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Previous: SCHWAB CHARLES FAMILY OF FUNDS, N-30D, 1997-03-06 |
Next: SCHWAB CHARLES FAMILY OF FUNDS, N-30D, 1997-03-06 |
<PAGE> 1
SchwabFunds(R)
Schwab
Value Advantage
Money Fund(R)
[Graphic - The Schwab Building, San Francisco, California]
Annual Report
December 31, 1996
<PAGE> 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
<PAGE> 3
KEEP YOUR
MONEY WORKING
HARDER!
----------------------------------
USE THIS ENVELOPE TO EASILY ADD
TO YOUR SCHWAB VALUE ADVANTAGE
INVESTMENTS.(R)
CHARLES SCHWAB
<PAGE> 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.
<PAGE> 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.
<PAGE> 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
<PAGE> 7
TABLE OF CONTENTS
<TABLE>
<S> <C>
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
</TABLE>
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
<PAGE> 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.
<TABLE>
<CAPTION>
================================================================================
7-DAY AVERAGE YIELDS 1
(as of 12/31/96)
Simple Compound
- --------------------------------------------------------------------------------
<S> <C> <C>
Schwab Value Advantage Money Fund 5.14% 5.27%
- --------------------------------------------------------------------------------
</TABLE>
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
<PAGE> 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]
<TABLE>
<CAPTION>
IBC First
Tier
Average Value Advantage
<S> <C> <C>
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%
</TABLE>
- - 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
<PAGE> 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.
<TABLE>
<CAPTION>
12/31/96 12/31/95 Change
================================================================================
<S> <C> <C> <C>
Total Net Assets (000s) $10,476,537 $6,923,890 +51%
- --------------------------------------------------------------------------------
Shareholder Accounts 97,880 67,109 +46%
================================================================================
</TABLE>
4
<PAGE> 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
<PAGE> 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
<TABLE>
<CAPTION>
CHART 9
Real GDP
<S> <C>
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%
</TABLE>
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
<PAGE> 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
<TABLE>
<CAPTION>
Unemployment Rate
<S> <C>
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%
</TABLE>
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
<PAGE> 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
<TABLE>
<CAPTION>
Monthly Quarterly
Consumer Employment
Price Cost
Index - Index -
YOY % YOY %
Change Change
<S> <C> <C> <C>
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%
</TABLE>
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
<PAGE> 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]
<TABLE>
<CAPTION>
CHART 12
90 Day Commercial Paper
<S> <C>
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%
</TABLE>
__ 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<TABLE>
<CAPTION>
Monthly Quarterly
Consumer Employment
Price Cost
Index - Index -
YOY % YOY %
Change Change
<S> <C> <C> <C>
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%
</TABLE>
<PAGE> 20
<TABLE>
<CAPTION>
CHART 12
90 Day Commercial Paper
<S> <C>
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%
</TABLE>
<PAGE> 21
SCHWAB VALUE ADVANTAGE MONEY FUND(R)
- ------------------------------------------------------------------------------
PORTFOLIO SUMMARY
ASSET GROWTH
<TABLE>
<CAPTION>
Total Total Percentage
Net Assets Net Assets Growth Over
as of 12/31/96 as of 12/31/95 Reporting
(000s) (000s) Period
- ---------------------------------------------------------------------
<S> <C> <C>
$ 10,476,537 $6,923,890 51%
- ---------------------------------------------------------------------
</TABLE>
AVERAGE YIELDS FOR THE PERIODS ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
Last Last Last
Seven Days Three Months Twelve Months
- ---------------------------------------------------------------------
<S> <C> <C>
5.14% 5.14% 5.14%
- ---------------------------------------------------------------------
</TABLE>
MATURITY SCHEDULE
PERCENT OF TOTAL INVESTMENTS
<TABLE>
<CAPTION>
Maturity Range 3/31/96 6/30/96 9/30/96 12/31/96
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C>
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
- ---------------------------------------------------------------------
</TABLE>
PORTFOLIO QUALITY
<TABLE>
<CAPTION>
Percent of
SEC Tier Net Assets
Rating 12/31/96
-----------------------
<S> <C>
Tier 1 100.0%
Tier 2 0.0%
-----------------------
</TABLE>
13
<PAGE> 22
SCHWAB VALUE ADVANTAGE MONEY FUND(R)
- ------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1996
<TABLE>
<CAPTION>
Par Value
-------- -----------
<S> <C> <C>
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
</TABLE>
14
<PAGE> 23
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
-------- -----------
<S> <C> <C>
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
</TABLE>
15
<PAGE> 24
SCHWAB VALUE ADVANTAGE MONEY FUND(R)
- ------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1996
<TABLE>
<CAPTION>
Par Value
-------- -----------
<S> <C> <C>
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
----------
</TABLE>
16
<PAGE> 25
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
-------- -----------
<S> <C> <C>
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
</TABLE>
17
<PAGE> 26
SCHWAB VALUE ADVANTAGE MONEY FUND(R)
- ------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1996
<TABLE>
<CAPTION>
Par Value
-------- -----------
<S> <C> <C>
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
-------
</TABLE>
18
<PAGE> 27
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
-------- -----------
<S> <C> <C>
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
</TABLE>
19
<PAGE> 28
SCHWAB VALUE ADVANTAGE MONEY FUND(R)
- ------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1996
<TABLE>
<CAPTION>
Par Value
-------- -----------
<S> <C> <C>
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
</TABLE>
20
<PAGE> 29
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
-------- -----------
<S> <C> <C>
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
---------
</TABLE>
21
<PAGE> 30
SCHWAB VALUE ADVANTAGE MONEY FUND(R)
- ------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1996
<TABLE>
<CAPTION>
Par Value
-------- -----------
<S> <C> <C>
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
</TABLE>
22
<PAGE> 31
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
-------- -----------
<S> <C> <C>
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
</TABLE>
23
<PAGE> 32
SCHWAB VALUE ADVANTAGE MONEY FUND(R)
- ------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1996
<TABLE>
<CAPTION>
Par Value
-------- -----------
<S> <C> <C>
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
----------
</TABLE>
24
<PAGE> 33
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
-------- -----------
<S> <C> <C>
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
----------
</TABLE>
25
<PAGE> 34
SCHWAB VALUE ADVANTAGE MONEY FUND(R)
- ------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1996
<TABLE>
<CAPTION>
Par Value
-------- -----------
<S> <C> <C>
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
</TABLE>
26
<PAGE> 35
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
-------- -----------
<S> <C> <C>
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
--------
</TABLE>
27
<PAGE> 36
SCHWAB VALUE ADVANTAGE MONEY FUND(R)
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (in thousands)
December 31, 1996
<TABLE>
<CAPTION>
Par Value
-------- -----------
<S> <C> <C>
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
===========
</TABLE>
28
<PAGE> 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.
<TABLE>
<CAPTION>
Abbreviations
-------------
<S> <C>
LOC Letter of Credit
MBIA Municipal Bond Investors Assurance Corporation
RECOP Remarketed Certificates of Participation
</TABLE>
See accompanying Notes to Financial Statements.
29
<PAGE> 38
SCHWAB VALUE ADVANTAGE MONEY FUND(R)
- --------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES (in thousands)
December 31, 1996
<TABLE>
<S> <C>
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
</TABLE>
See accompanying Notes to Financial Statements.
30
<PAGE> 39
- --------------------------------------------------------------------
STATEMENT OF OPERATIONS (in thousands)
Year ended December 31, 1996
<TABLE>
<S> <C>
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
========
</TABLE>
See accompanying Notes to Financial Statements.
31
<PAGE> 40
SCHWAB VALUE ADVANTAGE MONEY FUND(R)
- ----------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS (in thousands)
<TABLE>
<CAPTION>
Year ended
December 31,
1996 1995
------------ -----------
<S> <C> <C>
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
============ ===========
</TABLE>
See accompanying Notes to Financial Statements.
32
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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:
<TABLE>
<CAPTION>
Period
ended
\---------Year ended December 31,-----------\ December 31,
1996 1995 1994 1993 1992++
----------- ---------- ---------- -------- ------------
<S> <C> <C> <C> <C> <C>
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%*
</TABLE>
- ---------------
+ 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:
<TABLE>
<S> <C> <C> <C> <C> <C>
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%*
</TABLE>
++ Period from April 30, 1992 (commencement of operations) to December 31, 1992.
* Annualized
36
<PAGE> 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
<PAGE> 46
THIS SPACE RESERVED FOR YOUR COMMENTS AND QUESTIONS.
A SCHWAB REPRESENTATIVE WILL BE HAPPY TO ASSIST YOU.
<PAGE> 47
THIS SPACE RESERVED FOR YOUR COMMENTS AND QUESTIONS.
A SCHWAB REPRESENTATIVE WILL BE HAPPY TO ASSIST YOU.
<PAGE> 48
THIS SPACE RESERVED FOR YOUR COMMENTS AND QUESTIONS.
A SCHWAB REPRESENTATIVE WILL BE HAPPY TO ASSIST YOU.
<PAGE> 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.
<PAGE> 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
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