-----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, UTPbXQlAGwSd37nh0DPrFBpEEBU6jPzme2ChLPZuyEc+YTI/XU2Uetuv82d1jqmv WeYFjGUS+a1yoeQBSei27A== 0000950149-96-000201.txt : 19960311 0000950149-96-000201.hdr.sgml : 19960311 ACCESSION NUMBER: 0000950149-96-000201 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960308 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: 96533109 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 ANNUAL REPORT 1 SCHWABFUNDS(R) [SCHWAB LOGO] SCHWAB VALUE ADVANTAGE MONEY FUND(R) --------- [PHOTO OF THE SCHWAB BUILDING, SAN FRANCISCO, CALIFORNIA] ANNUAL REPORT DECEMBER 31, 1995 2 Dear Shareholder, [Photo of The SchwabFunds Family(R) is celebrating tremendous Charles growth as a mutual fund complex. By placing your trust R. Schwab] in SchwabFunds(R), you've helped total assets under management grow by $8 billion in 1995 to reach over $31 billion. With over $31 billion in assets under management, SchwabFunds ranks in the top 6% of all mutual fund complexes. We believe much of this success can be traced to the Schwab commitment to serve the needs of the 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 a careful and disciplined selection of securities, the portfolio managers strive to construct optimal portfolios that provide shareholders with competitive returns that meet their investment goals. And shareholders continue to signal their trust in 175 years of combined experience behind our SchwabFunds portfolio management by keeping their money invested in SchwabFunds. We believe an important part of serving your needs is keeping you informed about your investments. For example, we added the question and answer section of this report, developed by our portfolio managers to address what they feel were 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. The SchwabFunds Family has grown to include a selection of funds that meets the "core" needs of investors. SchwabFunds offers a solution to investors who want the convenience and competitive costs of a no-load mutual fund family. The 19 no-load funds available to retail investors, including the new Schwab Asset Director(R) Funds, offer 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 SchwabFunds to create an efficient, well-rounded portfolio. Or you may use them to serve as building blocks to an overall investment program that includes more specialized investments. I invite you to learn more about the SchwabFunds Family. To receive a brochure and prospectus for the SchwabFunds, please call our toll-free number, 1-800-2 NO-LOAD, or visit any one of our more than 200 Schwab offices. A Schwab representative will be happy to provide you with a prospectus that 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 as it continues to grow. 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 to meet even higher standards of excellence in the years ahead. /s/ Charles R. Schwab Charles R. Schwab Cover: The Schwab Building, San Francisco, California 3 COMMENTS FROM THE INVESTMENT ADVISER We're pleased to report to you on the performance of your investment in the Schwab Value Advantage Money Fund(R) for the annual reporting period ended December 31, 1995. During the year which ended December 31, 1995, the Schwab Value Advantage Money Fund provided you with higher than average money market fund yields on your larger cash balances, without sacrificing the safety and stability offered by a money market fund. STRONG ASSET GROWTH The Schwab Value Advantage Money Fund experienced strong asset growth in 1995, with a substantial number of shareholders contributing additional assets. At December 31, 1995, the Fund's total net assets had grown 86% to a new high of nearly $7 billion. We believe this robust growth reflects the Fund's success meeting investors' needs for higher than average money market returns on their long-term cash reserves. PERFORMANCE REVIEW The table below presents the Fund's 7-day average yields at year end. Of course, money market fund yields fluctuate and past performance is no guarantee of future results.
================================================================================ 7-DAY AVERAGE YIELDS 1 (As of December 31, 1995) Simple Compound - -------------------------------------------------------------------------------- Schwab Value Advantage Money Fund 5.47% 5.62% ================================================================================
THE OPPORTUNITY FOR HIGHER RETURNS ON YOUR CASH RESERVES The Schwab Value Advantage Money Fund is designed to provide potentially higher yields than most money market funds on your cash reserves invested for the long-term. For example, the Fund's average 7-day simple yield of 5.47% 2 on December 26, 1995 compares favorably with the 5.14% average 7-day yield for taxable money market funds on the same date.* In fact, the Fund's 7-day simple yield consistently outperformed the average for its category throughout 1995, as the chart at the top of the following page illustrates. * Source: IBC/Donoghue, average 7-day simple yield for the 269 funds in the First Tier category of Taxable Money Funds as of 12/26/95. Past performance is no guarantee of future results. 1 A portion of the Fund's fees were waived or reimbursed during the reporting period. Without the waivers or reimbursements, the Fund's 7-day simple yield would have been 5.18% and the 7-day compound yield would have been 5.31% at December 31, 1995. 2 A portion of the Fund's fees were waived or reimbursed during the reporting period. Without the waivers or reimbursements, the 7-day simple yield would have been 5.16% and the 7-day compound yield would have been 5.29% at December 26, 1995. 4 SCHWAB VALUE ADVANTAGE MONEY FUND'S(R) YIELD CONSISTENTLY OUTPERFORMED ITS CATEGORY AVERAGE* THROUGHOUT 1995 [Line graph showing 7-Day yield.]
IBC/Donohue's Money Fund DATE VAL Average - ------ ----- ---------- 1/3/95 5.56% 5.18 1/10/95 5.58 5.19 1/17/95 5.62 5.19 1/24/95 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 7/4/95 5.70 5.41 7/11/95 5.69 5.38 7/18/95 5.67 5.31 7/25/95 5.65 5.29 8/1/95 5.61 5.27 8/8/95 5.58 5.24 8/15/95 5.56 5.22 8/22/95 5.56 5.22 8/29/95 5.54 5.22 9/5/95 5.53 5.21 9/12/95 5.53 5.19 9/19/95 5.51 5.19 9/26/95 5.47 5.18 10/3/95 5.49 5.21 10/10/95 5.49 5.16 10/17/95 5.49 5.17 10/24/95 5.47 5.16 10/31/95 5.49 5.18 11/7/95 5.49 5.16 11/14/95 5.49 5.17 11/21/95 5.48 5.17 11/28/95 5.48 5.19 12/5/95 5.48 5.16 12/12/95 5.47 5.16 12/19/95 5.47 5.16 12/26/95 5.45 5.14
Schwab Value Advantage Money Fund IBC/Donohue's Money Fund Average *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 1995. Weekly number of funds in the category ranged from 245 to 270. The Schwab Value Advantage Money Fund gives you the opportunity to earn higher than average money market fund yields by requiring higher minimum balances and limiting shareholder transactions. For example, the Schwab Value Advantage Money Fund does not automatically sweep free cash from your brokerage or Schwab One(R) account on a regular basis or automatically transfer cash to settle trades or cover margin calls. By eliminating these transactions, the Fund can keep operating expenses low and take advantage of economies of scale which may increase your returns. When used in conjunction with one of Schwab's Sweep Shares money market funds, the Schwab Value Advantage Money Fund can help you keep all of your cash reserves working. For example, you can use one of Schwab's "sweep" money funds for short-term needs like checkwriting or covering securities purchases, and keep your long-term cash reserves invested in the Schwab Value Advantage Money Fund to earn potentially higher yields than the average money market fund. A KEY GOAL: PRESERVING YOUR INVESTMENT While higher returns are important, if you're like most money market fund investors, preserving the value of your investment probably ranks among your foremost concerns. Toward that end, the Schwab Value Advantage Money Fund is managed with capital stability as a fundamental objective. 5 The Fund seeks to maintain a stable $1 share price to protect your principal. As with all money market funds, however, there can be no assurance that the Fund will be able to maintain a $1 net asset value. It's also important to understand that your investment is neither insured nor guaranteed by the U.S. government. PROFESSIONALLY MANAGED, HIGH-QUALITY PORTFOLIO The Schwab Value Advantage Money Fund(R) primarily invests in a diversified portfolio of high-quality, short-term securities issued by the U.S. government and its agencies, banks, other financial institutions, and creditworthy corporations. To minimize credit risk, the Fund has invested in securities rated in the top rating category (known as "First Tier") assigned by nationally recognized statistical rating organizations (NRSROs), or securities of equivalent credit quality if unrated. Additionally, we maintain strict credit quality standards for the Fund's holdings and actively manage portfolio maturity to help protect and enhance your returns. The chart below illustrates the Fund's portfolio composition on December 31, 1995. In addition, you'll find a complete listing of the securities in the Fund's portfolio at year end later in this report. SCHWAB VALUE ADVANTAGE MONEY FUND PORTFOLIO COMPOSITION - DECEMBER 31, 1995 [PORTFOLIO COMPOSITION PIE CHART] Commercial Paper 62% Certificate of Deposit 25% Bank Notes 2% Variable Rate Notes 9% Other 2%
The Schwab Value Advantage Money Fund invests in bank certificates of deposit, time deposits, bankers' acceptances, highly-rated commercial paper, notes and other highly-rated corporate obligations, 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 in 1995, the portfolio management team discusses key economic trends and their impact on the Fund in the following section. If you want more information on the Fund, or any mutual fund in the SchwabFunds Family(R), contact your local Schwab office or call 1-800-2 NO-LOAD. 6 LOOKING FORWARD IN 1996 The Schwab Value Advantage Money Fund(R) helped you earn some of the highest available money market fund returns in 1995. We believe that the Fund will continue to offer potentially higher than average money market fund yields on your long-term cash reserves, combined with the safety and liquidity you expect from a money market fund. Thank you for placing your trust in SchwabFunds(R). We value your confidence, and we will strive to continue to meet your investment needs in the future. CHARLES SCHWAB INVESTMENT MANAGEMENT, INC. - -------------------------------------------------------------------------------- MAKING THE MOST OF YOUR INVESTMENT The Schwab Value Advantage Money Fund is designed to offer you higher yields than most money funds on your cash reserves invested for the long-term. By requiring higher account balances and limiting shareholder transactions, the Fund seeks to minimize operating expenses in order to maximize your returns. It's important to understand, however, that cash balances in this Fund are not designed to be automatically transferred to settle trades or cover Schwab One(R) checks, margin calls or insufficient funds in your Schwab brokerage or Schwab One account. If you need to access your money regularly for these purposes, you may wish to keep some short-term cash in one of our Sweep Shares money market funds, while keeping your long-term cash reserves in the Schwab Value Advantage Money Fund to earn potentially higher than average money market fund yields. If you have questions about how to make the most of your Schwab Value Advantage Money Fund, please call 1-800-2 NO-LOAD and one of our representatives will give you the information you need. - -------------------------------------------------------------------------------- 7 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 WAS THE GENERAL ECONOMIC CLIMATE DURING 1995? A. The economic expansion slowed in 1995 to an annual rate of 1.4% through the end of the third quarter, compared to the impressive 3.7% growth rate of the Real Gross Domestic Product GDP during 1994 1. This slowing of the economy can largely be attributed to the series of increases in the federal funds rate implemented by the Federal Reserve Bank (known as the Fed) throughout 1994 and early 1995. The Fed raised its federal funds rate target from 3.0% at the beginning of 1994 to a high of 6.0% in February 1995. By increasing the target on the federal funds rate, the Fed hoped to head off the inflationary impact of a rapidly growing economy by slowing the rate of growth without putting the economy into a recession. Following three 0.25% reductions in July and December of 1995, and January of 1996, the federal funds rate target stood at 5.25% at the end of January 1996. The economic data currently suggests that the Fed's actions have achieved the desired effect, as inflation has stabilized and the U.S. has entered into a period of moderate economic growth. Several key economic indicators, such as industrial production, capacity utilization, new home sales, and retail sales have fallen from their high 1994 levels, indicating that economic activity in many sectors has slowed. Although the unemployment rate has remained low at 5.6% for 1995, non-farm payroll growth slowed quite dramatically throughout the year. In light of the economic data and the positive inflation outlook, the Fed lowered the federal funds rate, or eased monetary policy, twice in 1995 and once in January 1996. Q. HOW HAVE RECENT POLITICAL EVENTS IMPACTED SHORT-TERM INTEREST RATES? A. One of the most significant news stories of 1995 was the uncertainty surrounding the federal budget and debt ceiling negotiations between Congress and the Clinton Administration and the resulting government shutdowns. While these events have taken center stage in the national spotlight, the issues relating to the deficit ceiling itself have had a relatively minor impact to date on the financial markets. As of this writing, short-term interest rates have declined largely as a result of weaker economic growth, lower inflation, and the market's expectations that a balanced budget deal may be achieved. The Fed already has lowered the federal funds rate a total of 0.50% in 1995 and 0.25% in January 1996; a balanced budget compromise could give the Fed incentive to lower interest rates even further, an action which is widely anticipated by market participants. 1 All Gross Domestic Product (GDP) statistics used in this report are based on the Commerce Department's new chain-weighted calculation methodology. As a result, these statistics may differ from those in previous SchwabFunds shareholder reports, which used the prior fixed-weight methodology. During 1996, the Commerce Department will revise all GDP growth rate reporting to a chain-weighted basis. 8 As shown in the chart below, short-term interest rates declined steadily throughout 1995. The primary reason for the decline has been the two 1995 reductions in the federal funds target rate and anticipation of further reductions in the future. INTEREST RATES DECREASED IN 1995 YIELDS 90-Day Commercial Paper January 6, 1995 - December 29, 1995 [Line graph showing 90-Day Commercial Paper yield.]
90 Day CP 1/6/95 6.27 1/13/95 6.07 1/20/95 6.2 1/27/95 6.24 2/3/95 6.19 2/10/95 6.14 2/17/95 6.13 2/24/95 6.12 3/3/95 6.14 3/10/95 6.2 3/17/95 6.14 3/24/95 6.13 3/31/95 6.19 4/7/95 6.12 4/14/95 6.12 4/21/95 6.07 4/28/95 6.11 5/5/95 6.08 5/12/95 6.09 5/19/95 6.06 5/26/95 6.02 6/2/95 5.87 6/9/95 5.98 6/16/95 5.97 6/23/95 5.9 6/30/95 5.97 7/7/95 5.860 7/14/95 5.730 7/21/95 5.770 7/28/95 5.800 8/4/95 5.800 8/11/95 5.810 8/18/95 5.790 8/25/95 5.820 9/1/95 5.790 9/8/95 5.760 9/15/95 5.720 9/22/95 5.700 9/29/95 5.760 10/6/95 5.810 10/13/95 5.820 10/20/95 5.800 10/27/95 5.820 11/3/95 5.790 11/10/95 5.750 11/17/95 5.740 11/24/95 5.720 12/1/95 5.720 12/8/95 5.670 12/15/95 5.650 12/22/95 5.610 12/29/95 5.610
90-Day Commercial Paper Increase or Decrease in Federal Funds Rate Source: Bloomberg L.P. Q. WHAT ACTIONS DID THE INVESTMENT MANAGER TAKE ON BEHALF OF THE FUND TO RESPOND TO CHANGES IN THE INTEREST RATE ENVIRONMENT? A. In response to the softer economic environment and expectations of federal funds rate reductions, the Fund's average maturity was lengthened during 1995. In general, in a declining interest rate environment, extending a fund's dollar-weighted average maturity helps soften the impact of having to reinvest money at lower market rates as securities held in a fund's portfolio mature. For example, from December 31, 1994 to December 31, 1995, the average maturity of the Schwab Value Advantage Money Fund(R) increased from 40 days to 59 days. Although the Fund's yield has decreased recently in response to the decline in market interest rates, this strategy of lengthening the Fund's maturity was successful in delaying the decline in the Fund's yield. 9 Q. WHAT STANDARDS ARE USED IN SELECTING SECURITIES FOR THE FUND'S PORTFOLIO? A. The Federal government requires money market funds to hold high-quality securities in their portfolios. For the Schwab Value Advantage Money Fund(R), we have continued to take the additional step of investing only in what are referred to as "First Tier" securities. In general, a First Tier security is one that matures within certain recognized limits and carries the top rating from the requisite number of NRSROs, or is deemed to be of comparable quality by the Trust's Board of Trustees, if unrated. To increase the overall credit of the Fund's portfolio, we also selectively purchase securities which are insured or backed by a letter of credit from First Tier financial institutions. These arrangements are frequently referred to as "credit enhancements" because they provide an additional level of creditworthiness in addition to the financial strength of the underlying issuer. The Investment Manager's thorough credit review of each Fund's securities includes ongoing review of the issuer as well as any insurance company or financial institution providing a credit enhancement to the security. Banks which provide enhancements on securities we purchase include First Tier banks in countries such as the U.S., Japan and the United Kingdom. There continues to be a considerable amount of news coverage concerning the health of the Japanese economy in general and Japanese banks in particular. Over the last year, we have increased the frequency of our visits to Japan to call on Japanese financial institutions and Japanese government agencies. As a result of these trips and our continuous monitoring of the economic situation in Japan, we continue to refine our policies regarding investment in these securities. The banks we have selected are First Tier and represent some of the highest-quality Japanese institutions. With respect to credit enhancements, we feel these Japanese banks, as well as certain other international institutions, represent excellent opportunities to maintain the overall credit quality of the portfolio. 10 SchwabFunds(R) - -------------------------------------------------------------------------------- SCHWAB VALUE ADVANTAGE MONEY FUND(R) PORTFOLIO SUMMARY - -------------------------------------------------------------------------------- ASSET GROWTH
Total Total Percentage Net Assets Net Assets Growth Over as of 12/31/95 as of 12/31/94 Reporting (000s) (000s) Period - ------------------------------------------------------------------------------ $6,923,890 $3,731,629 86% - ------------------------------------------------------------------------------
AVERAGE YIELDS FOR THE PERIODS ENDED DECEMBER 31, 1995
Last Last Last Seven Days Three Months Twelve Months - ------------------------------------------------------------------------------ 5.47% 5.48% 5.65% - ------------------------------------------------------------------------------
MATURITY SCHEDULE PERCENT OF TOTAL INVESTMENTS
Maturity Range 3/31/95 6/30/95 9/30/95 12/31/95 - ---------------------------------------------------------------- 0 - 15 Days 22.3% 11.1% 20.1% 17.5% 16 - 30 Days 13.4 17.2 19.6 19.0 31 - 60 Days 33.4 29.4 28.7 30.2 61 - 90 Days 26.2 21.8 20.0 11.9 91 - 120 Days 2.5 6.2 4.1 5.6 Over 120 Days 2.2 14.3 7.5 15.8 Weighted Average 44 Days 64 Days 53 Days 59 Days - ----------------------------------------------------------------
PORTFOLIO QUALITY
Percent of SEC Tier Net Assets Rating 12/31/95 - ----------------------- Tier 1 100.0% Tier 2 0.0 - -----------------------
11 SchwabFunds(R) 1 - -------------------------------------------------------------------------------- SCHWAB VALUE ADVANTAGE MONEY FUND(R) SCHEDULE OF INVESTMENTS (in thousands) December 31, 1995 - --------------------------------------------------------------------------------
Par Value -------- ---------- CORPORATE OBLIGATIONS--62.4%(a) ASSET BACKED SECURITIES--13.2% Alpha Finance Corp. 5.57%, 03/15/96 $ 5,000 $ 4,943 Alpine Securitization Corp. 5.83%, 01/09/96 15,224 15,205 Apreco, Inc. 5.80%, 01/29/96 32,200 32,057 5.75%, 02/23/96 7,000 6,942 Beta Finance, Inc. 5.71%, 01/22/96 12,000 11,961 5.87%, 02/16/96 13,000 12,905 5.79%, 03/25/96 12,000 11,842 5.65%, 04/10/96 5,000 4,923 Briarcliff Capital Corp. 5.78%, 02/05/96 20,000 19,889 Broadway Capital Corp. 5.91%, 01/03/96 7,616 7,614 5.91%, 01/05/96 25,000 24,984 5.87%, 01/05/96 10,000 9,994 5.86%, 01/09/96 40,941 40,888 5.86%, 01/10/96 40,000 39,942 5.86%, 01/11/96 15,748 15,723 5.99%, 01/16/96 25,365 25,303 5.88%, 01/19/96 18,000 17,948 5.99%, 01/22/96 50,753 50,578 6.05%, 02/05/96 5,000 4,971 6.05%, 02/12/96 18,000 17,875 Corporate Asset Funding Corp. 5.77%, 02/05/96 45,600 45,348 Corporate Receivables Corp. 5.80%, 01/25/96 20,000 19,924 5.76%, 02/02/96 21,375 21,267 5.76%, 02/16/96 31,400 31,172 ESC Securitization, Inc. 5.81%, 01/11/96 30,000 29,952 5.79%, 01/26/96 22,000 21,913 5.76%, 02/01/96 10,000 9,951 5.58%, 03/21/96 26,000 25,682 Enterprise Funding Corp. 5.82%, 01/09/96 5,073 5,067 5.80%, 01/10/96 8,111 8,099 5.83%, 01/18/96 5,886 5,870 5.83%, 01/19/96 5,074 5,059 5.83%, 01/23/96 4,384 4,369 5.78%, 02/02/96 11,155 11,098 5.77%, 02/23/96 7,986 7,919 5.76%, 03/08/96 6,096 6,032 5.58%, 03/20/96 6,083 6,010 5.54%, 06/12/96 10,281 10,030 Eureka Securitization, Inc. 5.78%, 02/12/96 16,000 15,894 5.79%, 02/13/96 53,000 52,639 First Deposit Master Trust Series 1993-3 5.81%, 02/27/96 28,349 28,091 Ranger Funding Corp. 5.84%, 01/08/96 6,000 5,993 5.82%, 01/11/96 15,206 15,182 5.83%, 01/24/96 8,000 7,971 5.83%, 01/25/96 10,000 9,962 5.83%, 02/13/96 5,075 5,040 5.76%, 02/20/96 6,000 5,953 5.76%, 02/21/96 8,000 7,936 5.71%, 03/18/96 20,000 19,759 Riverwoods Funding Corp. 5.79%, 02/15/96 40,000 39,715 Special Purpose Accounts Receivable Cooperative Corp. 5.76%, 02/07/96 7,000 6,959 5.78%, 02/14/96 20,000 19,861 WCP Funding, Inc. 5.74%, 02/23/96 25,000 24,792 ------- 916,996 ------- AUTOMOTIVE--5.0% Ford Credit Europe PLC 5.76%, 02/14/96 20,000 19,861 5.77%, 02/16/96 50,000 49,637 General Motors Acceptance Corp. 5.81%, 02/01/96 4,000 3,980 5.76%, 02/02/96 25,000 24,873 5.81%, 02/13/96 24,000 23,836 5.82%, 02/14/96 50,000 49,650 5.62%, 03/19/96 13,000 12,844 5.72%, 04/26/96 50,000 49,103 5.72%, 05/01/96 30,000 29,439 Renault Credit International SA Banque 5.84%, 01/08/96 52,300 52,242 5.87%, 01/24/96 18,700 18,631 5.88%, 01/25/96 15,000 14,942 ------- 349,038 ------- BANKING--AUSTRALIA--1.7% ANZ (Delaware), Inc. 5.80%, 02/01/96 40,000 39,803 5.58%, 05/14/96 22,000 21,554 National Australia Funding (Delaware), Inc. 5.55%, 05/29/96 10,000 9,777 5.53%, 06/12/96 29,000 28,294 Westpac Capital Corp. 5.80%, 05/02/96 20,000 19,618 ------- 119,046 ------- BANKING--BELGIUM--0.4% Generale Bank, Inc. 5.74%, 03/12/96 5,000 4,945 5.81%, 04/04/96 22,000 21,676 ------- 26,621 ------- BANKING--CANADA--2.0% Bank of Montreal 5.81%, 01/29/96 23,000 22,898
12 SchwabFunds(R) 2 - -------------------------------------------------------------------------------- SCHWAB VALUE ADVANTAGE MONEY FUND(R) SCHEDULE OF INVESTMENTS (in thousands) December 31, 1995 - --------------------------------------------------------------------------------
Par Value -------- ---------- Bank of Nova Scotia 5.75%, 01/19/96 $10,000 $ 9,972 5.75%, 01/24/96 50,000 49,820 5.81%, 02/02/96 16,000 15,919 Toronto-Dominion Holdings 5.51%, 07/10/96 39,000 37,897 ------- 136,506 ------- BANKING--DENMARK--0.5% Den Danske Corp. 5.80%, 04/10/96 37,000 36,421 ------- BANKING--DOMESTIC BANK HOLDING COMPANY--2.0% Bankers Trust New York Corp. 5.77%, 02/12/96 57,000 56,622 5.77%, 02/20/96 47,000 46,629 NationsBank Corp. 5.55%, 05/21/96 10,000 9,788 5.61%, 05/28/96 25,000 24,439 ------- 137,478 ------- BANKING--DOMESTIC--0.2% Vehicle Services of America/ (NationsBank of Texas LOC) 5.80%, 02/08/96 16,700 16,599 ------- BANKING--GERMANY--0.6% Banco Boavista S.A./ (Bayerische Vereinsbank AG LOC) 5.80%, 03/11/96 9,000 8,901 5.80%, 04/08/96 10,000 9,846 Kredietbank N.A. Finance Corp. 5.78%, 01/11/96 20,500 20,468 ------- 39,215 ------- BANKING--ITALY--0.8% Cariplo Finance, Inc. 5.76%, 02/20/96 10,000 9,921 5.76%, 02/22/96 40,000 39,672 5.74%, 02/22/96 9,000 8,926 ------- 58,519 ------- BANKING--JAPAN--0.5% Bancal Tri-State Corp./ (Mitsubishi Bank Keepwell Agreement) 5.81%, 03/15/96 10,000 9,883 Ridge Capital II/(Dai-Ichi Kangyo Bank Ltd. LOC) 6.26%, 01/04/96 6,000 5,997 Stellar Capital Corp./ (Bank of Tokyo Liquidity Agreement) 6.00%, 02/20/96 15,155 15,031 ------- 30,911 ------- BANKING--SPAIN--0.6% BEX America Finance, Inc. 5.79%, 01/16/96 10,000 9,976 5.76%, 02/26/96 30,000 29,735 ------- 39,711 ------- BANKING--UNITED KINGDOM--2.1% Abbey National N.A. Corp. 5.79%, 01/17/96 75,000 74,810 Cheltenham & Gloucester PLC 5.80%, 02/02/96 50,000 49,746 Yorkshire Building Society 5.53%, 06/07/96 25,000 24,410 ------- 148,966 ------- COMPUTER AND OFFICE EQUIPMENT--0.2% CSC Enterprises 5.74%, 02/12/96 15,000 14,900 ------- ELECTRICAL AND ELECTRONICS--0.1% Panasonic Finance, Inc. 5.75%, 02/09/96 5,000 4,969 ------- FINANCE (COMMERCIAL)--7.1% CIT Group Holdings, Inc. 5.76%, 02/15/96 30,000 29,787 General Electric Capital Corp. 5.80%, 03/01/96 25,000 24,764 5.74%, 03/06/96 31,000 30,688 5.70%, 04/03/96 42,000 41,393 5.55%, 05/02/96 13,338 13,093 5.62%, 05/08/96 9,000 8,825 5.61%, 05/08/96 30,000 29,415 5.52%, 06/13/96 60,000 58,535 5.52%, 06/14/96 41,000 39,993 General Electric Capital Services 5.76%, 02/14/96 46,000 45,681 5.74%, 03/07/96 36,000 35,632 5.59%, 05/06/96 50,000 49,045 5.62%, 05/07/96 40,000 39,227 5.58%, 05/10/96 50,000 49,016 ------- 495,094 ------- FINANCE (CONSUMER)--2.3% American Express Credit Corp. 5.50%, 06/05/96 30,000 29,305 5.50%, 06/06/96 35,000 34,183 Associates Corp. of North America 5.65%, 05/09/96 53,000 51,952 Sears Roebuck Acceptance Corp. 5.82%, 01/11/96 15,000 14,976 5.79%, 02/15/96 28,000 27,800 ------- 158,216 -------
13 SchwabFunds(R) 3 - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Par Value -------- ---------- GOVERNMENT LOCALITY--FOREIGN--0.3% New South Wales Treasury Corp. 5.80%, 01/30/96 $23,000 $ 22,894 ------- MINING AND MINERAL RESOURCES--0.5% BHP Finance (U.S.A.), Inc. 5.75%, 02/22/96 15,000 14,877 5.76%, 03/05/96 17,000 16,829 ------- 31,706 ------- MISCELLANEOUS MANUFACTURING--3.7% Hanson Finance (U.K.) PLC 5.75%, 01/12/96 20,000 19,965 5.80%, 01/18/96 10,000 9,973 5.80%, 01/19/96 72,500 72,293 5.79%, 01/23/96 30,000 29,896 5.80%, 01/31/96 30,000 29,858 5.80%, 02/07/96 50,000 49,708 5.82%, 02/09/96 39,000 38,759 5.75%, 02/29/96 5,000 4,954 ------- 255,406 ------- MORTGAGE BANKING--1.6% Fleet Mortgage Group, Inc. 5.83%, 01/26/96 22,000 21,912 5.82%, 02/21/96 54,000 53,560 5.79%, 02/22/96 9,000 8,926 5.80%, 02/23/96 27,000 26,772 ------- 111,170 ------- PERSONAL CARE PRODUCTS--0.9% Colgate-Palmolive Company 5.79%, 01/22/96 31,000 30,897 5.79%, 01/24/96 31,200 31,086 ------- 61,983 ------- PHARMACEUTICALS--0.1% Glaxo Wellcome PLC 5.79%, 01/18/96 8,000 7,978 ------- SECURITIES BROKERAGE-DEALER--15.7% BT Securities Corp. 5.85%, 01/18/96 15,000 14,959 5.84%, 01/25/96 30,000 29,885 5.82%, 01/29/96 18,000 17,920 5.83%, 01/30/96 29,000 28,866 5.77%, 02/16/96 10,000 9,927 Bear Stearns Companies, Inc. 5.80%, 01/29/96 13,000 12,942 5.78%, 02/05/96 25,000 24,861 5.79%, 02/08/96 35,000 34,789 5.72%, 02/29/96 35,000 34,676 CS First Boston, Inc. 5.82%, 02/01/96 45,000 44,778 Goldman Sachs Group, LP 5.83%, 01/17/96 30,000 29,924 5.80%, 03/07/96 77,000 76,201 5.77%, 03/19/96 55,000 54,329 5.77%, 03/21/96 56,000 55,299 5.77%, 03/22/96 53,000 52,329 5.72%, 04/09/96 58,000 57,107 Lehman Brothers Holdings, Inc. 5.83%, 01/26/96 10,000 9,960 5.94%, 02/01/96 10,000 9,949 5.82%, 02/06/96 33,000 32,811 5.80%, 02/12/96 32,000 31,787 5.81%, 02/13/96 35,000 34,760 Morgan Stanley Group, Inc. 5.83%, 01/08/96 40,000 39,955 5.83%, 01/09/96 8,000 7,990 5.78%, 02/06/96 36,000 35,795 5.78%, 02/07/96 20,000 19,883 5.82%, 02/08/96 20,000 19,879 5.79%, 02/08/96 42,000 41,747 5.79%, 02/09/96 55,000 54,660 5.79%, 02/12/96 17,000 16,887 5.89%, 02/13/96 10,000 9,932 Nomura Holdings America, Inc. 5.92%, 01/03/96 8,000 7,997 5.91%, 01/09/96 10,000 9,987 5.88%, 01/12/96 15,000 14,973 5.86%, 01/18/96 5,000 4,986 Paine Webber Group, Inc. 5.86%, 01/02/96 20,000 19,997 5.89%, 01/04/96 24,000 23,988 5.84%, 02/01/96 18,000 17,910 Salomon, Inc. 6.15%, 01/02/96 454 454 6.02%, 02/15/96 20,000 19,852 6.02%, 02/16/96 30,000 29,773 --------- 1,094,704 --------- STUDENT LOANS--0.3% Student Loan Corp. 5.80%, 01/12/96 22,000 21,962 --------- TOTAL CORPORATE OBLIGATIONS (Cost $4,337,009) 4,337,009 --------- VARIABLE RATE OBLIGATIONS--8.6%(b) ASSET BACKED SECURITIES--1.6% Advanta Credit Card Master Trust 5.87%, 01/07/96 21,200 21,200 Beta Finance, Inc. 5.91%, 01/16/96 50,000 49,989 Corporate Asset Funding Corp. 5.84%, 01/29/96 40,000 39,988 -------- 111,177 -------- BANKING--DOMESTIC BANK HOLDING COMPANY--1.1% Bankers Trust New York Corp. 6.14%, 01/02/96 50,000 50,000 6.13%, 01/02/96 25,000 25,000 -------- 75,000 --------
14 SchwabFunds(R) 4 - -------------------------------------------------------------------------------- SCHWAB VALUE ADVANTAGE MONEY FUND(R) SCHEDULE OF INVESTMENTS (in thousands) December 31, 1995 - --------------------------------------------------------------------------------
Par Value -------- ---------- BANKING--DOMESTIC--0.3% Huntington National Bank 5.87%, 01/02/96 $20,000 $20,000 Keystone Health Resources Corp. Variable Rate Taxable Demand Notes Series 1993/ (PNC Bank LOC) 6.00%, 01/07/96 3,400 3,400 ------ 23,400 ------ BANKING--FRANCE--0.8% New York City, General Obligation Bonds Fiscal 1995 Series F-8/ (Societe Generale LOC) 6.00%, 01/07/96 19,500 19,500 New York City, General Obligation Bonds Fiscal 1996 Series A-2/ (Societe Generale LOC) 6.00%, 01/07/96 36,000 36,000 ------ 55,500 ------ BANKING--GERMANY--0.1% Hudson County, New Jersey General Obligation Refunding Bonds Variable Rate Demand Obligations Taxable Series 1995/ (Landesbank Hessen-Thuringen Girozentrale LOC) 6.05%, 01/07/96 10,000 10,000 ------ BANKING--JAPAN--0.5% Missouri Economic Development Export & Infrastructure Board Adjustable Rate Taxable Securities (Biocraft Laboratories, Inc. Project) Series 1989/ (Bank of Tokyo LOC) 6.30%, 01/07/96 22,000 22,000 New York City Industrial Development Agency Industrial Development Revenue Bonds (G.A.F. Seelig Inc. Project) Series 1993/ (IBJ Schroder Bank & Trust LOC) 6.25%, 01/07/96 2,225 2,225 Riverside County, California 1990 Taxable Variable Rate Certificates of Participation (Monterey Avenue Project)/ (Sanwa Bank Ltd. LOC) 6.15%, 01/07/96 8,100 8,100 Town of Islip Industrial Development Agency 1992 Taxable Adjustable Rate Industrial Development Revenue Bonds (Nussdorf Associates/Quality King Distributors, Inc. Facility)/ (Bank of Tokyo LOC) 5.84%, 01/07/96 1,560 1,560 ------- 33,885 ------- BANKING--UNITED KINGDOM--0.4% New Jersey Economic Development Authority Variable Rate Title IX Loan Portfolio Securitization Bonds/(National Westminister Bank LOC) 5.86%, 01/01/96 28,300 28,300 ------- INSURANCE--0.1% Commonwealth Life Insurance Co. 6.03%, 01/01/96 10,000 10,000 ------- MONOLINE INSURANCE--0.2% Baptist Health Systems of South Florida, Inc. Taxable Variable Rate Direct Note Obligations Series 1995A/ (MBIA Insurance) 6.05%, 01/07/96 6,600 6,600 Baptist Health Systems of South Florida, Inc. Taxable Variable Rate Direct Note Obligations Series 1995B/ (MBIA Insurance) 6.05%, 01/07/96 4,500 4,500 New Orleans Aviation Board Taxable Refunding Bonds Series 1993A/ (MBIA Insurance) 6.01%, 01/07/96 700 700 ------- 11,800 ------- SECURITIES BROKERAGE-DEALER--3.5% Bear Stearns Companies, Inc. 6.03%, 01/04/96 75,000 75,000 5.99%, 01/08/96 50,000 50,000 5.99%, 02/01/96 50,000 50,000 5.91%, 03/21/96 45,000 45,000 Lehman Brothers Holdings, Inc. 5.90%, 01/30/96 20,000 20,000 ------- 240,000 ------- TOTAL VARIABLE RATE OBLIGATIONS (Cost $599,062) 599,062 -------
15 SchwabFunds(R) 5 - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Par Value -------- ---------- AGENCY OBLIGATIONS--1.1% COUPON NOTES--1.1% Federal National Mortgage Assoc. 5.50%, 06/12/96 $24,000 $ 23,983 5.62%, 07/02/96 24,000 23,985 5.91%, 08/19/96 30,000 30,047 ------- TOTAL AGENCY OBLIGATIONS (Cost $78,015) 78,015 ------- BANKER'S ACCEPTANCES--0.4% BANKING--DOMESTIC--0.4% Mellon Bank N.A. 5.86%, 02/26/96 9,000 8,920 5.58%, 05/06/96 5,000 4,904 5.55%, 06/07/96 15,000 14,645 ------- TOTAL BANKER'S ACCEPTANCES (Cost $28,469) 28,469 ------- BANK NOTES--2.1% BANKING--DOMESTIC--2.1% NationsBank of Texas, N.A. 5.74%, 03/08/96 50,000 50,000 NationsBank, N.A. (Carolinas) 5.54%, 06/04/96 30,000 30,000 PNC Bank, N.A. 5.62%, 05/24/96 15,000 15,014 Sea First--Seattle 5.80%, 01/12/96 50,000 50,000 ------- TOTAL BANK NOTES (Cost $145,014) 145,014 ------- CERTIFICATES OF DEPOSIT--24.5% BANKING--CANADA--2.2% Bank of Montreal 5.84%, 01/05/96 25,000 25,000 5.80%, 01/30/96 40,000 40,000 Canadian Imperial Bank of Commerce 5.81%, 01/26/96 25,000 25,000 5.81%, 01/31/96 60,000 60,000 ------- 150,000 ------- BANKING--DOMESTIC--1.1% MBNA America Bank N.A. 5.75%, 04/10/96 42,000 42,000 5.63%, 04/16/96 36,000 36,000 ------- 78,000 ------- BANKING--FRANCE--2.9% Banque Nationale de Paris 5.80%, 04/03/96 17,000 17,001 Societe Generale 5.84%, 01/18/96 33,000 33,000 5.80%, 01/25/96 54,000 54,000 5.84%, 03/14/96 25,000 25,002 5.85%, 03/20/96 58,000 58,001 5.61%, 04/12/96 13,000 13,032 ------- 200,036 ------- BANKING--GERMANY--3.4% Bayerische Vereinsbank AG 5.80%, 01/10/96 34,000 34,000 Deutsche Bank 5.79%, 01/23/96 75,000 75,000 5.79%, 01/29/96 30,000 30,000 5.79%, 01/30/96 45,000 45,000 Dresdner Bank AG 5.58%, 06/07/96 10,000 10,010 5.75%, 07/05/96 15,000 15,002 Westdeutsche Landesbank 5.71%, 01/16/96 30,000 29,998 ------- 239,010 ------- BANKING--ITALY--0.2% Cariplo SPA 5.70%, 03/04/96 10,000 10,001 ------- BANKING--JAPAN--10.2% Dai-Ichi Kangyo Bank, Ltd. 6.10%, 01/12/96 30,000 30,000 6.13%, 01/16/96 19,000 19,000 6.12%, 01/16/96 6,000 6,000 6.22%, 01/18/96 28,000 28,000 6.42%, 01/26/96 42,000 42,000 6.14%, 02/02/96 17,000 17,002 5.88%, 02/21/96 12,000 11,999 5.86%, 03/20/96 18,000 17,998 Industrial Bank of Japan, Ltd. 6.25%, 01/02/96 6,000 6,000 6.25%, 01/03/96 25,000 25,000 6.23%, 01/04/96 29,000 29,000 6.14%, 01/05/96 17,000 17,000 5.94%, 02/07/96 19,000 19,000 Mitsubishi Bank, Ltd. 6.14%, 01/02/96 50,000 50,000 6.06%, 01/04/96 25,000 25,000 5.82%, 03/08/96 30,000 30,000 5.83%, 03/12/96 31,000 30,999 5.83%, 03/14/96 40,000 40,000 5.83%, 03/19/96 30,000 30,000 Sanwa Bank, Ltd. 6.12%, 01/17/96 8,000 7,998 5.95%, 01/22/96 6,000 6,000 6.02%, 02/09/96 11,000 11,000 6.15%, 02/20/96 31,000 31,001 5.81%, 04/23/96 35,000 35,001 Sumitomo Bank, Ltd. 6.18%, 01/03/96 25,000 25,000 6.05%, 01/05/96 18,000 18,000 6.18%, 01/09/96 18,000 18,000 6.15%, 01/17/96 29,000 29,000 6.25%, 01/31/96 31,000 31,000 5.98%, 02/20/96 25,000 25,001 ------- 710,999 ------- BANKING--NETHERLANDS--1.1% ABN-AMRO Bank N.V. 5.80%, 01/16/96 40,000 39,998 5.58%, 06/05/96 10,000 9,998 Rabobank Nederland N.V. 5.95%, 07/25/96 25,000 25,001 ------- 74,997 -------
16 SchwabFunds(R) 6 - -------------------------------------------------------------------------------- SCHWAB VALUE ADVANTAGE MONEY FUND(R) SCHEDULE OF INVESTMENTS (in thousands) December 31, 1995 - --------------------------------------------------------------------------------
Par Value -------- ---------- BANKING--SWITZERLAND--1.4% Union Bank of Switzerland 5.55%, 05/03/96 $100,000 $ 100,003 -------- BANKING--UNITED KINGDOM--2.0% Abbey National PLC 5.61%, 04/01/96 20,000 20,042 5.53%, 06/14/96 50,000 50,002 5.58%, 06/21/96 30,000 30,009 Lloyds Bank PLC 5.80%, 04/22/96 10,000 10,013 National Westminster Bank PLC 5.79%, 02/06/96 14,000 13,999 5.72%, 02/06/96 7,000 7,000 5.75%, 06/10/96 10,000 9,996 -------- 141,061 -------- TOTAL CERTIFICATES OF DEPOSIT (Cost $1,704,107) 1,704,107 --------- REMARKETED CERTIFICATES--0.8% ASSET BACKED SECURITIES--0.8% Black & Decker RECOP Trust 5.80%, 02/06/96 17,000 17,000 5.80%, 02/15/96 18,311 18,311 Circuit City RECOP Trust 5.75%, 03/04/96 23,000 23,000 -------- TOTAL REMARKETED CERTIFICATES (Cost $58,311) 58,311 -------- TAXABLE BONDS--0.1% BANKING--JAPAN--0.1% Oklahoma Industrial Finance Authority Taxable General Obligation Industrial Finance Bonds Series P/ (Mitsubishi Bank LOC) 6.00%, 02/01/96 6,250 6,251 --------- TOTAL TAXABLE BONDS (Cost $6,251) 6,251 --------- TOTAL INVESTMENTS--100.0% (Cost $6,956,238) $6,956,238 =========
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. Any resale by the Fund must be in an exempt transaction, normally to a qualified institutional buyer. At December 31, 1995, the aggregate value of private placement securities held by the Fund was $1,106,106,000 which represented 15.98% of net assets. Of this total, $1,017,795,000 or 14.70% 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 December 31, 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. 17 SchwabFunds(R) 7 - -------------------------------------------------------------------------------- SCHWAB VALUE ADVANTAGE MONEY FUND(R) STATEMENT OF ASSETS AND LIABILITIES (in thousands) December 31, 1995 - -------------------------------------------------------------------------------- ASSETS Investments, at value (Cost: $6,956,238) $6,956,238 Interest receivable 28,312 Receivable for fund shares sold 37,105 Deferred organization costs 29 Prepaid expenses 771 ---------- Total assets 7,022,455 ---------- LIABILITIES Payable for: Dividends 48,255 Fund shares redeemed 47,728 Investment advisory and administration fee 2,084 Transfer agency and shareholder service fees 133 Other 365 ---------- Total liabilities 98,565 ---------- Net assets applicable to outstanding shares $6,923,890 ========== NET ASSETS CONSIST OF: Capital paid in $6,924,021 Accumulated net realized loss on investments sold (131) ---------- $6,923,890 ========== THE PRICING OF SHARES Outstanding shares, $0.00001 par value (unlimited shares authorized) 6,924,021 Net asset value, offering and redemption price per share $1.00
See accompanying Notes to Financial Statements. 18 SchwabFunds(R) 8 - -------------------------------------------------------------------------------- SCHWAB VALUE ADVANTAGE MONEY FUND(R) STATEMENT OF OPERATIONS (in thousands) For the year ended December 31, 1995 - -------------------------------------------------------------------------------- Interest income $333,064 -------- Expenses: Investment advisory and administration fee 23,799 Transfer agency and shareholder service fees 13,812 Custodian fees 483 Registration fees 1,251 Professional fees 130 Shareholder reports 262 Trustees' fees 27 Amortization of deferred organization costs 22 Insurance and other expenses 67 -------- 39,853 Less expenses reduced (17,754) -------- Total expenses incurred by Fund 22,099 -------- Net investment income 310,965 Net realized loss on investments sold (5) -------- Increase in net assets resulting from operations $310,960 ========
See accompanying Notes to Financial Statements. 19 SchwabFunds(R) 9 - -------------------------------------------------------------------------------- SCHWAB VALUE ADVANTAGE MONEY FUND(R) STATEMENT OF CHANGES IN NET ASSETS (in thousands) - --------------------------------------------------------------------------------
For the year ended December 31, 1995 1994 ----------- ----------- Operations: Net investment income $ 310,965 $ 85,792 Net realized loss on investments sold (5) (124) ----------- ----------- Increase in net assets resulting from operations 310,960 85,668 ----------- ----------- Dividends to shareholders from net investment income (310,965) (85,792) ----------- ----------- Capital share transactions (dollar amounts and number of shares are the same): Proceeds from shares sold 10,404,416 6,042,841 Net asset value of shares issued in reinvestment of dividends 262,426 63,079 Less payments for shares redeemed (7,474,576) (3,103,523) ----------- ----------- Increase in net assets from capital share transactions 3,192,266 3,002,397 ----------- ----------- Total increase in net assets 3,192,261 3,002,273 Net Assets: Beginning of period 3,731,629 729,356 ----------- ----------- End of period $ 6,923,890 $ 3,731,629 =========== ===========
See accompanying Notes to Financial Statements. 20 SchwabFunds(R) 10 - -------------------------------------------------------------------------------- SCHWAB VALUE ADVANTAGE MONEY FUND(R) NOTES TO FINANCIAL STATEMENTS For the year ended December 31, 1995 - -------------------------------------------------------------------------------- 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 (Sweep and Value Advantage Shares), the Schwab California Tax-Exempt Money Fund (Sweep and Value Advantage Shares), the Schwab New York Tax-Exempt Money Fund (Sweep and Value Advantage Shares), the Schwab Institutional Advantage Money FundTM and the Schwab Retirement Money Fund(R). 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 The following significant accounting policies are in conformity with generally accepted accounting principles for investment companies. The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. Security valuation -- Investments are stated at amortized cost which approximates market value. Security transactions and interest income -- Security transactions 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 and 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. 21 SchwabFunds(R) 11 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 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. 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 $23,799,000 for the year ended December 31, 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 year ended December 31, 1995, the Fund incurred transfer agency and shareholder service fees of $13,812,000 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 year ended December 31, 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 $27,000 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 year ended December 31, 1995, the total of such fees reduced by the Investment Manager and Schwab was $7,922,000 and $9,832,000, respectively. 5. INVESTMENT TRANSACTIONS Purchases, sales and maturities of investment securities for the year ended December 31, 1995, aggregated (in thousands) $24,387,423 and $21,192,127, respectively. 22 SchwabFunds(R) 12 - -------------------------------------------------------------------------------- SCHWAB VALUE ADVANTAGE MONEY FUND(R) NOTES TO FINANCIAL STATEMENTS For the year ended December 31, 1995 - -------------------------------------------------------------------------------- 6. FINANCIAL HIGHLIGHTS Per share income and capital changes for a share outstanding throughout the period:
For the period ended \----For the year ended December 31,-----\ December 31, 1995 1994 1993 1992 1 ----------------------------------------------------------- Net asset value at beginning of period $1.00 $1.00 $1.00 $1.00 Income from investment operations - --------------------------------- Net investment income .06 .04 .03 .02 Net realized and unrealized gain (loss) on investments -- -- -- -- ---------- ---------- -------- -------- Total from investment operations .06 .04 .03 .02 Less distributions - ------------------ Dividends from net investment income (.06) (.04) (.03) (.02) Distributions from realized gains on investments -- -- -- -- ---------- ---------- -------- -------- Total distributions (.06) (.04) (.03) (.02) ---------- ---------- -------- -------- Net asset value at end of period $1.00 $1.00 $1.00 $1.00 ========== ========== ======== ======== Total return (%) 5.80 4.09 3.02 2.33 - ---------------- Ratios/Supplemental data - ------------------------ Net assets, end of period (000s) $6,923,890 $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 (%) 5.63 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 December 31, 1995, 1994, 1993 and 1992 would have been .72%, .79%, .82% and .94%*, respectively, and the ratio of net investment income to average net assets would have been 5.31%, 4.01%, 2.54% and 2.62%*, respectively. 1 For the period April 30, 1992 (commencement of operations) to December 31, 1992. * Annualized 23 SchwabFunds(R) 13 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- To the Board of Trustees and Shareholders of the Schwab Value Advantage Money Fund(R) In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the Schwab Value Advantage Money Fund (one of the series constituting The Charles Schwab Family of Funds, hereafter referred to as the "Trust") at December 31, 1995, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each period presented, in conformity with generally accepted accounting principles. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Trust's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with generally accepted auditing standards which require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 1995 by correspondence with the custodian, provide a reasonable basis for the opinion expressed above. PRICE WATERHOUSE LLP San Francisco, California January 31, 1996 24 THIS SPACE RESERVED FOR YOUR COMMENTS AND QUESTIONS. A SCHWAB REPRESENTATIVE WILL BE HAPPY TO ASSIST YOU. 25 THIS SPACE RESERVED FOR YOUR COMMENTS AND QUESTIONS. A SCHWAB REPRESENTATIVE WILL BE HAPPY TO ASSIST YOU. 26 THIS SPACE RESERVED FOR YOUR COMMENTS AND QUESTIONS. A SCHWAB REPRESENTATIVE WILL BE HAPPY TO ASSIST YOU. 27 SCHWABFUNDS FAMILY(R) The SchwabFunds Family includes a variety of funds to help meet your investment needs. You can diversify your portfolio with one investment in any of the three Asset Director(R) Funds, or choose several different equity markets with our three equity index funds. You can also select from different maturities with our bond fund choices, and take advantage of an array of money market funds. SCHWAB ASSET DIRECTOR FUNDS - - HIGH GROWTH FUND seeks to provide high capital growth with less volatility than an all-stock portfolio. This Fund has the largest stock component and offers the highest risk and return potential. - - BALANCED GROWTH FUND seeks to provide maximum total return, including capital growth and income. This Fund invests in a more balanced mix of stocks and bonds and offers moderate risk and return potential. - - CONSERVATIVE GROWTH FUND seeks to provide income with growth potential. This Fund has the smallest stock component, which is designed to help offset inflation, and generally keeps the majority of its assets invested in bonds. It offers the lowest risk and return potential. SCHWAB INDEX FUNDS - - SCHWAB 1000 FUND(R) is designed to match the total return of the Schwab 1000 Index,(R) comprised of the largest 1,000 publicly traded U.S. companies--the stocks of which represent about 85% of the total market capitalization of the U.S. Stock Market. 1 - - SCHWAB SMALL-CAP INDEX FUND(R) is designed to track the total return of the Schwab Small-Cap Index(R), which tracks the performance of small-capitalization companies. The Schwab Small-Cap Index is comprised of the second 1,000 largest publicly traded companies in the U.S. 1 - - SCHWAB INTERNATIONAL INDEX FUND(TM) is designed to track the total return of the Schwab International Index(R), comprised of 350 of the largest companies, based on market capitalization, in foreign countries with developed securities markets. 2 SCHWAB BOND FUNDS - - SCHWAB GOVERNMENT BOND FUNDS include two Funds designed to offer high current yields with the credit safety of U.S. government securities. The income level you are seeking and your tolerance for fluctuation in share price should determine your selection of either our Short/Intermediate Fund or our Long-Term Fund. 3 - - SCHWAB TAX-FREE BOND FUNDS help investors take advantage of one of the last remaining tax breaks: tax-free municipal bonds. We offer a national Short/Intermediate Fund and a Long-Term Fund, both of which pay monthly income free from federal personal income tax. 4,5 - - SCHWAB CALIFORNIA TAX-FREE BOND FUNDS gives California taxpayers two different opportunities to earn double tax-free income--free from both federal and California state personal income taxes. 5 SCHWAB MONEY FUNDS Schwab offers an array of money funds that seek high current income with safety and liquidity. Choose from taxable or tax-exempt alternatives. Many can be linked to your Schwab account to "sweep" cash balances automatically when you're in between investments. Or, for your larger cash reserves, choose one of our Value Advantage Investments(TM). 6 We will be happy to provide you with a free prospectus and brochure on any of the SchwabFunds(R). EACH PROSPECTUS PROVIDES MORE COMPLETE INFORMATION, INCLUDING CHARGES AND EXPENSES. PLEASE READ IT CAREFULLY BEFORE INVESTING. 1-800-2 NO-LOAD (1-800-266-5623) 1 The Schwab 1000 Index and the Schwab Small-Cap Index consist of publicly traded companies ranked by market capitalization. These indices do not include privately held companies, investment companies and companies incorporated outside of the United States. 2 The Schwab International Index is comprised of publicly traded companies ranked by market capitalization in countries with developed securities markets. Currently invested in 15 countries, the Index does not include privately held companies, investment companies or companies from the United States. 3 Investors in the Schwab Government Bond Funds may experience a decline in share price due to prepayment of obligations held by the Funds. 4 Income may be subject to state and local taxes. 5 Income may be subject to the Alternative Minimum Tax (AMT). Capital appreciation from discounted bonds may be subject to state and federal income tax. 6 Investments in money market funds are neither insured nor guaranteed by the U.S. Government, and there is no assurance that the Funds will be able to maintain a stable share price of $1. 28 ------------------ BULK RATE U.S. POSTAGE PAID CHARLES SCHWAB ------------------ [SCHWABFUNDS FAMILY (R) 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. (C)1996 Charles Schwab & Co., Inc. All rights reserved. Member SIPC/NYSE. TF3960R(2/96) CRS 10211 Printed on recycled paper. -----END PRIVACY-ENHANCED MESSAGE-----