<PAGE> 1
SCHWABFUNDS(R)
[LOGO]
SCHWAB
1000 FUND(R)
SEMI-ANNUAL REPORT
FEBRUARY 29, 1996
[Photo of Schwab Building, San Francisco, California]
<PAGE> 2
Dear Fellow Shareholder,
The SchwabFunds Family(R) is celebrating substantial growth as
[Photo a mutual fund complex. By placing your trust in
of SchwabFunds(R), you've helped total assets under management
Charles R. grow by $10 billion over the last 12 months to reach $35
Schwab] billion.
We believe much of this success can be traced to the Schwab
commitment to serve the needs of shareholders, a commitment
demonstrated by the entire SchwabFunds staff and, in
particular, by our experienced team of portfolio managers.
The professionals who make up our growing portfolio management team have over
200 years of combined experience and are devoted to monitoring the financial
markets for you. Through a careful and disciplined selection of securities, the
portfolio managers strive to construct optimal portfolios that provide
shareholders with competitive returns that meet their investment goals. And
shareholders continue to signal their trust in our SchwabFunds portfolio
management by keeping their money invested in SchwabFunds.
We believe an important part of serving your needs is keeping you informed about
your investments. For example, we added the question and answer section of this
report, developed by our portfolio managers to address what they feel were the
most pressing questions we've heard from shareholders over the period. It is one
way we hope to keep communication open between you and the people managing your
investments.
The SchwabFunds Family has grown to include a group of mutual funds that
addresses many "core" needs of investors. SchwabFunds offers a solution to
investors who want the convenience and competitive costs of a no-load mutual
fund family. The 20 no-load funds available to retail investors, including the
new Schwab S&P 500 Fund, offer diversification of the U.S. and international
equity markets, both taxable and tax-free bonds and a variety of money market
investments.
With this level of diversification, you may use SchwabFunds to create an
efficient, well-rounded portfolio. Or you may use them to serve as building
blocks to an overall investment program that includes more specialized
investments.
I invite you to learn more about the SchwabFunds Family. To receive a brochure
and prospectus for the SchwabFunds, please call our toll-free number, 1-800-2
NO-LOAD, or visit any one of our more than 200 Schwab offices. A Schwab
representative will be happy to provide you with a prospectus that includes more
complete information on the Funds, including charges and expenses. Please read
it carefully before investing.
I'd like to extend my personal gratitude for your trust in the SchwabFunds
Family as it continues to grow. You should feel confident that the outstanding
efforts of all those who are part of the SchwabFunds organization will continue
going forward. And we expect these efforts to help us to meet even higher
standards of excellence in the years ahead.
/s/Charles R. Schwab
Charles R. Schwab
Cover: The Schwab Building, San Francisco, California
<PAGE> 3
COMMENTS FROM THE INVESTMENT ADVISER
We are pleased to report on the performance of your investment in the Schwab
1000 Fund(R) for the six-month period ended February 29, 1996. During this
period, the Schwab 1000 Fund continued to offer you a convenient, cost-effective
way to participate in the U.S. stock market's growth potential.
RECORD-BREAKING MARKET PERFORMANCE
By almost any measure, the last six months were an exceptionally strong period
for the U.S. equity market. Late in 1995, the Dow Jones Industrial Average broke
through the 5,000 mark, continuing upward to finish the period at 5,485 on
February 29, 1996, and other market indicators showed similar gains. While there
were occasional downturns along the way, the market generally climbed throughout
the period, driven by strong corporate profits, a favorable interest rate
environment, and large inflows of capital into stocks. To enhance your
understanding of the Fund's performance, the portfolio management team discusses
economic trends and the Fund's investment strategies in "Questions to the
Portfolio Management Team" following this letter.
Although past performance does not guarantee future results, the Schwab 1000
Fund's performance during the six-month period reflected the U.S. equity
market's strong upward momentum. The Fund's six-month total return was 14.43%
compared to an average total return of 12.71% for U.S. growth and income mutual
funds. 1 Reflecting the market's upswing during the period, the Fund's share
price rose by $2.02 to $17.70 in the six months ended February 29, 1996. This
increase in net asset value (NAV) is especially noteworthy considering that the
Fund also paid cash dividends totaling 23 cents per share during the period,
which reduced its NAV accordingly. We believe the Fund's strong performance
underscores the effectiveness of its indexing approach, which focuses on
tracking the stock price and dividend performance of the U.S. stock market, as
represented by the Schwab 1000 Index(R).
The Schwab 1000 Fund experienced strong growth in assets and its shareholder
base during the period. Net assets under management surpassed $1 billion for the
first time, rising 53% during the six-month period to $1.27 billion. More than
25,000 new shareholders invested in the Fund during the period, raising the
total number of shareholders to nearly 99,000. This strong growth makes the
Schwab 1000 Fund one of the fastest growing funds in the SchwabFunds Family(R).
1 Source: Morningstar, Inc. Average return of 489 U.S. growth and income funds
for the six-month period ended February 29, 1996. Past performance is no
guarantee of future results. Principal value and investment returns will
fluctuate, so that an investor's shares, when redeemed, may be worth more or
less than their original cost. The Investment Manager and Schwab have waived a
portion of their fees and guaranteed maximum total operating expenses of 0.49%
through at least December 31, 1996. Without this fee waiver and guarantee, the
Fund's six-month total return would have been 14.35%.
<PAGE> 4
FUND PERFORMANCE
In addition to tracking the performance of the broad U.S. stock market as
measured by the Schwab 1000 Index(R), during the reporting period, the Schwab
1000 Fund's(R) total return closely tracked the Standard & Poor's 500(R) Index
("S&P 500"), a widely recognized market benchmark. In fact, the Fund's average
annual total return since inception (4/2/91) is virtually identical to that of
the S&P 500. The table below compares total returns for the Schwab 1000 Fund,
the Schwab 1000 Index, and the S&P 500 for various periods.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
TOTAL RETURN
Cumulative Since Average Annual
Six Months Ended One Year Ended Fund Inception Since Inception
2/29/96 2/29/96 (4/2/91 - 2/29/96) (4/2/91 - 2/29/96)
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Schwab 1000
Fund 14.43% 33.89% 93.79% 14.40%
- ----------------------------------------------------------------------------------------------
Schwab 1000
Index 14.76% 34.62% 97.89% 14.88%
- ----------------------------------------------------------------------------------------------
S&P 500
Index 15.30% 34.66% 93.95% 14.41%
- ----------------------------------------------------------------------------------------------
</TABLE>
Past performance is no guarantee of future results. Principal value and
investment returns will fluctuate so that an investor's shares, when redeemed,
may be worth more or less than their original cost. The Invest-ment Manager and
Schwab have waived a portion of their fees and guaranteed maximum total
operating expenses of 0.49% through at least December 31, 1996. Without this fee
waiver and guarantee, the Fund's six-month total return would have been 14.35%;
one-year total return would have been 33.81%; cumulative total return since
inception would have been 92.19%; and average annual total return since
inception would have been 14.21%. Indices are unmanaged, and unlike the Fund, do
not reflect payment of advisory fees and other expenses associated with an
investment in the Fund. Investors cannot directly invest in an index. Fund total
return assumes reinvestment of all dividends.
- --------------------------------------------------------------------------------
BROADER MARKET COVERAGE
The Schwab 1000 Fund seeks to track the price and dividend performance of the
U.S. stock market by investing in substantially all the stocks that comprise the
Schwab 1000 Index. One of the broadest market indicators available, the Schwab
1000 Index includes a diversified group of stocks that represent about 86% of
the total market value of the U.S. stock market. 2 The Schwab 1000 Index
represents the stocks of the 1,000 largest publicly traded companies in the U.S.
(excluding investment companies), ranked by market capitalization.
Because the Schwab 1000 Index includes stocks of both large and medium-sized
companies, it covers a broader segment of the stock market than the S&P 500,
which represents about 72% of the U.S. stock market's value, or the Dow Jones
2 Source: Wilshire Associates, as of February 29, 1996. The U.S. stock market
as represented by the Wilshire 5000 Index.
<PAGE> 5
Industrial Average, which represents less than 17%. 3 You'll find a complete
listing of industries and companies represented in the Fund's portfolio holdings
at the end of the period in the "Statement of Net Assets" included in this
report. The chart below illustrates the composition of the Fund by economic
sector.
[The following is a pie chart of Schwab 1000 Fund's diversified stock
portfolio.]
THE SCHWAB 1000 FUND'S(R)
DIVERSIFIED STOCK PORTFOLIO COVERS
A BROAD RANGE OF ECONOMIC SECTORS
<TABLE>
<S> <C>
Capital Goods 5%
Consumer Durables 3%
Consumer Non-Durables 30%
Energy 7%
Finance 16%
Materials & Services 10%
Technology 15%
Transportation 2%
Utilities 12%
</TABLE>
Source: Wilshire Associates
TAX-SMART STRATEGY
Taxes can erode the returns you earn from your mutual fund investment. That's
why it's important to study how fund returns compare after taxes when you're
evaluating performance.
The Schwab 1000 Fund is managed to help maximize your after-tax returns by
minimizing taxable capital gain distributions. Since the Fund doesn't actively
trade stocks, except to realign portfolio holdings with the Schwab 1000 Index
and handle customer purchases and redemptions, capital gains are kept to a
minimum. And when the Fund's managers do trade, they attempt to offset capital
gains with capital losses to minimize taxable distributions to shareholders.
This tax-smart strategy seeks to defer capital gains until you sell your shares.
Any unrealized gains accumulate in the Fund, helping to build the value of your
investment. In fact, since its inception the Fund has never paid a capital gain
distribution. The chart on the next page illustrates the impact that deferring
capital gains can have on the growth of a mutual fund investment over time.
3 Source: Wilshire Associates, as of February 29, 1996. The U.S. stock market
as represented by the Wilshire 5000 Index.
<PAGE> 6
Additionally, the Fund's low portfolio turnover helps minimize your capital
gains tax liability by limiting capital gain distributions. Over the 12-month
period ended February 29, 1996, the Fund's average portfolio turnover was 2%,
compared with 61% for U.S. growth and income funds. 4
[The following is a bar chart comparing capital gains realized annually and
capital gains deferred and shares sold after 20 years.]
THE POWER OF A TAX-SMART STRATEGY
<TABLE>
<S> <C>
Portfolio A
Capital Gains
Realized Annually $75,281
Portfolio B
Capital Gains Deferred and
Shares Sold After 20 Years $88,640
</TABLE>
This example is for illustrative purposes only and is not intended to predict or
guarantee future performance of the Fund.
The chart shows two hypothetical portfolios, each with a $20,000 initial
investment and a 10% pre-tax average annual total return. The portfolio in which
capital gains are realized annually (Portfolio A) earns 3% income and 7%
realized capital gains taxed annually; the portfolio in which capital gains are
deferred over 20 years (Portfolio B) earns 3% income taxed annually and 7%
capital gains, which accumulate unrealized and are taxed at the end of the
20-year period. Compared to Portfolio A, Portfolio B earns an extra $13,359 by
deferring its capital gains. Both examples assume income dividends taxed
annually at the maximum 39.6% federal personal income tax rate and capital gains
taxed at the maximum 28% rate.
Of course, tax rates may vary and can be higher or lower than the rates shown.
LOW-COST INVESTING
At Schwab, we're committed to keeping the cost of mutual fund investing low.
Lower fund expenses generally translate into higher returns to shareholders,
since the less you pay in fees and expenses, the greater the portion of a fund's
returns you can receive.
The Schwab 1000 Fund's indexing strategy helps keep costs low. In fact, its
operating expense ratio of 0.49% is well below the average of 1.46% for actively
managed funds. 5 And of course, like all SchwabFunds(R), the Schwab 1000 Fund
charges no sales loads or 12b-1 fees, which can also reduce your returns over
time. 6
4 Source: Morningstar, Inc. Average portfolio turnover for 368 U.S. growth and
income funds as of 2/29/96.
5 Source: Morningstar, Inc. Average operating expenses for 2,784 actively
managed U.S. equity funds as of 2/29/96. The Investment Manager and Schwab have
waived a portion of their fees and guaranteed maximum total operating expenses
of 0.49% through at least 12/31/96.
6 To keep expenses low and discourage short-term trading, a redemption fee of
0.50% of proceeds will be charged by the Fund for redemption of shares held less
than six months.
<PAGE> 7
LOOKING FORWARD IN 1996
The last six months were an exceptionally rewarding time for stock investors. To
put this stock market performance in perspective, however, it's important to
remember that stocks can be volatile in the short term and are best viewed as a
long-term investment. When held over the long term, stocks have outperformed
most other U.S. investments, helping investors stay ahead of inflation and
realize capital appreciation. 7 Whatever direction the stock market may take in
the balance of the year, we're confident that the Schwab 1000 Fund(R) will
continue to offer you a convenient, cost-effective way to participate in the
market's long-term growth potential.
Thank you for placing your trust in SchwabFunds(R). We value your confidence,
and we'll continue to do our best to help you achieve your investment goals in
the future.
CHARLES SCHWAB INVESTMENT MANAGEMENT, INC.
7 Source: Stocks, Bonds, Bills and Inflation, 1995 Yearbook(TM), Ibbotson
Associates.
<PAGE> 8
QUESTIONS TO THE PORTFOLIO MANAGEMENT TEAM OF
CHARLES SCHWAB INVESTMENT MANAGEMENT, INC.
Stephen B. Ward: Senior Vice President and Chief Investment Officer
Geri Hom: Portfolio Manager
Q. WHAT ACCOUNTED FOR THE SCHWAB 1000 FUND'S(R) STRONG PERFORMANCE DURING THE
SIX-MONTH REPORTING PERIOD ENDED FEBRUARY 29, 1996?
A. During the period, the Fund closely tracked the performance of the U.S. stock
market, as represented by the Schwab 1000 Index(R). The market continued its
robust rally, as evidenced by the 15.30% total return of the S&P 500. In fact,
all major domestic equity indices achieved new highs during the period. Although
there are many contributing factors, most market observers attribute the
market's strong performance to three key developments: the second straight year
of impressive corporate earnings growth; a reduction in both short- and
long-term interest rates; and strong cash flows into the equity markets,
including record levels of cash flowing to equity mutual funds. The graph below
illustrates this dramatic increase.
[The following is a line graph comparing the change in value in a hypothetical
$10,000 investment among Schwab 1000 Fund, Schwab 1000 Index and the S&P 500.]
COMPARISON OF CHANGE IN VALUE OF A HYPOTHETICAL $10,000 INVESTMENT (IN THE
SCHWAB 1000 FUND, THE SCHWAB 1000 INDEX, AND THE S&P 500 INDEX)
--------------------------------
Schwab 1000 Fund
Average Annual Total Returns
February 29, 1996
--------------------------------
One Year Since Inception
33.89% 14.40%
--------------------------------
[GRAPH]
<TABLE>
<CAPTION>
$1000 Fund $1000 Index S&P 500 Index
---------- ----------- -------------
DATE $ Growth $ Growth $ Growth
- ---- ---------- ----------- -------------
<S> <C> <C> <C>
April 2 10,000 10,000.00 10,000.00
April 9,910 9,898.49 9,907.51
May 10,320 10,310.50 10,334.91
June 9,850 9,839.53 9,861.45
July 10,320 10,309.65 10,321.08
Aug. 10,600 10,591.15 10,565.60
Sept. 10,460 10,454.66 10,388.78
Oct. 10,630 10,625.27 10,528.47
Nov. 10,240 10,226.90 10,104.23
Dec. 11,425 11,411.75 11,259.81
Jan. 92 11,283 11,271.86 11,049.98
Feb. 11,425 11,415.17 11,193.09
Mar. 11,171 11,162.67 10,975.40
Apr. 11,404 11,392.14 11,297.56
May 11,404 11,456.96 11,352.94
June 11,485 11,256.50 11,184.12
July 11,726 11,728.23 11,541.03
Aug. 11,480 11,485.97 11,402.78
Sept. 11,623 11,646.34 11,536.78
Oct. 11,746 11,763.20 11,576.64
Nov. 12,206 12,233.22 11,970.82
Dec. 12,396 12,427.71 12,117.74
Jan. 93 12,502 12,538.60 12,219.06
Feb. 12,595 12,632.43 12,385.60
Mar. 12,696 12,948.05 12,646.91
Apr. 12,533 12,582.96 12,341.23
May 12,896 12,956.58 12,671.37
June 12,958 13,023.97 12,708.46
July 12,905 12,989.00 12,657.35
August 13,397 13,492.28 13,137.60
Sept. 13,355 13,453.69 13,036.44
Oct. 13,544 13,654.35 13,306.29
Nov. 13,355 13,462.42 13,179.88
Dec. 13,592 13,700.42 13,339.36
Jan. 94 14,005 14,136.31 13,792.90
Feb. 13,645 13,780.60 13,419.11
Mar. 13,042 13,168.98 12,835.36
Apr. 13,190 13,325.94 12,999.67
May 13,349 13,486.02 13,211.57
June 12,988 13,127.19 12,887.88
July 13,405 13,557.96 13,310.61
Aug. 13,971 14,145.55 13,655.01
Sept. 13,651 13,824.96 13,516.95
Oct. 13,918 14,094.52 13,819.73
Nov. 13,416 13,589.52 13,316.69
Dec. 13,577 13,766.96 13,513.78
Jan. 95 13,923 14,120.96 13,663.78
Feb. 14,474 14,700.16 14,403.09
Mar. 14,852 15,094.26 14,827.41
Apr. 15,219 15,475.56 15,263.70
May 15,770 16,047.94 15,872.72
June 16,191 16,469.81 16,240.96
July 16,807 17,110.81 16,778.54
Aug. 16,938 17,244.73 16,773.51
Sept. 17,606 17,849.33 17,481.35
Oct. 17,520 17,858.91 17,418.42
Nov. 18,276 18,646.25 18,183.06
Dec. 18,547 18,924.34 18,533.29
Jan. 96 19,095 19,499.27 19,163.42
Feb. 19,379 19,789.30 19,341.64
</TABLE>
Past performance is no guarantee of future results. Principal value and
investment returns will fluctuate so that an investor's shares, when redeemed,
may be worth more or less than their original cost. The Investment Manager and
Schwab have waived a portion of their fees and guaranteed maximum total
operating expenses of 0.49%. Without this fee waiver and guarantee, the Fund's
total return would have been lower.
The performance graph compares a hypothetical $10,000 investment in the Schwab
1000 Fund since inception with hypothetical investments in the Schwab 1000 Index
and the S&P 500. Investors cannot directly invest in an index. Indices are
unmanaged, and unlike the Fund, do not reflect payment of advisory fees and
other expenses associated with an investment in the Fund. Fund total return
assumes the reinvestment of all dividends.
<PAGE> 9
Q. CAN YOU PROVIDE SOME CONTEXT FOR THE FUND'S STRONG RETURN SINCE THE BEGINNING
OF 1995?
A. Although past performance does not guarantee future results, the Fund's
strong return since the beginning of 1995 reflects the strong performance of
some well-known benchmarks of the stock market. The total return of the S&P 500
for calendar year 1995 was 37.6%, its best performance since 1958 and
significantly greater than the 20-year average return of 13.6%. 8 We feel it is
important to point out that this market performance was a very unusual event
which should serve as a reminder that risk and return go hand in hand. Equity
returns can be volatile, resulting in both positive and negative single-year
returns for investors seeking the higher average returns which equity
investments can offer.
Many market observers have identified strong growth in corporate earnings during
1994 and 1995 as one of the more significant drivers of the market's recent
performance. Even so, the price level of the S&P 500 has risen significantly
faster than the earnings of the S&P 500 companies. Since the beginning of 1995,
the price/earnings ratio of the S&P 500 has grown from approximately 17.2 to
approximately 18.7 as of 2/29/96. This compares with a 30-year mean of
approximately 14.5. Additionally, since the rate of economic growth (as measured
by real Gross Domestic Product) slowed to 2.0% in 1995 -- down from 1994's 3.5%
pace 9 -- many economists do not anticipate a continuation of the strong
earnings growth we experienced during 1994 and 1995.
Finally, we feel it is important to comment on the concept of "mean reverting"
returns. This term refers to the statistical tendency of returns for particular
classes of investments to revert to their long-term averages. Unlike flipping a
coin, where the odds of the coin landing "heads" up is always 50% regardless of
the outcome of prior flips, investment returns have a tendency to be affected by
prior years' results. If returns of a particular asset class have outperformed
their long-term average returns for one or more years, there is a tendency for
the above-average returns not to repeat in the following year. Conversely, if
returns have underperformed their long-term average, there is a tendency for
better returns in the following year. This concept of mean reverting returns is
another way of saying that we should not expect either exceptionally good or
poor returns to continue indefinitely.
Q. HOW DID THE FUND'S PERFORMANCE COMPARE TO THE PERFORMANCE OF THE SCHWAB 1000
INDEX(R) DURING THE REPORTING PERIOD?
A. The Schwab 1000 Fund(R) achieved its objective of tracking the total return
performance of the Schwab 1000 Index during the period.
The Schwab 1000 Index is the theoretical return of a group of stocks
representing the 1,000 largest U.S. public operating corporations (excluding
investment companies), ranked by market capitalization. The Index generally
outperforms
8 Source: Standard & Poor's. Represents 20-year average annual return for the
period ended 2/29/96.
9 All Gross Domestic Product (GDP) statistics used in this report are based on
the Commerce Department's new chain-weighted calculation methodology. As a
result, these statistics may differ from those in previous SchwabFunds
shareholder reports, which used the prior fixed-weighted methodology. During
1996, the Commerce Department will revise all GDP growth rate reporting to a
chain-weighted basis.
<PAGE> 10
the Fund for several reasons. Unlike the Fund, the Index does not incur
management and other costs which reduce returns to Fund shareholders. In
addition, the Fund, unlike the Index, holds a small portion of its balances in
cash to meet shareholder redemptions and to pay expenses. The cash portion earns
interest at money market rates, which may be more or less than the returns of
the Index during a given period. Also, the weighting of any particular security
in the Fund can be greater or less than that in the Index.
Another factor accounting for the difference in performance is the Fund's goal
of minimizing capital gain distributions. In order to avoid excessive
realization of capital gains, the Fund may continue to hold certain stocks that
are no longer in the Index. Depending on the performance of these non-Index
stocks, this practice may contribute a positive or negative tracking error to
the Fund.
Taken together, these factors cause the difference in returns of the Fund
compared to the Index, a difference referred to as the Fund's "tracking error."
The tracking error for the Fund during the reporting period was 0.33%, and its
average annual tracking error since inception on 4/2/91 has been 0.48%. Given
the Fund's current operating expense ratio of 0.49% and the components of
tracking error discussed above, we are very pleased with this level of tracking
error.
Q. HOW DID THE PERFORMANCE OF THE SCHWAB 1000 INDEX(R) COMPARE TO THE
PERFORMANCE OF THE S&P 500 DURING THE REPORTING PERIOD?
A. Although the total return of the Schwab 1000 Index continues to exceed that
of the S&P 500 on a Fund inception-to-date basis, the S&P 500 marginally
outperformed the Schwab 1000 Index for the six-month period ended 2/29/96, when
its total return was 15.30% versus 14.76% for the Schwab 1000 Index. One reason
for this differential was the better performance of large capitalization stocks
relative to mid-cap stocks, which comprise a portion of the Schwab 1000 Index.
Since the two indices are constructed differently, differences in performance
between them are a normal and anticipated occurrence. The S&P 500 includes 500
large market capitalization stocks as determined by the Standard & Poor's Index
Committee. Stocks in the S&P 500 are chosen for market size, liquidity, and
industry group representation. The Schwab 1000 Index is much broader, including
the common stocks of the 1,000 largest U.S. operating corporations (excluding
investment companies) ranked by market capitalization.
<PAGE> 11
Q. HOW DID THE FUND'S PRE-TAX AND AFTER-TAX TOTAL RETURN COMPARE TO THAT OF
OTHER GROWTH AND INCOME FUNDS?
A.
PRE-TAX AND AFTER-TAX PERFORMANCE FOR THE PERIODS ENDED 2/29/96 10
<TABLE>
<CAPTION>
Three-Year One-Year
Average Annual Return Total Return
- --------------------------------------------------------------------------------
<S> <C> <C>
Fund Pre-Tax Total Return 15.43% 33.89%
Peer Group Median 14.29% 30.47%
Percentile Rank in Peer Group 65% 79%
- --------------------------------------------------------------------------------
Fund After-Tax Total Return 14.62% 33.15%
Peer Group Median 11.34% 26.38%
Percentile Rank in Peer Group 89% 94%
- --------------------------------------------------------------------------------
</TABLE>
The Fund's average annual total return since inception was 14.40% before taxes
and 14.02% after taxes.
As the table above shows, the Fund has enjoyed strong pre-tax returns when
compared to other funds in the growth and income category. It is particularly
gratifying to see even better results on an after-tax basis. This shows that the
Fund's tax-efficient management strategies are working and providing real
benefits to shareholders. These strategies are designed to minimize portfolio
turnover and capital gain distributions to shareholders.
10 Source: Morningstar, Inc., as of 2/29/96. For 283 growth and income funds
with three-year performance histories and 456 growth and income funds with
one-year performance histories. After-tax returns assume the maximum federal
rate of 39.6% on ordinary income dividends and 28% on capital gain
distributions. Past performance is no guarantee of future results. Principal
value and investment returns will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their original cost. The Investment
Manager and Schwab have waived a portion of their fees and guaranteed maximum
total operating expenses of 0.49% during the reporting period. Without the
waivers or reimbursements, the Fund's average annual total return since
inception would have been 15.36%; the one-year total return would have been
33.81%; and the six-month total return would have been 14.35%.
<PAGE> 12
SchwabFunds(R) 1
- --------------------------------------------------------------------------------
SCHWAB 1000 FUND(R)
STATEMENT OF NET ASSETS
February 29, 1996
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- ----------
<S> <C> <C>
COMMON STOCK--99.6%
AEROSPACE/DEFENSE--2.3%
BFGoodrich Co. 6,200 $ 472
Boeing Co. 76,300 6,190
General Dynamics Corp. 14,900 888
General Motors Corp. Class H 22,000 1,260
Litton Industries, Inc.* 10,500 530
Lockheed Martin Corp. 43,492 3,316
Loral Corp. 43,100 2,031
McDonnell Douglas Corp. 23,700 2,092
Northrop Grumman Corp. 9,900 611
Raytheon Co. 53,000 2,657
Rockwell International Corp. 48,500 2,765
Sundstrand Corp. 7,300 550
TRW Inc. 14,400 1,247
Textron Inc. 18,700 1,473
United Technologies Corp. 26,300 2,827
------
28,909
------
AIR TRANSPORTATION--0.6%
AMR Corp.* 15,900 1,395
Continental Airlines Inc.* 7,200 345
Delta Air Lines, Inc. 11,700 913
Federal Express Corp.* 12,800 947
FlightSafety International,
Inc. 4,800 256
Northwest Airlines Corp.
Class A* 19,000 873
Southwest Airlines Co. 36,400 1,119
UAL Corp.* 5,400 965
Valujet Inc.* 8,000 185
------
6,998
------
ALCOHOLIC BEVERAGES--0.3%
Anheuser-Busch
Companies, Inc. 54,700 3,685
Brown-Forman Corp. Class B 15,500 606
------
4,291
------
APPAREL--0.5%
Burlington Industries Inc.* 16,400 187
Fruit of the Loom, Inc.
Class A* 18,800 477
Jones Apparel Group, Inc.* 3,300 137
Liz Claiborne 17,500 549
Nautica Enterprises Inc.* 5,000 206
Nike Inc. Class B 31,100 2,018
Nine West Group Inc.* 7,700 302
Reebok International Ltd. 16,700 440
Russell Corp. 5,900 165
Talbots, Inc. 7,500 227
Unifi, Inc. 16,925 410
V.F. Corp. 12,300 661
Warnaco, Inc. Class A 13,600 354
------
6,133
------
AUTOMOTIVE PRODUCTS--0.2%
Bandag, Inc. 4,000 204
Cooper Tire & Rubber Co. 19,500 495
Danaher Corp. 12,800 435
Goodyear Tire & Rubber Co. 33,700 1,601
------
2,735
------
BANKS--7.4%
AmSouth Bancorp. 11,700 461
Banc One Corp. 106,021 3,777
Bancorp Hawaii, Inc. 10,175 354
<CAPTION>
Number Value
of Shares (000s)
--------- ----------
<S> <C> <C>
Bank of Boston Corp. 24,300 $1,182
Bank of New York Co., Inc. 43,000 2,231
BankAmerica Corp. 84,495 6,020
Bankers Life Holdings Corp. 6,900 155
Bankers Trust New York Corp. 15,900 1,028
Barnett Banks Inc. 23,088 1,443
BayBanks, Inc. 5,600 587
Boatmen's Bancshares Inc. 38,700 1,514
Central Fidelity Banks, Inc. 5,850 200
Chase Manhattan Corp. 39,500 2,943
Chemical Banking Corp. 54,530 3,906
Citicorp 108,300 8,447
Comerica Inc. 24,264 943
Commerce Bancshares, Inc. 7,056 256
Compass Bancshares, Inc. 8,850 288
CoreStates Financial Corp. 29,000 1,247
Crestar Financial Corp. 7,900 462
Dauphin Deposit Bank & Trust
Co. 10,100 294
Deposit Guaranty Corp. 3,000 141
Dime Bancorp Inc. (New)* 24,926 280
Fifth Third Bancorp 21,975 1,118
First American Corp. 5,900 264
First Bank System, Inc. 31,109 1,793
First Chicago Corp. 74,521 3,232
First Commerce Corp. 10,562 345
First Empire State Corp. 1,000 241
First Hawaiian, Inc. 5,000 143
First Interstate Bancorp 16,600 2,712
First Security Corp. 19,612 530
First Tennessee National
Corp. 16,300 515
First Union Corp. 64,793 3,920
First Virginia Banks, Inc. 9,750 389
First of America Bank Corp. 13,000 569
Firstar Corp. 15,000 677
Firstmerit Corp. 5,400 159
Fleet Financial Group Inc. 64,380 2,648
Greenpoint Financial Corp. 13,000 345
Hibernia Corp. Class A 17,400 187
Huntington Bancshares Inc. 28,102 660
Integra Financial Corp. 7,900 538
J.P. Morgan & Co., Inc. 41,900 3,431
KeyCorp (New) 58,923 2,217
Marshall & Ilsley Corp. 19,828 494
Mellon Bank Corp. 33,272 1,859
Mercantile Bancorp Inc. 14,450 650
Mercantile Bankshares Corp. 6,750 178
Meridian Bancorp, Inc. 13,900 718
National City Corp. 30,440 1,058
NationsBank Corp. 65,164 4,806
Northern Trust Corp. 10,450 553
Norwest Corp. 84,288 3,077
Old Kent Financial Corp. 7,505 301
PNC Bank Corp. 73,030 2,237
Regions Financial Corp. 8,850 407
Republic New York Corp. 11,200 671
Signet Banking Corp. 15,300 398
SouthTrust Corp. 17,425 453
Southern National Corp. 18,750 525
Star Banc Corp. 7,100 447
State Street Boston Corp. 15,700 710
Summit Bancorp 10,000 347
SunTrust Banks, Inc. 24,600 1,768
Synovus Financial Corp. 17,100 500
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE> 13
SchwabFunds(R) 2
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- ----------
<S> <C> <C>
U S Bancorp 35,391 $ 1,093
UJB Financial Corp. 13,900 528
Union Bank 7,400 386
Union Planters Corp. 12,100 374
Valley National Bancorp 10,824 272
Wachovia Corp. (New) 42,520 1,977
Wells Fargo & Co. 10,200 2,516
Wilmington Trust Co. 4,900 164
Zions Bancorp. 2,900 215
------
94,474
------
BUSINESS MACHINES & SOFTWARE--5.9%
3COM Corp.* 34,800 1,699
Adaptec, Inc.* 15,200 852
Adobe Systems Inc. 14,900 502
Amdahl Corp.* 16,100 135
Apple Computer, Inc. 23,700 653
Autodesk, Inc. 12,200 432
BMC Software, Inc.* 12,100 676
Bay Networks, Inc.* 38,123 1,549
Broderbund Software Inc.* 3,900 177
Cabletron Systems Inc.* 17,050 1,281
Ceridian Corp.* 17,480 752
Cheyenne Software Inc.* 12,500 292
Cirrus Logic, Inc.* 12,200 230
Cisco Systems Inc.* 119,000 5,645
Comdisco, Inc. 7,222 148
Compaq Computer Corp.* 61,600 3,119
Concord EFS, Inc.* 9,900 270
Dell Computer Corp.* 17,000 585
Diebold, Inc. 7,912 311
Digital Equipment Corp.* 32,000 2,304
Fiserv, Inc.* 8,975 280
Gateway 2000 Inc.* 14,000 415
Honeywell Inc. 26,900 1,426
Informix Corp.* 29,600 1,047
Input/Output, Inc.* 11,400 339
Integrated Device Technology
Inc.* 11,400 138
International Business
Machines Corp. 125,600 15,402
Iomega Corp.* 19,500 364
Komag Inc.* 27,200 853
Microchip Technology Inc.* 9,500 265
Micron Electronics* 20,000 215
Microsoft Corp.* 134,600 13,283
Novell Inc.* 74,000 911
Novellus Systems, Inc.* 2,200 116
Oracle Systems Corp.* 98,850 5,146
PLATINUM technology, inc.* 12,300 173
Picturetel Corp.* 4,800 170
Pitney Bowes Inc. 34,300 1,655
Quantum Corp.* 8,100 139
Read-Rite Corp.* 7,000 131
Seagate Technology, Inc.* 20,530 1,340
Shiva Corp.* 4,200 351
Silicon Graphics, Inc.* 32,900 823
Sterling Software, Inc.* 7,200 480
Storage Technology Corp.* 14,800 448
Structural Dynamics Research
Corp.* 10,000 306
Sun Microsystems Inc.* 42,700 2,244
Sybase, Inc.* 15,120 476
<CAPTION>
Number Value
of Shares (000s)
--------- ----------
<S> <C> <C>
System Software Associates,
Inc. 11,000 $ 232
Tandem Computers Inc.* 17,800 171
Total System Services, Inc. 15,900 455
Unisys Corp.* 25,900 159
Xerox Corp. 25,400 3,308
------
74,873
------
BUSINESS SERVICES--3.0%
America Online, Inc.* 17,600 868
Apria Healthcare Group Inc.* 14,000 433
Automatic Data Processing,
Inc. 63,700 2,468
Browning Ferris Industries
Inc. 45,200 1,339
Cintas Corp. 9,100 445
Computer Associates
International Inc. 55,050 3,785
Computer Sciences Corp.* 10,800 788
Computervision Corp. (New)* 20,000 213
Corrections Corp. of
America* 9,000 428
Credit Acceptance Corp.* 7,000 133
Cytec Industries Inc.* 4,585 353
Deluxe Corp. 20,400 655
Dial Corp. 20,100 603
Dun & Bradstreet Corp. 36,600 2,315
Ecolab Inc. 14,400 437
Equifax Inc. 31,000 643
FORE Systems, Inc.* 6,700 441
First Data Corp. 49,651 3,438
GTECH Holdings Corp.* 15,700 510
H & R Block, Inc. 22,700 803
HBO & Co. 9,300 923
Interpublic Group of
Companies, Inc. 15,100 636
Intuit* 11,800 788
Kelly Services, Inc. Class A 5,525 160
Manpower Inc. 19,500 612
Medaphis Corp.* 8,200 320
Micro Warehouse, Inc.* 6,300 301
National Service
Industries, Inc. 12,200 425
Netmanage Inc.* 13,400 167
Ogden Corp. 10,388 222
Olsten Corp. 9,050 414
Omnicom Group Inc. 14,600 597
Parametric Technology Corp.* 13,100 974
Paychex, Inc. 8,150 451
Peoplesoft Inc.* 11,400 618
Pittston Services Group 9,900 231
Policy Management Systems
Corp.* 3,000 153
Reynolds & Reynolds Co.
Class A 10,200 386
Robert Half International
Inc.* 8,200 343
Safety-Kleen Corp. 8,600 125
Shared Medical Systems Corp. 3,400 189
Stratacom Inc.* 13,600 547
SunGard Data Systems Inc.* 8,800 305
Symantec Corp.* 22,300 287
Synopsys Inc.* 9,800 323
Thermo Cardiosystems Inc.* 5,000 371
Thermotrex Corp.* 5,000 220
U.S. Robotics, Inc.* 8,000 993
USA Waste Services, Inc.* 17,000 363
WMX Technologies Inc. 113,000 3,221
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE> 14
SchwabFunds(R) 3
- --------------------------------------------------------------------------------
SCHWAB 1000 FUND(R)
STATEMENT OF NET ASSETS
February 29, 1996
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- ----------
<S> <C> <C>
Wallace Computer
Services, Inc. 3,400 $ 190
Wheelabrator
Technologies Inc.* 37,300 592
------
37,545
------
CHEMICAL--3.4%
ARCO Chemical Co. 20,600 1,056
Air Products & Chemicals
Inc. 22,700 1,209
Airgas, Inc.* 4,300 155
Albemarle Corp. 9,400 181
Betz Laboratories, Inc. 4,100 179
Cabot Corp. 8,900 538
Dow Chemical Co. 60,500 4,855
E.I. Du Pont de
Nemours & Co. 124,700 9,540
Eastman Chemical Co. 17,725 1,276
Ethyl Corp. 31,300 336
Georgia Gulf Corp. 5,600 179
Great Lakes Chemical Corp. 13,000 930
Hercules Inc. 23,400 1,404
International Speciality
Products Inc.* 15,400 191
Loctite Corp. 9,300 493
Lubrizol Corp. 15,600 456
Lyondell Petrochemical Co. 16,300 438
M.A. Hanna Co. 7,150 202
Minnesota Mining &
Manufacturing Co. 95,800 6,239
Monsanto Co. 27,100 3,648
Morton International Inc. 31,900 1,208
Nalco Chemical Co. 14,800 470
Olin Corp. 5,000 414
PPG Industries Inc. 43,100 1,999
Praxair Inc. 30,900 1,066
RPM, Inc. 10,875 162
Rohm & Haas Co. 14,300 996
Sigma-Aldrich Corp. 10,100 577
Union Carbide Corp. 29,500 1,328
Valspar Corp. 2,800 125
W.R. Grace & Co. 20,900 1,442
Witco Corp. 12,900 421
------
43,713
------
CONSTRUCTION--0.6%
Armstrong World
Industries, Inc. 8,100 475
Centex Corp. 10,200 293
Clayton Homes, Inc. 21,077 398
Crane Co. 4,600 186
Fluor Corp. 17,000 1,141
Lafarge Corp. 8,600 159
Lennar Corp. 11,500 276
Manville Corp.* 26,100 333
Martin Marietta Materials,
Inc. 6,400 144
Masco Corp. 33,400 952
Oakwood Homes Corp. 7,000 312
Owens Corning* 11,600 471
Pulte Corp. 7,500 224
Sherwin-Williams Co. 18,400 780
Sonoco Products Co. 21,310 583
Stanley Works 9,900 559
<CAPTION>
Number Value
of Shares (000s)
--------- ----------
<S> <C> <C>
USG Corp.* 11,700 $ 310
Vulcan Materials Co. 7,800 423
------
8,019
------
CONSUMER-DURABLE--0.5%
Black & Decker Corp. 19,500 658
Hillenbrand Industries, Inc. 15,000 489
Leggett & Platt, Inc. 18,300 428
Maytag Corp. 22,800 447
Newell Co. 37,674 1,045
Pittway Corp. Class A 4,500 307
QUALCOMM Inc.* 14,700 580
Shaw Industries, Inc. 30,100 342
Staples, Inc.* 20,737 538
Sunbeam-Oster Co., Inc. 14,100 227
Viking Office Products,
Inc.* 8,100 462
Whirlpool Corp. 14,600 812
------
6,335
------
CONSUMER-NONDURABLE--1.6%
American Greetings Corp.
Class A 13,700 375
Apple South Inc. 12,350 272
Boston Chicken, Inc.* 15,600 561
Brinker International, Inc.* 10,725 146
Coleman Co., Inc.* 3,600 158
Cracker Barrel Old Country
Store, Inc. 8,700 183
Darden Restaurants Inc. 38,600 473
Duracell International, Inc. 29,500 1,523
Electronic Arts Inc.* 11,400 286
Fastenal Co.* 9,700 350
First Brands Corp. 6,400 171
Harcourt General, Inc. 14,700 638
Hasbro, Inc. 18,150 626
International Game
Technology 33,600 496
Jostens, Inc. 9,900 225
Lancaster Colony Corp. 4,000 152
Lone Star Steakhouse &
Saloon, Inc.* 7,400 237
Mattel Inc. 49,776 1,655
McDonald's Corp. 156,100 7,805
Outback Steakhouse, Inc.* 11,250 398
Premark International, Inc. 11,800 618
Rubbermaid Inc. 36,000 1,013
Service Corp. International 26,400 1,198
Starbucks Corp.* 12,000 212
Stewart Enterprises Inc.
Class A 3,700 153
Wendy's International Inc. 23,500 426
------
20,350
------
CONTAINERS--0.2%
Bemis Co., Inc. 13,400 410
Crown Cork & Seal Inc.* 32,700 1,541
Owens-Illinois, Inc.* 30,900 502
Sealed Air Corp.* 9,600 283
Stone Container Corp. 22,112 304
------
3,040
------
ELECTRONICS--5.1%
ADC Telecommunications,
Inc.* 12,600 504
AMP Inc. 46,200 1,969
Advanced Micro Devices,
Inc.* 24,900 482
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE> 15
SchwabFunds(R) 4
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- ----------
<S> <C> <C>
Altera Corp.* 9,200 $ 602
American Power Conversion
Corp.* 14,000 148
Amphenol Corp. Class A* 6,500 158
Analog Devices, Inc.* 23,550 633
Andrew Corp.* 7,250 374
Anixter International Inc.* 8,600 162
Applied Materials Inc.* 36,400 1,299
Arrow Electronics, Inc.* 9,000 443
Ascend Communications, Inc.* 22,400 1,014
Atmel Corp.* 19,200 512
Avnet, Inc. 9,100 454
Cadence Design
Systems Inc.* 13,250 591
Cypress Semiconductor Corp.* 15,600 199
EG&G, Inc. 7,200 172
EMC Corp.* 49,400 1,087
Electronics for Imaging,
Inc.* 7,500 341
Exide Corp. 2,700 82
General Instrument Corp.* 25,000 681
General Motors Corp. Class E 100,500 5,741
General Signal Corp. 11,600 422
Glenayre Technologies, Inc.* 14,600 647
Harris Corp. 8,300 552
Hewlett-Packard Co. 115,200 11,606
ITT Industries, Inc.* 21,900 575
Intel Corp. 180,700 10,627
International Rectifier
Corp.* 7,600 156
KLA Instruments Corp.* 10,400 250
Kemet Corp.* 5,800 135
LCI International Inc.* 17,000 387
LSI Logic Corp.* 32,100 887
Lam Research Corp.* 5,200 191
Lin Television Corp.* 10,550 363
Linear Technology Corp. 18,700 872
Macromedia Inc.* 9,400 377
Maxim Integrated
Products Inc.* 14,600 530
Micron Technology Inc. 49,200 1,574
Molex Inc. 23,445 829
Molex Inc. Class A 12,366 413
Motorola Inc. 132,800 7,204
National Semiconductor
Corp.* 33,300 520
Nextel Communications Inc.* 46,100 700
Perkin-Elmer Corp. 10,300 474
SCI Systems, Inc.* 9,000 334
Scientific-Atlanta, Inc. 11,700 196
Sensormatic Electronics
Corp. 11,150 233
Symbol Technologies, Inc.* 4,300 163
Tektronix, Inc. 7,600 345
Teledyne Inc. 13,600 383
Teradyne, Inc.* 17,900 365
Texas Instruments Inc. 40,500 2,020
Thermo Electron Corp. 19,825 1,085
Thomas & Betts Corp. 5,200 374
Varian Associates, Inc. 4,800 250
Vishay Intertechnology,
Inc.* 12,200 322
Western Digital Corp.* 8,800 184
Xilinx, Inc.* 17,400 673
------
64,866
------
<CAPTION>
Number Value
of Shares (000s)
--------- ----------
<S> <C> <C>
ENERGY AND RESOURCE
SERVICES--0.0%
Cooper Cameron Corp.* 7,500 $ 244
------
ENERGY-DEVELOPMENT--1.1%
Anadarko Petroleum Corp. 12,500 681
Apache Corp. 17,100 445
Baker Hughes Inc. 28,200 744
Burlington Resources Inc. 27,000 982
Dresser Industries, Inc. 39,560 1,113
ENSCO International Inc.* 16,400 396
Enron Oil & Gas Co. 30,800 770
FINA, Inc. Class A 8,000 385
Freeport-McMoRan, Inc. 4,250 181
Global Marine, Inc.* 51,500 457
Halliburton Co. 23,600 1,295
Louisiana Land & Exploration
Co. 8,700 363
Mitchell Energy &
Development Corp. Class A 8,000 136
NGC Corp. 31,000 353
Nabors Industries Inc.* 21,100 272
Noble Affiliates, Inc. 12,400 380
Noble Drilling Corp.* 30,000 291
Occidental Petroleum Corp. 72,400 1,665
Reading & Bates Corp.* 18,500 354
Tidewater Inc. 12,600 430
Triton Energy Corp.* 8,200 407
Union Texas Petroleum
Holdings, Inc. 21,100 417
Valero Energy Corp. 6,600 156
Vastar Resources 19,800 626
Weatherford Enterra Inc.* 9,400 288
------
13,587
------
FOOD-AGRICULTURE--5.6%
AGCO Corp. 6,600 179
Archer Daniels Midland Co. 117,660 2,265
CPC International Inc. 31,200 2,161
Campbell Soup Co. 52,900 3,267
Coca-Cola Co. 277,900 22,440
Coca-Cola Enterprises Inc. 26,700 758
ConAgra Inc. 51,524 2,170
Dean Foods Co. 6,150 158
Dole Food Company, Inc. 13,100 527
General Mills Inc. 37,600 2,162
General Nutrition Companies,
Inc.* 14,600 332
H.J. Heinz Co. 85,000 2,890
Hershey Foods Corp. 15,700 1,183
Hormel Foods Corp. 19,100 480
IBP, Inc. 20,400 510
IMC Fertilizer, Inc. 13,400 553
Kellogg Co. 47,400 3,579
McCormick & Co., Inc. 15,400 353
Nabisco Holdings Corp.
Class A 14,000 492
Pepsico Inc. 175,700 11,113
Petsmart Inc.* 10,200 356
Pioneer Hi-Bred
International, Inc. 19,400 1,045
Quaker Oats Co. 28,100 966
Ralston Purina Group 26,300 1,762
Sara Lee Corp. 108,100 3,500
Southland Corp.* 70,000 267
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE> 16
SchwabFunds(R) 5
- --------------------------------------------------------------------------------
SCHWAB 1000 FUND(R)
STATEMENT OF NET ASSETS
February 29, 1996
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- ----------
<S> <C> <C>
Stop & Shop Companies, Inc.* 7,400 $ 170
Supervalu Inc. 15,800 510
Sysco Corp. 40,000 1,315
Tootsie Roll Industries,
Inc. 7,864 307
Tyson Foods, Inc. Class A 31,200 702
Universal Foods Corp. 4,100 155
Vigoro Corp. 7,100 470
Vons Companies, Inc.* 11,700 336
Whitman Corp. 23,900 556
Wm. Wrigley Jr. Co. 27,100 1,592
------
71,581
------
GOLD--0.3%
Homestake Mining Co. 27,800 539
Newmont Gold Co. 21,800 1,226
Newmont Mining Corp. 20,132 1,145
Santa Fe Pacific Gold Corp.* 25,720 402
------
3,312
------
HEALTHCARE--10.3%
ALZA Corp.* 17,600 585
Abbott Laboratories 172,400 7,198
Allergan, Inc. 15,700 585
American Home
Products Corp. 68,200 6,718
American Oncology Resources
Inc.* 6,000 242
Amgen Inc.* 62,700 3,742
Arrow International Inc. 3,100 130
C.R. Bard, Inc. 13,600 488
Bausch & Lomb Inc. 13,100 509
Baxter International Inc. 58,900 2,695
Beckman Instruments, Inc. 4,300 156
Becton, Dickinson & Co. 13,900 1,140
Bergen Brunswig Corp.
Class A 6,483 156
Beverly Enterprises, Inc.* 18,400 223
Biogen, Inc.* 7,400 483
Biomet Inc.* 19,900 378
Boston Scientific Corp.* 35,971 1,727
Bristol Myers Squibb Co. 111,200 9,466
Cardinal Health Inc. 10,862 654
Caremark International, Inc. 17,475 446
Centocor, Inc.* 10,600 308
Cephalon Inc.* 5,600 119
Chiron Corp.* 8,903 988
Columbia/HCA
Healthcare Corp. 96,772 5,298
Eli Lilly & Co. 120,484 7,289
FHP International Corp.* 10,500 346
Forest Laboratories, Inc.* 9,300 484
Foundation Health Corp.* 12,200 476
Genentech Inc.* 26,700 1,458
Genetics Institute* 4,900 336
Genzyme Corp.
General Division* 6,000 415
Guidant Corp. 17,168 813
Health Care and Retirement
Corp.* 6,700 272
Health Management
Associates, Inc. Class A* 14,112 443
HealthCare Compare Corp.* 6,000 293
Healthsource, Inc.* 17,000 644
Healthsouth Rehabilitation
Corp.* 29,600 1,036
Horizon Healthcare Corp.* 13,800 328
<CAPTION>
Number Value
of Shares (000s)
--------- ----------
<S> <C> <C>
Humana Inc.* 31,900 $ 782
IVAX Corp. 23,200 664
IDEXX Laboratories, Inc.* 9,800 469
Johnson & Johnson 146,501 13,698
Laboratory Corp. of America
Holdings, Inc.* 18,648 145
Mallinckrodt Group Inc. 15,300 601
Manor Care, Inc. 14,550 558
Marquette Electronics, Inc.* 10,000 196
McKesson Corp. (New) 9,700 507
Medtronic Inc. 52,500 3,012
Merck & Co. Inc. 275,954 18,282
Mid Atlantic Medical
Services Inc.* 7,800 165
Mylan Laboratories Inc. 25,550 498
Nellcor Puritan Bennett
Inc.* 7,500 503
Omnicare Inc. 13,300 642
OrNda Healthcorp* 16,300 418
PacifiCare Health Systems,
Inc.
Class B* 9,300 877
Perrigo Co.* 12,100 171
Pfizer Inc. 142,600 9,394
Phycor Inc.* 8,200 371
Physician Sales &
Service Inc.* 10,000 268
Quintiles Transnational
Corp.* 6,000 397
R.P. Scherer Corp.* 3,600 158
Rhone-Poulenc Rorer Inc. 28,100 1,798
Schering-Plough Corp. 79,400 4,456
St. Jude Medical, Inc.* 13,950 523
Stryker Corp. 8,800 478
Summit Technology Inc.* 8,000 230
Sybron International Corp.* 9,800 228
Tenet Healthcare Corp.* 55,368 1,239
Thermedics Inc.* 7,800 203
U.S. Healthcare, Inc. 36,225 1,764
United Healthcare Corp. 38,900 2,538
United States Surgical Corp. 15,300 434
Value Health Inc.* 9,082 235
Vencor Inc.* 15,775 590
Vivra Inc.* 11,000 325
Warner Lambert Co. 29,600 2,927
Watson Pharmaceuticals Inc.* 9,500 409
WellPoint Health Networks
Inc. Class A* 19,900 674
-------
130,894
-------
HOUSEHOLD PRODUCTS--1.9%
Alberto-Culver Co. Class B
(Convertible) 4,500 159
Avon Products Inc. 15,400 1,238
Clorox Co. 10,500 890
Colgate Palmolive Co. 32,500 2,543
Gillette Co. 102,500 5,548
International Flavors &
Fragrances Inc. 24,500 1,228
Procter & Gamble Co. 152,700 12,521
Tambrands Inc. 8,900 429
Thermolase Corp.* 5,700 149
-------
24,705
-------
IMAGING & PHOTO--0.7%
C-Cube Microsystems Inc.* 8,000 555
Corning Inc. 47,800 1,554
Dentsply International Inc. 4,100 163
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE> 17
SchwabFunds(R) 6
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- ----------
<S> <C> <C>
Eastman Kodak Co. 78,500 $ 5,613
Polaroid Corp. 10,700 471
------
8,356
------
INSURANCE--4.1%
20th Century Industries* 16,500 278
AFLAC Inc. 18,950 879
AMBAC Inc. 9,300 449
Aetna Life & Casualty Co. 24,900 1,883
Alleghany Corp.* 1,040 205
Allmerica Property &
Casualty Companies, Inc. 10,700 276
Allstate Corp. 119,124 5,107
American General Corp. 43,600 1,586
American International Group
Inc. 105,725 10,216
American National
Insurance Co. 5,700 391
American Re Corp. 11,300 434
Aon Corp. 27,350 1,422
CIGNA Corp. 16,400 1,943
CNA Financial Corp.* 14,000 1,628
Chubb Corp. 18,000 1,748
Cincinnati Financial Corp. 13,560 888
Conseco, Inc. 4,000 271
Equitable Companies, Inc. 38,100 962
Equitable of Iowa Companies 4,700 182
First Colony Corp. 7,550 187
General Re Corp. 18,000 2,590
Hartford Steam Boiler
Inspection & Ins. Co. 2,700 135
Health Systems
International, Inc.* 10,400 380
ITT Hartford Group Inc.* 25,400 1,308
Jefferson-Pilot Corp. 15,150 843
Lincoln National Corp. 25,100 1,381
MBIA Corp. 8,500 646
MGIC Investment Corp. 11,700 682
Marsh & McLennan Companies 17,100 1,661
Mercury General Corp. 4,200 183
Ohio Casualty Corp. 5,300 197
Old Republic International
Corp. 11,900 408
Oxford Health Plans Inc.* 7,100 585
Paul Revere Corp. 6,900 160
Progressive Corp. 16,300 750
Protective Life Corp. 3,800 133
Providian Corp. 19,400 897
Quorum Health Group, Inc.* 7,100 175
Reliance Group Holdings Inc. 35,000 284
Reliastar Financial Corp. 5,800 278
Safeco Corp. 27,600 1,004
St. Paul Companies Inc. 17,800 1,008
Sunamerica, Inc. 13,150 717
Torchmark Corp. 15,650 726
Transamerica Corp. 15,500 1,168
Transatlantic Holdings, Inc. 5,800 407
UNUM Corp. 15,308 901
USF&G Corp. 19,800 297
USLIFE Corp. 5,400 163
Unitrin, Inc. 7,200 354
<CAPTION>
Number Value
of Shares (000s)
--------- ----------
<S> <C> <C>
W.R. Berkley Corp. 6,100 $ 278
Western National Corp. 9,500 148
------
51,782
------
MEDIA--2.9%
A.H. Belo Corp. Class A 6,000 210
BHC Communications, Inc.
Class A* 5,700 527
Banta Corp. 6,000 254
Capital Cities/ABC, Inc. 32,600 4,132
Chris-Craft Industries,
Inc.* 4,423 187
Clear Channel
Communications* 9,600 486
Comcast Corp. Class A
Special 51,400 1,012
Cox Communications, Inc.
Class A* 67,306 1,481
Diamond Multimedia Systems
Inc.* 10,000 185
Dow Jones & Co. Inc. 22,000 858
E.W. Scripps Co. Class A 15,175 637
Gannett Inc. 33,800 2,298
Gartner Group Inc. Class A
(New)* 7,600 413
Gaylord Entertainment Co.
Class A 19,390 519
Infinity Broadcasting Corp.
Class A* 13,725 566
King World Productions,
Inc.* 5,600 235
Knight-Ridder, Inc. 9,200 637
Lee Enterprises, Inc. 7,000 151
Marvel Entertainment Group,
Inc.* 14,500 167
McGraw-Hill, Inc. 11,000 961
Meredith Corp. 8,000 351
New York Times Co. Class A 21,313 586
Paging Network, Inc.* 30,300 812
R.R. Donnelley & Sons Co. 32,500 1,170
Reader's Digest Assoc. Inc.
Class A 28,800 1,379
Scholastic Corp.* 2,800 196
Spelling Entertainment
Group, Inc.* 13,200 153
Tele-Communications Inc.
(Liberty Media Group) Class
A* 26,086 724
Tele-Communications Inc.
(TCI Group) Series A* 139,846 2,928
Time Warner Inc. 83,480 3,569
Times Mirror Co. Series A
(New) 22,400 762
Tribune Co. (New) 15,600 1,041
Turner Broadcasting System,
Inc. Class A 17,200 490
Turner Broadcasting System,
Inc. Class B 41,800 1,212
United Television, Inc.* 3,000 272
Viacom Inc. Class A* 18,212 708
Viacom Inc. Class B* 80,674 3,166
Washington Post Co. Class B 2,500 720
------
36,155
------
MISCELLANEOUS FINANCE--4.3%
A.G. Edwards & Sons, Inc. 15,562 377
ADVANTA Corp. Class A 14,600 695
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE> 18
SchwabFunds(R) 7
- --------------------------------------------------------------------------------
SCHWAB 1000 FUND(R)
STATEMENT OF NET ASSETS
February 29, 1996
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- ----------
<S> <C> <C>
AT&T Capital Corp. 10,900 $ 451
American Express Co. 111,400 5,124
Bear Stearns Companies Inc. 24,548 595
Beneficial Corp. 10,700 556
Berkshire Hathaway Inc.* 270 9,585
Capital One Financial Corp. 17,000 455
Case Corp. 15,300 813
Charter One Financial Inc. 12,500 427
Countrywide Credit
Industries, Inc. 20,885 439
Dean Witter, Discover & Co. 40,495 2,177
Federal Home Loan Mortgage
Corp. 38,800 3,201
Federal National Mortgage
Assoc. 247,300 7,821
Finova Group, Inc. 4,000 214
First USA, Inc. 11,200 561
Franklin Resources, Inc. 17,200 991
Golden West Financial Corp. 11,800 597
Great Western Financial
Corp. 30,800 705
Green Tree Financial Corp. 30,000 949
H.F. Ahmanson and Co. 24,800 564
Household International Inc. 20,100 1,352
John Nuveen Co. Class A 5,200 129
Lehman Brothers Holdings
Inc. 22,880 566
Leucadia National Corp. 13,000 346
MBNA Corp. 49,800 1,407
Mercury Finance Co. 35,563 489
Merrill Lynch & Co. Inc. 38,800 2,236
Morgan Stanley Group Inc. 32,800 1,538
Paine Webber Group Inc. 17,625 350
Salomon Inc. 21,900 835
Standard Federal Bank 4,700 194
Student Loan Marketing
Assoc. 15,100 1,248
T. Rowe Price Associates,
Inc. 6,600 355
TCF Financial Corp. 12,800 482
TIG Holdings, Inc. 16,300 515
Travelers Group Inc. 69,817 4,669
United Asset Management
Corp. 9,200 393
Washington Federal, Inc. 6,705 145
Washington Mutual, Inc. 11,125 335
Wesco Financial Corp. 1,000 180
------
55,061
------
MOTOR VEHICLE--2.0%
Chrysler Corp. 83,000 4,679
Cummins Engine Co., Inc. 10,400 438
Dana Corp. 22,300 675
Eaton Corp. 17,900 1,036
Echlin Inc. 13,800 467
Fleetwood Enterprises, Inc. 6,700 180
Ford Motor Co. 241,400 7,544
General Motors Corp. 166,700 8,543
Genuine Parts Co. 25,450 1,088
Harley-Davidson, Inc. 15,700 563
Lear Seating Corp.* 14,000 446
------
25,659
------
NON-FERROUS--0.6%
Alumax Inc.* 12,500 452
Aluminum Co. of America 42,200 2,395
Asarco Inc. 10,800 323
Cyprus Amax Minerals Co. 18,300 474
<CAPTION>
Number Value
of Shares (000s)
--------- ----------
<S> <C> <C>
Engelhard Corp. 32,687 $ 666
Freeport-McMoRan Copper &
Gold Inc. Class A 29,531 945
Freeport-McMoRan Copper &
Gold Inc. Class B 17,894 584
Kaiser Aluminum Corp.* 21,600 327
Phelps Dodge Corp. 15,400 941
Reynolds Metals Co. 14,800 764
Terra Industries Inc. 11,100 136
------
8,007
------
OIL-DOMESTIC--1.1%
Amerada Hess Corp. 19,500 1,004
Ashland, Inc. 18,600 681
Atlantic Richfield Co. 35,600 3,898
Kerr-McGee Corp. 10,600 632
MAPCO Petroleum Inc. 7,400 403
Murphy Oil Corp. 8,370 349
Oryx Energy Co.* 28,200 363
Pennzoil Co. 11,000 421
Phillips Petroleum Co. 57,500 2,013
Pogo Producing Co. 10,000 339
Republic Industries Inc.* 15,000 438
Santa Fe Energy Resources,
Inc.* 13,600 126
Smith International Inc. 10,000 204
Sonat Offshore Drilling Inc. 4,300 187
Sun Co., Inc. 15,900 463
Tosco Corp. 9,300 415
TransTexas Gas Corp.* 11,300 124
Unocal Corp. 54,534 1,636
------
13,696
------
OIL-INTERNATIONAL--4.3%
Amoco Corp. 108,600 7,548
Chevron Corp. 147,200 8,188
Exxon Corp. 275,100 21,870
Mobil Corp. 88,300 9,680
Texaco Inc. 58,200 4,641
USX Corp. -- Marathon Group
(New) 58,300 1,079
Ultramar Corp. 11,800 338
Western Atlas, Inc.* 12,600 663
------
54,007
------
PAPER--1.5%
Alco Standard Corp. 22,800 1,080
Boise Cascade Corp. 10,000 353
Bowater Inc. 7,600 281
Champion International Corp. 19,500 780
Consolidated Papers, Inc. 9,100 465
Federal Paper Board Co.,
Inc. 10,900 582
Georgia-Pacific Corp. 19,800 1,250
International Paper Co. 60,600 2,159
James River Corp. of
Virginia 20,600 543
Jefferson Smurfit Corp.* 16,900 193
Kimberly-Clark Corp. 61,730 4,715
Louisiana-Pacific Corp. 24,000 555
Mead Corp. 11,500 575
Pentair, Inc. 6,200 164
Potlatch Corp. 4,300 177
Rayonier, Inc. 3,875 133
Riverwood International
Corp. 9,300 185
St. Joe Paper Co. 6,800 415
Temple-Inland Inc. 11,400 459
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE> 19
SchwabFunds(R) 8
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- ----------
<S> <C> <C>
Thermo Fibertek Inc.* 6,100 $ 134
Union Camp Corp. 16,300 760
Westvaco Corp. 28,300 821
Weyerhaeuser Co. 44,400 1,881
Willamette Industries, Inc. 11,000 575
------
19,235
------
PRODUCER GOODS--5.1%
Allied Signal Inc. 65,400 3,638
American Financial Group,
Inc. 10,900 347
Avery Dennison Corp. 11,400 614
Blyth Industries Inc.* 10,000 320
Boise Cascade Corp.* 8,200 455
Briggs & Stratton Corp. 4,300 184
CBI Industries, Inc. 11,000 362
Caterpillar Inc. 45,100 3,016
Cincinnati Milacron Inc. 5,100 147
Cognex Corp.* 5,800 132
Cooper Industries Inc. 20,700 800
Corporate Express, Inc.* 11,900 356
Deere & Co. 57,000 2,230
Dover Corp. 25,700 1,144
Emerson Electric Co. 50,800 3,956
FMC Corp.* 7,500 548
Federal Signal Corp. 10,066 257
Foster Wheeler Corp. 9,800 431
General Electric Co. 366,700 27,686
Harnischfeger Industries
Inc. 10,100 383
Harsco Corp. 6,700 442
Hubbell Inc. Class B 7,969 526
Illinois Tool Works Inc. 29,600 1,950
Ingersoll-Rand Co. 24,200 989
Johnson Controls, Inc. 8,800 631
Mark IV Industries, Inc. 13,974 279
Mentor Graphics Corp.* 8,000 115
Millipore Corp. 12,400 550
Nordson Corp. 2,700 154
Pall Corp. 24,533 669
Parker Hannifin Corp. 15,050 529
Premier Industrial Corp. 20,350 654
Presstek Inc.* 4,000 418
Raychem Corp. 9,700 629
Snap-on Tools Corp. 10,100 452
Solectron Corp.* 9,100 441
Tecumseh Products Co. Class
A 3,500 199
Tenneco Inc. 39,000 2,179
Thermo Instrument Systems
Inc.* 19,437 532
Timken Co. 4,600 207
Trinity Industries, Inc. 11,950 399
Tyco International Ltd. 37,614 1,359
Varity Corp.* 6,300 238
W.W. Grainger, Inc. 10,000 684
Westinghouse Electric Corp. 90,600 1,676
York International Corp. 8,400 402
------
64,309
------
RAILROAD--1.0%
Alexander & Baldwin, Inc. 6,700 159
Burlington Northern Santa Fe 30,651 2,452
CSX Corp. 46,200 2,073
Conrail Inc. 16,300 1,176
GATX Corp. 2,600 117
Illinois Central Corp. Class
A 10,350 386
<CAPTION>
Number Value
of Shares (000s)
--------- ----------
<S> <C> <C>
Kansas City Southern
Industries, Inc. 6,700 $ 311
Norfolk Southern Corp. 30,700 2,502
Union Pacific Corp. 47,900 3,161
Wisconsin Central
Transportation Corp.* 4,300 320
------
12,657
------
REAL PROPERTY--0.1%
HFS, Inc.* 20,400 949
Host Marriott Corp.* 35,500 462
Rouse Co. 6,700 135
------
1,546
------
RETAIL--4.5%
Albertson's Inc. 62,100 2,298
American Stores Co. (New) 36,700 1,069
AutoZone, Inc.* 31,500 811
Baby Superstore, Inc.* 2,900 122
Barnes & Noble, Inc.* 5,100 147
Bed Bath & Beyond, Inc.* 12,400 554
CUC International, Inc.* 41,525 1,344
Circuit City Stores Inc. 19,200 569
Consolidated Stores Corp.* 6,400 166
Dayton Hudson Corp. 15,200 1,131
Dillard Department Stores
Inc. Class A 22,200 694
Dollar General Corp. 9,888 273
Federated Department
Stores, Inc.* 43,500 1,316
Food Lion, Inc. Class A 100,450 562
Food Lion, Inc. Class B 34,800 196
Gap, Inc. 33,600 1,802
Giant Food Inc. Class A 13,700 450
Great Atlantic & Pacific Tea
Co., Inc. 5,700 128
Hannaford Bros. Co. Inc. 5,800 160
Heilig-Meyers Co. 7,350 103
Home Depot Inc. 105,066 4,544
J.C. Penney Co., Inc. 48,100 2,285
Jack Eckerd Corp.* 8,700 390
K Mart Corp. 105,700 740
Kohl's Corp.* 9,100 563
Kroger Co.* 31,200 1,158
Limited Inc. 75,600 1,323
Longs Drug Stores Corp. 7,700 347
Lowe's Companies, Inc. 32,100 995
May Department Stores Co. 60,000 2,798
Melville Corp. 20,300 647
Mercantile Stores Co., Inc. 8,300 435
Neiman Marcus Group Inc.* 11,800 235
Nordstrom Inc. 22,900 1,031
Office Depot, Inc.* 37,300 779
OfficeMax Inc.* 17,400 374
Pep Boys - Manny,
Moe & Jack 13,700 411
Price/Costco, Inc.* 43,204 743
Revco D.S., Inc.* 16,000 444
Rite Aid Corp. 17,900 564
Safeway Inc.* 44,800 1,338
Sears Roebuck & Co. 90,100 4,088
Sunglass Hut
International Inc.* 14,000 387
TJX Companies, Inc. 11,100 247
Tandy Corp. 12,058 528
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE> 20
SchwabFunds(R) 9
- --------------------------------------------------------------------------------
SCHWAB 1000 FUND(R)
STATEMENT OF NET ASSETS
February 29, 1996
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- ----------
<S> <C> <C>
Toys 'R' Us, Inc.* 70,280 $ 1,678
Wal-Mart Stores, Inc. 506,700 10,767
Walgreen Co. 51,500 1,700
Weis Markets, Inc. 6,300 187
Winn-Dixie Stores, Inc. 32,400 1,110
Woolworth Corp. 29,800 358
------
57,089
------
STEEL--0.3%
AK Steel Holding Corp. 7,500 271
Allegheny Ludlum Corp. 10,000 183
Bethlehem Steel Corp.* 28,600 393
Inland Steel Industries,
Inc. 8,600 210
LTV Corp.* 19,200 245
Nucor Corp. 19,100 1,029
USX Corp.-U.S. Steel Group 19,160 627
Worthington Industries Inc. 16,700 360
------
3,318
------
TELEPHONE--7.6%
AT&T Corp. 352,617 22,435
Adtran, Inc.* 9,600 418
Airtouch Communications
Inc.* 117,500 3,643
Alltel Corp. 38,800 1,290
Ameritech Corp. (New) 124,000 7,146
Bell Atlantic Corp. 98,926 6,541
Bellsouth Corp. 217,000 8,653
C-TEC Corp.* 8,000 296
Cascade Communications
Corp.* 9,150 622
Century Telephone
Enterprises, Inc. 13,750 462
Cincinnati Bell Inc. 15,400 504
Comsat Corp. Series 1 7,000 162
DSC Communications Corp.* 24,100 734
Frontier Corp. 32,200 966
GTE Corp. 217,700 9,334
MCI Communications Corp. 151,600 4,425
MFS Communications
Co., Inc.* 12,900 782
Mobile Telecommunications
Technologies Corp.* 10,900 155
Nynex Corp. 93,700 4,826
Pacific Telesis Group 90,700 2,562
SBC Communications, Inc. 133,228 7,311
Southern New England
Telecommunications 13,800 564
Sprint Corp. 80,834 3,476
Telephone & Data
Systems, Inc. 12,600 581
Tellabs Inc.* 21,800 1,033
U.S. WEST, Inc.
Communications Group 103,810 3,400
U.S. WEST, Inc.
Media Group* 100,000 2,088
United States Cellular
Corp.* 19,500 702
Worldcom Inc.* 39,217 1,547
------
96,658
------
TOBACCO--2.0%
American Brands Inc. 38,600 1,751
Loews Corp. 25,000 2,125
Philip Morris Companies Inc. 184,100 18,226
RJR Nabisco Holdings Corp. 61,036 2,052
UST Inc. 42,900 1,523
<CAPTION>
Number Value
of Shares (000s)
--------- ----------
<S> <C> <C>
Universal Corp. 9,500 $ 255
------
25,932
------
TRANSPORTATION-MISCELLANEOUS--0.2%
Caliber Systems, Inc. 10,000 423
Consolidated Freightways,
Inc. 7,900 194
Fritz Companies, Inc.* 5,000 195
PACCAR Inc. 7,660 361
Ryder System, Inc. 19,800 497
Southern Pacific Rail Corp.* 39,363 915
------
2,585
------
TRAVEL & RECREATION--1.3%
Brunswick Corp. 28,900 661
Callaway Golf Co. 19,000 451
Circus Circus Enterprises,
Inc.* 20,400 650
Grand Casinos Inc.* 11,100 354
Harrah's Entertainment Inc.* 20,600 559
Hilton Hotels Corp. 11,500 1,078
ITT Corp. (New)* 25,900 1,564
La Quinta Inns, Inc. 12,800 346
MGM Grand, Inc.* 13,500 449
Marriot International Inc. 25,800 1,267
Mirage Resorts, Inc.* 18,350 851
Promus Hotel Corp.* 7,700 200
Walt Disney Co. 118,000 7,729
------
16,159
------
UTILITIES--5.2%
AES Corp.* 13,559 334
Allegheny Power System, Inc. 28,100 818
American Electric Power Inc. 39,600 1,698
American Water Works
Co., Inc. 4,800 182
Atlanta Gas Light Co. 7,600 138
Atlantic Energy, Inc. 7,800 142
Baltimore Gas & Electric Co. 32,150 912
Boston Edison Co. 12,900 356
Brooklyn Union Gas Co. 7,350 192
CIPSCO Inc. 5,000 198
CMS Energy Corp. 18,900 574
California Energy Co., Inc.* 14,600 325
Carolina Power & Light Co. 33,500 1,223
Centerior Energy Corp. 23,600 198
Central & South West Corp. 55,800 1,548
Cinergy Corp. 36,565 1,092
Citizens Utilities Co. Class
A* 52,225 607
Citizens Utilities Co. Class
B* 7,985 94
Coastal Corp. 20,400 750
Columbia Gas System, Inc.* 11,200 490
Consolidated Edison Co. of
New York, Inc. 55,700 1,817
Consolidated Natural Gas Co. 22,600 972
DPL Inc. 21,850 522
DQE, Inc. 17,050 499
DTE Energy Co. 37,100 1,322
Delmarva Power & Light Co. 15,700 347
Dominion Resources, Inc. 37,650 1,487
Duke Power Co. 45,900 2,243
ENSERCH Corp. 9,500 144
Edison International 95,600 1,673
El Paso Natural Gas Co. 4,941 167
Enova Corp. 24,300 562
Enron Corp. 54,600 2,000
Entergy Corp. 53,021 1,504
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE> 21
SchwabFunds(R) 10
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- ----------
<S> <C> <C>
Equitable Resources, Inc. 5,100 $ 146
FPL Group, Inc. 39,500 1,763
Florida Progress Corp. 19,400 686
General Public Utilities
Corp. 28,100 938
Hawaiian Electric
Industries, Inc. 7,900 299
Houston Industries Inc. 54,000 1,222
IPALCO Enterprises, Inc. 10,000 399
Idaho Power Co. 5,400 157
Illinova Corp. 16,300 465
KU Energy Corp. 5,500 159
Kansas City Power &
Light Co. 15,900 403
LG&E Energy Corp. 4,950 213
Long Island Lighting Co. 24,300 425
MCN Corp. 17,600 442
Midamerican Energy Co. 34,461 625
Minnesota Power & Light Co. 4,800 131
Montana Power Co. 7,900 173
NICOR Inc. 7,800 210
NIPSCO Industries, Inc. 13,900 525
National Fuel Gas Co. 5,800 186
Nevada Power Co. 13,000 283
New England Electric Co. 13,800 533
New York State Electric &
Gas Corp. 16,400 387
Niagara Mohawk Power Corp. 25,200 189
NorAm Energy Co. 25,215 227
Northeast Utilities 25,900 576
Northern States Power Co. 15,200 749
Ohio Edison Co. 34,000 808
Oklahoma Gas & Electric Co. 10,200 421
P P & L Resources Inc. 39,720 988
PacifiCorp 73,500 1,525
Pacific Enterprises 18,300 490
Pacific Gas & Electric Co. 91,500 2,345
Panhandle Eastern Corp. 31,800 910
Peco Energy Co. 46,000 1,300
Peoples Energy Corp. 9,500 292
Pinnacle West Capital Corp. 19,300 548
Portland General Corp. 13,200 404
Potomac Electric Power Co. 24,000 633
Public Service Co. of
Colorado 14,300 504
Public Service Enterprise
Group Inc. 50,500 1,420
Puget Sound Power &
Light Co. 16,200 405
Questar Corp. 6,100 192
Rochester Gas &
Electric Corp. 5,900 133
SCANA Corp. 20,500 564
Sonat Inc. 17,000 570
Southern Co. 147,700 3,526
<CAPTION>
Number Value
of Shares (000s)
--------- ----------
<S> <C> <C>
Southwestern Public
Service Co. 6,000 $ 193
Teco Energy Co. 27,200 680
Texas Utilities Co. 50,700 2,047
Unicom Corp. 46,400 1,485
Union Electric Co. 19,800 837
UtiliCorp United Inc. 6,600 195
WPL Holdings, Inc. 4,400 136
Washington Gas Light Co. 6,200 135
Washington Water Power Co. 7,700 142
Western Resources, Inc. 14,231 455
Williams Companies, Inc. 22,560 1,072
Wisconsin Energy Corp. 26,000 751
--------
65,747
--------
TOTAL COMMON STOCK
(Cost $939,965) 1,264,562
--------
<CAPTION>
Maturity
(000s)
---------
<S> <C> <C>
REPURCHASE
AGREEMENT--0.7%
PNC Bank, N.A. 4.50%
Dated 02/29/96
Due 03/01/96
Collateralized By:
Federal Home Loan
Mortgage Corp.:
$10,840,000 Par; 6.50%
Due 10/15/08 $8,288 8,287
--------
TOTAL REPURCHASE AGREEMENT
(Cost $8,287) 8,287
--------
TOTAL INVESTMENTS -- 100.3%
(Cost $948,252) 1,272,849
--------
OTHER ASSETS AND
LIABILITIES -- (0.3%)
Other Assets 5,734
Liabilities (9,617)
--------
(3,883)
--------
NET ASSETS -- 100.0%
Applicable to 71,692,932
outstanding $0.00001
par value shares
(unlimited shares authorized) $1,268,966
==========
NET ASSET VALUE PER SHARE $17.70
======
</TABLE>
- ------------------
*Non-Income Producing Security
See accompanying Notes to Financial Statements.
<PAGE> 22
SchwabFunds(R) 11
- --------------------------------------------------------------------------------
SCHWAB 1000 FUND(R)
STATEMENT OF OPERATIONS (in thousands)
For the six months ended February 29, 1996
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Investment income:
Dividends $ 10,995
Interest 204
--------
Total investment income 11,199
--------
Expenses:
Investment advisory and administration fee 1,315
Transfer agency and shareholder service fees 1,268
Custodian fees 113
Registration fees 69
Professional fees 32
Shareholder reports 74
Trustees' fees 20
Amortization of deferred organization costs 25
Insurance and other expenses 21
--------
2,937
Less expenses reduced (452)
--------
Total expenses incurred by Fund 2,485
--------
Net investment income 8,714
--------
Net realized gain (loss) on investments:
Proceeds from sales of investments 12,553
Cost of investments sold (11,396)
--------
Net realized gain on investments sold 1,157
--------
Change in net unrealized gain (loss) on investments:
Beginning of period 199,094
End of period 324,597
--------
Increase in net unrealized gain on investments 125,503
--------
Net gain on investments 126,660
--------
Increase in net assets resulting from operations $135,374
========
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE> 23
SchwabFunds(R) 12
- --------------------------------------------------------------------------------
SCHWAB 1000 FUND(R)
STATEMENT OF CHANGES IN NET ASSETS (in thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the
six months ended For the
February 29, year ended
1996 August 31,
(Unaudited) 1995
---------------- ----------
<S> <C> <C>
Operations:
Net investment income $ 8,714 $ 12,704
Net realized gain on investments sold 1,157 430
Increase in net unrealized gain
on investments 125,503 115,945
---------------- ----------
Increase in net assets resulting
from operations 135,374 129,079
---------------- ----------
Dividends to shareholders from
net investment income (14,179) (6,199 )
---------------- ----------
Capital share transactions:
Proceeds from shares sold 386,297 264,444
Net asset value of shares issued in
reinvestment of dividends 12,770 5,550
Early withdrawal fees 139 93
Less payments for shares redeemed (78,149) (120,314 )
---------------- ----------
Increase in net assets from
capital share transactions 321,057 149,773
---------------- ----------
Total increase in net assets 442,252 272,653
Net assets:
Beginning of period 826,714 554,061
---------------- ----------
End of period (including undistributed
net investment income of $3,214 and
$8,679, respectively) $1,268,966 $ 826,714
================ ===========
Number of Fund shares:
Sold 22,825 18,751
Reinvested 758 439
Redeemed (4,623) (8,825 )
---------------- ----------
Net increase in shares outstanding 18,960 10,365
Shares outstanding:
Beginning of period 52,733 42,368
---------------- ----------
End of period 71,693 52,733
================ ===========
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE> 24
SchwabFunds(R) 13
- --------------------------------------------------------------------------------
SCHWAB 1000 FUND(R)
NOTES TO FINANCIAL STATEMENTS
For the six months ended February 29, 1996
(Unaudited)
- --------------------------------------------------------------------------------
1. DESCRIPTION OF THE FUND
The Schwab 1000 Fund (the "Fund") is a series of Schwab Investments (the
"Trust"), a no-load, open-end management investment company organized as a
Massachusetts business trust on October 26, 1990 and registered under the
Investment Company Act of 1940, as amended.
In addition to the Fund, the Trust also offers -- the Schwab Short/Intermediate
Government Bond Fund, Schwab Long-Term Government Bond Fund, Schwab California
Short/Intermediate Tax-Free Bond Fund, Schwab California Long-Term Tax-Free Bond
Fund, Schwab Short/Intermediate Tax-Free Bond Fund and Schwab Long-Term Tax-Free
Bond Fund. The assets of each series are segregated and accounted for
separately.
The investment objective of the Fund is to provide a total return which matches
that of the Schwab 1000 Index(R), an index created to represent the performance
of the 1000 largest publicly traded common stocks of United States companies.
2. SIGNIFICANT ACCOUNTING POLICIES
The following significant accounting policies are in conformity with generally
accepted accounting principles for investment companies. The preparation of
financial statements in accordance with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could differ
from those estimates.
Security valuation -- Investments in securities traded on an exchange are valued
at the last quoted sale price for a given day, or if a sale is not reported for
that day, at the mean between the most recent quoted bid and asked prices.
Unlisted securities for which market quotations are readily available are valued
at the mean between the most recent bid and asked prices. Securities for which
no quotations are readily available are valued at fair value as determined in
good faith by the Fund's investment manager pursuant to Board of Trustees
guidelines. Short-term securities with 60 days or less to maturity are stated at
amortized cost, which approximates market value.
Security transactions and investment income -- Security transactions are
accounted for on a trade date basis (date the order to buy or sell is executed).
Dividend income and distributions to shareholders are recorded on the
ex-dividend date; interest income is recorded on the accrual basis. Realized
gains and losses from security transactions are determined on an identified cost
basis.
Repurchase agreements -- Repurchase agreements are fully collateralized by U.S.
Treasury or government agency securities. All collateral is held by the Fund's
custodian and is monitored daily to ensure that its market value at least equals
the repurchase price under the agreement.
Deferred organization costs -- Costs incurred in connection with the
organization of the Fund and its initial registration with the Securities and
Exchange Commission and with various states are amortized on a straight-line
basis over a five-year period from the Fund's commencement of operations.
<PAGE> 25
SchwabFunds(R) 14
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- --------------------------------------------------------------------------------
Expenses -- Expenses arising in connection with the Fund are charged directly to
the Fund. Expenses common to all series of the Trust are 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 substantially all net investment income and realized net capital
gains, if any, to shareholders. Therefore, no federal income tax provision is
required. The Fund is considered a separate entity for tax purposes.
At February 29, 1996, (for financial reporting and federal income tax purposes),
net unrealized gain aggregated (in thousands) $324,597 of which $338,055 related
to appreciated securities and $13,458 related to depreciated securities.
3. TRANSACTIONS WITH AFFILIATES
Investment advisory and administration agreement -- The Trust has an investment
advisory and administration agreement with Charles Schwab Investment Management,
Inc. (the "Investment Manager"). For advisory services and facilities furnished,
the Fund pays an annual fee, payable monthly, of .30% of the first $500 million
of average daily net assets and .22% of such assets over $500 million. Under
this agreement, the Fund incurred investment advisory and administration fees of
$1,315,000 for the six months ended February 29, 1996, before the Investment
Manager reduced its fee (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 .05% of average daily net assets for transfer
agency services and .20% of such assets for shareholder services. For the six
months ended February 29, 1996, the Fund incurred transfer agency and
shareholder service fees of $1,268,000, before Schwab reduced its fees (see Note
4).
Officers and trustees -- Certain officers and trustees of the Trust are also
officers and/or directors of the Investment Manager and/or Schwab. During the
six months ended February 29, 1996, the Trust made no direct payments to its
officers or trustees who are "interested persons" within the meaning of the
Investment Company Act of 1940, as amended. The Fund incurred fees of $20,000
related to the Trust's unaffiliated trustees.
4. EXPENSES REDUCED BY THE INVESTMENT MANAGER AND SCHWAB
The Investment Manager and Schwab reduced a portion of their fees in order to
limit the ratio of operating expenses to average net assets for the Fund. For
the six months ended February 29, 1996, the total of such fees reduced by the
Investment Manager and Schwab were $300,000 and $152,000, respectively.
<PAGE> 26
SCHWABFUNDS FAMILY(R)
The SchwabFunds Family includes a variety of funds to help meet your investment
needs. You can diversify your portfolio with one investment in any of the three
Asset Director(R) Funds, or choose several different equity markets with our
three equity index funds. You can also select from different maturities with our
bond fund choices, and take advantage of an array of money market funds.
SCHWAB ASSET DIRECTOR FUNDS
- - HIGH GROWTH FUND seeks to provide high capital growth with less volatility
than an all-stock portfolio. This Fund has the largest stock component and
offers the highest risk and return potential.
- - BALANCED GROWTH FUND seeks to provide maximum total return, including capital
growth and income. This Fund invests in a more balanced mix of stocks and
bonds and offers moderate risk and return potential.
- - CONSERVATIVE GROWTH FUND seeks to provide income with growth potential. This
Fund has the smallest stock component, which is designed to help offset
inflation, and generally keeps the majority of its assets invested in bonds.
It offers the lowest risk and return potential.
SCHWAB INDEX FUNDS
- - SCHWAB 1000 FUND(R) is designed to match the total return of the Schwab 1000
Index,(R) comprised of the largest 1,000 publicly traded U.S. companies - the
stocks of which represent about 85% of the total market capitalization of the
U.S. Stock Market. 1
- - SCHWAB SMALL-CAP INDEX FUND(R) is designed to track the total return of the
Schwab Small-Cap Index(R), which tracks the performance of
small-capitalization companies. The Schwab Small-Cap Index is composed of
the second 1,000 largest publicly traded companies in the U.S. 1
- - SCHWAB INTERNATIONAL INDEX FUND(TM) is designed to track the total return of
the Schwab International Index(R), composed of 350 of the largest companies,
based on market capitalization, in foreign countries with developed
securities markets. 2
SCHWAB BOND FUNDS
- - SCHWAB GOVERNMENT BOND FUNDS include two Funds designed to offer high current
yields with the credit safety of U.S. government securities. The income level
you are seeking and your tolerance for fluctuation in share price should
determine your selection of either our Short/Intermediate Fund or our
Long-Term Fund. 3
- - SCHWAB TAX-FREE BOND FUNDS help investors take advantage of one of the last
remaining tax breaks: tax-free municipal bonds. We offer a national
Short/Intermediate Fund and a Long-Term Fund, both of which pay monthly
income free from federal personal income tax. 4,5
- - SCHWAB CALIFORNIA TAX-FREE BOND FUNDS give California taxpayers two
different opportunities to earn double tax-free income - free from both
federal and California state personal income taxes. 5
SCHWAB MONEY MARKET FUNDS
Schwab offers an array of money funds that seek high current income with safety
and liquidity. Choose from taxable or tax-exempt 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(TM). 6
We will be happy to provide you with a free prospectus and brochure on any of
the SchwabFunds(R). Each prospectus provides more complete information,
including charges and expenses. Please read it carefully before investing.
1-800-2 NO-LOAD (1-800-266-5623)
1. The Schwab 1000 Index and the Schwab Small-Cap Index consist of publicly
traded companies ranked by market capitalization. These indices do not
include privately held companies, investment companies and companies
incorporated outside of the United States.
2. The Schwab International Index is composed of publicly traded companies
ranked by market capitalization in countries with developed securities
markets. Currently invested in 15 countries, the Index does not include
privately held companies, investment companies or companies from the United
States.
3. Investors in the Schwab Government Bond Funds may experience a decline in
share price due to prepayment of obligations held by the Funds.
4. Income may be subject to state and local taxes.
5. Income may be subject to the Alternative Minimum Tax (AMT). Capital
appreciation from discounted bonds may be subject to state and federal
income tax.
6. Investments in money market funds are neither insured nor guaranteed by the
U.S. government, and there is no assurance that the Funds will be able to
maintain a stable share price of $1.
<PAGE> 27
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BULK RATE
U.S. POSTAGE
PAID
CHARLES SCHWAB
--------------
[SCHWABFUNDS FAMILY(R) LOGO]
101 Montgomery Street
San Francisco, California 94104
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.
TF4029R (4/96) CRS 10407 Printed on recycled paper.
