While recent evidence confirms that the economy has indeed slowed and there has been much talk in the press of a possible recession, it is still too soon to say whether the economy will go into a downturn. The Fed has already demonstrated the extent of its concern about the economy through its rate reductions, and it may cut rates yet again if it believes that doing so would help the economy. - -------------------------------------------------------------------------------- The threat of recession also added momentum for President Bush's tax-cut proposal, which passed Congress before the close of the report period. - -------------------------------------------------------------------------------- Going forward, we will be watching to see if the combination of lower short-term rates and the tax cut will provide the necessary stimulus to avoid an economic downturn and will set the stage for continued growth (even slow growth) during the second half of the year. YIELDS OF U.S. TREASURY SECURITIES Effective yields of ten-year and five-year Treasuries With its buyback program, the Treasury emerged as a major customer for its own bonds, driving prices up (and yields down) on long-term Treasuries. [YIELDS OF U.S. TREASURY SECURITIES LINE GRAPH]
Date 5 Yr 10 Yr Jun-91 7.88 8.23 Jul-91 7.74 8.15 Aug-91 7.34 7.82 Sep-91 6.91 7.45 Oct-91 6.74 7.46 Nov-91 6.48 7.38 Dec-91 5.93 6.7 Jan-92 6.43 7.27 Feb-92 6.56 7.25 Mar-92 6.92 7.53 Apr-92 6.88 7.58 May-92 6.6 7.32 Jun-92 6.27 7.12 Jul-92 5.82 6.71 Aug-92 5.58 6.6 Sep-92 5.32 6.35 Oct-92 5.89 6.79 Nov-92 6.22 6.94 Dec-92 5.99 6.69 Jan-93 5.55 6.36 Feb-93 5.21 6.02 Mar-93 5.24 6.02 Apr-93 5.11 6.01 May-93 5.37 6.15 Jun-93 5.05 5.78 Jul-93 5.15 5.81 Aug-93 4.79 5.45 Sep-93 4.77 5.38 Oct-93 4.85 5.43 Nov-93 5.16 5.82 Dec-93 5.21 5.79 Jan-94 5.02 5.64 Feb-94 5.57 6.13 Mar-94 6.23 6.74 Apr-94 6.64 7.04 May-94 6.76 7.15 Jun-94 6.95 7.32 Jul-94 6.73 7.11 Aug-94 6.8 7.17 Sep-94 7.28 7.6 Oct-94 7.49 7.81 Nov-94 7.79 7.91 Dec-94 7.83 7.82 Jan-95 7.51 7.58 Feb-95 7.04 7.2 Mar-95 7.07 7.2 Apr-95 6.88 7.06 May-95 6.05 6.28 Jun-95 5.97 6.2 Jul-95 6.16 6.43 Aug-95 6.07 6.28 Sep-95 6.02 6.18 Oct-95 5.81 6.02 Nov-95 5.52 5.74 Dec-95 5.38 5.57 Jan-96 5.24 5.58 Feb-96 5.73 6.1 Mar-96 6.09 6.33 Apr-96 6.41 6.67 May-96 6.63 6.85 Jun-96 6.46 6.71 Jul-96 6.57 6.79 Aug-96 6.73 6.94 Sep-96 6.46 6.7 Oct-96 6.07 6.34 Nov-96 5.83 6.04 Dec-96 6.21 6.42 Jan-97 6.25 6.49 Feb-97 6.39 6.55 Mar-97 6.75 6.9 Apr-97 6.57 6.72 May-97 6.5 6.66 Jun-97 6.38 6.5 Jul-97 5.9 6.01 Aug-97 6.22 6.34 Sep-97 5.99 6.1 Oct-97 5.71 5.83 Nov-97 5.84 5.87 Dec-97 5.71 5.74 Jan-98 5.38 5.51 Feb-98 5.59 5.62 Mar-98 5.62 5.65 Apr-98 5.64 5.67 May-98 5.55 5.55 Jun-98 5.47 5.45 Jul-98 5.5 5.49 Aug-98 4.8 4.98 Sep-98 4.22 4.42 Oct-98 4.23 4.61 Nov-98 4.48 4.71 Dec-98 4.54 4.65 Jan-99 4.55 4.65 Feb-99 5.22 5.29 Mar-99 5.1 5.24 Apr-99 5.21 5.35 May-99 5.58 5.62 Jun-99 5.65 5.78 Jul-99 5.79 5.9 Aug-99 5.87 5.97 Sep-99 5.75 5.88 Oct-99 5.96 6.02 Nov-99 6.11 6.19 Dec-99 6.34 6.44 Jan-00 6.68 6.67 Feb-00 6.6 6.41 Mar-00 6.31 6 Apr-00 6.54 6.21 May-00 6.52 6.27 Jun-00 6.19 6.03 Jul-00 6.15 6.03 Aug-00 5.97 5.73 Sep-00 5.85 5.8 Oct-00 5.81 5.75 Nov-00 5.43 5.47 Dec-00 4.98 5.11 Jan-01 4.77 5.11 Feb-01 4.66 4.9 Mar-01 4.56 4.92 Apr-01 4.89 5.34 May-01 4.91 5.38 Jun-01 4.95 5.41
Yields, or interest rates, represent the cost of borrowing money. Rapid economic growth or the expectation of higher inflation can drive rates up, while the opposite conditions can push rates down. Data source: Bloomberg L.P. SHORT-TERM RATES Effective yields of 90-day commercial paper and three-month U.S. Treasury bills. In step with the Federal Reserve Bank cutting short-term rates six times, 90-day commercial paper and three-month T-bills declined during the period. [SHORT-TERM RATES LINE GRAPH]
Weekly 3 Mo T Bill 90-Day 12/31/00 5.9 6.28 01/05/01 5.12 5.85 01/12/01 5.32 5.48 01/19/01 5.24 5.43 01/26/01 5.17 5.34 02/02/01 5.09 5.2 02/09/01 5.05 5.21 02/16/01 4.98 5.16 02/23/01 4.89 5.14 03/02/01 4.84 4.9 03/09/01 4.71 4.89 03/16/01 4.53 4.76 03/23/01 4.34 4.65 03/30/01 4.29 4.73 04/06/01 3.93 4.63 04/13/01 4 4.58 04/20/01 3.76 4.24 04/27/01 3.85 4.17 05/04/01 3.73 4.08 05/11/01 3.74 3.89 05/18/01 3.59 3.85 05/25/01 3.66 3.81 06/01/01 3.66 3.85 06/08/01 3.64 3.73 06/15/01 3.5 3.68 06/22/01 3.44 3.56 06/29/01 3.66 3.63
Typically, the yields offered by commercial paper and three-month T-bills move in the same direction, and broadly reflect market interest rates and the Federal Funds Rate. The spread between these two investments' yields reflects investors' sense of how risky the obligations of banks and corporations are compared with lower-risk U.S. Government-backed T-bills. Data source: Bloomberg L.P. 4 === 9 SCHWAB INSTITUTIONAL ADVANTAGE MONEY FUND(R) [PHOTO OF MIKE NEITZKE AND LINDA KLINGMAN] "Throughout the reporting period we anticipated further easing by the Fed, and positioned the fund to take advantage of falling interest rates by investing in securities with longer maturities." Portfolio Managers Linda Klingman and Mike Neitzke LINDA KLINGMAN, a vice president of the investment advisor and senior portfolio manager, has overall responsibility for the management of the fund. She joined the firm in 1990 and has nearly 15 years experience managing money market funds. MIKE NEITZKE, a portfolio manager, has day-to-day responsibility for management of the fund. Prior to joining the investment adviser in March 2001, he worked for more than 15 years in the financial industry as a portfolio manager. TICKER SYMBOL SWIXX - -------------------------------------------------------------------------------- The fund seeks the highest current income consistent with stability of capital and liquidity. - -------------------------------------------------------------------------------- THIS FUND WAS CREATED FOR RETIREMENT PLANS, PLAN PARTICIPANTS AS WELL AS OTHER INSTITUTIONAL INVESTORS INVESTING ON THEIR OWN BEHALF OR AS A FIDUCIARY, AGENT OR CUSTODIAN. MANAGER'S PERSPECTIVE SHORT-TERM INTEREST RATES DECLINED SHARPLY DURING THE PERIOD, IN STEP WITH THE FED'S RATE CUTS. The six rate cuts, all within the first half of 2001, put the Federal Funds rate at its lowest level since 1994. These cuts had the direct effect of reducing yields for money fund investors. We can see this by noting the fall of the one-year LIBOR, a key benchmark for money market security yields, which began the reporting period at 6.0%, but by the end of the period had dropped to 4.2%. BY LENGTHENING ITS MATURITY, WE WERE ABLE TO DELAY THE EFFECTS OF FALLING YIELDS. Because we anticipated that the Fed would cut rates, we invested in securities with longer maturities which enabled us to lock in somewhat higher yields. While the fund may gradually have to replace these securities with issues paying lower yields, this move helped us maintain competitive yields in a falling rate environment. At the close of the report period the fund's dollar-weighted average maturity was 63 days -- slightly longer than the average of its peer group. WHILE WE DID NOT FOCUS ON ANY SPECIFIC SECURITY TYPE, WE DID INCREASE THE FUND'S POSITION IN CDS ISSUED BY EUROPEAN BANKS. We felt these CDs offered superior value as compared to other money market securities during the period. 5 === 10 SCHWAB INSTITUTIONAL ADVANTAGE MONEY FUND(R) PERFORMANCE AND FUND FACTS - -------------------------------------------------------------------------------- SEVEN-DAY YIELDS 1 as of 6/30/01 - -------------------------------------------------------------------------------- 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, and that past performance is no guarantee of future results. - -------------------------------------------------------------------------------- Seven-Day Yield 3.86% - -------------------------------------------------------------------------------- Seven-Day Effective Yield 3.93% - --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- WEIGHTED AVERAGE MATURITY during the period - --------------------------------------------------------------------------------
Monthly Maturity 12/31/00 59 days 01/31/01 56 days 02/28/01 60 days 03/31/01 58 days 04/30/01 62 days 05/31/01 62 days 06/30/01 63 days
- -------------------------------------------------------------------------------- PORTFOLIO COMPOSITION 2 as of 6/30/01 - -------------------------------------------------------------------------------- All figures are shown as a percentage of the fund's investments. All of the fund's securities were in the top tier of credit quality at the time of purchase. BY SECURITY TYPE ================================================================================ [BY SECURITY TYPE PIE GRAPH] 1. 46.3% Certificates of Deposit 2. 44.6% Commercial Paper and Other Corporate Obligations 3. 3.0% Repurchase Agreements 4. 2.3% Variable-Rate Obligations 5. 2.0% Promissory Notes 6. 1.8% Bank Notes BY CREDIT QUALITY ================================================================================ [BY CREDIT QUALITY PIE GRAPH] 1. 100.0% Tier 1 1 A portion of the fund's expenses was reduced during the reporting period. Without this reduction, the fund's yields would have been lower. 2 Composition of the fund's portfolio is as of 6/30/01 and is not indicative of holdings after that date. 6 === 11 SCHWAB INSTITUTIONAL ADVANTAGE MONEY FUND(R) -- FINANCIALS ================================================================================ FINANCIAL TABLES These pages provide additional data on the fund's performance, portfolio holdings, expenses and business operations. Because this is a semiannual report, the figures for the current report period are unaudited. Two other sections of this report provide context for the data in these financials. The FINANCIAL NOTES section contains information about the fund's business structure, accounting practices and other matters, completing the data given in these tables. The final section, HOW TO READ THIS REPORT, includes guides designed to make the financials easy to read and understand. FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------------------------------------ 1/1/01- 1/1/00- 1/1/99- 1/1/98- 1/1/97- 1/1/96- 6/30/01 12/31/00 12/31/99 12/31/98 12/31/97 12/31/96 - ------------------------------------------------------------------------------------------------------------ PER-SHARE DATA ($) ============================================================================================================ Net asset value at beginning of period 1.00 1.00 1.00 1.00 1.00 1.00 -------------------------------------------------------------- Income from investment operations: Net investment income 0.02 0.06 0.05 0.05 0.05 0.05 -------------------------------------------------------------- Less distributions: Dividends from net investment income (0.02) (0.06) (0.05) (0.05) (0.05) (0.05) -------------------------------------------------------------- Net asset value at end of period 1.00 1.00 1.00 1.00 1.00 1.00 ============================================================== Total return (%) 2.49 2 6.12 4.90 5.26 5.31 5.15 RATIOS/SUPPLEMENTAL DATA (%)\ ============================================================================================================ Ratio of net operating expenses to average net assets 0.50 1 0.50 3 0.50 0.50 0.50 0.50 Expense reductions reflected in above ratio 0.18 1 0.18 0.21 0.29 0.34 0.38 Ratio of net investment income to average net assets 4.95 1 5.96 4.84 5.12 5.20 5.03 Net assets, end of period ($ x 1,000,000) 744 647 604 369 275 139
1 Annualized. 2 Not annualized. 3 Would have been 0.51% if certain non-routine expenses (proxy fees) had been included. SEE THE FINANCIAL NOTES, WHICH 7 ARE INTEGRAL TO THIS INFORMATION. ====== 12 SCHWAB INSTITUTIONAL ADVANTAGE MONEY FUND(R) -- FINANCIALS ================================================================================ PORTFOLIO HOLDINGS As of June 30, 2001; unaudited. This section shows all the securities in the fund's portfolio and their market value, as of the report date. We use the symbols below to designate certain characteristics: * Asset-backed security + Credit-enhanced security o Illiquid restricted security For fixed-rate obligations, the rate shown is the effective yield at the time of purchase, except for U.S. government coupon notes and 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. For variable-rate obligations with scheduled maturities greater than 397 days, the maturity shown is the later of the next interest rate change date or demand date. For variable-rate obligations with scheduled maturities less than 397 days, the maturity shown is the earlier of the next interest rate change date or demand date. For variable-rate obligations without demand features, the maturity shown is the next interest rate change date. The pie chart below shows the fund's major categories and the market value and cost of the securities in each category. For definitions of abbreviations and acronyms used in security descriptions, see "portfolio terms" in the glossary. ALL DOLLAR VALUES ARE IN THOUSANDS. [PIE CHART] 94.7% FIXED-RATE OBLIGATIONS Market Value: $701,121 Cost: $701,121 2.3% VARIABLE-RATE OBLIGATIONS Market Value: $17,305 Cost: $17,305 3.0% OTHER INVESTMENTS Market Value: $22,658 Cost: $22,658 ================================= 100.0% TOTAL INVESTMENTS Market Value: $741,084 Cost: $741,084
ISSUER FACE VALUE MKT. VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) ------------------------------------------------------------------------ FIXED-RATE OBLIGATIONS 94.7% of investments ------------------------------------------------------------------------ CERTIFICATES OF DEPOSIT 46.3% ======================================================================== ABBEY NATIONAL TREASURY SERVICES, PLC 5.17% 08/09/01 8,000 8,000 3.77% 09/18/01 2,000 2,000 4.20% 05/30/02 2,000 2,000 3.86% 07/22/02 3,000 3,000 AUSTRALIA & NEW ZEALAND BANKING GROUP, LTD. 3.59% 09/27/01 6,000 6,000 BANCO BILBAO VIZCAYA ARGENTARIA SA 3.64% 09/24/01 2,000 2,000 BANK OF MONTREAL 3.96% 08/16/01 4,000 4,000 BANK OF NOVA SCOTIA 4.01% 08/13/01 3,000 3,000 BANK OF SCOTLAND TREASURY SERVICES, PLC 3.99% 08/22/01 5,000 5,000 BANQUE BRUXELLES LAMBERT 5.30% 08/01/01 2,000 2,000 BARCLAYS BANK, PLC 5.10% 08/06/01 10,000 10,000 5.17% 08/09/01 1,000 1,000 3.68% 09/11/01 5,000 5,001 3.67% 09/19/01 2,000 2,000 4.43% 04/10/02 1,000 1,000 BAYERICHE HYPOVEREINSBANK, AG 5.49% 07/11/01 3,000 3,000 3.87% 08/28/01 5,000 5,001 3.85% 09/28/01 5,000 5,001 BAYERISCHE LANDESBANK GIROZENTRALE 3.72% 10/02/01 3,000 3,000 4.53% 04/11/02 5,000 4,995 BNP PARIBAS 3.94% 08/17/01 5,000 5,000 3.64% 09/24/01 5,000 5,000 3.64% 09/25/01 10,000 10,000 CANADIAN IMPERIAL BANK OF COMMERCE 4.62% 03/28/02 5,000 4,999 3.88% 07/23/02 4,000 3,999 CHASE MANHATTAN BANK USA, N.A. 4.63% 07/11/01 12,000 12,000
8 SEE THE FINANCIAL NOTES, WHICH ====== ARE INTEGRAL TO THIS INFORMATION. 13
ISSUER FACE VALUE MKT. VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) CITIBANK, N.A. 4.23% 08/01/01 5,000 5,000 4.25% 08/02/01 6,000 6,000 3.93% 08/30/01 10,000 10,000 COMMERZBANK, AG 4.25% 08/01/01 5,000 5,000 3.77% 09/13/01 2,000 2,000 CREDIT AGRICOLE INDOSUEZ 3.79% 09/07/01 7,000 7,001 CREDIT SUISSE FIRST BOSTON CORP. 4.00% 08/14/01 3,000 3,000 DEN NORSKE BANK 3.79% 09/14/01 5,000 5,000 DEUTSCHE BANK, AG 5.40% 07/05/01 2,000 2,000 4.00% 08/08/01 4,000 4,000 6.80% 09/10/01 2,000 2,000 3.84% 09/12/01 2,000 2,000 3.65% 09/19/01 2,000 2,000 3.65% 09/21/01 10,000 10,000 DEXIA BANK 4.05% 08/14/01 5,000 5,000 DRESDNER BANK 4.15% 08/08/01 1,000 1,000 3.94% 08/21/01 2,000 2,000 4.84% 08/27/01 2,000 2,000 FIRST TENNESSEE BANK, N.A. 4.26% 07/24/01 5,000 5,000 FORENINGS SPARBANKEN AB (SWEDBANK) 3.85% 08/31/01 4,000 4,000 HALIFAX, PLC 3.98% 08/23/01 2,000 2,000 3.90% 08/29/01 5,000 5,001 ING BANK, NV 4.73% 07/09/01 5,000 5,000 3.67% 09/20/01 7,000 7,000 3.62% 12/20/01 1,000 1,000 LANDESBANK BADEN WURTTEMBERG 3.91% 08/20/01 1,000 1,000 3.94% 08/21/01 2,000 2,000 3.79% 09/17/01 5,000 5,000 LLOYDS BANK TSB, PLC 4.30% 07/23/01 2,000 2,000 MERITA BANK, LTD. 3.95% 08/21/01 5,000 5,000 NATIONAL AUSTRALIA BANK, LTD. 5.36% 07/23/01 5,000 5,000 4.01% 08/17/01 4,000 4,000 NATIONAL WESTMINSTER BANK, PLC 4.70% 07/16/01 3,000 3,000 NORDDEUTSCHE LANDESBANK GIROZENTRALE 7.02% 07/10/01 2,000 2,000 3.99% 08/24/01 4,000 4,000 RABOBANK NEDERLAND, NV 5.47% 07/16/01 10,000 10,000 4.43% 04/02/02 5,000 5,005 ROYAL BANK OF CANADA 5.41% 01/22/02 5,000 5,000 4.47% 04/12/02 5,000 5,000 ROYAL BANK OF SCOTLAND 4.73% 07/06/01 11,000 11,000 3.90% 07/29/02 4,000 3,999 SOCIETE GENERALE 5.94% 07/05/01 5,000 5,000 5.40% 07/09/01 7,000 7,000 4.00% 08/13/01 4,000 4,000 TORONTO DOMINION BANK 4.75% 07/18/01 9,000 9,000 4.11% 05/10/02 1,000 1,000 UBS, AG 3.97% 08/03/01 4,000 4,000 6.72% 10/09/01 2,000 2,000 US BANK, N.A. 4.30% 07/23/01 5,000 5,000 WESTDEUTSCHE LANDESBANK GIROZENTRALE 4.22% 07/31/01 7,000 7,000 3.85% 09/24/01 2,000 2,001 3.66% 12/21/01 2,000 2,000 -------- 343,003 COMMERCIAL PAPER & OTHER CORPORATE OBLIGATIONS 44.6% ================================================================================ AB SPINTAB 4.70% 07/17/01 5,000 4,990 * AMSTERDAM FUNDING CORP. 4.03% 07/02/01 7,000 6,999 3.89% 08/06/01 3,000 2,988
SEE THE FINANCIAL NOTES, WHICH 9 ARE INTEGRAL TO THIS INFORMATION. ====== 14 SCHWAB INSTITUTIONAL ADVANTAGE MONEY FUND(R) -- FINANCIALS ================================================================================ PORTFOLIO HOLDINGS Continued As of June 30, 2001; unaudited.
ISSUER FACE VALUE MKT. VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) * APRECO, INC. 4.01% 07/26/01 4,000 3,989 3.93% 07/30/01 1,000 997 * ASSET SECURITIZATION COOPERATIVE CORP. 3.88% 07/27/01 2,000 1,994 ASSOCIATES FIRST CAPITAL, B.V. 3.92% 07/20/01 1,000 998 3.75% 08/24/01 7,000 6,961 *+ ATLANTIS ONE FUNDING CORP. 3.75% 09/26/01 5,000 4,955 BANC ONE FINANCIAL CORP. 3.81% 09/12/01 4,000 3,969 * BAVARIA UNIVERSAL FUNDING CORP. 3.71% 09/20/01 3,241 3,214 3.66% 09/25/01 2,143 2,124 4.72% 10/19/01 1,000 986 BEAR STEARNS COMPANIES, INC. 4.25% 07/26/01 2,000 1,994 * BETA FINANCE, INC. 5.27% 02/25/02 1,000 1,000 4.32% 05/09/02 5,000 5,000 4.20% 05/13/02 2,000 1,998 CBA (DELAWARE) FINANCE, INC. 4.00% 08/07/01 1,000 996 3.98% 08/09/01 4,000 3,983 * CC (USA), INC. 5.35% 07/23/01 5,000 4,984 * CC (USA), INC., 144A 4.20% 05/10/02 3,000 3,003 CIT GROUP HOLDINGS, INC. 4.64% 07/11/01 5,000 4,994 * CONCORD MINUTEMEN CAPITAL CO., L.L.C. Series A 4.75% 07/13/01 5,000 4,992 * CORPORATE RECEIVABLES CORP. 3.79% 09/13/01 5,000 4,961 * DAKOTA CP NOTES OF CITIBANK CREDIT CARD ISSUANCE TRUST 3.99% 07/24/01 3,000 2,992 *+ EDISON ASSET SECURITIZATION CORP., L.L.C. 4.79% 07/03/01 15,000 14,996 3.85% 08/29/01 1,000 994 *+ ENTERPRISE FUNDING CORP. 3.95% 08/28/01 3,000 2,981 4.71% 09/27/01 5,000 4,944 FCE BANK, PLC 3.73% 07/27/01 5,000 4,987 FORD MOTOR CREDIT 5.45% 07/06/01 1,000 999 3.75% 08/20/01 5,000 4,974 3.85% 08/31/01 6,000 5,961 *+ FORRESTAL FUNDING MASTER TRUST 4.00% 07/11/01 2,000 1,998 3.99% 07/19/01 6,000 5,988 4.27% 07/24/01 4,000 3,989 FORTIS FUNDING, L.L.C. 4.30% 07/17/01 10,000 9,981 * GALAXY FUNDING, INC. 4.01% 08/23/01 6,000 5,965 GE CAPITAL INTERNATIONAL FUNDING, INC. 4.74% 07/10/01 20,000 19,977 GE FINANCIAL ASSURANCE HOLDINGS, INC. 3.89% 07/26/01 3,000 2,992 GENERAL ELECTRIC CAPITAL CORP. 4.30% 07/18/01 12,000 11,976 GENERAL MOTORS ACCEPTANCE CORP. 3.90% 08/22/01 10,000 9,944 3.81% 09/12/01 4,000 3,969 *+ GIRO FUNDING US CORP. 4.75% 07/11/01 4,000 3,995 4.76% 07/25/01 3,000 2,991 *o GREENWICH FUNDING CORP. 4.01% 07/23/01 5,000 4,988 * GREYHAWK FUNDING, L.L.C. 3.74% 07/27/01 2,000 1,995 HERTZ CORP. 3.95% 07/20/01 5,000 4,990 *+ INTREPID FUNDING MASTER TRUST 4.76% 07/06/01 7,000 6,995 J.P. MORGAN CHASE & CO. 3.97% 08/07/01 2,000 1,992 3.98% 08/08/01 10,000 9,958 3.73% 10/04/01 5,000 4,951 3.73% 10/05/01 5,000 4,951
10 SEE THE FINANCIAL NOTES, WHICH ====== ARE INTEGRAL TO THIS INFORMATION. 15
ISSUER FACE VALUE MKT. VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) * JUPITER SECURITIZATION CORP. 4.01% 07/02/01 1,196 1,196 4.35% 07/16/01 1,102 1,100 4.28% 07/30/01 1,000 997 3.63% 09/24/01 7,283 7,221 *+ KITTY HAWK FUNDING CORP. 3.90% 09/14/01 1,081 1,072 LANDESBANK SCHLESWIG-HOLSTEIN GIROZENTRALE 5.77% 12/19/01 5,000 4,870 * LEXINGTON PARKER CAPITAL CORP. 5.39% 07/25/01 5,000 4,983 * LINKS FINANCE, L.L.C. 4.00% 08/23/01 5,000 4,971 * MONT BLANC CAPITAL CORP. 4.34% 07/18/01 5,000 4,990 MORGAN STANLEY, DEAN WITTER, DISCOVER & CO. 5.17% 08/10/01 4,000 3,978 3.61% 09/28/01 1,000 991 * NEW CENTER ASSET TRUST 3.90% 08/02/01 5,000 4,983 * NEWCASTLE CERTIFICATES PROGRAM 3.75% 07/30/01 1,000 997 SANTANDER FINANCE (DELAWARE), INC. 5.17% 08/06/01 5,000 4,975 * SIGMA FINANCE, INC. 5.19% 08/10/01 1,000 994 3.73% 09/05/01 5,000 4,966 4.56% 10/02/01 6,000 5,931 4.60% 10/11/01 2,000 1,975 * SIGMA FINANCE, INC., 144A 3.92% 07/22/02 2,000 2,004 * STELLAR FUNDING GROUP, INC. 4.75% 07/12/01 2,000 1,997 *+ TRIPLE-A ONE FUNDING CORP. 4.00% 07/13/01 5,000 4,993 *+ TULIP FUNDING CORP. 3.94% 08/31/01 5,000 4,967 * VARIABLE FUNDING CAPITAL CORP. 3.92% 07/19/01 1,000 998 4.18% 08/08/01 3,000 2,987 --------- 330,618 PROMISSORY NOTES 2.0% ===================================================================== o THE GOLDMAN SACHS GROUP, INC. 5.63% 07/17/01 1,500 1,500 5.00% 08/24/01 3,000 3,000 5.04% 08/27/01 4,000 4,000 4.05% 11/07/01 6,000 6,000 -------- 14,500 BANK NOTES 1.8% ===================================================================== BANK OF AMERICA, N.A. 5.30% 07/23/01 6,000 6,000 BANK OF NEW YORK 4.27% 04/30/02 2,000 2,000 LASALLE NATIONAL BANK 5.10% 08/01/01 5,000 5,000 -------- 13,000 - -------------------------------------------------------------------------------- VARIABLE-RATE OBLIGATIONS 2.3% of investments - -------------------------------------------------------------------------------- + ASSET PARTNERS, INC. RB Series 1997 3.90% 07/07/01 3,620 3,620 + BMC SPECIAL CARE FACILITIES FINANCING AUTHORITY OF THE CITY OF MONTGOMERY, ALABAMA Taxable RB (Montgomery Baptist Outreach Services Corp. Project) 1997B 3.82% 07/07/01 2,200 2,200 + CITY OF NEW BRITAIN, CONNECTICUT GO, 144A 3.83% 07/07/01 6,300 6,300 + NEW YORK CITY IDA Taxable Industrial Revenue Refunding Bonds (1997 Allway Tools, Inc. Project) 3.88% 07/07/01 185 185 * SIGMA FINANCE, INC., 144A 4.00% 07/16/01 5,000 5,000 -------- 17,305
SEE THE FINANCIAL NOTES, WHICH 11 ARE INTEGRAL TO THIS INFORMATION. ====== 16 SCHWAB INSTITUTIONAL ADVANTAGE MONEY FUND(R) -- FINANCIALS ================================================================================ - -------------------------------------------------------------------------------- OTHER INVESTMENTS 3.0% of investments - --------------------------------------------------------------------------------
MATURITY VALUE MKT. VALUE SECURITY ($ x 1,000) ($ x 1,000) REPURCHASE AGREEMENTS 3.0% ============================================================================= CREDIT SUISSE FIRST BOSTON CORP. Tri-Party Repurchase Agreement Collateralized by U.S. Government Securities, 4.12%, issued 06/29/01, due 07/02/01 16,664 16,658 CREDIT SUISSE FIRST BOSTON CORP. Tri-Party Repurchase Agreement Collateralized by U.S. Government Securities, 3.94%, issued 5/10/01, due 07/07/01 6,038 6,000 -------- 22,658
================================================================================ END OF PORTFOLIO HOLDINGS. FOR TOTALS, PLEASE SEE THE FIRST PAGE OF HOLDINGS FOR THIS FUND. 12 SEE THE FINANCIAL NOTES, WHICH ====== ARE INTEGRAL TO THIS INFORMATION. 17 Statement of ASSETS AND LIABILITIES As of June 30, 2001; unaudited. All numbers x 1,000 except NAV. ASSETS ================================================================================ Investments, at market value $741,084 a Receivables: Fund shares sold 5,395 Interest 3,848 Prepaid expenses + 13 ------------ TOTAL ASSETS 750,340 LIABILITIES ================================================================================ Payables: Fund shares redeemed 2,393 Dividends to shareholders 1,188 Investments bought 3,000 Investment adviser and administrator fees 14 Transfer agent and shareholder service fees 13 Accrued expenses + 39 ------------ TOTAL LIABILITIES 6,647 NET ASSETS ================================================================================ TOTAL ASSETS 750,340 TOTAL LIABILITIES - 6,647 ------------ NET ASSETS $743,693 NET ASSETS BY SOURCE Capital received from investors 743,694 Net realized capital losses (1)
NET ASSET VALUE (NAV) SHARES NET ASSETS (DIVIDE) OUTSTANDING = NAV $743,693 743,751 $1.00 a Includes illiquid restricted securities worth $19,488, or 2.63% of the fund's investments. The amortized cost for the fund's securities was $741,084. FEDERAL TAX DATA =================================================== COST BASIS OF PORTFOLIO $741,084 UNUSED CAPITAL LOSSES: Expires 12/31 of: Loss amount 2004 $3
SEE THE FINANCIAL NOTES, WHICH 13 ARE INTEGRAL TO THIS INFORMATION. ====== 18 SCHWAB INSTITUTIONAL ADVANTAGE MONEY FUND(R) -- FINANCIALS ================================================================================ Statement of OPERATIONS For January 1, 2001 through June 30, 2001; unaudited. All numbers x 1,000. INVESTMENT INCOME ================================================================================ Interest $19,600 NET REALIZED GAINS ================================================================================ Net realized gains on investments sold 2 EXPENSES ================================================================================ Investment adviser and administrator fees 1,367 a Transfer agent and shareholder service fees 881 b Trustees' fees 9 c Custodian and portfolio accounting fees 107 Professional fees 12 Registration fees 41 Shareholder reports 15 Other expenses + 4 ------------ Total expenses 2,436 Expense reduction - 637 d ------------ NET EXPENSES 1,799 INCREASE IN NET ASSETS FROM OPERATIONS ================================================================================ TOTAL INVESTMENT INCOME 19,600 NET EXPENSES - 1,799 ------------ NET INVESTMENT INCOME 17,801 NET REALIZED GAINS + 2 ------------ INCREASE IN NET ASSETS FROM OPERATIONS $17,803
a Calculated on a graduated basis as a percentage of average daily net assets: 0.38% of the first $1 billion, 0.35% over $1 billion, 0.32% over $10 billion, 0.30% over $20 billion and 0.27% over $40 billion. Prior to June 1, 2001, these percentages were 0.38% of the first $1 billion, 0.35% over $1 billion, 0.32% over $10 billion and 0.30% over $20 billion. b Calculated as a percentage of average daily net assets: for transfer agent services, 0.05% of the fund's assets; for shareholder services, 0.17% of the fund's assets. Prior to June 1, 2001, the percentage for shareholder services was 0.20%. c For the fund's independent trustees only. d This reduction was made by the investment adviser (CSIM). It reflects a guarantee by CSIM and the transfer agent and shareholder service agent (Schwab) to limit the operating expenses of this fund through at least April 30, 2002 to 0.50% of average daily net assets. This limit doesn't include interest, taxes, certain non-routine and money fund insurance expenses, if any. 14 SEE THE FINANCIAL NOTES, WHICH ====== ARE INTEGRAL TO THIS INFORMATION. 19 Statements Of CHANGES IN NET ASSETS For the current and prior reporting periods. All numbers x 1,000. Figures for 1/1/01 - 6/30/01 are unaudited. OPERATIONS ================================================================================ 1/1/01-6/30/01 1/1/00 - 12/31/00 Net investment income $17,801 $36,182 Net realized gains + 2 -- ----------------------------------- INCREASE IN NET ASSETS FROM OPERATIONS 17,803 36,182 DISTRIBUTIONS PAID - -------------------------------------------------------------------------------- Dividends from net investment income $17,801 $36,182 TRANSACTIONS IN FUND SHARES a ================================================================================ Shares sold 452,988 1,084,512 Shares reinvested 16,467 35,753 Shares redeemed + (373,149) (1,076,597) ----------------------------------- NET INCREASE 96,306 43,668 NET ASSETS ================================================================================ Beginning of period 647,385 603,717 Total increase + 96,308 43,668 b ----------------------------------- END OF PERIOD $743,693 $647,385
a Because all transactions in this section took place at $1.00 a share, figures for share quantities are the same as for dollars. b Represents the changes in net assets from operations plus the changes in value of transactions in fund shares, minus distributions paid. SEE THE FINANCIAL NOTES, WHICH 15 ARE INTEGRAL TO THIS INFORMATION. ====== 20 SCHWAB RETIREMENT MONEY FUND(R) [PHOTO OF MIKE NEITZKE AND LINDA KLINGMAN] "Falling interest rates made it a difficult environment for money funds, but we were able to keep yields competitive by lengthening the maturity of the fund's portfolio." Portfolio Managers Linda Klingman and Mike Neitzke LINDA KLINGMAN, a vice president of the investment advisor and senior portfolio manager, has overall responsibility for the management of the fund. She joined the firm in 1990 and has nearly 15 years experience managing money market funds. MIKE NEITZKE, a portfolio manager, has day-to-day responsibility for management of the fund. Prior to joining the investment adviser in March 2001, he worked for more than 15 years in the financial industry as a portfolio manager. TICKER SYMBOL SWRXX - -------------------------------------------------------------------------------- The fund seeks the highest current income consistent with stability of capital and liquidity. - -------------------------------------------------------------------------------- THIS FUND WAS CREATED FOR RETIREMENT PLANS, PLAN PARTICIPANTS AS WELL AS OTHER INSTITUTIONAL INVESTORS INVESTING ON THEIR OWN BEHALF OR AS A FIDUCIARY, AGENT OR CUSTODIAN. MANAGER'S PERSPECTIVE SHORT-TERM INTEREST RATES DECLINED SHARPLY DURING THE PERIOD, IN STEP WITH THE FED'S RATE CUTS. The six rate cuts, all within the first half of 2001, put the Federal Funds rate at its lowest level since 1994. These cuts had the direct effect of reducing yields for money fund investors. We can see this by noting the fall of the one-year LIBOR, a key benchmark for money market security yields, which began the report period at 6.0%, but by the end of the period had dropped to 4.2%. BY LENGTHENING ITS MATURITY, WE WERE ABLE TO DELAY THE EFFECTS OF FALLING YIELDS. Because we anticipated that the Fed would cut rates, we invested in securities with longer maturities which enabled us to lock in somewhat higher yields. While the fund may gradually have to replace these securities with issues paying lower yields, this move helped us maintain competitive yields in a falling rate environment. At the close of the reporting period the fund's dollar-weighted average maturity was 60 days--slightly longer than the average of its peer group. WHILE WE DID NOT FOCUS ON ANY SPECIFIC SECURITY TYPE, WE DID INCREASE THE FUND'S POSITION IN CDS ISSUED BY EUROPEAN BANKS. We felt these CDs offered superior value as compared to other money market securities during the period. 16 ====== 21 PERFORMANCE AND FUND FACTS - -------------------------------------------------------------------------------- SEVEN-DAY YIELDS as of 6/30/01 - -------------------------------------------------------------------------------- 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, and that past performance is no guarantee of future results. - -------------------------------------------------------------------------------- Seven-Day Yield 3.60% - -------------------------------------------------------------------------------- Seven-Day Effective Yield 3.66% - --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- WEIGHTED AVERAGE MATURITY during the period - --------------------------------------------------------------------------------
Monthly Maturity 12/31/00 61 days 01/31/01 56 days 02/28/01 65 days 03/31/01 65 days 04/30/01 60 days 05/31/01 61 days 06/30/01 60 days
- -------------------------------------------------------------------------------- PORTFOLIO COMPOSITION 1 as of 6/30/01 - -------------------------------------------------------------------------------- All figures are shown as a percentage of the fund's investments. All of the fund's securities were in the top tier of credit quality at the time of purchase. BY SECURITY TYPE ================================================================================ [SECURITY TYPE PIE GRAPH] 1. 53.0% Commercial Paper and Other Corporate Obligations 2. 40.5% Certificates of Deposit 3. 1.9% Repurchase Agreements 4. 1.8% Promissory Notes 5. 1.4% Bank Notes 6. 1.4% Variable-Rate Obligations BY CREDIT QUALITY ================================================================================ [CREDIT QUALITY PIE GRAPH] 1. 100.0% Tier 1 1 Composition of the fund's portfolio is as of 6/30/01 and is not indicative of holdings after that date. 17 ====== 22 SCHWAB RETIREMENT MONEY FUND(R) -- FINANCIALS ================================================================================ FINANCIAL TABLES These pages provide additional data on the fund's performance, portfolio holdings, expenses and business operations. Because this is a semiannual report, the figures for the current report period are unaudited. Two other sections of this report provide context for the data in these financials. The FINANCIAL NOTES section contains information about the fund's business structure, accounting practices and other matters, completing the data given in these tables. The final section, HOW TO READ THIS REPORT, includes guides designed to make the financials easy to read and understand. FINANCIAL HIGHLIGHTS
- ---------------------------------------------------------------------------------------------------------------------- 1/1/01 - 1/1/00 - 1/1/99 - 1/1/98 - 1/1/97 - 1/1/96 - 6/30/01 12/31/00 12/31/99 12/31/98 12/31/97 12/31/96 - ---------------------------------------------------------------------------------------------------------------------- PER-SHARE DATA ($) ====================================================================================================================== Net asset value at beginning of period 1.00 1.00 1.00 1.00 1.00 1.00 ---------------------------------------------------------------------- Income from investment operations: Net investment income 0.02 0.06 0.05 0.05 0.05 0.05 ---------------------------------------------------------------------- Less distributions: Dividends from net investment income (0.02) (0.06) (0.05) (0.05) (0.05) (0.05) ---------------------------------------------------------------------- Net asset value at end of period 1.00 1.00 1.00 1.00 1.00 1.00 ====================================================================== Total return (%) 2.38 2 5.90 4.68 5.03 5.07 4.93 RATIOS/SUPPLEMENTAL DATA (%) ====================================================================================================================== Ratio of net operating expenses to average net assets 0.70 1 0.71 3 0.72 0.73 0.73 0.73 Expense reductions reflected in above ratio -- -- 0.02 0.07 0.11 0.15 Ratio of net investment income to average net assets 4.70 1 5.77 4.62 4.88 4.96 4.83 Net assets, end of period ($ x 1,000,000) 487 399 322 225 155 136
1 Annualized. 2 Not annualized. 3 Would have been 0.72% if certain non-routine expenses (proxy fees) had been included. 18 SEE THE FINANCIAL NOTES, WHICH ==== ARE INTEGRAL TO THIS INFORMATION. 23 PORTFOLIO HOLDINGS As of June 30, 2001; unaudited. This section shows all the securities in the fund's portfolio and their market value, as of the report date. We use the symbols below to designate certain characteristics: * Asset-backed security + Credit-enhanced security o Illiquid restricted security For fixed-rate obligations, the rate shown is the effective yield at the time of purchase, except for U.S. government coupon notes and 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. For variable-rate obligations with scheduled maturities greater than 397 days, the maturity shown is the later of the next interest rate change date or demand date. For variable-rate obligations with scheduled maturities less than 397 days, the maturity shown is the earlier of the next interest rate change date or demand date. For variable-rate obligations without demand features, the maturity shown is the next interest rate change date. The pie chart below shows the fund's major categories and the market value and cost of the securities in each category. For definitions of abbreviations and acronyms used in security descriptions, see "portfolio terms" in the glossary. ALL DOLLAR VALUES ARE IN THOUSANDS. [PIE CHART] 96.7% FIXED-RATE OBLIGATIONS Market Value: $477,738 Cost: $477,738 1.4% VARIABLE-RATE OBLIGATIONS Market Value: $6,735 Cost: $6,735 1.9% OTHER INVESTMENTS Market Value: $9,175 Cost: $9,175 - ---------------------------------- 100.0% TOTAL INVESTMENTS Market Value: $493,648 Cost: $493,648
ISSUER FACE VALUE MKT. VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) ================================================================================ FIXED-RATE OBLIGATIONS 96.7% of investments - -------------------------------------------------------------------------------- COMMERCIAL PAPER & OTHER CORPORATE OBLIGATIONS 53.0% ================================================================================ AB SPINTAB 4.30%, 07/17/01 4,000 3,992 4.70%, 07/17/01 1,000 998 ABBEY NATIONAL N.A. CORP. 4.20%, 08/09/01 1,500 1,493 * AMSTERDAM FUNDING CORP. 4.03%, 07/02/01 7,000 6,999 * APRECO, INC. 3.93%, 07/30/01 2,000 1,994 ASSOCIATES FIRST CAPITAL, B.V. 4.01%, 07/03/01 3,000 2,999 3.80%, 07/30/01 2,000 1,994 3.75%, 08/24/01 2,000 1,989 *+ ATLANTIS ONE FUNDING CORP. 3.75%, 09/26/01 3,000 2,973 BANC ONE FINANCIAL CORP. 3.81%, 09/12/01 4,000 3,969 * BARTON CAPITAL CORP. 4.01%, 07/10/01 5,000 4,995 * BAVARIA UNIVERSAL FUNDING CORP. 4.08%, 08/16/01 2,000 1,990 3.71%, 09/20/01 2,000 1,983 3.66%, 09/25/01 1,000 991 * BETA FINANCE, INC. 5.27%, 02/25/02 1,000 1,000 4.32%, 05/09/02 5,000 5,000 4.20%, 05/13/02 1,000 999 CBA (DELAWARE) FINANCE, INC. 3.98%, 08/09/01 3,000 2,987 * CC (USA), INC. 4.27%, 08/01/01 4,000 3,985 CIT GROUP HOLDINGS, INC. 4.64%, 07/11/01 5,000 4,994 * CONCORD MINUTEMEN CAPITAL CO., L.L.C. Series A 4.04%, 07/10/01 1,000 999 4.71%, 07/10/01 1,000 999 4.00%, 07/13/01 1,000 999 3.98%, 08/10/01 1,025 1,021
SEE THE FINANCIAL NOTES, WHICH 19 ARE INTEGRAL TO THIS INFORMATION. ==== 24 SCHWAB RETIREMENT MONEY FUND(R) -- FINANCIALS ================================================================================ PORTFOLIO HOLDINGS Continued As of June 30, 2001; unaudited.
ISSUER FACE VALUE MKT. VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) * CORPORATE ASSET FUNDING CO., INC 3.86%, 08/02/01 5,000 4,983 * CXC, INC 4.00%, 08/24/01 3,000 2,982 3.94%, 08/29/01 1,000 994 * DAKOTA CP NOTES OF CITIBANK CREDIT CARD ISSUANCE TRUST 3.99%, 07/24/01 2,000 1,995 DANSKE CORP 4.18%, 10/17/01 4,000 3,951 DEN NORSKE BANK 4.00%, 08/13/01 3,000 2,986 DEUTSCHE BANK FINANCIAL, INC 4.00%, 08/15/01 2,000 1,990 3.65%, 09/19/01 5,000 4,960 DEXIA DELAWARE, L.L.C 3.94%, 08/15/01 4,000 3,980 3.79%, 09/17/01 1,000 992 *+ EDISON ASSET SECURITIZATION CORP., L.L.C 3.96%, 07/27/01 6,000 5,983 3.90%, 08/03/01 5,000 4,982 * FALCON ASSET SECURITIZATION CORP 3.70%, 08/03/01 8,000 7,973 FCE BANK, PLC 3.73%, 07/27/01 3,000 2,992 FORD MOTOR CREDIT 4.12%, 07/03/01 5,000 4,999 5.45%, 07/06/01 2,000 1,998 3.75%, 08/22/01 2,000 1,989 *+ FORRESTAL FUNDING MASTER TRUST 4.00%, 07/11/01 5,000 4,994 FORTIS FUNDING, L.L.C 4.64%, 07/10/01 8,000 7,991 * GALAXY FUNDING, INC 4.01%, 08/23/01 4,000 3,977 GE CAPITAL INTERNATIONAL FUNDING, INC 4.74%, 07/10/01 1,000 999 3.96%, 07/25/01 6,000 5,984 GENERAL ELECTRIC CAPITAL CORP 4.30%, 07/18/01 3,000 2,994 GENERAL MOTORS ACCEPTANCE CORP 3.90%, 08/22/01 5,000 4,972 3.81%, 09/12/01 1,000 992 *+ GIRO FUNDING US CORP 4.00%, 07/23/01 1,000 998 3.81%, 09/13/01 1,838 1,824 * GIRO MULTI FUNDING CORP 3.96%, 07/19/01 5,000 4,990 *o GREENWICH FUNDING CORP 4.70%, 07/05/01 4,000 3,998 HALIFAX, PLC 5.32%, 07/16/01 3,000 2,994 HERTZ CORP 3.95%, 07/20/01 5,000 4,990 *+ INTREPID FUNDING MASTER TRUST 4.07%, 07/11/01 1,870 1,868 J.P. MORGAN CHASE & CO 3.97%, 08/07/01 1,000 996 3.98%, 08/08/01 4,000 3,983 3.73%, 10/05/01 4,000 3,961 * JUPITER SECURITIZATION CORP 4.01%, 07/03/01 4,119 4,118 3.99%, 08/27/01 3,210 3,190 3.63%, 09/24/01 2,500 2,479 *+ KITTY HAWK FUNDING CORP 3.96%, 07/20/01 4,000 3,992 LANDESBANK SCHLESWIG-HOLSTEIN GIROZENTRALE 5.05%, 08/20/01 3,000 2,979 5.77%, 12/19/01 2,000 1,948 * LEXINGTON PARKER CAPITAL CORP 5.39%, 07/25/01 5,000 4,983 * LINKS FINANCE, L.L.C 4.68%, 07/12/01 2,000 1,997 4.00%, 08/20/01 3,000 2,984 MORGAN STANLEY, DEAN WITTER, DISCOVER & CO 5.17%, 08/10/01 4,000 3,978 3.61%, 09/28/01 5,000 4,956 * NEWCASTLE CERTIFICATES PROGRAM 3.81%, 07/24/01 5,000 4,988 * QUINCY CAPITAL CORP 3.92%, 07/26/01 1,002 999 * RECEIVABLES CAPITAL CORP 3.76%, 07/20/01 4,000 3,992 SANTANDER FINANCE (DELAWARE), INC 5.17%, 08/06/01 3,000 2,985 3.91%, 08/23/01 2,000 1,989
20 SEE THE FINANCIAL NOTES, WHICH ==== ARE INTEGRAL TO THIS INFORMATION. 25
ISSUER FACE VALUE MKT. VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) * SIGMA FINANCE, INC 3.73%, 09/05/01 5,000 4,966 * STELLAR FUNDING GROUP, INC 4.30%, 07/31/01 1,000 996 4.24%, 08/01/01 2,000 1,993 4.33%, 09/26/01 1,022 1,012 *+ TULIP FUNDING CORP 3.78%, 09/14/01 1,692 1,679 * VARIABLE FUNDING CAPITAL CORP 3.87%, 08/06/01 8,000 7,969 * WCP FUNDING, INC 4.29%, 07/06/01 1,000 999 3.96%, 08/24/01 3,000 2,982 ------- 261,729 CERTIFICATES OF DEPOSIT 40.5% ========================================================================== ABBEY NATIONAL TREASURY SERVICES, PLC 5.17%, 08/09/01 7,000 7,000 3.77%, 09/18/01 3,000 3,000 AUSTRALIA & NEW ZEALAND BANKING GROUP, LTD 3.59%, 09/27/01 5,000 5,000 BANCO BILBAO VIZCAYA ARGENTARIA SA 5.32%, 07/17/01 3,000 3,000 BANK OF MONTREAL 3.96%, 08/16/01 5,000 5,000 BANK OF NOVA SCOTIA 4.00%, 08/07/01 4,000 4,000 4.01%, 08/13/01 1,000 1,000 3.60%, 09/27/01 2,000 2,000 BANQUE BRUXELLES LAMBERT 5.30%, 08/01/01 4,000 4,000 BARCLAYS BANK, PLC 5.10%, 08/06/01 7,000 7,000 3.62%, 12/21/01 4,000 4,000 4.43%, 04/10/02 2,000 2,000 BAYERICHE HYPOVEREINSBANK, AG 5.49%, 07/11/01 5,000 5,000 4.06%, 08/15/01 4,000 4,000 BAYERISCHE LANDESBANK GIROZENTRALE 3.81%, 09/07/01 2,000 2,000 4.53%, 04/11/02 3,000 2,997 BNP PARIBAS 3.64%, 09/24/01 3,000 3,000 CANADIAN IMPERIAL BANK OF COMMERCE 4.62%, 03/28/02 5,000 4,999 CHASE MANHATTAN BANK USA, N.A 4.63%, 07/11/01 2,000 2,000 3.90%, 08/29/01 5,000 5,000 CITIBANK, N.A 4.23%, 08/01/01 5,000 5,000 4.25%, 08/02/01 4,000 4,000 COMMERZBANK, AG 3.84%, 09/06/01 2,000 2,000 3.77%, 09/13/01 3,000 3,000 CREDIT AGRICOLE INDOSUEZ 3.79%, 09/07/01 5,000 5,001 CREDIT SUISSE FIRST BOSTON CORP 4.00%, 08/14/01 5,000 5,000 DANSKE BANK A/S 3.98%, 08/02/01 5,000 5,000 DEN NORSKE BANK 3.99%, 08/13/01 2,000 2,000 DEUTSCHE BANK, AG 5.40%, 07/05/01 5,000 5,000 4.90%, 08/20/01 5,000 5,012 6.80%, 09/10/01 1,000 1,000 3.84%, 09/12/01 5,000 5,000 DRESDNER BANK 4.15%, 08/08/01 2,000 2,000 3.65%, 09/20/01 2,000 2,000 FORENINGS SPARBANKEN AB (SWEDBANK) 3.85%, 08/31/01 5,000 5,000 HALIFAX, PLC 3.98%, 08/23/01 3,000 3,000 ING BANK, NV 4.73%, 07/09/01 8,000 8,000 3.67%, 09/20/01 2,000 2,000 LANDESBANK BADEN WURTTEMBERG 3.91%, 08/20/01 1,000 1,000 3.85%, 09/05/01 1,000 1,000 3.79%, 09/17/01 3,000 3,000 MERITA BANK, LTD 3.79%, 09/17/01 5,000 5,000 NATIONAL AUSTRALIA BANK, LTD 4.25%, 04/29/02 6,000 6,000
SEE THE FINANCIAL NOTES, WHICH 21 ARE INTEGRAL TO THIS INFORMATION. ==== 26 SCHWAB RETIREMENT MONEY FUND(R) -- FINANCIALS PORTFOLIO HOLDINGS Continued As of June 30, 2001; unaudited.
ISSUER FACE VALUE MKT. VALUE RATE, MATURITY DATE ($ x 1,000) ($ x 1,000) NORDDEUTSCHE LANDESBANK GIROZENTRALE 7.02%, 07/10/01 3,000 3,000 RABOBANK NEDERLAND, NV 4.04%, 07/08/02 2,000 2,000 ROYAL BANK OF CANADA 5.41%, 01/22/02 5,000 5,000 4.47%, 04/12/02 2,000 2,000 ROYAL BANK OF SCOTLAND 4.73%, 07/06/01 5,000 5,000 SOCIETE GENERALE 4.00%, 08/13/01 1,000 1,000 TORONTO DOMINION BANK 4.69%, 07/13/01 5,000 5,000 UBS, AG 4.70%, 07/11/01 2,000 2,000 3.98%, 08/01/01 3,000 3,000 6.72%, 10/09/01 1,000 1,000 UNICREDITO ITALIANO SPA 3.65%, 09/21/01 3,000 3,000 US BANK, N.A 4.30%, 07/23/01 2,000 2,000 WESTDEUTSCHE LANDESBANK GIROZENTRALE 3.61%, 09/28/01 2,000 2,000 3.66%, 12/21/01 3,000 3,000 ------- 200,009 PROMISSORY NOTES 1.8% ========================================================================== o THE GOLDMAN SACHS GROUP 5.63%, 07/17/01 1,000 1,000 4.93%, 08/10/01 2,000 2,000 5.00%, 08/24/01 2,000 2,000 5.04%, 08/27/01 1,000 1,000 4.05%, 11/07/01 3,000 3,000 ------- 9,000 BANK NOTES 1.4% ========================================================================== BANK OF NEW YORK 4.27%, 04/30/02 2,000 2,000 LASALLE NATIONAL BANK 5.10%, 08/01/01 3,000 3,000 4.84%, 08/27/01 2,000 2,000 ------- 7,000 - -------------------------------------------------------------------------------- VARIABLE-RATE OBLIGATIONS 1.4% of investments - -------------------------------------------------------------------------------- + CALIFORNIA POLLUTION CONTROL FINANCING AUTHORITY Solid Waste Disposable RB (Burr Properties Project) Series 1997 4.20%, 07/07/01 2,025 2,025 + EAGLE COUNTY, COLORADO TAXABLE HOUSING FACILITIES RB (BC Housing, L.L.C. Project) Series 1997B 3.75%, 07/07/01 1,500 1,500 + TRAP ROCK INDUSTRIES, INC VRD RB Series 1997, 144A 4.01%, 07/07/01 1,940 1,940 + VILLAGE OF STURTEVANT, WISCONSIN IDRB (Andis Co. Project) Series 1996B 3.88%, 07/07/01 1,270 1,270 ----- 6,735
OTHER INVESTMENTS 1.9% of investments
MATURITY VALUE MKT. VALUE SECURITY ($ x 1,000) ($ x 1,000) REPURCHASE AGREEMENTS 1.9% ================================================================================ CREDIT SUISSE FIRST BOSTON CORP Tri-Party Repurchase Agreement Collateralized by U.S. Government Securities, 4.12%, issued 06/29/01, due 07/02/01 9,178 9,175
================================================================================ END OF PORTFOLIO HOLDINGS. FOR TOTALS, PLEASE SEE THE FIRST PAGE OF HOLDINGS FOR THIS FUND. 22 SEE THE FINANCIAL NOTES, WHICH ==== ARE INTEGRAL TO THIS INFORMATION. 27 Statement of ASSETS AND LIABILITIES As of June 30, 2001; unaudited. All numbers x 1,000 except NAV. ASSETS =============================================================================== Investments, at market value $493,648 a Receivables: Fund shares sold 697 Interest 2,583 Prepaid expenses + 17 ------------ TOTAL ASSETS 496,945 LIABILITIES ================================================================================ Payables: Fund shares redeemed 9,195 Dividends to shareholders 748 Investment adviser and administrator fees 16 Transfer agent and shareholder service fees 10 Accrued expenses + 38 ------------ TOTAL LIABILITIES 10,007 NET ASSETS ================================================================================ TOTAL ASSETS 496,945 TOTAL LIABILITIES - 10,007 ------------ NET ASSETS $486,938 NET ASSETS BY SOURCE Capital received from investors 486,939 Net realized capital losses (1)
NET ASSET VALUE (NAV) SHARES NET ASSETS (DIVIDE) OUTSTANDING = NAV $486,938 486,996 $1.00 a. Includes illiquid restricted securities worth $12,998, or 2.63% of the fund's investments. The amortized cost for the fund's securities was $493,648.
FEDERAL TAX DATA ============================================= COST BASIS OF PORTFOLIO $493,648 UNUSED CAPITAL LOSSES: Expires 12/31 of: Loss amount 2004 $1
SEE THE FINANCIAL NOTES, WHICH 23 ARE INTEGRAL TO THIS INFORMATION. === 28 SCHWAB RETIREMENT MONEY FUND(R) -- FINANCIALS =============================================================================== Statement of OPERATIONS For January 1, 2001 through June 30, 2001; unaudited. All numbers x 1,000. INVESTMENT INCOME =============================================================================== Interest $12,348 EXPENSES =============================================================================== Investment adviser and administrator fees 868 a Transfer agent and shareholder service fees 571 b Trustees' fees 9 c Custodian and portfolio accounting fees 92 Professional fees 11 Registration fees 29 Shareholder reports 20 Other expenses + 3 ------------- TOTAL EXPENSES 1,603 d INCREASE IN NET ASSETS FROM OPERATIONS ================================================================================ TOTAL INVESTMENT INCOME 12,348 TOTAL EXPENSES - 1,603 ------------- NET INVESTMENT INCOME 10,745 ------------- INCREASE IN NET ASSETS FROM OPERATIONS $10,745
a. Calculated on a graduated basis as a percentage of average daily net assets: 0.38% of the first $1 billion, 0.35% over $1 billion, 0.32% over $10 billion, 0.30% over $20 billion and 0.27% over $40 billion. Prior to June 1, 2001, these percentages were 0.38% of the first $1 billion, 0.35% over $1 billion, 0.32% over $10 billion and 0.30% over $20 billion. b. Calculated as a percentage of average daily net assets: for transfer agent services, 0.05% of the fund's assets; for shareholder services, 0.20% of the fund's assets. c. For the fund's independent trustees only. d. The investment adviser (CSIM) and the transfer agent and shareholder service agent (Schwab) guarantee to limit the operating expenses of this fund through at least April 30, 2002 to 0.73% of average daily net assets. This limit doesn't include interest, taxes, certain non-routine and money fund insurance expenses, if any. 24 SEE THE FINANCIAL NOTES, WHICH ==== ARE INTEGRAL TO THIS INFORMATION. 29 Statements of CHANGES IN NET ASSETS For the current and prior reporting periods. All numbers x 1,000. Figures for 1/1/01 - 6/30/01 are unaudited. OPERATIONS ================================================================================ 1/1/01-6/30/01 1/1/00-12/31/00 Net investment income $ 10,745 $ 20,691 -------------------------------------- INCREASE IN NET ASSETS FROM OPERATIONS 10,745 20,691 DISTRIBUTIONS PAID - -------------------------------------------------------------------------------- Dividends from net investment income $ 10,745 $ 20,691 TRANSACTIONS IN FUND SHARES a ================================================================================ Shares sold 286,211 519,298 Shares reinvested 9,955 20,585 Shares redeemed + (208,180) (462,992) -------------------------------------- NET INCREASE 87,986 76,891 NET ASSETS ================================================================================ Beginning of period 398,952 322,061 Total increase + 87,986 76,891 b -------------------------------------- END OF PERIOD $ 486,938 $ 398,952
a. Because all transactions in this section took place at $1.00 a share, figures for share quantities are the same as for dollars. b. Represents the changes in net assets from operations plus the changes in value of transactions in fund shares, minus distributions paid. SEE THE FINANCIAL NOTES, WHICH 25 ARE INTEGRAL TO THIS INFORMATION. === 30 FINANCIAL NOTES ================================================================================ FINANCIAL NOTES Unaudited BUSINESS STRUCTURE OF THE FUNDS EACH OF THE FUNDS DISCUSSED IN THIS REPORT IS A SERIES OF THE CHARLES SCHWAB FAMILY OF FUNDS,(TM) 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 sidebar shows the funds in this report and their trust. THE FUNDS OFFER ONE SHARE CLASS. For these funds, 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 trust may issue as many shares as necessary. FUND OPERATIONS Most of the funds' investments are described in the fund-by-fund sections earlier in this report. However, there are certain other investments and policies that may affect a fund's financials. The most significant of these are described below. Other policies concerning the funds' business operations also are described here. 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. 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, a fund could end up paying more for the security than its market value at the time of settlement. The funds have set aside sufficient securities as collateral for those securities bought on a delayed-delivery basis. 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, with tri-party agreements, the agent's bank) and is monitored daily to ensure that its market value is at least equal to the repurchase price under the agreement. THE TRUST AND ITS FUNDS - -------------------------------------------------------------------------------- This list shows all of the funds included in The Charles Schwab Family of Funds. The funds discussed in this report 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(R) 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 Florida Municipal Money Fund Schwab Institutional Advantage Money Fund(R) Schwab Retirement Money Fund(R) Schwab Government Cash Reserves 26 === 31 FINANCIAL NOTES ================================================================================ THE FUNDS PAY FEES FOR VARIOUS SERVICES. Through their trust, the funds have agreements with Charles Schwab Investment Management, Inc. (CSIM) to provide investment advisory and administrative services and with Charles Schwab & Co., Inc. (Schwab) to provide transfer agent and shareholder services. Although these agreements specify certain fees for these services, CSIM and Schwab have made additional agreements with the funds that may limit the total expenses charged. The rates and limitations for these fees vary from fund to fund, and are described in each fund's Statement of Operations. TRUSTEES MAY INCLUDE PEOPLE WHO ARE OFFICERS 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 noted in each fund's Statement of Operations. THE FUNDS MAY ENGAGE IN CERTAIN TRANSACTIONS INVOLVING AFFILIATES. The funds may make direct transactions with certain other SchwabFunds(R) 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. 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. ACCOUNTING POLICIES The following are the main policies the funds use in preparing their financial statements. THE FUNDS VALUE THEIR SECURITIES AT AMORTIZED COST, which approximates market value. SECURITY TRANSACTIONS are recorded as of the date the order to buy or sell the security is executed. INTEREST INCOME is recorded as it accrues. If a fund bought a debt instrument at a discount (that is, for less than its face value) or a premium (more than face value), it amortizes the discount or premium from the current date up to maturity. The fund then increases (in the case of discounts) or reduces (in the case of premiums) the income it records from the security. If the security is callable (meaning that the issuer has the option to pay it off before its maturity date), then the fund amortizes the premium to the security's call date and price, rather than the maturity date and price. REALIZED GAINS AND LOSSES from security transactions are based on the identified costs of the securities involved. EXPENSES that are specific to a fund 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 net assets. 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. A REVISED AICPA AUDIT AND ACCOUNTING GUIDE, Audits of Investment Companies, was issued in November 2000 and is effective for fiscal years beginning after 27 === 32 FINANCIAL NOTES ================================================================================ December 15, 2000. Each fund expects that the adoption of these principles will have no effect on its financial statements. THE ACCOUNTING POLICIES DESCRIBED ABOVE CONFORM WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES. 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. 28 === 33 GLOSSARY 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 ALLOCATION The practice of dividing a portfolio among different asset classes, with each asset class assigned a particular percentage. ASSET-BACKED SECURITIES Securities that are backed by the loans or accounts receivable of an entity, such as a bank or credit card company. These securities are obligations that the issuer intends to repay using the assets backing them (once collected). Therefore, repayment depends largely on the cash flows generated by the assets backing the securities. ASSET CLASS A group of securities with similar structure and basic characteristics. Stocks, bonds and cash are the three main examples of asset classes. 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." 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 and other institutions to finance short-term credit needs. These securities generally are structured as discount notes but sometimes may be interest-bearing notes. Commercial paper, which may be unsecured, is subject to credit risk. 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 Moody's Investor Service, Standard & Poor's and Fitch, Inc., 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. 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 TOB Tender option bond TOBP Tender option bond partnership TRAN Tax and revenue anticipation note VRD Variable-rate demand 29 === 34 GLOSSARY CONTINUED 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. INTEREST Payments to holders of debt securities as compensation for loaning a security's principal to the issuer. MATURITY Generally, 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, corporations and financial institutions (such as banks). Money market securities include commercial paper, promissory notes, certificates of deposit, banker's acceptances, notes and time deposits. 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. REVENUE ANTICIPATION NOTES Obligations that are issued in expectation of the receipt of other types of revenue, such as that available under the Federal Revenue Sharing Program. 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% O [1 - 0.25%] = 6.0%). TOTAL RETURN The overall performance of an investment over a given period, including any expenses, any income or distributions paid out and any capital gain or loss (increases or decreases in portfolio value). TAX ANTICIPATION NOTES Notes that typically are sold to finance the working capital needs of municipalities in anticipation of the receipt of property taxes on a future date. WEIGHTED AVERAGE For mutual funds, an average that gives the same weight to each security as the security represents in the fund's portfolio. 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 an annual rate and calculated as a percentage of the investment's market value. 30 === 35 CONTACT SCHWAB The SchwabFunds(R) Family includes a variety of funds to help meet your investment needs. You can diversify your portfolio in a single step with our asset allocation funds. Or you can customize your portfolio with a combination of our stock funds as well as our taxable and tax-advantaged bond and money market funds. Please call 800-435-4000 for a free prospectus and brochure for any of these SchwabFunds. This report must be preceded or accompanied by a current prospectus. METHODS FOR PLACING ORDERS The following information outlines how Schwab brokerage account investors can place orders. If you are investing through a third-party investment provider, methods for placing orders may be different. INTERNET 1 www.schwab.com SCHWAB BY PHONE(TM) Use our automated voice service or speak to a representative. Call 800-435-4000, day or night (for TDD service, call 800-345-2550). TELEBROKER(R) Automated touch-tone phone service at 800-272-4922 MAIL Write to SchwabFunds at: PO Box 7575 San Francisco, CA 94120-7575 When selling or exchanging shares, be sure to include the signatures of at least one of the persons whose name is on the account. 1 Shares of Sweep Investments (a) may not be purchased over the Internet. THE SCHWABFUNDS FAMILY STOCK FUNDS Schwab S&P 500 Fund Schwab 1000 Fund(R) Schwab Small-Cap Index Fund(R) Schwab Total Stock Market Index Fund(R) Schwab International Index Fund(R) Schwab Analytics Fund(R) Schwab Focus Funds Communications Focus Fund Financial Services Focus Fund Health Care Focus Fund Technology Focus Fund Schwab MarketManager Portfolios(R) Small Cap Portfolio International Portfolio ASSET ALLOCATION FUNDS Schwab MarketTrack Portfolios(R) All Equity Portfolio Growth Portfolio Balanced Portfolio Conservative Portfolio Schwab MarketManager Portfolios Growth Portfolio Balanced Portfolio BOND FUNDS Schwab Short-Term Bond Market Index Fund Schwab Total Bond Market Index Fund Schwab YieldPlus Fund(R) Schwab Short/Intermediate Tax-Free Bond Fund Schwab Long-Term Tax-Free Bond Fund Schwab California Short/Intermediate Tax-Free Bond Fund Schwab California Long-Term Tax-Free Bond Fund SCHWAB MONEY FUNDS Schwab offers an array of money market funds that seek high current income consistent with safety and liquidity. 2 Choose from taxable or tax-advantaged alternatives. Many can be linked to your Schwab account to "sweep" cash balances automatically when you're between investments. Or, for your larger cash reserves, choose one of our Value Advantage Investments.(R) 2 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. 36 [CHARLES SCHWAB LOGO] INVESTMENT ADVISER Charles Schwab Investment Management, Inc. 101 Montgomery Street, San Francisco, CA 94104 DISTRIBUTOR Charles Schwab & Co., Inc. PO Box 7575, San Francisco, CA 94120-7575 This report is not authorized for distribution to prospective investors unless preceded or accompanied by a current prospectus. (C)2001 Charles Schwab & Co., Inc. All rights reserved. Member SIPC/NYSE. Printed on recycled paper. REG13605-04 (08/01) -----END PRIVACY-ENHANCED MESSAGE-----