N-Q 1 f55591nvq.htm N-Q nvq
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-Q
QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS
OF
REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-6200
Schwab Investments — Schwab Global Real Estate Fund
 
(Exact name of registrant as specified in charter)
211 Main Street, San Francisco, California 94105
 
(Address of principal executive offices) (Zip code)
Randall W. Merk
Schwab Investments
211 Main Street, San Francisco, California 94105
 
(Name and address of agent for service)
Registrant’s telephone number, including area code: (415) 636-7000
Date of fiscal year end: February 28
Date of reporting period: March 1, 2010 - May 31, 2010
 
 
Item 1. Schedule of Investments.

 

 

Schwab Investments
Schwab Global Real Estate Fund™
 
Portfolio Holdings of May 31, 2010 (Unaudited)
 
 
The following are the portfolio holdings as of the report date. For more information, please refer to the fund’s semiannual or annual shareholder reports.
 
                         
        Cost
 		  Value
Holdings by Category   ($ x 1,000)   ($ x 1,000)
 
  98 .5%   Common Stock     132,487       146,653  
  0 .4%   Preferred Stock     844       579  
  —%   Warrants     —       —  
  0 .7%   Short-Term Investments     1,080       1,080  
 
 
  99 .6%   Total Investments     134,411       148,312  
  0 .4%   Other Assets and Liabilities, Net             543  
 
 
  100 .0%   Net Assets             148,855  
 
                 
    Number
 		  Value
Security   of Shares   ($ x 1,000)
 
 Common Stock 98.5% of net assets
 
Asia Pacific and Other 45.7%
                 
 
Australia 10.6%
CFS Retail Property Trust
    1,306,909       2,130  
Commonwealth Property Office Fund
    2,656,513       2,106  
Dexus Property Group
    1,816,711       1,186  
Goodman Group
    1,433,232       745  
Stockland
    632,432       2,053  
Westfield Group
    706,974       7,602  
                 
              15,822  
                 
 
Brazil 4.2%
Brookfield Incorporacoes S.A.
    173,700       714  
Cyrela Brazil Realty S.A.
    65,775       712  
Gafisa S.A.
    115,620       685  
Iguatemi Empresa de Shopping Centers S.A.
    73,000       1,195  
Multiplan Empreendimentos Imobiliarios S.A.
    113,750       2,082  
Rossi Residencial S.A.
    109,700       809  
                 
              6,197  
                 
 
China 3.9%
Agile Property Holdings Ltd.
    634,000       661  
Guangzhou R&F Properties Co., Ltd., Class H
    2,339,400       3,004  
Hopson Development Holdings Ltd.
    1,763,000       2,117  
                 
              5,782  
                 
 
Hong Kong 12.4%
Great Eagle Holdings Ltd.
    258,000       618  
Henderson Land Development Co., Ltd.
    445,500       2,658  
Hongkong Land Holdings Ltd.
    636,000       3,033  
Regal Real Estate Investment Trust
    11,877,000       2,582  
Sun Hung Kai Properties Ltd.
    381,454       5,054  
The Hongkong & Shanghai Hotels Ltd.
    500,000       781  
The Link REIT
    1,572,718       3,746  
                 
              18,472  
                 
 
India 0.8%
DLF Ltd.
    114,122       680  
Indian Hotels Co., Ltd.
    218,000       482  
                 
              1,162  
                 
 
Japan 8.1%
Advance Residence Investment *
    1,463       1,966  
GOLDCREST Co., Ltd.
    59,120       1,277  
Japan Hotel and Resort, Inc.
    450       845  
Mitsubishi Estate Co., Ltd.
    88,000       1,351  
Mitsui Fudosan Co., Ltd.
    257,000       3,889  
Sumitomo Realty & Development Co., Ltd.
    155,000       2,754  
                 
              12,082  
                 
 
Mexico 0.4%
Consorcio ARA, S.A. de C.V.
    1,077,300       663  
                 
 
New Zealand 0.2%
ING Property Trust
    677,605       331  
                 
 
Philippines 0.7%
SM Prime Holdings, Inc.
    4,614,000       1,043  
                 
 
Singapore 4.4%
Ascendas India Trust
    2,153,000       1,377  
Keppel Land Ltd.
    548,000       1,356  
Mapletree Logistics Trust
    2,490,000       1,399  
Singapore Land Ltd.
    161,000       730  
Suntec Real Estate Investment Trust
    1,807,000       1,621  
                 
              6,483  
                 
              68,037  
 
Europe 12.0%
                 
 
France 4.7%
Gecina S.A.
    11,703       952  
Klepierre
    23,546       624  
Societe Immobilliere de Location pour l’Industrie et le Commerce
    13,842       1,298  
Unibail-Rodamco SE
    27,465       4,184  
                 
              7,058  
                 
 
Germany 0.6%
Deutsche Wohnen AG *
    119,743       937  
                 
 
Luxembourg 0.5%
GAGFAH S.A.
    99,299       676  
                 
 
Switzerland 1.8%
Allreal Holding AG - Reg’d
    6,438       652  
Swiss Prime Site AG - Reg’d *
    36,185       1,969  
                 
              2,621  
 
 
 
 1

 

 
 Schwab Global Real Estate Fund
 

 
Portfolio Holdings (Unaudited) continued
 
                 
    Number
 		  Value
Security   of Shares   ($ x 1,000)
                 
 
United Kingdom 4.4%
Derwent London plc
    56,409       1,083  
Grainger plc
    381,125       662  
Great Portland Estates plc
    170,678       754  
Hammerson plc
    97,671       505  
Land Securities Group plc
    203,905       1,761  
Shaftesbury plc
    147,967       793  
Unite Group plc *
    347,411       958  
                 
              6,516  
                 
              17,808  
 
North America 40.8%
                 
 
Canada 4.4%
Boardwalk Real Estate Investment Trust
    39,068       1,479  
Canadian Apartment Properties Real Estate Investment Trust
    81,386       1,170  
Canadian Real Estate Investment Trust
    59,218       1,552  
Primaris Retail Real Estate Investment Trust
    48,640       780  
RioCan Real Estate Investment Trust
    87,143       1,594  
                 
              6,575  
                 
 
United States 36.4%
Alexandria Real Estate Equities, Inc.
    22,693       1,488  
AMB Property Corp.
    43,288       1,122  
American Campus Communities, Inc.
    29,000       776  
AvalonBay Communities, Inc.
    30,130       2,955  
Boston Properties, Inc.
    38,674       2,966  
Corporate Office Properties Trust
    34,555       1,310  
D.R. Horton, Inc.
    117,388       1,431  
Digital Realty Trust, Inc.
    52,112       2,966  
Duke Realty Corp.
    60,873       723  
Entertainment Properties Trust
    22,057       903  
Equity Residential
    42,790       1,931  
Essex Property Trust, Inc.
    25,051       2,636  
Federal Realty Investment Trust
    35,660       2,628  
HCP, Inc.
    47,700       1,520  
Home Properties, Inc.
    16,165       786  
Host Hotels & Resorts, Inc.
    128,429       1,831  
Kilroy Realty Corp.
    35,577       1,170  
Kimco Realty Corp.
    67,035       959  
LaSalle Hotel Properties
    27,660       622  
Lennar Corp., Class A
    159,256       2,755  
Mack-Cali Realty Corp.
    21,500       709  
Monmouth Real Estate Investment Corp., Class A
    6,340       46  
ProLogis
    108,167       1,231  
Public Storage
    23,864       2,212  
Regency Centers Corp.
    20,242       744  
Simon Property Group, Inc.
    77,460       6,586  
SL Green Realty Corp.
    24,528       1,528  
Starwood Hotels & Resorts Worldwide, Inc.
    26,566       1,229  
Starwood Property Trust, Inc.
    39,169       714  
Tanger Factory Outlet Centers, Inc.
    39,353       1,638  
Ventas, Inc.
    31,419       1,475  
Vornado Realty Trust
    34,020       2,643  
                 
              54,233  
                 
              60,808  
                 
Total Common Stock
(Cost $132,487) 		    146,653  
         
                 
                 
 
 Preferred Stock 0.4% of net assets
 
Asia Pacific and Other 0.4%
                 
 
Australia 0.4%
Goodman Plus Trust *
    9,800       579  
                 
Total Preferred Stock
(Cost $844) 		    579  
         
                 
                 
 
 Warrants 0.0% of net assets
 
Asia Pacific and Other 0.0%
Henderson Land Development Ltd. (a)*
    81,300       —  
                 
Total Warrants
(Cost $—) 		    —  
         
                 
                 
    Face Amount
 		   
Security
 		  Local Currency
 		  Value
    Rate, Maturity Date   ($ x 1,000)   ($ x 1,000)
 
 Short-Term Investments 0.7% of net assets
 
Time Deposits 0.7%
Bank of America
Canadian Dollar
               
0.07%, 06/01/10
    63       60  
Brown Brothers Harriman
Japanese Yen
               
0.01%, 06/01/10
    1,488,000       16,000  
Swiss France
               
0.01%, 06/01/10
    177,000       153,000  
US Dollar
               
0.04%, 06/01/10
    31,000       31,000  
Citibank
Australian Dollar
               
3.50%, 06/01/10
    111,000       94,000  
Euro
               
0.04%, 06/01/10
    104,000       128,000  
Hong Kong Dollar
               
0.01%, 06/01/10
    3,174,000       408,000  
Pound Sterling
               
0.08%, 06/01/10
    42,000       61,000  
 
 
 
2 

 

 
 Schwab Global Real Estate Fund
 

 
Portfolio Holdings (Unaudited) continued
 
                 
    Face Amount
 		   
Security
 		  Local Currency
 		  Value
    Rate, Maturity Date   ($ x 1,000)   ($ x 1,000)
JPMorgan Chase
Singapore Dollar
               
0.01%, 06/01/10
    182       129  
                 
Total Short-Term Investments
(Cost $1,080) 		    1,080  
         
 
End of Investments.
 
(All dollar amount are x 1,000)
 
At 05/31/10, the tax basis cost of the fund’s investments was $144,582 and the unrealized appreciation and depreciation were $11,020 and ($7,290), respectively, with a net unrealized appreciation of $3,730.
 
As of 05/31/10, the values of certain foreign securities held by the fund aggregating $76,221 were adjusted from their closing market values in accordance with procedures approved by the Board of Trustees.
 
* Non-income producing security.
(a) Fair-valued by management in accordance with procedures approved by the Board of Trustees.
 
 
Various inputs are used in determining the value of the funds’ investments. The fair value measurements and disclosures establish a three-tier hierarchy of inputs to establish a classification of fair value measurements for disclosure purposes. These inputs are summarized in the three broad levels listed below:
 
  •  Level 1 — quoted prices in active markets for identical securities. — Investments whose values are based on quoted market prices in active markets, and whose values are therefore classified as Level 1 prices, include active listed equities. The funds do not adjust the quoted price for such investments, even in situations where the funds hold a large position and a sale could reasonably impact the quoted price.
 
  •  Level 2 — other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.) — Investments that trade in markets that are not considered to be active, but whose values are based on quoted market prices, dealer quotations or valuations provided by alternative pricing sources supported by observable inputs are classified as Level 2 prices. These generally include U.S. government and sovereign obligations, most government agency securities, investment-grade corporate bonds, certain mortgage products, less liquid listed equities, and state, municipal and provincial obligations. In addition, international securities whose markets close hours before the funds value their holdings may require fair valuations due to significant movement in the U.S. markets occurring after the daily close of the foreign markets. The Board of Trustees has approved a vendor that would calculate fair valuations of international securities based on a number of factors that appear to correlate to the movements in the U.S. markets. As investments whose values are classified as Level 2 prices include positions that are not traded in active markets and/or are subject to transfer restrictions, valuations may be adjusted to reflect illiquidity and/or non-transferability, which are generally based on available market information.
 
  •  Level 3 — significant unobservable inputs (including the funds’ own assumption in determining the fair value of investments). — Investments whose values are classified as Level 3 prices have significant unobservable inputs, as they may trade infrequently or not at all. When observable prices are not available for these securities, the funds use one or more valuation techniques for which sufficient and reliable data is available. The inputs used by the funds in estimating the value of Level 3 prices may include the original transaction price, quoted prices for similar securities or assets in active markets, completed or pending third-party transactions in the underlying investment or comparable issuers, and changes in financial ratios or cash flows. Level 3 prices may also be adjusted to reflect illiquidity and/or non-transferability, with the amount of such discount estimated by the funds in the absence of market information. Assumptions used by the funds due to the lack of observable inputs may significantly impact the resulting fair value and therefore the funds’ results of operations.
 
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The following is a summary of the inputs used to value the funds’ investments as of May 31, 2010:
 
 
 
 
 3

 

 
 Schwab Global Real Estate Fund
 

 
Portfolio Holdings (Unaudited) continued
 
                                 
    Quoted Prices in
 		      Significant
 		   
    Active Markets for
 		  Significant Other
 		  Unobservable
 		   
    Identical Assets
 		  Observable Inputs
 		  Inputs
 		   
Description
 
(Level 1)
 
(Level 2)
 
(Level 3)
 
Total*
 
Common Stock
                               
Asia Pacific and Other(a)
    $—       $42,612       $—       $42,612  
Brazil
    6,197       —       —       6,197  
Japan
    1,966       10,116       —       12,082  
Mexico
    663       —       —       663  
Singapore
    1,377       5,106       —       6,483  
Europe(a)
    —       17,808       —       17,808  
North America(a)
    60,808       —       —       60,808  
Preferred Stock(a)
    —       579       —       579  
Warrants
    —       —       —       —  
Short-Term Investments(a)
    —       1,080       —       1,080  
                                 
Total
    $71,011       $77,301       $—       $148,312  
                                 
 
     
*
  The fund had no Other Financial Instruments.
(a)
  As categorized in Portfolio Holdings.
 
The following is a reconciliation of Level 3 investments for which significant unobservable inputs were used to determine fair value:
 
                                                         
    Balance
 		          Change in
 		          Balance
    as of
 		  Accrued
 		  Realized
 		  Unrealized
 		  Net
 		  Net
 		  as of
    February 28,
 		  Discounts
 		  Gain
 		  Gain
 		  Purchases
 		  Transfers
 		  May 31,
Investments in Securities
 
2010
 
(Premiums)
 
(Loss)
 
(Loss)
 
(Sales)
 
in/out
 
2010
 
Common Stock
                                                       
Asia Pacific and Other
                                                       
Japan
    $2,124       $—       $—       $240       $(2,364 )     $—       $—  
                                                         
Total
    $2,124       $—       $—       $240       $(2,364 )     $—       $—  
                                                         
 
REG46025MAY10 - 00
 
 
 
4 

 

Item 2. Controls and Procedures.
(a)   Based on their evaluation of Registrant’s disclosure controls and procedures, as of a date within 90 days of the filing date, Registrant’s Chief Executive Officer, Randall Merk and Registrant’s Principal Financial Officer, George Pereira, have concluded that Registrant’s disclosure controls and procedures are: (i) reasonably designed to ensure that information required to be disclosed in this report is appropriately communicated to Registrant’s officers to allow timely decisions regarding disclosures required in this report; (ii) reasonably designed to ensure that information required to be disclosed in this report is recorded, processed, summarized and reported in a timely manner; and (iii) are effective in achieving the goals described in (i) and (ii) above.
(b)   During Registrant’s last fiscal quarter, there have been no changes in Registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the Act (17 CFR 270.30a-3(d)) that the above officers believe to have materially affected, or to be reasonably likely to materially affect, Registrant’s internal control over financial reporting.
Item 3. Exhibits.
Separate certifications for Registrant’s principal executive officer and principal financial officer, as required by Rule 30a-2(a) under the Act (17 CFR 270.30a-2(a)), are attached.
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Schwab Investments
       
By:
  /s/ Randall W. Merk  
 
     
 
  Randall W. Merk
Chief Executive Officer		  
 
      
Date:
  July 20, 2010  
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
       
By:
  /s/ Randall W. Merk  
 
     
 
  Randall W. Merk
Chief Executive Officer		  
 
      
Date:
  July 20, 2010  
 
      
By:
  /s/ George Pereira  
 
     
 
  George Pereira
Principal Financial Officer		  
 
      
Date:
  July 20, 2010