SCHWABFUNDS -REGISTERED TRADEMARK-
SCHWAB
VALUE ADVANTAGE
MONEY FUND -REGISTERED TRADEMARK-
ANNUAL REPORT
AND
AN IMPORTANT NOTICE REGARDING
DELIVERY OF SHAREHOLDER
DOCUMENTS
Annual Report
December 31, 1999
<PAGE>
IMPORTANT NOTICE REGARDING DELIVERY OF SHAREHOLDER DOCUMENTS
The Securities and Exchange Commission has adopted a rule permitting mutual
funds to deliver only one copy of shareholder documents, including prospectuses
and shareholder reports to fund investors with multiple accounts at the same
residential or post office box address. This practice is commonly called
"householding" and is intended to eliminate duplicate mailings of shareholder
documents.
As permitted by the rule, Schwab may begin indefinitely householding
prospectuses and shareholder reports for SchwabFunds.-Registered Trademark-
ADDITIONAL COPIES OF SHAREHOLDER DOCUMENTS
ALL SCHWABFUNDS PROSPECTUSES AND SHAREHOLDER REPORTS ARE AVAILABLE FREE OF
CHARGE, AND MAY BE REQUESTED AT ANY TIME BY CALLING SCHWAB AS INDICATED BELOW.
SCHWABFUNDS PROSPECTUSES ARE ALSO AVAILABLE ON OUR WEB SITE AT WWW.SCHWAB.COM.
If you would otherwise fall under our householding policy, but for any reason
prefer to receive multiple SchwabFunds prospectuses and shareholder reports,
please contact:
- - SCHWAB SIGNATURE SERVICES-TM- CLIENTS: Schwab Signature Services.
- - INVESTMENT MANAGER CLIENTS: Schwab at 1-800-515-2157, or your investment
manager.
- - ALL OTHER CLIENTS: Schwab at 1-800-435-4000.
Your instructions that householding not apply to your accounts holding
SchwabFunds will be effective within 30 days of receipt by Schwab.
<PAGE>
SCHWABFUNDS - REGISTERED TRADEMARK-
SCHWAB
VALUE ADVANTAGE
MONEY FUND -REGISTERED TRADEMARK-
Annual Report
December 31, 1999
<PAGE>
SCHWAB VALUE ADVANTAGE MONEY FUND-REGISTERED TRADEMARK-
We're pleased to bring you this annual report for the Schwab Value Advantage
Money Fund-Investor Shares (the fund) for the one-year period ended
December 31, 1999. During the reporting period, the fund continued to provide
investors with high current yields while offering the liquidity and stability
traditionally associated with money market funds.
Schwab's Value Advantage Investments,-Registered Trademark- which include the
fund as well as three tax-advantaged alternatives, are designed to provide
higher yields than Sweep Investments.-TM- This is because Value Advantage
Investments have higher minimum initial and ongoing balance requirements than
Sweep Investments. These requirements, along with policies designed to
discourage frequent transactions, can help minimize fund expenses--which in turn
can mean higher returns for investors. Please remember that unlike Sweep
Investments, Value Advantage Investments cannot be linked to your Schwab account
to serve as your primary sweep fund. For more information on Schwab money funds,
see page 3.
Please remember that an investment in the fund is neither insured nor guaranteed
by the Federal Deposit Insurance Corporation (FDIC) or any other government
agency and, although the fund seeks to preserve the value of your investment at
$1 per share, it is possible to lose money by investing in the fund.
CONTENTS
<TABLE>
<S> <C>
- ---------------------------------------------
A Message from the Chairman 1
- ---------------------------------------------
What Money Fund Investors Should Know 2
- ---------------------------------------------
Market Overview 5
- ---------------------------------------------
Portfolio Management 8
- ---------------------------------------------
Fund Performance and Portfolio
Composition 9
- ---------------------------------------------
Fund Discussion 10
- ---------------------------------------------
Glossary of Terms 11
- ---------------------------------------------
Portfolio Highlights 12
- ---------------------------------------------
Financial Statements and Notes 13
- ---------------------------------------------
</TABLE>
<PAGE>
A MESSAGE FROM THE CHAIRMAN
[PHOTO]
Dear Shareholder,
As we begin a new year, I'd like to take this opportunity to reflect on last
year's milestones at Charles Schwab Investment Management, Inc. (CSIM), the
investment adviser for the SchwabFunds-Registered Trademark- Family.
First of all, SchwabFunds assets topped the $100 billion mark in September. With
the support of investors like you, SchwabFunds continue to be among the largest
and fastest growing fund families in the nation.
Secondly, we added two new products to our SchwabFunds offering in 1999:
- - SCHWAB TOTAL STOCK MARKET INDEX FUND-TM- seeks to track the total return of
the entire U.S. stock market, as measured by the Wilshire 5000 Total Market
Index, the broadest measure of U.S. stock market performance. In one single,
low-cost investment, fund investors can benefit from exposure to U.S.
companies of all types and sizes.
- - SCHWAB YIELDPLUS FUND-TM- The fund seeks high current income with minimal
changes in share price. It is designed to provide the potential for higher
yields than a money fund and lower risk than a longer-term bond fund through a
management strategy designed to minimize price fluctuation. Intended for your
long-term (over one-year) cash needs, the fund seeks to increase the overall
yield potential of the cash portion of your portfolio.
For more information on either of these funds, please call 1-800-435-4000 and
request a free prospectus. The prospectus contains more information on fund fees
and expenses. Please read it carefully before investing.
I encourage you to take a moment to read this annual report as it is designed to
provide timely information about your SchwabFunds investments. You will find
information on each fund's total returns and performance, as well as commentary
on market conditions provided by the portfolio management team. In the section
"What Money Fund Investors Should Know," we've also provided guidelines that can
help you reach your goals by establishing--or maintaining--an ongoing investment
program.
As a leader in online brokerage, we recognize the value of the web as a means of
communicating timely, relevant information to investors. Regular updates on all
of the SchwabFunds, including performance data, are available on our Web site at
www.schwab.com/schwabfunds. We encourage you to take advantage of this valuable
resource which can help you keep track of your funds' performance.
At Schwab our philosophy has always been that a combination of regular investing
and diversification is the best strategy over the long term. By investing in
SchwabFunds, you've already taken an important step in building a portfolio that
can help you meet your future goals. Thank you for your investment in
SchwabFunds.
Sincerely,
/s/ Charles R. Schwab
Charles R. Schwab
December 31, 1999
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 historically have 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, money market securities or
funds, and cash in their portfolio.
CHOOSING A MONEY MARKET FUND
Some 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. 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 that you've chosen the right money market fund by
considering the role it will play in your investment portfolio. Here are some
factors to consider when making or reviewing your money market fund choice.
EXPENSES: Because expenses are one of the key determining factors in a money
market 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 consider 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. 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 convenient access to
your investment, also are 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 one-year
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. Accounts with this feature automatically "sweep" uninvested cash into
the fund you select as your primary money fund. The upshot: It keeps cash
working. In addition, shares of your fund will be redeemed automatically to
cover investment purchases and other debits in your account. This convenience
may be well worth the small additional cost.
LARGER CASH BALANCES: You may earn higher yields 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 larger cash balances. These funds
typically have higher minimum balance requirements and transaction policies
designed to minimize fund operating expenses, and 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 tax, you may be best served by choosing a state-specific tax-free
fund that provides income free from federal, state and, in some cases, local
income taxes.(3)
(1) An investment in a money market fund is neither insured nor guaranteed by
the Federal Deposit Insurance Corporation or any other government agency
and, although money funds seek to preserve the value of your investment at
$1 per share, it is possible to lose money by investing in a money fund.
(2) Yields may vary.
(3) This may not be true for investors subject to the federal alternative
minimum tax (AMT); consult your tax advisor.
2
<PAGE>
SCHWAB MONEY FUNDS
Schwab offers two types of money funds--Sweep Investments-TM- and Value
Advantage Investments.-Registered Trademark- Both include funds that offer
taxable and tax-free income. 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 portfolio.
SWEEP INVESTMENTS are designed for your cash balances requiring frequent access.
These funds can be linked to your Schwab account to serve as a primary sweep
money fund. That means uninvested cash in your Schwab brokerage account is
automatically swept in and out of the fund, based on transactions in your
account and the terms and conditions of your account agreement.
VALUE ADVANTAGE INVESTMENTS are designed for your larger cash balances that
don't require frequent access. Value Advantage Investments have higher minimum
initial and ongoing balance requirements than Sweep Investments. These
requirements, along with policies designed to discourage frequent transactions,
can help minimize fund expenses--which in turn can mean higher returns for
investors. Please remember that Value Advantage Investments cannot be linked to
your Schwab account to serve as your primary sweep fund.
Schwab currently offers a variety of money funds. If you are selecting from
among them, you should consider your attitude toward risk and return, as well as
your income tax bracket.
SCHWAB TAXABLE MONEY FUNDS
SCHWAB MONEY MARKET FUND A high-quality money fund for investors interested in
the potential for high money market yields.
SCHWAB GOVERNMENT MONEY FUND Designed for investors who want current money
market yields along with the added margin of safety provided by a portfolio of
U.S. government securities and repurchase agreements.
SCHWAB U.S. TREASURY MONEY FUND Of all the money funds offered by Schwab, this
one seeks to provide the highest degree of safety. The fund invests exclusively
in U.S. Treasury securities and other investments that are backed by the full
faith and credit of the U.S. government. What's more, income from the fund is
generally free from state and local income tax.
SCHWAB VALUE ADVANTAGE MONEY FUND-REGISTERED TRADEMARK- A high-quality money
fund designed for investors interested in the potential for higher money market
yields.
SCHWAB MUNICIPAL MONEY FUNDS
SCHWAB MUNICIPAL MONEY FUND A high-quality municipal money fund that seeks to
provide income that is free from federal income tax.*
SCHWAB STATE-SPECIFIC MUNICIPAL MONEY FUNDS Each of these funds is designed for
taxpayers of a particular state and seeks to provide income that is exempt from
federal, state and, in some cases, local income taxes.(*) The Schwab Florida
Municipal Money Fund also seeks to have its shares exempt from the Florida
Intangible Tax.
- Schwab California Municipal Money Fund
- Schwab Florida Municipal Money Fund
- Schwab New Jersey Municipal Money Fund
- Schwab New York Municipal Money Fund
- Schwab Pennsylvania Municipal Money Fund
* Income from all of the Schwab Municipal Money Funds may be subject to the
Federal Alternative Minimum Tax (AMT).
3
<PAGE>
WHAT MONEY FUND INVESTORS SHOULD KNOW (continued)
The table below presents the various money fund choices available at Schwab.
<TABLE>
<CAPTION>
VALUE ADVANTAGE
TAXABLE MONEY FUNDS SWEEP INVESTMENTS-TM- INVESTMENTS-REGISTERED TRADEMARK-
<S> <C> <C>
- --------------------------------------------------------------------------------
Schwab Money Market
Fund -
- --------------------------------------------------------------------------------
Schwab Government
Money Fund -
- --------------------------------------------------------------------------------
Schwab U.S. Treasury
Money Fund -
- --------------------------------------------------------------------------------
Schwab Value
Advantage Money
Fund--Investor Shares -
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MUNICIPAL MONEY FUNDS
<S> <C> <C>
- -------------------------------------------------------------------
Schwab Municipal
Money Fund - -
- -------------------------------------------------------------------
Schwab California
Municipal Money Fund - -
- -------------------------------------------------------------------
Schwab Florida
Municipal Money Fund -
- -------------------------------------------------------------------
Schwab New Jersey
Municipal Money Fund -
- -------------------------------------------------------------------
Schwab New York
Municipal Money Fund - -
- -------------------------------------------------------------------
Schwab Pennsylvania
Municipal Money Fund -
- -------------------------------------------------------------------
</TABLE>
If you would like more information on any of these funds, please call us toll
free at 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 make it easy and convenient to invest in SchwabFunds.-Registered Trademark-
With Schwab MoneyLink,-Registered Trademark- Schwab's electronic transfer
service, you can have money automatically transferred into your Schwab account
on a regular basis. You also can invest in person at any of our more than 340
nationwide branches, through our Web site at www.schwab.com and through our
automated touch-tone telephone service, TeleBroker,-Registered Trademark- by
calling 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
current 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
<PAGE>
MARKET OVERVIEW
U.S. ECONOMIC GROWTH
The U.S. economy, as measured by real (inflation adjusted) growth in gross
domestic product (GDP), continued its lengthy expansion with a strong growth
rate of 4.0%--the third consecutive year at 4% or higher. This rate is
considered by many economists to be in excess of what the economy can absorb
without experiencing inflationary pressures. High levels of consumer spending
and business capital investment, as well as rising real wages and strong gains
in stock prices, have been the principal factors continuing this lengthy
expansion.
The Commerce Department, after revising the GDP benchmark data for the past four
decades, has reported stronger growth, higher personal savings and lower
inflation than were previously calculated for the 1990s.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
REAL GROSS DOMESTIC PRODUCT
QUARTERLY PERCENTAGE CHANGE (ANNUALIZED RATE)
<S> <C>
Q1 1990 5.0%
Q2 1990 1.0%
Q3 1990 -0.6%
Q4 1990 -3.0%
Q1 1991 -1.7%
Q2 1991 2.6%
Q3 1991 1.3%
Q4 1991 2.5%
Q1 1992 4.3%
Q2 1992 4.0%
Q3 1992 3.1%
Q4 1992 5.2%
Q1 1993 -0.7%
Q2 1993 2.1%
Q3 1993 1.5%
Q4 1993 6.0%
Q1 1994 3.6%
Q2 1994 5.7%
Q3 1994 2.2%
Q4 1994 5.1%
Q1 1995 1.5%
Q2 1995 0.8%
Q3 1995 3.2%
Q4 1995 3.3%
Q1 1996 2.9%
Q2 1996 6.9%
Q3 1996 2.2%
Q4 1996 4.9%
Q1 1997 4.9%
Q2 1997 5.1%
Q3 1997 4.0%
Q4 1997 3.1%
Q1 1998 6.7%
Q2 1998 2.1%
Q3 1998 3.8%
Q4 1998 5.9%
Q1 1999 3.7%
Q2 1999 1.9%
Q3 1999 5.7%
Q4 1999 5.8%
Source: BLOOMBERG L.P.
</TABLE>
Concerns in 1998 over the impact of international economic problems were
displaced in 1999 by concerns over imbalances in the domestic economy, namely
the surging current account (trade) deficit, record high stock valuations and
the low savings rate.
Looking ahead, the availability of increasingly scarce labor resources and the
behavior of domestic consumers in response to continued stock market volatility
may be key determinants of whether the economy continues on its current course
or softens throughout 2000. The consensus of most economists is that the U.S.
economy appears poised for continued growth, but at a more moderate pace than
the last four years.
UNEMPLOYMENT
December's unemployment rate of 4.1% was the lowest in 29 years. Labor markets
continue to be extremely tight in many areas of the country. Growth in the labor
force has slowed, and there continues to be concern that wage and benefits
increases may begin to put more pressure on labor costs (refer to Employment
Cost Index on the next page).
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 6.8%
Feb-94 6.6%
Mar-94 6.5%
Apr-94 6.4%
May-94 6.1%
Jun-94 6.1%
Jul-94 6.3%
Aug-94 6.0%
Sep-94 5.8%
Oct-94 5.8%
Nov-94 5.6%
Dec-94 5.5%
Jan-95 5.6%
Feb-95 5.4%
Mar-95 5.3%
Apr-95 5.8%
May-95 5.8%
Jun-95 5.6%
Jul-95 5.6%
Aug-95 5.7%
Sep-95 5.6%
Oct-95 5.5%
Nov-95 5.7%
Dec-95 5.6%
Jan-96 5.6%
Feb-96 5.5%
Mar-96 5.6%
Apr-96 5.5%
May-96 5.6%
Jun-96 5.3%
Jul-96 5.5%
Aug-96 5.1%
Sep-96 5.2%
Oct-96 5.2%
Nov-96 5.3%
Dec-96 5.4%
Jan-97 5.3%
Feb-97 5.3%
Mar-97 5.1%
Apr-97 5.0%
May-97 4.7%
Jun-97 5.0%
Jul-97 4.7%
Aug-97 4.9%
Sep-97 4.7%
Oct-97 4.7%
Nov-97 4.6%
Dec-97 4.7%
Jan-98 4.5%
Feb-98 4.6%
Mar-98 4.6%
Apr-98 4.3%
May-98 4.3%
Jun-98 4.5%
Jul-98 4.5%
Aug-98 4.5%
Sep-98 4.5%
Oct-98 4.5%
Nov-98 4.4%
Dec-98 4.3%
Jan-99 4.3%
Feb-99 4.4%
Mar-99 4.2%
Apr-99 4.3%
May-99 4.2%
Jun-99 4.3%
Jul-99 4.3%
Aug-99 4.2%
Sep-99 4.2%
Oct-99 4.1%
Nov-99 4.1%
Dec-99 4.1%
SOURCE: BLOOMBERG L.P.
</TABLE>
5
<PAGE>
MARKET OVERVIEW (continued)
INFLATION
Price inflation continued to remain well contained. The Consumer Price Index
(CPI) rose a modest 2.7% during 1999. Its core rate (which excludes the more
volatile food and energy components) rose just 1.9%. The GDP price deflator, the
broadest measure of inflation, indicated prices rising at an annual rate of 1.5%
for 1999. The Employment Cost Index, which measures inflation in wages, salaries
and benefits, was also well contained, increasing just 3.4% for the year.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MEASURES OF INFLATION MONTHLY EMPLOYMENT MONTHLY CONSUMER
COST INDEX PRICE INDEX
<S> <C> <C>
Jan-90 5.5% 5.2%
Feb-90 5.5% 5.3%
Mar-90 5.5% 5.2%
Apr-90 5.4% 4.7%
May-90 5.4% 4.4%
Jun-90 5.4% 4.7%
Jul-90 5.2% 4.8%
Aug-90 5.2% 5.6%
Sep-90 5.2% 6.2%
Oct-90 4.9% 6.3%
Nov-90 4.9% 6.3%
Dec-90 4.9% 6.1%
Jan-91 4.6% 5.7%
Feb-91 4.6% 5.3%
Mar-91 4.6% 4.9%
Apr-91 4.6% 4.9%
May-91 4.6% 5.0%
Jun-91 4.6% 4.7%
Jul-91 4.3% 4.4%
Aug-91 4.3% 3.8%
Sep-91 4.3% 3.4%
Oct-91 4.3% 2.9%
Nov-91 4.3% 3.0%
Dec-91 4.3% 3.1%
Jan-92 4.0% 2.6%
Feb-92 4.0% 2.8%
Mar-92 4.0% 3.2%
Apr-92 3.6% 3.2%
May-92 3.6% 3.0%
Jun-92 3.6% 3.1%
Jul-92 3.5% 3.2%
Aug-92 3.5% 3.1%
Sep-92 3.5% 3.0%
Oct-92 3.5% 3.2%
Nov-92 3.5% 3.0%
Dec-92 3.5% 2.9%
Jan-93 3.5% 3.3%
Feb-93 3.5% 3.2%
Mar-93 3.5% 3.1%
Apr-93 3.6% 3.2%
May-93 3.6% 3.2%
Jun-93 3.6% 3.0%
Jul-93 3.6% 2.8%
Aug-93 3.6% 2.8%
Sep-93 3.6% 2.7%
Oct-93 3.5% 2.8%
Nov-93 3.5% 2.7%
Dec-93 3.5% 2.7%
Jan-94 3.2% 2.5%
Feb-94 3.2% 2.5%
Mar-94 3.2% 2.5%
Apr-94 3.2% 2.4%
May-94 3.2% 2.3%
Jun-94 3.2% 2.5%
Jul-94 3.2% 2.8%
Aug-94 3.2% 2.9%
Sep-94 3.2% 3.0%
Oct-94 3.0% 2.6%
Nov-94 3.0% 2.7%
Dec-94 3.0% 2.7%
Jan-95 2.9% 2.8%
Feb-95 2.9% 2.9%
Mar-95 2.9% 2.9%
Apr-95 2.9% 3.1%
May-95 2.9% 3.2%
Jun-95 2.9% 3.0%
Jul-95 2.7% 2.8%
Aug-95 2.7% 2.6%
Sep-95 2.7% 2.5%
Oct-95 2.7% 2.8%
Nov-95 2.7% 2.6%
Dec-95 2.7% 2.5%
Jan-96 2.8% 2.7%
Feb-96 2.8% 2.7%
Mar-96 2.8% 2.8%
Apr-96 2.9% 2.9%
May-96 2.9% 2.9%
Jun-96 2.9% 2.8%
Jul-96 2.8% 3.0%
Aug-96 2.8% 2.9%
Sep-96 2.8% 3.0%
Oct-96 2.9% 3.0%
Nov-96 2.9% 3.3%
Dec-96 2.9% 3.3%
Jan-97 2.9% 3.0%
Feb-97 2.9% 3.0%
Mar-97 2.9% 2.8%
Apr-97 2.8% 2.5%
May-97 2.8% 2.2%
Jun-97 2.8% 2.3%
Jul-97 3.0% 2.2%
Aug-97 3.0% 2.2%
Sep-97 3.0% 2.2%
Oct-97 3.3% 2.1%
Nov-97 3.3% 1.8%
Dec-97 3.3% 1.7%
Jan-98 3.3% 1.6%
Feb-98 3.3% 1.4%
Mar-98 3.3% 1.4%
Apr-98 3.5% 1.4%
May-98 3.5% 1.7%
Jun-98 3.5% 1.7%
Jul-98 3.7% 1.7%
Aug-98 3.7% 1.6%
Sep-98 3.7% 1.5%
Oct-98 3.4% 1.5%
Nov-98 3.4% 1.5%
Dec-98 3.4% 1.6%
Jan-99 3.0% 1.7%
Feb-99 3.0% 1.6%
Mar-99 3.0% 1.7%
Apr-99 3.2% 2.3%
May-99 3.2% 2.1%
Jun-99 3.2% 2.0%
Jul-99 3.1% 2.1%
Aug-99 3.1% 2.3%
Sep-99 3.1% 2.6%
Oct-99 3.4% 2.6%
Nov-99 3.4% 2.6%
Dec-99 3.4% 2.7%
SOURCE: BLOOMBERG L.P. AND BUREAU OF LABOR STATISTICS
</TABLE>
Although there is little evidence of accelerating core inflation, the Federal
Reserve (Fed) has expressed concern that if labor markets continue to tighten,
increases in wages could outpace productivity growth. In such an environment,
productivity growth becomes particularly critical, as it enables companies to
pay higher wages without raising prices. Non-farm productivity grew 2.8% in 1998
and at 2.9% during 1999, continuing a healthy trend that began in 1996.
ASSET CLASS PERFORMANCE
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
TOTAL RETURN PERFORMANCE MSCE-EAFE INDEX S&P 500 INDEX RUSSELL 2000 INDEX LEHMAN AGGREGATE BOND INDEX
GROWTH OF A HYPOTHETICAL $1 INVESTMENT
<S> <C> <C> <C> <C>
DEC-98 $1.0000 $1.0000 $1.0000 $1.0000
JAN-99 $0.9970 $1.0418 $1.0133 $1.0071
Feb-99 $0.9733 $1.0094 $0.9312 $0.9895
Mar-99 $1.0139 $1.0498 $0.9457 $0.9949
Apr-99 $1.0549 $1.0904 $1.0305 $0.9981
May-99 $1.0006 $1.0647 $1.0455 $0.9893
Jun-99 $1.0396 $1.1238 $1.0928 $0.9862
Jul-99 $1.0705 $1.0887 $1.0628 $0.9820
Aug-99 $1.0710 $1.0833 $1.0235 $0.9815
Sep-99 $1.0818 $1.0536 $1.0237 $0.9929
Oct-99 $1.1224 $1.1203 $1.0279 $0.9966
Nov-99 $1.1614 $1.1430 $1.0893 $0.9965
Dec-99 $1.2656 $1.2104 $1.2126 $0.9917
</TABLE>
COMPILED BY CHARLES SCHWAB & CO., INC.
For the first time since 1994, international stocks outperformed domestic
large-cap stocks. Assisted by the rebound in Asian markets, international
stocks, as represented by the MSCI EAFE Index, achieved a total return of 26.96%
for 1999 versus 21.04% for the S&P 500 Index. Within the S&P 500, growth stocks
in general, and technology growth stocks in particular, continued to be the
strongest performing style for the period. Small-cap stocks, as represented by
the Russell 2000 Index, also experienced a positive return of 21.26% for the
year.
Reflecting the rise in intermediate and long-term interest rates, fixed income
returns were generally weak for the period. Bond returns, as represented by the
Lehman Brothers Aggregate Bond Index, were (0.82)% for the year.
6
<PAGE>
TREASURY BOND YIELDS
Continuing a trend which began in October 1998, both long-term and
intermediate-term rates continued to climb upward during the reporting period.
The primary drivers of this upward trend were scaled back concerns about the
impact of international economic problems and continued strong growth of the
domestic economy, which shows no immediate signs of slowing.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
30-YEAR AND FIVE-YEAR TREASURY BOND YIELDS
30-YEAR TREASURY BOND YIELD FIVE-YEAR TREASURY NOTE YIELD
<S> <C> <C>
1/1/99 5.10% 4.54%
1/8/99 5.27% 4.73%
1/15/99 5.11% 4.55%
1/22/99 5.08% 4.52%
1/29/99 5.09% 4.55%
2/5/99 5.35% 4.86%
2/12/99 5.42% 4.96%
2/19/99 5.39% 4.99%
2/26/99 5.58% 5.22%
3/5/99 5.60% 5.22%
3/12/99 5.53% 5.06%
3/19/99 5.56% 5.08%
3/26/99 5.59% 5.08%
4/2/99 5.46% 4.96%
4/9/99 5.46% 4.96%
4/16/99 5.57% 5.11%
4/23/99 5.60% 5.14%
4/30/99 5.66% 5.21%
5/7/99 5.81% 5.37%
5/14/99 5.92% 5.50%
5/21/99 5.75% 5.43%
5/28/99 5.83% 5.58%
6/4/99 5.96% 5.73%
6/11/99 6.16% 5.91%
6/18/99 5.97% 5.73%
6/25/99 6.15% 5.89%
7/2/99 6.00% 5.69%
7/9/99 6.00% 5.69%
7/16/99 5.88% 5.55%
7/23/99 6.03% 5.69%
7/30/99 6.10% 5.79%
8/6/99 6.18% 5.91%
8/13/99 6.10% 5.86%
8/20/99 5.99% 5.77%
8/27/99 5.98% 5.77%
9/3/99 6.02% 5.77%
9/10/99 6.04% 5.78%
9/17/99 6.06% 5.75%
9/24/99 5.97% 5.66%
10/1/99 6.13% 5.86%
10/8/99 6.20% 5.95%
10/15/99 6.26% 5.97%
10/22/99 6.35% 6.10%
10/29/99 6.16% 5.95%
11/5/99 6.06% 5.86%
11/12/99 6.04% 5.86%
11/19/99 6.16% 5.99%
11/26/99 6.23% 6.05%
12/3/99 6.25% 6.07%
12/10/99 6.17% 5.98%
12/17/99 6.37% 6.19%
12/24/99 6.49% 6.31%
12/31/99 6.48% 6.34%
SOURCE: BLOOMBERG L.P.
</TABLE>
SHORT-TERM INTEREST RATE ENVIRONMENT
Short-term interest rates increased approximately 1% during 1999. Until the
April CPI report, the economy demonstrated continued signs of growth with no
significant evidence of accelerating inflation or indications that the Fed would
move to change short-term rates. Following the unexpectedly high April CPI
report, the Fed adopted a "tightening" bias in May, followed by a 0.25% increase
in the Federal Funds Rate at the June meeting.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
1999 YIELDS ON 90-DAY COMMERCIAL PAPER
AND THREE-MONTH TREASURY BILLS
3 MONTH TREASURY BILL 90 DAY COMMERCIAL PAPER
<S> <C> <C>
1/1/99 4.46% 4.78%
1/8/99 4.48% 4.75%
1/15/99 4.43% 4.76%
1/22/99 4.34% 4.76%
1/29/99 4.45% 4.75%
2/5/99 4.49% 4.76%
2/12/99 4.52% 4.78%
2/19/99 4.56% 4.80%
2/26/99 4.67% 4.81%
3/5/99 4.60% 4.83%
3/12/99 4.59% 4.81%
3/19/99 4.49% 4.81%
3/26/99 4.49% 4.81%
4/2/99 4.39% 4.82%
4/9/99 4.35% 4.80%
4/16/99 4.31% 4.79%
4/23/99 4.41% 4.78%
4/30/99 4.54% 4.77%
5/7/99 4.60% 4.79%
5/14/99 4.65% 4.79%
5/21/99 4.58% 4.83%
5/28/99 4.64% 4.84%
6/4/99 4.54% 4.87%
6/11/99 4.73% 4.90%
6/18/99 4.65% 5.00%
6/25/99 4.79% 5.03%
7/2/99 4.67% 5.13%
7/9/99 4.68% 5.11%
7/16/99 4.66% 5.10%
7/23/99 4.66% 5.11%
7/30/99 4.75% 5.12%
8/6/99 4.80% 5.18%
8/13/99 4.71% 5.24%
8/20/99 4.83% 5.27%
8/27/99 4.99% 5.30%
9/3/99 4.91% 5.31%
9/10/99 4.73% 5.31%
9/17/99 4.65% 5.33%
9/24/99 4.78% 5.33%
10/1/99 4.86% 5.30%
10/8/99 4.79% 5.90%
10/15/99 5.05% 5.87%
10/22/99 5.05% 5.96%
10/29/99 5.09% 5.90%
11/5/99 5.12% 5.88%
11/12/99 5.22% 5.78%
11/19/99 5.22% 5.79%
11/26/99 5.29% 5.78%
12/3/99 5.25% 5.83%
12/10/99 5.28% 5.84%
12/17/99 5.44% 5.89%
12/24/99 5.45% 6.00%
12/31/99 5.33% 5.78%
SOURCE: BLOOMBERG L.P.
</TABLE>
Throughout the remainder of the year, the Fed continued to express concern about
the potential for a buildup of inflationary imbalances that could undermine the
favorable performance of the economy. The Fed raised the Federal Funds Rate by
0.25% two additional times in August and November. The target Federal Funds Rate
was 5.50% at the end of the reporting period and there was a widespread
expectation by most economists that the Fed may adopt further rate increases
during 2000.
This market overview has been provided by the portfolio management team.
7
<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.
8
<PAGE>
SCHWAB VALUE ADVANTAGE MONEY FUND-REGISTERED TRADEMARK-
YIELD SUMMARY AS OF 12/31/99(1)
<TABLE>
<S> <C>
- ------------------------------------------------------------------
Seven-Day Yield 5.63%
- ------------------------------------------------------------------
Seven-Day Effective Yield 5.79%
- ------------------------------------------------------------------
</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 offers the potential to earn higher yields
than many other money market funds. The fund is designed for cash reserves that
do not require frequent 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 effective yields for the fund and
for the average taxable money fund and shows that the fund consistently
outperformed the average taxable money fund during the reporting period.
PORTFOLIO COMPOSITION
The Schwab Value Advantage Money Fund invests in high-quality short-term money
market investments issued by U.S. and foreign issuers, such as commercial paper,
including asset-backed commercial paper, certificates of deposit, variable- and
floating-rate debt securities, bank notes and repurchase agreements. The chart
at right illustrates the composition of the fund's portfolio as of
December 31,1999 and is not indicative of its holdings after that date. A
complete list of the securities in the fund's portfolio as of December 31, 1999
is provided in the Schedule of Investments later in this report.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
SEVEN-DAY EFFECTIVE YIELDS: 1/1/99 THROUGH 12/31/99
SCHWAB VALUE IBC FINANCIAL DATA INC.'S
ADVANTAGE MONEY FUND MONEY FUND AVERAGE(2)
<S> <C> <C>
1/8 5.08 4.66
1/15 5.04 4.57
1/22 5.02 4.54
1/29 4.99 4.46
2/5 4.95 4.44
2/12 4.88 4.41
2/19 4.85 4.37
2/26 4.81 4.35
3/5 4.79 4.37
3/12 4.78 4.34
3/19 4.77 4.33
3/26 4.74 4.31
4/2 4.73 4.32
4/9 4.73 4.35
4/16 4.73 4.30
4/23 4.72 4.30
4/30 4.71 4.29
5/7 4.72 4.31
5/14 4.72 4.28
5/21 4.72 4.28
5/28 4.71 4.27
6/4 4.72 4.31
6/11 4.73 4.30
6/18 4.74 4.31
6/25 4.74 4.31
7/2 4.76 4.36
7/9 4.79 4.41
7/16 4.80 4.43
7/23 4.82 4.46
7/30 4.85 4.48
8/6 4.87 4.50
8/13 4.91 4.51
8/20 4.96 4.56
8/27 4.99 4.58
9/30 5.04 4.65
9/10 5.08 4.68
9/17 5.12 4.70
9/24 5.16 4.74
10/1 5.19 4.76
10/8 5.21 4.78
10/15 5.25 4.81
10/22 5.29 4.84
10/29 5.36 4.87
11/5 5.40 4.91
11/12 5.43 4.92
11/19 5.46 4.98
11/26 5.48 5.03
12/3 5.51 5.10
12/10 5.59 5.12
12/17 5.64 5.19
12/24 5.70 5.25
12/31 5.78 5.29
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
PORTFOLIO COMPOSITION AS A PERCENTAGE
OF FUND INVESTMENTS
as of 12/31/99
<S> <C>
Bank Notes 0.7%
Commercial Paper and Other Corporate Obligations 64.9%
Repurchase Agreements 1.3%
Certificates of Deposit 25.1%
Variable Rate Obligations 8.0%
</TABLE>
(1) A portion of the fund's expenses was reduced during the reporting period.
Without this reduction, as of 12/31/99, the seven-day and the seven-day
effective yields for the fund would have been 5.44% and 5.59%, respectively.
(2) Source: IBC Financial Data, Inc. Average seven-day effective yield of funds
in the first-tier category of taxable money funds for each week in the year
ended 12/31/99. The weekly number of funds in the category ranged from 278
to 306.
9
<PAGE>
FUND DISCUSSION
QUESTIONS TO THE
PORTFOLIO MANAGEMENT TEAM
Q. CAN YOU DESCRIBE THE SHORT-TERM INTEREST
RATE ENVIRONMENT DURING THE ONE-YEAR
REPORTING PERIOD?
A. Short-term interest rates remained relatively stable during the first half of
the reporting period as the economy demonstrated continued signs of growth.
However, the April Consumer Price Index (CPI) report, which was unexpectedly
high, renewed inflation fears and increased the possibility of potential action
by the Federal Reserve (Fed). In May, the Fed gave its first indication that
they were concerned about building inflationary pressure by adopting a
"tightening" bias, causing short-term rates to edge upward toward the end of the
first half of the reporting period.
The Fed maintained its vigilant stance as the economy continued to grow at a
robust pace and the labor markets remained very tight. Concerned that
inflationary imbalances could undermine the favorable performance of the
economy, the Fed took steps to slow growth by raising short-term interest rates
by 0.25% on June 30th. This rate increase was followed by two additional
increases, each 0.25%, in August and November, which left the Federal Funds Rate
at 5.50% as of the end of the reporting period.
During much of the year there was a great deal of concern about the potential
effect of Y2K on short-term interest rates. These concerns were largely
controlled by the Fed's willingness to provide liquidity and the positive
reports about Y2K preparations. As a result there was very little pressure on
short-term rates as the reporting period ended.
Q. HOW HAS THE PORTFOLIO MANAGEMENT TEAM ADJUSTED THE FUNDS' PORTFOLIOS IN
RESPONSE TO CHANGES IN INTEREST RATES?
A. During the reporting period our overall strategy for the funds was consistent
with our long-term strategy, which is to maintain a dollar-weighted average
maturity (DWAM) slightly longer than those of other funds with similar
investment objectives. This strategy had a beneficial impact on the fund's
yields throughout most of the period.
During the first quarter of 1999, based on our expectation that short-term rates
would remain relatively stable, we looked for opportunities to buy securities
with longer-dated maturities when they were available at attractive prices.
Beginning in May, the Fed took a more restrictive stance and we deviated from
this strategy somewhat by focusing on shorter-term securities while looking for
opportunities to purchase higher-yielding securities with longer maturities on a
selective basis.
10
<PAGE>
GLOSSARY OF TERMS
COMMERCIAL PAPER--Short-term 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 values 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--Generally, a security rated in the highest credit-rating
category by a requisite number of nationally recognized statistical rating
organizations, 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) is 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.
11
<PAGE>
PORTFOLIO HIGHLIGHTS
AVERAGE YIELDS FOR THE PERIOD ENDED 12/31/99(1)
<TABLE>
<S> <C>
- -------------------------------------------
Last seven days 5.63%
- -------------------------------------------
Last three months 5.34%
- -------------------------------------------
Last 12 months 4.90%
- -------------------------------------------
</TABLE>
MATURITY SCHEDULE: PERCENTAGE OF TOTAL INVESTMENTS
<TABLE>
<CAPTION>
MATURITY RANGE 3/31/99 6/30/99 9/30/99 12/31/99
<S> <C> <C> <C> <C>
- -------------------------------------------------------------
0-15 days 15.4% 21.2% 21.6% 12.7%
- -------------------------------------------------------------
16-30 days 11.6% 14.5% 16.7% 10.6%
- -------------------------------------------------------------
31-60 days 22.5% 24.8% 19.6% 33.6%
- -------------------------------------------------------------
61-90 days 22.3% 24.1% 16.6% 22.7%
- -------------------------------------------------------------
91-120 days 16.9% 1.7% 7.6% 8.1%
- -------------------------------------------------------------
More than 120 days 11.3% 13.7% 17.9% 12.3%
- -------------------------------------------------------------
Weighted average 72 days 68 days 66 days 68 days
- -------------------------------------------------------------
</TABLE>
PORTFOLIO QUALITY
<TABLE>
<CAPTION>
SEC TIER RATING PERCENTAGE OF TOTAL INVESTMENTS: 12/31/99
<S> <C>
- -----------------------------------------------------------------------------------
Tier 1 100.0%
- -----------------------------------------------------------------------------------
</TABLE>
(1) A portion of the Fund's expenses was reduced during these periods. Without
this reduction, yields would have been lower.
12
<PAGE>
SCHWAB VALUE ADVANTAGE MONEY FUND(REGISTRATION MARK)
SCHEDULE OF INVESTMENTS (IN THOUSANDS)
December 31, 1999
Par Value
-------- -----------
COMMERCIAL PAPER AND OTHER CORPORATE
OBLIGATIONS -- 64.6%
AUTOMOBILE RECEIVABLES -- 1.0% (f)
New Center Asset Trust Plus
5.93%, 02/09/00 $100,000 $ 99,367
5.93%, 02/11/00 75,000 74,501
6.15%, 03/16/00 100,000 98,738
-----------
272,606
-----------
AUTOMOTIVE -- 1.2%
Ford Motor Credit
6.23%, 03/09/00 147,000 145,293
General Motors Acceptance Corp.
5.97%, 02/09/00 100,000 99,363
5.93%, 02/14/00 85,000 84,393
-----------
329,049
-----------
BANKING - AUSTRALIA -- 0.3%
Westpac Capital Corp.
7.14%, 01/07/00 43,000 42,949
6.05%, 05/01/00 46,000 45,092
-----------
88,041
-----------
BANKING - BELGIUM -- 1.4% (a)
BBL North America
6.03%, 03/13/00 85,000 83,992
6.02%, 06/06/00 25,000 24,363
Fortis Funding L.L.C
6.03%, 01/10/00 17,613 17,587
6.09%, 02/29/00 78,000 77,239
5.92%, 04/17/00 20,000 19,657
6.05%, 05/03/00 50,000 48,996
5.90%, 05/16/00 50,000 48,917
5.93%, 05/17/00 46,000 44,992
-----------
365,743
-----------
BANKING - CANADA -- 0.2%
Bank of Nova Scotia
6.02%, 03/06/00 50,000 49,465
-----------
BANKING - DENMARK -- 0.6%
Den Danske Corp.
5.96%, 02/28/00 20,000 19,811
6.05%, 04/28/00 28,000 27,461
6.04%, 06/15/00 43,000 41,838
Unifunding, Inc.
6.00%, 02/04/00 65,000 64,637
----------
153,747
-----------
Par Value
-------- -----------
BANKING - DOMESTIC -- 3.7%
Bank One Corp.
5.92%, 04/11/00 $ 50,000 $ 49,191
6.00%, 05/08/00 20,000 19,586
Citibank Capital Market Assets,
L.L.C. (a) (e)
5.97%, 02/17/00 24,000 23,819
6.00%, 02/29/00 30,000 29,713
Citicorp
5.96%, 02/02/00 30,000 29,845
6.31%, 02/18/00 75,000 74,376
Enterprise Funding Corp. (a) (e)
6.14%, 02/02/00 30,332 30,169
6.02%, 02/15/00 16,045 15,927
6.10%, 03/14/00 30,147 29,780
Forrestal Funding Master Trust (a) (e)
5.96%, 02/09/00 50,000 49,686
5.97%, 02/23/00 50,000 49,574
6.05%, 02/29/00 53,135 52,621
6.00%, 03/10/00 21,000 20,766
6.02%, 03/13/00 43,000 42,497
6.04%, 03/23/00 8,000 7,892
5.95%, 04/24/00 25,000 24,541
Intrepid Funding Master Trust (a) (e)
5.97%, 02/03/00 30,696 30,530
6.02%, 02/09/00 49,000 48,687
5.97%, 03/07/00 30,527 30,198
5.98%, 03/24/00 171,946 169,625
Kitty Hawk Funding Corp. (a) (e)
6.04%, 01/03/00 20,824 20,817
6.04%, 01/28/00 50,000 49,776
6.35%, 02/09/00 30,793 30,583
6.00%, 03/20/00 41,000 40,476
6.03%, 06/01/00 16,060 15,663
Vehicle Services of America (e)
6.51%, 02/10/00 27,000 26,807
-----------
1,013,145
-----------
BANKING - GERMANY -- 1.3% (e)
Bavaria TRR Corp. (a)
6.05%, 03/02/00 32,000 31,677
6.10%, 03/23/00 70,000 69,053
6.10%, 03/27/00 36,000 35,490
6.11%, 03/27/00 21,000 20,702
6.13%, 03/31/00 10,000 9,851
13
<PAGE>
SCHWAB VALUE ADVANTAGE MONEY FUND(REGISTRATION MARK)
SCHEDULE OF INVESTMENTS (IN THOUSANDS) (CONTINUED)
December 31, 1999
Par Value
-------- -----------
Comision Federal de Electricidad
6.00%, 03/27/00 $ 10,000 $ 9,861
Giro US Funding Corp. (a)
6.04%, 01/03/00 17,000 16,994
6.07%, 01/10/00 20,000 19,970
6.21%, 01/18/00 7,247 7,226
5.78%, 02/03/00 15,000 14,923
6.10%, 02/10/00 37,153 36,906
6.18%, 02/22/00 54,000 53,527
6.12%, 03/15/00 10,303 10,177
5.97%, 04/25/00 6,931 6,802
-----------
343,159
-----------
BANKING - NETHERLANDS -- 5.2%
ABN-AMRO North America
Finance, Inc.
5.96%, 02/29/00 165,000 163,412
Atlantis One Funding Corp. (e)
5.61%, 01/20/00 112,600 112,276
5.66%, 01/26/00 66,813 66,558
6.01%, 01/28/00 199,000 198,121
6.03%, 01/28/00 30,000 29,867
5.78%, 02/04/00 40,605 40,390
5.60%, 02/07/00 75,958 75,534
5.68%, 02/07/00 60,000 59,660
5.93%, 02/08/00 140,000 139,147
5.90%, 02/10/00 92,000 91,414
5.93%, 02/10/00 153,334 152,351
5.95%, 02/16/00 217,568 215,960
6.03%, 02/18/00 25,000 24,804
5.97%, 02/22/00 5,000 4,958
Tulip Funding Corp. (a)
6.06%, 01/21/00 48,983 48,820
-----------
1,423,272
-----------
BANKING - NORWAY -- 0.3% (a)
Christiania Capital Corp.
6.08%, 02/04/00 80,000 79,547
-----------
BANKING - SPAIN -- 0.2%
Santander Finance (Delaware), Inc.
5.96%, 02/23/00 50,000 49,568
-----------
Par Value
-------- -----------
BANKING - SWEDEN -- 1.7%
AB Spintab
6.00%, 02/29/00 $ 82,000 $ 81,206
6.06%, 03/01/00 45,000 44,554
6.00%, 03/02/00 50,000 49,499
6.04%, 03/06/00 100,000 98,926
6.04%, 03/07/00 30,000 29,673
Forenings Sparbanken AB (Swedbank)
5.93%, 02/10/00 75,000 74,512
Swedbank, Inc.
6.10%, 03/22/00 76,000 74,983
-----------
453,353
-----------
BANKING - SWITZERLAND -- 0.2% (a)
Credit Suisse First Boston, Inc.
5.78%, 02/08/00 50,000 49,704
-----------
BANKING - UNITED KINGDOM -- 0.5%
Abbey National Treasury Services PLC
5.20%, 05/04/00 92,000 91,979
Repeat Offering Securitzation
Entity, Inc. (a) (e)
6.02%, 02/28/00 56,882 56,338
-----------
148,317
-----------
CREDIT CARD RECEIVABLES -- 2.3% (a) (f)
Dakota Certificates Program SCCMT-1
6.92%, 01/06/00 36,000 35,965
6.07%, 01/11/00 100,000 99,833
6.08%, 01/12/00 95,000 94,825
6.11%, 02/25/00 50,000 49,539
6.06%, 03/07/00 105,000 103,851
6.06%, 03/10/00 35,000 34,600
Montauk Funding Corp.
7.03%, 01/12/00 28,930 28,868
7.04%, 01/18/00 47,000 46,845
6.55%, 02/03/00 100,000 99,404
5.98%, 02/09/00 7,600 7,551
6.13%, 02/25/00 10,000 9,908
Providian Master Trust Series 1993-3
6.08%, 02/07/00 12,000 11,926
6.01%, 02/17/00 15,352 15,234
-----------
638,349
-----------
14
<PAGE>
Par Value
-------- -----------
DIVERSIFIED FINANCIAL ASSETS -- 18.3% (a) (f)
Amsterdam Funding Corp.
6.13%, 01/04/00 $ 50,000 $ 49,975
6.26%, 01/04/00 32,000 31,983
6.02%, 01/11/00 70,000 69,885
6.06%, 01/12/00 1,800 1,797
5.62%, 01/20/00 75,000 74,784
6.01%, 02/04/00 54,118 53,817
Bavaria Universal Funding Corp.
5.91%, 01/20/00 13,000 12,961
6.00%, 03/27/00 15,600 15,383
Beta Finance, Inc.
6.09%, 03/14/00 22,489 22,219
6.00%, 03/28/00 10,000 9,860
6.00%, 04/14/00 45,000 44,246
6.07%, 04/14/00 50,000 49,150
5.25%, 05/11/00 75,000 75,000
5.55%, 06/09/00 45,000 44,998
CC (USA), Inc.
5.13%, 01/11/00 50,000 50,000
5.99%, 03/03/00 35,500 35,145
6.00%, 03/14/00 185,000 182,816
6.00%, 03/20/00 100,000 98,723
6.00%, 03/31/00 11,000 10,840
Concord Minutemen Capital Co.,
LLC Series A
5.66%, 01/21/00 25,000 24,924
6.25%, 01/27/00 93,000 92,587
6.00%, 01/31/00 50,000 49,756
5.98%, 02/09/00 100,000 99,371
5.99%, 02/11/00 75,000 74,502
5.94%, 02/15/00 11,000 10,921
5.99%, 02/18/00 14,000 13,892
6.02%, 02/22/00 126,000 124,932
6.00%, 02/24/00 42,231 41,861
6.10%, 03/17/00 10,000 9,875
Dorada Finance, Inc.
5.91%, 02/15/00 42,000 41,699
6.00%, 04/10/00 80,000 78,710
6.00%, 04/14/00 15,000 14,749
Greenwich Funding Corp.
6.00%, 01/28/00 49,900 49,678
6.31%, 02/16/00 157,600 156,341
6.09%, 03/15/00 73,256 72,352
Par Value
-------- -----------
Greyhawk Funding, LLC
6.00%, 01/25/00 $ 11,000 $ 10,957
6.06%, 03/01/00 75,000 74,252
6.23%, 03/02/00 165,000 163,281
6.07%, 03/08/00 25,000 24,722
6.08%, 03/09/00 54,000 53,389
International Securitization Corp.
6.20%, 01/18/00 24,000 23,931
6.25%, 01/19/00 7,000 6,978
6.23%, 01/20/00 50,000 49,838
6.23%, 01/25/00 50,000 49,796
5.93%, 01/27/00 50,000 49,792
6.00%, 01/27/00 33,000 32,860
6.10%, 02/02/00 25,085 24,952
6.02%, 02/24/00 22,000 21,806
6.03%, 02/25/00 50,110 49,660
6.16%, 04/24/00 12,000 11,773
6.15%, 04/28/00 15,000 14,707
Lexington Parker Capital Corp.
5.66%, 01/25/00 89,000 88,674
5.60%, 02/02/00 90,000 89,565
5.60%, 02/08/00 30,000 29,828
5.98%, 02/09/00 2,000 1,987
5.98%, 02/16/00 120,000 119,109
6.05%, 03/03/00 55,000 54,435
6.07%, 03/03/00 20,000 19,794
Market Street Funding Corp.
6.06%, 02/02/00 168,000 167,108
6.14%, 02/03/00 60,961 60,623
6.02%, 02/11/00 76,000 75,491
Mont Blanc Capital Corp.
5.98%, 02/17/00 50,000 49,616
6.02%, 02/25/00 29,715 29,446
Moriarty LLC
6.25%, 01/24/00 8,000 7,969
5.97%, 02/15/00 50,000 49,632
5.97%, 02/17/00 88,000 87,324
6.09%, 03/10/00 100,000 98,850
Quincy Capital Corp.
6.74%, 01/13/00 48,000 47,893
6.16%, 02/03/00 75,346 74,927
6.46%, 02/03/00 20,163 20,045
6.13%, 02/07/00 64,122 63,726
5.95%, 02/15/00 39,000 38,715
15
<PAGE>
SCHWAB VALUE ADVANTAGE MONEY FUND(REGISTRATION MARK)
SCHEDULE OF INVESTMENTS (IN THOUSANDS) (CONTINUED)
December 31, 1999
Par Value
-------- -----------
Sigma Finance, Inc.
5.61%, 01/18/00 $ 15,000 $ 14,961
6.00%, 02/24/00 62,500 61,946
6.13%, 02/24/00 75,000 74,325
6.02%, 03/01/00 50,000 49,506
6.05%, 03/02/00 53,000 52,465
6.05%, 03/06/00 84,200 83,294
6.05%, 03/08/00 21,000 20,767
6.06%, 03/08/00 50,000 49,444
6.06%, 03/22/00 74,000 73,008
6.08%, 04/10/00 100,000 98,362
6.08%, 04/14/00 25,000 24,570
6.11%, 04/14/00 40,000 39,316
6.11%, 04/25/00 75,000 73,582
6.15%, 04/25/00 29,500 28,938
5.93%, 05/15/00 32,500 31,799
5.95%, 05/30/00 50,000 48,799
6.10%, 06/15/00 79,000 76,845
6.31%, 11/01/00 50,000 50,000
Stellar Funding Group, Inc.
6.53%, 01/13/00 10,000 9,978
6.25%, 01/27/00 8,900 8,860
6.13%, 02/10/00 13,000 12,913
6.03%, 02/15/00 13,000 12,904
6.04%, 02/22/00 20,000 19,830
6.18%, 02/25/00 21,000 20,806
6.03%, 02/28/00 7,192 7,124
6.01%, 02/29/00 10,000 9,903
6.03%, 03/23/00 9,289 9,165
Variable Funding Capital Corp.
5.91%, 01/06/00 25,000 24,980
6.03%, 01/06/00 37,000 36,970
6.02%, 01/07/00 50,000 49,951
-----------
5,002,494
-----------
FINANCE - COMMERCIAL -- 5.5%
CIT Group Holdings, Inc.
5.96%, 02/15/00 100,000 99,266
5.95%, 02/17/00 81,000 80,380
Concord Minutemen Capital Co.,
L.L.C. Series B (a)
5.78%, 02/09/00 30,000 29,818
6.04%, 02/16/00 18,000 17,863
6.12%, 02/17/00 50,000 49,609
General Electric Capital Corp.
5.97%, 02/10/00 32,000 31,791
6.02%, 03/08/00 50,000 49,448
6.05%, 03/08/00 110,000 108,788
6.17%, 03/08/00 205,000 202,677
Par Value
-------- -----------
General Electric Capital
International Funding, Inc. (a)
6.02%, 03/09/00 $105,892 $ 104,706
6.12%, 03/14/00 232,000 229,191
6.12%, 03/16/00 150,000 148,134
6.10%, 03/17/00 155,000 153,053
General Electric Capital Services
6.10%, 02/23/00 50,000 49,560
6.05%, 03/13/00 50,000 49,408
Heller Financial, Inc.
6.30%, 01/18/00 24,000 23,930
6.08%, 02/14/00 56,000 55,591
6.15%, 03/13/00 20,000 19,758
-----------
1,502,971
-----------
FINANCE - CONSUMER -- 0.5%
Associates First Capital B.V
5.95%, 02/17/00 18,000 17,862
5.95%, 02/18/00 40,000 39,688
5.95%, 03/02/00 50,000 49,504
6.04%, 03/03/00 25,000 24,744
-----------
131,798
-----------
SECURITIES BROKERAGE - DEALER -- 8.8%
Bear Stearns Companies, Inc.
6.00%, 01/24/00 58,000 57,783
5.95%, 02/03/00 50,000 49,735
6.11%, 02/09/00 65,000 64,579
6.11%, 02/11/00 105,000 104,285
Goldman Sachs Group
5.84%, 02/10/00 55,000 54,654
6.09%, 02/23/00 200,000 198,245
6.08%, 02/24/00 65,000 64,415
6.09%, 02/24/00 117,000 115,954
6.23%, 03/29/00 22,000 21,671
6.25%, 04/27/00 50,000 49,004
6.00%, 08/07/00 100,000 99,998
JP Morgan & Co.
5.46%, 01/21/00 100,000 99,706
5.92%, 02/17/00 76,000 75,422
6.00%, 03/10/00 140,000 138,417
5.90%, 05/17/00 68,000 66,517
Lehman Brothers Holdings, Inc.
6.32%, 04/03/00 100,000 98,396
Merrill Lynch & Co., Inc.
6.03%, 03/15/00 55,000 54,330
6.02%, 06/12/00 95,000 92,492
16
<PAGE>
Par Value
-------- -----------
Morgan Stanley Dean Witter
Discover & Co.
5.61%, 01/19/00 $250,000 $ 249,319
6.12%, 02/04/00 170,000 169,034
6.11%, 02/07/00 50,000 49,691
6.11%, 02/08/00 145,000 144,081
6.12%, 02/09/00 73,000 72,525
6.14%, 03/13/00 7,000 6,915
Salomon Smith Barney Holdings, Inc.
5.78%, 02/10/00 13,000 12,919
6.02%, 03/06/00 100,000 98,928
6.02%, 03/07/00 100,000 98,912
-----------
2,407,927
-----------
TRADE RECEIVABLES -- 11.4% (a) (f)
Apreco, Inc.
6.10%, 02/07/00 12,000 11,926
6.13%, 02/07/00 50,000 49,691
6.11%, 02/08/00 75,000 74,526
6.10%, 02/17/00 50,000 49,610
6.15%, 03/15/00 35,000 34,564
Barton Capital Corp.
6.44%, 01/13/00 81,000 80,827
6.09%, 02/04/00 34,775 34,579
6.00%, 02/10/00 21,901 21,758
6.12%, 02/10/00 22,283 22,135
6.03%, 02/16/00 46,027 45,680
Corporate Asset Funding Co., Inc.
5.94%, 02/15/00 25,000 24,817
Corporate Receivables Corp.
6.15%, 02/15/00 70,000 69,472
CXC, Inc.
5.97%, 02/14/00 20,000 19,856
5.99%, 02/17/00 53,000 52,592
Edison Asset Securitization Corp., L.L.C.
6.14%, 02/08/00 50,000 49,682
6.11%, 02/11/00 87,000 86,408
6.12%, 03/08/00 65,000 64,276
6.12%, 03/09/00 138,000 136,440
6.01%, 03/10/00 78,609 77,728
6.12%, 03/10/00 100,000 98,854
Eureka Securitization, Inc.
6.13%, 02/08/00 32,000 31,797
6.13%, 02/25/00 50,000 49,542
Falcon Asset Securitization Corp.
6.82%, 01/06/00 43,000 42,959
6.92%, 01/07/00 50,000 49,943
6.06%, 01/11/00 10,000 9,983
Par Value
-------- -----------
6.73%, 01/11/00 $ 94,000 $ 93,825
6.06%, 01/13/00 80,000 79,840
5.98%, 02/18/00 57,000 56,552
Monte Rosa Capital Corp.
6.00%, 01/27/00 163,147 162,456
6.00%, 01/28/00 25,000 24,890
6.00%, 02/04/00 40,919 40,692
6.01%, 02/11/00 50,000 49,666
6.02%, 02/24/00 14,922 14,790
6.00%, 02/28/00 67,662 67,025
6.00%, 03/15/00 39,214 38,741
Preferred Receivables Funding Corp.
6.06%, 01/13/00 50,000 49,900
6.01%, 05/25/00 10,000 9,765
Receivables Capital Corp.
6.15%, 02/11/00 40,000 39,725
6.02%, 02/15/00 43,000 42,684
Sheffield Receivables Corp.
6.20%, 01/25/00 163,000 162,337
6.17%, 01/26/00 38,300 38,139
6.21%, 01/26/00 230,000 229,025
6.19%, 01/27/00 32,000 31,860
6.21%, 01/28/00 50,000 49,771
6.02%, 02/01/00 16,860 16,774
6.14%, 02/25/00 151,200 149,814
WCP Funding, Inc.
6.00%, 02/07/00 50,000 49,696
6.00%, 02/11/00 45,000 44,697
5.99%, 02/17/00 100,000 99,230
6.10%, 02/17/00 10,000 9,922
Windmill Funding
5.93%, 01/14/00 35,000 34,927
6.10%, 02/03/00 119,578 118,921
6.09%, 03/07/00 20,000 19,780
-----------
3,115,089
-----------
TOTAL COMMERCIAL PAPER AND OTHER
CORPORATE OBLIGATIONS
(Cost $17,617,344) 17,617,344
-----------
CERTIFICATES OF DEPOSIT -- 25.0%
BANKING - AUSTRALIA -- 0.4%
National Australia Bank, Ltd.
6.02%, 06/14/00 100,000 100,002
-----------
17
<PAGE>
SCHWAB VALUE ADVANTAGE MONEY FUND(REGISTRATION MARK)
SCHEDULE OF INVESTMENTS (IN THOUSANDS) (CONTINUED)
December 31, 1999
Par Value
-------- -----------
BANKING - BELGIUM -- 2.6%
Banque Bruxelles Lambert
5.92%, 02/08/00 $ 50,000 $ 50,005
Credit Communal de Belgique
6.27%, 01/03/00 50,000 50,000
6.02%, 03/01/00 100,000 100,000
6.02%, 03/02/00 175,000 175,000
5.20%, 04/06/00 100,000 99,987
5.10%, 04/13/00 100,000 99,987
5.13%, 04/17/00 100,000 99,986
6.02%, 06/09/00 35,000 35,000
-----------
709,965
-----------
BANKING - CANADA -- 3.9%
Bank of Montreal
5.13%, 04/17/00 50,000 49,994
5.20%, 04/17/00 40,000 39,986
Bank of Nova Scotia
6.27%, 01/03/00 50,000 50,000
6.00%, 02/01/00 110,000 110,000
6.00%, 02/28/00 85,000 85,000
6.02%, 06/23/00 30,000 30,018
Canadian Imperial Bank of Commerce
5.05%, 02/07/00 45,000 44,998
5.35%, 03/03/00 25,000 24,997
5.20%, 04/04/00 100,000 99,988
5.10%, 04/12/00 87,000 86,995
5.45%, 06/01/00 45,000 44,991
National Bank of Canada
6.12%, 04/28/00 25,000 24,913
6.05%, 07/05/00 100,000 100,000
Royal Bank of Canada
5.06%, 02/08/00 25,000 24,999
5.75%, 07/03/00 52,500 52,487
Toronto-Dominion Bank
5.10%, 02/10/00 50,000 49,998
5.15%, 02/18/00 100,000 99,996
5.20%, 04/03/00 50,000 49,994
-----------
1,069,354
-----------
BANKING - DOMESTIC -- 2.0%
American Express Centurion Bank
5.93%, 02/08/00 10,000 10,000
6.20%, 03/21/00 30,000 30,000
6.00%, 03/30/00 130,000 130,000
First Tennessee Bank N.A.
5.85%, 02/28/00 50,000 50,000
Par Value
-------- -----------
Southtrust Bank N.A.
5.96%, 02/15/00 $ 50,000 $ 50,000
5.95%, 02/16/00 15,000 15,000
Union Bank of California
6.03%, 02/14/00 126,000 126,000
Wilmington Trust Co.
6.12%, 04/20/00 50,000 49,999
6.12%, 04/26/00 50,000 50,000
5.95%, 05/08/00 40,000 40,000
-----------
550,999
-----------
BANKING - FINLAND -- 0.3%
Merita Bank Ltd.
6.10%, 02/07/00 78,000 78,000
-----------
BANKING - FRANCE -- 2.1%
Banque Nationale de Paris
6.00%, 01/18/00 35,000 35,002
6.00%, 03/03/00 64,000 64,001
6.00%, 06/02/00 50,000 50,000
Societe Generale
5.85%, 03/30/00 50,000 50,000
5.85%, 03/31/00 195,000 195,000
5.85%, 04/03/00 118,000 118,000
5.93%, 04/03/00 50,000 50,000
-----------
562,003
-----------
BANKING - GERMANY -- 6.1%
Bayerische HypoVereinsbank AG
6.02%, 03/03/00 100,000 100,000
Bayerische Landesbank Girozentrale
6.02%, 03/07/00 50,000 50,000
6.00%, 06/02/00 25,000 25,000
6.02%, 06/13/00 25,000 25,000
Commerzbank, AG
5.90%, 05/22/00 25,000 24,930
Deutsche Bank AG
6.02%, 01/14/00 125,000 125,000
5.80%, 04/04/00 40,000 40,000
6.00%, 06/02/00 145,000 145,000
6.14%, 10/18/00 25,000 25,009
6.26%, 10/18/00 100,000 99,954
6.21%, 11/29/00 100,000 99,939
Landesbank Hessen-Thuringen
Girozentrale
5.20%, 04/26/00 50,000 49,988
Norddeutsche Landesbank Girozentrale
6.01%, 01/14/00 100,000 100,000
18
<PAGE>
Par Value
-------- -----------
Westdeutsche Landesbank Girozentrale
5.95%, 02/01/00 $ 57,000 $ 57,000
6.00%, 03/01/00 46,000 46,000
6.16%, 03/23/00 60,000 60,000
6.15%, 03/28/00 104,000 104,000
6.18%, 03/28/00 150,000 150,000
6.15%, 03/29/00 100,000 100,000
6.18%, 03/29/00 167,000 167,000
6.03%, 06/06/00 61,000 61,000
-----------
1,654,820
-----------
BANKING - NETHERLANDS -- 0.4%
ING Bank NV
5.93%, 02/15/00 100,000 100,000
6.00%, 06/21/00 25,000 25,005
-----------
125,005
-----------
BANKING - NORWAY -- 0.4%
Christiania Bank
6.14%, 02/02/00 100,000 100,000
-----------
BANKING - SWEDEN -- 0.6%
Svenska Handelsbanken
6.04%, 01/18/00 50,000 50,001
6.00%, 03/02/00 50,000 50,000
6.03%, 03/10/00 25,000 24,991
6.04%, 06/19/00 31,100 31,018
-----------
156,010
-----------
BANKING - SWITZERLAND -- 3.7%
Credit Suisse First Boston
6.15%, 07/03/00 75,000 74,771
UBS AG
5.05%, 01/13/00 100,000 100,001
5.11%, 01/13/00 50,000 49,999
5.20%, 02/28/00 100,000 99,994
5.35%, 03/01/00 25,000 24,997
5.10%, 04/12/00 71,000 70,996
5.26%, 05/10/00 100,000 99,983
5.40%, 05/31/00 50,000 49,991
5.45%, 06/01/00 50,000 49,991
5.70%, 06/27/00 25,000 24,995
5.80%, 07/05/00 25,000 24,995
6.15%, 11/20/00 250,000 249,852
6.30%, 12/11/00 100,000 99,923
-----------
1,020,488
-----------
Par Value
---------- ----------
BANKING - UNITED KINGDOM -- 2.5%
Bank of Scotland Treasury Services PLC
5.94%, 03/31/00 $ 60,000 $ 60,001
6.02%, 06/07/00 100,000 100,002
6.02%, 06/08/00 150,000 150,003
6.02%, 06/12/00 40,000 40,000
Barclays Bank PLC
5.04%, 01/12/00 100,000 99,999
5.35%, 05/22/00 40,000 40,000
5.66%, 06/14/00 25,000 24,995
5.85%, 08/01/00 100,000 100,000
National Westminster Bank PLC
5.06%, 01/10/00 24,500 24,500
Royal Bank of Scotland
5.93%, 02/18/00 50,000 50,000
-----------
689,500
-----------
TOTAL CERTIFICATES OF DEPOSIT
(Cost $6,816,146) 6,816,146
-----------
VARIABLE RATE OBLIGATIONS -- 8.0% (b)
AUTOMOTIVE -- 0.3%
Ford Motor Credit
6.10%, 02/18/00 90,000 89,953
-----------
BANKING - CANADA -- 0.2%
City of New Britain,
Connecticut GO Pension Bonds
5.70%, 01/07/00 40,000 40,000
-----------
BANKING - DOMESTIC -- 0.2% (e)
Active Living of Glenview,
L.L.C. Senior Floating Rate Note
Series 1998 (a)
6.05%, 01/07/00 11,000 11,000
Baptist Health Systems of South
Florida, Inc. Series 1995A
6.40%, 01/07/00 6,375 6,375
Baptist Health Systems of South
Florida, Inc. Series 1995B
6.40%, 01/07/00 4,500 4,500
BMC Special Care Facilities
Financing Authority of the City
of Montgomery, Alabama Taxable RB
(Montgomery Baptist Outreach
Services Corp. Project) Series 1997A
5.85%, 01/07/00 8,600 8,600
19
<PAGE>
SCHWAB VALUE ADVANTAGE MONEY FUND(REGISTRATION MARK)
SCHEDULE OF INVESTMENTS (IN THOUSANDS) (CONTINUED)
December 31, 1999
Par Value
-------- -----------
Columbus, Georgia Development
Authority Taxable RB (Jay Leasing,
Inc. Project) Series 1997
5.85%, 01/07/00 $ 7,400 $ 7,400
Fillmore Public Financing Authority
VRD Tax Allocation Bond (Fillmore
Redevelopment Agency Central City
Redevelopment Project Area)
Series 1998A
5.85%, 01/07/00 10,120 10,120
MoviePlex Realty Leasing, L.L.C.
Adjustable Rate Tender Securities
(Carmike Cinemas Inc.) Series 1997
B-1
6.46%, 01/07/00 7,625 7,625
New Jersey Economic Development
Authority Adjustable Rate Title IX
Loan Portfolio Securitization Bonds
Series 1995
6.43%, 01/03/00 12,700 12,700
Town of Islip IDA 1992 Taxable
Adjustable Rate IDRB (Nussdorf
Associates/Quality King Distributors,
Inc. Facility) (a)
5.73%, 01/07/00 5,215 5,215
-----------
73,535
-----------
BANKING - GERMANY -- 0.7%
City of Santa Rosa VRD Wastewater
Series 1998A (e)
6.50%, 01/07/00 17,800 17,800
Deutsche Bank AG
6.59%, 01/18/00 165,000 165,000
-----------
182,800
-----------
BANKING - NETHERLANDS -- 0.4%
Restructured Assets Certificates with
Enhanced Returns Notes
Series 1999-25-MM-MBS (d) (e)
6.56%, 01/06/00 100,000 100,000
Special Care Facilities Financing Authority
of The City of Daphne (Presbyterian
Retirement Corp., Inc.) Series 1998B
5.85%, 01/07/00 6,850 6,850
-----------
106,850
-----------
Par Value
-------- -----------
BANKING - SWITZERLAND -- 0.4% (d)
Structured Products Asset Return
Certificates Series 1999-4
6.32%, 01/24/00 $100,000 $ 100,000
-----------
BANKING - UNITED KINGDOM & GERMANY -- 0.0% (e)
County of Riverside 1990 Taxable COP
(Monterey Avenue Project)
6.00%, 01/07/00 7,800 7,800
-----------
DIVERSIFIED FINANCIAL ASSETS -- 1.7% (a) (f)
Lexington Parker Capital Corp.
6.53%, 01/25/00 29,000 29,000
Short-Term Repackaged Asset Trust
Series 1998E
6.56%, 01/18/00 50,000 50,000
Short-Term Repackaged Asset Trust
Series 1999C
6.52%, 01/13/00 12,400 12,400
Sigma Finance, Inc.
6.24%, 3/15/00 50,000 49,997
6.24%, 3/22/00 30,000 29,998
Variable Funding Capital Corp.
6.56%, 01/14/00 195,000 195,000
6.56%, 01/18/00 100,000 100,000
-----------
466,395
-----------
ELECTRICAL & ELECTRONICS -- 0.2% (a)(e)
New Jersey Economic Development
Authority Taxable Economic
Development Bonds (MSNBC CNBC
Project) Series 1997A
5.90%, 01/03/00 40,900 40,900
-----------
LIFE & HEALTH INSURANCE -- 1.3%
Monumental Life Insurance Co. (d)
5.78%, 01/01/00 100,000 100,000
6.56%, 01/01/00 10,000 10,000
6.68%, 01/03/00 100,000 100,000
Transamerica Life Insurance
and Annuity Co. (a)
6.48%, 01/03/00 75,000 75,000
Travelers Insurance Co. (d)
6.49%, 01/01/00 75,000 75,000
-----------
360,000
-----------
20
<PAGE>
Par Value
-------- -----------
SECURITIES BROKERAGE - DEALER -- 2.0%
Lehman Commercial Paper, Inc. (d)
6.73%, 01/03/00 $400,000 $ 400,000
Morgan Stanley Dean Witter & Co.
6.51%, 01/14/00 155,000 155,000
-----------
555,000
-----------
TRADE RECEIVABLES -- 0.6% (a) (f)
Asset Securitization Cooperative Corp.
6.59%, 01/31/00 50,000 50,000
Park Avenue Receivables Corp.
6.51%, 01/13/00 100,000 100,000
-----------
150,000
-----------
TOTAL VARIABLE RATE OBLIGATIONS
(Cost $2,173,233) 2,173,233
-----------
BANK NOTES -- 0.7%
European American Bank
5.61%, 06/12/00 25,000 24,995
FCC National Bank
6.00%, 02/25/00 33,000 32,988
LaSalle National Bank
5.15%, 04/10/00 75,000 74,994
5.30%, 05/15/00 50,000 49,991
-----------
TOTAL BANK NOTES
(COST $182,968) 182,968
-----------
Maturity Value Value
--------------- ----------
REPURCHASE AGREEMENTS -- 1.3% (c)
Credit Suisse First Boston Corp.
Tri-Party Repurchase Agreement
Collateralized by U.S. Government
Securities
5.00% Issue 10/01/99
Due 01/03/00 $111,362 $ 111,316
5.00% Issue 12/15/99
Due 01/03/00 35,014 35,000
5.00% Issue 12/16/99
Due 01/03/00 103,728 103,684
5.00% Issue 12/31/99
Due 01/03/00 19,837 19,828
Salomon Smith Barney, Inc.
4.55% Issue 12/31/99
Due 01/03/00 100,038 100,000
-----------
TOTAL REPURCHASE AGREEMENTS
(Cost $369,828) 369,828
-----------
TOTAL INVESTMENTS -- 99.6%
(Cost $27,159,519) 27,159,519
-----------
OTHER ASSETS AND LIABILITIES-- 0.4%
Other assets 250,130
Liabilities (144,464)
-----------
105,666
-----------
TOTAL NET ASSETS-- 100.0% $27,265,185
===========
SEE ACCOMPANYING NOTES TO SCHEDULE OF INVESTMENTS AND NOTES TO FINANCIAL
STATEMENTS.
21
<PAGE>
NOTES TO SCHEDULE OF INVESTMENTS
December 31, 1999
(All dollar amounts are in thousands unless otherwise noted.)
Yields shown are effective yields at the time of purchase, except for variable
rate obligations, which are described below and U.S. government coupon notes and
U.S. 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) These securities can be resold to qualified institutional buyers within
seven business days. Such securities are deemed liquid in accordance with
procedures adopted by the Board of Trustees. At December 31, 1999, the
aggregate value of such securities held by the fund was $11,983,606 which
represented 43.95% of net assets.
(b) Variable rate obligations have interest rates that 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 seven days from issue date may be
subject to seven day putable demand features for liquidity purposes.
(d) These securities have legal or contractual restrictions on resale. Such
securities are deemed illiquid in accordance with procedures adopted by the
Board of Trustees. At December 31, 1999, the aggregate value of such
securities held by Schwab Value Advantage Fund was $885,000 which
represented 3.25% of the net assets of the fund.
(e) Security has one or more third party credit enhancements.
(f) Asset-backed securities are securities backed by underlying assets and
categorized by industry.
PORTFOLIO ABBREVIATIONS
COP Certificates of Participation
GO General Obligation
IDA Industrial Development Authority
IDRB Industrial Development Revenue Bond
RB Revenue Bond
VRD Variable Rate Demand
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
22
<PAGE>
SCHWAB VALUE ADVANTAGE MONEY FUND(REGISTRATION MARK)
STATEMENT OF ASSETS AND LIABILITIES (IN THOUSANDS)
December 31, 1999
ASSETS
Investments, at value (Cost: $27,159,519) $27,159,519
Receivables:
Interest 133,306
Fund shares sold 115,292
Prepaid expenses 1,532
-----------
Total assets 27,409,649
-----------
LIABILITIES
Payables:
Dividends 19,004
Fund shares redeemed 121,515
Investment advisory and administration fees 717
Transfer agency and shareholder service fees 1,317
Other liabilities 1,911
-----------
Total liabilities 144,464
-----------
Net assets applicable to outstanding shares $27,265,185
===========
NET ASSETS CONSIST OF
Paid-in capital $27,265,310
Accumulated net realized loss on investments sold (125)
-----------
$27,265,185
===========
PRICING OF SHARES
Outstanding shares, $0.00001 par value
(unlimited shares authorized) 27,265,419
Net asset value, offering and redemption
price per share $1.00
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
23
<PAGE>
SCHWAB VALUE ADVANTAGE MONEY FUND(REGISTRATION MARK)
STATEMENT OF OPERATIONS (IN THOUSANDS)
For the year ended December 31, 1999
Interest income $ 1,378,837
-----------
Expenses:
Investment advisory and administration fees 89,505
Transfer agency and shareholder service fees 64,922
Custodian and portfolio accounting fees 1,649
Registration fees 1,600
Professional fees 115
Shareholder reports 107
Trustees' fees 41
Other expenses 218
-----------
158,157
Less: expenses reduced (see Note 4) (54,235)
-----------
Net expenses incurred by fund 103,922
-----------
Net investment income 1,274,915
-----------
Increase in net assets resulting from operations $ 1,274,915
===========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
24
<PAGE>
SCHWAB VALUE ADVANTAGE MONEY FUND(REGISTRATION MARK)
STATEMENTS OF CHANGES IN NET ASSETS (IN THOUSANDS)
For the year ended December 31,
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
Operations:
Net investment income $ 1,274,915 $ 947,847
------------ ------------
Increase in net assets resulting from operations 1,274,915 947,847
------------ ------------
Dividends to shareholders from net investment income (see Note 2): (1,274,915) (947,956)
------------ ------------
Capital share transactions (at $1.00 per share):
Proceeds from shares sold 40,135,739 31,568,338
Net asset value of shares issued in reinvestment of dividends 1,322,147 849,749
Payments for shares redeemed (36,388,513) (23,884,351)
------------ ------------
Increase in net assets from capital share transactions 5,069,373 8,533,736
------------ ------------
Total increase in net assets 5,069,373 8,533,627
Net assets:
Beginning of period 22,195,812 13,662,185
------------ ------------
End of period $ 27,265,185 $ 22,195,812
============ ============
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
25
<PAGE>
SCHWAB VALUE ADVANTAGE MONEY FUND(REGISTRATION MARK)
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEAR ENDED 12/31 1999 1998 1997 1996 1995
PER SHARE DATA ($)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of period 1.00 1.00 1.00 1.00 1.00
------------------------------------------------------------------
From investment operations:
Net investment income 0.05 0.05 0.05 0.05 0.06
------------------------------------------------------------------
Total from investment operations 0.05 0.05 0.05 0.05 0.06
Less distributions:
Dividends from net investment income (0.05) (0.05) (0.05) (0.05) (0.06)
------------------------------------------------------------------
Total distributions (0.05) (0.05) (0.05) (0.05) (0.06)
------------------------------------------------------------------
NET ASSET VALUE AT END OF PERIOD 1.00 1.00 1.00 1.00 1.00
------------------------------------------------------------------
Total return (%) 5.01 5.35 5.40 5.26 5.80
RATIOS/SUPPLEMENTAL DATA (%)
- -----------------------------------------------------------------------------------------------------------------------
Ratio of net operating expenses to average net assets 0.40 0.40 0.40 0.40 0.40
Reductions reflected in above expense ratio 0.21 0.27 0.29 0.30 0.32
Ratio of net investment income to average net assets 4.91 5.21 5.28 5.14 5.63
Net assets, end of period ($ X 1,000) 27,265,185 22,195,812 13,662,185 10,476,537 6,923,890
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
26
<PAGE>
NOTES TO FINANCIAL STATEMENTS
For the year ended December 31, 1999
(All dollar amounts are in thousands unless otherwise noted)
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 (the "Act"), 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,(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. 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.
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 federal income tax purposes.
27
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
As of December 31, 1999, 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
12/31/02 2
12/31/03 122
----
Total capital loss carryforwards $125
====
3. TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY AND ADMINISTRATION AGREEMENT -- The fund has an investment
advisory and administration agreement with Charles Schwab Investment Management,
Inc. (the "investment adviser"). For advisory services and facilities furnished,
the fund pays an annual fee, payable monthly, of 0.38% on the first $1 billion
of average daily net assets, 0.35% on such net assets in excess of $1 billion to
$10 billion, 0.32% on such net assets in excess of $10 billion to $20 billion,
and 0.30% on such net assets in excess of $20 billion. Prior to April 30, 1999
the fund paid an annual fee, payable monthly, of 0.46% on the first $1 billion
of average daily net assets, 0.45% on the next $2 billion, 0.40% on the next $7
billion, 0.37% on the next $10 billion, and 0.34% on such net assets in excess
of $20 billion. The investment adviser has reduced a portion of its fee for the
year ended December 31, 1999 (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 0.05% of average daily net assets for transfer
agency services and 0.20% on such assets for shareholder services. In addition,
Schwab may charge a fee of five dollars for purchases and redemptions in amounts
less than five thousand dollars and may impose a five dollar 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 adviser and/or Schwab. During the
year ended December 31, 1999, the Trust made no direct payments to its officers
or trustees who are "interested persons" within the meaning of the Act, as
amended. The fund incurred fees of $41 related to the Trust's unaffiliated
trustees.
4. EXPENSES REDUCED BY THE INVESTMENT ADVISER AND SCHWAB
The investment adviser and Schwab guarantee that, through at least April 30,
2000, 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 year ended December 31, 1999, the total of such fees reduced by the
investment adviser was $54,235.
28
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees and Shareholders of
Schwab Value Advantage Money Fund
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 Schwab Value Advantage Money Fund
(one of the portfolios constituting The Charles Schwab Family of Funds,
hereafter referred to as the "Fund") at December 31, 1999, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the year then ended and the financial highlights for each of
the five years in the period then ended, in conformity with accounting
principles generally accepted in the United States. These financial statements
and financial highlights (hereafter referred to as "financial statements") are
the responsibility of the Fund'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 auditing standards
generally accepted in the United States, 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, 1999 by correspondence with the custodian, provide a reasonable basis for
the opinion expressed above.
PricewaterhouseCoopers LLP
San Francisco, California
February 4, 2000
29
<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 meet your investment
needs. You can diversify your portfolio in a single step with our asset
allocation funds. Or you can customize your portfolio with a combination of our
stock funds as well as our taxable and tax-advantaged bond and money market
funds.
Please call 800-435-4000 for a free prospectus and brochure for any of these
SchwabFunds.-Registered Trademark-
This report must be preceded or accompanied by a current prospectus.
METHODS FOR PLACING ORDERS
The information below outlines how Schwab brokerage account investors can place
orders. If you are investing through a third-party investment provider, methods
for placing orders may be different.
PHONE
Call 800-435-4000, day or night (for TDD service, call 800-345-2550).
INTERNET
www.schwab.com/schwabfunds
MAIL
Write to SchwabFunds at:
P. O. Box 7575, San Francisco, CA 94120-7575
When selling or exchanging shares, be sure to include the signatures of at least
one of the persons whose name is on the account.
IN PERSON
Visit the nearest Charles Schwab office.
SCHWAB ASSET ALLOCATION FUNDS
Schwab MarketTrack All Equity Portfolio
Schwab MarketTrack Growth Portfolio
Schwab MarketTrack Balanced Portfolio
Schwab MarketTrack Conservative Portfolio
Schwab MarketManager Growth Portfolio
Schwab MarketManager Balanced Portfolio
SCHWAB STOCK FUNDS
Schwab S&P 500-Registered Trademark- Fund
Schwab 1000 Fund-Registered Trademark-
Schwab Analytics Fund-Registered Trademark-
Schwab Small-Cap Index Fund-Registered Trademark-
Schwab MarketManager Small Cap Portfolio
Schwab International Index Fund-Registered Trademark-
Schwab MarketManager International Portfolio
Schwab Total Stock Market Index Fund-TM-
SCHWAB BOND FUNDS
Schwab YieldPlus Fund-TM-
Schwab Total Bond Market Index Fund
Schwab Short-Term Bond Market Index Fund
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 Bond Fund
SCHWAB MONEY FUNDS
Schwab offers an array of money funds that seek high current income consistent
with stability of capital and liquidity.(1) 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)Investments in money funds are neither insured nor guaranteed by the Federal
Deposit Insurance Corporation (FDIC) or any other government agency and,
although money funds seek to preserve the value of your investment at $1 per
share, it is possible to lose money.
<PAGE>
[LOGO]
INVESTMENT ADVISER
Charles Schwab Investment Management, Inc.
101 Montgomery Street, San Francisco, CA 94104
DISTRIBUTOR
Charles Schwab & Co., Inc.
101 Montgomery Street, San Francisco, CA 94104
This report is not authorized for distribution to prospective investors
unless preceded or accompanied by a current prospectus.
-C-2000 Charles Schwab & Co., Inc. All rights reserved.
Member SIPC/NYSE.
Printed on recycled paper. MKT3858-2 (2/00)
