-----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, KbL4Von1fd44GOf9BCZZWI8K4T7TRLTABrsTlnCl6BdLKC/6cBts9LAyMZnuhdbS wlLtIQBDScK3HLfmLRnh3A== 0000950149-97-000498.txt : 19970307 0000950149-97-000498.hdr.sgml : 19970307 ACCESSION NUMBER: 0000950149-97-000498 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970306 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: 97551988 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 1 SchwabFunds(R) Schwab Value Advantage Money Fund(R) [Graphic - The Schwab Building, San Francisco, California] Annual Report December 31, 1996 2 Dear Shareholder, It's been an exciting year at SchwabFunds(R). With the support [Photo of of investors like you, the SchwabFunds Family(R) continues to Charles R. rank among the largest and fastest-growing mutual fund Schwab] complexes in the nation. In total, Charles Schwab Investment Management, Inc. (CSIM) manages over $40 billion in assets for approximately 2.5 million shareholders. Today CSIM offers investors 30 funds spanning a spectrum of financial markets and investing styles. You'll find in-depth information on the performance of your SchwabFunds investment in the following pages. SMART NEW WAYS TO DIVERSIFY YOUR PORTFOLIO Now more than ever, investors tell us they're looking for new ways to diversify their portfolios in order to manage risk and enhance return potential. But with literally thousands of mutual funds to choose from, analyzing and selecting funds can be an overwhelming task. That's why we've introduced the new Schwab OneSource Portfolios -- three "funds of funds" that span both U.S. and international markets. Each OneSource Portfolio is actively managed by an experienced portfolio manager who invests primarily in a variety of mutual funds from well-known fund families, monitors their performance and adjusts the portfolio mix in response to certain changes in the markets. So you can get diversification among different funds and investing styles. OPENING NEW CHANNELS OF COMMUNICATION If you're among the millions of people exploring the Internet, I encourage you to visit our Web site at www.schwab.com. There you'll find a wealth of online information about SchwabFunds as well as a wide range of investments and resources available from Schwab. You can access the latest mutual fund performance data, request a free fund prospectus, trade funds and more -- all from the comfort of your home or office, 24 hours a day. It's just one more way we're harnessing the latest technology to make investing easier and more convenient. Thank you for placing your trust in SchwabFunds. In the year ahead, we'll continue working to provide you with an expanding range of investment opportunities to meet your needs. /s/ Charles R. Schwab ----------------------- Charles R. Schwab Cover: The Schwab Building, San Francisco, California 3 KEEP YOUR MONEY WORKING HARDER! ---------------------------------- USE THIS ENVELOPE TO EASILY ADD TO YOUR SCHWAB VALUE ADVANTAGE INVESTMENTS.(R) CHARLES SCHWAB 4 WE'VE MADE IT EASIER FOR YOU! TAKE ADVANTAGE OF THIS OPPORTUNITY TO ADD TO YOUR SCHWAB VALUE ADVANTAGE INVESTMENTS.(R) Now, you can add to your account by using this convenient Schwab investment envelope. It's a simple, easy way to increase your invest- ment. You can also have money transferred to your fund directly from your bank account or payroll check using Schwab's free Automatic Investment Plan (AIP). If you'd like more information on AIP, just check the appropriate box on the coupon. We'll send you everything you need to get started. DON'T DELAY. USE THIS CONVENIENT INVESTMENT ENVELOPE AND SEND YOUR CHECK TODAY! - ------------------------------------------------------------------------------- PLEASE DETACH HERE. SCHWAB VALUE ADVANTAGE INVESTMENTS(R) COUPON - --------------------- Please enclose your check and this completed investment coupon in the attached postage-paid envelope. - ----------------------------- Name $ - -------------------------------------- Amount of Investment* [ ] Check here if you would like more investment coupons for future use. [ ] Check here if you would like more information on Schwab's Automatic Investment Plan (AIP). *THIS ENVELOPE MAY NOT BE USED FOR INITIAL INVESTMENTS. SUBSEQUENT INVESTMENT MINIMUM IS $5,000. ($2,000 FOR IRAs AND OTHER RETIREMENT ACCOUNTS INVESTED IN THE SCHWAB VALUE ADVANTAGE MONEY FUND) Please indicate to which Schwab Value Advantage Investment(s) your investment should go: - - --------- ---------- SCHWAB ACCOUNT NUMBER [ ] Schwab Value Advantage Money Fund (R) [ ] Schwab Municipal Money Fund -- Value Advantage Shares(TM) [ ] Schwab California Municipal Money Fund -- Value Advantage Shares(TM) (for California taxpayers only) [ ] Schwab New York Municipal Money Fund -- Value Advantage Shares(TM) (for New York taxpayers only) IF NO FUND IS INDICATED, YOUR INVESTMENT WILL GO INTO THE SWEEP MONEY FUND YOU'VE DESIGNATED IN YOUR SCHWAB ACCOUNT. ---------------------------------------- (LIFT HERE FOR MORE INFORMATION) ---------------------------------------- (C)1997 Charles Schwab & Co., Inc. All rights reserved. Member SIPC/NYSE. Printed on recycled paper. TP4505 (2/97) CRS 11011. 5 CHARLESSCHWAB JUST FOLLOW THESE EASY STEPS TO INVEST IN YOUR SCHWAB VALUE ADVANTAGE INVESTMENTS: 1. Fill out the Schwab investment coupon completely, THIS ENVELOPE MUST including your name, account number, amount of your BE PRECEDED OR check and signature. Please use one coupon for each ACCOMPANIED BY A account. CURRENT PROSPECTUS. AN INVESTMENT IN A 2. Make your check payable to CHARLES SCHWAB & CO., FUND IS NEITHER INSURED INC. and enclose your check with the completed NOR GUARANTEED BY THE coupon in this postage-paid envelope. U.S. GOVERNMENT. THERE CAN BE NO ASSURANCE 3. Then just drop your investment envelope in the THAT A FUND WILL BE mail today--and start putting your money to work! ABLE TO MAINTAIN A If you have any questions, don't hesitate to call STABLE NET ASSET VALUE 1-800-2 NO LOAD. OF $1.00 PER SHARE. 6 Attn: Dept. FP 333-7 -------------- NO POSTAGE NECESSARY IF MAILED IN THE UNITED STATES -------------- ------------------------------------- BUSINESS REPLY MAIL FIRST-CLASS MAIL PERMIT NO. 18125 [BAR CODE] SAN FRANCISCO, CA ------------------------------------- POSTAGE WILL BE PAID BY ADDRESSEE CHARLES SCHWAB & CO INC PO BOX 7778 SAN FRANCISCO CA 94120-9419 7 TABLE OF CONTENTS OVERVIEW ............................................................ 1 FUND SUMMARY ........................................................ 2 ECONOMIC HIGHLIGHTS ................................................. 6 QUESTIONS TO THE PORTFOLIO MANAGEMENT TEAM .......................... 10 GLOSSARY OF TERMS ................................................... 12 PORTFOLIO SUMMARY ................................................... 13 FINANCIAL STATEMENTS AND NOTES ...................................... 14
OVERVIEW We're pleased to report on the performance of your investment in the Schwab Value Advantage Money Fund(R) for the year ended December 31, 1996. During the year, the Schwab Value Advantage Money Fund provided you with higher than average money market fund yields on your larger cash balances, combined with capital stability and liquidity. The Fund seeks to maintain a stable $1 share price to protect your principal. As with all money funds, however, there can be no assurance that the Fund will be able to maintain a $1 net asset value per share. It's also important to understand that your investment is not insured or guaranteed by the U.S. government. 1 8 SCHWAB VALUE ADVANTAGE MONEY FUND(R) SUMMARY PERFORMANCE REVIEW The table below presents the Fund's 7-day average yields at the 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 12/31/96) Simple Compound - -------------------------------------------------------------------------------- Schwab Value Advantage Money Fund 5.14% 5.27% - --------------------------------------------------------------------------------
YOUR YIELD ADVANTAGE The Schwab Value Advantage Money Fund offers you the potential to earn higher yields than most money market funds. It is specifically designed for cash reserves that you do not need to access regularly. The Fund's 7-day simple yield consistently outperformed the average 7-day simple yield for its category during the 12-month reporting period, as the chart at the right illustrates. 1 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 4.86% and the 7-day compound yield would have been 4.98% at December 31, 1996. 2 9 SCHWAB VALUE ADVANTAGE MONEY FUND'S(R) YIELD CONSISTENTLY OUTPERFORMED ITS CATEGORY AVERAGE* THROUGHOUT 1996 The following is a line graph which illustrates the simple 7-day average yield of the Schwab Value Advantage Money Fund vs. the average of the simple 7-day average yield of the funds in IBC Financial Data, Inc.'s First Tier category for each week on 1996. [GRAPH]
IBC First Tier Average Value Advantage 1/2/96 5.12% 5.46% 1/9/96 5.09% 5.40% 1/16/96 5.03% 5.37% 1/23/96 5.01% 5.33% 1/30/96 4.97% 5.30% 2/6/96 4.88% 5.25% 2/13/96 4.82% 5.19% 2/20/96 4.78% 5.13% 2/27/96 4.74% 5.08% 3/5/96 4.74% 5.07% 3/12/96 4.67% 5.05% 3/19/96 4.70% 5.04% 3/26/96 4.68% 5.02% 4/2/96 4.70% 5.03% 4/9/96 4.68% 5.03% 4/16/96 4.70% 5.03% 4/23/96 4.67% 5.01% 4/30/96 4.68% 5.01% 5/7/96 4.67% 5.02% 5/14/96 4.67% 5.03% 5/21/96 4.67% 5.03% 5/28/96 4.67% 5.03% 6/4/96 4.69% 5.03% 6/11/96 4.68% 5.05% 6/18/96 4.69% 5.06% 6/25/96 4.71% 5.05% 7/2/96 4.73% 5.07% 7/9/96 4.72% 5.09% 7/16/96 4.72% 5.11% 7/23/96 4.73% 5.12% 7/30/96 4.74% 5.14% 8/6/96 4.78% 5.16% 8/13/96 4.73% 5.15% 8/20/96 4.74% 5.14% 8/27/96 4.73% 5.15% 9/3/96 4.74% 5.15% 9/10/96 4.74% 5.16% 9/17/96 4.75% 5.17% 9/24/96 4.75% 5.14% 10/1/96 4.78% 5.16% 10/8/96 4.75% 5.17% 10/15/96 4.76% 5.17% 10/22/96 4.74% 5.15% 10/29/96 4.75% 5.15% 11/5/96 4.75% 5.15% 11/12/96 4.74% 5.14% 11/19/96 4.75% 5.13% 11/26/96 4.75% 5.12% 12/3/96 4.78% 5.13% 12/10/96 4.74% 5.13% 12/17/96 4.76% 5.13% 12/24/96 4.78% 5.14% 12/31/96 4.82% 5.14%
- - Schwab Value Advantage Money Fund - IBC Financial Data's Money Fund Average *First Tier Taxable Money Funds Source IBC Financial Data, Inc.'s MONEY FUND REPORT, 1996, Average 7-day current yield of the funds in IBC Financial Data, Inc.'s First Tier category of the Taxable Money Funds for each week in 1996. Weekly number of funds in the category ranged from 266 to 273. PORTFOLIO COMPOSITION The chart on the following page illustrates the composition of the Fund's portfolio as of December 31, 1996. In addition, you'll find a complete listing of the securities in the Fund's portfolio on December 31, 1996 later in this report. 3 10 SCHWAB VALUE ADVANTAGE MONEY FUND(R) PORTFOLIO COMPOSITION - DECEMBER 31, 1996 The following is a pie chart illustrating the portfolio composition of the Schwab Value Advantage Money Fund as of December 31, 1996. [PIE CHART] Certificates of Deposit 32% Commercial Paper & Other Corporate Obligations 59% Variable Rate Obligations 6% Other 3% The Schwab Value Advantage Money Fund invests in bank certificates of deposit, time deposits, banker's acceptances, highly-rated commercial paper and notes, and other highly-rated corporate obligations, as well as repurchase agreements, U.S. Treasury securities and other obligations of the U.S. and Canadian governments, their agencies and instrumentalities. STRONG GROWTH IN FUND ASSETS AND SHAREHOLDERS The table below illustrates the growth in the Schwab Value Advantage Money Fund's total net assets and number of shareholders during the year.
12/31/96 12/31/95 Change ================================================================================ Total Net Assets (000s) $10,476,537 $6,923,890 +51% - -------------------------------------------------------------------------------- Shareholder Accounts 97,880 67,109 +46% ================================================================================
4 11 MAKING THE MOST OF YOUR MONEY The choice of the most appropriate money fund will depend upon such factors as your attitudes toward risk and return, your income tax bracket, and how much money you normally keep in your money fund. The Schwab Value Advantage Money Fund(R) is designed to offer you higher yields than most money market funds. By requiring higher account balances and limiting shareholder transactions, the Fund's operating expenses are minimized in order to maximize your returns. To help achieve this goal, the Schwab Value Advantage Money Fund is not designed to transfer cash balances to settle trades, or cover Schwab One(R) checks, margin calls, or insufficient funds in your Schwab brokerage or Schwab One account. If you expect to access your money regularly, you may wish to invest your short-term funds in one of our six sweep money funds and keep your longer-term cash reserves in the Schwab Value Advantage Money Fund to gain the opportunity for higher yields. Our sweep money funds can be linked to your Schwab account to keep all of your money invested and working for you. These funds automatically invest or "sweep" balances of $100 or more from your brokerage account into the sweep money fund you select, where it will be available to settle trades and cover other day-to-day transactions. We offer both taxable and tax-advantaged choices to meet your individual needs. If you're in a high tax bracket, one of our tax-advantaged municipal money funds may provide you with higher returns after taxes. Consult your tax advisor for specific guidance on your own tax situation before investing. 5 12 ECONOMIC HIGHLIGHTS 1996 GROWTH CONTINUES THE SIXTH YEAR OF ECONOMIC EXPANSION REAL GDP GROWTH RATE (QUARTERLY % CHANGE, ANNUAL RATE) The following is a bar graph which illustraates the Quarterly % change in GDP for each quarter from the first quarter 1990 through the fourth quarter 1996. [GRAPHIC] Real Gross Domestic Product Chain Weighted Percent change from preceeding quarter, seasonally adjusted at annual rates Source: Bloomberg
CHART 9 Real GDP Q1 1990 4.1% Q2 1990 1.3% Q3 1990 -1.9% Q4 1990 -4.1% Q1 1991 -2.2% Q2 1991 1.7% Q3 1991 1.0% Q4 1991 1.0% Q1 1992 4.7% Q2 1992 2.5% Q3 1992 3.0% Q4 1992 4.3% Q1 1993 -0.1% Q2 1993 1.9% Q3 1993 2.3% Q4 1993 4.8% Q1 1994 2.5% Q2 1994 4.9% Q3 1994 3.5% Q4 1994 3.0% Q1 1995 0.4% Q2 1995 0.7% Q3 1995 3.8% Q4 1995 0.3% Q1 1996 2.0% Q2 1996 4.7% Q3 1996 2.1% Q4 1996 4.7%
Source: Bloomberg L.P. - - The GDP growth rate for 1996 was 3.4%. This growth rate represents a significant improvement from the relatively weak 1.3% overall rate in 1995 and in particular, the 0.3% fourth quarter 1995 rate, which caused concern over the possibility of a recession early in 1996. - - The 1996 second and fourth quarter growth rates of 4.7% resulted in sentiment focusing on the apparent strength of the economy and its potential impact on future inflation and Federal Reserve Board policy. - - At the time of this writing, the economy appears to be on track for moderate growth, continuing the six year expansion which began in 1991. 6 13 U.S. UNEMPLOYMENT RATE The following is a line graph which illustrates the monthly unemployment rate from January 1990 through December 1996. [GRAPH] US Unemployment Rate Source: Bloomberg
Unemployment Rate Jan-90 5.3% Feb-90 5.3% Mar-90 5.2% Apr-90 5.4% May-90 5.3% Jun-90 5.1% Jul-90 5.4% Aug-90 5.6% Sep-90 5.7% Oct-90 5.8% Nov-90 6.0% Dec-90 6.2% Jan-91 6.3% Feb-91 6.5% Mar-91 6.8% Apr-91 6.6% May-91 6.8% Jun-91 6.8% Jul-91 6.7% Aug-91 6.8% Sep-91 6.8% Oct-91 6.9% Nov-91 6.9% Dec-91 7.1% Jan-92 7.1% Feb-92 7.3% Mar-92 7.3% Apr-92 7.3% May-92 7.4% Jun-92 7.7% Jul-92 7.6% Aug-92 7.6% Sep-92 7.5% Oct-92 7.4% Nov-92 7.3% Dec-92 7.3% Jan-93 7.1% Feb-93 7.0% Mar-93 7.0% Apr-93 7.0% May-93 6.9% Jun-93 6.9% Jul-93 6.8% Aug-93 6.7% Sep-93 6.7% Oct-93 6.7% Nov-93 6.5% Dec-93 6.4% Jan-94 6.7% Feb-94 6.6% Mar-94 6.5% Apr-94 6.4% May-94 6.0% Jun-94 6.0% Jul-94 6.1% Aug-94 6.1% Sep-94 5.9% Oct-94 5.6% Nov-94 5.6% Dec-94 5.4% Jan-95 5.6% Feb-95 5.4% Mar-95 5.8% Apr-95 5.7% May-95 5.7% Jun-95 5.6% Jul-95 5.7% Aug-95 5.3% Sep-95 5.6% Oct-95 5.5% Nov-95 5.6% Dec-95 5.6% Jan-96 5.8% Feb-96 5.5% Mar-96 5.6% Apr-96 5.4% May-96 5.6% Jun-96 5.3% Jul-96 5.4% Aug-96 5.1% Sep-96 5.2% Oct-96 5.2% Nov-96 5.3% Dec-96 5.3%
Source: Bloomberg L.P. - - The unemployment rate during 1996 remained near its lows for the decade, leading many economists to question whether such low levels can continue without generating inflationary pressures on wages and, ultimately, prices. - - Job creation slowed during the latter half of 1996, consistent with the slowing of the economy in the third quarter from the second quarter of 1996. 7 14 MEASURES OF INFLATION The following is a bar and line graph which illustrates the monthly consumer price index and the quarterly employment cost index from January 1990 through December 1996. [GRAPH] Consumer Price Index - All Items YOY Employment Cost Index (includes both wages and salaries and benefits components) - - Quarterly Data Annualized Source: Bloomberg CHART 14
Monthly Quarterly Consumer Employment Price Cost Index - Index - YOY % YOY % Change Change Jan-90 5.2% 5.3% Feb-90 5.3% 5.3% Mar-90 5.2% 5.3% Apr-90 4.7% 5.4% May-90 4.4% 5.4% Jun-90 4.7% 5.4% Jul-90 4.8% 5.1% Aug-90 5.6% 5.1% Sep-90 6.2% 5.1% Oct-90 6.3% 4.8% Nov-90 6.3% 4.8% Dec-90 6.1% 4.8% Jan-91 5.7% 4.6% Feb-91 5.3% 4.6% Mar-91 4.9% 4.6% Apr-91 4.9% 4.5% May-91 5.0% 4.5% Jun-91 4.7% 4.5% Jul-91 4.4% 4.3% Aug-91 3.8% 4.3% Sep-91 3.4% 4.3% Oct-91 2.9% 4.2% Nov-91 3.0% 4.2% Dec-91 3.1% 4.2% Jan-92 2.6% 4.1% Feb-92 2.8% 4.1% Mar-92 3.2% 4.1% Apr-92 3.2% 3.5% May-92 3.0% 3.5% Jun-92 3.1% 3.5% Jul-92 3.2% 3.4% Aug-92 3.1% 3.4% Sep-92 3.0% 3.4% Oct-92 3.2% 3.5% Nov-92 3.0% 3.5% Dec-92 2.9% 3.5% Jan-93 3.3% 3.4% Feb-93 3.2% 3.4% Mar-93 3.1% 3.4% Apr-93 3.2% 3.6% May-93 3.2% 3.6% Jun-93 3.0% 3.6% Jul-93 2.8% 3.6% Aug-93 2.8% 3.6% Sep-93 2.7% 3.6% Oct-93 2.8% 3.4% Nov-93 2.7% 3.4% Dec-93 2.7% 3.4% Jan-94 2.5% 3.2% Feb-94 2.5% 3.2% Mar-94 2.5% 3.2% Apr-94 2.4% 3.1% May-94 2.3% 3.1% Jun-94 2.5% 3.1% Jul-94 2.8% 3.1% Aug-94 2.9% 3.1% Sep-94 3.0% 3.1% Oct-94 2.6% 3.0% Nov-94 2.7% 3.0% Dec-94 2.7% 3.0% Jan-95 2.8% 3.0% Feb-95 2.9% 3.0% Mar-95 2.9% 3.0% Apr-95 3.1% 3.0% May-95 3.2% 3.0% Jun-95 3.0% 3.0% Jul-95 2.8% 2.8% Aug-95 2.6% 2.8% Sep-95 2.5% 2.8% Oct-95 2.8% 2.8% Nov-95 2.6% 2.8% Dec-95 2.5% 2.8% Jan-96 2.7% 2.9% Feb-96 2.7% 2.9% Mar-96 2.8% 2.9% Apr-96 2.9% 2.9% May-96 2.9% 2.9% Jun-96 2.8% 2.9% Jul-96 3.0% 2.9% Aug-96 2.9% 2.9% Sep-96 3.0% 2.9% Oct-96 3.0% 3.0% Nov-96 3.3% 3.0% Dec-96 3.3% 3.0%
Quarterly Employment Cost Index Monthly Consumer Price Index Source: Bloomberg L.P. - - Although trending slightly upward, both employment cost and CPI remained in check during 1996, reflecting continued low levels of inflation. - - CPI rose 3.3% in 1996, the highest annual rate since 1990. However, the core rate (which excludes the more volatile food and energy components) rose 2.6%, the lowest rate since 1965. - - The Fed has indicated it will maintain a posture of "heightened surveillance" and remain diligent in its effort to prevent increases in inflation. 8 15 SHORT-TERM INTEREST RATES IN 1996 YIELDS 90-Day Commercial Paper January 2, 1996-December 31, 1996 The following is a line graph which illustrates the 90 day commercial paper rates for each day in 1996. [GRAPH]
CHART 12 90 Day Commercial Paper 1/2/96 5.50% 1/3/96 5.51% 1/4/96 5.49% 1/5/96 5.46% 1/8/96 5.48% 1/9/96 5.47% 1/10/96 5.45% 1/11/96 5.44% 1/12/96 5.43% 1/15/96 5.43% 1/16/96 5.42% 1/17/96 5.41% 1/18/96 5.39% 1/19/96 5.38% 1/22/96 5.37% 1/23/96 5.36% 1/24/96 5.35% 1/25/96 5.34% 1/26/96 5.34% 1/29/96 5.32% 1/30/96 5.31% 1/31/96 5.27% 2/1/96 5.21% 2/2/96 5.17% 2/5/96 5.17% 2/6/96 5.16% 2/7/96 5.16% 2/8/96 5.15% 2/9/96 5.14% 2/12/96 5.13% 2/13/96 5.13% 2/14/96 5.12% 2/15/96 5.12% 2/16/96 5.12% 2/20/96 5.14% 2/21/96 5.16% 2/22/96 5.14% 2/23/96 5.13% 2/26/96 5.14% 2/27/96 5.16% 2/28/96 5.16% 2/29/96 5.19% 3/1/96 5.19% 3/4/96 5.17% 3/5/96 5.18% 3/6/96 5.19% 3/7/96 5.19% 3/8/96 5.31% 3/11/96 5.31% 3/12/96 5.32% 3/13/96 5.34% 3/14/96 5.34% 3/15/96 5.34% 3/18/96 5.36% 3/19/96 5.36% 3/20/96 5.36% 3/21/96 5.35% 3/22/96 5.35% 3/25/96 5.37% 3/26/96 5.36% 3/27/96 5.37% 3/28/96 5.39% 3/29/96 5.38% 4/1/96 5.36% 4/2/96 5.36% 4/3/96 5.36% 4/4/96 5.36% 4/5/96 5.36% 4/8/96 5.40% 4/9/96 5.41% 4/10/96 5.41% 4/11/96 5.41% 4/12/96 5.41% 4/15/96 5.41% 4/16/96 5.40% 4/17/96 5.39% 4/18/96 5.39% 4/19/96 5.38% 4/22/96 5.38% 4/23/96 5.38% 4/24/96 5.38% 4/25/96 5.38% 4/26/96 5.38% 4/29/96 5.38% 4/30/96 5.39% 5/1/96 5.40% 5/2/96 5.41% 5/3/96 5.41% 5/6/96 5.41% 5/7/96 5.41% 5/8/96 5.41% 5/9/96 5.40% 5/10/96 5.39% 5/13/96 5.38% 5/14/96 5.38% 5/15/96 5.38% 5/16/96 5.38% 5/17/96 5.38% 5/20/96 5.38% 5/21/96 5.37% 5/22/96 5.37% 5/23/96 5.37% 5/24/96 5.37% 5/27/96 5.37% 5/28/96 5.37% 5/29/96 5.37% 5/30/96 5.39% 5/31/96 5.40% 6/3/96 5.43% 6/4/96 5.42% 6/5/96 5.42% 6/6/96 5.41% 6/7/96 5.50% 6/10/96 5.51% 6/11/96 5.50% 6/12/96 5.49% 6/13/96 5.49% 6/14/96 5.49% 6/17/96 5.50% 6/18/96 5.50% 6/19/96 5.50% 6/20/96 5.50% 6/21/96 5.50% 6/24/96 5.51% 6/25/96 5.50% 6/26/96 5.50% 6/27/96 5.51% 6/28/96 5.52% 7/1/96 5.50% 7/2/96 5.50% 7/3/96 5.50% 7/4/96 5.50% 7/5/96 5.59% 7/8/96 5.59% 7/9/96 5.56% 7/10/96 5.54% 7/11/96 5.54% 7/12/96 5.55% 7/15/96 5.56% 7/16/96 5.56% 7/17/96 5.55% 7/18/96 5.54% 7/19/96 5.51% 7/22/96 5.51% 7/23/96 5.51% 7/24/96 5.50% 7/25/96 5.50% 7/26/96 5.52% 7/29/96 5.52% 7/30/96 5.54% 7/31/96 5.55% 8/1/96 5.54% 8/2/96 5.47% 8/5/96 5.44% 8/6/96 5.43% 8/7/96 5.43% 8/8/96 5.42% 8/9/96 5.41% 8/12/96 5.40% 8/13/96 5.40% 8/14/96 5.40% 8/15/96 5.41% 8/16/96 5.40% 8/19/96 5.40% 8/20/96 5.40% 8/21/96 5.40% 8/22/96 5.39% 8/23/96 5.39% 8/26/96 5.42% 8/27/96 5.42% 8/28/96 5.42% 8/29/96 5.42% 8/30/96 5.45% 9/2/96 5.45% 9/3/96 5.53% 9/4/96 5.53% 9/5/96 5.55% 9/6/96 5.57% 9/9/96 5.54% 9/10/96 5.53% 9/11/96 5.53% 9/12/96 5.51% 9/13/96 5.47% 9/16/96 5.46% 9/17/96 5.50% 9/18/96 5.52% 9/19/96 5.54% 9/20/96 5.56% 9/23/96 5.59% 9/24/96 5.61% 9/25/96 5.48% 9/26/96 5.46% 9/27/96 5.47% 9/30/96 5.49% 10/1/96 5.48% 10/2/96 5.48% 10/3/96 5.49% 10/4/96 5.44% 10/7/96 5.43% 10/8/96 5.43% 10/9/96 5.43% 10/10/96 5.43% 10/11/96 5.43% 10/14/96 5.43% 10/15/96 5.42% 10/16/96 5.42% 10/17/96 5.42% 10/18/96 5.42% 10/21/96 5.42% 10/22/96 5.42% 10/23/96 5.42% 10/24/96 5.42% 10/25/96 5.42% 10/28/96 5.43% 10/29/96 5.42% 10/30/96 5.41% 10/31/96 5.41% 11/1/96 5.41% 11/4/96 5.41% 11/5/96 5.41% 11/6/96 5.41% 11/7/96 5.41% 11/8/96 5.40% 11/11/96 5.40% 11/12/96 5.40% 11/13/96 5.40% 11/14/96 5.40% 11/15/96 5.42% 11/18/96 5.42% 11/19/96 5.41% 11/20/96 5.41% 11/21/96 5.41% 11/22/96 5.40% 11/25/96 5.41% 11/26/96 5.41% 11/27/96 5.42% 11/28/96 5.42% 11/29/96 5.44% 12/2/96 5.44% 12/3/96 5.42% 12/4/96 5.42% 12/5/96 5.41% 12/6/96 5.43% 12/9/96 5.43% 12/10/96 5.43% 12/11/96 5.44% 12/12/96 5.44% 12/13/96 5.47% 12/16/96 5.48% 12/17/96 5.49% 12/18/96 5.52% 12/19/96 5.55% 12/20/96 5.57% 12/23/96 5.58% 12/24/96 5.60% 12/25/96 5.60% 12/26/96 5.61% 12/27/96 5.64% 12/30/96 5.65% 12/31/96 5.63%
__ 90-Day Commercial Paper Source: Bloomberg L.P. - - Short-term interest rates displayed a moderate decline early in the year in response to fears of an economic recession, and then increased moderately during the middle of the year in response to concerns over excessive growth and its potential impact on future inflation. - - Short-term rates exhibited a significant degree of volatility, much of which was a result of the market's reaction to strong employment reports. 9 16 QUESTIONS TO THE PORTFOLIO MANAGEMENT TEAM OF CHARLES SCHWAB INVESTMENT MANAGEMENT, INC. STEPHEN B. WARD - Senior Vice President of Charles Schwab and Co., Inc. and Chief Investment Officer of Charles Schwab Investment Management, Inc. Mr. Ward has held this position since 1993. He joined CSIM in 1991 as a Vice President and Portfolio Manager. LINDA KLINGMAN - Senior Portfolio Manager and Vice President, Schwab Value Advantage Money Fund(R). Ms. Klingman has managed the Schwab Value Advantage Money Fund since April of 1992. She joined CSIM in 1990. Q. HOW HAS THE PORTFOLIO MANAGEMENT TEAM ADJUSTED THE FUND'S PORTFOLIO TO RESPOND TO CHANGES IN INTEREST RATES? A. During the reporting period, the Portfolio Manager adjusted the weighted average maturity of the Fund in an effort to capitalize on opportunities to buy higher yielding money market instruments resulting from market fluctuations. Specifically, periodic uncertainties about the future direction of the economy led the market to overreact to reports of economic growth. An example of this was strong employment reports released throughout the year, which drove up interest rates for short periods. The resulting increase in short-term rates presented us with opportunities to moderately extend the Fund's average maturity and lock in higher yields at different points throughout the year. Conversely, during periods when there was no clear benefit to extend maturity, we elected not to do so. The weighted average maturity of the Fund was 59 days at the beginning of the reporting period and 50 days at the close of the period. Q. WHAT STANDARDS DOES THE PORTFOLIO MANAGEMENT TEAM USE IN SELECTING SECURITIES FOR THE FUND? A. Money market funds are required by law to hold high-quality securities in their portfolios. For the Schwab Value Advantage Money Fund, we have continued to take the additional step of only investing in what are referred to as First Tier securities. In general, a First Tier 10 17 security provides certain maturity limits and carries the highest credit rating from the required number of nationally recognized statistical rating organizations (NRSROs). If unrated, a security must be deemed to be of comparable quality to a First Tier security according to guidelines approved by the Board of Trustees of The Charles Schwab Family of Funds. Certain securities owned by the Schwab Value Advantage Money Fund(R) are insured or are backed by a Letter of Credit issued by a First Tier financial institution. These arrangements are frequently referred to as "credit enhancements" because they provide incremental levels of creditworthiness in addition to the underlying strength of the primary issuer. The credit quality of the insurance companies and financial institutions providing credit enhancements are reviewed by Charles Schwab Investment Management, Inc. as a regular part of our thorough credit review procedures for all portfolio securities and issuers. 11 18 GLOSSARY OF TERMS COMMERCIAL PAPER Short-term, interest-paying obligations with maturities ranging up to 270 days issued by banks, corporations, and other borrowers. CREDIT ENHANCEMENTS A bank letter of credit, purchase agreement, insurance, or line of credit that provides an additional level of creditworthiness for debt securities to supplement the financial strength of the issuer. DOLLAR-WEIGHTED AVERAGE MATURITY A measure of the average maturity of a mutual fund's entire portfolio, weighted by the value of its individual holdings. FEDERAL FUNDS RATE A key interest rate charged by banks when lending money to other banks overnight. FEDERAL RESERVE The central bank of the United States that establishes policies on bank reserves and regulations, determines the discount rate, and tightens or loosens the availability of credit. FIRST TIER SECURITY A security that matures within certain recognized limits and carries the top credit rating from the requisite number of NRSROs, or if unrated, is of comparable credit quality. HIGH-QUALITY SECURITY A security ranked in the highest two rating categories by a nationally recognized statistical rating organization (NRSRO), or if unrated, is of comparable credit quality. MATURITY The length of time before which the issuer of a debt security must repay the principal amount. NRSRO A nationally recognized statistical rating organization, such as Standard & Poor's or Moody's Investor Services, which evaluates and rates the credit quality of securities. REAL GDP The national Gross Domestic Product (GDP) -- the total value of all goods and services produced in the U.S. over a specific period of time -- adjusted for the rate of inflation to allow meaningful year-to-year comparisons. YIELD The rate of return, usually dividend or interest payments, on an investment, expressed as a percentage of market price. 12 19 Consumer Price Index - All Items YOY Employment Cost Index (includes both wages and salaries and benefits components) - - Quarterly Data Annualized Source: Bloomberg CHART 14
Monthly Quarterly Consumer Employment Price Cost Index - Index - YOY % YOY % Change Change Jan-90 5.2% 5.3% Feb-90 5.3% 5.3% Mar-90 5.2% 5.3% Apr-90 4.7% 5.4% May-90 4.4% 5.4% Jun-90 4.7% 5.4% Jul-90 4.8% 5.1% Aug-90 5.6% 5.1% Sep-90 6.2% 5.1% Oct-90 6.3% 4.8% Nov-90 6.3% 4.8% Dec-90 6.1% 4.8% Jan-91 5.7% 4.6% Feb-91 5.3% 4.6% Mar-91 4.9% 4.6% Apr-91 4.9% 4.5% May-91 5.0% 4.5% Jun-91 4.7% 4.5% Jul-91 4.4% 4.3% Aug-91 3.8% 4.3% Sep-91 3.4% 4.3% Oct-91 2.9% 4.2% Nov-91 3.0% 4.2% Dec-91 3.1% 4.2% Jan-92 2.6% 4.1% Feb-92 2.8% 4.1% Mar-92 3.2% 4.1% Apr-92 3.2% 3.5% May-92 3.0% 3.5% Jun-92 3.1% 3.5% Jul-92 3.2% 3.4% Aug-92 3.1% 3.4% Sep-92 3.0% 3.4% Oct-92 3.2% 3.5% Nov-92 3.0% 3.5% Dec-92 2.9% 3.5% Jan-93 3.3% 3.4% Feb-93 3.2% 3.4% Mar-93 3.1% 3.4% Apr-93 3.2% 3.6% May-93 3.2% 3.6% Jun-93 3.0% 3.6% Jul-93 2.8% 3.6% Aug-93 2.8% 3.6% Sep-93 2.7% 3.6% Oct-93 2.8% 3.4% Nov-93 2.7% 3.4% Dec-93 2.7% 3.4% Jan-94 2.5% 3.2% Feb-94 2.5% 3.2% Mar-94 2.5% 3.2% Apr-94 2.4% 3.1% May-94 2.3% 3.1% Jun-94 2.5% 3.1% Jul-94 2.8% 3.1% Aug-94 2.9% 3.1% Sep-94 3.0% 3.1% Oct-94 2.6% 3.0% Nov-94 2.7% 3.0% Dec-94 2.7% 3.0% Jan-95 2.8% 3.0% Feb-95 2.9% 3.0% Mar-95 2.9% 3.0% Apr-95 3.1% 3.0% May-95 3.2% 3.0% Jun-95 3.0% 3.0% Jul-95 2.8% 2.8% Aug-95 2.6% 2.8% Sep-95 2.5% 2.8% Oct-95 2.8% 2.8% Nov-95 2.6% 2.8% Dec-95 2.5% 2.8% Jan-96 2.7% 2.9% Feb-96 2.7% 2.9% Mar-96 2.8% 2.9% Apr-96 2.9% 2.9% May-96 2.9% 2.9% Jun-96 2.8% 2.9% Jul-96 3.0% 2.9% Aug-96 2.9% 2.9% Sep-96 3.0% 2.9% Oct-96 3.0% 3.0% Nov-96 3.3% 3.0% Dec-96 3.3% 3.0%
20
CHART 12 90 Day Commercial Paper 1/2/96 5.50% 1/3/96 5.51% 1/4/96 5.49% 1/5/96 5.46% 1/8/96 5.48% 1/9/96 5.47% 1/10/96 5.45% 1/11/96 5.44% 1/12/96 5.43% 1/15/96 5.43% 1/16/96 5.42% 1/17/96 5.41% 1/18/96 5.39% 1/19/96 5.38% 1/22/96 5.37% 1/23/96 5.36% 1/24/96 5.35% 1/25/96 5.34% 1/26/96 5.34% 1/29/96 5.32% 1/30/96 5.31% 1/31/96 5.27% 2/1/96 5.21% 2/2/96 5.17% 2/5/96 5.17% 2/6/96 5.16% 2/7/96 5.16% 2/8/96 5.15% 2/9/96 5.14% 2/12/96 5.13% 2/13/96 5.13% 2/14/96 5.12% 2/15/96 5.12% 2/16/96 5.12% 2/20/96 5.14% 2/21/96 5.16% 2/22/96 5.14% 2/23/96 5.13% 2/26/96 5.14% 2/27/96 5.16% 2/28/96 5.16% 2/29/96 5.19% 3/1/96 5.19% 3/4/96 5.17% 3/5/96 5.18% 3/6/96 5.19% 3/7/96 5.19% 3/8/96 5.31% 3/11/96 5.31% 3/12/96 5.32% 3/13/96 5.34% 3/14/96 5.34% 3/15/96 5.34% 3/18/96 5.36% 3/19/96 5.36% 3/20/96 5.36% 3/21/96 5.35% 3/22/96 5.35% 3/25/96 5.37% 3/26/96 5.36% 3/27/96 5.37% 3/28/96 5.39% 3/29/96 5.38% 4/1/96 5.36% 4/2/96 5.36% 4/3/96 5.36% 4/4/96 5.36% 4/5/96 5.36% 4/8/96 5.40% 4/9/96 5.41% 4/10/96 5.41% 4/11/96 5.41% 4/12/96 5.41% 4/15/96 5.41% 4/16/96 5.40% 4/17/96 5.39% 4/18/96 5.39% 4/19/96 5.38% 4/22/96 5.38% 4/23/96 5.38% 4/24/96 5.38% 4/25/96 5.38% 4/26/96 5.38% 4/29/96 5.38% 4/30/96 5.39% 5/1/96 5.40% 5/2/96 5.41% 5/3/96 5.41% 5/6/96 5.41% 5/7/96 5.41% 5/8/96 5.41% 5/9/96 5.40% 5/10/96 5.39% 5/13/96 5.38% 5/14/96 5.38% 5/15/96 5.38% 5/16/96 5.38% 5/17/96 5.38% 5/20/96 5.38% 5/21/96 5.37% 5/22/96 5.37% 5/23/96 5.37% 5/24/96 5.37% 5/27/96 5.37% 5/28/96 5.37% 5/29/96 5.37% 5/30/96 5.39% 5/31/96 5.40% 6/3/96 5.43% 6/4/96 5.42% 6/5/96 5.42% 6/6/96 5.41% 6/7/96 5.50% 6/10/96 5.51% 6/11/96 5.50% 6/12/96 5.49% 6/13/96 5.49% 6/14/96 5.49% 6/17/96 5.50% 6/18/96 5.50% 6/19/96 5.50% 6/20/96 5.50% 6/21/96 5.50% 6/24/96 5.51% 6/25/96 5.50% 6/26/96 5.50% 6/27/96 5.51% 6/28/96 5.52% 7/1/96 5.50% 7/2/96 5.50% 7/3/96 5.50% 7/4/96 5.50% 7/5/96 5.59% 7/8/96 5.59% 7/9/96 5.56% 7/10/96 5.54% 7/11/96 5.54% 7/12/96 5.55% 7/15/96 5.56% 7/16/96 5.56% 7/17/96 5.55% 7/18/96 5.54% 7/19/96 5.51% 7/22/96 5.51% 7/23/96 5.51% 7/24/96 5.50% 7/25/96 5.50% 7/26/96 5.52% 7/29/96 5.52% 7/30/96 5.54% 7/31/96 5.55% 8/1/96 5.54% 8/2/96 5.47% 8/5/96 5.44% 8/6/96 5.43% 8/7/96 5.43% 8/8/96 5.42% 8/9/96 5.41% 8/12/96 5.40% 8/13/96 5.40% 8/14/96 5.40% 8/15/96 5.41% 8/16/96 5.40% 8/19/96 5.40% 8/20/96 5.40% 8/21/96 5.40% 8/22/96 5.39% 8/23/96 5.39% 8/26/96 5.42% 8/27/96 5.42% 8/28/96 5.42% 8/29/96 5.42% 8/30/96 5.45% 9/2/96 5.45% 9/3/96 5.53% 9/4/96 5.53% 9/5/96 5.55% 9/6/96 5.57% 9/9/96 5.54% 9/10/96 5.53% 9/11/96 5.53% 9/12/96 5.51% 9/13/96 5.47% 9/16/96 5.46% 9/17/96 5.50% 9/18/96 5.52% 9/19/96 5.54% 9/20/96 5.56% 9/23/96 5.59% 9/24/96 5.61% 9/25/96 5.48% 9/26/96 5.46% 9/27/96 5.47% 9/30/96 5.49% 10/1/96 5.48% 10/2/96 5.48% 10/3/96 5.49% 10/4/96 5.44% 10/7/96 5.43% 10/8/96 5.43% 10/9/96 5.43% 10/10/96 5.43% 10/11/96 5.43% 10/14/96 5.43% 10/15/96 5.42% 10/16/96 5.42% 10/17/96 5.42% 10/18/96 5.42% 10/21/96 5.42% 10/22/96 5.42% 10/23/96 5.42% 10/24/96 5.42% 10/25/96 5.42% 10/28/96 5.43% 10/29/96 5.42% 10/30/96 5.41% 10/31/96 5.41% 11/1/96 5.41% 11/4/96 5.41% 11/5/96 5.41% 11/6/96 5.41% 11/7/96 5.41% 11/8/96 5.40% 11/11/96 5.40% 11/12/96 5.40% 11/13/96 5.40% 11/14/96 5.40% 11/15/96 5.42% 11/18/96 5.42% 11/19/96 5.41% 11/20/96 5.41% 11/21/96 5.41% 11/22/96 5.40% 11/25/96 5.41% 11/26/96 5.41% 11/27/96 5.42% 11/28/96 5.42% 11/29/96 5.44% 12/2/96 5.44% 12/3/96 5.42% 12/4/96 5.42% 12/5/96 5.41% 12/6/96 5.43% 12/9/96 5.43% 12/10/96 5.43% 12/11/96 5.44% 12/12/96 5.44% 12/13/96 5.47% 12/16/96 5.48% 12/17/96 5.49% 12/18/96 5.52% 12/19/96 5.55% 12/20/96 5.57% 12/23/96 5.58% 12/24/96 5.60% 12/25/96 5.60% 12/26/96 5.61% 12/27/96 5.64% 12/30/96 5.65% 12/31/96 5.63%
21 SCHWAB VALUE ADVANTAGE MONEY FUND(R) - ------------------------------------------------------------------------------ PORTFOLIO SUMMARY ASSET GROWTH
Total Total Percentage Net Assets Net Assets Growth Over as of 12/31/96 as of 12/31/95 Reporting (000s) (000s) Period - --------------------------------------------------------------------- $ 10,476,537 $6,923,890 51% - ---------------------------------------------------------------------
AVERAGE YIELDS FOR THE PERIODS ENDED DECEMBER 31, 1996
Last Last Last Seven Days Three Months Twelve Months - --------------------------------------------------------------------- 5.14% 5.14% 5.14% - ---------------------------------------------------------------------
MATURITY SCHEDULE PERCENT OF TOTAL INVESTMENTS
Maturity Range 3/31/96 6/30/96 9/30/96 12/31/96 - --------------------------------------------------------------------- 0 - 15 Days 26.9% 20.1% 22.7% 18.4% 16 - 30 Days 17.4 21.4 20.3 18.8 31 - 60 Days 24.5 32.2 26.6 30.8 61 - 90 Days 16.2 10.7 12.7 20.1 91 - 120 Days 6.7 4.2 2.5 6.8 Over 120 Days 8.3 11.4 15.2 5.1 Weighted Average 57 Days 58 Days 57 Days 50 Days - ---------------------------------------------------------------------
PORTFOLIO QUALITY
Percent of SEC Tier Net Assets Rating 12/31/96 ----------------------- Tier 1 100.0% Tier 2 0.0% -----------------------
13 22 SCHWAB VALUE ADVANTAGE MONEY FUND(R) - ------------------------------------------------------------------------------ SCHEDULE OF INVESTMENTS (in thousands) December 31, 1996
Par Value -------- ----------- COMMERCIAL PAPER AND OTHER CORPORATE OBLIGATIONS--58.9%(a) ASSET BACKED SECURITIES--17.5% Alpha Finance Corp. 5.39%, 02/03/97 $20,000 $19,903 Asset Securitization Cooperative Corp. 5.40%, 01/23/97 65,000 64,790 5.40%, 01/30/97 25,000 24,893 5.40%, 02/05/97 50,000 49,741 5.39%, 02/05/97 25,000 24,871 5.38%, 02/20/97 26,000 25,809 5.46%, 03/25/97 11,000 10,864 Barton Capital Corp. 5.40%, 01/16/97 16,902 16,864 5.38%, 02/26/97 38,015 37,702 Beta Finance, Inc. 5.42%, 01/21/97 17,000 16,950 5.42%, 01/23/97 16,000 15,948 5.38%, 02/25/97 11,000 10,911 5.78%, 03/24/97 61,000 60,219 5.76%, 03/24/97 16,000 15,796 5.80%, 04/15/97 35,000 35,000 5.51%, 04/23/97 22,500 22,125 CC (USA) Inc. 5.39%, 02/14/97 8,500 8,445 5.38%, 02/25/97 8,000 7,935 5.41%, 03/13/97 10,000 9,895 Corporate Asset Funding Corp. 5.40%, 01/27/97 50,000 49,808 Corporate Receivables Corp. 5.43%, 01/13/97 40,000 39,929 5.42%, 01/17/97 23,000 22,945 5.43%, 01/24/97 35,000 34,881 5.40%, 01/28/97 35,000 34,860 5.38%, 02/13/97 35,000 34,778 5.38%, 02/21/97 15,000 14,887 CXC, Inc. 5.43%, 01/13/97 40,000 39,929 5.41%, 01/28/97 25,000 24,900 5.40%, 01/28/97 37,000 36,852 5.42%, 02/04/97 25,000 24,874 5.38%, 02/07/97 30,000 29,837 5.38%, 02/14/97 22,000 21,857 5.39%, 02/21/97 30,000 29,774
14 23 - ------------------------------------------------------------------------------
Par Value -------- ----------- Dakota Certificates Program of Citibank Credit Card Master Trust I 5.44%, 01/08/97 $25,000 $24,974 5.42%, 02/03/97 10,000 9,951 5.42%, 02/07/97 20,000 19,890 5.40%, 02/11/97 20,000 19,879 5.53%, 03/11/97 30,000 29,686 5.52%, 03/13/97 20,000 19,785 Enterprise Funding Corp. 5.87%, 01/06/97 44,511 44,475 5.42%, 01/09/97 21,721 21,695 5.42%, 01/10/97 6,121 6,113 5.42%, 01/13/97 25,332 25,287 5.41%, 01/14/97 10,128 10,108 5.39%, 01/30/97 17,000 16,927 5.41%, 02/07/97 24,354 24,221 5.40%, 02/10/97 22,000 21,870 5.43%, 02/27/97 16,500 16,360 5.39%, 02/28/97 19,304 19,139 Eureka Securitization, Inc. 5.45%, 02/12/97 20,000 19,874 5.40%, 03/04/97 15,000 14,862 5.44%, 03/13/97 25,000 24,736 5.46%, 03/18/97 20,000 19,773 First Deposit Master Trust Series 1993-3 5.42%, 01/15/97 20,000 19,958 5.40%, 02/19/97 20,000 19,855 Kitty Hawk Funding Corp. 5.45%, 03/03/97 25,000 24,772 5.47%, 03/14/97 10,000 9,892 McKenna Triangle National Corp. 5.38%, 02/18/97 25,000 24,823 Mont Blanc Capital Corp. 5.50%, 01/09/97 10,000 9,988 5.46%, 03/18/97 30,000 29,659 Monte Rosa Capital Corp. 5.40%, 01/24/97 25,423 25,336 National Fleet Funding 5.38%, 01/08/97 25,000 24,974 Preferred Receivables Funding Corp. 5.41%, 01/07/97 30,000 29,973 5.38%, 02/13/97 32,900 32,691 Ranger Funding Corp. 5.43%, 01/22/97 20,000 19,938 5.40%, 01/30/97 10,000 9,957 5.39%, 02/03/97 20,000 19,902 5.43%, 03/14/97 18,000 17,807
15 24 SCHWAB VALUE ADVANTAGE MONEY FUND(R) - ------------------------------------------------------------------------------ SCHEDULE OF INVESTMENTS (in thousands) December 31, 1996
Par Value -------- ----------- Receivables Capital Corp. 5.43%, 02/07/97 $17,000 $ 16,906 Sheffield Receivables Corp. 6.75%, 01/02/97 5,410 5,409 WCP Funding, Inc. 5.41%, 03/07/97 25,000 24,759 5.41%, 03/11/97 20,000 19,796 5.43%, 03/13/97 20,000 19,789 Windmill Funding 5.39%, 01/16/97 25,353 25,297 5.39%, 01/17/97 30,000 29,929 5.50%, 03/19/97 20,000 19,768 5.53%, 03/20/97 35,000 34,587 ---------- 1,844,142 ---------- AUTOMOTIVE--5.7% Chrysler Financial Corp. 5.49%, 01/22/97 75,000 74,764 5.49%, 01/27/97 49,000 48,809 5.49%, 01/29/97 20,000 19,916 Ford Credit Europe PLC 5.38%, 02/25/97 7,000 6,943 5.38%, 03/03/97 25,000 24,775 5.38%, 03/04/97 20,000 19,817 5.37%, 03/07/97 22,200 21,988 Ford Motor Credit 5.37%, 02/03/97 20,000 19,903 5.37%, 02/05/97 43,000 42,778 5.38%, 02/11/97 50,000 49,699 General Motors Acceptance Corp. 5.87%, 01/30/97 35,000 34,839 5.61%, 02/12/97 27,000 26,828 5.72%, 03/03/97 28,000 27,736 5.88%, 03/05/97 28,000 27,720 5.87%, 03/12/97 28,000 27,690 5.61%, 04/15/97 9,000 8,858 5.50%, 05/16/97 25,000 24,499 5.50%, 06/05/97 15,000 14,655 5.60%, 06/23/97 25,000 24,345 5.60%, 06/25/97 21,000 20,445 Renault Credit Internationale SA Banque 5.49%, 01/13/97 30,000 29,946 ---------- 596,953 ----------
16 25 - ------------------------------------------------------------------------------
Par Value -------- ----------- BANKING--AUSTRALIA--0.3% National Australia Funding (Delaware), Inc. 5.80%, 04/17/97 $17,000 $ 16,719 5.79%, 04/17/97 10,000 9,835 ------- 26,554 ------- BANKING--BELGIUM--0.9% Cregem North America, Inc. 5.42%, 01/14/97 25,000 24,952 5.39%, 02/04/97 30,000 29,848 5.38%, 02/10/97 25,000 24,853 5.37%, 02/14/97 12,100 12,022 ------- 91,675 ------- BANKING--CANADA--1.2% Bank of Montreal 5.38%, 01/09/97 41,000 40,951 Bank of Nova Scotia 5.38%, 02/19/97 50,000 49,639 5.40%, 03/17/97 40,000 39,557 ------- 130,147 ------- BANKING--DENMARK--0.7% Den Danske Corp. 5.38%, 02/28/97 10,000 9,915 Unifunding, Inc. 5.41%, 01/07/97 14,000 13,988 5.41%, 01/22/97 29,000 28,909 5.43%, 03/10/97 25,000 24,747 ------- 77,559 ------- BANKING--DOMESTIC--3.0% Bankers Trust New York Corp. 5.86%, 01/06/97 40,000 39,968 5.58%, 02/10/97 20,000 19,879 5.57%, 02/19/97 50,000 49,631 5.53%, 04/16/97 13,000 12,796 5.50%, 06/19/97 20,000 19,499 International Securitization Corp./(First National Bank of Chicago LOC) 5.39%, 02/25/97 14,000 13,886 5.41%, 03/03/97 7,900 7,829 5.54%, 03/20/97 13,825 13,661 NationsBank Corp. 5.38%, 02/07/97 50,000 49,728 5.53%, 02/11/97 40,000 39,755 Secured Short Term Notes 96-7 5.68%, 03/21/97 37,000 37,000
17 26 SCHWAB VALUE ADVANTAGE MONEY FUND(R) - ------------------------------------------------------------------------------ SCHEDULE OF INVESTMENTS (in thousands) December 31, 1996
Par Value -------- ----------- Vehicle Services of America/(NationsBank of Texas LOC) 5.43%, 03/06/97 $7,000 $ 6,933 ------- 310,565 ------- BANKING--ITALY--0.2% Cariplo Finance, Inc. 5.42%, 01/16/97 25,000 24,944 ------- BANKING--JAPAN--0.9% Anchor Funding Corp./(Dai-Ichi Kangyo Bank LOC) 5.51%, 02/19/97 5,000 4,963 Apex Funding Corp./(Bank of Tokyo-Mitsubishi LOC) 5.51%, 02/28/97 23,384 23,179 Gotham Funding Corp./(Bank of Tokyo- Mitsubishi LOC) 5.50%, 02/04/97 20,500 20,395 5.48%, 02/21/97 20,000 19,847 Ridge Capital II/(Dai-Ichi Kangyo Bank LOC) 5.55%, 01/06/97 30,000 29,977 ------- 98,361 ------- BANKING--SPAIN--0.7% B.B.V. Finance (Delaware) Inc. 5.56%, 02/18/97 50,000 49,640 BEX America Finance, Inc. 5.43%, 01/07/97 25,000 24,978 ------- 74,618 ------- BANKING--SWEDEN--0.5% Nordbanken of North America, Inc. 5.38%, 02/24/97 17,000 16,865 5.40%, 03/05/97 35,000 34,673 ------- 51,538 ------- BANKING--UNITED KINGDOM--1.1% Abbey National N.A. Corp. 5.61%, 04/02/97 50,000 49,310 Abbey National Treasury Services PLC 5.13%, 03/03/97 25,000 24,996 Bank of Scotland Treasury Services 5.50%, 04/09/97 20,000 19,709 Yorkshire Building Society 5.40%, 02/05/97 25,000 24,871 ------- 118,886 -------
18 27 - ------------------------------------------------------------------------------
Par Value -------- ----------- COMPUTERS AND OFFICE EQUIPMENT--0.2% CSC Enterprises 5.45%, 01/09/97 $ 10,000 $ 9,989 5.42%, 01/14/97 8,000 7,984 ------- 17,973 ------- FINANCE--COMMERCIAL--4.9% Finova Capital Corp. 5.49%, 01/16/97 25,000 24,944 General Electric Capital Corp. 5.41%, 01/14/97 67,000 66,871 5.41%, 01/15/97 50,000 49,896 5.41%, 01/16/97 40,000 39,911 5.41%, 01/17/97 25,000 24,941 General Electric Capital Services 5.55%, 01/16/97 40,000 39,909 5.40%, 01/30/97 12,000 11,949 5.40%, 02/04/97 50,000 49,749 5.38%, 02/19/97 50,000 49,639 5.80%, 02/26/97 30,000 29,737 Heller Financial Inc. 5.53%, 02/04/97 5,000 4,974 5.54%, 02/05/97 17,000 16,910 5.44%, 02/14/97 15,000 14,902 5.43%, 02/14/97 24,000 23,843 5.46%, 02/24/97 26,000 25,790 5.51%, 03/07/97 34,000 33,668 5.66%, 04/17/97 5,000 4,918 ------- 512,551 ------- FINANCE--CONSUMER--6.0% American Express Credit Corp. 5.40%, 01/30/97 40,000 39,829 5.40%, 01/31/97 50,000 49,778 5.40%, 02/06/97 37,000 36,803 5.38%, 02/11/97 40,000 39,759 5.38%, 02/12/97 12,000 11,926 Associates Corp. of North America 5.40%, 01/28/97 70,000 69,720 5.40%, 01/29/97 100,000 99,587 5.40%, 01/30/97 22,000 21,906 5.38%, 02/07/97 33,000 32,820 5.39%, 02/10/97 30,000 29,823 5.39%, 02/12/97 50,000 49,690 Household Finance Corp. 5.40%, 01/22/97 19,000 18,941 5.43%, 01/24/97 50,000 49,829 5.39%, 02/24/97 23,000 22,816
19 28 SCHWAB VALUE ADVANTAGE MONEY FUND(R) - ------------------------------------------------------------------------------ SCHEDULE OF INVESTMENTS (in thousands) December 31, 1996
Par Value -------- ----------- Sears Roebuck Acceptance Corp. 5.41%, 02/11/97 $20,000 $ 19,879 5.41%, 02/12/97 40,000 39,751 ------- 632,857 ------- MISCELLANEOUS MANUFACTURING--0.2% Newell Co. 5.41%, 02/10/97 22,000 21,869 ------- MORTGAGE BANKING--0.2% Countrywide Home Loans, Inc. 5.41%, 01/08/97 9,000 8,991 5.43%, 01/31/97 8,000 7,964 ------- 16,955 ------- PAPER AND WOOD PRODUCTS--0.2% Rexam PLC 5.38%, 02/12/97 17,900 17,789 ------- PHARMACEUTICALS--0.3% Glaxo Wellcome PLC 5.38%, 02/20/97 30,000 29,779 ------- SAVINGS AND LOAN--0.2% Bank of America, FSB 5.42%, 01/15/97 25,000 24,948 ------- SECURITIES BROKERAGE-DEALER--14.0% Bear Stearns Companies, Inc. 5.39%, 02/25/97 50,000 49,594 5.39%, 02/27/97 25,000 24,790 BT Securities Corp. 5.58%, 02/10/97 14,000 13,916 5.54%, 06/18/97 13,000 12,673 5.50%, 07/01/97 15,000 14,598 CS First Boston Inc. 5.41%, 02/03/97 20,000 19,902 5.39%, 02/03/97 13,000 12,937 Goldman Sachs Group, LP 5.38%, 02/06/97 75,000 74,603 5.37%, 02/10/97 50,000 49,706 5.45%, 03/14/97 12,000 11,871 5.39%, 03/14/97 68,000 67,277 5.40%, 03/18/97 10,000 9,888 5.43%, 03/20/97 50,000 49,420
20 29 - ------------------------------------------------------------------------------
Par Value -------- ----------- Lehman Brothers Holdings, Inc. 5.67%, 01/23/97 $54,000 $ 53,817 5.84%, 03/13/97 23,000 22,743 5.50%, 06/05/97 57,000 55,687 5.55%, 06/12/97 49,000 47,809 5.55%, 06/13/97 39,000 38,048 Merrill Lynch & Co., Inc. 5.39%, 01/24/97 20,000 19,932 5.40%, 02/13/97 50,000 49,682 5.39%, 02/25/97 14,000 13,886 5.38%, 02/28/97 98,000 97,164 5.40%, 03/11/97 17,000 16,826 5.51%, 04/16/97 50,000 49,218 Morgan Stanley Group, Inc. 5.42%, 01/21/97 74,000 73,780 5.40%, 01/28/97 32,000 31,872 5.40%, 01/29/97 40,000 39,834 5.39%, 02/05/97 25,000 24,871 5.39%, 02/06/97 10,000 9,947 5.75%, 03/19/97 25,000 24,701 5.60%, 03/21/97 35,000 34,581 5.59%, 03/21/97 50,000 49,402 5.75%, 03/24/97 50,000 49,363 5.64%, 04/01/97 54,000 53,260 5.64%, 04/04/97 50,000 49,292 Nomura Holdings America, Inc. 5.44%, 01/10/97 14,000 13,981 5.45%, 01/17/97 12,000 11,971 PaineWebber Group, Inc. 5.58%, 01/02/97 16,000 15,998 5.48%, 01/31/97 40,000 39,820 Salomon, Inc. 5.58%, 02/21/97 30,000 29,766 5.54%, 02/27/97 30,000 29,741 5.61%, 03/18/97 10,000 9,883 --------- 1,468,050 --------- TOTAL COMMERCIAL PAPER AND OTHER CORPORATE OBLIGATIONS (Cost $6,188,713) 6,188,713 ---------
21 30 SCHWAB VALUE ADVANTAGE MONEY FUND(R) - ------------------------------------------------------------------------------ SCHEDULE OF INVESTMENTS (in thousands) December 31, 1996
Par Value -------- ----------- CERTIFICATES OF DEPOSIT--32.4% BANKING--AUSTRALIA--0.5% Australia & New Zealand Bank Group 5.38%, 03/07/97 $ 50,000 $ 50,000 -------- BANKING--CANADA--1.7% Bank of Montreal 5.42%, 01/10/97 100,000 100,000 Canadian Imperial Bank of Commerce 5.41%, 01/07/97 50,000 50,000 5.42%, 01/14/97 25,000 25,000 -------- 175,000 -------- BANKING--DOMESTIC--4.3% Bankers Trust Company 5.43%, 01/08/97 100,000 100,000 5.50%, 03/10/97 50,000 50,000 Chase Manhattan Bank U.S.A. 5.75%, 03/11/97 50,000 50,000 5.60%, 04/01/97 50,000 50,000 5.60%, 04/03/97 40,000 40,000 First Deposit National Bank 5.50%, 02/13/97 25,000 25,000 MBNA America Bank N.A. 5.51%, 02/07/97 21,000 21,000 5.44%, 03/04/97 37,000 37,000 5.54%, 03/18/97 11,000 11,000 Mellon Bank N.A. 5.50%, 04/08/97 45,000 45,000 Providian National Bank 5.43%, 01/14/97 25,000 25,000 -------- 454,000 -------- BANKING--FRANCE--6.4% Banque Nationale de Paris 5.40%, 01/15/97 55,000 55,001 5.41%, 01/24/97 11,000 11,000 5.40%, 02/06/97 10,000 10,001 5.38%, 02/06/97 50,000 50,000 5.38%, 02/20/97 64,000 64,002 5.38%, 03/04/97 52,000 52,000 5.38%, 03/05/97 30,000 30,000 5.38%, 03/06/97 63,000 63,000 5.43%, 03/18/97 32,000 32,000 5.54%, 04/15/97 25,000 25,001 5.54%, 06/19/97 25,000 25,001
22 31 - ------------------------------------------------------------------------------
Par Value -------- ----------- Societe Generale 5.54%, 03/14/97 $25,000 $ 25,000 5.65%, 03/31/97 25,000 24,996 5.60%, 04/03/97 50,000 50,001 5.90%, 05/30/97 25,000 24,997 6.09%, 06/10/97 25,000 24,997 6.12%, 06/13/97 34,000 33,994 6.11%, 06/13/97 25,000 24,998 5.83%, 08/20/97 50,000 49,985 ------- 675,974 ------- BANKING--GERMANY--1.9% Bayerische Hypotheken und Wechsel Bank 5.38%, 02/26/97 50,000 50,000 5.39%, 03/07/97 50,000 49,999 Bayerische Landesbank Girozentrale 4.94%, 01/13/97 43,000 43,004 Bayerische Vereinsbank AG 5.50%, 06/19/97 30,000 30,001 Landesbank Hessen-Thuringen Girozentrale 6.20%, 09/05/97 25,000 25,002 ------- 198,006 ------- BANKING--ITALY--0.5% Cariplo SpA 5.42%, 01/27/97 25,000 25,000 5.43%, 02/03/97 20,000 20,000 5.38%, 02/19/97 10,000 10,000 ------- 55,000 ------- BANKING--JAPAN--12.9% Bank of Tokyo-Mitsubishi, Ltd. 5.62%, 01/02/97 50,000 50,000 5.62%, 01/06/97 41,000 40,999 5.50%, 01/10/97 55,000 55,000 5.52%, 03/03/97 50,000 49,998 5.52%, 03/12/97 50,000 50,000 Dai-Ichi Kangyo Bank, Ltd. 5.54%, 01/15/97 25,000 25,000 5.60%, 03/05/97 25,000 24,997 5.70%, 03/12/97 35,000 34,989 5.62%, 03/13/97 17,000 16,998 5.65%, 03/19/97 10,000 10,000
23 32 SCHWAB VALUE ADVANTAGE MONEY FUND(R) - ------------------------------------------------------------------------------ SCHEDULE OF INVESTMENTS (in thousands) December 31, 1996
Par Value -------- ----------- Industrial Bank of Japan, Ltd. 5.58%, 01/02/97 $80,000 $ 80,000 5.61%, 01/03/97 16,000 16,000 5.58%, 01/03/97 80,000 80,003 5.50%, 01/07/97 50,000 50,000 5.50%, 01/09/97 33,000 33,000 5.50%, 02/03/97 90,000 90,000 5.48%, 02/13/97 30,000 30,000 5.48%, 02/21/97 60,000 60,000 5.62%, 03/12/97 37,000 37,000 5.58%, 03/19/97 20,000 20,000 Sanwa Bank, Ltd. 5.61%, 01/06/97 13,000 13,000 5.49%, 01/08/97 25,000 25,000 5.52%, 01/17/97 50,000 50,000 5.49%, 01/17/97 25,000 25,000 5.52%, 01/21/97 50,000 50,000 5.50%, 01/21/97 18,000 18,000 5.49%, 01/21/97 30,000 30,000 5.52%, 01/22/97 36,000 36,000 5.51%, 01/23/97 30,000 30,000 5.51%, 01/24/97 50,000 50,001 5.51%, 01/27/97 40,000 40,000 5.50%, 01/27/97 20,000 20,000 5.52%, 01/29/97 25,000 25,000 5.50%, 01/31/97 20,000 20,000 5.49%, 02/24/97 50,000 49,999 5.69%, 03/10/97 11,000 10,997 ---------- 1,346,981 ---------- BANKING--NETHERLANDS--0.7% ABN-Amro Bank N.V. 4.95%, 02/14/97 50,000 49,996 5.82%, 02/18/97 25,000 24,990 ---------- 74,986 ---------- BANKING--SWEDEN--1.4% Svenska Handelsbanken 5.39%, 02/18/97 20,000 20,000 5.38%, 02/24/97 50,000 50,000 5.60%, 03/31/97 30,000 30,001 5.54%, 04/11/97 50,000 50,001 ---------- 150,002 ----------
24 33 - ------------------------------------------------------------------------------
Par Value -------- ----------- BANKING--UNITED KINGDOM--2.1% Abbey National Treasury Services PLC 5.13%, 02/20/97 $50,000 $ 50,001 5.08%, 02/26/97 25,000 25,000 5.38%, 03/03/97 25,000 25,000 5.61%, 04/02/97 25,000 25,000 5.50%, 04/08/97 50,000 50,001 Bank of Scotland 5.61%, 04/04/97 50,000 50,001 ---------- 225,003 ---------- TOTAL CERTIFICATES OF DEPOSIT (Cost $3,404,952) 3,404,952 ---------- VARIABLE RATE OBLIGATIONS--6.0%(a) (b) ASSET BACKED SECURITIES--1.0% Beta Finance, Inc. 5.56%, 01/15/97 50,000 49,997 Corporate Asset Funding Corp. 5.56%, 01/10/97 50,000 49,998 ---------- 99,995 ---------- BANKING--DOMESTIC--0.5% Keystone Health Resources Corp. Variable Rate Taxable Demand Notes Series 1993/(PNC Bank LOC) 5.80%, 01/07/97 3,300 3,300 PNC Bank, N.A. 5.57%, 01/27/97 40,000 39,967 Town of Islip Industrial Development Agency 1992 Taxable Adjustable Rate Industrial Development Revenue Bonds (Nussdorf Associates/Quality King Distributors, Inc. Facility)/(European American Bank LOC) 5.81%, 01/07/97 7,180 7,180 ---------- 50,447 ---------- BANKING--GERMANY--0.1% General Obligation Refunding Bonds of the County of Hudson (State of New Jersey) (Variable Rate Demand Obligations) Taxable Series 1995/(Landesbank Hessen-Thuringen Girozentrale LOC) 5.90%, 01/07/97 9,300 9,300 ----------
25 34 SCHWAB VALUE ADVANTAGE MONEY FUND(R) - ------------------------------------------------------------------------------ SCHEDULE OF INVESTMENTS (in thousands) December 31, 1996
Par Value -------- ----------- BANKING--JAPAN--0.1% New York City Industrial Development Agency Industrial Development Revenue Bonds (G.A.F. Seelig Inc. Project) Series 1993/(Industrial Bank of Japan Schroder Bank & Trust LOC) 6.05%, 01/07/97 $ 2,130 $ 2,130 ------- BANKING--UNITED KINGDOM--0.2% County of Riverside 1990 Taxable Variable Rate Certificates of Participation (Monterey Avenue Project)/ (National Westminister Commerzbank LOC) 5.85%, 01/07/97 8,100 8,100 New Jersey Economic Development Authority Variable Rate Title IX Loan Portfolio Securitization Bonds/(National Westminster Bank LOC) 5.91%, 01/06/97 24,500 24,500 ------- 32,600 ------- INSURANCE--1.5% Commonwealth Life Insurance Co. 5.64%, 01/01/97 10,000 10,000 5.46%, 01/01/97 100,000 100,000 General American Life Insurance Co. 5.58%, 01/07/97 50,000 50,000 ------- 160,000 ------- MONOLINE INSURANCE--0.1% Baptist Health Systems of South Florida, Inc. Taxable Variable Rate Direct Note Obligations Series 1995A/(MBIA Insurance) 5.90%, 01/07/97 6,600 6,600 Baptist Health Systems of South Florida, Inc. Taxable Variable Rate Direct Note Obligations Series 1995B/(MBIA Insurance) 5.90%, 01/07/97 4,500 4,500 New Orleans Aviation Board Taxable Refunding Bonds Series 1993A/(MBIA Insurance) 6.03%, 01/07/97 700 700 ------- 11,800 ------- SECURITIES BROKERAGE-DEALER--2.5% Bear Stearns Companies, Inc. 5.61%, 01/06/97 60,000 60,000 5.59%, 01/06/97 110,000 110,000
26 35 - --------------------------------------------------------------------------------
Par Value -------- ----------- Lehman Brothers Holdings, Inc. 5.67%, 01/30/97 $95,000 $ 95,000 -------- 265,000 -------- TOTAL VARIABLE RATE OBLIGATIONS (Cost $631,272) 631,272 -------- U.S. TREASURY OBLIGATIONS--1.0% U.S. Treasury Notes 7.50%, 01/31/97 50,000 50,101 6.63%, 03/31/97 50,000 50,166 -------- TOTAL U.S. TREASURY OBLIGATIONS (Cost $100,267) 100,267 -------- BANK NOTES--0.8% BANKING--CANADA--0.7% Harris Trust & Savings Bank 5.59%, 03/26/97 45,000 44,992 6.10%, 06/17/97 25,000 24,993 -------- 69,985 -------- BANKING--DOMESTIC--0.1% FCC National Bank 5.55%, 02/21/97 13,000 13,000 -------- TOTAL BANK NOTES (Cost $82,985) 82,985 -------- MUNICIPAL BONDS--0.5% BANKING--FRANCE--0.5% The City of New York General Obligation Bonds Fiscal 1995 Series F-8/(Societe Generale LOC) 5.55%, 02/25/97 14,000 14,000 The City of New York General Obligation Bonds Fiscal 1996 Series A-2/(Societe Generale LOC) 5.55%, 02/25/97 38,000 38,000 The City of New York General Obligation Bonds Fiscal 1996 Series F/(Societe Generale LOC) 5.55%, 02/25/97 5,500 5,500 -------- TOTAL MUNICIPAL BONDS (Cost $57,500) 57,500 --------
27 36 SCHWAB VALUE ADVANTAGE MONEY FUND(R) - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS (in thousands) December 31, 1996
Par Value -------- ----------- REMARKETED CERTIFICATES--0.2%(a) ASSET BACKED SECURITIES--0.2% Black & Decker RECOP Trust 5.40%, 02/03/97 $10,000 $ 10,000 5.40%, 02/14/97 10,000 10,000 ----------- TOTAL REMARKETED CERTIFICATES (Cost $20,000) 20,000 ----------- Maturity -------- REPURCHASE AGREEMENTS--0.2% Salomon Brothers, Inc. 7.00%, Issue Date 12/31/96 Due 01/02/97; Tri-Party Repurchase Agreement; Collateralized By: U.S. Government Agency Obligations 26,010 26,000 ----------- TOTAL REPURCHASE AGREEMENTS (Cost $26,000) 26,000 ----------- TOTAL INVESTMENTS--100% (Cost $10,511,689) $10,511,689 ===========
28 37 - ------------------------------------------------------------------------------ NOTES TO SCHEDULE OF INVESTMENTS December 31, 1996 Yields shown are effective yields at the time of purchase, except for variable rate securities which are described below and Treasury notes which reflect the coupon rate of the security. 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 sold 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, 1996, the aggregate value of private placement securities held by the Fund was $2,383,676,000 which represented 22.75% of net assets. Of this total, $2,178,676,000 or 20.80% of net assets, was determined by the Investment Manager to be liquid in accordance with procedures adopted by the Board of Trustees. (b) Variable rate securities. Interest rates vary periodically based on current market rates. Rates shown are the effective rates on December 31, 1996. 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. 29 38 SCHWAB VALUE ADVANTAGE MONEY FUND(R) - -------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES (in thousands) December 31, 1996 ASSETS Investments, at value (Cost: $10,511,689) $10,511,689 Interest receivable 55,051 Receivable for Fund shares sold 80,409 Deferred organization costs 7 Prepaid expenses 155 ----------- Total assets 10,647,311 ----------- LIABILITIES Payable for: Dividends 67,797 Fund shares redeemed 101,347 Investment advisory and administration fee 638 Transfer agency and shareholder service fees 62 Other 930 ----------- Total liabilities 170,774 ----------- Net assets applicable to outstanding shares $10,476,537 =========== NET ASSETS CONSIST OF: Paid-in-capital $10,476,662 Accumulated net realized loss on investments sold (125) ----------- $10,476,537 =========== PRICING OF SHARES Outstanding shares, $0.00001 par value (unlimited shares authorized) 10,476,662 Net asset value, offering and redemption price per share $1.00
See accompanying Notes to Financial Statements. 30 39 - -------------------------------------------------------------------- STATEMENT OF OPERATIONS (in thousands) Year ended December 31, 1996 Interest income $485,244 -------- Expenses: Investment advisory and administration fee 36,748 Transfer agency and shareholder service fees 21,905 Custodian fees 659 Registration fees 1,448 Professional fees 132 Shareholder reports 114 Trustees' fees 36 Amortization of deferred organization costs 22 Insurance and other expenses 124 -------- 61,188 Less: expenses reduced (see Note 4) (26,140) -------- Total expenses incurred by Fund 35,048 -------- Net investment income 450,196 Net realized gain on investments sold 6 -------- Increase in net assets resulting from operations $450,202 ========
See accompanying Notes to Financial Statements. 31 40 SCHWAB VALUE ADVANTAGE MONEY FUND(R) - ---------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS (in thousands)
Year ended December 31, 1996 1995 ------------ ----------- Operations: Net investment income $ 450,196 $ 310,965 Net realized gain (loss) on investments sold 6 (5) ------------ ----------- Increase in net assets resulting from operations 450,202 310,960 ------------ ----------- Dividends to shareholders from net investment income (450,196) (310,965) ------------ ----------- Capital share transactions (at $1.00 per share): Proceeds from shares sold 14,542,131 10,404,416 Net asset value of shares issued in reinvestment of dividends 405,539 262,426 Less payments for shares redeemed (11,395,029) (7,474,576) ------------ ----------- Increase in net assets from capital share transactions 3,552,641 3,192,266 ------------ ----------- Total increase in net assets 3,552,647 3,192,261 Net assets: Beginning of period 6,923,890 3,731,629 ------------ ----------- End of period $ 10,476,537 $ 6,923,890 ============ ===========
See accompanying Notes to Financial Statements. 32 41 - ------------------------------------------------------------------------------ NOTES TO FINANCIAL STATEMENTS Year ended December 31, 1996 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, Schwab Government Money Fund, Schwab U.S. Treasury Money Fund, Schwab Institutional Advantage Money Fund(R), Schwab Retirement Money Fund(R), Schwab Municipal Money Fund, Schwab California Municipal Money Fund and Schwab New York Municipal Money Fund. The assets of each series are segregated and accounted for separately. 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, interest income and realized gains (losses) -- Security transactions are accounted for on a trade date basis (date the order to buy or sell is executed). Interest income is accrued daily 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 U.S. government agency obligations. All collateral is held by the Funds' custodian, except in the case of a tri-party agreement, the collateral is held by an agent bank. The collateral is monitored daily to 33 42 SCHWAB VALUE ADVANTAGE MONEY FUND(R) - ------------------------------------------------------------------------------ NOTES TO FINANCIAL STATEMENTS Year ended December 31, 1996 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 are amortized on a straight-line basis over a five-year period from the Fund's commencement of operations. Expenses -- Expenses arising in connection with the Fund are charged directly to the Fund. Expenses common to all series of the Trust are generally 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 0.46% of the first $2 billion of average daily net assets, 0.45% of the next $1 billion, and 0.40% of such assets in excess of $3 billion. The Investment Manager has reduced a portion of its fee for the year ended December 31, 1996 (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 0.25% 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 34 43 - ------------------------------------------------------------------------------ balances below the minimum required. Schwab has reduced a portion of its fee for the year ended December 31, 1996 (see Note 4). Officers and trustees -- Certain officers and trustees of the Trust are also officers and/or directors of the Investment Manager and/or Schwab. During the year ended December 31, 1996, 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 $36,000 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, 1996, the total of such fees reduced by the Investment Manager and Schwab was $6,081,000 and $20,059,000, respectively (see Note 6). 5. INVESTMENT TRANSACTIONS Purchases and sales, including maturities of investment securities for the year ended December 31, 1996, aggregated (in thousands) $33,695,195 and $30,157,323, respectively. 35 44 SCHWAB VALUE ADVANTAGE MONEY FUND(R) - ------------------------------------------------------------------------------ NOTES TO FINANCIAL STATEMENTS Year ended December 31, 1996 6. FINANCIAL HIGHLIGHTS For a share outstanding throughout each period:
Period ended \---------Year ended December 31,-----------\ December 31, 1996 1995 1994 1993 1992++ ----------- ---------- ---------- -------- ------------ Net asset value at beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 Income from investment operations - --------------------------------- Net investment income 0.05 0.06 0.04 0.03 0.02 Net realized and unrealized gain (loss) on investments -- -- -- -- -- ----------- ---------- ---------- -------- -------- Total from investment operations 0.05 0.06 0.04 0.03 0.02 Less distributions - ------------------ Dividends from net investment income (0.05) (0.06) (0.04) (0.03) (0.02) Distributions from realized gains on investments -- -- -- -- -- ----------- ---------- ---------- -------- -------- Total distributions (0.05) (0.06) (0.04) (0.03) (0.02) ----------- ---------- ---------- -------- -------- Net asset value at end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 =========== ========== ========== ======== ======== Total return (not annualized) 5.26% 5.80% 4.09% 3.02% 2.33% - ------------ Ratios/Supplemental data - ------------------------ Net assets, end of period (000s) $10,476,537 $6,923,890 $3,731,629 $729,356 $ 319,024 Ratio of expenses to average net assets+ 0.40% 0.40% 0.40% 0.39% 0.29%* Ratio of net investment income to average net assets+ 5.14% 5.63% 4.40% 2.97% 3.27%*
- --------------- + The information contained in the above table is based on actual expenses for the periods, after giving effect to the portion of expenses reduced and absorbed by the Investment Manager and Schwab. Had these expenses not been reduced and absorbed, the Fund's expense and net investment income ratios would have been: Ratio of expenses to average net assets 0.70% 0.72% 0.79% 0.82% 0.94%* Ratio of net investment income to average net assets 4.84% 5.31% 4.01% 2.54% 2.62%*
++ Period from April 30, 1992 (commencement of operations) to December 31, 1992. * Annualized 36 45 - ------------------------------------------------------------------------------ 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, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of 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, 1996, the results of its operations for the year ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the periods 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 audit 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, 1996 by correspondence with the custodian and brokers, provide a reasonable basis for the opinion expressed above. PRICE WATERHOUSE LLP San Francisco, California January 31, 1997 37 46 THIS SPACE RESERVED FOR YOUR COMMENTS AND QUESTIONS. A SCHWAB REPRESENTATIVE WILL BE HAPPY TO ASSIST YOU. 47 THIS SPACE RESERVED FOR YOUR COMMENTS AND QUESTIONS. A SCHWAB REPRESENTATIVE WILL BE HAPPY TO ASSIST YOU. 48 THIS SPACE RESERVED FOR YOUR COMMENTS AND QUESTIONS. A SCHWAB REPRESENTATIVE WILL BE HAPPY TO ASSIST YOU. 49 SCHWABFUNDS FAMILY(R) The SchwabFunds 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 funds. SCHWAB ASSET ALLOCATION FUNDS Schwab Asset Director*--High Growth Fund Schwab Asset Director--Balance Growth Fund Schwab Asset Director--Conservative Growth Fund Schwab OneSource Portfolios--Growth Allocation Schwab OneSource Portfolios--Balanced Allocation SCHWAB STOCK FUNDS Schwab 1000 Fund(R) Schwab S&P 500 Fund Schwab Analytics Fund(TM) Schwab Small-Cap Index Fund(R) Schwab International Index Fund(R) Schwab OneSource Portfolios--International SCHWAB BOND FUNDS Schwab Government Bond Funds--Long-Term and Short/Intermediate Schwab Tax-Free Bond Funds--Long-Term and Short/Intermediate Schwab California Tax-Free Bond Funds--Long-Term and Short/Intermediate SCHWAB MONEY MARKET FUNDS Schwab offers an array of money market funds* that seek high current income with safety and liquidity. 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) Please call 1-800-2-NO-LOAD for a free prospectus and brochure for any of the SchwabFunds(R). Each prospectus provides more complete information, including charges and expenses. Please read it carefully before investing. This report must be preceded or accompanied by a current prospectus. * 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. 50 SchwabFunds ============== - --------------- BULK RATE F A M I L Y (R) U.S. POSTAGE - --------------- PAID CHARLES SCHWAB 101 Montgomery Street ============== San Francisco, California 94104 INVESTMENT ADVISOR 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) 1997 Charles Schwab & Co., Inc. All rights reserved. Member SIPC/NYSE. TF4503R(2/97) CRS 11811 Printed on recycled paper -----END PRIVACY-ENHANCED MESSAGE-----