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<PAGE> PAGE 2
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<PAGE> PAGE 4
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<PAGE> PAGE 6
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<PAGE> PAGE 7
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<PAGE> PAGE 8
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<PAGE> PAGE 10
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<PAGE> PAGE 11
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<PAGE> PAGE 12
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<PAGE> PAGE 13
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<PAGE> PAGE 14
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<PAGE> PAGE 15
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<PAGE> PAGE 16
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<PAGE> PAGE 17
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<PAGE> PAGE 18
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<PAGE> PAGE 19
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<PAGE> PAGE 20
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067 000500 N
068 A000500 N
068 B000500 N
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<PAGE> PAGE 21
070 D010500 N
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070 F020500 N
070 G010500 N
070 G020500 N
070 H010500 N
070 H020500 N
070 I010500 N
070 I020500 N
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070 J020500 N
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<PAGE> PAGE 22
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<PAGE> PAGE 23
075 B000500 58732
076 000500 0.00
024 000600 N
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039 000600 N
<PAGE> PAGE 24
040 000600 N
045 000600 Y
046 000600 N
047 000600 Y
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048 H020600 0.000
048 I010600 0
048 I020600 0.000
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048 J020600 0.000
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060 A000600 N
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<PAGE> PAGE 25
063 B000600 3.6
064 A000600 Y
064 B000600 N
066 A000600 N
067 000600 N
068 A000600 N
068 B000600 N
069 000600 N
070 A010600 Y
070 A020600 N
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070 B020600 N
070 C010600 N
070 C020600 N
070 D010600 N
070 D020600 N
070 E010600 N
070 E020600 N
070 F010600 N
070 F020600 N
070 G010600 N
070 G020600 N
070 H010600 N
070 H020600 N
070 I010600 N
070 I020600 N
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070 J020600 N
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070 K020600 Y
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070 L020600 N
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070 M020600 N
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070 N020600 N
070 O010600 N
070 O020600 N
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070 Q020600 N
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<PAGE> PAGE 26
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<PAGE> PAGE 27
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024 000700 Y
025 A000701 MERRILL LYNCH & CO., INC.
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<PAGE> PAGE 28
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<PAGE> PAGE 29
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<PAGE> PAGE 30
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<PAGE> PAGE 31
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SIGNATURE MARY JANE MALONEY
TITLE MANAGER
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<PAYABLE-FOR-SECURITIES> 2524
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 627
<TOTAL-LIABILITIES> 3151
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 95105
<SHARES-COMMON-STOCK> 9345
<SHARES-COMMON-PRIOR> 5797
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<OVERDISTRIBUTION-NII> 25
<ACCUMULATED-NET-GAINS> (788)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1602
<NET-ASSETS> 95894
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3213
<OTHER-INCOME> 0
<EXPENSES-NET> (349)
<NET-INVESTMENT-INCOME> 2864
<REALIZED-GAINS-CURRENT> 9
<APPREC-INCREASE-CURRENT> 856
<NET-CHANGE-FROM-OPS> 3729
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2906)
<DISTRIBUTIONS-OF-GAINS> 0
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<NUMBER-OF-SHARES-SOLD> 5893
<NUMBER-OF-SHARES-REDEEMED> (2562)
<SHARES-REINVESTED> 217
<NET-CHANGE-IN-ASSETS> 37018
<ACCUMULATED-NII-PRIOR> 12
<ACCUMULATED-GAINS-PRIOR> (797)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
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<GROSS-EXPENSE> 564
<AVERAGE-NET-ASSETS> 71225
<PER-SHARE-NAV-BEGIN> 10.16
<PER-SHARE-NII> .41
<PER-SHARE-GAIN-APPREC> .11
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<PER-SHARE-DISTRIBUTIONS> 0
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<PER-SHARE-NAV-END> 10.26
<EXPENSE-RATIO> .49
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<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000869365
<NAME> SCHWAB INVESTMENTS
<SERIES>
<NUMBER> 07
<NAME> SCHWAB TOTAL BOND MARKET INDEX FUND
<MULTIPLIER> 1000
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<FISCAL-YEAR-END> AUG-31-1998
<PERIOD-END> AUG-31-1998
<INVESTMENTS-AT-COST> 289433
<INVESTMENTS-AT-VALUE> 293129
<RECEIVABLES> 70748
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<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 363879
<PAYABLE-FOR-SECURITIES> 69386
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<TOTAL-LIABILITIES> 69859
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 288879
<SHARES-COMMON-STOCK> 28894
<SHARES-COMMON-PRIOR> 2542
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<OVERDISTRIBUTION-NII> 74
<ACCUMULATED-NET-GAINS> 1409
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3806
<NET-ASSETS> 294020
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<INTEREST-INCOME> 8746
<OTHER-INCOME> 0
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<NET-INVESTMENT-INCOME> 8308
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<APPREC-INCREASE-CURRENT> 3391
<NET-CHANGE-FROM-OPS> 13461
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<DISTRIBUTIONS-OF-GAINS> 0
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<SHARES-REINVESTED> 731
<NET-CHANGE-IN-ASSETS> 269242
<ACCUMULATED-NII-PRIOR> 7
<ACCUMULATED-GAINS-PRIOR> (349)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
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<GROSS-EXPENSE> 1158
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<PER-SHARE-NAV-BEGIN> 9.75
<PER-SHARE-NII> .60
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</TABLE>
EXHIBIT INDEX
EXHIBIT A:
ATTACHMENT TO ITEM 77B: ACCOUNTANT'S REPORT ON INTERNAL CONTROL
- -----------------------------------------------------------------------
EXHIBIT A:
To the Board of Trustees and Shareholders of
Schwab Investments
In planning and performing our audits of the financial statements of Schwab
Short/Intermediate Tax- Free Bond Fund, Schwab Long-Term Tax-Free Bond Fund,
Schwab California Short/Intermediate Tax- Free Bond Fund, Schwab California
Long-Term Tax-Free Bond Fund, Schwab Short-Term Bond Market Index Fund, and
Schwab Total Bond Index Fund (six portfolios of Schwab Investments)
(collectively the "Funds") for the year ended August 31, 1998, we considered
their internal control, including control activities for safeguarding
securities, in order to determine our auditing procedures for the purpose of
expressing our opinions on the financial statements and to comply with the
requirements of Form N-SAR, not to provide assurance on internal control.
The management of the Funds is responsible for establishing and maintaining
internal control. In fulfilling this responsibility, estimates and judgments
by management are required to assess the expected benefits and related costs
of controls. Generally, controls that are relevant to an audit pertain to the
entity's objective of preparing financial statements for external purposes
that are fairly presented in conformity with generally accepted accounting
principles. Those controls include the safeguarding of assets against
unauthorized acquisition, use or disposition.
Because of inherent limitations in internal control, errors or fraud may occur
and not be detected. Also, projection of any evaluation of internal control
to future periods is subject to the risk that it may become inadequate because
of changes in conditions or that the effectiveness of the design and operation
may deteriorate.
Our consideration of internal control would not necessarily disclose all
matters in internal control that might be material weaknesses under standards
established by the American Institute of Certified Public Accountants. A
material weakness is a condition in which the design or operation of one or
more of the internal control components does not reduce to a relatively low
level the risk that misstatements caused by error or fraud in amounts that
would be material in relation to the financial statements being audited may
occur and not be detected within a timely period by employees in the normal
course of performing their assigned functions. However, we noted no matters
involving internal control and its operation, including controls for
safeguarding securities, that we consider to be material weaknesses as defined
above as of August 31, 1998.
This report is intended solely for the information and use of management and
the Board of Trustees of Schwab Investments and the Securities and Exchange
Commission.
PricewaterhouseCoopers LLP
San Francisco, CA
October 5, 1998
