N-Q 1 f30047nvq.htm FORM 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)
Marie Chandoha
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: September 1, 2012 — November 30, 2012
 
 
Item 1. Schedule of Investments.

 

 

Schwab Investments
Schwab Global Real Estate Fund™
 
Portfolio Holdings as of November 30, 2012 (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   ($)   ($)
 
  98 .1%   Common Stock     187,023,997       210,830,309  
  0 .0%   Rights     —       4,152  
  0 .4%   Other Investment Company     951,490       954,450  
  1 .2%   Short-Term Investment     2,625,887       2,625,887  
 
 
  99 .7%   Total Investments     190,601,374       214,414,798  
  0 .3%   Other Assets and Liabilities, Net             621,887  
 
 
  100 .0%   Net Assets             215,036,685  
 
                 
    Number
 		  Value
Security   of Shares   ($)
 
 Common Stock 98.1% of net assets
 
Australia 7.5%
                 
 
Real Estate 7.5%
Commonwealth Property Office Fund
    1,315,260       1,401,067  
Dexus Property Group
    1,241,328       1,302,993  
Goodman Group
    341,300       1,645,823  
Investa Office Fund
    195,100       590,769  
Westfield Group
    666,640       7,257,244  
Westfield Retail Trust
    1,278,141       3,991,302  
                 
              16,189,198  
 
Austria 0.6%
                 
 
Real Estate 0.6%
Immofinanz AG *
    333,400       1,347,827  
 
Brazil 2.7%
                 
 
Consumer Durables & Apparel 0.2%
MRV Engenharia e Participacoes S.A.
    35,200       186,312  
Rossi Residencial S.A.
    176,700       337,391  
                 
              523,703  
                 
 
Real Estate 2.5%
BR Properties S.A.
    256,900       3,029,708  
Multiplan Empreendimentos Imobiliarios S.A.
    82,850       2,287,603  
                 
              5,317,311  
                 
              5,841,014  
 
Canada 4.6%
                 
 
Real Estate 4.6%
Boardwalk Real Estate Investment Trust
    33,379       2,166,014  
Brookfield Canada Office Properties
    28,096       840,038  
Brookfield Office Properties, Inc.
    215,663       3,560,551  
Canadian Apartment Properties Real Estate Investment Trust
    79,414       1,913,899  
Canadian Real Estate Investment Trust
    26,693       1,117,056  
InnVest Real Estate Investment Trust
    50,000       217,949  
Mainstreet Equity Corp. *
    800       26,029  
                 
              9,841,536  
 
Chile 0.9%
                 
 
Real Estate 0.9%
Parque Arauco S.A.
    883,260       1,965,045  
 
China 0.9%
                 
 
Consumer Services 0.2%
Home Inns & Hotels Management, Inc. ADR *
    16,200       435,456  
                 
 
Real Estate 0.7%
Guangzhou R&F Properties Co., Ltd., Class H
    924,800       1,576,927  
                 
              2,012,383  
 
France 4.2%
                 
 
Real Estate 4.2%
ICADE
    12,300       1,112,334  
Unibail-Rodamco SE
    33,837       7,949,687  
                 
              9,062,021  
 
Germany 2.3%
                 
 
Real Estate 2.3%
Alstria Office REIT-AG
    80,200       984,944  
Deutsche Wohnen AG
    203,549       3,937,811  
                 
              4,922,755  
 
Hong Kong 11.5%
                 
 
Consumer Services 0.7%
Mandarin Oriental International Ltd.
    83,100       114,678  
Shangri-La Asia Ltd.
    732,000       1,416,729  
                 
              1,531,407  
 
 
 
 1

 

 
 Schwab Global Real Estate Fund
 

 
Portfolio Holdings (Unaudited) continued
 
                 
    Number
 		  Value
Security   of Shares   ($)
                 
 
Real Estate 10.8%
China Overseas Land & Investment Ltd.
    788,000       2,332,564  
Country Garden Holdings Co. Ltd. *
    3,011,000       1,436,811  
Hang Lung Properties Ltd.
    988,300       3,620,106  
Hongkong Land Holdings Ltd.
    350,700       2,291,589  
Kerry Properties Ltd.
    460,000       2,346,595  
New World Development Co., Ltd.
    928,500       1,470,556  
Sun Hung Kai Properties Ltd.
    239,454       3,503,053  
The Link REIT
    250,000       1,356,126  
The Wharf Holdings Ltd.
    524,000       4,031,497  
Yuexiu Real Estate Investment Trust
    1,502,000       720,763  
                 
              23,109,660  
                 
              24,641,067  
 
Indonesia 0.9%
                 
 
Real Estate 0.9%
Lippo Karawaci Tbk PT
    8,878,000       989,608  
Summarecon Agung Tbk PT
    4,272,500       854,505  
                 
              1,844,113  
 
Israel 0.7%
                 
 
Real Estate 0.7%
Azrieli Group
    61,300       1,490,931  
 
Japan 9.8%
                 
 
Real Estate 9.8%
Global One Real Estate Investment Corp.
    200       1,212,502  
Japan Hotel REIT Investment Corp.
    4,000       1,171,950  
Japan Logistics Fund, Inc.
    200       1,750,296  
Japan Real Estate Investment Corp.
    107       1,052,183  
Mitsubishi Estate Co., Ltd.
    217,300       4,206,075  
Mitsui Fudosan Co., Ltd.
    362,400       7,596,432  
Mori Trust Sogo Reit, Inc.
    58       487,379  
Sumitomo Realty & Development Co., Ltd.
    130,500       3,568,989  
                 
              21,045,806  
 
Malaysia 0.3%
                 
 
Real Estate 0.3%
SP Setia Bhd
    61,200       61,205  
Sunway Real Estate Investment Trust
    1,211,400       581,839  
                 
              643,044  
 
Mexico 0.3%
                 
 
Consumer Durables & Apparel 0.3%
Consorcio ARA, S.A.B. de C.V. *
    1,526,700       453,284  
Urbi, Desarrollos Urbanos, S.A.B. de C.V. *
    320,400       185,054  
                 
              638,338  
 
New Zealand 0.2%
                 
 
Real Estate 0.2%
Kiwi Income Property Trust
    405,800       389,933  
 
Philippines 2.0%
                 
 
Real Estate 2.0%
Robinsons Land Corp.
    2,170,500       1,009,734  
SM Prime Holdings, Inc.
    8,568,125       3,262,764  
                 
              4,272,498  
 
Singapore 4.5%
                 
 
Real Estate 4.5%
CapitaCommercial Trust
    1,383,700       1,836,125  
CapitaMall Trust
    490,000       831,457  
CDL Hospitality Trusts
    1,111,300       1,753,340  
Global Logistic Properties Ltd.
    1,455,700       3,349,043  
Keppel REIT
    720,000       725,258  
Starhill Global REIT
    1,755,000       1,085,219  
                 
              9,580,442  
 
South Africa 0.7%
                 
 
Real Estate 0.7%
Growthpoint Properties Ltd.
    535,800       1,476,548  
 
Sweden 2.0%
                 
 
Real Estate 2.0%
Fabege AB
    161,100       1,658,631  
Hufvudstaden AB, A Shares
    213,300       2,727,144  
                 
              4,385,775  
 
United Kingdom 3.7%
                 
 
Real Estate 3.7%
British Land Co., plc
    520,600       4,590,723  
Land Securities Group plc
    161,788       2,095,858  
Raven Russia Ltd. *
    303,800       303,478  
Segro plc
    147,600       559,041  
Shaftesbury plc
    49,500       440,000  
                 
              7,989,100  
 
United States 37.8%
                 
 
Consumer Services 0.9%
Starwood Hotels & Resorts Worldwide, Inc.
    36,415       1,964,953  
                 
 
Real Estate 36.9%
Alexandria Real Estate Equities, Inc.
    67,259       4,568,231  
American Assets Trust, Inc.
    23,200       631,736  
American Tower Corp.
    27,600       2,068,068  
Associated Estates Realty Corp.
    189,100       2,861,083  
 
 
 
2 

 

 
 Schwab Global Real Estate Fund
 

 
Portfolio Holdings (Unaudited) continued
 
                 
    Number
 		  Value
Security   of Shares   ($)
AvalonBay Communities, Inc.
    19,224       2,533,531  
Boston Properties, Inc.
    47,951       4,921,211  
Colonial Properties Trust
    46,800       954,720  
DiamondRock Hospitality Co.
    209,300       1,829,282  
Duke Realty Corp.
    77,180       1,041,930  
EPR Properties
    14,100       639,435  
Equity Lifestyle Properties, Inc.
    8,800       577,632  
Equity Residential
    59,000       3,275,090  
Essex Property Trust, Inc.
    33,766       4,743,785  
General Growth Properties, Inc.
    80,700       1,563,159  
Glimcher Realty Trust
    225,200       2,414,144  
HCP, Inc.
    65,948       2,970,957  
Host Hotels & Resorts, Inc.
    203,153       2,984,318  
Hudson Pacific Properties, Inc.
    59,400       1,150,578  
Kite Realty Group Trust
    39,200       209,328  
LaSalle Hotel Properties
    129,608       3,124,849  
Mack-Cali Realty Corp.
    23,400       591,552  
Pebblebrook Hotel Trust
    42,700       890,295  
ProLogis, Inc.
    76,771       2,605,608  
Public Storage
    14,006       1,969,804  
Rayonier, Inc.
    12,600       627,984  
Regency Centers Corp.
    25,200       1,180,620  
Sabra Health Care REIT, Inc.
    15,600       338,520  
Simon Property Group, Inc.
    47,381       7,208,072  
SL Green Realty Corp.
    68,100       5,133,378  
Sunstone Hotel Investors, Inc. *
    93,900       969,048  
Taubman Centers, Inc.
    17,200       1,332,484  
The Macerich Co.
    44,600       2,519,900  
UDR, Inc.
    67,803       1,560,147  
Ventas, Inc.
    62,067       3,950,565  
Vornado Realty Trust
    17,722       1,354,492  
Weingarten Realty Investors
    73,232       1,990,446  
                 
              79,285,982  
                 
              81,250,935  
                 
Total Common Stock
(Cost $187,023,997)     210,830,309  
         
                 
                 
 
 Rights 0.0% of net assets
 
Brazil 0.0%
                 
 
Consumer Durables & Apparel 0.0%
Rossi Residencial S.A. *
    98,564       4,152  
                 
Total Rights
(Cost $—)     4,152  
         
                 
                 
 
 Other Investment Company 0.4% of net assets
 
United States 0.4%
iShares Dow Jones US Real Estate Index Fund
    15,000       954,450  
                 
Total Other Investment Company
(Cost $951,490)     954,450  
         
                 
                 
Security
 		  Face Amount
 		  Value
    Rate, Maturity Date   Local Currency   ($)
 
 Short-Term Investment 1.2% of net assets
 
Time Deposit 1.2%
Deutsche Bank
US Dollar
0.03%, 12/03/12
    2,625,887       2,625,887  
                 
Total Short-Term Investment
(Cost $2,625,887)     2,625,887  
         
 
End of Investments.
 
At 11/30/12, the tax basis cost of the fund’s investments was $193,116,624 and the unrealized appreciation and depreciation were $25,345,137 and ($4,046,963), respectively, with a net unrealized appreciation of $21,298,174.
 
As of 11/30/12, the values of certain foreign securities held by the fund aggregating $107,335,293 were adjusted from their closing market values in accordance with international fair valuation procedures approved by the fund’s Board of Trustees.
 
* Non-income producing security.
 
 
Under procedures approved by the fund’s Board of Trustees (the “Board”), the investment adviser has formed a Pricing Committee to administer the pricing and valuation of portfolio securities and other assets and to ensure that prices used for internal purposes or provided by third parties reasonably reflect fair market value. Among other things, these procedures allow the fund to utilize independent pricing services, quotations from securities and financial instrument dealers and other market sources to determine fair value.
 
The fund values the securities in its portfolio every business day. The fund uses the following policies to value various types of securities:
 
  •  Securities traded on an exchange or over-the-counter: valued at the closing value for the day, or, on days when no closing value has been reported at halfway between the most recent bid and ask quotes. Securities that are primarily traded
 
 
 
 3

 

 
 Schwab Global Real Estate Fund
 

 
Portfolio Holdings (Unaudited) continued
 
  on foreign exchanges are valued at the official closing price or the last sales price on the exchange where the securities are principally traded with these values then translated into U.S. dollars at the current exchange rate, unless these securities are fair valued as discussed below.
 
  •  Securities for which no quoted value is available: The Board has adopted procedures to fair value the fund’s securities when market prices are not “readily available” or are unreliable. For example, the fund may fair value a security when it is de-listed or its trading is halted or suspended; when a security’s primary pricing source is unable or unwilling to provide a price; or when a security’s primary trading market is closed during regular market hours. The fund makes fair value determinations in good faith in accordance with the fund’s valuation procedures. The Pricing Committee considers a number of factors, including unobservable market inputs when arriving at fair value. The Pricing Committee may employ techniques such as the review of related or comparable assets or liabilities, related market activity, recent transactions, market multiples, book values, transactional back-testing, disposition analysis and other relevant information. The Pricing Committee regularly reviews these inputs and assumptions to calibrate the valuations. The Board convenes on a regular basis to review fair value determinations made by the fund pursuant to the procedures.
 
  •  International fair valuation: The Board has adopted procedures to fair value foreign equity securities that are traded in markets that close prior to the fund valuing its holdings. By fair valuing securities whose prices may have been affected by events occurring after the close of trading, the fund seeks to establish prices that investors might expect to realize upon the current sales of these securities. This methodology is designed to deter “arbitrage” market timers, who seek to exploit delays between the change in the value of the fund’s portfolio holdings and the net asset value of the fund’s shares, and seeks to help ensure that the prices at which the fund’s shares are purchased and redeemed are fair and do not result in dilution of shareholder interest or other harm to shareholders. When fair value pricing is used at the open or close of a reporting period, it may cause a temporary divergence between the return of the fund and that of its comparative index or benchmark. The fund makes fair value determinations in good faith in accordance with the fund’s valuation procedures. Due to the subjective and variable nature of fair value pricing, there can be no assurance that a fund could obtain the fair value assigned to the security upon the sale of such security. The Board regularly reviews fair value determinations made by the fund pursuant to the procedures.
 
  •  Futures and forward foreign currency exchange contracts: valued at their settlement prices as of the close of their exchanges (for futures) or at a value based on that day’s forward exchange rates (for forwards).
 
  •  Short-term securities (60 days or less to maturity): valued at amortized cost, which approximates market value.
 
  •  Underlying funds: valued at their respective net asset values.
 
In accordance with the authoritative guidance on fair value measurements and disclosures under generally accepted accounting principles in the United States of America (GAAP), the fund discloses the fair value of its investments in a hierarchy that prioritizes the inputs to valuation techniques used to measure the fair value. The hierarchy gives the highest priority to valuations based upon unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to valuations based upon unobservable inputs that are significant to the valuation (Level 3 measurements). If the fund determines that either the volume and/or level of activity for an asset or liability has significantly decreased (from normal conditions for that asset or liability) or price quotations or observable inputs are not associated with orderly transactions, increased analysis and management judgment will be required to estimate fair value.
 
The three levels of the fair value hierarchy are as follows:
 
  •  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 and futures contracts.
 
  •  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
 
 
 
4 

 

 
 Schwab Global Real Estate Fund
 

 
Portfolio Holdings (Unaudited) continued
 
  close of the foreign markets. The Board has approved a vendor that calculates fair valuations of international equity 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 fund’s 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 fund uses one or more valuation techniques for which sufficient and reliable data is available. The inputs used by the fund 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 fund in the absence of market information. Assumptions used by the fund due to the lack of observable inputs may significantly impact the resulting fair value and therefore the fund’s results of operations.
 
 
 
 5

 

 
 Schwab Global Real Estate Fund
 

 
Portfolio Holdings (Unaudited) continued
 
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 fund’s investments as of November 30, 2012:
 
                                 
    Quoted Prices in
 		      Significant
 		   
    Active Markets for
 		  Significant Other
 		  Unobservable
 		   
    Identical Assets
 		  Observable Inputs
 		  Inputs
 		   
Description
 
(Level 1)
 
(Level 2)
 
(Level 3)
 
Total2
 
Common Stock
                               
Australia1
    $—       $16,189,198       $—       $16,189,198  
Austria1
    —       1,347,827       —       1,347,827  
Brazil1
    5,841,014       —       —       5,841,014  
Canada1
    9,841,536       —       —       9,841,536  
Chile1
    1,965,045       —       —       1,965,045  
China1
    —       1,576,927       —       1,576,927  
Consumer Services
    435,456       —       —       435,456  
France1
    —       9,062,021       —       9,062,021  
Germany
                               
Real Estate
    984,944       3,937,811       —       4,922,755  
Hong Kong1
    —       23,109,660       —       23,109,660  
Consumer Services
    114,678       1,416,729       —       1,531,407  
Indonesia1
    —       1,844,113       —       1,844,113  
Israel1
    —       1,490,931       —       1,490,931  
Japan1
    —       21,045,806       —       21,045,806  
Malaysia1
    643,044       —       —       643,044  
Mexico1
    638,338       —       —       638,338  
New Zealand1
    —       389,933       —       389,933  
Philippines1
    —       4,272,498       —       4,272,498  
Singapore1
    —       9,580,442       —       9,580,442  
South Africa1
    1,476,548       —       —       1,476,548  
Sweden1
    —       4,385,775       —       4,385,775  
United Kingdom
                               
Real Estate
    303,478       7,685,622       —       7,989,100  
United States1
    81,250,935       —       —       81,250,935  
Rights1
    4,152       —       —       4,152  
Other Investment Company
    954,450       —       —       954,450  
Short-Term Investment1
    —       2,625,887       —       2,625,887  
                                 
Total
    $104,453,618       $109,961,180       $—       $214,414,798  
                                 
 
     
1
  As categorized in Portfolio Holdings.
2
  The fund had no Other Financial Instruments.
 
The fund’s policy is to recognize transfers between Level 1, Level 2 and Level 3 as of the beginning of the fiscal year. There were no transfers between Level 1, Level 2 and Level 3 for the period ended November 30, 2012.
 
REG406025NOV12
 
 
 
6 

 

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, Marie Chandoha 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/ Marie Chandoha
 
Marie Chandoha 		   
 
  Chief Executive Officer    
 
        
Date:
  1/24/2013    
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/ Marie Chandoha
 
Marie Chandoha 		   
 
  Chief Executive Officer    
 
        
Date:
  1/24/2013    
 
        
By:
  /s/ George Pereira
 
George Pereira 		   
 
  Principal Financial Officer    
 
        
Date:
  1/24/2013