<PAGE>
SCHWAB VALUE ADVANTAGE MONEY FUND-REGISTERED TRADEMARK-
We're pleased to bring you this semiannual report for the Schwab Value Advantage
Money Fund (the Fund) for the six-month period ended June 30, 1998. This report
includes only the Investor Shares class of the Fund, as the Sweep Shares-TM-
class is currently not available for purchase. During the reporting period, the
Fund continued to provide investors with higher-than-average money market fund
yields on their larger cash balances, combined with capital stability and
liquidity.
Please remember that while the Fund seeks to maintain a stable $1.00 share price
to protect your principal, as with all money funds, there can be no assurance
that the Fund will be able to maintain a $1.00 net asset value per share. It is
also important to understand that your investment in the Fund is neither insured
nor guaranteed by the U.S. government.
Schwab's Value Advantage Investments-Registered Trademark-, which include the
Schwab Value Advantage Money Fund Investor Shares as well as three
tax-advantaged alternatives, are designed to serve as longer-term money market
investment vehicles for larger balances that do not require frequent access.
They may help fill the cash-equivalent sector in your asset allocation plan.
It is important to note that unlike sweep money fund products, the Value
Advantage Investments are not designed to transfer cash balances for checks,
margin calls and other debit balances in your Schwab brokerage or Schwab One-TM-
account. If you expect to access your money regularly, you may wish to consider
investing your short-term funds in one of our six sweep money fund products. See
page 3 of this report for further information.
CONTENTS
<TABLE>
<S> <C>
- ------------------------------------------------
A Message from the Chairman 1
- ------------------------------------------------
What Money Fund Investors Should Know 2
- ------------------------------------------------
Market Overview 4
- ------------------------------------------------
Portfolio Management 7
- ------------------------------------------------
Fund Performance and
Portfolio Composition 8
- ------------------------------------------------
Fund Discussion 9
- ------------------------------------------------
Glossary of Terms 10
- ------------------------------------------------
Portfolio Highlights 11
- ------------------------------------------------
Financial Statements and Notes 12
- ------------------------------------------------
</TABLE>
<PAGE>
A MESSAGE FROM THE CHAIRMAN
Dear Shareholder,
The U.S. stock market rallied strongly over most of the six-month period ended
June 30, 1998, as did many European markets. And despite investors' concerns
about Asia's financial crisis last autumn, economic conditions continued to
provide a solid underpinning for U.S. business activity. The U.S. economy, as
measured by gross domestic product (GDP), grew at a strong real rate in the
first half of 1998, and it appears poised for continued growth. Inflation has
remained in check despite the lowest unemployment levels in decades, and
short-term interest rates remained in a relatively narrow range due, in part, to
widespread expectations that the Federal Reserve would make no
[PHOTO] changes to interest rates in the near term. This combination
of strong growth and tight labor markets, offset by low
inflation and uncertainty generated by continued turmoil in
Asian markets, resulted in a relatively calm short-term interest rate
environment with no clear trend during the six-month reporting period.
Regardless of short-term market trends, however, our philosophy has always been
that REGULAR INVESTING is the best strategy over the long term.
Your investment in a money fund may play an important role in your asset
allocation. Because of this, we've included some guidelines in the following
pages about what to look for in a money market fund. You might find that more
than one kind of money fund may be appropriate for you, depending on your goals
and financial situation. As always, feel free to contact us if you have any
questions.
The support of investors like you has helped Charles Schwab Investment
Management, Inc. (CSIM) become one of the largest and fastest-growing mutual
fund families in the nation. CSIM now manages more than $66 billion in assets on
behalf of more than 3.5 million SchwabFunds-Registered Trademark- shareholders.
We offer a full spectrum of 35 mutual funds for investors with varying financial
situations and goals.
Once again, thank you for your investment in SchwabFunds. We continue to do
everything we can to warrant the trust you have placed in us.
Sincerely,
/s/ Charles R. Schwab
Charles R. Schwab
June 30, 1998
1
<PAGE>
WHAT MONEY FUND INVESTORS SHOULD KNOW
WHY ASSET ALLOCATION MATTERS
As most investors know, one of the most compelling reasons to invest in a mutual
fund is diversification. By allocating your assets across many different
securities, a fund helps to reduce the risk that you might otherwise encounter
by owning just a few stocks or bonds.
Don't forget, however, that diversification across your portfolio is just as
important as diversification within one of the mutual funds you own. As you
probably know, stocks have historically offered much higher returns over the
long term than other asset classes, such as bonds or cash, but those returns
have come at the price of higher volatility. To help mitigate some of that risk,
many investors often include at least some bonds and cash in their portfolio.
CHOOSING A MONEY MARKET FUND
Many investors may believe that there is no good reason to shop around for a
money market fund. This may be partially due to the fact that 20 years ago
practically the only feature that differentiated one money market fund from
another was whether it allowed investors to write checks against it. Things have
changed since then, and today investors can choose from a wide variety of
options and features offered by the more than 1,000 money market funds currently
available.(1)
You can help assure yourself that you've chosen the right money market fund by
considering how it will be used and what role it will play in your investment
portfolio. Here are some things to consider when making or reviewing your money
market fund choice.
EXPENSES: Because expenses are one of the key factors that determines a money
market mutual fund's performance, investors are wise to seek out funds with low
operating expense ratios. Also, beware of those that have temporary expense
waivers that waive expenses to zero, because expenses can't stay at zero
forever, and fees will undoubtedly eventually rise.
Also beware of 12b-1 fees, which some money market funds include in their
expense ratios to pay for marketing costs. These fees can reduce yield--in some
cases by a full percentage point. A recent survey by a money market trade
publication found that more than 40% of taxable money market funds available to
individual investors charge these fees. When comparing money market fund
choices, you may want to avoid funds that carry these unnecessary fees.
YIELDS: Look for competitive yields--but don't stop there. Many institutions
advertise their money market funds on the basis of yield.(2) Although getting a
competitive yield is important, other features--such as how you access your
investment--are also important considerations. Furthermore, stretching for an
additional 10 or 20 basis points in yield (0.10% to 0.20%) may not be worth the
time, effort or added risk. For example, a $10,000 investment in a money fund
that yields 0.10% more amounts to only an additional $10 over a year-long
period.
SWEEP FEATURES: If you're looking for a convenient way to link your money market
fund with your brokerage account, consider an account that has a "sweep"
feature. Money market funds with this feature "sweep" uninvested cash balances
into your money fund. The upshot: It keeps cash working. This convenience may be
well worth the small additional cost.
LARGER CASH BALANCES: You may earn a higher yield for larger cash balances. If
you don't need frequent access to the money in your money market fund, consider
one designed to pay higher yields for a higher cash balance. Because the account
balances are higher, these money market funds normally incur lower expenses and,
therefore, may be able to post higher yields, all else being equal.
TAXES: Don't forget to consider your tax situation. If you're in a high
tax-bracket, investing in tax-free or municipal money market funds may help take
a bite out of your tax bill.(3) And, if you live in a state with a high personal
state income or other personal tax, you may be best served by choosing a state
tax-free fund that provides income free from federal and state and, in some
cases, local income taxes.(3)
(1)Money market funds are managed to maintain a stable $1 share price.
Investments in these funds are neither insured nor guaranteed by the U.S.
government, and there can be no assurance that a fund will be able to
maintain a stable net asset value of $1 per share.
(2)Yields may vary.
(3)This may not be true for investors subject to the federal alternative minumum
tax (AMT); consult your tax advisor.
2
<PAGE>
MONEY FUNDS AT SCHWAB
Schwab offers two types of money funds--Sweep Investments-TM- and Value
Advantage Investments-Registered Trademark---both of which offer taxable and
tax-advantaged alternatives. Depending on the role that cash and cash-equivalent
investments play in your investment plan, either or both may have a place in
your investment plan.
SWEEP INVESTMENTS-TM- are designed for cash balances requiring frequent
access--such as your short-term and even daily cash needs. These shares can be
linked to your Schwab brokerage account and contain a feature that automatically
"sweeps" uninvested cash balances into the Sweep Shares class of the Fund you
designate, according to the terms and conditions of your Schwab account. Sweep
Shares also may be used to settle trades and automatically cover other
day-to-day transactions, such as margin calls.
VALUE ADVANTAGE INVESTMENTS-REGISTERED TRADEMARK- are designed to serve as
longer-term money market investment vehicles for larger balances that do not
require frequent access. These funds may help fill the cash-equivalent sector in
your asset allocation plan. With higher minimum investment and balance
requirements and other transaction restrictions designed to minimize fund
operating expenses, Value Advantage Investments can offer the potential of
higher yields to investors. It is important to note that, unlike Sweep
Investments, Value Advantage Investments are not designed to automatically cover
negative balances in your Schwab account.
TAXABLE MONEY MARKET FUNDS
Schwab offers the following taxable money market Sweep investments. If you are
selecting from among them, you should consider your attitude toward risk and
return, as well as your income-tax bracket.
SCHWAB MONEY MARKET FUND invests in high-quality money market securities,
including commercial paper and certificates of deposit.
SCHWAB GOVERNMENT MONEY FUND invests exclusively in obligations issued or
guaranteed by the U.S. government, its agencies and instrumentalities, and
repurchase agreements.
SCHWAB U.S. TREASURY MONEY FUND invests exclusively in U.S. Treasury notes,
bills or other direct obligations of the U.S. government and pays income free
from state and local taxes in the vast majority of states.
TAX-ADVANTAGED MONEY FUNDS
The SCHWAB MUNICIPAL MONEY FUNDS may provide you with higher returns after
taxes, especially if you're in a high tax bracket.(4) The SCHWAB MUNICIPAL MONEY
FUND Sweep Shares-TM- invests in municipal obligations that generate income free
from federal income tax. And for investors in California, New York, New Jersey,
Pennsylvania and Florida, Schwab offers Sweep Investments that can also provide
income free from state and, in some instances, local taxes. Consult your tax
advisor for specific guidance on your tax situation before investing.
If you would like more information on any of these funds, please call us
toll-free at 1-800-435-4000 and request a free prospectus that contains more
information, including fees and expenses. Please read the prospectus before
investing.
WE MAKE IT EASY TO INVEST
We try to make it easy and convenient for you to invest in our
SchwabFunds-Registered Trademark-. In addition to our automated methods that
allow you to invest or transfer money to your Schwab account on a regular basis,
you can also invest in person at any of our nationwide branches, through our Web
site at WWW.SCHWAB.COM and through our automated touch-tone telephone service,
TeleBroker-Registered Trademark-, by calling 1-800-272-4922.
KEEPING YOU INFORMED
One of our top priorities at Charles Schwab is to keep you informed about your
investments and potential opportunities in the marketplace. A wealth of
information about our investment philosophy and funds, as well as the market
and economic environment, can be found at our Web site:
WWW.SCHWAB.COM/SCHWABFUNDS
(4)Income from all of the Funds may be subject to the alternative minimum tax
(AMT), and income from the Schwab Municipal Money Fund may be subject to
state and local taxes.
3
<PAGE>
MARKET OVERVIEW
U.S. GROWTH RATE
Although somewhat dampened during the second quarter, THE U.S. ECONOMY, AS
MEASURED BY THE GROSS DOMESTIC PRODUCT (GDP), GREW AT A STRONG REAL RATE OF 3.5%
for the first half of 1998--well in excess of the Federal Reserve's estimated
noninflationary growth rate of 2.0% to 2.75%.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
REAL GDP GROWTH RATE
QUARTERLY PERCENTAGE CHANGE (ANNUALIZED
RATE)
<S> <C>
Q1 1990 3.9%
Q2 1990 1.2%
Q3 1990 -1.9%
Q4 1990 -4.0%
Q1 1991 -2.1%
Q2 1991 1.8%
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 2.0%
Q3 1993 2.1%
Q4 1993 5.3%
Q1 1994 3.0%
Q2 1994 4.7%
Q3 1994 1.8%
Q4 1994 3.6%
Q1 1995 0.9%
Q2 1995 0.3%
Q3 1995 3.0%
Q4 1995 2.2%
Q1 1996 1.8%
Q2 1996 6.0%
Q3 1996 1.0%
Q4 1996 4.3%
Q1 1997 4.9%
Q2 1997 3.3%
Q3 1997 3.1%
Q4 1997 3.7%
Q1 1998 5.5%
Q2 1998 1.4%
Source: Bloomberg L.P.
</TABLE>
At the time of this writing, THE U.S. ECONOMY APPEARS POISED FOR CONTINUED
GROWTH, further extending the current economic expansion that began in 1991.
This expansion is fueled by high levels of consumer confidence, rising real
wages and strong year-to-date gains in stock prices. Although most economists
believe that the brunt of Asia's economic crisis will hit the United States in
the next six months, they feel that it is unlikely to cause even a temporary
pause in U.S. economic growth; it may help slow the GDP growth rate nearer to
the Federal Reserve's estimated non-inflationary levels, however.
UNEMPLOYMENT
THE U.S. UNEMPLOYMENT RATE STOOD AT 4.5% IN JUNE AFTER FALLING TO 4.3% IN APRIL
AND MAY--THE LOWEST LEVELS IN 28 YEARS. Labor markets have become extremely
tight; growth in the labor force has slowed, and wage increases are beginning to
put more pressure on labor costs (refer to Employment Cost Index at right).
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
U.S. UNEMPLOYMENT RATE
<S> <C>
Jan-90 5.4%
Feb-90 5.3%
Mar-90 5.2%
Apr-90 5.4%
May-90 5.4%
Jun-90 5.2%
Jul-90 5.5%
Aug-90 5.7%
Sep-90 5.9%
Oct-90 5.9%
Nov-90 6.2%
Dec-90 6.3%
Jan-91 6.4%
Feb-91 6.6%
Mar-91 6.8%
Apr-91 6.7%
May-91 6.9%
Jun-91 6.9%
Jul-91 6.8%
Aug-91 6.9%
Sep-91 6.9%
Oct-91 7.0%
Nov-91 7.0%
Dec-91 7.3%
Jan-92 7.3%
Feb-92 7.4%
Mar-92 7.4%
Apr-92 7.4%
May-92 7.6%
Jun-92 7.8%
Jul-92 7.7%
Aug-92 7.6%
Sep-92 7.6%
Oct-92 7.3%
Nov-92 7.4%
Dec-92 7.4%
Jan-93 7.3%
Feb-93 7.1%
Mar-93 7.0%
Apr-93 7.1%
May-93 7.1%
Jun-93 7.0%
Jul-93 6.9%
Aug-93 6.8%
Sep-93 6.7%
Oct-93 6.8%
Nov-93 6.6%
Dec-93 6.5%
Jan-94 6.6%
Feb-94 6.6%
Mar-94 6.5%
Apr-94 6.4%
May-94 6.0%
Jun-94 6.1%
Jul-94 6.1%
Aug-94 6.1%
Sep-94 5.9%
Oct-94 5.8%
Nov-94 5.6%
Dec-94 5.4%
Jan-95 5.6%
Feb-95 5.4%
Mar-95 5.4%
Apr-95 5.7%
May-95 5.6%
Jun-95 5.6%
Jul-95 5.7%
Aug-95 5.7%
Sep-95 5.7%
Oct-95 5.6%
Nov-95 5.6%
Dec-95 5.6%
Jan-96 5.7%
Feb-96 5.5%
Mar-96 5.5%
Apr-96 5.5%
May-96 5.5%
Jun-96 5.3%
Jul-96 5.5%
Aug-96 5.2%
Sep-96 5.2%
Oct-96 5.3%
Nov-96 5.4%
Dec-96 5.3%
Jan-97 5.3%
Feb-97 5.3%
Mar-97 5.2%
Apr-97 5.0%
May-97 4.8%
Jun-97 5.0%
Jul-97 4.9%
Aug-97 4.9%
Sep-97 4.9%
Oct-97 4.8%
Nov-97 4.6%
Dec-97 4.7%
Jan-98 4.7%
Feb-98 4.6%
Mar-98 4.7%
Apr-98 4.3%
May-98 4.3%
Jun-98 4.5%
Source: Bloomberg L.P.
</TABLE>
4
<PAGE>
INFLATION
BOTH THE EMPLOYMENT COST INDEX (ECI) AND CONSUMER PRICE INDEX (CPI) REMAINED IN
CHECK during the first half of 1998, reflecting continued low inflation.
THE CPI ROSE just 1.7% for the year ended June 1998-- reaching levels during the
reporting period that were the lowest since January 1987. Its core rate (which
excludes the more volatile food and energy components) rose 2.2%--the lowest
rate of increase since 1965. The Employment Cost Index includes two
components--BENEFITS, which has been well contained (up only 2.4% for the year
ended Q2 1998), and WAGES AND SALARIES, which has increased 3.8% for the same
period.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MEASURES OF INFLATION
MONTHLY CONSUMER PRICE INDEX QUARTERLY EMPLOYMENT COST INDEX
<S> <C> <C>
Jan-90 5.2% 5.5%
Feb-90 5.3% 5.5%
Mar-90 5.2% 5.5%
Apr-90 4.7% 5.4%
May-90 4.4% 5.4%
Jun-90 4.7% 5.4%
Jul-90 4.8% 5.2%
Aug-90 5.6% 5.2%
Sep-90 6.2% 5.2%
Oct-90 6.3% 4.9%
Nov-90 6.3% 4.9%
Dec-90 6.1% 4.9%
Jan-91 5.7% 4.6%
Feb-91 5.3% 4.6%
Mar-91 4.9% 4.6%
Apr-91 4.9% 4.6%
May-91 5.0% 4.6%
Jun-91 4.7% 4.6%
Jul-91 4.4% 4.3%
Aug-91 3.8% 4.3%
Sep-91 3.4% 4.3%
Oct-91 2.9% 4.3%
Nov-91 3.0% 4.3%
Dec-91 3.1% 4.3%
Jan-92 2.6% 4.0%
Feb-92 2.8% 4.0%
Mar-92 3.2% 4.0%
Apr-92 3.2% 3.6%
May-92 3.0% 3.6%
Jun-92 3.1% 3.6%
Jul-92 3.2% 3.5%
Aug-92 3.1% 3.5%
Sep-92 3.0% 3.5%
Oct-92 3.2% 3.5%
Nov-92 3.0% 3.5%
Dec-92 2.9% 3.5%
Jan-93 3.3% 3.5%
Feb-93 3.2% 3.5%
Mar-93 3.1% 3.5%
Apr-93 3.2% 3.6%
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% 3.5%
Nov-93 2.7% 3.5%
Dec-93 2.7% 3.5%
Jan-94 2.5% 3.2%
Feb-94 2.5% 3.2%
Mar-94 2.5% 3.2%
Apr-94 2.4% 3.2%
May-94 2.3% 3.2%
Jun-94 2.5% 3.2%
Jul-94 2.8% 3.2%
Aug-94 2.9% 3.2%
Sep-94 3.0% 3.2%
Oct-94 2.6% 3.0%
Nov-94 2.7% 3.0%
Dec-94 2.7% 3.0%
Jan-95 2.8% 2.9%
Feb-95 2.9% 2.9%
Mar-95 2.9% 2.9%
Apr-95 3.1% 2.9%
May-95 3.2% 2.9%
Jun-95 3.0% 2.9%
Jul-95 2.8% 2.7%
Aug-95 2.6% 2.7%
Sep-95 2.5% 2.7%
Oct-95 2.8% 2.7%
Nov-95 2.6% 2.7%
Dec-95 2.5% 2.7%
Jan-96 2.7% 2.8%
Feb-96 2.7% 2.8%
Mar-96 2.8% 2.8%
Apr-96 2.9% 2.9%
May-96 2.9% 2.9%
Jun-96 2.8% 2.9%
Jul-96 3.0% 2.8%
Aug-96 2.9% 2.8%
Sep-96 3.0% 2.8%
Oct-96 3.0% 2.9%
Nov-96 3.3% 2.9%
Dec-96 3.3% 2.9%
Jan-97 3.0% 2.9%
Feb-97 3.0% 2.9%
Mar-97 2.8% 2.9%
Apr-97 2.5% 2.8%
May-97 2.2% 2.8%
Jun-97 2.3% 2.8%
Jul-97 2.2% 3.0%
Aug-97 2.2% 3.0%
Sep-97 2.2% 3.0%
Oct-97 2.1% 3.3%
Nov-97 1.8% 3.3%
Dec-97 1.7% 3.3%
Jan-98 1.6% 3.3%
Feb-98 1.4% 3.3%
Mar-98 1.4% 3.3%
Apr-98 1.4% 3.5%
May-98 1.7% 3.5%
Jun-98 1.7% 3.5%
Source: Bloomberg L.P. and Bureau of Labor
Statistics
</TABLE>
Although inflation has been well contained, the combination of a tight labor
market (as evidenced by low unemployment rates) and strong economic growth
typically leads to inflationary pressures on wages and, ultimately, prices. In
this environment, productivity growth becomes particularly important. Strong
productivity gains, such as those achieved in 1997, allow manufacturers and
other businesses to limit price increases in the face of rising wages without
sacrificing profit margins.
SHORT-TERM INTEREST RATE ENVIRONMENT
SHORT-TERM INTEREST RATES REMAINED IN A NARROW RANGE throughout the reporting
period due to widespread expectations that there would be no changes to the
Federal Reserve's interest rate policy.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
YIELDS ON 90-DAY COMMERCIAL PAPER
AND THREE-MONTH TREASURY BILLS: 1/1/98 THROUGH
6/30/98
3-MONTH 90-DAY COMMERCIAL
TREASURY BILL PAPER
<S> <C> <C>
1/1/98 5.35% 5.54%
1/2/98 5.29% 5.54%
1/5/98 5.23% 5.56%
1/6/98 5.20% 5.47%
1/7/98 5.20% 5.45%
1/8/98 5.10% 5.44%
1/9/98 5.01% 5.42%
1/12/98 5.02% 5.36%
1/13/98 5.19% 5.38%
1/14/98 5.15% 5.37%
1/15/98 5.11% 5.37%
1/16/98 5.15% 5.41%
1/19/98 5.15% 5.41%
1/20/98 5.15% 5.41%
1/21/98 5.11% 5.39%
1/22/98 5.13% 5.40%
1/23/98 5.17% 5.40%
1/26/98 5.12% 5.40%
1/27/98 5.25% 5.40%
1/28/98 5.21% 5.39%
1/29/98 5.19% 5.40%
1/30/98 5.18% 5.42%
2/2/98 5.22% 5.40%
2/3/98 5.23% 5.40%
2/4/98 5.11% 5.42%
2/5/98 5.15% 5.38%
2/6/98 5.17% 5.43%
2/9/98 5.13% 5.41%
2/10/98 5.21% 5.42%
2/11/98 5.20% 5.42%
2/12/98 5.21% 5.43%
2/13/98 5.15% 5.39%
2/16/98 5.21% 5.39%
2/17/98 5.18% 5.40%
2/18/98 5.17% 5.41%
2/19/98 5.19% 5.43%
2/20/98 5.20% 5.44%
2/23/98 5.24% 5.43%
2/24/98 5.32% 5.44%
2/25/98 5.30% 5.42%
2/26/98 5.34% 5.45%
2/27/98 5.31% 5.48%
3/2/98 5.30% 5.42%
3/3/98 5.17% 5.45%
3/4/98 5.15% 5.47%
3/5/98 5.16% 5.47%
3/6/98 5.15% 5.47%
3/9/98 5.09% 5.49%
3/10/98 5.08% 5.47%
3/11/98 5.08% 5.45%
3/12/98 5.08% 5.46%
3/13/98 5.09% 5.48%
3/16/98 5.10% 5.49%
3/17/98 5.14% 5.45%
3/18/98 5.15% 5.46%
3/19/98 5.17% 5.46%
3/20/98 5.17% 5.46%
3/23/98 5.14% 5.45%
3/24/98 5.14% 5.47%
3/25/98 5.17% 5.45%
3/26/98 5.20% 5.45%
3/27/98 5.21% 5.46%
3/30/98 5.21% 5.44%
3/31/98 5.12% 5.47%
4/1/98 5.11% 5.46%
4/2/98 5.09% 5.48%
4/3/98 5.08% 5.47%
4/6/98 5.08% 5.45%
4/7/98 5.04% 5.46%
4/8/98 5.05% 5.45%
4/9/98 5.05% 5.46%
4/10/98 5.05% 5.46%
4/13/98 5.16% 5.43%
4/14/98 5.11% 5.46%
4/15/98 5.07% 5.46%
4/16/98 5.05% 5.47%
4/17/98 5.04% 5.45%
4/20/98 5.02% 5.47%
4/21/98 5.07% 5.44%
4/22/98 5.08% 5.46%
4/23/98 5.08% 5.44%
4/24/98 5.06% 5.45%
4/27/98 5.05% 5.51%
4/28/98 5.06% 5.49%
4/29/98 5.06% 5.49%
4/30/98 4.97% 5.49%
5/1/98 5.00% 5.46%
5/4/98 5.02% 5.47%
5/5/98 5.11% 5.46%
5/6/98 5.10% 5.49%
5/7/98 5.10% 5.46%
5/8/98 5.12% 5.47%
5/11/98 5.12% 5.48%
5/12/98 5.13% 5.47%
5/13/98 5.12% 5.48%
5/14/98 5.16% 5.49%
5/15/98 5.16% 5.49%
5/18/98 5.17% 5.50%
5/19/98 5.20% 5.50%
5/20/98 5.18% 5.48%
5/21/98 5.23% 5.48%
5/22/98 5.21% 5.48%
5/25/98 5.21% 5.48%
5/26/98 5.10% 5.48%
5/27/98 5.09% 5.49%
5/28/98 5.05% 5.48%
5/29/98 5.01% 5.47%
6/1/98 4.97% 5.49%
6/2/98 5.20% 5.46%
6/3/98 5.11% 5.48%
6/4/98 5.11% 5.48%
6/5/98 5.11% 5.48%
6/8/98 5.12% 5.49%
6/9/98 5.14% 5.48%
6/10/98 5.13% 5.49%
6/11/98 5.09% 5.48%
6/12/98 5.11% 5.49%
6/15/98 5.11% 5.47%
6/16/98 5.16% 5.47%
6/17/98 5.21% 5.48%
6/18/98 5.18% 5.49%
6/19/98 5.15% 5.48%
6/22/98 5.12% 5.49%
6/23/98 5.07% 5.48%
6/24/98 5.04% 5.50%
6/25/98 5.00% 5.48%
6/26/98 4.99% 5.49%
6/29/98 5.00% 5.50%
6/30/98 4.99% 5.47%
</TABLE>
The combination of strong first-quarter growth and tight labor markets, offset
by continued low inflation and uncertainty regarding Asia, resulted in a
relatively calm short-term interest rate environment with no clear direction
over the period.
5
<PAGE>
MARKET OVERVIEW (continued)
As Federal Reserve Chairman Alan Greenspan said in his February congressional
testimony, "The key question going forward is whether the restraint building
from the turmoil in Asia will be sufficient to check inflationary tendencies
that might otherwise result from the strength of domestic spending and
tightening labor markets." Although many economists believe that the Federal
Reserve has a longer-term bias toward more-restrictive monetary policy, they
also anticipate a slowing of the GDP growth rate for the remainder of the year.
Therefore, they do not expect that the Federal Reserve will, over the near term,
implement any restrictive policy changes (increases to the federal funds rate)
unless more-meaningful signs of inflation appear.
Since the last federal funds rate increase to 5.5% in March 1997, the rate of
inflation--as measured by the year-over-year change in the CPI--has dropped from
2.8% to 1.7%. Thus the real (inflation-adjusted) federal funds rate has
increased from 2.7% in March 1997 to 3.8% in June 1998. In his June 1998
testimony to Congress, Chairman Greenspan commented on the following statement
by Senator Paul S. Sarbanes: "By holding the federal funds rate constant at a
time when inflation has been dropping, in effect the Federal Reserve has raised
real interest rates. Monetary policy has tightened even though you have not
raised the rate." Chairman Greenspan's response: "That is correct."
NOTE: THIS MARKET OVERVIEW HAS BEEN PROVIDED BY THE PORTFOLIO MANAGEMENT TEAM.
6
<PAGE>
PORTFOLIO MANAGEMENT
THE PORTFOLIO MANAGEMENT TEAM
STEPHEN B. WARD, Senior Vice President and Chief Investment Officer, has
overall responsibility for the management of the Fund's portfolio. Steve
joined Charles Schwab Investment Management, Inc. (CSIM) as Vice President and
Portfolio Manager in April 1991 and was promoted to his current position in
August 1993. Prior to joining CSIM, Steve was Vice President and Portfolio
Manager at Federated Investors.
LINDA KLINGMAN, Vice President and Senior Portfolio Manager, has managed the
Schwab Value Advantage Money Fund since its inception in 1992. Linda joined
CSIM in 1990 and was promoted to her current position in August 1996. Prior to
joining CSIM, Linda was Senior Money Market Trader with AIM Management.
7
<PAGE>
SCHWAB VALUE ADVANTAGE MONEY FUND
FUND PERFORMANCE AND PORTFOLIO COMPOSITION
YIELD SUMMARY AS OF 6/30/98(1)
<TABLE>
<S> <C>
- ---------------------------------------------------------------------------
Seven-Day Yield 5.26%
- ---------------------------------------------------------------------------
Seven-Day Effective Yield 5.40%
- ---------------------------------------------------------------------------
</TABLE>
Please remember that money market fund yields fluctuate and that past
performance is no guarantee of future results.
YIELD ADVANTAGE
The Schwab Value Advantage Money Fund-Registered Trademark- offers the potential
to earn higher yields than most other money market funds. The Fund is designed
for cash reserves that do not require regular access and, as such, has minimum
balance and transaction requirements designed to keep operating expenses low.
These lower expenses generally mean higher yields for Fund shareholders.
The chart at right presents weekly seven-day yields for the Investor Shares of
the Fund and for the average taxable money fund and illustrates that the
Investor Shares of the Fund consistently outperformed the average for their
category during the reporting period.
PORTFOLIO COMPOSITION
The Schwab Value Advantage Money Fund invests primarily in highly rated
commercial paper and other corporate obligations, bank certificates of deposit,
time deposits, bankers' acceptances, U.S. government securities and repurchase
agreements for these securities. The chart at right illustrates the composition
of the Fund's portfolio as of June 30, 1998, and is not indicative of its
holdings after that date. A complete list of the securities in the Fund's
portfolio as of June 30, 1998, is provided in the Statement of Net Assets later
in this report.
(1)A portion of the Fund's fees were waived or reimbursed during the reporting
period. Without the waivers or reimbursements, as of 6/30/98, the seven-day
current and seven-day effective yields for the Fund would have been 4.99% and
5.11%, respectively.
(2)Source: IBC Financial Data, Inc. Average seven-day yield of funds in the
first-tier category of taxable money funds for each week ended 1/7/98 through
6/30/98. The weekly number of funds in the category ranged from 282 to 287.
(3)These percentages do not take into account other assets and liabilities.
SEVEN-DAY YIELDS: 1/1/98 THROUGH 6/30/98(2)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
SCHWAB VALUE ADVANTAGE IBC FINANCIAL DATA INC.'S
MONEY FUND-INVESTOR SHARES MONEY FUND AVERAGE
<S> <C> <C>
1/2/98 5.46% 5.12%
1/9/98 5.44% 5.23%
1/16/98 5.41% 5.07%
1/23/98 5.38% 5.08%
1/30/98 5.36% 5.05%
2/6/98 5.34% 5.08%
2/13/98 5.33% 5.03%
2/20/98 5.32% 5.04%
2/27/98 5.29% 5.03%
3/6/98 5.28% 5.07%
3/13/98 5.30% 5.01%
3/20/98 5.29% 5.02%
3/27/98 5.26% 5.01%
4/3/98 5.26% 5.05%
4/10/98 5.26% 5.03%
4/17/98 5.27% 5.03%
4/24/98 5.25% 5.02%
5/1/98 5.26% 5.00%
5/8/98 5.26% 4.99%
5/15/98 5.27% 4.97%
5/22/98 5.27% 5.03%
5/29/98 5.26% 4.98%
6/5/98 5.26% 5.02%
6/12/98 5.26% 4.99%
6/19/98 5.27% 5.02%
6/26/98 5.25% 5.00%
7/3/98 5.25% 5.04%
</TABLE>
PORTFOLIO COMPOSITION AS A PERCENTAGE
OF FUND INVESTMENTS(3)
as of 6/30/98
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Commercial Paper and Other Corporate Obligations 81.6%
Certificates of Deposit 10.9%
Variable-Rate Obligations 5.9%
Repurchase Agreements 1.0%
Bank Notes 0.6%
</TABLE>
8
<PAGE>
FUND DISCUSSION
QUESTIONS TO THE
PORTFOLIO MANAGEMENT TEAM
Q. HOW HAS THE PORTFOLIO MANAGEMENT TEAM ADJUSTED THE FUND'S PORTFOLIO TO
RESPOND TO THE INTEREST RATE ENVIRONMENT?
A. Our strategy for managing the Fund has remained consistent during the
reporting period. Based on our expectation that the Federal Reserve would not
raise the federal funds rate, thereby not raising interest rates, we looked for
opportunities to purchase securities with somewhat longer maturities (and higher
yields) when market conditions were advantageous. We attempted to maintain a
dollar-weighted average maturity (DWAM) slightly longer than that of other funds
with similar investment objectives. This strategy had a beneficial impact on
yields throughout most of the period.
Q. WHAT IMPACT HAVE THE ECONOMIC PROBLEMS OF SO MANY PACIFIC RIM COUNTRIES HAD
ON THE MANAGEMENT OF THE FUND?
A. Beginning in the fourth quarter of 1997, many Asian economies experienced
economic difficulties and severe currency devaluations--collectively referred to
as the "Asian Flu." These problems are expected by many to continue through
1998. Although it is a serious global problem that will no doubt have a credit
impact on issuers of securities in those countries and their economies, it has
not had a significant effect on issuers of what typically are considered money
market-eligible securities. Nevertheless, we continue as always to carefully
monitor the creditworthiness of any issuers of securities considered for
investment.
As we discussed in the Fund's December 1997 annual report, the Schwab Value
Advantage Money Fund-Registered Trademark- did, as a precaution, reduce its
exposure to Japanese issuers of commercial paper, Japanese providers of credit
enhancements and certificates of deposit issued by Japanese banks. As of the end
of this reporting period, the Schwab Value Advantage Money Fund had no direct
exposure to any Asian-issued securities. It did hold one security with a credit
enhancement issued by a Japanese bank, which represented 0.01% of portfolio
assets. We will continue to monitor the risks and relative merits of any direct
or indirect Asian exposure for the Fund.
9
<PAGE>
GLOSSARY OF TERMS
COMMERCIAL PAPER--Short-term, interest-paying obligations issued by banks,
corporations and other borrowers.
CREDIT ENHANCEMENTS--A bank letter of credit, purchase agreement, insurance,
line of credit or other instrument that provides an additional level of
financial strength for debt securities to supplement the creditworthiness of the
issuer.
DOLLAR-WEIGHTED AVERAGE MATURITY--(DWAM) 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, which establishes
policies on bank reserves and regulations, determines the discount rate and the
federal funds rate, and tightens or loosens the availability of credit.
FIRST-TIER SECURITY--A security rated in the highest credit-rating category by a
nationally recognized statistical rating organization such as Moody's, Standard
& Poor's-Registered Trademark-, Duff or Fitch.
MATURITY--The length of time remaining until the issuer of a debt security must
repay the principal amount.
REAL GDP--The national Gross Domestic Product (GDP)--the total value of all
goods and services produced in the United States over a specific period of
time--adjusted for the rate of inflation to allow meaningful year-to-year
comparisons.
YIELD--The actual annualized income earned on an investment over a stated period
of time (assumed to be generated over a one-year period). An EFFECTIVE YIELD
assumes that the income earned is reinvested.
10
<PAGE>
PORTFOLIO HIGHLIGHTS
AVERAGE YIELDS FOR THE SIX-MONTH PERIOD ENDED 6/30/98(1)
<TABLE>
<S> <C>
- ------------------------------------------------
Last seven days: 5.26%
- ------------------------------------------------
Last three months: 5.26%
- ------------------------------------------------
Last 12 months: 5.32%
- ------------------------------------------------
</TABLE>
MATURITY SCHEDULE: PERCENTAGE OF TOTAL INVESTMENTS
<TABLE>
<CAPTION>
MATURITY RANGE 3/31/98 6/30/98
<S> <C> <C>
- -----------------------------------------------------------
0-15 days 18.5% 14.9%
- -----------------------------------------------------------
16-30 days 21.3% 18.5%
- -----------------------------------------------------------
31-60 days 20.0% 28.0%
- -----------------------------------------------------------
61-90 days 14.5% 23.0%
- -----------------------------------------------------------
91-120 days 7.9% 5.0%
- -----------------------------------------------------------
More than 120 days 17.8% 10.6%
- -----------------------------------------------------------
Weighted average 67 days 60 days
- -----------------------------------------------------------
</TABLE>
(1)A portion of the Fund's expenses was reduced during the periods. Had these
expenses not been reduced, yields would have been lower.
PORTFOLIO QUALITY
<TABLE>
<CAPTION>
SEC TIER RATING PERCENTAGE OF NET ASSETS: 6/30/98
<S> <C>
- ---------------------------------------------------------------------------
Tier 1 100.0%
- ---------------------------------------------------------------------------
Tier 2 0.0%
- ---------------------------------------------------------------------------
</TABLE>
11
<PAGE>
SCHWAB VALUE ADVANTAGE MONEY FUND(REGISTRATION MARK)
STATEMENT OF NET ASSETS (in thousands)
June 30, 1998 (Unaudited)
Par Value
-------- ----------
COMMERCIAL PAPER AND OTHER CORPORATE
OBLIGATIONS -- 81.5% (a)
AUTOMOBILE RECEIVABLES -- 1.1%
New Center Asset Trust
5.60%, 08/04/98 $ 60,000 $ 59,690
New Center Asset Trust Plus
5.55%, 07/29/98 100,000 99,574
5.60%, 08/27/98 35,000 34,694
----------
193,958
----------
AUTOMOTIVE -- 3.3%
American Honda Finance Corp.
5.60%, 07/23/98 30,000 29,900
5.59%, 07/30/98 7,000 6,969
5.59%, 07/31/98 35,000 34,839
5.62%, 08/28/98 35,000 34,688
Chrysler Financial Corp.
5.58%, 07/13/98 20,000 19,963
5.61%, 08/13/98 100,000 99,342
5.61%, 08/14/98 43,000 42,710
5.60%, 08/26/98 50,000 49,571
5.61%, 08/26/98 20,000 19,828
5.61%, 09/02/98 26,000 25,749
5.62%, 09/03/98 14,000 13,862
5.68%, 09/03/98 35,000 34,650
FCE Bank PLC
5.57%, 07/06/98 12,500 12,490
5.58%, 08/10/98 29,000 28,823
General Motors Acceptance Corp.
5.57%, 08/05/98 95,000 94,495
Hertz Corp.
6.06%, 07/01/98 25,000 25,000
----------
572,879
----------
BANKING - AUSTRALIA -- 0.2%
Commonwealth Bank of Australia
5.60%, 07/14/98 13,000 12,974
5.60%, 09/28/98 25,000 24,664
----------
37,638
----------
BANKING - BELGIUM -- 2.6%
BBL North America
5.57%, 07/10/98 150,000 149,793
Cregem North America, Inc.
5.64%, 07/28/98 35,000 34,854
5.59%, 08/11/98 45,000 44,718
5.65%, 12/16/98 50,000 48,720
5.65%, 12/17/98 50,000 48,713
Par Value
-------- ----------
Generale Bank, Inc.
5.65%, 12/08/98 $100,000 $ 97,560
5.65%, 12/09/98 17,000 16,583
----------
440,941
----------
BANKING - CANADA -- 0.8%
Bank of Nova Scotia
5.59%, 08/19/98 42,000 41,685
Toronto-Dominion Holdings
5.45%, 07/14/98 45,000 44,914
5.45%, 07/15/98 50,000 49,897
----------
136,496
----------
BANKING - DENMARK -- 1.0%
Den Danske Corp.
5.60%, 09/28/98 75,000 73,990
Unifunding, Inc.
5.59%, 08/27/98 25,000 24,784
5.60%, 10/05/98 64,000 63,070
5.65%, 12/03/98 6,000 5,858
----------
167,702
----------
BANKING - DOMESTIC -- 7.4%
Bankers Trust Corp.
5.66%, 12/10/98 67,000 65,342
Bankers Trust New York Corp.
5.57%, 08/25/98 21,000 20,826
5.65%, 10/23/98 38,000 37,340
Citibank Capital Markets
Assets, L.L.C.
5.60%, 08/12/98 43,000 42,723
5.60%, 09/08/98 24,000 23,746
Enterprise Funding Corp.
5.58%, 07/14/98 40,876 40,795
International Securitization
Corp./(First National Bank
of Chicago LOC)
5.66%, 07/08/98 25,000 24,973
5.76%, 07/08/98 8,650 8,640
5.60%, 07/16/98 10,000 9,977
5.61%, 07/16/98 25,000 24,943
5.58%, 07/17/98 13,512 13,479
5.58%, 07/23/98 30,752 30,649
5.62%, 07/27/98 12,000 11,952
5.57%, 07/30/98 25,000 24,890
5.58%, 07/30/98 106,960 106,487
5.58%, 08/06/98 70,000 69,616
5.60%, 08/11/98 39,000 38,755
5.60%, 08/17/98 30,000 29,784
5.60%, 08/25/98 9,530 9,450
12
<PAGE>
Par Value
-------- ----------
J. P. Morgan & Co.
5.65%, 12/04/98 $ 23,000 $ 22,453
5.65%, 12/14/98 10,000 9,747
5.65%, 12/15/98 40,000 38,983
5.65%, 12/16/98 100,000 97,443
Kitty Hawk Funding Corp.
5.60%, 07/15/98 23,708 23,657
5.64%, 08/17/98 15,000 14,892
5.60%, 09/01/98 76,074 75,350
5.60%, 09/14/98 50,000 49,425
5.62%, 09/17/98 25,000 24,700
5.65%, 12/01/98 50,000 48,831
NationsBank Corp.
5.63%, 07/15/98 100,000 99,787
Salts (III) Cayman Islands Corp.
Secured Short Term Notes
Series 1998-6/(Bankers Trust
Co. Guaranty)
5.81%, 12/18/98 34,000 34,000
UnionBancal Commercial
Funding Corp.
5.60%, 08/20/98 50,000 49,617
5.60%, 08/25/98 25,000 24,789
Vehicle Services of America/
(Nations Bank N.A. LOC)
5.61%, 09/09/98 16,000 15,828
----------
1,263,869
----------
BANKING - GERMANY -- 1.2%
Bavaria TRR Corp.
5.63%, 07/30/98 14,554 14,489
5.61%, 09/01/98 44,000 43,581
5.63%, 09/02/98 56,465 55,924
Comision Federal de Electricidad/
(Westdeutsche Landesbank LOC)
5.60%, 08/10/98 20,000 19,877
Deutsche Bank Financial, Inc.
5.58%, 07/31/98 75,000 74,657
----------
208,528
----------
BANKING - NORWAY -- 1.4%
Den Norske Bank
5.58%, 07/20/98 50,000 49,855
5.60%, 08/18/98 66,000 65,514
5.61%, 09/10/98 23,000 22,753
5.61%, 09/15/98 50,000 49,425
Par Value
-------- ----------
5.61%, 09/21/98 $ 23,000 $ 22,714
5.64%, 10/27/98 32,000 31,422
----------
241,683
----------
BANKING - SWEDEN -- 3.0%
Nordbanken of North America, Inc.
5.61%, 07/21/98 25,000 24,922
5.58%, 07/23/98 50,000 49,832
5.60%, 08/25/98 50,000 49,584
5.61%, 09/08/98 41,000 40,572
5.64%, 10/30/98 39,000 38,278
Svenska Handelsbanken, Inc.
5.61%, 07/29/98 24,000 23,897
5.60%, 08/20/98 39,400 39,098
5.61%, 09/03/98 100,000 99,031
5.61%, 09/04/98 50,000 49,508
5.61%, 09/08/98 48,000 47,499
5.65%, 12/04/98 50,000 48,811
----------
511,032
----------
BANKING - UNITED KINGDOM -- 1.2%
Banco Nacional de Comercio Exterior/
(Barclays Bank LOC)
5.59%, 08/04/98 64,000 63,666
5.60%, 09/21/98 50,000 49,379
Banco Nacional de Mexico S.A./
(Barclays Bank LOC)
5.55%, 08/19/98 15,000 14,890
5.60%, 09/09/98 14,000 13,852
5.60%, 09/21/98 30,000 29,628
Bank of Scotland Treasury Services
5.60%, 10/06/98 11,000 10,838
5.60%, 10/07/98 10,000 9,852
Yorkshire Building Society
5.65%, 08/24/98 9,000 8,924
----------
201,029
----------
COMPUTERS AND OFFICE EQUIPMENT -- 0.2%
CSC Enterprises
5.63%, 08/19/98 5,050 5,012
5.63%, 09/10/98 10,000 9,891
5.68%, 09/18/98 23,000 22,717
----------
37,620
----------
13
<PAGE>
SCHWAB VALUE ADVANTAGE MONEY FUND(REGISTRATION MARK)
STATEMENT OF NET ASSETS (in thousands) (continued)
June 30, 1998 (Unaudited)
Par Value
-------- ----------
CONSUMER PRODUCTS -- 0.2%
Philip Morris Capital Corp.
5.57%, 07/14/98 $ 23,000 $ 22,954
5.59%, 08/12/98 9,000 8,942
----------
31,896
----------
CREDIT CARD RECEIVABLES -- 1.5%
Dakota Certificates Program of
Citibank Credit Card Master
Trust I
5.60%, 08/04/98 50,000 49,739
5.60%, 08/05/98 50,000 49,732
5.60%, 08/06/98 25,000 24,862
5.60%, 08/18/98 50,000 49,632
5.60%, 08/19/98 50,000 49,624
Providian Master Trust Series 1993-3
5.58%, 07/01/98 25,500 25,500
----------
249,089
----------
DIVERSIFIED FINANCIAL ASSETS -- 12.4%
Bavaria GLB Corp.
5.60%, 07/01/98 9,000 9,000
5.59%, 07/06/98 6,710 6,705
5.58%, 07/13/98 15,867 15,838
5.61%, 09/01/98 36,710 36,360
5.61%, 09/08/98 26,380 26,100
Beta Finance, Inc.
5.60%, 08/13/98 12,000 11,921
5.61%, 08/17/98 40,000 39,711
5.62%, 08/26/98 14,000 13,881
5.62%, 09/08/98 22,500 22,265
5.60%, 09/10/98 50,000 49,455
5.61%, 09/18/98 25,000 24,697
CC (USA), Inc.
5.61%, 07/07/98 12,000 11,989
5.46%, 07/13/98 8,000 7,986
5.59%, 07/14/98 16,000 15,968
5.60%, 07/21/98 23,000 22,929
5.60%, 08/13/98 23,500 23,345
5.60%, 08/18/98 25,000 24,816
5.61%, 08/20/98 18,000 17,862
5.62%, 09/03/98 7,000 6,932
5.61%, 09/25/98 28,000 27,635
5.60%, 10/06/98 11,400 11,233
5.65%, 10/20/98 25,000 24,576
Par Value
-------- ----------
Concord Minutemen Capital Co., LLC
6.40%, 07/01/98 $ 22,580 $ 22,580
5.64%, 07/07/98 38,626 38,590
5.65%, 10/01/98 13,498 13,309
5.64%, 10/08/98 12,000 11,819
5.66%, 10/08/98 15,797 15,559
Greenwich Funding Corp.
5.60%, 07/29/98 22,000 21,905
5.60%, 07/31/98 37,907 37,733
5.60%, 09/09/98 39,243 38,822
Lexington Parker Capital Corp.
5.61%, 07/06/98 31,736 31,712
6.00%, 07/06/98 13,000 12,989
5.62%, 07/08/98 56,000 55,939
5.59%, 07/23/98 43,000 42,855
5.53%, 07/24/98 50,770 50,595
5.53%, 07/27/98 10,000 9,961
5.61%, 07/28/98 39,000 38,838
5.55%, 08/11/98 15,000 14,908
5.60%, 08/11/98 27,000 26,830
5.60%, 08/19/98 41,230 40,921
5.60%, 08/20/98 30,770 30,534
5.55%, 08/21/98 7,000 6,947
5.60%, 08/21/98 35,000 34,726
5.62%, 08/21/98 38,334 38,036
5.66%, 09/09/98 8,000 7,914
5.60%, 09/11/98 9,000 8,901
5.63%, 09/11/98 94,000 92,972
5.60%, 10/08/98 44,000 43,341
5.65%, 11/24/98 8,000 7,822
Ranger Funding Corp.
5.57%, 07/07/98 10,000 9,991
5.60%, 07/14/98 20,000 19,960
Repeat Offering Securitization
Entity, Inc.
5.63%, 07/27/98 78,756 78,441
5.59%, 07/28/98 25,000 24,896
5.64%, 07/28/98 28,195 28,077
5.59%, 07/29/98 12,000 11,949
5.61%, 08/28/98 90,000 89,197
Sigma Finance, Inc.
5.62%, 07/17/98 39,000 38,903
5.59%, 07/22/98 8,000 7,974
5.58%, 07/23/98 39,000 38,869
5.59%, 07/30/98 31,400 31,260
5.55%, 08/04/98 34,500 34,324
5.60%, 08/10/98 20,000 19,877
5.61%, 08/11/98 50,000 49,685
14
<PAGE>
Par Value
-------- ----------
5.60%, 08/19/98 $ 46,500 $ 46,151
5.55%, 08/24/98 20,000 19,838
5.60%, 08/24/98 50,000 49,586
5.62%, 08/24/98 40,000 39,668
5.55%, 08/25/98 30,000 29,753
5.61%, 09/01/98 19,000 18,818
5.62%, 09/23/98 13,000 12,832
5.64%, 09/30/98 68,000 67,046
5.65%, 10/01/98 12,000 11,832
5.67%, 11/16/98 7,000 6,852
5.68%, 11/17/98 10,000 10,002
5.65%, 12/14/98 100,000 97,464
----------
2,141,507
----------
ELECTRICAL AND ELECTRONICS -- 1.0%
General Electric Co.
5.60%, 07/24/98 62,000 61,781
5.59%, 08/05/98 10,000 9,947
5.57%, 08/07/98 100,000 99,438
----------
171,166
----------
FINANCE - COMMERCIAL -- 7.4%
CIT Group Holdings, Inc.
5.58%, 07/30/98 20,000 19,912
5.60%, 08/26/98 72,000 71,383
5.60%, 09/18/98 19,000 18,773
Commercial Credit Corp.
5.58%, 07/28/98 50,000 49,793
Finova Capital Corp.
6.40%, 07/01/98 37,000 37,000
5.70%, 09/04/98 10,000 9,900
5.64%, 09/22/98 30,000 29,621
5.68%, 09/29/98 15,000 14,793
5.68%, 10/08/98 15,000 14,773
5.69%, 10/30/98 7,000 6,869
5.68%, 11/05/98 23,000 22,548
General Electric Capital Corp.
5.61%, 07/24/98 143,000 142,497
5.58%, 08/05/98 49,000 48,738
5.58%, 08/13/98 48,000 47,686
5.60%, 08/20/98 100,000 99,242
5.60%, 08/21/98 60,000 59,536
5.60%, 08/24/98 50,000 49,591
5.60%, 09/10/98 95,000 93,981
5.64%, 10/23/98 28,000 27,511
5.65%, 12/07/98 50,000 48,785
Par Value
-------- ----------
General Electric Capital Services
5.57%, 08/03/98 $100,000 $ 99,498
5.60%, 08/20/98 30,000 29,773
5.59%, 09/09/98 45,000 44,525
Heller Financial, Inc.
5.99%, 07/10/98 8,000 7,987
5.87%, 08/07/98 50,000 49,703
5.83%, 08/27/98 25,000 24,772
5.84%, 08/28/98 20,000 19,815
5.83%, 09/01/98 16,000 15,842
5.84%, 09/03/98 25,000 24,744
5.87%, 09/09/98 35,000 34,609
5.79%, 09/16/98 9,000 8,890
----------
1,273,090
----------
FINANCE - CONSUMER -- 2.8%
Associates Corp. of North America
5.58%, 07/14/98 27,000 26,946
5.58%, 07/16/98 50,000 49,885
5.60%, 08/14/98 100,000 99,325
5.60%, 08/17/98 50,000 49,640
5.60%, 08/18/98 10,000 9,926
5.60%, 08/31/98 40,000 39,627
5.60%, 09/08/98 50,000 49,472
5.60%, 09/09/98 30,000 29,679
5.60%, 09/10/98 50,000 49,457
5.61%, 09/17/98 78,000 77,069
----------
481,026
----------
MISCELLANEOUS SERVICES -- 0.2%
PHH Corp.
5.67%, 07/01/98 38,000 38,000
----------
MORTGAGE BANKING -- 1.4%
Countrywide Home Loans, Inc.
5.60%, 07/09/98 15,000 14,982
5.77%, 07/22/98 10,000 9,966
5.62%, 08/10/98 25,000 24,846
5.64%, 08/25/98 75,000 74,360
5.63%, 08/27/98 50,000 49,559
5.64%, 08/31/98 75,000 74,292
----------
248,005
----------
SECURITIES BROKERAGE - DEALER -- 15.3%
Bear Stearns Companies, Inc.
5.69%, 07/16/98 48,000 47,890
5.58%, 07/17/98 141,000 140,655
5.57%, 07/23/98 10,000 9,967
15
<PAGE>
SCHWAB VALUE ADVANTAGE MONEY FUND(REGISTRATION MARK)
STATEMENT OF NET ASSETS (in thousands) (continued)
June 30, 1998 (Unaudited)
Par Value
-------- ----------
5.55%, 07/27/98 $ 50,000 $ 49,804
5.65%, 12/18/98 50,000 48,701
BT Alex Brown, Inc.
5.71%, 07/14/98 6,000 5,988
5.60%, 10/09/98 15,000 14,773
5.65%, 12/04/98 12,000 11,715
Credit Suisse First Boston, Inc.
5.58%, 07/23/98 20,000 19,933
5.63%, 08/06/98 50,000 49,723
Goldman Sachs Group, LP
5.70%, 07/09/98 145,000 144,821
5.64%, 07/10/98 45,000 44,938
5.60%, 08/24/98 16,000 15,868
5.61%, 08/31/98 45,000 44,579
5.61%, 09/01/98 50,000 49,525
5.61%, 09/02/98 75,000 74,276
5.61%, 09/17/98 50,000 49,403
Lehman Brothers Holdings, Inc.
5.58%, 07/28/98 31,000 30,874
5.56%, 07/29/98 37,000 36,845
5.58%, 08/07/98 50,000 49,720
5.60%, 08/17/98 8,000 7,943
5.58%, 08/19/98 34,000 33,749
5.66%, 09/08/98 16,000 15,831
5.67%, 10/02/98 65,000 64,075
5.65%, 10/22/98 15,000 14,742
5.70%, 11/10/98 19,000 18,614
5.68%, 11/24/98 50,000 48,877
5.69%, 12/10/98 14,000 13,652
5.70%, 12/17/98 9,000 8,766
5.70%, 12/29/98 20,000 19,443
Merrill Lynch & Co., Inc.
5.57%, 07/23/98 50,000 49,833
5.57%, 07/27/98 50,000 49,802
5.57%, 07/28/98 50,000 49,795
5.57%, 07/31/98 12,000 11,945
5.59%, 08/06/98 40,000 39,780
5.62%, 08/10/98 50,000 49,693
5.61%, 09/16/98 85,000 84,006
5.61%, 09/17/98 60,000 59,292
5.61%, 09/18/98 120,000 118,566
5.64%, 10/29/98 13,000 12,761
Morgan Stanley-Dean Witter,
Discover
5.58%, 07/20/98 75,000 74,782
5.58%, 07/22/98 18,000 17,942
5.58%, 07/30/98 50,000 49,779
5.58%, 08/03/98 50,000 49,748
Par Value
-------- ----------
5.58%, 08/05/98 $ 55,000 $ 54,706
5.58%, 08/06/98 50,000 49,726
5.58%, 08/07/98 50,000 49,718
5.60%, 09/02/98 53,000 52,488
PaineWebber Group, Inc.
5.69%, 07/02/98 30,000 29,995
5.68%, 09/24/98 25,000 24,669
Salomon Smith Barney Holdings, Inc.
5.60%, 07/02/98 100,000 99,985
5.60%, 07/07/98 29,000 28,973
5.57%, 07/16/98 17,000 16,961
5.58%, 07/21/98 76,000 75,768
5.62%, 08/11/98 21,000 20,868
5.60%, 08/14/98 21,000 20,858
5.60%, 08/31/98 48,000 47,552
5.63%, 10/13/98 50,000 49,203
5.63%, 10/14/98 107,000 105,277
----------
2,630,161
----------
TRADE RECEIVABLES -- 15.9%
Apreco, Inc.
5.61%, 07/02/98 11,000 10,998
5.59%, 07/14/98 35,000 34,930
5.58%, 07/22/98 14,000 13,955
5.61%, 08/14/98 12,000 11,919
5.62%, 08/19/98 21,000 20,842
5.60%, 09/14/98 35,000 34,598
5.65%, 10/15/98 9,500 9,345
Asset Securitization Cooperative
Corp.
5.60%, 08/14/98 50,000 49,663
Barton Capital Corp.
5.57%, 07/07/98 10,000 9,991
5.57%, 07/08/98 31,051 31,018
5.59%, 07/29/98 16,927 16,854
5.59%, 08/07/98 26,020 25,872
5.60%, 08/12/98 23,000 22,852
5.60%, 08/17/98 30,245 30,027
5.61%, 09/14/98 25,000 24,712
5.62%, 09/16/98 21,154 20,903
Clipper Receivables Corp.
5.60%, 09/15/98 50,000 49,417
Corporate Receivables Corp.
5.58%, 07/22/98 80,000 79,744
5.60%, 09/10/98 27,000 26,706
5.61%, 09/14/98 80,000 79,080
5.60%, 09/15/98 50,000 49,417
5.61%, 09/15/98 23,000 22,732
16
<PAGE>
Par Value
-------- ----------
5.60%, 09/16/98 $ 50,000 $ 49,410
5.62%, 09/16/98 50,000 49,409
5.60%, 09/17/98 50,000 49,402
5.60%, 09/18/98 45,000 44,455
5.62%, 09/24/98 60,000 59,215
CXC, Inc.
5.57%, 07/01/98 22,000 22,000
5.60%, 07/08/98 8,000 7,991
5.60%, 07/20/98 50,000 49,855
5.58%, 07/29/98 25,000 24,893
5.59%, 07/29/98 40,000 39,829
5.58%, 07/30/98 10,000 9,956
5.61%, 08/11/98 43,000 42,730
5.62%, 09/15/98 75,000 74,136
5.64%, 10/09/98 58,000 57,110
5.64%, 11/05/98 35,000 34,320
5.64%, 11/09/98 75,000 73,499
5.64%, 11/10/98 75,000 73,488
Edison Asset Securitization
Corp., L.L.C.
5.60%, 07/17/98 63,000 62,846
5.60%, 08/20/98 20,289 20,133
5.62%, 09/09/98 27,895 27,595
5.60%, 09/11/98 47,680 47,154
Eureka Securitization, Inc.
5.60%, 08/19/98 30,000 29,775
5.60%, 09/04/98 40,000 39,601
5.62%, 09/11/98 30,000 29,668
Falcon Asset Securitization Corp.
5.58%, 07/20/98 20,280 20,221
5.60%, 08/24/98 12,890 12,783
Market Street Funding Corp.
5.59%, 07/21/98 50,000 49,847
Mont Blanc Capital Corp.
5.59%, 08/10/98 52,741 52,416
5.62%, 08/12/98 50,000 49,675
5.63%, 09/03/98 86,283 85,429
5.63%, 09/04/98 10,000 9,899
5.64%, 09/22/98 53,000 52,321
Preferred Receivables Funding Corp.
5.61%, 08/28/98 39,310 38,959
5.67%, 12/28/98 10,400 10,113
Quincy Capital Corp.
5.62%, 08/12/98 40,000 39,740
5.60%, 08/25/98 19,384 19,220
Receivables Capital Corp.
5.60%, 08/03/98 42,004 41,791
Par Value
-------- -----------
Special Purpose Accounts
Receivable Cooperative Corp.
5.62%, 07/31/98 $ 10,000 $ 9,954
5.64%, 07/31/98 30,000 29,861
5.60%, 08/06/98 22,000 21,879
5.61%, 08/07/98 22,000 21,875
5.71%, 09/01/98 10,000 9,903
WCP Funding, Inc.
5.57%, 07/16/98 10,000 9,977
5.60%, 08/10/98 25,000 24,846
5.60%, 08/21/98 50,000 49,609
5.61%, 09/04/98 30,000 29,699
5.62%, 09/17/98 19,000 18,772
Windmill Funding
5.59%, 07/06/98 50,000 49,962
5.58%, 07/07/98 62,356 62,298
5.60%, 07/10/98 34,445 34,397
5.57%, 07/17/98 50,400 50,278
5.58%, 07/21/98 28,006 27,920
5.61%, 07/22/98 13,721 13,676
5.60%, 08/13/98 24,343 24,183
5.60%, 08/18/98 31,000 30,772
5.60%, 08/19/98 9,119 9,050
5.62%, 09/14/98 29,819 29,475
-----------
2,734,845
-----------
TOTAL COMMERCIAL PAPER AND OTHER
CORPORATE OBLIGATIONS
(Cost $14,012,160) 14,012,160
-----------
CERTIFICATES OF DEPOSIT -- 10.8%
BANKING - BELGIUM -- 0.3%
Credit Communal de Belgique
5.65%, 11/19/98 25,000 25,000
5.90%, 05/04/99 25,000 24,988
-----------
49,988
-----------
BANKING - CANADA -- 2.0%
Bank of Nova Scotia
5.60%, 10/01/98 69,000 69,012
Canadian Imperial Bank of
Commerce
5.50%, 07/13/98 100,000 99,999
5.95%, 08/12/98 50,000 49,998
5.95%, 08/27/98 50,000 49,996
5.80%, 04/01/99 25,000 24,991
5.80%, 04/27/99 50,000 49,978
-----------
343,974
-----------
17
<PAGE>
SCHWAB VALUE ADVANTAGE MONEY FUND(REGISTRATION MARK)
STATEMENT OF NET ASSETS (in thousands) (continued)
June 30, 1998 (Unaudited)
Par Value
-------- ----------
BANKING - DENMARK -- 0.3%
Unibank A/S
5.61%, 09/16/98 $ 50,000 $ 50,001
----------
BANKING - DOMESTIC -- 1.3%
Bankers Trust Co.
5.63%, 07/07/98 20,000 20,000
Crestar Bank
5.57%, 07/06/98 25,000 25,000
5.58%, 08/04/98 50,000 50,001
Mellon Bank N.A.
5.57%, 07/07/98 12,000 12,000
Morgan Guaranty Trust Co.
5.84%, 07/28/98 50,000 49,999
5.90%, 08/06/98 50,000 49,999
Wilmington Trust Co.
5.61%, 09/08/98 12,000 12,000
----------
218,999
----------
BANKING - FRANCE -- 2.7%
Credit Agricole-IndoSuez
5.99%, 12/09/98 50,000 50,002
Societe Generale
5.92%, 07/14/98 50,000 49,999
5.92%, 07/22/98 50,000 49,999
6.00%, 08/26/98 25,000 24,998
6.01%, 09/11/98 50,000 49,995
5.45%, 10/01/98 25,000 25,021
6.00%, 10/20/98 35,000 34,990
5.75%, 03/23/99 50,000 49,983
5.75%, 03/29/99 75,000 74,971
5.80%, 03/29/99 22,000 21,981
5.80%, 03/30/99 35,000 34,986
----------
466,925
----------
BANKING - GERMANY -- 1.9%
Deutsche Bank
5.80%, 04/27/99 25,000 24,988
5.80%, 06/11/99 50,000 49,968
Westdeutsche Landesbank
5.44%, 07/15/98 10,000 10,000
5.58%, 07/16/98 50,000 50,000
5.58%, 07/20/98 100,000 100,000
5.58%, 07/21/98 50,000 50,000
5.58%, 07/27/98 50,000 50,000
----------
334,956
----------
Par Value
-------- ----------
BANKING - SWEDEN -- 0.3%
Svenska Handelsbanken
5.64%, 11/12/98 $ 50,000 $ 50,000
----------
BANKING - UNITED KINGDOM -- 2.0%
Abbey National Treasury
Services PLC
5.60%, 08/18/98 100,000 100,000
5.60%, 09/28/98 100,000 100,000
6.00%, 12/08/98 100,000 100,000
6.00%, 12/09/98 50,000 50,000
----------
350,000
----------
TOTAL CERTIFICATES OF DEPOSIT
(Cost $1,864,843) 1,864,843
----------
VARIABLE RATE OBLIGATIONS -- 5.9% (b)
BANKING - DOMESTIC -- 0.7%
BMC Special Care Facilities
Financing Authority of the
City of Montgomery Taxable RB
(Montgomery Baptist Outreach
Services Corp. Project) Series
1997A/(Regions Bank LOC)
5.67%, 07/07/98 8,600 8,600
Columbus, Georgia Development
Authority Taxable RB (Jay
Leasing, Inc.Project) Series
1997/(Regions Bank LOC)
5.67%, 07/07/98 7,500 7,500
Keystone Health Resources Corp.
Taxable Series 1993/
(PNC Bank LOC)
5.65%, 07/07/98 3,300 3,300
MoviePlex Realty Leasing, L.L.C.
Adjustable Rate Tender Securities
(Carmike Cinemas Inc.) Series 1997B1/
(Wachovia Bank NA LOC)
5.60%, 07/07/98 7,625 7,625
New Jersey Economic Development
Authority Title IX Loan Portfolio
Securitization Bonds/
(Fleet National Bank LOC)
5.57%, 07/06/98 18,700 18,700
18
<PAGE>
Par Value
-------- ----------
Salts (II) Cayman Islands Corp.
Secured Short Term Notes,
Series 1998-19/(Bankers Trust
Co. Guaranty)
5.74%, 09/18/98 $ 20,000 $ 20,000
Strategic Money Market Trust
1998B
5.66%, 07/06/98 (Morgan
Guaranty Trust Co.
Guaranty) 50,000 50,000
Town of Islip IDA 1992 Taxable
Adjustable Rate IDRB (Nussdorf
Associates/Quality King
Distributors, Inc. Facility)/
(European American Bank LOC)
5.83%, 07/07/98 6,525 6,525
----------
122,250
----------
BANKING - FRANCE -- 0.3%
Societe Generale
5.56%, 07/20/98 50,000 49,967
----------
BANKING - JAPAN -- 0.0%
New York City IDA RB (G.A.F.
Seelig Inc. Project)
Series 1993/(IBJ Schroder
Bank & Trust LOC)
5.95%, 07/07/98 1,990 1,990
----------
BANKING - SWITZERLAND -- 0.3%
Triangle Funding Ltd.
Series 1997-1 Class 1
(Credit Suisse First
Boston Guaranty)
5.66%, 07/15/98 50,000 50,000
----------
BANKING - UNITED KINGDOM & GERMANY -- 0.4%
County of Riverside 1990 Taxable
(Monterey Avenue Project)/
(National Westminster Bank PLC/
Commerzbank LOC)
5.80%, 07/07/98 8,000 8,000
Hudson County, New Jersey GO
Refunding Bonds Taxable
Series 1995 /(Landesbank Hessen-
Thuringen Girozentrale LOC)
5.60%, 07/07/98 8,460 8,460
Restructured Assets Certificates
with Enhanced Returns Notes
Series 1997 MM-8-5 (National
Westminster Bank PLC Guaranty)
5.65%, 07/29/98 50,000 50,000
----------
66,460
----------
Par Value
-------- ----------
ELECTRICAL AND ELECTRONICS -- 0.3%
New Jersey Economic Development
Authority Taxable Economic
Development Bonds (MSNBC
CNBC Project) Series 1997A/
(General Electric Co. & Microsoft
Corp. Guarantee)
5.64%, 07/01/98 $ 47,000 $ 47,000
----------
HEALTH CARE -- 0.2%
Catholic Health Initiatives
Series 1997C
5.60%, 07/07/98 35,900 35,900
----------
LIFE INSURANCE -- 2.2% (a)
Commonwealth Life Insurance Co. (d)
5.73%, 07/01/98 100,000 100,000
5.81%, 07/01/98 10,000 10,000
First Allmerica Financial Life
Insurance Co. (d)
5.72%, 07/01/98 50,000 50,000
General American Life
Insurance Co.
5.85%, 07/01/98 125,000 125,000
Jackson National Life
Insurance Co. (d)
5.73%, 07/01/98 40,000 40,000
John Hancock Mutual Life
Insurance Co. (d)
5.69%, 07/01/98 50,000 50,000
----------
375,000
----------
MONOLINE INSURANCE -- 0.3%
Baptist Health Systems of South
Florida, Inc. Taxable Direct Note
Series 1995A /(MBIA Insurance)
5.60%, 07/07/98 6,600 6,600
Baptist Health Systems of South
Florida, Inc. Taxable Direct Note
Series 1995B /(MBIA Insurance)
5.60%, 07/07/98 4,500 4,500
City of New Britain, Connecticut GO
Pension Bonds /(Bank of Nova
Scotia SBPA & AMBAC Insurance)
5.52%, 07/07/98 40,000 40,000
----------
51,100
----------
19
<PAGE>
SCHWAB VALUE ADVANTAGE MONEY FUND(REGISTRATION MARK)
STATEMENT OF NET ASSETS (in thousands) (continued)
June 30, 1998 (Unaudited)
Par Value
-------- ----------
SECURITIES BROKERAGE - DEALER -- 1.2%
Asset-Backed Securities Investment
Trust, Series 1997E (Goldman Sachs
Group LP Guaranty)
5.66%, 07/15/98 $ 20,000 $ 20,000
J. P. Morgan Securities
5.65%, 07/01/98 50,000 50,000
Lehman Brothers Holdings, Inc.
5.65%, 07/15/98 (d) 95,000 95,000
5.66%, 07/16/98 50,000 50,000
----------
215,000
----------
TOTAL VARIABLE RATE OBLIGATIONS
(Cost $1,014,667) 1,014,667
----------
BANK NOTES -- 0.6%
BANKING - DOMESTIC -- 0.6%
NationsBank N.A.
5.45%, 07/15/98 100,000 100,000
----------
Total Bank Notes
(Cost $100,000) 100,000
----------
Par Value
-------- ----------
REPURCHASE AGREEMENTS -- 1.0% (c)
Salomon Brothers, Inc. Tri-Party
Repurchase Agreements Collateralized
by: U.S. Government Securities
6.25% Issue 09/30/96
Due 07/01/98 $ 26,000 $ 26,000
6.25% Issue 01/02/97
Due 07/01/98 37,000 37,000
6.25% Issue 01/31/97
Due 07/01/98 2,000 2,000
6.25% Issue 04/07/97
Due 07/01/98 40,000 40,000
6.25% Issue 01/12/98
Due 07/01/98 75,000 75,000
-----------
TOTAL REPURCHASE AGREEMENTS
(Cost $180,000) 180,000
-----------
TOTAL INVESTMENTS -- 99.8%
(Cost $17,171,670) 17,171,670
-----------
OTHER ASSETS AND LIABILITIES -- 0.2%
Other Assets 146,684
Liabilities (117,034)
-----------
29,650
-----------
NET ASSETS -- 100.0% $17,201,320
===========
SEE ACCOMPANYING NOTES TO STATEMENTS OF NET ASSETS AND NOTES TO
FINANCIAL STATEMENTS.
20
<PAGE>
NOTES TO STATEMENT OF NET ASSETS
June 30, 1998 (Unaudited)
Yields shown are effective yields at the time of purchase, except for variable
rate obligations, which are described below and U.S. Government coupon 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 issued to institutional investors, such as
the Schwab Value Advantage Money Fund. Any resale by the Fund must be in an
exempt transaction, normally to a qualified institutional buyer. At June
30, 1998, the aggregate value of private placement securities held by the
Fund was $6,829,622,000 which represented 39.70% of net assets. Of this
total, $6,484,622,000 or 37.70% 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 obligations -- Interest rates vary periodically based on
current market rates. Rates shown are the effective rates as of the report
date. Dates shown for securities with scheduled maturities within 397 days
or less represent the earlier of the demand date or next interest rate
change date. Dates shown for securities with scheduled maturities greater
than 397 days represent the later of the demand date or next interest rate
change date. For variable rate obligations without demand features, the
next interest reset date is shown. All dates shown are considered the
maturity date for financial reporting purposes.
(c) Repurchase agreements due dates are considered the maturity date.
Repurchase agreements with due dates later than 7 days from issue dates may
be subject to 7-day putable demand features for liquidity purposes.
(d) Certain securities cannot be resold to the general public without prior
registration under the Securities Act of 1933. If the security is
subsequently registered and resold, the issuers would typically bear the
expense of all registrations at no cost to the fund. At June 30, 1998, the
aggregate value of the restricted securities held by Schwab Value Advantage
Fund was $345,000,000 which represented 2.00% of the net assets of the
Fund. All of these restricted investments were determined by the Investment
Manager to be illiquid in accordance with procedures adopted by the Board
of Trustees.
Portfolio Abbreviations
- -----------------------
AMBAC American Municipal Bond Assurance Company
BAN Bond Anticipation Note
COP Certificates of Participation
GO General Obligation
IDA Industrial Development Authority
IDRB Industrial Development Revenue Bond
LOC Letter of Credit
MBIA Municipal Bond Investors Assurance Corporation
RB Revenue Bond
SBPA Standby Purchase Agreement
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
21
<PAGE>
SCHWAB VALUE ADVANTAGE MONEY FUND(REGISTRATION MARK)
STATEMENT OF ASSETS AND LIABILITIES (in thousands)
June 30, 1998 (Unaudited)
ASSETS
Investments, at value (Cost: $17,171,670) $17,171,670
Cash 1
Receivables:
Interest 54,925
Fund shares sold 90,593
Prepaid expenses 1,165
-----------
Total assets 17,318,354
-----------
LIABILITIES
Payables:
Dividends 36,910
Fund shares redeemed 75,890
Investment advisory and administration fees 349
Transfer agency and shareholder service fees 705
Other liabilities 3,180
-----------
Total liabilities 117,034
-----------
Net assets applicable to outstanding shares $17,201,320
===========
NET ASSETS CONSIST OF:
Paid-in-capital $17,201,445
Accumulated net realized loss on investments sold (125)
-----------
$17,201,320
===========
PRICING OF SHARES
Outstanding shares, $0.00001 par value
(unlimited shares authorized) 17,201,554
Net asset value, offering and redemption price per share $1.00
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
22
<PAGE>
SCHWAB VALUE ADVANTAGE MONEY FUND(REGISTRATION MARK)
STATEMENT OF OPERATIONS (in thousands)
For the six months ended June 30, 1998 (Unaudited)
Interest income $445,664
--------
Expenses:
Investment advisory and administration fees 31,257
Transfer agency and shareholder service fees 19,579
Custodian and portfolio accounting fees 547
Registration fees 1,320
Professional fees 153
Shareholder reports 123
Trustees' fees 22
Insurance and other expenses 41
--------
53,042
Less: expenses reduced (see Note 4) (21,716)
--------
Total expenses incurred by Fund 31,326
--------
Net investment income 414,338
--------
Increase in net assets resulting from operations $414,338
========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
23
<PAGE>
SCHWAB VALUE ADVANTAGE MONEY FUND(REGISTRATION MARK)
STATEMENT OF CHANGES IN NET ASSETS (in thousands)
<TABLE>
<CAPTION>
Six months
ended Year ended
June 30, 1998 December 31,
(Unaudited) 1997
------------- ------------
<S> <C> <C>
Operations:
Net investment income $ 414,338 $ 670,258
------------ ------------
Increase in net assets resulting from operations 414,338 670,258
------------ ------------
Dividends to shareholders from net investment income (see Note 2) (414,447) (670,258)
------------ ------------
Capital share transactions (at $1.00 per share):
Proceeds from shares sold 13,242,052 19,544,216
Net asset value of shares issued in reinvestment of dividends 442,844 617,943
Less payments for shares redeemed (10,145,652) (16,976,511)
------------ ------------
Increase in net assets from capital share transactions 3,539,244 3,185,648
------------ ------------
Total increase in net assets 3,539,135 3,185,648
Net assets:
Beginning of period 13,662,185 10,476,537
------------ ------------
End of period $ 17,201,320 $ 13,662,185
============ ============
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
24
<PAGE>
THIS SPACE RESERVED FOR YOUR COMMENTS AND QUESTIONS.
A SCHWAB REPRESENTATIVE WILL BE HAPPY TO ASSIST YOU.
<PAGE>
SCHWAB VALUE ADVANTAGE MONEY FUND(REGISTRATION MARK)
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period:
<TABLE>
<CAPTION>
Income from
Investment Operations Less Distributions
--------------------------------------- --------------------------
Net
Fiscal Net Asset Realized & Total Dividends Net Asset
Period Value At Net Unrealized from from Net Value at
Ended Beginning Investment Gain (Loss) on Investment Investment Total End of
December 31, of Period Income Investments Operations Income Distributions Period
- ------------ --------- ---------- -------------- ---------- ---------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1998 2 $1.00 $0.03 $-- $0.03 $(0.03)3 $(0.03) $1.00
1997 $1.00 $0.05 $-- $0.05 $(0.05) $(0.05) $1.00
1996 $1.00 $0.05 $-- $0.05 $(0.05) $(0.05) $1.00
1995 $1.00 $0.06 $-- $0.06 $(0.06) $(0.06) $1.00
1994 $1.00 $0.04 $-- $0.04 $(0.04) $(0.04) $1.00
1993 $1.00 $0.03 $-- $0.03 $(0.03) $(0.03) $1.00
</TABLE>
Ratios/Supplemental Data
--------------------------------------------------------------
Ratio of Net
Ratio of Investment
Fiscal Total Expenses Income
Period Return Net Assets to Average to Average
Ended (not annualized) End of Period Net Assets 1 Net Assets 1
December 31, (%) (000's) (%) (%)
- ------------ ---------------- ------------- ------------ -------------
1998 2 2.65 $17,201,320 0.40* 5.29*
1997 5.40 $13,662,185 0.40 5.28
1996 5.26 $10,476,537 0.40 5.14
1995 5.80 $ 6,923,890 0.40 5.63
1994 4.09 $ 3,731,629 0.40 4.40
1993 3.02 $ 729,356 0.39 2.97
1 The information contained in the above table is based on actual expenses
for the periods, after giving effect to the portion of expenses reduced by
the Investment Manager and Schwab. Had these expenses not been reduced, the
Fund's expense and net investment income ratios would have been:
Period Ratio of Net
Ended Ratio of Investment
December 31, Expenses Income
- ------------ -------- ------------
1998 2 0.68%* 5.01%*
1997 0.69% 5.00%
1996 0.70% 4.84%
1995 0.72% 5.31%
1994 0.79% 4.01%
1993 0.82% 2.54%
2 For the six months ended June 30, 1998 (Unaudited)
3 The amounts shown include certain reclassifications related to book to tax
differences (see Note 2 of Notes to Finanical Statements).
* Annualized.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
26-27
<PAGE>
NOTES TO FINANCIAL STATEMENTS
For the six months ended June 30, 1998 (Unaudited)
1. DESCRIPTION OF THE FUND
The Schwab Value Advantage Money Fund (the "Fund") is a series of The Charles
Schwab Family of Funds (the "Trust"), an open-end investment management company
organized as a Massachusetts business trust on October 20, 1989 and registered
under the Investment Company Act of 1940, as amended. This report includes only
the Investor Shares of the Fund; Sweep Shares are currently not available for
purchase.
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(REGISTRATION MARK), Schwab Retirement Money
Fund(REGISTRATION MARK), Schwab Municipal Money Fund, Schwab California
Municipal Money Fund, Schwab New York Municipal Money Fund, Schwab New Jersey
Municipal Money Fund, Schwab Pennsylvania Municipal Money Fund, Schwab Florida
Municipal Money Fund and Schwab Government Cash Reserves. 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.
government securities. All collateral is held by the Fund's custodian, except in
the case of a tri-party agreement, under which the collateral is held by an
agent bank. The collateral is monitored daily to ensure that its market value at
least equals the repurchase price under the agreement.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Fund declares a daily
dividend, equal to its net investment income for that day, payable monthly. Net
realized capital gains, if any, are normally distributed annually.
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.
28
<PAGE>
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.
As of December 31, 1997, the unused capital loss carryforwards, for federal
income tax purposes with expiration dates, were as follows:
Schwab Value Advantage
Expiring in: Money Fund(REGISTRATION MARK)
------------ -----------------------------
12/31/01 $ 1,000
12/31/02 2,000
12/31/03 122,000
--------
Total capital loss carryforward $125,000
========
RECLASSIFICATION -- Generally accepted accounting principles require that
certain components of net assets be reclassified to reflect permanent
differences between financial and tax reporting. Accordingly, permanent book/tax
differences of $ 109,000 were reclassified from paid-in-capital to undistributed
net investment income. These reclassifications have no effect on net assets or
net asset value per share.
3. TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY AND ADMINISTRATION AGREEMENT -- 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 $1 billion of average daily net assets, 0.45% of the next $2 billion,
0.40% of the next $7 billion, 0.37% of the next $10 billion and 0.34% of such
assets in excess of $20 billion. The Investment Manager has reduced a portion of
its fees for the six months ended June 30, 1998 (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 purchases and redemptions in amounts less
than $5,000 and may impose a $5.00 monthly fee for balances below the minimum
required.
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
six months ended June 30, 1998, 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 $22,000
related to the Trust's unaffiliated trustees.
29
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
4. EXPENSES REDUCED BY THE INVESTMENT MANAGER AND SCHWAB
The Investment Manager and Schwab guarantee that, through at least October 31,
1998, the Fund's total operating expenses will not exceed 0.40% of the Fund's
average daily net assets, after reductions. For the purpose of this guarantee,
operating expenses do not include interest expenses, extraordinary expenses and
taxes.
For the six months ended June 30, 1998, the total of such fees reduced by the
Investment Manager was $21,716,000.
30
<PAGE>
THIS SPACE RESERVED FOR YOUR COMMENTS AND QUESTIONS.
A SCHWAB REPRESENTATIVE WILL BE HAPPY TO ASSIST YOU.
<PAGE>
THIS SPACE RESERVED FOR YOUR COMMENTS AND QUESTIONS.
A SCHWAB REPRESENTATIVE WILL BE HAPPY TO ASSIST YOU.
<PAGE>
THE SCHWABFUNDS FAMILY-REGISTERED TRADEMARK-
The SchwabFunds Family includes a variety of funds to help you meet your
investment goals. You can diversify your portfolio in a single step with our
asset allocation funds. Or you can customize your portfolio with a combination
of our stock funds as well as our taxable and tax-advantaged bond and money
market funds.
Please call 1-800-435-4000 for a free prospectus and brochure for any of these
SchwabFunds.
This report must be preceded or accompanied by a current prospectus.
SCHWAB ASSET ALLOCATION FUNDS
Schwab MarketTrack All Equity Portfolio(1)
Schwab MarketTrack Growth Portfolio(1)
Schwab MarketTrack Balanced Portfolio(1)
Schwab MarketTrack Conservative Portfolio(1)
Schwab MarketManager Growth Portfolio(2)
Schwab MarketManager Balanced Portfolio(2)
SCHWAB STOCK FUNDS
Schwab 1000 Fund-Registered Trademark-
Schwab S&P 500 Fund
Schwab Analytics Fund-Registered Trademark-
Schwab Small-Cap Index Fund-Registered Trademark-
Schwab MarketManager Small Cap Portfolio(2)
Schwab International Index Fund-Registered Trademark-
Schwab MarketManager International Portfolio(2)
SCHWAB BOND FUNDS
Schwab Total Bond Market Index Fund(3)
Schwab Short-Term Bond Market Index Fund(3)
Schwab Long-Term Tax-Free Bond Fund
Schwab Short/Intermediate Tax-Free Bond Fund
Schwab California Long-Term Tax-Free Bond Fund
Schwab California Short/Intermediate
Tax-Free Fund
SCHWAB MONEY MARKET FUNDS
Schwab offers an array of money market funds(4) 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-Registered Trademark-.
(1)Formerly the Schwab Asset Director Funds.
(2)Formerly the Schwab OneSource-TM- Portfolios.
(3)Formerly the Schwab Government Bond Funds.
(4)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.
