<PAGE> 1
SCHWAB FUNDS (R)
[LOGO]
SCHWAB
1000 FUND (R)
SEMI-ANNUAL REPORT
FEBRUARY 28, 1997
<PAGE> 2
Dear Shareholder,
[Photo of With the support of investors like you, the SchwabFunds Family(R)
Charles continues to be among the largest and fastest-growing mutual fund
R. Schwab] complexes in the nation. Charles Schwab Investment Management,
Inc. (CSIM) manages over $46 billion in assets for more than 2.5
million shareholders. Today CSIM offers investors 30 funds
spanning a spectrum of financial markets and investing styles.
You'll find in-depth information on the performance of your
SchwabFunds(R) investment in the following pages.
LONG-TERM INVESTMENT STRATEGIES
SchwabFunds' expanding family of quality mutual funds offers investors
time-tested strategies for long-term investing--Asset Allocation, Indexing,
Tax-Efficiency, Quantitative Models and Fund-of-Funds. Each strategy was
developed to fit specific financial objectives. The SchwabFunds Family was
developed to provide you with smart, cost-efficient solutions and an easy,
convenient way to put your money to work. And we'll continue to explore new
strategies to help meet your financial goals.
EXPANDING CHANNELS OF COMMUNICATION
If you're among the millions of people exploring the Internet, I encourage you
to visit our Web site at WWW.SCHWAB.COM/FUNDS. There you'll find a wealth of
online information about SchwabFunds as well as a wide range of investments and
resources available from Schwab. You can access the latest mutual fund
performance data, request a free fund prospectus, trade funds and more--all from
the comfort of your home or office, 24 hours a day. It's just one more way we're
harnessing the latest technology to make investing easier and more convenient.
Thank you for placing your trust in SchwabFunds. In the year
ahead, we'll continue working to provide you with an expanding range of
investment opportunities to meet your growing needs.
/s/ Charles R. Schwab
Charles R. Schwab
<PAGE> 3
KEEP YOUR
MONEY WORKING
HARDER!
----------------------------------
USE THIS ENVELOPE TO EASILY ADD TO
YOUR SCHWAB 1000 FUND.
CHARLES SCHWAB
<PAGE> 4
WE'VE MADE IT EASIER FOR YOU! TAKE ADVANTAGE OF THIS OPPORTUNITY TO
ADD TO YOUR SCHWAB 1000 FUND.(R)
As a Schwab 1000 Fund shareholder, you can seek U.S. stock market returns by
effectively investing in a diversified equity portfolio of America's 1,000
largest publicly traded U.S. corporations, based on market capitalization.(1)
Now you can add to your fund by using this convenient Schwab investment coupon.
It's a simple, easy way to increase your investment. You can also have money
transferred to your Schwab 1000 Fund directly from your bank account or payroll
check using Schwab's free Automatic Investment Plan (AIP).(2) If you'd like
more information on AIP, just check the appropriate box on the coupon. We'll
send you everything you need to get started.
DON'T DELAY. USE THIS CONVENIENT INVESTMENT
ENVELOPE AND SEND YOUR CHECK TODAY!
(1) The Schwab 1000 Fund does not include privately held companies, investment
companies and companies incorporated outside the United States.
(2) The Automatic Investment Plan does not ensure profit or protect against
loss in declining markets.
- --------------------------------------------------------------------------------
PLEASE DETACH HERE.
SCHWAB 1000 FUND(R)
INVESTMENT COUPON
- ---------------------
Please enclose your check and this completed investment
coupon in the attached postage-paid envelope.
[ ][ ][ ][ ]-[ ][ ][ ][ ]
- -------------------------------------- SCHWAB ACCOUNT NUMBER
Name
$
- --------------------------------------
Amount of Investment*
- --------------------------------------
Signature
* THIS ENVELOPE MAY NOT BE USED FOR INITIAL INVESTMENTS. SUBSEQUENT INVESTMENT
MINIMUM IS $100.
[ ] Check here if you would like more investment coupons for future use.
[ ] Check here if you would like more information on Schwab's Automatic
Investment Plan (AIP).
----------------------------------------
(LIFT HERE FOR MORE INFORMATION)
----------------------------------------
(C) 1996 Charles Schwab & Co., Inc. All rights reserved. Member SIPC/NYSE.
Printed on recycled paper. TF4268 (10/96) CRS 10552
<PAGE> 5
CharlesSchwab
JUST FOLLOW THESE EASY STEPS TO INVEST IN YOUR SCHWAB 1000 FUND(R):
1. Fill out the Schwab investment coupon completely, This envelope must
including your name, account number and the be preceded or
amount of your check. Please use one coupon for accompanied by a
each account. current Schwab 1000
Fund prospectus. The
2. Make your check payable to CHARLES SCHWAB & CO., principal value and
INC., and enclose your check with the completed investment returns will
coupon in this postage-paid envelope. fluctuate so that an
investor's shares, when
3. Then just drop your Schwab investment envelope redeemed, may be worth
in the mail today--and start putting your money more or less than their
to work! If you have any questions, don't original cost.
hesitate to call your local Schwab office or
1-800-2 NO LOAD.
<PAGE> 6
Attn: Dept. AIP 333-4
--------------
NO POSTAGE
NECESSARY IF
MAILED IN THE
UNITED STATES
--------------
-------------------------------------
BUSINESS REPLY MAIL
FIRST-CLASS MAIL PERMIT NO. 18125 [BAR CODE]
SAN FRANCISCO, CA
-------------------------------------
POSTAGE WILL BE PAID BY ADDRESSEE
CHARLES SCHWAB & CO., INC.
PO BOX 7778
SAN FRANCISCO CA 94120-9419
<PAGE> 7
Table of Contents
<TABLE>
<S> <C>
GROWTH IN NET ASSETS .......................................... 2
TOTAL RETURN .................................................. 3
TAX-SMART INVESTMENT STRATEGY ................................. 4
TOP TEN HOLDINGS .............................................. 5
ECONOMIC SECTOR DIVERSIFICATION ............................... 5
PORTFOLIO MANAGEMENT TEAM ..................................... 6
MARKET OVERVIEW ............................................... 7
QUESTIONS TO THE PORTFOLIO MANAGEMENT TEAM .................... 12
FINANCIAL STATEMENTS AND NOTES ................................ 16
</TABLE>
We are pleased to report on the performance of the Schwab 1000 Fund(R) (the
"Fund") for the six-month period ended February 28, 1997. During the period, the
Fund achieved its primary objective of tracking the price and dividend
performance of the Schwab 1000 Index(R) (the "Index"). It also succeeded in
maintaining the tax efficiencies and low costs designed to help maximize
long-term performance results as explained in this report.
In its tradition of providing low-cost investing, the Investment Manager and
Schwab lowered the operating expense ratio of the Schwab 1000 Fund from 0.49% to
0.46% (effective February 28, 1997), helping to increase the Fund's long-term
performance. The lower expense ratio is guaranteed through at least February 29,
2000.
1
<PAGE> 8
GROWTH IN NET ASSETS
SCHWAB 1000 FUND(R) GROWTH IN NET ASSETS
<TABLE>
<S> <C>
Apr-91 $ 53,336,997
May-91 $ 72,262,905
Jun-91 $ 81,564,216
Jul-91 $ 95,315,144
Aug-91 $ 107,967,485
Sep-91 $ 124,612,182
Oct-91 $ 152,872,184
Nov-91 $ 161,113,589
Dec-91 $ 192,205,731
Jan-92 $ 198,352,031
Feb-92 $ 213,081,600
Mar-92 $ 223,850,552
Apr-92 $ 237,730,005
May-92 $ 248,825,191
Jun-92 $ 257,530,509
Jul-92 $ 283,989,604
Aug-92 $ 288,559,048
Sep-92 $ 300,430,711
Oct-92 $ 317,378,177
Nov-92 $ 344,325,469
Dec-92 $ 370,979,659
Jan-93 $ 394,118,811
Feb-93 $ 417,254,541
Mar-93 $ 450,550,816
Apr-93 $ 457,844,754
May-93 $ 479,573,115
Jun-93 $ 490,991,383
Jul-93 $ 496,879,480
Aug-93 $ 515,272,239
Sep-93 $ 514,077,420
Oct-93 $ 524,003,717
Nov-93 $ 520,583,323
Dec-93 $ 530,585,055
Jan-94 $ 542,919,945
Feb-94 $ 530,175,794
Mar-94 $ 507,256,375
Apr-94 $ 515,477,911
May-94 $ 526,887,738
Jun-94 $ 522,927,585
Jul-94 $ 533,383,390
Aug-94 $ 554,058,696
Sep-94 $ 544,599,716
Oct-94 $ 555,890,085
Nov-94 $ 542,581,678
Dec-94 $ 553,985,018
Jan-95 $ 563,981,983
Feb-95 $ 595,547,957
Mar-95 $ 625,454,197
Apr-95 $ 649,296,568
May-95 $ 691,330,320
Jun-95 $ 725,864,762
Jul-95 $ 777,822,777
Aug-95 $ 826,713,843
Sep-95 $ 899,016,189
Oct-95 $ 934,458,012
Nov-95 $1,014,562,000
Dec-95 $1,063,437,738
Jan-96 $1,167,308,631
Feb-96 $1,268,965,356
Mar-96 $1,357,281,165
Apr-96 $1,438,898,241
May-96 $1,512,894,629
Jun-96 $1,543,360,839
Jul-96 $1,490,340,383
Aug-96 $1,560,051,275
Sep-96 $1,678,924,969
Oct-96 $1,750,459,597
Nov-96 $1,922,254,836
Dec-96 $1,908,768,074
Jan-97 $2,097,379,440
Feb-96 $2,164,499,716
</TABLE>
* Commencement of Operations
2
<PAGE> 9
FUND PERFORMANCE
TOTAL RETURN TABLE
The table below compares total returns for various periods for the Schwab 1000
Fund(R), Schwab 1000 Index(R) and the Standard and Poor's 500(R) Index ("S&P
500").
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
5-Year Cumulative Average Annual
6-Months 1-Year Average Since Fund Since Fund
Ended Ended Annual Inception Inception
2/28/97 2/28/97 2/28/97 (4/2/91-2/28/97) (4/2/91-2/28/97)
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Schwab 1000 Fund 20.51% 23.51% 15.94% 139.35% 15.89%
- ----------------------------------------------------------------------------------------------
Schwab 1000 Index 20.67% 23.94% 16.53% 145.28% 16.37%
- ----------------------------------------------------------------------------------------------
S&P 500 22.53% 26.13% 16.92% 144.64% 16.32%
- ----------------------------------------------------------------------------------------------
Average for Growth
and Income Funds 17.13% 20.38% 14.10% 118.41% 14.11%
- ----------------------------------------------------------------------------------------------
</TABLE>
As of 12/31/96, the 6-month, 1-year and 5-year average annual total returns for
the Schwab 1000 Fund were 11.08%, 21.58% and 14.57%, respectively. The average
annual total return since inception was 15.17%.
TOTAL RETURN ASSUMES REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAIN
DISTRIBUTIONS, IF ANY. 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.
Source for average growth & income funds is Morningstar, Inc. for 213 growth &
income funds with 5-year track records as of 2/28/97. The Investment Manager and
Schwab waived a portion of their fees during the reporting period and have
guaranteed that maximum total operating expenses will not exceed 0.46% through
at least 2/29/2000. Without fee waivers and guarantees the Fund's total returns
for the six-month, one-year, five-year average annual, cumulative
since-inception, and average annual since inception, for the period ended
2/28/97, would have been 20.44%, 23.44%, 15.85%, 137.24% and 15.72%,
respectively. For the period ended 12/31/96, the Fund's six-month, one-year,
five-year average annual and average annual since inception total returns,
without fee waivers and guarantees, would have been 11.02%, 21.51%, 14.48% and
15.00%, respectively. Indices are unmanaged, and unlike the Fund, do not reflect
advisory and other fees associated with an investment in the Fund. Investors
cannot invest in an index directly.
3
<PAGE> 10
TAX-SMART INVESTMENT STRATEGY
The Schwab 1000 Fund(R) seeks to maximize its after-tax performance for
investors by keeping capital gain distributions to a minimum. This strategy is
designed to help you keep more of what your money earns. The following chart
illustrates the effects of this strategy.
FIVE-YEAR AVERAGE ANNUAL TOTAL RETURN AS OF FEBRUARY 28, 1997
<TABLE>
<CAPTION>
Before Tax After-Tax % Lost to Taxes
- -------------------------------------------------------------------------
<S> <C> <C> <C>
Schwab 1000 Fund 15.94% 15.11% 0.83%
- -------------------------------------------------------------------------
Average Growth and
Income Funds 14.09% 11.72% 2.37%
- -------------------------------------------------------------------------
</TABLE>
Source for average growth & income funds is Morningstar, Inc. for 213 growth &
income funds with 5-year track records as of 2/28/97. After-tax returns assume
the maximum Federal tax rate of 39.6% on dividends and 28% on capital gain
distributions. Tax rates vary and may be higher or lower than those shown. TOTAL
RETURN ASSUMES REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS, IF
ANY. 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 waived a portion of their fees during the reporting period and have
guaranteed that maximum total operating expenses will not exceed 0.46% through
at least 2/29/2000. Without fee waivers and guarantees, the Fund's total return
would have been lower.
FUND HOLDINGS
The Fund is a diversified and broad representation of the U.S. stock market,
generally consisting of the 1,000 largest publicly traded U.S. companies
(excluding investment companies). The Fund includes a diversified group of
stocks that represent approximately 85% of the total value of the U.S. stock
market.(1) Following is a list of the Fund's ten largest holdings shown as a
percentage of Fund investments and a pie chart, as a percentage of total
investments, showing the Fund's diversification across a broad range of economic
sectors. Both are as of February 28, 1997 and are not necessarily indicative of
the Fund's future holdings. A complete listing of the Fund's portfolio holdings,
as of February 28, 1997, can be found in the Statement of Net Assets section of
this report.
(1) Source: Wilshire Associates, as of 2/28/97. The U.S. stock market is
represented by the Wilshire 5000 Index.
4
<PAGE> 11
FUND'S TOP TEN HOLDINGS AS A PERCENTAGE OF TOTAL FUND INVESTMENTS
<TABLE>
<S> <C>
General Electric 2.39%
Coca-Cola Co. 2.13%
Exxon Corp. 1.75%
Intel Corp. 1.64%
Microsoft Corp. 1.64%
Merck & Co., Inc. 1.56%
Philip Morris Cos., Inc. 1.56%
Procter & Gamble Co. 1.16%
Johnson & Johnson 1.08%
International Business Machines Corp. 1.06%
</TABLE>
<TABLE>
<CAPTION>
[Pie Chart]
THE SCHWAB 1000 FUND'S(R)
DIVERSIFIED STOCK PORTFOLIO COVERS
A BROAD RANGE OF SECTORS
<S> <C>
Capital Goods 5.55%
Cash Equivalents 0.37%
Consumer Durables 2.67%
Consumer Non-Durables 31.02%
Energy 6.66%
Finance 18.15%
Material & Services 9.10%
Technology 14.80%
Transportation 1.38%
Utilities 10.30%
</TABLE>
Source: Wilshire Associates
5
<PAGE> 12
PORTFOLIO MANAGEMENT TEAM
STEPHEN B. WARD - Senior Vice President and Chief Investment Officer, has
overall responsibility for the management of the Fund's portfolio. Steve joined
CSIM as Vice President and Portfolio Manager in April 1991, and was promoted to
his current position in August 1993. Prior to joining CSIM, Steve was Vice
President and Portfolio Manager at Federated Investors.
GERI HOM - Vice President and Senior Portfolio Manager, has primary
responsibility for the day-to-day management of the Fund's portfolio. Geri
joined CSIM in March 1995 as Portfolio Manager and currently manages over $3.5
billion in assets. Prior to joining CSIM, Geri was a Principal for Wells Fargo
Nikko Investment Advisors and Vice President and Manager of the Domestic Equity
Portfolio Management Group for Wells Fargo Nikko.
The following market overview and answers to questions are provided by the
Portfolio Management Team.
6
<PAGE> 13
MARKET OVERVIEW
REAL GDP GROWTH RATE
[GRAPH]
<TABLE>
<CAPTION>
Real
GDP
-----
<S> <C>
Q1 1990 4.1%
Q2 1990 1.3%
Q3 1990 -1.9%
Q4 1990 -4.1%
Q1 1991 -2.2%
Q2 1991 1.7%
Q3 1991 1.0%
Q4 1991 1.0%
Q1 1992 4.7%
Q2 1992 2.5%
Q3 1992 3.0%
Q4 1992 4.3%
Q1 1993 -0.1%
Q2 1993 1.9%
Q3 1993 2.3%
Q4 1993 4.8%
Q1 1994 2.5%
Q2 1994 4.9%
Q3 1994 3.5%
Q4 1994 3.0%
Q1 1995 0.4%
Q2 1995 0.7%
Q3 1995 3.8%
Q4 1995 0.3%
Q1 1996 2.0%
Q2 1996 4.7%
Q3 1996 2.1%
Q4 1996 3.9%
</TABLE>
Source: Bloomberg L.P.
- - The economy continued to expand at a healthy rate during the reporting
period. The GDP growth rate was 2.1% and 3.9% for the third and fourth
quarters, and 3.2% for the full year (1996).
- - The particularly strong second and fourth quarter 1996 growth rates of 4.7%
and 3.9% respectively, resulted in sentiment focusing on the apparent
strength of the economy and its potential impact on future inflation and
Federal Reserve Board (Fed) policy.
- - At the time of this writing, the economy appears to be on track for moderate
growth, continuing the six year expansion which began in 1991.
7
<PAGE> 14
U.S. UNEMPLOYMENT RATE
[GRAPH]
<TABLE>
<CAPTION>
UNEMPLOYMENT
RATE
------------
<S> <C>
Jan-90 5.3%
Feb-90 5.3%
Mar-90 5.2%
Apr-90 5.4%
May-90 5.3%
Jun-90 5.1%
Jul-90 5.4%
Aug-90 5.6%
Sep-90 5.7%
Oct-90 5.8%
Nov-90 6.0%
Dec-90 6.2%
Jan-91 6.3%
Feb-91 6.5%
Mar-91 6.8%
Apr-91 6.6%
May-91 6.8%
Jun-91 6.8%
Jul-91 6.7%
Aug-91 6.8%
Sep-91 6.8%
Oct-91 6.9%
Nov-91 6.9%
Dec-91 7.1%
Jan-92 7.1%
Feb-92 7.3%
Mar-92 7.3%
Apr-92 7.3%
May-92 7.4%
Jun-92 7.7%
Jul-92 7.6%
Aug-92 7.6%
Sep-92 7.5%
Oct-92 7.4%
Nov-92 7.3%
Dec-92 7.3%
Jan-93 7.1%
Feb-93 7.0%
Mar-93 7.0%
Apr-93 7.0%
May-93 6.9%
Jun-93 6.9%
Jul-93 6.8%
Aug-93 6.7%
Sep-93 6.7%
Oct-93 6.7%
Nov-93 6.5%
Dec-93 6.4%
Jan-94 6.7%
Feb-94 6.6%
Mar-94 6.5%
Apr-94 6.4%
May-94 6.0%
Jun-94 6.0%
Jul-94 6.1%
Aug-94 6.1%
Sep-94 5.9%
Oct-94 5.6%
Nov-94 5.6%
Dec-94 5.4%
Jan-95 5.6%
Feb-95 5.4%
Mar-95 5.8%
Apr-95 5.7%
May-95 5.7%
Jun-95 5.6%
Jul-95 5.7%
Aug-95 5.3%
Sep-95 5.6%
Oct-95 5.5%
Nov-95 5.6%
Dec-95 5.6%
Jan-96 5.8%
Feb-96 5.5%
Mar-96 5.6%
Apr-96 5.4%
May-96 5.6%
Jun-96 5.3%
Jul-96 5.4%
Aug-96 5.1%
Sep-96 5.2%
Oct-96 5.2%
Nov-96 5.3%
Dec-96 5.3%
Jan-97 5.4%
Feb-97 5.3%
</TABLE>
Source: Bloomberg L.P.
- - Although trending up during the second half of the year, the unemployment
rate during 1996 remained near its lows for the decade, leading many
economists to question whether such low levels can continue without
generating inflationary pressures on wages and, ultimately, prices.
8
<PAGE> 15
MEASURES OF INFLATION
[GRAPH]
<TABLE>
<CAPTION>
Monthly Quarterly Employment Employment
Consumer Price Employment Cost Cost Index - Cost Index - 4 Employment Cost
Index - YOY % Index - YOY % Quarterly quarter rolling Index % Change
Change Change (annualized) average (SA) Index (1/90=0)
-------------- --------------- ------------ --------------- --------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Jan-90 5.2% 5.3% 5.3% 5.1% 1.3% 1.065
Feb-90 5.3% 5.3% 5.3% 5.1% 1.3% 1.065
Mar-90 5.2% 5.3% 5.3% 5.1% 1.3% 1.065
Apr-90 4.7% 5.4% 5.3% 5.3% 1.3% 1.078
May-90 4.4% 5.4% 5.3% 5.3% 1.3% 1.078
Jun-90 4.7% 5.4% 5.3% 5.3% 1.3% 1.078
Jul-90 4.8% 5.1% 4.5% 5.4% 1.1% 1.090
Aug-90 5.6% 5.1% 4.5% 5.4% 1.1% 1.090
Sep-90 6.2% 5.1% 4.5% 5.4% 1.1% 1.090
Oct-90 6.3% 4.8% 4.1% 5.1% 1.0% 1.101
Nov-90 6.3% 4.8% 4.1% 5.1% 1.0% 1.101
Dec-90 6.1% 4.8% 4.1% 5.1% 1.0% 1.101
Jan-91 5.7% 4.6% 4.5% 4.8% 1.1% 1.113
Feb-91 5.3% 4.6% 4.5% 4.8% 1.1% 1.113
Mar-91 4.9% 4.6% 4.5% 4.8% 1.1% 1.113
Apr-91 4.9% 4.5% 4.9% 4.6% 1.2% 1.127
May-91 5.0% 4.5% 4.9% 4.6% 1.2% 1.127
Jun-91 4.7% 4.5% 4.9% 4.6% 1.2% 1.127
Jul-91 4.4% 4.3% 3.6% 4.5% 0.9% 1.137
Aug-91 3.8% 4.3% 3.6% 4.5% 0.9% 1.137
Sep-91 3.4% 4.3% 3.6% 4.5% 0.9% 1.137
Oct-91 2.9% 4.2% 3.6% 4.3% 0.9% 1.147
Nov-91 3.0% 4.2% 3.6% 4.3% 0.9% 1.147
Dec-91 3.1% 4.2% 3.6% 4.3% 0.9% 1.147
Jan-92 2.6% 4.1% 4.1% 4.2% 1.0% 1.159
Feb-92 2.8% 4.1% 4.1% 4.2% 1.0% 1.159
Mar-92 3.2% 4.1% 4.1% 4.2% 1.0% 1.159
Apr-92 3.2% 3.5% 2.8% 4.1% 0.7% 1.167
May-92 3.0% 3.5% 2.8% 4.1% 0.7% 1.167
Jun-92 3.1% 3.5% 2.8% 4.1% 0.7% 1.167
Jul-92 3.2% 3.4% 3.2% 3.5% 0.8% 1.176
Aug-92 3.1% 3.4% 3.2% 3.5% 0.8% 1.176
Sep-92 3.0% 3.4% 3.2% 3.5% 0.8% 1.176
Oct-92 3.2% 3.5% 4.1% 3.4% 1.0% 1.188
Nov-92 3.0% 3.5% 4.1% 3.4% 1.0% 1.188
Dec-92 2.9% 3.5% 4.1% 3.4% 1.0% 1.188
Jan-93 3.3% 3.4% 3.6% 3.5% 0.9% 1.198
Feb-93 3.2% 3.4% 3.6% 3.5% 0.9% 1.198
Mar-93 3.1% 3.4% 3.6% 3.5% 0.9% 1.198
Apr-93 3.2% 3.6% 3.6% 3.4% 0.9% 1.209
May-93 3.2% 3.6% 3.6% 3.4% 0.9% 1.209
Jun-93 3.0% 3.6% 3.6% 3.4% 0.9% 1.209
Jul-93 2.8% 3.6% 3.2% 3.6% 0.8% 1.219
Aug-93 2.8% 3.6% 3.2% 3.6% 0.8% 1.219
Sep-93 2.7% 3.6% 3.2% 3.6% 0.8% 1.219
Oct-93 2.8% 3.4% 3.2% 3.6% 0.8% 1.229
Nov-93 2.7% 3.4% 3.2% 3.6% 0.8% 1.229
Dec-93 2.7% 3.4% 3.2% 3.6% 0.8% 1.229
Jan-94 2.5% 3.2% 2.8% 3.4% 0.7% 1.237
Feb-94 2.5% 3.2% 2.8% 3.4% 0.7% 1.237
Mar-94 2.5% 3.2% 2.8% 3.4% 0.7% 1.237
Apr-94 2.4% 3.1% 3.2% 3.2% 0.8% 1.247
May-94 2.3% 3.1% 3.2% 3.2% 0.8% 1.247
Jun-94 2.5% 3.1% 3.2% 3.2% 0.8% 1.247
Jul-94 2.8% 3.1% 3.2% 3.1% 0.8% 1.257
Aug-94 2.9% 3.1% 3.2% 3.1% 0.8% 1.257
Sep-94 3.0% 3.1% 3.2% 3.1% 0.8% 1.257
Oct-94 2.6% 3.0% 2.8% 3.1% 0.7% 1.266
Nov-94 2.7% 3.0% 2.8% 3.1% 0.7% 1.266
Dec-94 2.7% 3.0% 2.8% 3.1% 0.7% 1.266
Jan-95 2.8% 3.0% 2.8% 3.0% 0.7% 1.275
Feb-95 2.9% 3.0% 2.8% 3.0% 0.7% 1.275
Mar-95 2.9% 3.0% 2.8% 3.0% 0.7% 1.275
Apr-95 3.1% 3.0% 3.2% 3.0% 0.8% 1.285
May-95 3.2% 3.0% 3.2% 3.0% 0.8% 1.285
Jun-95 3.0% 3.0% 3.2% 3.0% 0.8% 1.285
Jul-95 2.8% 2.8% 2.4% 3.0% 0.6% 1.293
Aug-95 2.6% 2.8% 2.4% 3.0% 0.6% 1.293
Sep-95 2.5% 2.8% 2.4% 3.0% 0.6% 1.293
Oct-95 2.8% 2.8% 2.8% 2.8% 0.7% 1.302
Nov-95 2.6% 2.8% 2.8% 2.8% 0.7% 1.302
Dec-95 2.5% 2.8% 2.8% 2.8% 0.7% 1.302
Jan-96 2.7% 2.9% 3.2% 2.8% 0.8% 1.312
Feb-96 2.7% 2.9% 3.2% 2.8% 0.8% 1.312
Mar-96 2.8% 2.9% 3.2% 2.8% 0.8% 1.312
Apr-96 2.9% 2.9% 3.2% 2.9% 0.8% 1.323
May-96 2.9% 2.9% 3.2% 2.9% 0.8% 1.323
Jun-96 2.8% 2.9% 3.2% 2.9% 0.8% 1.323
Jul-96 3.0% 2.9% 2.4% 2.9% 0.6% 1.331
Aug-96 2.9% 2.9% 2.4% 2.9% 0.6% 1.331
Sep-96 3.0% 2.9% 2.4% 2.9% 0.6% 1.331
Oct-96 3.0% 3.0% 3.2% 2.9% 0.8% 1.341
Nov-96 3.3% 3.0% 3.2% 2.9% 0.8% 1.341
Dec-96 3.3% 3.0% 3.2% 2.9% 0.8% 1.341
Jan-97 3.0% 2.2% 0.0% 3.0% 1.341
Feb-97 3.0% 2.2% 0.0% 3.0% 1.341
1.341
</TABLE>
Source: Bloomberg L.P.
- - Although trending slightly upward, both Employment Cost and CPI remained
relatively stable during 1996, reflecting continued low levels of inflation.
- - CPI rose 3.3% in 1996, the highest annual rate since 1990. However, the core
rate (which excludes the more volatile food and energy components) rose just
2.6%, the lowest rate since 1965.
- - The Fed has indicated its belief that the economy remains in the zone where
inflation risks are on the upside and that it is poised to act preemptively
by raising interest rates if necessary. The Fed did take action in March by
increasing the Fed Funds Rate by 0.25%.
9
<PAGE> 16
TOTAL RETURN PERFORMANCE
GROWTH OF A DOLLAR INVESTED
[GRAPH]
<TABLE>
<CAPTION>
Monthly Total Return
--------------------------------------------
Lehman
MF
Schwab Schwab General
Small Cap Int'l US Govt.
S&P 50 Index Index Index
-------- --------- -------- ---------
<S> <C> <C> <C> <C>
Sep-96 5.62% 3.68% 2.94% 1.66%
Oct-96 2.76% -1.71% -0.34% 2.20%
Nov-96 7.56% 3.98% 4.64% 1.74%
Dec-96 -1.98% 1.86% -0.88% -1.02%
Jan-97 6.24% 2.36% -3.32% 0.11%
Feb-97 0.79% -2.44% 1.67% 0.14%
</TABLE>
<TABLE>
<CAPTION>
Growth of $ Investment
------------------------------------------
Lehman
MF
Schwab Schwab General
Small Cap Int'l US Govt.
S&P 500 Index Index Index
------- --------- ------ --------
<S> <C> <C> <C> <C>
$1.000 $1.000 $1.000 $1.000
Sep-96 $1.056 $1.037 $1.029 $1.017
Oct-96 $1.085 $1.019 $1.026 $1.039
Nov-96 $1.167 $1.060 $1.074 $1.057
Dec-96 $1.144 $1.079 $1.064 $1.046
Jan-97 $1.216 $1.105 $1.029 $1.047
Feb-97 $1.225 $1.078 $1.046 $1.049
</TABLE>
TOTAL RETURN ASSUMES REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAIN
DISTRIBUTIONS. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. The
Indices are representative returns of specific market sectors during
the Fund's reporting period and do not reflect Fund performance.
Indices are unmanaged and, unlike a fund, do not reflect the payment of
advisory fees and other expenses associated with an investment in a
fund. Investors cannot invest in an index directly.
- - Large cap domestic stocks, as represented by the S&P 500, were clearly the
strongest performing asset class, achieving a 22.5% return during the
six-month reporting period.
- - Although positive, domestic small cap stock (as represented by the Schwab
Small-Cap Index) and international stock total returns (as represented by the
Schwab International Index) both lagged the S&P 500 Index with six-month
returns of 7.8% and 4.6%, respectively.
- - The six-month total return for U.S. Government bonds (as represented by the
Lehman Mutual Fund General U.S. Government Index) was 4.9%.
10
<PAGE> 17
S&P 500 PRICE EARNINGS RATIO
[GRAPH]
<TABLE>
<CAPTION>
S&P
500
Price
Earnings
Ratio
--------
<S> <C>
Jan-90 14.37
Feb-90 14.21
Mar-90 14.77
Apr-90 14.82
May-90 15.84
Jun-90 16.66
Jul-90 16.65
Aug-90 15.57
Sep-90 14.90
Oct-90 14.36
Nov-90 14.59
Dec-90 15.19
Jan-91 14.95
Feb-91 16.82
Mar-91 17.48
Apr-91 17.85
May-91 17.92
Jun-91 17.96
Jul-91 18.07
Aug-91 19.72
Sep-91 19.88
Oct-91 19.92
Nov-91 21.02
Dec-91 21.85
Jan-92 23.35
Feb-92 23.83
Mar-92 25.45
Apr-92 25.51
May-92 25.71
Jun-92 25.08
Jul-92 25.61
Aug-92 25.50
Sep-92 24.37
Oct-92 23.94
Nov-92 24.08
Dec-92 24.01
Jan-93 24.20
Feb-93 24.25
Mar-93 24.22
Apr-93 23.20
May-93 23.21
Jun-93 22.58
Jul-93 22.52
Aug-93 23.02
Sep-93 23.74
Oct-93 23.97
Nov-93 22.55
Dec-93 23.55
Jan-94 22.98
Feb-94 21.17
Mar-94 20.34
Apr-94 20.10
May-94 20.16
Jun-94 19.76
Jul-94 18.64
Aug-94 18.90
Sep-94 18.26
Oct-94 17.55
Nov-94 16.58
Dec-94 16.98
Jan-95 16.23
Feb-95 16.20
Mar-95 16.50
Apr-95 16.02
May-95 16.43
Jun-95 16.82
Jul-95 16.55
Aug-95 16.18
Sep-95 16.86
Oct-95 16.18
Nov-95 17.14
Dec-95 17.41
Jan-96 18.11
Feb-96 18.56
Mar-96 18.94
Apr-96 19.16
May-96 19.48
Jun-96 19.30
Jul-96 18.31
Aug-96 18.62
Sep-96 19.75
Oct-96 19.60
Nov-96 21.05
Dec-96 20.70
Jan-97 20.55
Feb-97 20.98
</TABLE>
Source: Bloomberg L.P.
- - The price earnings ratio for the S&P 500 was 21 at the close of the reporting
period, well above its 30-year mean of 15, but below its 1992 and 1987 highs
of 26 and 22, respectively.
- - Based on other traditional measures such as the price-to-book value ratio or
dividend yield, the U.S. stock market valuation, as measured by the S&P 500,
reached historical highs during the reporting period.
11
<PAGE> 18
QUESTIONS TO THE PORTFOLIO MANAGEMENT TEAM
Q. ARE INDEX FUNDS LESS RISKY THAN ACTIVELY MANAGED FUNDS? HOW DO INDEX FUNDS
BEHAVE IN A BEAR MARKET?
A. While broad based index funds like the Schwab 1000 Fund(R) help reduce the
risk associated with investing in individual stocks or a specific market sector,
they do not provide protection against market risk. It's important to realize
that the market can fluctuate significantly. Because equity index funds are
designed to track stock market performance in both directions, down as well as
up, their value will fall and rise with the markets they seek to track.
We feel the most meaningful way for investors to think about their exposure to
market risk is not on a fund by fund basis, but on the basis of their overall
investment portfolio. One of the greatest risks of a bear market is the risk of
selling at the bottom of a market downturn. It is for this reason that your
asset allocation strategy and total portfolio market exposure should be set at
an appropriate level for you -- one that allows you to "ride out" bear markets
over the long-term. Index funds offer an excellent way to achieve long-term
exposure to the equity markets, but each individual investor has a different
tolerance for risk and should have a portfolio with a risk profile that reflects
that tolerance level.
Q. HOW DID THE FUND PERFORM DURING THE REPORTING PERIOD?
A. The Fund achieved a very strong total return of 20.51% for the reporting
period. As discussed in the Market Overview section, large-cap domestic stocks
(such as those in the Schwab 1000 Index(R)) were clearly a strong performing
asset class for the reporting period. As shown on the chart at right, the Fund
continued to closely track the performance of its benchmark, the Schwab 1000
Index.
12
<PAGE> 19
COMPARISON OF CHANGE IN VALUE OF A HYPOTHETICAL
$10,000 INVESTMENT IN THE SCHWAB 1000 FUND(R),
THE SCHWAB 1000 INDEX(R), AND THE S&P 500(R) INDEX
[GRAPH]
<TABLE>
<CAPTION>
4/2/91 Apr-91 May-91 Jun-91 Jul-91 Aug-91 Sep-91 Oct-91 Nov-91 Dec-91 Jan-92 Feb-92
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Schwab 1000 Fund $10,000 $ 9,910 $10,320 $ 9,850 $10,320 $10,600 $10,460 $10,630 $10,240 $11,425 $11,283 $11,425
Schwab 1000 Index $10,000 $ 9,898 $10,311 $ 9,840 $10,310 $10,591 $10,455 $10,625 $10,225 $11,412 $11,272 $11,415
S&P 500 Index $10,000 $ 9,908 $10,335 $ 9,861 $10,321 $10,566 $10,389 $10,528 $10,104 $11,260 $11,050 $11,193
<CAPTION>
Mar-92 Apr-92 May-92 Jun-92 Jul-92 Aug-92 Sep-92 Oct-92 Nov-92 Dec-92 Jan-93 Feb-93
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Schwab 1000 Fund $11,171 $11,404 $11,484 $11,465 $11,726 $11,480 $11,623 $11,746 $12,208 $12,398 $12,502 $12,595
Schwab 1000 Index $11,163 $11,392 $11,457 $11,257 $11,728 $11,486 $11,646 $11,763 $12,233 $12,428 $12,539 $12,632
S&P 500 Index $10,975 $11,298 $11,353 $11,184 $11,641 $11,403 $11,537 $11,577 $11,971 $12,119 $12,220 $12,387
<CAPTION>
Mar-93 Apr-93 May-93 Jun-93 Jul-93 Aug-93 Sep-93 Oct-93 Nov-93 Dec-93 Jan-94 Feb-94
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Schwab 1000 Fund $12,896 $12,533 $12,896 $12,958 $12,905 $13,397 $13,355 $13,544 $13,355 $13,592 $14,005 $13,645
Schwab 1000 Index $12,948 $12,583 $12,957 $13,024 $12,989 $13,492 $13,454 $13,654 $13,462 $13,700 $14,136 $13,781
S&P 500 Index $12,648 $12,342 $12,673 $12,710 $12,659 $13,139 $13,038 $13,308 $13,181 $13,341 $13,794 $13,420
<CAPTION>
Mar-94 Apr-94 May-94 Jun-94 Jul-94 Aug-94 Sep-94 Oct-94 Nov-94 Dec-94 Jan-95 Feb-95
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Schwab 1000 Fund $13,042 $13,190 $13,349 $12,988 $13,405 $13,971 $13,651 $13,918 $13,416 $13,577 $13,923 $14,474
Schwab 1000 Index $13,169 $13,326 $13,488 $13,127 $13,558 $14,147 $13,825 $14,095 $13,590 $13,767 $14,121 $14,700
S&P 500 Index $12,837 $13,001 $13,213 $12,889 $13,312 $13,856 $13,518 $13,821 $13,318 $13,514 $13,864 $14,404
<CAPTION>
Mar-95 Apr-95 May-95 Jun-95 Jul-95 Aug-95 Sep-95 Oct-95 Nov-95 Dec-95 Jan-96 Feb-96
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Schwab 1000 Fund $14,852 $15,219 $15,770 $16,191 $16,807 $16,936 $17,606 $17,520 $18,276 $18,547 $19,095 $19,379
Schwab 1000 Index $15,094 $15,476 $16,048 $16,490 $17,111 $17,245 $17,949 $17,859 $18,646 $18,924 $19,499 $19,789
S&P 500 Index $14,829 $15,264 $15,874 $16,242 $16,779 $16,821 $17,531 $17,468 $18,233 $18,585 $19,217 $19,396
<CAPTION>
Mar-96 Apr-96 May-96 Jun-96 Jul-96 Aug-96 Sep-96 Oct-96 Nov-96 Dec-96 Jan-97 Feb-97
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Schwab 1000 Fund $19,554 $19,883 $20,354 $20,299 $19,335 $19,861 $20,967 $21,394 $22,938 $22,549 $23,846 $23,935
Schwab 1000 Index $19,980 $20,321 $20,812 $20,779 $19,794 $20,327 $21,465 $21,899 $23,485 $23,103 $24,442 $24,528
S&P 500 Index $19,582 $19,870 $20,380 $20,458 $19,553 $19,966 $21,090 $21,672 $23,310 $22,848 $24,274 $24,464
</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 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. Total return assumes reinvestment of all dividends and capital
gain distributions, if any. Indices are unmanaged and investors cannot invest in
an index directly, therefore indices, unlike the Fund, do not reflect advisory
fees and other expenses associated with an investment in the Fund. The
Investment Manager and Schwab waived a portion of their fees during the
reporting period, and have guaranteed that maximum total operating expenses will
not exceed 0.46% through at least 2/28/2000. Without fee waivers and guarantees,
the Fund's total return for each period would have been lower.
13
<PAGE> 20
Q. HOW DID THE PERFORMANCE OF THE SCHWAB 1000 INDEX(R) COMPARE TO THE S&P
500(R) INDEX DURING THE REPORTING PERIOD?
A. The total return of the Schwab 1000 Index continued to exceed the S&P 500 by
a slim margin on an inception-to-date basis, however, the S&P 500 marginally
outperformed the Schwab 1000 Index during the reporting period. The total return
for the S&P 500 for the six-month period was 22.53% versus 20.67% for the Schwab
1000 Index. The reason for the difference is that large-cap stocks outperformed
mid-cap stocks, which comprise a portion of the Schwab 1000 Index.
Since the two indices are constructed very differently, performance variance
between the two indices is a normal and anticipated occurrence. The S&P 500
Index includes 500 large market capitalization stocks as determined by the
Standard & Poor's Index Committee. Stocks in the S&P 500 Index are chosen based
on market size, liquidity and industry group representation. The Schwab 1000
Index is a broader representation of the U.S. stock market, composed of the
common stocks of the 1,000 largest operating U.S. corporations (excluding
investment companies) based on market capitalization.
Q. WHAT ACCOUNTS FOR THE DIFFERENCE BETWEEN THE PERFORMANCE OF THE SCHWAB 1000
FUND(R) AND THE SCHWAB 1000 INDEX?
A. Unlike the Fund, the Index does not incur management and other Fund costs
which reduce returns to the shareholders. Conversely, the Fund, unlike the
Index, holds a small portion of its assets in cash to meet shareholder
redemptions and to pay Fund 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 precise weighting of any particular security in the Fund
can be greater or less than 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 have a positive or negative impact on the Fund.
Lastly, unlike the Index, the Fund incurs trading costs when it buys or sells
stocks. Recently, a
14
<PAGE> 21
change from semi-annual rebalancing of the Index to annual rebalancing of the
Index was implemented. As a result of this change, we anticipate that the Fund's
trading costs may decrease and shareholder returns may be enhanced.
Taken together, these factors cause the difference in the 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 0.16%, and its
average annual tracking error since 4/2/91, the Fund's inception, has been
0.48%. Given the Fund's current operating expense ratio of 0.49% during the
reporting period, and the components of tracking error (as discussed above), we
are very pleased with this level of tracking error.
15
<PAGE> 22
SCHWAB 1000 FUND(R)
- ------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
February 28, 1997 (Unaudited)
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- ----------
<S> <C> <C>
COMMON STOCK--99.7%
AEROSPACE/DEFENSE--1.7%
BFGoodrich Co. 12,400 $ 504
Boeing Co. 110,441 11,237
Coltec Industries Inc.+ 18,200 332
General Dynamics Corp. 21,400 1,439
Litton Industries, Inc.+ 10,500 452
Lockheed Martin Corp. 58,092 5,141
McDonnell Douglas Corp. 62,900 3,994
Northrop Grumman Corp. 15,900 1,155
Raytheon Co. 68,400 3,223
Sundstrand Corp. 14,600 637
Textron Inc. 27,700 2,732
United Technologies Corp. 74,400 5,599
------
36,445
------
AIR TRANSPORTATION--0.4%
AMR Corp.+ 25,100 1,973
Atlas Air Inc.+ 7,000 141
Comair Holdings, Inc. 12,000 248
Continental Airlines Inc.+ 14,400 412
Delta Airlines, Inc. 22,200 1,787
Northwest Airlines Corporation Class A+ 24,500 867
Southwest Airlines Co. 36,400 855
UAL Corp.+ 21,600 1,226
USAir Group, Inc.+ 16,500 326
------
7,835
------
ALCOHOLIC BEVERAGES--0.4%
Anheuser-Busch Companies, Inc. 151,800 6,755
Brown-Forman Corp. Class B 25,500 1,141
------
7,896
------
APPAREL--0.6%
Fruit of the Loom, Inc. Class A+ 18,800 768
Jones Apparel Group, Ltd.+ 28,600 1,062
Liz Claiborne, Inc. 17,500 709
Nautica Enterprises+ 10,000 250
NIKE, Inc. Class B 86,600 6,224
Nine West Group, Inc.+ 7,700 362
Reebok International Ltd. 16,700 781
Russell Corp. 5,900 222
Unifi, Inc. 16,925 539
V.F. Corp. 18,800 1,307
Warnaco Group, Inc. 13,600 434
------
12,658
------
</TABLE>
16
<PAGE> 23
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- ----------
<S> <C> <C>
AUTOMOTIVE PRODUCTS--0.2%
Bandag, Inc. 4,000 $ 195
Cooper Tire & Rubber Co. 19,500 388
Danaher Corp. 17,400 753
Goodyear Tire & Rubber Co. 48,900 2,579
Lear Corp.+ 26,000 1,014
------
4,929
------
BANKS--8.8%
Amsouth Bancorporation 21,200 1,087
Banc One Corp. 126,621 5,587
Bancorp Hawaii, Inc. 10,175 448
Bank of Boston Corp. 52,420 3,951
Bank of New York Co., Inc. 115,000 4,456
BankAmerica Corp. 111,695 12,705
Bankers Trust New York Corp. 27,300 2,477
Barnett Banks, Inc. 59,676 2,760
CCB Financial Corp. 4,500 309
Central Fidelity Banks, Inc. 12,825 374
Centura Banks, Inc. 8,000 350
Chase Manhattan Corp. (New) 132,830 13,300
Citicorp 142,500 16,632
Comerica Inc. 31,864 1,916
Commerce Bancshares, Inc. 7,408 352
Compass Bancshares, Inc. 8,850 395
CoreStates Financial Corp. 66,592 3,504
Crestar Financial Corp. 38,800 1,426
Dauphin Deposit Bank & Trust Co. 10,000 424
Deposit Guaranty Corp. 12,000 369
Dime Bancorp Inc. (New)+ 24,926 436
Fifth Third Bancorp 33,975 2,833
First American Corp. 21,900 1,371
First Bank System, Inc. 44,109 3,463
First Chicago NBD Corp. 98,321 5,752
First Commerce Corp. 10,562 438
First Commercial Corp. 9,000 356
First Empire State Corp. 2,500 809
First Hawaiian, Inc. 10,000 333
First of America Bank Corp. 8,800 564
First Security Corp. 19,612 684
First Tennessee National Corp. 16,300 762
First Union Corp. 85,993 7,546
First Virginia Banks, Inc. 9,750 514
Firstar Corp. 39,000 1,194
Firstmerit Corp. 5,400 217
Fleet Financial Group, Inc. 84,580 5,159
Hibernia Corp. Class A 35,000 486
Huntington Bancshares, Inc. 48,512 1,383
</TABLE>
17
<PAGE> 24
SCHWAB 1000 FUND(R)
- ------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
February 28, 1997 (Unaudited)
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- ----------
<S> <C> <C>
J.P. Morgan & Co., Inc. 57,000 $ 5,992
KeyCorp, Inc. 68,423 3,661
Marshall & Ilsley Corp. 32,828 1,297
MBNA Corp. 104,550 3,346
Mellon Bank Corp. 40,472 3,253
Mercantile Bancorp Inc. 14,450 836
Mercantile Bankshares Corp. 10,450 388
National City Corp. 74,240 3,749
NationsBank Corp. 241,470 14,458
Northern Trust Corp. 33,900 1,441
Norwest Corp. 116,788 5,810
Old Kent Financial Corp. 17,120 858
Old National Bancorp 7,500 278
People's Bank, Bridgeport 12,000 414
PNC Bank Corp. 104,730 4,438
Provident Bancorp, Inc. 10,200 380
Regions Financial Corp. 22,850 1,345
Republic New York Corp. 16,400 1,523
Signet Banking Corp. 15,300 486
Southern National Corp. 28,750 1,118
Southtrust Corp. 25,125 996
Star Banc Corp. 21,300 836
State Street Boston Corp. 26,600 2,138
Summit Bancorp 32,900 1,571
SunTrust Banks, Inc. 67,200 3,452
Synovus Financial Corp. 40,650 1,418
U.S. Bancorp 47,891 2,365
Union Bank of San Francisco 19,400 1,169
Union Planters Corp. 23,900 1,070
Wachovia Corp. 50,820 3,094
Wells Fargo & Co. 28,000 8,519
Wilmington Trust Co. 14,200 643
Zions Bancorporation 2,900 361
-------
189,825
-------
BUSINESS MACHINES & SOFTWARE--7.8%
3COM Corp.+ 51,500 1,705
Adobe Systems, Inc. 19,800 723
Amdahl Corp.+ 32,100 317
Apple Computer, Inc.+ 35,900 583
Autodesk, Inc. 12,200 413
Bay Networks, Inc.+ 51,423 977
BMC Software, Inc.+ 34,200 1,464
Cabletron Systems, Inc.+ 42,500 1,275
Ceridian Corp.+ 17,480 684
Cirrus Logic, Inc.+ 12,200 165
Cisco Systems, Inc.+ 197,100 10,964
Citrix Systems Inc.+ 8,000 101
</TABLE>
18
<PAGE> 25
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- ----------
<S> <C> <C>
Compaq Computer Corp.+ 84,300 $ 6,681
Computer Associates International, Inc. 116,775 5,080
Computer Sciences Corp.+ 22,598 1,525
Compuware Corp.+ 12,700 791
Dell Computer Corp.+ 54,600 3,883
Diebold, Inc. 25,818 1,084
Digital Equipment Corp.+ 50,400 1,651
Electronic Arts, Inc.+ 11,400 356
Electronics For Imaging Inc.+ 15,000 578
EMC Corp.+ 73,900 2,660
Gateway 2000, Inc.+ 24,000 1,410
Hewlett-Packard Co. 316,500 17,724
Honeywell Inc. 40,800 2,902
Informix Corp.+ 40,700 707
International Business Machines Corp. 159,700 22,957
Intuit, Inc.+ 11,800 267
Iomega Corp.+ 39,000 605
Komag, Inc.+ 27,200 816
Lexmark International Group, Inc. Class A+ 20,000 558
McAfee Associates, Inc.+ 14,400 661
Microchip Technology, Inc.+ 30,000 1,121
Micron Electronics+ 20,000 388
Microsoft Corp.+ 364,200 35,505
Netscape Communications Corp.+ 25,700 749
Network General Corp.+ 11,000 243
Novell, Inc.+ 104,000 1,053
Oracle Systems Corp.+ 202,975 7,967
Parametric Technology Corp.+ 37,700 2,125
Peoplesoft, Inc.+ 32,800 1,308
Pitney Bowes Inc. 49,300 3,063
Quantum Corp.+ 17,200 684
Rational Software Corp.+ 10,000 259
Read-Rite Corp.+ 14,000 430
Remedy Corp.+ 8,000 307
Seagate Technology, Inc.+ 87,060 4,114
Security Dynamics Technologies, Inc.+ 8,000 220
Shiva Corp.+ 8,400 140
Silicon Graphics, Inc.+ 47,900 1,156
Sterling Software, Inc.+ 13,800 395
Storage Technology Corp.+ 14,800 618
Sun Microsystems, Inc.+ 114,000 3,520
Sybase, Inc.+ 15,120 248
Synopsys, Inc.+ 9,800 350
Tandem Computers Inc.+ 47,800 598
Technology Data Corp.+ 13,000 312
U.S. Robotics Inc. 27,400 1,529
Unisys Corp.+ 69,900 472
</TABLE>
19
<PAGE> 26
SCHWAB 1000 FUND(R)
- ------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
February 28, 1997 (Unaudited)
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- ----------
<S> <C> <C>
Western Digital Corp.+ 16,700 $ 985
Xerox Corp. 107,500 6,719
-------
168,845
-------
BUSINESS SERVICES--2.9%
Accustaff Inc.+ 30,000 623
Affiliated Computer Services Inc.+ 11,000 227
America Online, Inc.+ 36,700 1,376
American Management Systems, Inc.+ 11,000 193
APAC Teleservices, Inc.+ 14,000 417
Apollo Group Inc.+ 15,000 405
Automatic Data Processing, Inc. 91,400 3,896
Browning-Ferris Industries, Inc. 71,200 2,234
Cadence Design Systems, Inc.+ 19,875 733
Cambridge Technology Partners+ 12,000 288
Camco International, Inc.+ 8,000 309
Catalina Marketing Corp.+ 6,000 302
Cintas Corp. 16,100 869
Cognizant Corp. 47,600 1,660
Comdisco, Inc. 22,022 685
Concord EFS, Inc.+ 14,850 352
Corrections Co.+ 18,000 513
Credit Acceptance Corp.+ 7,000 149
Deluxe Corp. 20,400 645
DST Systems, Inc.+ 15,000 493
Dun & Bradstreet Corp. 47,600 1,166
Ecolab Inc. 14,400 545
Equifax Inc. 39,000 1,160
First Data Corp. 137,302 5,023
Fiserv, Inc.+ 8,975 294
Foundation Health Corp.+ 12,200 461
Gartner Group Inc. Class A+ 24,300 644
Gtech Holdings Corp.+ 15,700 493
H & R Block, Inc. 34,700 1,019
HBO & Co. 24,600 1,418
Health Care & Retirement Corp.+ 10,050 273
Health Management Associates, Inc. Class A+ 39,168 1,038
Healthcare Compare Corp.+ 6,000 256
Ikon Office Solutions 41,400 1,708
Interpublic Group of Companies, Inc. 29,900 1,499
John H. Harland Co. 10,000 303
Keane, Inc.+ 10,000 353
Kelly Services, Inc. Class A 5,525 152
Manpower, Inc. 19,500 736
Medpartners Inc.+ 49,144 1,081
National Data Corp. 10,000 351
National Service Industries, Inc. 12,200 464
NCR Corp.+ 29,451 972
</TABLE>
20
<PAGE> 27
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- ----------
<S> <C> <C>
Olsten Corp. 22,275 $ 398
Omnicom Group, Inc. 29,100 1,444
Paychex, Inc. 22,725 989
PHH Corp. 9,000 431
Phycor, Inc.+ 12,300 374
Quorum Health Group, Inc.+ 13,100 411
R.R. Donnelley & Sons Co. 52,500 1,621
Republic Industries, Inc.+ 66,700 2,368
Reynolds & Reynolds Co. Class A 20,400 571
Robert Half International, Inc.+ 23,100 962
Service Corp. International 67,400 1,955
Shared Medical Systems Corp. 7,600 415
Steris Corp.+ 9,000 227
Stewart Enterprises, Inc. Class A 13,050 461
Sungard Data Systems, Inc.+ 8,800 447
SUPERVALU Inc. 15,800 490
Total System Services, Inc. 46,800 1,439
U.S. Office Products Co.+ 23,000 736
U.S.A. Waste Services Inc.+ 41,550 1,496
Unisource Worldwide Inc.+ 20,700 445
United Waste System, Inc.+ 9,000 324
Value Health, Inc.+ 9,082 218
Vencor, Inc.+ 15,775 546
Viad Corp. 20,100 322
Wallace Computer Service, Inc. 23,800 806
Wellpoint Health Networks, Inc. Class A+ 18,175 779
Wheelabrator Technologies, Inc. 37,300 532
WMX Technologies, Inc. 149,000 4,712
------
63,697
------
CHEMICAL--3.3%
Air Products & Chemicals, Inc. 36,100 2,676
Albemarle Corp. 15,400 302
Arcadian Corp.+ 12,000 314
Arco Chemical Co. 25,600 1,210
Betz Laboratories, Inc. 12,500 811
Cabot Corp. 17,800 418
Crompton & Knowles Corp. 22,000 418
Cytec Industries, Inc.+ 13,755 545
Dow Chemical Co. 74,000 5,994
E.I. du Pont de Nemours & Co. 171,700 18,413
Eastman Chemical Co. 23,725 1,308
Ethyl Corp. 31,300 286
Great Lakes Chemical Corp. 21,700 1,006
Hercules Inc. 29,300 1,362
International Specialty Products Inc.+ 15,400 206
Lubrizol Corp. 15,600 540
Lyondell Petrochemical Co. 16,300 385
</TABLE>
21
<PAGE> 28
SCHWAB 1000 FUND(R)
- ------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
February 28, 1997 (Unaudited)
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- ----------
<S> <C> <C>
M.A. Hanna Co. 10,725 $ 223
Millennium Chemicals Inc.+ 24,000 459
Minnesota Mining & Manufacturing Co. 129,900 11,951
Monsanto Co. 180,500 6,566
Morton International, Inc. 46,900 1,935
Nalco Chemical Co. 14,800 544
Olin Corp. 10,000 400
PPG Industries, Inc. 55,500 3,108
Praxair, Inc. 47,100 2,290
Rohm & Haas Co. 30,300 2,788
RPM, Inc. 35,875 632
Sigma-Aldrich Corp. 35,000 1,072
Union Carbide Corp. 37,000 1,748
Valspar Corp. 10,800 618
W.R. Grace & Co. (New) 24,900 1,320
Witco Corp. 12,900 397
------
72,245
------
CONSTRUCTION--0.5%
Armstrong World Industries, Inc. 16,400 1,130
Centex Corp. 9,000 363
Clayton Homes, Inc. 26,346 375
Crane Co. 21,900 714
Fluor Corp. 27,000 1,638
Lafarge Corp. 16,100 374
Martin Marietta Materials, Inc. 21,400 564
Oakwood Homes Corp. 14,000 277
Owens Corning 11,600 492
Schuller Corp. 49,300 585
Sherwin-Williams Co. 27,500 1,543
Stanley Works 36,800 1,408
USG Corp.+ 11,700 412
Vulcan Materials Co. 7,800 505
------
10,380
------
CONSUMER-DURABLE--0.4%
Black & Decker Corp. 29,500 933
Harman International Industries, Inc. 5,600 256
Leggett & Platt, Inc. 33,300 1,195
Masco Corp. 51,400 1,805
Maytag Corp. 22,800 502
Newell Co. 51,674 1,917
Shaw Industries, Inc. 30,100 391
Snap-on Inc. 15,150 589
Sunbeam Corp. 21,100 578
Whirlpool Corp. 21,100 1,066
------
9,232
------
</TABLE>
22
<PAGE> 29
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- ----------
<S> <C> <C>
CONSUMER-NONDURABLE--1.0%
American Greetings Corp. Class A 29,200 $ 905
Boston Chicken, Inc.+ 15,600 511
Brinker International, Inc.+ 20,225 240
Corning Inc. 75,800 2,852
Cracker Barrel Old Country Store, Inc. 20,900 570
Darden Restaurants, Inc. 38,600 280
First Brands Corp. 6,400 159
Hasbro, Inc. 23,150 990
Lancaster Colony Corp. 5,300 242
Lone Star Steakhouse & Saloon, Inc.+ 7,400 196
Mattel, Inc. 89,220 2,219
McDonald's Corp. 215,200 9,308
Outback Steakhouse, Inc.+ 11,250 269
Premark International, Inc. 17,300 409
Rubbermaid Inc. 54,000 1,289
Starbucks Corp.+ 20,500 689
U.S. Industries Inc.+ 15,000 549
Wendy's International, Inc. 33,500 695
------
22,372
------
CONTAINERS--0.2%
Bemis Co., Inc. 13,400 554
Crown Cork & Seal Co., Inc. 43,600 2,421
Jefferson Smurfit Corp.+ 25,900 353
Owens-Illinois, Inc.+ 30,900 745
Sealed Air Corp.+ 9,600 395
Sonoco Products, Inc. 21,310 559
Stone Container Corp. 22,112 287
------
5,314
------
ELECTRONICS--5.3%
Adaptec, Inc.+ 30,400 1,157
ADC Telecommunications, Inc.+ 35,400 956
Advanced Micro Devices, Inc.+ 37,300 1,338
Altera Corp.+ 32,200 1,461
American Power Conversion Corp.+ 33,500 699
AMP Inc. 61,300 2,383
Amphenol Corp. Class A+ 6,500 166
Analog Devices, Inc.+ 49,400 1,149
Applied Materials, Inc.+ 59,700 3,022
Arrow Electronics, Inc.+ 11,400 640
Ascend Communications, Inc.+ 33,900 1,771
Atmel Corp.+ 30,200 1,129
Avnet, Inc. 17,100 1,069
AVX Corp. (New)+ 26,000 575
Cascade Communications Corp.+ 25,300 781
Cypress Semiconductor Corp.+ 15,600 207
Electronic Data Systems Corp. 149,800 6,760
</TABLE>
23
<PAGE> 30
SCHWAB 1000 FUND(R)
- ------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
February 28, 1997 (Unaudited)
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- ----------
<S> <C> <C>
ESS Technology+ 12,000 $ 316
Fore Systems, Inc.+ 23,400 784
General Instrument Corp.+ 37,000 879
General Signal Corp. 11,600 506
Glenayre Technologies, Inc.+ 14,600 193
Harris Corp. 18,300 1,350
Imation Corp.+ 10,760 286
Integrated Device Technology, Inc.+ 24,000 264
Intel Corp. 250,800 35,578
KLA Instruments Corp.+ 22,400 934
Lattice Semiconductor Corp.+ 7,000 334
Linear Technology Corp. 18,700 844
LSI Logic Corp.+ 45,100 1,556
Lucent Technologies, Inc.+ 198,727 10,706
Maxim Integrated Products, Inc.+ 14,600 725
Micron Technology, Inc. 59,500 2,231
Molex Inc. 33,445 1,196
Molex Inc. Class A 12,366 411
Motorola, Inc. 180,900 10,108
National Semiconductor Corp.+ 49,300 1,288
Perkin Elmer Corp. 12,800 909
Pittway Corp. 6,750 358
Qualcomm, Inc.+ 24,700 1,375
Rockwell International Corp. (New)+ 64,800 4,196
SCI Systems, Inc.+ 9,000 482
Scientific-Atlanta, Inc. 24,700 414
Sensormatic Electronics Corp. 27,150 468
Solectron Corp.+ 16,800 888
Symbol Technologies, Inc.+ 7,700 387
Tektronix, Inc. 7,600 371
Tele-Communications International Series A+ 35,000 473
Teradyne, Inc.+ 17,900 488
Texas Instruments, Inc. 58,800 4,535
Thermo Electron Corp.+ 39,137 1,336
Thomas & Betts Corp. 19,400 866
Varian Associates, Inc. 9,300 537
Vishay Intertechnology, Inc.+ 12,810 293
Vitesse Semiconductor Corp.+ 7,000 294
VLSI Technology, Inc.+ 14,000 262
Xilinx, Inc.+ 17,400 785
-------
115,469
-------
ENERGY-DEVELOPMENT--1.6%
Anadarko Petroleum Corp. 19,700 1,108
Apache Corp. 30,100 974
Baker Hughes, Inc. 41,200 1,463
Barrett Resources Corp.+ 10,000 329
BJ Services Co.+ 10,000 398
</TABLE>
24
<PAGE> 31
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- ----------
<S> <C> <C>
Burlington Resources, Inc. 33,000 $ 1,448
Chesapeake Energy Corp.+ 15,000 311
Cooper Cameron Corp.+ 7,500 491
Devon Energy Corp. 10,000 313
Diamond Offshore Drilling, Inc.+ 20,300 1,198
Dresser Industries, Inc. 61,060 1,855
Energy Ventures, Inc.+ 13,800 704
Enron Oil & Gas Co. 41,100 832
Ensco International Inc.+ 26,400 1,145
Enserch Explorations, Inc.+ 38,000 366
Falcon Drilling, Inc.+ 12,000 407
Flores & Rucks, Inc.+ 6,000 270
Global Marine, Inc.+ 51,500 959
Halliburton Co. 38,700 2,501
Helmerich & Payne, Inc. 10,000 423
Louisiana Land & Exploration Co. 8,700 415
Mapco Petroleum Co. 31,400 997
Mitchell Energy & Development Corp. Class A 8,000 168
Nabors Industries, Inc.+ 21,100 324
NGC Corp. 56,000 1,106
Noble Affiliates, Inc. 19,400 757
Noble Drilling Corp.+ 30,000 533
Occidental Petroleum Corp. 108,900 2,776
Parker & Parsley Petroleum Co. 9,400 277
Reading & Bates Corp.+ 18,500 449
Rowan Companies, Inc.+ 22,000 437
Tidewater, Inc. 15,000 645
Transocean Offshore, Inc. 18,000 1,006
Union Pacific Resources Group 75,354 1,837
Union Texas Petroleum Holding, Inc. 21,100 390
United Meridian Corp.+ 7,500 226
Valero Energy Corp. 19,600 617
Vastar Resources 29,800 864
Weatherford International, Inc.+ 21,400 642
Western Atlas, Inc.+ 26,600 1,619
------
33,580
------
FOOD-AGRICULTURE--5.5%
Archer-Daniels Midland Co. 163,443 3,024
Campbell Soup Co. 71,100 6,408
Coca-Cola Co. 758,100 46,243
Coca-Cola Enterprises, Inc. 41,200 2,544
ConAgra, Inc. 71,024 3,764
CPC International, Inc. 43,700 3,676
Dean Foods Co. 6,150 201
Dole Food Co., Inc. 13,100 501
Flowers Industries, Inc. 15,000 347
General Mills, Inc. 46,500 3,034
</TABLE>
25
<PAGE> 32
SCHWAB 1000 FUND(R)
- ------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
February 28, 1997 (Unaudited)
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- ----------
<S> <C> <C>
H.J. Heinz Co. 113,100 $ 4,708
Hershey Foods Corp. 45,800 2,090
Hormel Foods Corp. 19,100 501
IBP, Inc. 20,400 474
IMC Global, Inc. 24,760 864
Interstate Bakeries Corp. 18,600 870
Kellogg Co. 65,900 4,514
McCormick & Co., Inc. 15,400 364
Nabisco Holdings Corp. 14,000 576
Pepsico, Inc. 470,600 15,471
Pioneer Hi-Bred International, Inc. 26,500 1,805
Quaker Oats Co. 56,600 2,031
Ralston Purina Co. 32,300 2,653
Richfood Holdings, Inc. 12,750 269
Sara Lee Corp. 144,400 5,596
Sysco Corp. 60,700 2,109
Terra Industries, Inc. 11,100 151
Tyson Foods, Inc. Class A 69,300 1,403
Universal Corp. 9,500 299
Whitman Corp. 23,900 562
Wm. Wrigley Jr. Co. 35,000 2,096
-------
119,148
-------
GOLD--0.2%
Battle Mountain Gold Co. 66,000 487
Homestake Mining Co. 37,800 624
Newmont Gold Co. 28,600 1,394
Newmont Mining Corp. 26,132 1,241
Santa Fe Pacific Gold Corp. 53,720 1,007
-------
4,753
-------
HEALTHCARE--10.1%
Abbott Laboratories 240,700 13,539
Allegiance Corp. 14,920 394
Allergan, Inc. 15,700 534
ALZA Corp.+ 27,600 783
American Home Products Corp. 193,300 12,371
Amgen, Inc.+ 85,200 5,208
Bausch & Lomb, Inc. 13,100 490
Baxter International, Inc. 84,600 3,892
Beckman Instruments, Inc. 4,300 178
Becton, Dickinson & Co. 35,800 1,763
Bergen Brunswig Corp. 6,483 208
Beverly Enterprises, Inc.+ 18,400 265
Biogen, Inc.+ 26,000 1,281
Biomet, Inc. 25,900 395
Boston Scientific Corp.+ 58,471 3,874
Bristol-Myers Squibb Co. 152,600 19,914
C.R. Bard, Inc. 13,600 372
</TABLE>
26
<PAGE> 33
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- ----------
<S> <C> <C>
Cardinal Health, Inc. 29,793 $ 1,832
Centocor, Inc.+ 20,600 780
Chiron Corp.+ 49,612 1,029
Columbia/HCA Healthcare Corp. 209,258 8,789
Dentsply International, Inc. 4,100 214
Dura Pharmaceuticals, Inc.+ 9,000 303
Eli Lilly & Co. 171,084 14,948
Forest Laboratories, Inc.+ 9,300 355
Genentech Inc.+ 34,300 1,891
Genzyme Corp. (General Division)+ 28,800 742
Guidant Corp. 27,168 1,820
Healthsouth Corp.+ 53,600 2,157
Humana Inc.+ 46,500 913
Idexx Corp.+ 9,800 365
Interneuron Pharmaceuticals, Inc.+ 10,500 287
Ivax Corp. 29,700 364
Johnson & Johnson 406,800 23,442
Jones Medical Industries, Inc. 10,800 327
Lincare Holdings, Inc.+ 7,500 323
Mallinckrodt Inc. 25,600 1,088
Manor Care, Inc. 14,550 387
McKesson Corp. (New) 12,500 828
Medtronic, Inc. 71,100 4,604
Merck & Co., Inc. 367,554 33,815
Mylan Laboratories, Inc. 25,550 428
Nellcor, Inc.+ 15,000 261
Omnicare, Inc. 26,600 705
Pacificare Health Systems, Inc. Class A+ 588 47
Pacificare Health Systems, Inc. Class B+ 18,148 1,520
Pfizer, Inc. 199,900 18,316
Quintiles Transnational Corp.+ 11,000 719
R.P. Scherer Corp.+ 3,600 208
Rhone-Poulenc Rorer, Inc. 44,500 3,160
Schering Plough Corp. 114,600 8,781
St. Jude Medical, Inc.+ 26,450 1,045
Stryker Corp. 36,600 1,061
Sybron International Corp.+ 9,800 292
Tenet Healthcare Corp.+ 112,373 3,048
Thermo Cardiosystems, Inc.+ 7,500 210
U.S. Surgical Corp. 15,300 652
United Healthcare Co. 60,200 3,002
Vivra, Inc.+ 11,000 327
Warner Lambert Co. 80,400 6,754
Watson Pharmaceuticals+ 9,500 414
-------
218,014
-------
</TABLE>
27
<PAGE> 34
SCHWAB 1000 FUND(R)
- ------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
February 28, 1997 (Unaudited)
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- ----------
<S> <C> <C>
HOUSEHOLD PRODUCTS--2.5%
Alberto-Culver Co. Class B 24,000 $ 684
Avon Products, Inc. 45,200 2,633
Clorox Co. 19,300 2,306
Colgate-Palmolive Co. 47,500 4,916
Dial Corp. (New) 20,100 302
Estee Lauder Companies Class A+ 18,000 837
Gillette Co. 172,705 13,665
International Flavors & Fragrances, Inc. 32,500 1,507
Procter & Gamble Co. 208,600 25,058
Tambrands, Inc. 8,900 383
Tupperware Corp. 18,500 828
------
53,119
------
IMAGING & PHOTO--0.5%
C-Cube Microsystems, Inc.+ 8,000 233
Eastman Kodak Co. 101,900 9,133
Polaroid Corp. 10,700 452
------
9,818
------
INSURANCE--4.5%
Aetna Inc. 48,665 4,033
AFLAC Inc. 39,825 1,608
Alleghany Corp.+ 2,896 618
Allmerica Financial Corp.+ 30,000 1,121
Allmerica Property & Casualty Companies, Inc. 24,700 775
Allstate Financial Corp. 134,624 8,532
AMBAC, Inc. 10,400 694
American Bankers Insurance Group, Inc. 6,100 336
American General Corp. 64,500 2,798
American International Group, Inc. 142,025 17,184
American National Insurance Co. 7,900 652
Aon Corp. 33,850 2,145
Chubb Corp. 55,100 3,230
CIGNA Corp. 24,700 3,776
Cincinnati Financial Corp. 16,538 1,143
CNA Financial Corp.+ 18,400 2,047
Conseco, Inc. 60,640 2,380
Equitable Companies, Inc. 61,100 1,917
Equitable of Iowa (New) 14,700 781
Erie Indemnity Co. Class A+ 40,000 1,240
Everest Reinsurance Holdings+ 15,000 473
General Re Corp. 27,700 4,699
Health Systems International, Inc.+ 10,400 306
ITT Hartford Group Inc. 35,900 2,693
Jefferson-Pilot Corp. 21,150 1,248
Liberty Financial Corp. 7,000 299
Lincoln National Corp. 33,900 1,970
Marsh & McLennan Companies, Inc. 21,400 2,504
</TABLE>
28
<PAGE> 35
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- ----------
<S> <C> <C>
MBIA Corp. 13,500 $ 1,318
Mercury General Corp. 12,200 749
MGIC Investment Corp. 17,700 1,392
Ohio Casualty Corp. 5,300 210
Old Republic International Corp. 30,850 837
Oxford Health Plans, Inc.+ 21,900 1,221
Paul Revere Corp. 18,900 787
Penncorp Financial Group, Inc. 9,000 315
PMI Group, Inc. 10,400 569
Progressive Corp. 23,900 1,580
Protective Life Corp. 13,800 593
Provident Companies Inc. 12,000 654
Providian Corp. 25,400 1,419
Reliance Group Holdings, Inc. 34,000 370
Reliastar Financial Corp. 12,500 775
Safeco Corp. 39,600 1,653
St. Paul Companies, Inc. 24,600 1,661
Sunamerica, Inc. 34,100 1,564
TIG Holdings, Inc. 16,300 583
Torchmark Corp. 24,850 1,463
Transamerica Corp. 20,500 1,796
Transatlantic Holdings, Inc. 5,800 489
United Insurance Companies, Inc.+ 12,000 354
Unitrin, Inc. 14,200 767
Unum Corp. 21,708 1,669
USF&G Corp. 32,700 736
USLIFE Corp. 15,400 733
Western National Corp. 9,500 219
------
97,678
------
MEDIA--2.4%
A.H. Belo Corp. Class A 18,000 680
BHC Communications, Inc. 5,700 581
Central Newspapers, Inc. Class A 7,000 322
Chris-Craft Industries, Inc.+ 4,555 187
Clear Channel Communications, Inc.+ 19,200 919
Comcast Corp. Special Class A 130,688 2,336
Cox Communications, Inc. Class A+ 87,306 1,757
Dow Jones & Co., Inc. 46,000 1,846
E.W. Scripps Co. Class A (New) 19,675 708
Gannett Co., Inc. 41,800 3,334
Harte Hanks Communications, Inc. 9,100 235
K-III Communications Corp.+ 38,000 485
King World Productions, Inc.+ 9,000 334
Knight-Ridder, Inc. 28,800 1,145
Lee Enterprises, Inc. 7,000 165
Lin Television Corp.+ 10,550 438
McClatchy Newspapers, Inc. Class A 12,000 287
</TABLE>
29
<PAGE> 36
SCHWAB 1000 FUND(R)
- ------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
February 28, 1997 (Unaudited)
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- ----------
<S> <C> <C>
McGraw Hill Companies, Inc. 32,100 $ 1,665
Meredith Corp. 8,000 392
New York Times Co. Class A 34,013 1,514
Pulitzer Publishing Co. 3,066 148
Readers Digest Association, Inc. 28,800 1,076
Regal Cinemas Inc.+ 7,500 200
SBC Communications, Inc. 183,728 10,562
Scholastic Corp.+ 4,800 158
Telecommunications, Inc. Series A (Liberty Media Group)+ 78,129 1,641
Telecommunications, Inc. Series A (TCI Group)+ 187,346 2,225
Time Warner, Inc. 171,955 7,050
Times Mirror Co. Series A 26,400 1,360
Tribune Co. (New) 44,200 1,735
Viacom, Inc. Class A+ 18,212 635
Viacom, Inc. Class B+ 108,074 3,810
Washington Post Co. 2,800 970
------
50,900
------
MISCELLANEOUS FINANCE--4.6%
A.G. Edwards & Sons, Inc. 15,562 552
Advanta Corp. Class A 14,600 604
Alex. Brown Inc. 8,000 465
American Express Co. 148,400 9,702
Bear, Stearns & Co., Inc. 39,139 1,174
Beneficial Corp. 16,000 1,106
Berkshire Hathaway, Inc.+ 369 13,100
Capital One Financial Corp. 17,000 676
Charles Schwab Corp. (see Note 6) 48,800 1,830
Charter One Financial, Inc. 13,125 625
Countrywide Credit Industries, Inc. 25,985 757
Dean Witter Discover and Company 97,990 3,760
Donaldson Lufkin & Jenrette+ 17,300 744
Federal Home Loan Mortgage Corp. 218,400 6,497
Federal National Mortgage Assoc. 333,000 13,318
Finova Group, Inc. 10,800 825
First USA, Inc. 36,400 1,770
Franklin Resources, Inc. 36,300 2,124
Glendale Federal Bank (New)+ 14,000 373
Golden West Financial Corp. 19,200 1,301
GP Financial Corp. 14,100 846
Great Western Financial Corp. 46,800 2,053
Green Tree Financial Corp. 44,000 1,650
H.F. Ahmanson & Co. 40,300 1,657
Household International, Inc. 31,000 3,003
Lehman Brothers Holdings Inc. 34,880 1,173
Leucadia National Corp. 13,000 346
Mercury Finance Co. 64,563 202
Merrill Lynch & Co., Inc. 52,300 5,021
</TABLE>
30
<PAGE> 37
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- ----------
<S> <C> <C>
Money Store Inc. 15,000 $ 388
Morgan Stanley Group, Inc. 45,100 2,847
PaineWebber Group Inc. 25,125 820
Salomon, Inc. 37,100 2,064
Standard Federal Bancorp. 10,700 617
Student Loan Marketing Assoc. 20,100 2,128
T. Rowe Price Associates, Inc. 13,200 582
TCF Financial Corp. 12,800 581
Travelers Group, Inc. 195,933 10,507
United Asset Management Corp. 18,400 497
Washington Federal, Inc. 14,000 357
Washington Mutual, Inc. 24,125 1,276
Wesco Financial Corp. 2,100 437
-------
100,355
-------
MOTOR VEHICLE--2.0%
Chrysler Corp. 216,600 7,337
Cummins Engine Co., Inc. 10,400 527
Dana Corp. 36,300 1,125
Eaton Corp. 25,100 1,801
Echlin Inc. 13,800 478
Ford Motor Co. 360,500 11,851
General Motors Corp. 232,100 13,432
General Motors Corp. Class H 28,000 1,652
Genuine Parts Co. 39,050 1,826
Harley-Davidson, Inc. 20,700 774
Paccar, Inc. 15,060 988
TRW, Inc. 37,700 1,975
-------
43,766
-------
NON-FERROUS--0.6%
Alumax, Inc.+ 12,500 489
Aluminum Co. of America 51,000 3,634
Asarco, Inc. 10,800 338
Cyprus Minerals Co. 38,500 900
Engelhard Corp. 44,687 989
Freeport-McMoran Copper & Gold Inc. Class A 29,531 963
Freeport-McMoran Copper & Gold Inc. Class B 63,894 2,172
Phelps Dodge Corp. 22,200 1,587
Reynolds Metals Co. 21,800 1,368
-------
12,440
-------
OIL-DOMESTIC--1.1%
Amerada Hess Corp. 27,700 1,478
Ashland, Inc. 18,600 779
Atlantic Richfield Co. 51,100 6,387
Fina, Inc. 8,000 499
Kerr-McGee Corp. 17,000 1,065
Murphy Oil Corp. 11,370 527
</TABLE>
31
<PAGE> 38
SCHWAB 1000 FUND(R)
- ------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
February 28, 1997 (Unaudited)
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- ----------
<S> <C> <C>
Oryx Energy Co.+ 28,200 $ 564
Pennzoil Co. 13,800 792
Phillips Petroleum Co. 82,700 3,422
Pogo Producing Co. 10,000 344
Santa Fe Energy Resources, Inc.+ 38,600 497
Sun, Inc. 15,900 429
Tosco Corp. 48,600 1,355
TransTexas Gas+ 22,000 332
Ultramar Diamond Shamrock Corp. 30,800 939
Unocal Corp. 71,534 2,763
USX-Marathon Group 81,000 2,157
------
24,329
------
OIL-INTERNATIONAL--4.0%
Amoco Corp. 152,500 12,886
Chevron Corp. 199,400 12,861
Exxon Corp. 379,200 37,873
Mobil Corp. 119,000 14,607
Texaco, Inc. 81,800 8,088
------
86,315
------
PAPER--1.4%
Boise Cascade Corp. 10,000 329
Bowater, Inc. 7,600 322
Champion International Corp. 27,500 1,213
Consolidated Papers, Inc. 17,100 866
Fort Howard Co.+ 20,000 595
Georgia-Pacific Corp. 27,100 2,114
International Paper Co. 95,100 3,970
James River Corp. 20,600 675
Kimberly-Clark Corp. 86,330 9,151
Louisiana-Pacific Corp. 24,000 510
Mead Corp. 18,400 1,072
Potlatch Corp. 4,300 186
Rayonier, Inc. 13,875 527
St. Joe Corp. 9,100 706
Temple Inland, Inc. 19,400 1,069
Union Camp Corp. 26,300 1,269
Westvaco Corp. 28,300 835
Weyerhaeuser Co. 64,400 2,979
Willamette Industries, Inc. 17,000 1,088
------
29,476
------
PRODUCER GOODS & MANUFACTURING--5.3%
Agco Inc. 19,600 556
Airgas, Inc.+ 20,600 397
Allied Signal Inc. 83,900 6,062
American Financial Group, Inc. 24,100 904
American Standard Corp.+ 20,000 900
</TABLE>
32
<PAGE> 39
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- ----------
<S> <C> <C>
Avery Dennison Corp. 36,800 $ 1,486
Blyth Industries, Inc.+ 10,000 328
Boise Cascade Office Products+ 16,400 363
Briggs & Stratton Corp. 4,300 188
Case Corp. 23,900 1,240
Caterpillar, Inc. 56,800 4,452
Cooper Industries, Inc. 30,300 1,341
Corporate Express, Inc.+ 34,350 644
Deere & Co. 83,500 3,559
Dover Corp. 34,600 1,717
Emerson Electric Co. 70,200 6,950
Federal Signal Corp. 10,066 253
FMC Corp.+ 13,600 935
Foster Wheeler Corp. 9,800 382
General Electric Co. 502,600 51,702
Harnischfeger Industries, Inc. 32,100 1,408
Harsco Corp. 14,800 533
Herman Miller, Inc. 7,100 467
Hillenbrand Industries, Inc. 27,000 1,016
Hubbell, Inc. Class B 15,938 675
Illinois Tool Works, Inc. 35,300 2,978
Ingersoll-Rand Co. 33,700 1,601
ITT Industries, Inc. 31,600 822
Johnson Controls, Inc. 14,300 1,205
Kennametal Inc. 9,700 398
Mark IV Industries, Inc. 14,672 341
Millipore Corp. 12,400 535
Nordson Corp. 5,300 297
Pall Corp. 40,233 875
Parker-Hannifin Corp. 24,250 1,061
Pentair, Inc. 6,200 195
Precision Castparts Corp. 7,100 348
Prestek Inc.+ 4,000 198
Raychem Corp. 15,400 1,311
Smith International, Inc.+ 10,000 406
Tecumseh Products Co. Class A 6,500 372
Tenneco Inc. (New)+ 51,000 2,008
Thermo Instruments Systems, Inc.+ 26,737 909
Timken Co. 9,300 487
Trinity Industries, Inc. 11,950 385
TRINOVA Corp. 7,000 260
Tyco International, Ltd. 47,614 2,809
U.S. Filter Corp. (New)+ 25,000 875
Ucar International, Inc.+ 14,000 602
W.W. Grainger, Inc. 15,800 1,252
</TABLE>
33
<PAGE> 40
SCHWAB 1000 FUND(R)
- ------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
February 28, 1997 (Unaudited)
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- ----------
<S> <C> <C>
Westinghouse Electric Corp. 179,803 $ 3,102
York International Corp. 17,000 750
-------
114,840
-------
RAILROAD--0.9%
Alexander & Baldwin, Inc. 6,700 179
Burlington Northern Santa Fe Corp. 44,951 3,742
Conrail, Inc. 24,993 2,612
CSX Corp. 65,700 3,030
Illinois Central Corp. Class A 15,525 534
Kansas City Southern Industries, Inc. 14,700 772
Norfolk Southern Corp. 41,700 3,800
Union Pacific Corp. 71,261 4,293
Wisconsin Central Transportation Corp.+ 12,900 463
-------
19,425
-------
REAL PROPERTY--0.2%
Doubletree Corp.+ 11,000 459
HFS, Inc.+ 44,000 3,014
Host Marriott Corp.+ 67,500 1,215
Rouse Co. 22,500 658
-------
5,346
-------
RETAIL--4.8%
Albertson's, Inc. 76,800 2,707
American Stores Co. 46,700 2,090
AutoZone, Inc.+ 38,500 953
Bed Bath & Beyond, Inc.+ 24,800 645
Borders Group+ 11,000 463
CDW Computer Centers Inc.+ 6,400 336
Circuit City Stores, Inc. 25,700 803
CompUSA, Inc.+ 26,000 520
Consolidated Stores Corp.+ 24,250 852
Costco Companies, Inc.+ 62,704 1,607
CUC International, Inc.+ 114,037 2,723
CVS Corp. 31,300 1,448
Dayton Hudson Corp. 70,500 2,961
Dillard Department Stores, Inc. Class A 32,200 970
Dollar General Corp. 27,950 793
Family Dollar Stores, Inc. 14,000 331
Fastenal Co. 9,700 352
Federated Department Stores, Inc.+ 64,200 2,231
Food Lion, Inc. Class A 150,450 1,194
Food Lion, Inc. Class B 64,800 539
Fred Meyer, Inc.+ 10,000 396
Gap, Inc. 92,000 3,036
General Nutrition Companies, Inc.+ 23,600 425
Giant Food Inc. Class A 13,700 447
Global Directmail Corp.+ 10,000 335
</TABLE>
34
<PAGE> 41
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- ----------
<S> <C> <C>
Great Atlantic & Pacific Tea Co., Inc. 5,700 $ 170
Hannaford Bros. Co., Inc. 13,300 474
Harcourt General, Inc. 20,200 952
Home Depot, Inc. 142,966 7,792
International Game Technology 33,600 588
Intimate Brands+ 75,000 1,463
J.C. Penney Co., Inc. 70,300 3,462
K Mart Corp.+ 135,700 1,696
Kohl's Corp.+ 18,200 837
Kroger Co.+ 40,200 2,131
Limited, Inc. 94,819 1,802
Lowe's Companies, Inc. 52,100 1,902
May Department Stores Co. 75,900 3,539
Mercantile Stores Co., Inc. 8,300 398
Nordstrom, Inc. 22,900 842
Office Depot, Inc.+ 48,300 918
Officemax Inc.+ 26,100 313
Payless Shoesource Inc.+ 9,600 413
Pep Boys-Manny Moe & Jack 13,700 447
PETsMART, Inc.+ 27,400 534
Revco D.S., Inc.+ 16,000 654
Rite Aid Corp. 39,450 1,662
Ross Stores, Inc. 8,000 384
Safeway, Inc.+ 66,300 3,191
Sears Roebuck & Co. 121,400 6,586
Sotheby's Holdings, Inc. Class A 18,700 318
Southland Corp.+ 70,000 241
Staples, Inc.+ 58,605 1,267
Tandy Corp. 18,058 910
Tiffany & Co. (New) 10,000 348
TJX Companies, Inc. 26,100 1,090
Toys 'R' Us, Inc.+ 84,780 2,204
Viking Office Products, Inc.+ 30,200 713
Vons Companies, Inc.+ 12,800 872
Wal Mart Stores, Inc. 698,500 18,419
Walgreen Co. 78,700 3,364
Weis Markets, Inc. 7,900 237
Winn Dixie Stores, Inc. 50,300 1,603
Woolworth Corp.+ 50,000 1,044
-------
104,937
-------
STEEL--0.2%
AK Steel Holding Corp. 7,500 270
Allegheny Teledyne, Inc. 58,280 1,486
LTV Corp. 19,200 240
Nucor Corp. 26,100 1,256
</TABLE>
35
<PAGE> 42
SCHWAB 1000 FUND(R)
- ------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
February 28, 1997 (Unaudited)
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- ----------
<S> <C> <C>
USX - U.S. Steel Group 19,160 $ 601
Worthington Industries, Inc. 21,700 453
-------
4,306
-------
TELEPHONE--6.0%
360 Communications Co.+ 44,944 972
Adtran, Inc.+ 9,600 342
Air Touch Communications+ 147,700 4,025
ALLTEL Corp. 60,500 2,140
Ameritech Corp. 171,000 10,901
Andrew Corp. 17,075 939
Aspect Telecommunications Corp.+ 10,000 249
AT&T Corp. 501,617 20,001
Bell Atlantic Corp. 138,226 9,555
Bellsouth Corp. 303,500 14,227
Century Telephone Enterprises, Inc. 13,750 421
Cincinnati Bell, Inc. 23,400 1,451
Comsat Corp. Series 1 17,000 446
DSC Communications Corp.+ 31,800 668
Frontier Corp. 42,200 934
GTE Corp. 293,900 13,740
LCI International, Inc.+ 17,000 323
MCI Communications Corp. 208,100 7,440
Nextel Communications, Inc.+ 63,100 899
Nynex Corp. 139,200 7,169
Pacific Telesis Group 125,200 5,102
Paging Network, Inc.+ 30,300 456
Pairgain Technologies Inc.+ 24,000 710
Renaissance Commerce Corp.+ 7,000 250
Southern New England Telecommunications Corp. 23,800 863
Sprint Corp. 132,334 6,021
Telephone & Data Systems, Inc. 24,600 984
Tellabs, Inc.+ 55,600 2,217
U.S. Cellular Corp.+ 19,500 512
U.S. West, Inc. (Communications Group) 147,110 5,296
U.S. West, Inc. (Media Group)+ 189,700 3,486
WorldCom Inc.+ 263,979 7,028
-------
129,767
-------
TOBACCO--2.1%
American Brands, Inc. 51,300 2,700
Loew's Corp. 33,500 3,421
Philip Morris Cos., Inc. 249,800 33,754
RJR Nabisco Holdings Corp. 83,736 3,067
UST, Inc. 54,200 1,673
-------
44,615
-------
</TABLE>
36
<PAGE> 43
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- ----------
<S> <C> <C>
TRANSPORTATION-MISCELLANEOUS--0.1%
Federal Express Corp.+ 35,600 $ 1,833
Pittston Service Group 9,900 255
Ryder Systems, Inc. 19,800 624
------
2,712
------
TRAVEL & RECREATION--1.3%
Acxiom Corp.+ 16,000 244
Brunswick Corp. 28,900 827
Callaway Golf Co. 19,000 606
Choice Hotels Holdings, Inc.+ 14,550 224
Circus Circus Enterprises, Inc.+ 25,400 794
Extended Stay America, Inc.+ 20,400 403
Gaylord Entertainment Co. Class A 20,359 412
Harrah's Entertainment Inc.+ 25,100 464
Hilton Hotels Corp. 96,200 2,417
ITT Corp. (New)+ 38,900 2,198
La Quinta Inns, Inc. 19,200 379
Marriott International, Inc. 38,100 2,019
MGM Grand, Inc.+ 13,500 474
Mirage Resorts, Inc.+ 49,100 1,221
Promus Hotel Corp.+ 15,200 538
Walt Disney Co. 209,907 15,586
------
28,806
------
UTILITIES--4.3%
AES Corp.+ 27,659 1,808
AGL Resources Inc. 14,600 285
Allegheny Power System, Inc. 42,100 1,289
American Electric Power Co., Inc. 58,900 2,459
American Water Works Co., Inc. 19,600 458
Baltimore Gas & Electric Co. 47,150 1,297
Boston Edison Co. 12,900 345
Brooklyn Union Gas Co. 22,350 637
Calenergy Co., Inc+ 14,600 487
Carolina Power & Light Co. 50,500 1,875
Centerior Energy Corp. 48,600 504
Central & South West Services Corp. 55,800 1,360
Cinergy Corp. 49,565 1,710
Cipsco, Inc. 5,000 182
Citizens Utilities Co. Class A+ 75,966 883
CMS Energy Corp. 27,900 914
Coastal Corp. 34,300 1,561
Columbia Gas System, Inc. 19,100 1,122
Consolidated Edison Co. of New York, Inc. 69,700 2,152
Consolidated Natural Gas Co. 30,400 1,550
Delmarva Power & Light Co. 15,700 304
Dominion Resources, Inc. 57,750 2,324
DPL, Inc. 38,850 957
</TABLE>
37
<PAGE> 44
SCHWAB 1000 FUND(R)
- ------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
February 28, 1997 (Unaudited)
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- ----------
<S> <C> <C>
DQE, Inc. 17,050 $ 505
DTE Energy Co. 37,100 1,122
Duke Power Co. 59,800 2,646
Edison International 125,600 2,700
El Paso Natural Gas Co. (New) 19,684 1,056
Enova Corp. 43,300 969
Enron Corp. 79,600 3,174
Enserch Corp. 24,500 515
Entergy Corp. 74,421 1,963
Equitable Resources, Inc. 5,100 151
Florida Progress Corp. 30,400 958
FPL Group, Inc. 58,200 2,648
GPU, Inc. 42,600 1,491
Hawaiian Electric Industries, Inc. 7,900 277
Houston Industries Inc. 69,900 1,625
Idaho Power Co. 5,400 167
Illinova Corp. 16,300 408
Ipalco Enterprises, Inc. 15,000 474
K N Energy, Inc. 7,000 277
Kansas City Power & Light Co. 15,900 453
Ku Energy Corp. 5,500 165
LG&E Energy Corp. 25,900 641
Long Island Lighting Co. 36,800 846
MCN Corp. 17,600 532
Midamerican Energy Holdings Co. 34,461 569
Montana Power Co. 7,900 173
National Fuel Gas Co. 16,600 714
New England Electric Co. 13,800 481
New York State Electric & Gas Corp. 16,400 381
Niagara Mohawk Power Corp.+ 25,200 258
Nicor Inc. 10,300 345
Nipsco Industries, Inc. 13,900 554
Noram Energy Corp. 52,715 791
Northeast Utilities 25,900 269
Northern States Power Co. 24,200 1,153
Ohio Edison Co. 54,000 1,215
Oklahoma Gas & Electric Co. 10,200 430
Pacific Enterprises, Inc. 33,300 1,016
Pacific Gas & Electric Corp. 125,300 2,882
PacifiCorp 94,500 1,949
Panhandle Eastern Corp. 48,000 2,046
Peco Energy Co. 60,500 1,361
Peoples Energy Corp. 9,500 322
Pinnacle West Capital Co. 32,300 1,009
Portland General Corp. 13,200 516
Potomac Electric Power Co. 39,500 1,002
PP&L Resources, Inc. 54,720 1,252
Public Service Co. of Colorado 14,300 558
</TABLE>
38
<PAGE> 45
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- ----------
<S> <C> <C>
Public Service Enterprises 73,000 $ 2,053
Puget Sound Power & Light Co. 28,200 716
Questar Corp. 17,900 649
Scana Corp. 25,800 674
Seagull Energy Corp.+ 19,000 349
Sonat, Inc. 25,600 1,178
Southern Co. 201,700 4,386
Southwestern Public Service Co. 12,000 434
Teco Energy, Inc. 27,200 663
Texas Utilities Co. 63,200 2,552
Unicom Corp. 70,900 1,578
Union Electric Co. 28,400 1,090
Utilicorp United, Inc. 13,900 374
Washington Water Power Co. 7,700 141
Western Resources Inc. 14,231 430
Williams Companies, Inc. 45,090 1,973
Wisconsin Energy Corp. 26,000 666
---------
93,378
---------
TOTAL COMMON STOCK
(Cost $1,490,605) 2,158,965
---------
PREFERRED STOCK--0.0%
Aetna, Inc 6.25% Class C (Voting) 2,922 236
Fresenius National Medical, Inc.+ 24,900 2
---------
TOTAL PREFERRED STOCK
(Cost $191) 238
---------
</TABLE>
39
<PAGE> 46
SCHWAB 1000 FUND(R)
- ------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
February 28, 1997 (Unaudited)
<TABLE>
<CAPTION>
Maturity Value
(000s) (000s)
--------- ----------
<S> <C> <C>
REPURCHASE AGREEMENTS--0.4%
PNC Bank, N.A.
4.50%, Dated 02/28/97;
Due 03/03/97, Collateralized By: Federal Home Loan
Mortgage Corp.: $8,595,000 Par; 6.00% Due 11/15/08 $8,018 $ 8,015
---------
TOTAL REPURCHASE AGREEMENTS
(Cost $8,015) 8,015
---------
TOTAL INVESTMENTS--100.1%
(Cost $1,498,811) 2,167,218
---------
OTHER ASSETS AND LIABILITIES--(0.1)%
Other Assets 7,739
Liabilities (10,455)
---------
(2,716)
---------
NET ASSETS--100.0%
Applicable to 100,272,329 outstanding shares,
$0.00001 par value (unlimited shares authorized) $2,164,502
=========
NET ASSET VALUE PER SHARE $21.59
=====
</TABLE>
- ---------------
+Non-Income Producing Security.
See accompanying Notes to Financial Statements.
40
<PAGE> 47
SCHWAB 1000 FUND(R)
- ------------------------------------------------------------------------------
STATEMENT OF OPERATIONS (in thousands)
Six months ended February 28, 1997 (Unaudited)
<TABLE>
<S> <C>
Investment income:
Dividends $ 17,600
Interest 179
--------
Total investment income 17,779
--------
Expenses:
Investment advisory and administration fee 2,240
Transfer agency and shareholder service fees 2,320
Custodian fees 128
Registration fees 129
Professional fees 34
Shareholder reports 91
Trustees' fees 24
Insurance and other expenses 21
--------
4,987
Less expenses reduced (see Note 4) (443)
--------
Total expenses incurred by Fund 4,544
--------
Net investment income 13,235
--------
Net realized loss on investments sold (2,083)
Increase in net unrealized gain on investments 324,361
--------
Net gain on investments 322,278
--------
Increase in net assets resulting from operations $335,513
========
</TABLE>
See accompanying Notes to Financial Statements.
41
<PAGE> 48
SCHWAB 1000 FUND(R)
- ------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS (in thousands)
<TABLE>
<CAPTION>
Six months
ended
February 28, Year ended
1997 August 31,
(Unaudited) 1996
------------ ----------
<S> <C> <C>
Operations:
Net investment income $ 13,235 $ 20,634
Net realized gain (loss) on investments
sold (2,083) 1,429
Increase in net unrealized gain on
investments 324,361 144,952
--------- ---------
Increase in net assets resulting
from operations 335,513 167,015
--------- ---------
Dividends to shareholders from net
investment income (23,949) (14,179)
--------- ---------
Capital share transactions:
Proceeds from shares sold 458,421 788,862
Net asset value of shares issued in
reinvestment of dividends 21,833 12,770
Early withdrawal fees 174 385
Less payments for shares redeemed (187,549) (221,508)
--------- ---------
Increase in net assets from
capital share transactions 292,879 580,509
--------- ---------
Total increase in net assets 604,443 733,345
Net assets:
Beginning of period 1,560,059 826,714
--------- ---------
End of period (including undistributed
net investment income of $4,420 and
$15,134, respectively) $2,164,502 $1,560,059
========= =========
Number of Fund shares:
Sold 22,356 45,105
Reinvested 1,058 758
Redeemed (9,155) (12,583)
--------- ---------
Net increase in shares outstanding 14,259 33,280
Shares outstanding:
Beginning of period 86,013 52,733
--------- ---------
End of period 100,272 86,013
========= =========
</TABLE>
See accompanying Notes to Financial Statements.
42
<PAGE> 49
- ------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
Six months ended February 28, 1997 (Unaudited)
1. DESCRIPTION OF THE FUND
The Schwab 1000 Fund(R) (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.
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 and
unlisted securities are valued at the last 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. Securities for which no quotations are readily available
are valued at fair value as determined by the Fund's investment manager pursuant
to guidelines adopted in good faith by the Board of Trustees. 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).
Realized gains and losses from security transactions are determined on an
identified cost basis. Dividend income and distributions to shareholders are
recorded on the ex-dividend date; interest income is accrued on a daily basis.
Repurchase agreements -- Repurchase agreements are fully collateralized by U.S.
Treasury or government agency securities. All collateral is held by the
43
<PAGE> 50
- ------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
Fund's custodian and is monitored daily to ensure that its market value at least
equals the repurchase price under the agreement.
Expenses -- Expenses arising in connection with the Fund are charged directly to
the Fund. Expenses common to all series of the Trust are generally allocated to
each series in proportion to their relative net assets.
Federal income taxes -- It is the Fund's policy to meet the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all 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 28, 1997, (for financial reporting and federal income tax purposes),
net unrealized gain aggregated $668,407,000 of which $686,334,000 related to
appreciated securities and $17,927,000 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 0.30% of the first $500 million
of average daily net assets and 0.22% of such assets over $500 million. The
Investment Manager has reduced a portion of its fee for the six months ended
February 28, 1997 (see Note 4).
Transfer agency and shareholder service agreements -- The Trust has transfer
agency and shareholder service agreements with Charles Schwab & Co., Inc.
("Schwab"). For services provided under these agreements, Schwab receives an
annual fee, payable monthly, of 0.05% of average daily net assets for transfer
agency services and 0.20% of such assets for shareholder services. Schwab has
reduced a portion of its fee for the six months ended February 28, 1997 (see
Note 4).
Officers and trustees -- Certain officers and trustees of the Trust were also
officers and/or directors of the Investment Manager and/or Schwab. During the
six months ended February 28, 1997, the Trust made no direct payments to its
officers or trustees who were "interested persons" within the meaning of the
44
<PAGE> 51
- ------------------------------------------------------------------------------
Investment Company Act of 1940, as amended. The Fund incurred fees of $24,000
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 Fund's ratio of operating expenses to average net assets. For the six
months ended February 28, 1997, the total of such fees reduced by the Investment
Manager and Schwab was $384,000 and $59,000, respectively (see Note 9).
5. BORROWING AGREEMENT
The Trust has an arrangement with PNC Bank, N.A., the Fund's custodian, whereby
the Fund may borrow up to $50,000,000, on a temporary basis, to fund
redemptions. Amounts borrowed under this arrangement bear interest at
periodically negotiated rates and may be collateralized by the assets of the
Fund. During the six months ended February 28, 1997, no borrowings were made
under this arrangement.
6. INVESTMENT TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
Purchases and sales of investment securities, other than short-term obligations,
aggregated (in thousands) $305,727 and $19,861, respectively, during the six
months ended February 28, 1997. Included in the aforementioned are purchases of
common stock of Charles Schwab Corp., an affiliated issuer, of $1,830,000.
7. EARLY WITHDRAWAL FEES PAID TO THE FUND
The Fund assesses a 0.50% early withdrawal fee on redemption proceeds
attributable to shares purchased and held less than six months. The early
withdrawal fee is retained by the Fund and is treated as a contribution to
capital. For the six months ended February 28, 1997, total early withdrawal fees
retained by the Fund amounted to $174,000.
45
<PAGE> 52
- ------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
8. COMPOSITION OF NET ASSETS
<TABLE>
<CAPTION>
At February 28, 1997, net assets consisted of (in thousands):
<S> <C>
Paid in capital $1,495,317
Undistributed net investment income 4,420
Accumulated net realized loss on investments sold (3,642)
Net unrealized gain on investments 668,407
----------
Total $2,164,502
=========
</TABLE>
At February 28, 1997, the Fund's Statement of Net Assets included: $7,796,000
payable for investments purchased, $2,074,000 payable for Fund shares redeemed,
$104,000 payable for investment advisory and administration fee, $129,000
payable for transfer agency and shareholder service fees and $3,543,000
receivable for Fund shares sold.
46
<PAGE> 53
- ------------------------------------------------------------------------------
9. FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period:
<TABLE>
<CAPTION>
Six months Eight
ended months Year
February 28, ended ended
1997 Year ended August 31, August 31, December 31,
(Unaudited) 1996 1995 1994 1993 1992
------------ ---------- -------- -------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value at
beginning of period $ 18.14 $ 15.68 $ 13.08 $ 12.80 $ 11.96 $ 11.26
Income from investment
- -----------------
operations
--------
Net investment income 0.13 0.24 0.26 0.26 0.17 0.24
Net realized and unrealized
gain (loss) on investments 3.58 2.45 2.48 0.28 0.79 0.71
---------- ---------- -------- -------- -------- --------
Total from investment operations 3.71 2.69 2.74 0.54 0.96 0.95
Less distributions
- ------------
Dividends from net investment
income (0.26) (0.23) (0.14) (0.26) (0.12) (0.25)
Distributions from realized
gain on investments -- -- -- -- -- --
---------- ---------- -------- -------- -------- --------
Total distributions (0.26) (0.23) (0.14) (0.26) (0.12) (0.25)
---------- ---------- -------- -------- -------- --------
Net asset value at end of period $ 21.59 $ 18.14 $ 15.68 $ 13.08 $ 12.80 $ 11.96
========== ========== ======== ======== ======== ========
Total return (not annualized) 20.51% 17.27% 21.23% 4.28% 8.06% 8.52%
- -------
Ratios/Supplemental data
- ------------------
Net assets, end of period (000s) $ 2,164,502 $1,560,059 $826,714 $554,061 $ 515,272 $370,980
Ratio of expenses to average net
assets+ 0.49%* 0.49% 0.54% 0.51% 0.45%* 0.35%
Ratio of net investment income to
average net assets+ 1.43%* 1.66% 2.03% 2.06% 2.21%* 2.45%
Portfolio turnover rate 1% 2% 2% 3% 1% 1%
Average commission rate $0.03 $0.03
</TABLE>
- ---------------
+ The information contained in the above table is based on actual expenses for
the periods, after giving effect to the portion of expenses reduced and
absorbed by the Investment Manager and Schwab. Had these expenses not been
reduced and absorbed, the Fund's expense and net investment income ratios
would have been:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Ratio of expenses to average net
assets 0.54%* 0.57% 0.63% 0.56% 0.49% * 0.52%
Ratio of net investment income to
average net assets 1.38%* 1.58% 1.94% 2.01% 2.17% * 2.28%
</TABLE>
* Annualized
47
<PAGE> 54
THIS SPACE RESERVED FOR YOUR COMMENTS AND QUESTIONS.
A SCHWAB REPRESENTATIVE WILL BE HAPPY TO ASSIST YOU.
<PAGE> 55
SCHWABFUNDS FAMILY(R)
The SchwabFunds Family includes a variety of funds to help meet your investment
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maintain a stable share price of $1.
<PAGE> 56
BULK RATE
U.S. POSTAGE
PAID
CHARLES SCHWAB
[SCHWABFUNDS FAMILY(R) LOGO]
101 Montgomery Street,
San Francisco, CA 94104
INVESTMENT ADVISOR
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
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(C)1997 Charles Schwab & Co., Inc. All rights reserved. Member SIPC/NYSE.
TF4629R(4/97) CRS 20033 Printed on recycled paper.
