<PAGE> 1
SCHWABFUNDS(R)
[LOGO]
SCHWAB SMALL-CAP
INDEX FUND(R)
ANNUAL REPORT
OCTOBER 31, 1995
[Photo of the Schwab Building, San Francisco, California]
<PAGE> 2
Dear Fellow Shareholder,
[Photo The Schwabfunds Family(R) is celebrating tremendous growth as a
of mutual fund complex. By placing your trust in SchwabFunds,(R)
Charles you've helped total assets under management grow by $8 billion in
R. Schwab] 1995 to reach over $31 billion. With over $31 billion in assets
under management, SchwabFunds ranks in the top 6% of all mutual
fund complexes.
We believe much of this success can be traced to the Schwab commitment to serve
the needs of the Fund shareholders, a commitment demonstrated by the entire
SchwabFunds staff and, in particular, by our experienced team of portfolio
managers.
The 20 professionals who make up our growing portfolio management team are
devoted to monitoring the financial markets for you. Through a careful and
disciplined selection of securities, the portfolio managers strive to construct
optimal portfolios that provide shareholders with competitive returns that meet
their investment goals. And shareholders continue to signal their trust in the
175 years of combined experience behind our SchwabFunds portfolio management by
keeping their money invested in SchwabFunds. In fact, a large number of the 1.5
million shareholders have been investing in the SchwabFunds Family since its
first year of operation.
We believe an important part of serving your needs is keeping you informed
about your investments. For example, last year we added the question and answer
section of this report, developed by our portfolio managers to address what
they feel were the most pressing questions we've heard from shareholders over
the period. It is one way we hope to keep communication open between you and
the people managing your investments.
During its six years, the SchwabFunds Family has grown to include a solid
selection of funds that meet the "core" needs of investors. SchwabFunds offers
a solution to investors who want the convenience and competitive costs of a
no-load mutual fund family. The 19 no-load funds available to retail investors,
including the new Schwab Asset Director(R) Funds, offer diversification of the
U.S. and international equity markets, both taxable and tax-free bonds and a
variety of money market investments.
With this level of diversification, you may use SchwabFunds to create an
efficient, well-rounded portfolio. Or you may use them to serve as building
blocks to an overall investment program that includes more specialized
investments.
I invite you to learn more about the SchwabFunds Family. To receive a brochure
and prospectus for the SchwabFunds, please call our toll-free number, 1-800-2
NO-LOAD, or visit any one of our more than 200 Schwab offices. A Schwab
representative will be happy to provide you with a prospectus that includes
more complete information on the Funds, including charges and expenses. Please
read it carefully before investing. If you normally invest in SchwabFunds with
the help of an investment manager, he or she can give you more information on
the other SchwabFunds.
I'd like to extend my personal gratitude for your trust in the SchwabFunds
Family as it continues to grow. You should feel confident that the outstanding
efforts of all those who are part of the SchwabFunds organization will continue
going forward. And we expect these efforts to help us to meet even higher
standards of excellence in the years ahead.
/s/ Charles R. Schwab
Charles R. Schwab
Cover: The Schwab Building, San Francisco, California
<PAGE> 3
COMMENTS FROM THE INVESTMENT MANAGER
We are pleased to report the performance of the Schwab Small-Cap Index Fund(R)
for fiscal year 1995, which began November 1, 1994 and ended October 31,
1995. During the year, the Fund continued to help you participate in the growth
potential of the small-cap segment of the U.S. stock market by tracking the
price and dividend performance of the Schwab Small-Cap Index.(TM)
GROWTH IN ASSETS AND SHAREHOLDERS
Investors signaled their confidence in the Schwab Small-Cap Index Fund by
investing over $40 million in the Fund during the year. In fact, the Fund's net
assets nearly doubled, rising from $68 million to over $122 million, while the
number of shareholders increased by 35% to over 18,000. We believe this strong
growth underscores the Fund's effectiveness as a way to tap the long-term
growth potential of the small-cap sector of the U.S. stock market.
FUND ACHIEVED POSITIVE TOTAL RETURN
The Schwab Small-Cap Index Fund's net asset value (NAV) increased
substantially, reflecting the growth of the overall U.S. equity market,
including the small-cap sector. The Fund's NAV began the year at $10.05 and
ended at $11.70. Additionally, the Fund paid $0.06 per share in dividends
during the year.
The table below compares total return for various periods for the Schwab
Small-Cap Index Fund, the Schwab Small-Cap Index and the Fund's industry
benchmark, the Standard and Poor's Small-Cap 600 Index(R) (S&P 600) and the
Standard & Poor's 500 Index(R) (S&P 500).
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
TOTAL RETURN
Cumulative Since Average Annual
6-Months Ended One-Year Ended Fund Inception Since Fund Inception
October 31, 1995 October 31, 1995 (12/3/93 -10/31/95) (12/3/93 -10/31/95)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Schwab Small-Cap
Index Fund(R) 11.53% 17.11% 17.85% 8.97%
- -----------------------------------------------------------------------------------------------------
Schwab Small-Cap
Index(TM) 11.61% 17.35% 19.10%
- -----------------------------------------------------------------------------------------------------
S&P 600 14.79% 21.09% 19.76%
- -----------------------------------------------------------------------------------------------------
S&P 500 14.30% 26.23% 31.45%
- -----------------------------------------------------------------------------------------------------
</TABLE>
Total return assumes reinvestment of all dividends. 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. A portion of the Fund's fees were waived during
the year. Without the waivers, the Fund's total return for the year would have
been 16.71%. Indices are unmanaged, and unlike the Fund, do not reflect
advisory and other fees associated with investment in the Fund.
<PAGE> 4
The S&P 600 was created in October of 1994 to track the small-cap sector of the
U.S. stock market. We believe the S&P 600, rather than the S&P 500, is a more
appropriate industry benchmark for the Schwab Small-Cap Index(TM) and the Fund.
The S&P 500, which tracks the large-cap market sector is provided for purposes
of comparison to that sector.
While the total return of the Fund and the Schwab Small-Cap Index were both
over 17% during the reporting period, they lagged the return of the S&P 600.
The lag was primarily due to composition differences between the S&P 600 and
the Schwab Small-Cap Index. This is further discussed in "Questions to the
Portfolio Management Team" section later in this report.
STOCK MARKET OVERVIEW
Fueled by stabilized interest rates and improved corporate earnings, the U.S.
stock market experienced almost uninterrupted growth during the 12-month
period, with all market sectors registering strong gains. While the performance
of small company stocks generally lagged that of large company stocks, the
small-cap market sector still experienced solid results for the year. As
expected, the performance of the Schwab Small-Cap Index Fund(R) reflected these
market trends.
Although short-term market cycles favoring large or small company stocks are
inevitable, over the longer term small-cap stocks have proven to be strong
performers. In fact, over the 20-year period ended 12/31/94, the small-cap
sector outperformed the large-cap sector. The average annual return for this
20-year period was 19.1% for the small-cap sector and 14.5% for the large-cap
sector. 1 This performance is further explained in the "Questions to the
Portfolio Management Team" section of this report.
INDEXING: A SMART STRATEGY
Indexing offers you a smart, convenient way to participate in the long-term
growth potential of the small-cap sector. The Schwab Small-Cap Index Fund
attempts to track the price and dividend performance of the Schwab Small-Cap
Index, which is comprised of the stocks of the second 1,000 largest publicly
traded U.S. companies, ranked by market capitalization. 2 Under normal
circumstances, the Fund keeps substantially all of its assets invested in the
stocks that comprise the Index, maintaining only a small cash position to cover
shareholder redemptions and Fund expenses.
Index funds are designed to help you earn returns that keep pace with targeted
segments of the equity market. While actively managed funds regularly buy and
sell securities based on predictions of market movements, index funds follow a
passive investment strategy that seeks to track the market's performance. Few
professional money managers
1 Source: BARRA, Inc. Specific sources for the data are the S&P 500 for
large-cap stock and Ibbotson and BARRA Small Company Index for small-cap
stock. Indices are unmanaged and do not incur management or transaction
costs and cannot be invested in. Past performance does not guarantee
future results. Total return assumes reinvestment of all dividends and
capital gain distributions.
2 The Schwab Small-Cap Index does not include privately held companies,
investment companies and companies incorporated outside the U.S.
<PAGE> 5
are actually able to beat the performance of the stock market consistently. In
fact, over the last five years, only about one in four professionally managed
equity funds outperformed the U.S. stock market. 3 Trying to match market
performance with an indexing approach can be a sensible alternative.
HIGHER AFTER-TAX RETURNS
The Schwab Small-Cap Index Fund(R) seeks to maximize your after-tax returns by
minimizing expenses and capital gain distributions. Since the Fund follows a
buy-and-hold investment strategy, it features relatively low portfolio turnover
which translates into lower portfolio trading expenses and reduces the
likelihood of capital gain distributions. For the year ended October 31, 1995,
the Fund's portfolio turnover rate was 24%, compared with 77%, the average for
U.S. small-cap funds. 4 When it does become necessary to sell securities, the
Fund's Investment Manager seeks to offset capital gains with losses to avoid
capital gain distributions. These strategies can help maximize your after-tax
returns by reducing or deferring the taxes you pay.
EXPENSE RATIO REDUCED
At Schwab, we have a commitment to keep fees and expenses low. The less you pay
in fees and expenses, the greater the portion of a fund's return you can
receive. In line with this commitment, the Schwab Small-Cap Index Fund does not
impose sales loads or 12b-1 fees, both of which would increase expenses and
diminish total return. 5
To enhance your return potential, we reduced the operating expense ratio of the
Schwab Small-Cap Index Fund. Effective July 1, 1995 and through at least June
30, 1996, the Fund's operating expense ratio was lowered from 0.75% to
0.59%--significantly below 1.48%, the average for small-cap funds. 6 While the
reduction occurred too late in the reporting period for its full impact to be
felt, the Fund's new, lower expense ratio will help you earn higher returns
going forward.
BROAD DIVERSIFICATION
The Schwab Small-Cap Index Fund's diversified portfolio helps reduce investment
risk by investing in a wide variety of industries. The Fund invests in
substantially all of the stocks that comprise the Schwab Small-Cap Index(TM).
The Index does not include the very smallest companies represented in the stock
market which helps avoid the increased volatility and higher trading costs
associated with these "micro-cap" stocks. 7
3 U.S. stock market performance as measured by the S&P 500; equity fund
performance measured by the total return of 1,036 general equity funds as
reported by Morningstar, Inc., 9/30/95.
4 Source: Morningstar, Inc. Average annual portfolio turnover for 358 U.S.
small-cap funds, as of 10/31/95.
5 To help keep Fund expenses low for long-term shareholders, investors who
hold their shares for less than six months will be charged a redemption
fee of 0.50%. This fee is paid directly to the Fund to offset the costs
associated with short-term trading.
6 Source: Morningstar, Inc. Average operating expenses reported for 358 U.S.
small-cap funds as of 10/31/95.
7 "Micro-cap" stocks refer to stock of the smallest 3,500 companies, which
represent only 3% of the total market capitalization of all U.S. stocks.
<PAGE> 6
The chart below shows how the Fund's portfolio is diversified by industry.
You'll also find a complete listing of its holdings at year-end following the
"Questions to the Portfolio Management Team" section of this report.
THE FUND PROVIDES SMALL-CAP STOCK OPPORTUNITIES
[Pie Chart showing Schwab Small-Cap Index Fund(R) portfolio industry
diversification among common stock holdings as of October 31, 1995]
<TABLE>
<S> <C>
Capital Goods 5.4%
Consumer Durables 4.1%
Consumer Non-Durables 19.8%
Energy 5.3%
Finance 17.7%
Materials & Services 23.2%
Technology 16.7%
Transportation 2.9%
Utilities 4.9%
</TABLE>
SCHWAB SMALL-CAP INDEX FUND(R) PORTFOLIO
INDUSTRY DIVERSIFICATION AMONG COMMON STOCK HOLDINGS
AS OF OCTOBER 31, 1995
LOOKING FORWARD
Whatever direction the equity markets take in the year ahead, we believe the
Schwab Small-Cap Index Fund will continue to offer you a convenient, low-cost
way to diversify your portfolio with small company stocks. Going forward, the
Fund will also continue to strive to track the price and dividend performance
of the Schwab Small-Cap Index and to maintain its tax and cost efficiencies.
Thank you for placing your confidence in SchwabFunds.(R) We recognize that we
earn your trust day by day, and we look forward to continuing to serve your
investment needs in the future.
CHARLES SCHWAB INVESTMENT MANAGEMENT, INC.
- ------------------------------------------
<PAGE> 7
TRACKING SMALL COMPANY STOCKS
The Schwab Small-Cap Index(TM), comprised of the stocks of the second 1,000
largest U.S. corporations (as defined below), is designed to track the
performance of the small-capitalization sector of the U.S. stock
market--smaller growth companies that fall somewhere between large, "blue chip"
corporations and very small, "micro-cap" companies. Developed by Schwab in
1993, the Index's total market capitalization currently exceeds $359 billion.
To be included in the Index, a company must satisfy the following criteria:
- - it must be an operating company, not an investment company;
- - it must be incorporated in the United States;
- - its shares must trade on the New York Stock Exchange, American Stock
Exchange or NASDAQ exchange;
- - it must rank among the second largest 1,000 U.S. companies, based on
market capitalization (shares outstanding multiplied by share price).
The Index is revised at least semi-annually, and companies that meet or no
longer meet these criteria are added or deleted, as appropriate. By investing
in the stocks that comprise the Index, the Schwab Small-Cap Index Fund(R) can
help you diversify your portfolio through exposure to some of America's most
dynamic growth companies.
QUESTIONS TO THE PORTFOLIO MANAGEMENT TEAM OF CHARLES SCHWAB INVESTMENT
MANAGEMENT, INC.
Stephen B. Ward - Senior Vice President and Chief Investment Officer
Geri Hom - Portfolio Manager
Q. TO WHAT DO YOU ATTRIBUTE THE SCHWAB SMALL-CAP INDEX FUND'S STRONG
PERFORMANCE DURING THE 12-MONTH REPORTING PERIOD?
A. During the 12-month reporting period, the U.S. stock market experienced
strong gains, with all major domestic equity indices achieving new highs.
Although the large capitalization sector of the market outperformed the small
capitalization sector, the returns achieved by investors in small-cap stocks
were nonetheless very respectable in comparison to the historical returns of
either large-cap or small-cap stocks.
Even though the Federal Reserve's series of increases in the federal funds rate
(from 3% in January 1994 to 6% in February 1995) was successful at slowing the
rate of economic growth during the first and second quarters of 1995, the
domestic equities market continued its strong rally. The most significant
factor contributing to the solid performance of the U.S. stock market appeared
to be the strong growth in corporate earnings. Based on value measures such as
the ratio of price-to-book value and divi-
<PAGE> 8
dend yield, most domestic equity indices experienced record or near-record
highs during the reporting period. However, because of the strong growth in
corporate earnings, the price/earnings ratio of the S&P 500, which stood at
approximately 17 as of October 31, 1995, has experienced a sustained decline
from its 1992 high of approximately 26. This level is still above its 30-year
average of approximately 14.
Q. HOW DID THE PERFORMANCE OF THE SCHWAB SMALL-CAP INDEX(TM) COMPARE TO THE
S&P 600 DURING THE REPORTING PERIOD? HOW DO THESE INDICES DIFFER?
A. During the period, the total return of the Schwab Small-Cap Index was
17.35%, underperforming the S&P 600, which had a total return of 21.09% for the
period. As shown at right, the two indices tracked very closely through the
second quarter of 1995. Then, coincident with the strong performance of the
technology sector in the third quarter, the S&P 600 began to outpace the Schwab
Small-Cap Index, as well as other broad-based, well-known small-cap indices
such as the Russell 2000 Index. This is partially due to the fact that the
technology sector makes up a larger portion of the S&P 600 than the Schwab
Small-Cap Index. On a Fund inception-to-date basis, however, the average annual
total return of the Schwab Small-Cap Index and the S&P 600 remain close, 9.58%
and 9.92% respectively, within four tenths of 1%.
Since the composition of the two indices is different, we fully expect that
there will continue to be periods of some discrepancies in the performance of
the two indices. While the Schwab Small-Cap Index represents the stocks of the
second 1,000 largest U.S. corporations (excluding investment companies), the
S&P 600 is composed of 600 domestic stocks selected by the Standard & Poor's
Corporation. The composition differences result in differing index
characteristics, such as industry concentration and style characteristics.
Q. WHAT ACCOUNTS FOR THE DIFFERENCE BETWEEN THE PERFORMANCE OF THE SCHWAB
SMALL-CAP INDEX AND THE SCHWAB SMALL-CAP INDEX FUND(R)?
A. The Schwab Small-Cap Index is a theoretical return of a group of stocks
representing the second 1,000 largest U.S. corporations (excluding investment
companies), ranked by market capitalization. Unlike the Fund, the Index does
not incur management and other Fund costs which reduce returns to the
shareholders. In addition, the Fund, unlike the Index, holds a small portion of
its balances in cash to meet shareholder redemptions and to pay expenses. The
cash portion earns interest at money market rates, which may be more or less
than the returns of the Index during a given period. Also, the weighting of any
particular security in the Fund can be greater or less than 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 positive or negative contributions to the Fund's
tracking error.
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 0.24%, and its
average annual tracking
<PAGE> 9
error since 12/3/93, the Fund's inception, has been 0.61%. Given the Fund's
current operating expense ratio of 0.59%, and the components of tracking error
(as discussed above), we view this tracking error as favorable.
COMPARISON OF CHANGE IN VALUE OF A HYPOTHETICAL $10,000 INVESTMENT
(IN THE SCHWAB SMALL-CAP INDEX FUND(R), THE SCHWAB SMALL-CAP INDEX(TM), THE
STANDARD & POOR'S SMALL-CAP 600 INDEX(R) AND THE STANDARD & POOR'S 500 INDEX(R))
SCHWAB SMALL-CAP INDEX FUND
AVERAGE ANNUAL TOTAL RETURNS
THROUGH OCTOBER 31, 1995
<TABLE>
<CAPTION>
ONE YEAR SINCE INCEPTION
- -------- ---------------
<S> <C>
17.11% 8.97%
</TABLE>
[Line graph comparing value of $10,000 investment for the period 12/3/93
through 10/31/95 between the Schwab Small-Cap Index Fund(R) $11,785, the
Schwab Small-Cap Index(TM) $11,910, the S&P Small-Cap 600 Index(R) $11,976,
and the S&P 500 Index(R) $13,145]
<TABLE>
<CAPTION>
Small-Cap Small-Cap
Date Index Fund Index S & P 500 S & P 600
---- ---------- --------- --------- ---------
<S> <C> <C> <C> <C>
12/3/93 10,000 10,000 10,000 10,000
12/31/93 10,154 10,234 10,053 10,232
1/31/94 10,394 10,469 10,401 10,473
2/28/94 10,334 10,430 10,113 10,443
3/31/94 9,783 9,871 9,672 9,693
4/30/94 9,753 9,847 9,769 9,839
5/31/94 9,613 9,692 9,953 9,644
6/30/94 9,333 9,419 9,709 9,286
7/31/94 9,493 9,614 10,027 9,401
8/31/94 10,134 10,249 10,437 10,042
9/30/94 10,094 10,191 10,183 9,990
10/31/94 10,064 10,149 10,411 9,890
11/30/94 9,663 9,767 10,034 9,513
12/31/94 9,841 10,000 10,183 9,744
1/31/95 9,730 9,838 10,447 9,606
2/28/95 10,082 10,229 10,853 10,002
3/31/95 10,334 10,442 11,173 10,204
4/30/95 10,566 10,671 11,502 10,432
5/31/95 10,717 10,809 11,961 10,595
6/30/95 11,211 11,356 12,238 11,176
7/31/95 11,866 12,021 12,644 12,031
8/31/95 12,077 12,270 12,676 12,292
9/30/95 12,309 12,510 13,211 12,605
10/31/95 11,785 11,910 13,145 11,976
</TABLE>
Past performance is no guarantee of future results. Principal value and 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
Small-Cap Index Fund since inception with hypothetical investments in the
Schwab Small-Cap Index, the S&P 600 and the S&P 500. Indices are unmanaged and
assume reinvestment of all dividends. Investors cannot invest directly in an
index, therefore indices, unlike the Fund, do not reflect the payment of
advisory fees and other expenses associated with an investment in the Fund.
Since the S&P 600 did not exist before October, 1994, it was reconstructed from
December 3, 1993 through September, 1994 by S&P. Fund total returns assume the
reinvestment of all dividends.
Q. WHICH INDUSTRY SECTORS WERE THE BEST PERFORMERS IN THE U.S. EQUITY MARKETS
DURING THE 12-MONTH PERIOD?
A. The technology sector was clearly the strongest performing sector in the
small-cap equity market during the period. This sector, achieved an overall
industry total return of 41% 8. The technology sector comprised approximately
17% of Fund net assets as of 10/31/95. Other sectors in the small-cap market
with strong performance during the period were finance, and capital goods which
had overall industry total returns of 33%8 and 30%8, respectively. Finance
represented approximately 18% of Fund net assets and capital goods 5% of Fund
net assets as of 10/31/95.
8 Source: Standard and Poor's Corp. Based on the results of the S&P 600.
These total returns do not represent those of the Schwab Small-Cap Index
or the Schwab Small-Cap Index Fund.
<PAGE> 10
Q. WHY ARE SMALL-CAP INDEX FUNDS AN ATTRACTIVE INVESTMENT OPTION, AND WHAT
ROLE SHOULD A SMALL-CAP INDEX FUND PLAY IN AN INVESTMENT PORTFOLIO?
A. As with other types of securities, investing in small-cap stocks using an
index fund as the investment vehicle offers the advantages of broad company
diversification, typically a lower operating expense ratio than actively
managed funds, 9 and in the case of the Schwab Small-Cap Index Fund(R), a
tax-smart management strategy that seeks to minimize portfolio turnover and
capital gain distributions.
Small company stocks also manifest certain characteristics that make them
attractive elements of a well-diversified investment portfolio. Historically,
small company stocks have proven to have some of the highest return potential
and volatility characteristics of all major classes of investment assets. For
example, for the 20-year period ended December 31, 1994, small company stocks
provided an average annual total return of 19.1%. 10 This compares with large
company returns of 14.5%, 10 and international equity returns of 15.5%. 10
However, small company stocks also exhibited the greatest volatility during the
same period as measured by the annual standard deviation of returns of
21.4%. 10 This compares with standard deviations of return of 15.0% 10 and
17.8% 10 for large company stocks and international stocks, respectively
during the same period.
Small company stocks can be added to a diversified, long-term investment
portfolio in an effort to enhance the portfolio's long-term total return
potential. Typically, because of the volatility characteristics of small
company stocks, investors with higher risk tolerances and longer term
investment horizons may be able to consider a larger allocation to small
company stocks. Investors with lower risk tolerances and shorter term
investment horizons may want to consider a smaller or no allocation to small
company stocks. Since small company stock returns are not perfectly correlated
with returns of other major asset classes (such as large company stocks,
international stocks or bonds), combining small company stocks in a portfolio
with other asset classes can provide total portfolio returns with lower return
volatility than each of the individual components.
An investment portfolio which uses only small company stocks will not realize
the benefits of asset class diversification described above. To take maximum
advantage of these investment principles, an investor should consider combining
small-cap stocks with other major equity asset classes (such as large company
stocks and international stocks) to form the equity component of a
well-diversified investment portfolio.
9 Source: Morningstar, Inc. Average operating expense ratio for 346 actively
managed small-cap funds was 1.51% compared to 0.60% for 12 small-cap index
funds, as of 10/31/95.
10 Source: BARRA, Inc. Specific sources for the data are the S&P 500 for
large-cap stock; Ibbotson and BARRA Small Company Index for small-cap
stock and EAFEIndex for international stock. Indices are unmanaged and do
not incur management or transaction costs and cannot be invested in. Past
performance does not guarantee future results. Total return assumes
reinvestment of all dividends and capital gain distributions.
<PAGE> 11
SchwabFunds(R) 1
- --------------------------------------------------------------------------------
SCHWAB SMALL-CAP INDEX FUND(R)
STATEMENT OF NET ASSETS
October 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
COMMON STOCK--99.0%
1st Source Corp. 2,433 $ 57
20th Century Industries 12,100 201
3COM Corp. 4,134 194
3DO Co.* 5,900 64
AAR Corp. 4,000 71
ACX Technologies, Inc. 6,200 98
ADVO, Inc. 4,500 115
AG Chemical Equipment Inc. 2,700 77
AGCO Corp. 6,150 275
ALANTEC Corp.* 2,200 78
ALBANK Financial Corp. 2,600 75
AMC Entertainment Inc.* 3,700 67
AMCORE Financial, Inc. 4,100 93
AMETEK, Inc. 7,700 136
AMP Inc. 1,792 70
APS Holding Corp. Class A* 3,200 66
AST Research, Inc.* 9,754 87
Acclaim Entertainment, Inc.* 10,000 237
Acme Metals Co.* 1,000 15
Acordia, Inc. 2,900 80
Actava Group Inc.* 4,100 71
Actel Corp.* 3,700 44
Acuson Corp.* 5,600 65
Acxiom Corp. 5,700 170
Addington Resources, Inc.* 3,100 39
Adobe Systems Inc. 1,600 91
Advanced Tissue Sciences,
Inc.* 7,800 70
Affiliated Computer Services
Inc.* 1,800 59
Air Express International
Corp. 4,000 82
Airborne Freight Corp. 4,700 123
Alaska Air Group, Inc.* 3,300 49
Albany International Corp.
Class A 7,100 147
Alberto-Culver Co. Class A 300 8
Alex. Brown Inc. 3,800 186
Alfa Farmers Federation Corp. 9,600 103
Allen Group Inc. 5,100 125
Alliance Entertainment Corp.* 8,200 55
Alliance Semiconductor Corp. 8,250 253
Alliant Techsystems Inc.* 2,900 135
Allied Group, Inc. 1,900 61
Alpharma, Inc. 4,600 110
Altera Corp. 3,000 182
Alternative Resources Corp. 4,100 126
Altron Inc. 2,500 73
Amcol International Corp. 3,900 67
Amerco* 10,500 190
America Online, Inc. 1,000 80
America West Airlines, Inc.* 10,200 139
American Annuity Group, Inc. 8,250 89
American Bankers Insurance
Group, Inc. 5,100 182
American Business
Information, Inc. 7,650 136
American Business Products,
Inc. 3,300 72
American Financial
Enterprises Inc. 1,500 35
American Freightways Corp.* 7,400 93
American Heritage Life
Investment Corp. 5,200 100
American Homepatient Inc.* 1,900 46
American Maize-Products Co. 2,700 107
American Management Systems,
Inc. 6,600 192
American Medical Response,
Inc.* 6,000 173
American Mobile Satellite
Corp.* 6,300 132
American Oncology Resources
Inc.* 6,400 224
American President Companies,
Ltd. 7,100 172
Americredit Corp.* 7,100 87
Amphenol Corp. Class A* 3,100 67
Amresco Inc. 5,700 61
Amsco International, Inc.* 10,700 171
Anchor Gaming* 2,500 55
Andrew Corp. 1,275 54
Angelica Corp. 2,000 45
AnnTaylor Stores Corp.* 5,500 61
Antec Corp.* 5,600 70
Anthony Industries, Inc. 6,415 119
Apogee Enterprises, Inc. 2,300 34
Apollo Group Inc. 4,650 121
Apple South, Inc. 6,650 138
Applebee's International,
Inc. 7,600 212
Applied Innovation Inc. 3,400 32
Applied Power Inc. Class A 2,800 85
Apria Healthcare Group Inc.* 11,600 252
Aptar Group, Inc. 4,500 154
Aquila Gas Pipeline Corp. 6,800 75
Arbor Drugs, Inc. 5,900 107
Arch Communications Group
Inc.* 2,600 71
Arctco, Inc. 6,150 70
Argosy Gaming Co.* 4,700 44
Armco Inc.* 28,000 172
Armor All Products Corp. 4,600 77
Arnold Industries Inc. 6,300 104
Arrow International, Inc. 1,000 42
Arthur J. Gallagher & Co. 3,300 117
Arvin Industries, Inc. 6,300 112
Ashland Coal, Inc. 2,900 69
Aspect Telecommunications
Corp. 5,600 194
Associated Banc-Corp 3,900 148
Associated Group Inc. Class
A* 4,100 73
Astoria Financial Corp. 4,000 172
Atlantic Southeast Airlines,
Inc. 6,300 157
Atmos Energy Corp. 4,000 73
Atria Software Inc. 3,200 115
Augat Inc. 4,100 65
Auspex Systems, Inc.* 7,600 108
Authentic Fitness Corp. 5,500 113
Avatar Holdings, Inc.* 2,400 89
Avid Technology, Inc.* 4,500 196
Aztar Corp.* 7,400 60
B W/I P Inc. Class A 5,100 84
BISYS Group, Inc.* 5,600 156
BJ Services Co.* 6,900 162
BMC Industries, Inc. 3,100 120
Baldor Electric Co. 6,540 157
Baldwin & Lyons, Inc. Class B 3,300 49
Ballard Medical Products 9,900 171
Bally Entertainment Corp. 10,100 111
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE> 12
SchwabFunds(R) 2
- --------------------------------------------------------------------------------
SCHWAB SMALL-CAP INDEX FUND(R)
STATEMENT OF NET ASSETS
October 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
Bancorp South, Inc. 2,300 $ 108
Banta Corp. 5,050 220
Banyan Systems, Inc.* 2,800 22
Barnes Group Inc. 1,600 60
Barrett Resources Corp.* 6,900 160
Bassett Furniture Industries,
Inc. 3,600 73
Bay State Gas Co. 2,800 70
Bearings, Inc. 1,600 58
Belden Inc. 12,300 297
Bell Bancorp, Inc. 1,800 53
Ben Franklin Retail Stores,
Inc.* 912 3
Benton Oil & Gas Co.* 5,000 61
Berkley (W.R.) Corp. 4,000 173
Best Products Inc. (New)* 7,300 36
Big B, Inc. 4,700 69
Bio Rad Laboratories Inc.* 1,700 65
Biocraft Laboratories, Inc. 2,800 43
Birmingham Steel Corp. 7,100 108
Black Box Corp. 4,000 66
Black Hills Corp. 3,200 80
Blair Corp. 1,900 56
Blanch (E.W.) Holdings, Inc. 3,500 67
Block Drug Co., Inc. Class A 4,957 191
Blount, Inc. Class A 2,900 126
Blount, Inc. Class B 1,000 48
Blyth Industries Inc.* 3,600 182
Boise Cascade Office Products
Co.* 7,600 275
Bok Financial Corp. 5,000 108
Bolt Beranek and Newman Inc.* 4,300 133
Bombay Company, Inc.* 7,850 46
Books-A-Million, Inc. 3,500 45
Boole & Babbage, Inc. 500 18
Borg Warner Automotive Inc. 5,400 159
Borland International, Inc.* 9,300 126
Boston Scientific Corp.* 3,073 129
Boston Technology, Inc.* 8,400 117
Bowne & Co., Inc. 3,800 71
Brady (W.H.) Co. Class A 1,700 124
Breed Technologies, Inc. 8,300 155
BroadBand Technologies, Inc.* 2,600 46
Broderbund Software, Inc. 100 7
Brooklyn Bancorp Inc.* 3,200 126
Brooktree Corp.* 3,500 42
Brown (Tom), Inc.* 4,600 52
Brown Group, Inc. 3,700 51
Bruno's Inc.* 402 4
Brush Wellman Inc. 4,000 67
Buffets, Inc.* 6,900 87
Burlington Coat Factory
Warehouse Corp.* 8,800 98
Burlington Industries, Inc.* 16,400 182
Burr-Brown Corp. 3,200 102
Bush Boake Allen Inc.* 4,600 126
Business Records Corp.
Holding Co.* 1,200 45
C-COR Electronics, Inc. 2,400 56
C-Cube Microsystems, Inc.* 4,100 283
C-TEC Corp. 6,800 145
CCB Financial Corp. 3,550 175
CCH Inc. Class A 4,800 113
CCH Inc. Class B 8,700 202
CDI Corp.* 4,000 59
CDW Computer Centers, Inc. 3,500 172
CFW Communications Co. 2,400 44
CIDCO, Inc.* 3,300 97
CILCORP Inc. 3,300 129
CLARCOR Inc. 3,000 68
CMAC Investment Corp. 2,900 138
CML Group, Inc. 11,350 65
CNB Bancshares, Inc. 3,801 103
CPI Corp. 2,800 51
CSF Holdings, Inc. 2,375 93
Cabot Oil & Gas Corp. Class A 4,600 62
Cadence Design Systems, Inc. 2,700 87
CalMat Co. 9,100 154
Caldor Corp.* 3,400 17
Calgon Carbon Corp. 9,500 108
California Federal Bank 12,600 186
California Federal Bank
Goodwill Certificates* 960 4
California Microwave, Inc.* 3,500 76
Cambridge Technology
Partners, Inc.* 3,200 183
Camco International Inc. 6,000 137
Canandaigua Wine Co., Inc.
Class B* 1,000 48
Capital Re Corp. 5,400 153
Capitol American Financial
Corp. 6,500 128
Caraustar Industries, Inc. 6,600 122
Carlisle Companies Inc. 3,400 140
Carmike Cinemas, Inc.* 2,500 52
Carpenter Technology Corp. 3,600 136
Carson Pirie Scott & Co.
Illinois* 4,100 69
Carter-Wallace, Inc. 9,800 103
Casey's General Stores, Inc. 6,000 139
Casino America, Inc.* 3,350 23
Castech Aluminum Group Inc.* 2,400 34
Catalina Marketing Corp.* 2,200 111
Catellus Development Corp.* 28,300 156
Cato Corp. (New) Class A 6,200 37
Cellstar Corp.* 4,700 129
Cellular Communications, Inc.
Class A (Redeemable)* 4,500 242
Cellular Technical Services
Inc.* 2,100 35
Centex Construction Products
Inc.* 6,000 76
Central Hudson
Gas & Electric Corp. 3,700 113
Central Louisiana Electric
Co., Inc. 4,800 129
Central Maine Power Co. 7,900 110
Central Newspapers, Inc.
Class A 6,400 189
Centura Banks, Inc. 5,000 169
Century Communications Corp.
Class A* 19,100 166
Cephalon Inc.* 5,600 168
Cerner Corp. 5,400 139
Champion Enterprises, Inc. 4,200 109
Chaparral Steel Co. 6,000 59
Charming Shoppes, Inc. 26,100 74
Charter Medical Corp.* 6,100 110
Charter One Financial, Inc. 5,700 161
Chase Manhattan Corp. 1,360 78
Checkpoint Systems, Inc.* 5,700 165
Cheesecake Factory, Inc.* 2,400 51
Chemed Corp. 2,000 70
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE> 13
SchwabFunds(R) 3
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
Chemical Financial Corp. 1,995 $ 79
Chesapeake Corp. 6,700 205
Chesapeake Energy Corp. 2,600 76
Cheyenne Software, Inc.* 9,450 197
Chips & Technologies Inc.* 3,900 34
Chiquita Brands
International, Inc. 13,000 211
Church & Dwight Co., Inc. 4,100 84
Citicasters Inc. 3,000 94
Citizens Bancorp 3,700 122
Citizens Banking Corp. 3,600 110
Citizens Corp. 8,800 160
City National Corp. 11,200 148
Claire's Stores, Inc. 4,500 88
Clear Channel Communications,
Inc. 475 39
Cleveland-Cliffs Inc. 2,700 101
Coast Savings Financial,
Inc.* 4,600 121
Coastal Physician Group Inc.* 6,200 81
Cobra Golf, Inc. 4,300 113
Coca-Cola Bottling Co.
Consolidated 2,000 67
Coeur d'Alene Mines Corp. 3,000 51
Cognex Corp.* 3,900 234
Coherent, Inc.* 2,800 80
Cole Taylor Financial Group
Inc. 3,600 95
Collective Bancorp, Inc. 4,400 103
Collins & Aikman Corp.* 15,700 126
Colonial BancGroup, Inc. 3,400 98
Colonial Data Technologies
Corp.* 3,600 50
Comair Holdings, Inc. 7,400 209
Comdata Holdings Corp.* 4,000 98
Commerce Group Inc.
Massachusetts 8,500 173
Commercial Federal Corp. 3,800 125
Commercial Intertech Corp. 3,450 58
Commercial Metals Co. 3,233 83
Commonwealth Energy System 2,600 110
Community Health Systems,
Inc.* 4,500 143
Community Psychiatric Centers 10,100 110
Comnet Cellular, Inc.* 3,700 93
CompUSA Inc.* 5,100 195
Computer Network Technology* 5,000 33
ComputerVision Corp.* 12,400 146
Comverse Technology Inc.* 5,000 113
Concord Efs Inc.* 10,300 355
Cone Mills Corp.* 10,300 112
Conner Peripherals, Inc.* 14,100 254
Consolidated Stores Corp.* 6,100 141
Continental Airlines, Inc.
Class B* 6,400 228
Continuum Company, Inc.* 5,000 197
Coors (Adolph) Co. Class B 9,000 163
Copley Pharmaceutical, Inc.* 4,764 78
Coram Healthcare Corp.* 9,262 37
Corrections Corp. of America 3,800 207
Coventry Corp. 8,000 158
Crawford & Co. Class A 4,300 67
Crawford & Co. Class B 8,500 132
Cray Research, Inc.* 6,400 133
Creative Computers Inc.* 2,100 60
Credence Systems Corp. 6,750 253
Crompton & Knowles Corp. 13,600 172
Cross (A.T.) Co. Class A 5,800 83
Cross Timbers Oil Co. 4,900 71
Cullen/Frost Bankers, Inc. 2,700 137
Culligan Water Technologies
Inc.* 3,500 60
Curtiss-Wright Corp. 1,400 62
Cypress Semiconductor Corp. 900 32
Cyrix Corp.* 4,500 144
Cytec Industries Inc.* 3,000 164
DSP Group, Inc.* 1,500 24
Daig Corp. 5,000 113
Dallas Semiconductor Corp. 9,500 202
Dames & Moore, Inc. 4,700 64
Data General Corp.* 7,900 91
Datascope Corp.* 4,200 101
Dauphin Deposit Corp. 8,400 245
Dave & Busters Inc.* 840 13
Davidson & Associates, Inc. 8,700 312
DeVRY Inc. 7,000 158
Dekalb Genetics Corp. 1,200 51
Dell Computer Corp. 6,300 293
Delta & Pine Land Co. 2,100 81
Department 56 Inc.* 300 14
Deposit Guaranty Corp. 4,400 194
Detroit Diesel Corp.* 8,900 158
Devon Energy Corp. 4,700 102
Devon Group, Inc. (New)* 1,600 62
Dexter Corp. 5,800 138
Diagnostic Products Corp. 4,300 159
Dial Page, Inc.* 5,000 74
Dialogic Corp.* 3,400 98
Diamond Multimedia Systems
Inc.* 7,200 214
Diamond Shamrock, Inc. 7,800 201
Digi International Inc.* 3,000 81
Digital Link Corp.* 1,900 30
Dimon Inc. 8,400 123
Dionex Corp.* 1,500 80
Discount Auto Parts, Inc.* 2,900 78
Discovery Zone, Inc.* 11,900 42
Dollar Tree Stores Inc.* 4,100 109
Donaldson Co., Inc. 5,800 141
Doubletree Corp.* 4,300 94
Downey Financial Corp. 3,200 65
Dreyer's Grand Ice Cream,
Inc. 3,300 115
Duriron Co., Inc. 4,400 118
Duty Free International, Inc. 6,800 97
Dynatech Corp. 3,400 52
Eastern Enterprises 4,800 143
Eastern Utilities Assoc. 4,800 113
Eaton Vance Corp. (Non
Voting) 2,100 76
Edison Brothers Stores, Inc. 4,200 15
Egghead, Inc.* 3,000 21
Electro Scientific Industries
Inc.* 2,200 69
Electroglas Inc. 2,300 163
Electronics for Imaging, Inc. 2,800 232
Empire District Electric Co. 3,200 59
Energen Corp. 2,800 63
Enhance Financial Services
Group, Inc. 7,100 145
Envoy Corp. (New)* 2,000 26
Enzo Biochem, Inc. 5,775 92
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE> 14
SchwabFunds(R) 4
- --------------------------------------------------------------------------------
SCHWAB SMALL-CAP INDEX FUND(R)
STATEMENT OF NET ASSETS
October 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
Ethan Allen Interiors, Inc.* 3,700 $ 73
Exabyte Corp.* 4,900 63
Exar Corp. 2,000 48
Expeditors International of
Washington, Inc. 3,900 104
Express Scripts, Inc. Class A 3,400 131
F & M National Corp. 3,955 71
FHP International Corp.* 1,056 26
FMC Gold Co. 17,500 68
FSF Financial Corp. 5,100 68
FTP Software Inc.* 6,600 179
Fab Industries, Inc. 400 12
Fair, Issac & Co., Inc. 3,000 83
Farmer Bros. Co. 400 52
Fastenal Co. 1,400 49
Fedders Corp. 825 4
Federal-Mogul Corp. 8,800 157
Federated Department Stores,
Inc.* 2,700 69
Ferro Corp. 7,700 178
FileNet Corp.* 2,800 127
Financial Security Assured
Holdings Ltd. 6,400 166
Fingerhut Companies, Inc. 10,600 144
FirsTier Financial, Inc. 6,200 265
First Alert, Inc. 5,600 86
First American Financial
Corp. 3,600 84
First Bank System, Inc. 3,809 189
First Citizens BancShares,
Inc. Class A 2,600 138
First Commerce Bancshares
Inc. 3,000 54
First Commercial Corp. 5,640 169
First Commonwealth Financial
Corp. 5,300 87
First Data Corp. 501 33
First Financial Bancorp 2,800 95
First Financial Corp. 6,900 147
First Michigan Bank Corp. 4,906 132
First Midwest Bancorp, Inc. 2,900 82
First Mississippi Corp. 4,900 100
First National Bancorp 5,200 146
First Union Corp. 2,220 110
FirstFed Michigan Corp. 5,100 173
Firstbank of Illinois Co. 2,600 78
Firstmiss Gold Inc.* 7,571 138
Fisher Scientific
International, Inc. 3,600 113
Flagstar Companies, Inc.* 8,300 35
Florida East Coast
Industries, Inc. 2,400 161
Florida Rock Industries, Inc. 2,000 54
Fluke Corp. 1,600 59
Foremost Corp. of America 2,400 110
Forest City Enterprises, Inc.
Class A 2,100 78
Fort Wayne National Corp. 2,700 85
Fossil, Inc.* 2,200 23
FoxMeyer Health Corp. 5,473 125
Frame Technology Corp.* 3,800 107
Franklin Quest Co.* 5,700 136
Fremont General Corp. 4,280 124
Fresenius U.S.A. Inc.* 4,500 74
Fritz Cos., Inc. 5,200 181
Frontier Insurance Group,
Inc. 3,050 87
Fuller (H.B.) Co. 3,300 104
Fulton Financial Corp. 6,560 141
Fund American Enterprises
Holdings, Inc.* 1,909 132
Fusion Systems Corp.* 1,800 50
G&K Services, Inc. Class A 5,250 119
GC Companies Inc.* 1,680 54
Gartner Group Inc. Class A 5,800 253
Gasonics International Corp. 2,000 66
Gaylord Container Corp. Class
A* 11,400 87
GenCorp Inc. 8,100 85
General Binding Corp. 3,400 67
General DataComm Industries,
Inc.* 5,000 76
General Magic Inc.* 6,300 80
Genesis Health Ventures,
Inc.* 3,300 95
Geneva Steel Class A* 6,200 45
Gentex Corp.* 5,000 113
Geon Co. 6,300 157
Geotek Communications Inc.* 14,400 120
Gerber Scientific, Inc. 5,100 86
Giddings & Lewis, Inc. 8,800 143
Gilead Sciences, Inc.* 4,900 94
Glendale Federal
Bank, F.S.B. (New)* 9,100 146
Global Natural Resources
Inc.* 6,600 66
Global Village
Communications* 3,600 62
Goulds Pumps, Inc. 5,300 127
Graco Inc. 2,650 89
Grand Casinos, Inc. 4,600 183
Granite Construction Inc. 3,100 88
Great Financial Corp. 3,500 72
Greenfield Industries Inc. 3,500 104
Greif Brothers Corp. 5,600 141
Grey Advertising Inc. 100 19
Griffon Corp.* 7,600 64
Guaranty National Corp. (New) 3,500 50
Guilford Mills, Inc. 2,900 64
Gulf South Medical Supply
Inc. 3,000 63
Gymboree Corp. 6,000 136
HBO & Co. 2,600 184
HCC Insurance Holdings, Inc.* 2,900 101
HCIA Inc.* 1,600 43
Hadco Corp.* 2,400 67
Haemonetics Corp.* 7,700 145
Hancock Holding Co. 2,300 84
Handleman Co. 6,300 49
Hanover Direct Inc.* 26,800 45
Harland (John H.) Co. 7,600 158
Harleysville Group Inc. 4,600 129
Harman International
Industries, Inc. 3,675 170
Harnischfeger Industries
Corp. 4,369 138
Harper Group, Inc. 3,800 67
Harte Hanks Communications 5,000 151
Hawkeye Bancorporation 2,900 71
Hayes Wheels International,
Inc. 4,400 116
Health Management Systems,
Inc. 2,400 77
Heart Technology, Inc.* 4,100 116
Heartland Express, Inc.* 2,900 79
Heartland Wireless
Communications, Inc.* 3,500 91
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE> 15
SchwabFunds(R) 5
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
Hechinger Co. Class A 9,100 $ 39
Hecla Mining Co.* 10,400 77
Helene Curtis Industries,
Inc. 2,400 72
Helix Technology Corp. 2,100 78
Helmerich & Payne, Inc. 5,600 145
Herbalife International, Inc. 6,400 48
Heritage Media Corp. Class A* 4,500 125
Hollywood Entertainment Corp. 7,900 210
Hollywood Park Inc. (New)* 4,100 39
Home Beneficial Corp. Class B 4,400 108
Home Financial Corp. 5,400 83
Horace Mann Educators Corp. 5,200 138
Horizon Healthcare Corp.* 11,695 237
Hudson Foods, Inc. 6,250 88
Human Genome Sciences Inc.* 3,300 64
Hunt (J.B.) Transport
Services, Inc. 9,150 141
Hunt Manufacturing Co. 3,000 53
Huntco Inc. Class A 1,200 16
Hutchinson Technology Inc.* 1,500 95
Hyperion Software Corp.* 1,800 88
I-Stat Corp.* 2,300 71
ICN Pharmaceuticals, Inc. 7,802 160
IDEX Corp. 4,350 164
IDEXX Laboratories, Inc. 6,800 275
IES Industries Inc. 8,300 221
IHOP Corp.* 2,200 48
INDRESCO Inc.* 5,000 86
INSO Corp. 3,400 121
INTERCO Inc. 10,300 76
INTERSOLV Inc.* 4,200 67
Ideon Group Inc. 5,600 50
Immunex Corp. (New)* 9,300 117
Imperial Bancorp 3,300 74
In Focus Systems, Inc.* 2,200 72
Indiana Energy, Inc. 5,500 116
Information Resources, Inc.* 6,600 72
Inphynet Medical Management
Inc.* 3,400 62
Input/Output, Inc. 4,500 168
Insignia Financial Group
Class A (New)* 2,100 57
Insilco Corp.* 2,100 71
Insurance Auto Auctions,
Inc.* 2,200 16
Integon Corp. 3,900 64
Integrated Device Technology,
Inc. 800 15
Integrated Health Services,
Inc. 5,300 121
Integrated Systems Inc.* 2,200 78
Intelligent Electronics, Inc. 8,200 64
Inter-Regional Financial
Group, Inc. 1,700 60
InterVoice, Inc.* 3,200 58
Interdigital Communications
Corp.* 9,300 68
Interface Systems, Inc. Class
A 4,400 67
Intergraph Corp.* 11,900 146
Interim Services Inc.* 2,800 83
Intermet Corp.* 9,200 110
International CableTel, Inc. 7,033 188
International Dairy Queen,
Inc. Class A* 5,400 115
International Family
Entertainment, Inc. Class B* 9,300 172
International Multifoods
Corp. 3,900 80
International Rectifier
Corp.* 5,200 235
Interneuron Pharmaceuticals,
Inc.* 7,500 113
Interpool, Inc.* 4,100 66
Interstate Bakeries Corp. 8,600 184
Interstate Power Co. 2,000 58
Intuit Inc. 1,200 87
Invacare Corp. 8,400 210
Iomega Corp. 4,300 102
Ionics, Inc. 4,200 171
Isis Pharmaceuticals, Inc.* 4,000 40
Isolyser Inc. 5,400 96
Itron, Inc.* 2,600 76
J & L Specialty Steel, Inc. 10,200 167
JSB Financial, Inc. 2,800 86
Jacobs Engineering Group
Inc.* 9,500 208
Jacor Communications, Inc.
Class A* 4,600 72
Jefferson Bankshares, Inc. 3,200 72
John Alden Financial Corp. 5,700 118
John Wiley & Sons, Inc. Class
A 5,800 173
Jones Intercable, Inc. Class
A* 7,500 94
Juno Lighting, Inc. 4,600 67
Just for Feet Inc. 3,350 80
Justin Industries, Inc. 5,800 59
K N Energy, Inc. 6,568 168
KCS Energy, Inc. 1,900 22
KLA Instruments Corp. 1,200 52
Kaiser Aluminum Corp.* 12,800 144
Kaman Corp. Class A 4,700 51
Kaufman & Broad Home Corp. 7,700 90
Kaydon Corp. 3,500 101
Keane, Inc. 4,500 122
Kelley Oil & Gas Corp.* 10,100 24
Kellwood Co. 5,000 94
Kemet Corp. 7,800 267
Kenetech Corp.* 8,900 28
Kennametal Inc. 5,400 168
Kent Electronics Corp. 3,050 149
KeyCorp, Inc. 2,200 74
Keystone Financial, Inc. 6,100 199
Keystone International, Inc. 8,700 194
Kimball International, Inc.
Class B 5,000 129
Kinder-Care Learning
Centers, Inc. (New)* 5,000 68
Kinetic Concepts, Inc. 10,300 116
Kirby Corp.* 6,000 99
Komag, Inc.* 5,100 291
Kulicke & Soffa Industries
Inc. 6,000 212
LCI International Inc. 16,200 292
LTX Corp.* 6,400 78
La Quinta Inns, Inc. 2,250 58
La-Z-Boy Chair Co. 4,000 119
Laclede Gas Co. 3,800 77
Lance, Inc. 7,200 123
Landmark Graphics Corp.* 4,000 87
Landry's Seafood Restaurants,
Inc. 4,000 56
Lands' End, Inc. 8,000 120
Landstar Systems, Inc.* 2,700 72
Lattice Semiconductor Corp.* 4,400 172
Lawson Products, Inc. 2,800 68
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE> 16
SchwabFunds(R) 6
- --------------------------------------------------------------------------------
SCHWAB SMALL-CAP INDEX FUND(R)
STATEMENT OF NET ASSETS
October 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
Lawter International, Inc. 9,500 $ 101
Leader Financial Corp. 3,500 125
Learning Co.* 1,600 95
Lechters, Inc.* 3,300 31
Legg Mason, Inc. 3,500 101
Lennar Corp. 8,800 201
Level One Communications
Inc.* 2,650 61
Libbey Inc. 3,200 66
Liberty Bancorp, Inc. 2,000 72
Liberty Corp. 4,800 161
Life Partners Group, Inc. 5,900 107
Life Re Corp. 3,300 68
Life Technologies, Inc. 3,800 95
Lillian Vernon Corp. 3,800 51
Lilly Industries, Inc. Class
A 5,350 68
Lincare Holdings, Inc.* 7,200 180
Lincoln Electric Co. 2,600 64
Lincoln Telecommunications
Co. 9,900 172
Liposome Co., Inc.* 7,200 110
Liqui-Box Corp. 300 8
Littlefuse, Inc.* 3,400 111
Living Centers of America,
Inc.* 4,700 122
Logicon, Inc. 3,400 78
Lojack Corp.* 7,200 111
Lone Star Industries, Inc. 6,300 144
Long Islands Bancorp Inc. 6,200 142
Louis Dreyfus Natural Gas
Corp.* 11,400 160
Loyola Capital Corp. 2,800 100
Luby's Cafeterias, Inc. 6,500 135
Lukens Inc. 4,150 128
Lydall, Inc. 5,800 132
M.S. Carriers, Inc.* 3,000 47
MAIC Holdings Inc.* 1,627 49
MAXXAM Inc.* 2,300 85
MDU Resources Group, Inc. 7,200 152
MESA Inc.* 12,400 53
MICROS Systems, Inc. 1,500 56
Mac Frugal's Bargains-
Close-outs, Inc.* 6,000 71
Macromedia Inc. 8,000 294
Madison Gas and Electric Co. 2,300 76
Mafco Consolidated Group
Inc.* 6,300 143
Magma Copper Co. (New) 12,000 201
Magna Group, Inc. 6,500 159
MagneTek, Inc.* 5,300 52
Manitowoc Co., Inc. 1,600 45
Marcus Corp. 3,700 128
Mariner Health Group, Inc.* 4,300 42
Mark Twain Bancshares, Inc. 4,100 143
Markel Corp.* 1,300 95
Marquette Electronics, Inc.
Class A* 9,400 172
Marshall Industries* 4,300 152
Mascotech, Inc. 16,500 169
Material Sciences Corp. 3,300 55
Maxicare Health Plans Inc.* 4,200 74
Maxim Integrated Products,
Inc. 2,100 157
Maxtor Corp.* 10,700 54
Maybelline, Inc. 2,900 69
McAfee Associates, Inc. 3,500 205
McClatchy Newspapers, Inc.
Class A 6,900 136
Measurex Corp. 3,600 111
Medic Computer Systems, Inc.* 2,900 155
Medicine Shoppe
International, Inc. 1,800 78
Medisense Inc.* 3,800 81
Medpartners Inc.* 4,700 131
Medusa Corp. 3,400 85
Men's Wearhouse, Inc. 3,200 126
Mentor Corp. 5,800 129
Mercury Interactive Corp.* 3,700 77
Meredith Corp. 6,800 243
Merisel, Inc.* 6,500 39
Mesa Airlines, Inc.* 7,900 75
Methode Electronics, Inc.
Class A 5,300 123
Meyer (Fred), Inc.* 7,200 134
Michaels Stores, Inc.* 5,600 77
Microchip Technology, Inc. 2,100 83
Microdyne Corp.* 2,700 75
Mid-Am, Inc. 3,320 55
Midamerican Energy Co. 9,261 148
Mikasa Inc.* 4,900 64
Miller (Herman), Inc. 6,300 188
Mine Safety Appliances Co. 1,200 61
Minerals Technologies, Inc. 4,900 195
Mississippi Chemical Corp. 5,800 139
Mohawk Industries, Inc.* 8,200 122
Molten Metal Technology,
Inc.* 5,100 198
Money Store Inc. 4,950 197
Morrison Knudsen Corp. 8,000 52
Movie Gallery Inc.* 3,000 115
Mueller Industries, Inc. 4,600 108
Multicare Cos., Inc.* 3,800 71
Musicland Stores Corp.* 6,800 44
Myers Industries, Inc. 5,450 78
NAC Re Corp. 4,900 172
NACCO Industries, Inc. Class
A 2,300 132
NCH Corp. 1,800 98
NL Industries, Inc.* 12,500 163
NYMAGIC, Inc. 2,000 32
Nabors Industries, Inc.* 21,100 182
National Auto Credit Inc.* 5,500 89
National Bancorp of Alaska,
Inc. 1,800 113
National Commerce Bancorp 6,200 160
National Computer Systems,
Inc. 3,400 64
National Data Corp. 5,800 154
National Instruments Corp.* 5,100 97
National Presto Industries,
Inc. 1,600 65
National RE Holdings Corp. 4,300 145
National Steel Corp. Class B* 9,600 127
Nautica Enterprises, Inc. 4,650 160
Neiman Marcus Group, Inc. 9,800 168
Nellcor Inc.* 7,296 421
Neostar Retail Group Inc.* 3,500 53
Netcom Online Communications* 2,500 145
Netmanage Inc. 10,800 221
Network Equipment
Technologies, Inc.* 4,400 144
Network General Corp.* 5,100 211
Network Peripherals Inc.* 2,400 25
New England Business Service,
Inc. 3,200 62
New Jersey Resources Corp. 3,700 93
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE> 17
SchwabFunds(R) 7
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
Newfield Exploration Co.* 5,900 $ 174
Nexgen Inc.* 7,500 139
Nextel Communications, Inc.* 3,877 54
Noble Drilling Corp.* 22,975 162
Norand Corp.* 1,600 27
North American Mortgage Co. 3,800 78
North Fork Bancorp, Inc. 5,700 125
Northwest Natural Gas Co. 3,400 110
Norwest Corp. 3,680 109
NovaCare, Inc.* 14,080 88
Novellus Systems, Inc.* 600 41
Nu-Kote Holding, Inc. 4,900 101
Nuevo Energy Co.* 4,300 95
O'Reilly Automotive, Inc.* 2,100 69
OEA, Inc. 5,100 139
OM Group Inc. 2,700 79
ONBANCorp, Inc. 3,600 106
Oak Industries Inc.* 4,500 94
Oak Technology* 4,400 242
Oakwood Homes Corp. 6,200 233
Octel Communications Corp.* 5,600 191
Offshore Logistics, Inc.* 4,200 53
Olympic Financial Ltd.* 5,100 92
Omnicare, Inc. 6,600 239
One Valley Bancorp of
West Virginia, Inc. 4,700 157
Oneok Inc. 6,900 168
Opti Inc.* 2,400 24
Optical Data Systems, Inc. 3,900 117
OrNda Healthcorp* 9,760 173
Orange & Rockland Utilities,
Inc. 3,400 119
Orbital Sciences Corp.* 5,300 77
Oregon Steel Mills, Inc. 6,300 90
Orion Capital Corp. 3,200 131
Ostex International Inc.* 2,700 53
Otter Tail Power Co. 2,500 86
Outboard Marine Corp. 4,400 91
Outlet Communications Inc.* 1,800 83
Overseas Shipholding Group,
Inc. 9,200 156
Owens & Minor, Inc. 6,600 78
Oxford Health Plans, Inc. 2,200 173
PAXAR Corp. 4,687 59
PDT Inc. 2,400 91
PHH Corp. 3,900 171
PLATINUM technology, inc.* 12,300 225
Pairgain Technologies Inc.* 3,400 145
Papa John's International,
Inc.* 2,400 93
Park Electrochemical Corp. 2,600 81
Park National Corp. 1,500 68
Parker & Parsley Petroleum
Co. 8,300 154
Parker Drilling Co.* 21,100 111
Patlex Corp. (New)* 550 3
Patterson Dental Co. 3,850 95
Paxson Communications Corp. 6,500 80
Payless Cashways Inc.* 9,300 53
Penn Traffic Co.* 2,600 28
PennCorp Financial Group,
Inc. 6,900 165
People's Bank 8,600 171
People's Choice TV Corp.* 2,600 54
PeopleSoft, Inc. 600 52
Peoples Heritage Financial
Group, Inc. 3,800 73
Performance Systems
International Inc.* 7,100 126
Petrie Stores Corp. 12,300 35
Petrolite Corp. 2,400 58
Phillips-Van Heusen Corp. 5,700 58
Phoenix Resource Cos Inc. 3,200 57
Photronic, Inc. 2,950 88
Phycor, Inc. 6,900 253
Physician Reliance Network
Inc.* 5,300 176
Physician Sales & Service
Inc. 4,500 73
Physicians Corp. of America* 9,900 150
Physicians Health Services,
Inc.* 2,000 67
Picturetel Corp. 3,300 217
Piedmont Natural Gas Co.,
Inc. 9,400 207
Pier 1 Imports, Inc. 9,745 94
Pioneer Group, Inc. 6,100 160
Pioneer-Standard Electronics,
Inc. 5,025 69
Piper Jaffray Inc. 4,600 55
Pittway Corp. 800 48
Pittway Corp. Class A 3,200 192
Planar Systems, Inc.* 2,700 47
Players International Inc. 6,900 73
Playtex Products, Inc.* 12,300 86
Ply-Gem Industries, Inc. 2,800 48
Pogo Producing Co. 9,000 181
Polaris Industries Inc. 6,900 193
Policy Management Systems
Corp.* 2,000 94
Pratt & Lambert United, Inc. 2,100 44
Precision Castparts Corp. 4,800 172
Premier Bancorp, Inc. 7,900 163
Presidential Life Corp. 6,800 65
Presstek Inc. 3,350 160
Price Enterprises Inc. 5,300 78
Primadonna Resorts Inc.* 7,400 116
Primark Corp.* 4,600 105
Prime Hospitality Corp.* 6,900 68
Production Operators Corp. 2,200 65
Proffitt's, Inc.* 2,100 49
Progress Software Corp. 1,600 104
Protective Life Corp. 600 17
Protein Design Labs, Inc.* 3,300 55
Provident Bancorp, Inc. 3,700 155
Public Service Co. of
New Mexico* 10,200 171
Public Service Co. of
North Carolina, Inc. 6,000 95
Pulitzer Publishing Co. 4,025 182
Pulte Corp. 7,300 231
Quaker State Corp. 7,400 97
Quality Food Centers, Inc. 3,600 73
Quanex Corp. 2,800 55
Quantum Health Resources,
Inc.* 3,000 32
Quarterdeck Corp.* 5,200 111
Quick & Reilly Group, Inc. 5,580 133
Quintiles Transnational Corp. 2,500 159
RCSB Financial Inc. 3,600 80
Raymond James Financial, Inc. 4,400 95
Reading & Bates Corp.* 20,600 237
Regal Cinemas, Inc. 3,200 125
Regal-Beloit Corp. 4,500 81
Reinsurance Group of America,
Inc. 4,400 151
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE> 18
SchwabFunds(R) 8
- --------------------------------------------------------------------------------
SCHWAB SMALL-CAP INDEX FUND(R)
STATEMENT OF NET ASSETS
October 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
Reliance Group Holdings, Inc. 26,400 $ 195
Renaissance Commerce Corp. 6,600 148
Renal Treatment Centers Inc.* 2,200 79
Republic Waste Industries
Inc. 14,600 316
Respironics, Inc. 3,900 86
Rexel Inc.* 5,200 60
Rexene Corp.* 3,200 29
Richfood Holdings, Inc. 8,500 214
Riggs National Corp.* 11,100 145
Rio Hotel and Casino, Inc.* 4,900 62
River Forest Bancorp, Inc. 3,200 75
RoTech Medical Corp.* 3,100 72
Robert Half International
Inc. 6,900 252
Roberts Pharmaceutical Corp.* 4,600 89
Rock Tennessee Co. 6,700 111
Rogers Corp. 1,400 32
Rohr Inc.* 6,600 98
Rollins Environmental
Services, Inc.* 15,100 51
Rollins Truck Leasing Corp. 9,800 94
Roosevelt Financial Group,
Inc. 10,200 163
Roper Industries, Inc. 3,800 135
Ross Stores, Inc. 5,700 89
Rouge Steel Co. 3,500 76
Rowan Companies, Inc.* 21,100 140
Ruddick Corp. 11,200 143
Russ & Berrie Co., Inc. 8,500 118
Ryan's Family Steak Houses,
Inc.* 21,100 165
Rykoff-Sexton, Inc. 6,250 141
Ryland Group, Inc. 2,900 42
S & T Bancorp, Inc. 2,100 54
S3 Inc. 9,000 153
SCI Systems, Inc.* 7,300 257
SEI Corp. 4,200 90
STERIS Corp. 4,100 138
Safeguard Scientifics Inc. 3,300 149
Salick Health Care, Inc.* 2,600 95
Samsonite Corp. (New) 3,500 35
Sanifill, Inc.* 3,800 120
Sanmina Corp.* 1,900 103
Santa Cruz Operations, Inc.* 6,200 37
Savannah Foods & Industries,
Inc. 5,400 68
Savoy Pictures Entertainment,
Inc.* 7,200 42
Sbarro, Inc. 8,000 167
Schuler Homes, Inc.* 8,300 100
Scientific Games Holdings
Corp. 3,400 113
Scotts Co. Class A* 7,400 146
Seaboard Corp. 300 79
Seafield Capital Corp. 1,400 50
Seagull Energy Corp.* 8,600 147
Security Capital Corp. 2,300 126
Security Dynamics Tech 3,400 110
Seitel, Inc.* 2,100 54
Selective Insurance Group,
Inc. 4,400 163
Semitool Inc. 2,700 43
Sepracor Inc.* 5,200 88
Sequa Corp. Class A* 2,600 67
Sequent Computer Systems,
Inc.* 8,000 140
Service Merchandise Co.,
Inc.* 23,562 127
Shiva Corp.* 3,100 186
Shoney's, Inc.* 10,200 113
ShopKo Stores, Inc. 12,800 138
Shorewood Packaging Corp.* 4,900 81
Showboat, Inc. 3,300 79
Shurgard Storage Centers Inc. 5,800 148
Sierra Health Services, Inc.* 3,100 89
Sierra On-Line, Inc. 4,300 161
Sierra Pacific Resources 7,000 164
Silicon Valley Group, Inc.* 5,700 184
Sithe Energies Inc.* 13,700 98
SkyWest Airlines, Inc. 2,300 39
Smart & Final Inc. 5,000 94
Smith International, Inc.* 8,600 138
Smith's Food & Drug Centers,
Inc. Class B 4,200 96
Smithfield Foods, Inc.* 3,400 86
Smucker (J.M.) Co. Class A 6,900 135
Smucker (J.M.) Co. Class B 3,500 63
Snyder Oil Corp. 6,500 67
Sofamor/Danek Group, Inc.* 5,800 142
Somatogen Inc.* 4,400 70
Sonat Offshore Drilling, Inc. 6,700 213
South Jersey Industries, Inc. 2,800 57
Southdown, Inc.* 6,400 104
Southern Indiana
Gas & Electric Co. 3,966 134
Southwest Gas Corp. 4,900 74
Southwestern Energy Co. 4,900 61
Sovereign Bancorp, Inc. 10,179 102
SpaceLabs Medical Inc.* 2,800 71
Spectrian Corp.* 1,700 37
Spectrum HoloByte, Inc.* 5,100 53
Sports & Recreation, Inc. 3,600 27
Sports Authority Inc.* 4,600 100
Springs Industries, Inc. 4,900 210
St. John's Knits, Inc. 2,100 101
St. Paul Bancorp, Inc. 4,500 108
Standard Financial Inc.* 4,300 60
Standard Motor Products, Inc. 2,500 41
Standard Products Co. 3,900 60
Standard Register Co. 7,700 175
Standex International Corp. 3,000 98
Stanhome Inc. 4,700 143
State Auto Financial Corp. 3,100 69
Station Casinos Inc* 8,100 104
Stein Mart, Inc.* 4,300 48
Sterling Chemicals, Inc.* 15,200 122
Stewart Enterprises, Inc.
Class A 5,300 179
Stillwater Mining Co.* 4,800 80
Stone & Webster, Inc. 3,100 104
Stone Container Corp. 6,112 101
Stratacom Inc. 1,400 86
Stratosphere Corp.* 7,200 72
Stratus Computer, Inc.* 6,600 205
Stride Rite Corp. 12,200 137
Structural Dynamics Research
Corp.* 7,300 134
Student Loan Corp. 5,000 158
Sturm, Ruger & Co., Inc. 2,700 73
Sumitomo Bank California 4,000 94
Summit Bancorp 7,860 222
Summit Technology Inc.* 5,100 226
Sun Healthcare Group, Inc.* 12,708 151
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE> 19
SchwabFunds(R) 9
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
Sunglass Hut International,
Inc. 9,600 $ 260
Sunrise Medical Inc.* 4,300 78
Sunshine Mining Co.* 43,700 71
Surgical Care Affiliates,
Inc. 10,650 316
Susquehanna Bancshares, Inc. 2,500 73
Swift Transportation Co. 5,100 85
Symantec Corp.* 7,700 187
Symmetricom, Inc.* 2,900 54
Synetic, Inc.* 4,100 96
Synopsys, Inc. 400 15
System Software Associates,
Inc. 6,600 204
Systems & Computer Technology
Corp.* 2,600 47
TBC Corp.* 4,900 35
TCA Cable TV, Inc. 5,800 173
TJ International 4,900 85
TNT Freightways Corp. 5,500 100
TSX Corp. 2,100 41
Target Therapeutics Inc.* 1,700 131
Tech Data Corp.* 9,000 110
Tecnol Inc.* 4,400 82
Tejas Gas Corp. 2,530 119
Tekelec Inc. 2,800 41
Teleflex Inc. 3,950 167
Telular Corp.* 4,800 66
Telxon Corp. 4,000 92
Tencor Instruments 5,000 214
Tennant Co. 2,100 53
Terra Industries, Inc. 14,700 186
Tesoro Petroleum Corp.* 7,800 61
Tetra Tech, Inc. (New) 3,906 85
Texas Industries, Inc. 2,600 137
Theratx Inc.* 4,500 51
Thermedics Inc.* 8,200 151
Thermo Cardiosystems Inc.* 4,700 228
Thermo Fibertek Inc. 16,050 253
Thermotrex Corp. 4,500 161
Thiokol Corp. 5,100 177
Thomas Nelson, Inc. 4,125 69
Three-Five Systems, Inc. 1,700 31
Tiffany & Co. (New) 3,900 170
Timberland Co. Class A* 2,500 48
Titan Wheel International,
Inc. 5,225 76
Toll Brothers, Inc.* 7,300 130
Topps Co., Inc. 9,500 59
Toro Co. 2,600 75
Toy Biz Inc.* 3,800 85
Toys 'R' Us, Inc.* 730 16
Transpro Inc.* 1,275 14
Trenwick Group Inc. 1,400 70
Triangle Pacific Corp.* 3,200 50
Triarc Cos., Inc. Class A* 6,400 61
Trident Microsystems Inc.* 2,300 69
Trimble Navigation Ltd.* 5,000 99
True North Communications 5,500 111
Trust Co. of New Jersey (New) 3,900 51
TrustCo Bank Corp New York 3,904 84
Trustmark Corp. 8,200 157
Tuscon Electric Power Co.* 34,100 102
Tyco Toys, Inc.* 6,800 37
U S Delivery Systems Inc.* 4,500 93
U S Trust Corp. (New) 2,000 96
U.S. Home Corp. (New)* 2,200 59
U.S. Robotics, Inc. 6,800 632
UGI Corp. 7,800 164
UMB Financial Corp. 4,816 208
UNR Industries, Inc. 12,200 101
US Filter Corp. (New) 5,700 133
USA Waste Services, Inc.* 13,907 292
USAir Group, Inc.* 17,200 234
UST Corp.* 4,400 61
Ultratech Stepper Inc. 4,700 188
UniFirst Corp. 3,900 55
Unicom Corp. 2,400 79
Union Planters Corp. 7,788 239
Uniroyal Chemical Corp.* 5,400 42
United Bankshares, Inc. 2,500 76
United Carolina Bancshares
Corp. 3,300 118
United Companies Financial
Corp. 6,440 181
United Illuminating Co. 3,400 129
United Insurance Companies,
Inc. 9,300 156
United International Holdings
Inc.* 4,900 74
United Meridian Corp.* 6,600 111
United Stationers Inc. 3,990 155
United Television, Inc. 2,400 205
United Waste Systems, Inc.* 3,500 138
United Water Resources Inc. 9,300 117
United Wisconsin Services,
Inc. 2,500 62
Unitrode Corp.* 2,300 62
Univar Corp. 4,300 58
Universal Health Services,
Inc. Class B* 3,300 124
VLSI Technology, Inc.* 7,500 176
Valassis Communications,
Inc.* 10,600 147
Valley National Bancorp 7,824 191
Valmont Industries, Inc. 3,300 80
Value City Department Stores,
Inc.* 5,900 35
Value Health, Inc.* 2,338 53
Value Line, Inc. 2,100 70
Varco International, Inc.* 9,900 90
Vencor, Inc. 11,687 324
Ventritex, Inc.* 5,000 98
VeriFone, Inc.* 5,500 149
Vertex Pharmaceuticals, Inc.* 4,300 71
Vesta Insurance Group Inc. 4,500 182
Vicor Corp. 8,600 173
Vigoro Corp. 4,100 178
Vintage Petroleum, Inc. 5,200 105
Vital Signs Inc. 2,900 53
Vitalink Pharmacy Services,
Inc.* 2,600 48
Vivra, Inc. 5,400 178
WD-40 Co. 1,700 67
WHX Corp.* 11,700 121
WICOR, Inc. 3,600 107
WLR Foods, Inc. 3,450 48
WMS Industries Inc.* 5,800 114
WPS Resources Corp. 6,000 187
Waban, Inc.* 8,100 127
Wabash National Corp. 4,900 124
Wallace Computer Services,
Inc. 4,600 259
Wang Laboratories, Inc.* 8,300 140
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE> 20
SchwabFunds(R) 10
- --------------------------------------------------------------------------------
SCHWAB SMALL-CAP INDEX FUND(R)
STATEMENT OF NET ASSETS
October 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
Washington Energy Co. 5,300 $ 97
Washington National Corp. 4,900 111
Watkins-Johnson Co. 2,500 120
Watson Pharmaceuticals Inc.* 8,556 385
Watts Industries, Inc. Class
A 6,600 136
Wausau Paper Mills Co. 7,056 171
Weatherford Enterra Inc.* 12,654 305
Webb (Del) Corp. 4,200 87
Weirton Steel Corp.* 8,300 37
Wellman, Inc. 300 7
Werner Enterprises, Inc. 6,300 119
West Company, Inc. 3,400 84
WestPoint Stevens, Inc. 8,100 173
Westamerica Bancorp 2,400 95
Westcorp, Inc. 5,596 94
Westcott Communications,
Inc.* 4,000 56
Western Gas Resources, Inc. 5,400 84
Western Publishing Group
Inc.* 4,800 39
Western Waste Industries* 6,200 122
Westinghouse Air Brake
Co. (New)* 6,600 58
Westwood One, Inc.* 7,900 125
Whitney Holding Corp. 3,200 98
Williams Companies, Inc. 206 8
Williams-Sonoma, Inc. 6,200 109
Winnebago Industries, Inc. 4,100 33
Wisconsin Central
Transportation Corp. 500 30
Wolverine Tube Inc.* 3,800 135
Wolverine World Wide, Inc. 3,600 108
Wonderware Corp.* 2,600 83
Work Recovery Inc.* 13,000 17
World Acceptance Corp. 5,300 69
Wyle Laboratories 3,000 128
Wyman-Gordon Co.* 8,700 110
X-Rite, Inc. 4,500 69
Yankee Energy System, Inc. 1,900 41
Yellow Corp. 7,100 94
Zale Corp. (New)* 8,000 119
Zebra Technologies Corp.
Class A* 3,200 190
Zeigler Coal Holding Co. 6,700 79
Zenith Electronics Corp.* 11,100 93
Zenith National Insurance
Corp. 4,300 100
Zero Corp. 3,600 55
Zilog, Inc.* 4,100 146
Zions Bancorp 3,500 243
Zurn Industries, Inc. 5,000 108
--------
TOTAL COMMON STOCK
(Cost $107,206) 120,832
--------
<CAPTION>
Maturity Value
(000s) (000s)
--------- --------
<S> <C> <C>
REPURCHASE AGREEMENT--1.1%
State Street Bank & Trust 4.75%
Dated 10/31/95
Due 11/01/95 Collateralized
By:
U.S. Treasury Bond
$940,000 Par; 12%
Due 8/15/13 $1,400 $ 1,400
--------
TOTAL REPURCHASE AGREEMENT
(Cost $1,400) 1,400
--------
TOTAL INVESTMENTS -- 100.1%
(Cost $108,606) 122,232
--------
OTHER ASSETS AND
LIABILITIES -- (0.1%)
Other Assets 325
Liabilities (483)
--------
(158)
--------
NET ASSETS -- 100.0%
Applicable to 10,431,988
outstanding $0.00001
par value shares
(unlimited shares authorized) $122,074
========
NET ASSET VALUE PER SHARE $11.70
======
</TABLE>
- ------------------
*Non-Income Producing Security
See accompanying Notes to Financial Statements.
<PAGE> 21
SchwabFunds(R) 11
- --------------------------------------------------------------------------------
SCHWAB SMALL-CAP INDEX FUND(R)
STATEMENT OF OPERATIONS (in thousands)
For the year ended October 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Investment income:
Dividends $ 1,072
Interest 133
--------
Total investment income 1,205
--------
Expenses:
Investment advisory and administration fee 447
Transfer agency and shareholder service fees 223
Custodian fees 95
Registration fees 46
Professional fees 25
Shareholder reports 35
Trustees' fees 21
Amortization of deferred organization costs 15
Insurance and other expenses 5
--------
912
Less expenses reduced (303)
--------
Total expenses incurred by Fund 609
--------
Net investment income 596
--------
Net realized gain (loss) on investments:
Proceeds from sales of investments 27,327
Cost of investments sold (27,036)
--------
Net realized gain on investments sold 291
--------
Change in net unrealized appreciation on investments:
Beginning of period 597
End of period 13,626
--------
Increase in net unrealized appreciation on investments 13,029
--------
Net gain on investments 13,320
--------
Increase in net assets resulting from operations $ 13,916
========
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE> 22
SchwabFunds(R) 12
- --------------------------------------------------------------------------------
SCHWAB SMALL-CAP INDEX FUND(R)
STATEMENT OF CHANGES IN NET ASSETS (in thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the period
For the December 3, 1993
year ended (commencement of
October 31, operations) to
1995 October 31, 1994
----------- ----------------
<S> <C> <C>
Operations:
Net investment income $ 596 $ 353
Net realized gain (loss) on
investments sold 291 (528)
Increase in net unrealized appreciation
on investments 13,029 597
-------- --------
Increase in net assets resulting from
operations 13,916 422
-------- --------
Dividends to shareholders from
net investment income (408) (57)
-------- --------
Capital Share Transactions:
Proceeds from shares sold 64,687 78,646
Net asset value of shares issued in
reinvestment of dividends 364 53
Early withdrawal fees 41 27
Less payments for shares redeemed (24,654) (10,963)
-------- --------
Increase in net assets from capital
share transactions 40,438 67,763
-------- --------
Total increase in net assets 53,946 68,128
Net Assets:
Beginning of period 68,128 --
-------- --------
End of period (including undistributed
net investment income of $484 and
$296, respectively) $ 122,074 $ 68,128
======== ========
Number of Fund Shares:
Sold 5,910 7,884
Reinvested 38 5
Redeemed (2,296) (1,109)
-------- --------
Net increase in shares outstanding 3,652 6,780
Shares Outstanding:
Beginning of period 6,780 --
-------- --------
End of period 10,432 6,780
======== ========
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE> 23
SchwabFunds(R) 13
- --------------------------------------------------------------------------------
SCHWAB SMALL-CAP INDEX FUND(R)
NOTES TO FINANCIAL STATEMENTS
For the year ended October 31, 1995
- --------------------------------------------------------------------------------
1. DESCRIPTION OF THE FUND
The Schwab Small-Cap Index Fund (the "Fund") is a series of Schwab Capital Trust
(the "Trust"), an open-end, management investment company organized as a
Massachusetts business trust on May 7, 1993 and registered under the Investment
Company Act of 1940, as amended.
In addition to the Fund, the Trust also offers -- the Schwab International Index
Fund(TM), the Schwab Asset Director(R)-High Growth Fund, the Schwab Asset
Director(R)-Conservative Growth Fund and the Schwab Asset Director(R)-Balanced
Growth Fund. The assets of each series are segregated and accounted for
separately.
The investment objective of the Fund is to attempt to track the price and
dividend performance (total return) of the Schwab Small-Cap Index(TM), an index
created to represent the performance of the second 1,000 largest publicly traded
common stocks issued by United States companies.
2. SIGNIFICANT ACCOUNTING POLICIES
Security valuation -- Investments in securities traded on an exchange are valued
at the last quoted sale price for a given day, or if a sale is not reported for
that day, at the mean between the most recent quoted bid and asked prices.
Unlisted securities for which market quotations are readily available are valued
at the mean between the most recent bid and asked prices. Securities for which
no quotations are readily available are valued at fair value as determined in
good faith by the Fund's investment manager pursuant to Board of Trustees'
guidelines. Short-term securities with 60 days or less to maturity are stated at
amortized cost, which approximates market value.
Security transactions and investment income -- Security transactions, in the
accompanying financial statements, are accounted for on a trade date basis (date
the order to buy or sell is executed). Dividend income and distributions to
shareholders are recorded on the ex-dividend date; interest income is recorded
on the accrual basis. Realized gains and losses from security transactions are
determined on an identified cost basis.
Repurchase agreements -- Repurchase agreements are fully collateralized by U.S.
Treasury or Government agency securities. All collateral is held by the Fund's
custodian and is monitored daily to ensure that its market value at least equals
the repurchase price under the agreement.
Deferred organization costs -- Costs incurred in connection with the
organization of the Fund, its initial registration with the Securities and
Exchange Commission and with various states are amortized on a straight-line
basis over a five year period from the Fund's commencement of operations.
Expenses -- Expenses arising in connection with the Fund are charged directly to
the Fund. Expenses common to all series of the Trust are allocated to each
series in proportion to their relative net assets.
<PAGE> 24
SchwabFunds(R) 14
- --------------------------------------------------------------------------------
SCHWAB SMALL-CAP INDEX FUND(R)
NOTES TO FINANCIAL STATEMENTS
For the year ended October 31, 1995
- --------------------------------------------------------------------------------
Federal income taxes -- It is the Fund's policy to meet the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all net investment income and realized net capital
gains, if any, to shareholders. Therefore, no federal income tax provision is
required. The Fund is considered a separate entity for tax purposes.
At October 31, 1995, (for financial reporting and federal income tax purposes),
net unrealized appreciation aggregated $13,626,000, of which $22,090,000 related
to appreciated securities and $8,464,000 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 .50% of the first $300 million
of average daily net assets and .45% of such assets over $300 million. Under
this agreement, the Fund incurred investment advisory and administration fees of
$447,000 during the year ended October 31, 1995, before the Investment Manager
reduced its fee (see Note 5).
Sub-advisory agreement -- Prior to May 1, 1995, the Investment Manager had a
sub-advisory agreement with Dimensional Fund Advisors Inc. ("Dimensional"),
under which Dimensional performed day-to-day portfolio management for the Fund.
Dimensional did not receive compensation directly from the Fund. However, the
Investment Manager did pay Dimensional an annual fee, payable monthly, of .10%
of the first $300 million of average daily net assets and .05% of such assets
over $300 million.
Effective May 1, 1995, the sub-advisory agreement for the Fund was terminated
and the Investment Manager assumed day-to-day portfolio management
responsibility for the Fund.
Transfer agency and shareholder service agreements -- The Trust has transfer
agency and shareholder service agreements with Charles Schwab & Co., Inc.
("Schwab"). For services provided under these agreements, Schwab receives an
annual fee, payable monthly, of .05% of the average daily net assets for
transfer agency services and .20% of such assets for shareholder services. For
the year ended October 31, 1995, the Fund incurred transfer agency and
shareholder service fees of $223,000, before Schwab reduced its fees (see Note
5).
Officers and trustees -- During the period, certain officers and trustees of the
Trust were also officers or directors of the Investment Manager and/or Schwab.
During the year ended October 31, 1995, the Trust made no direct payments to its
officers or trustees who were "interested persons" within the meaning of the
Investment Company Act of 1940, as amended. The Fund incurred fees of $21,000
related to the Trust's unaffiliated trustees.
<PAGE> 25
SchwabFunds(R) 15
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4. BORROWING AGREEMENT
The Trust has an arrangement with State Street Bank and Trust Company, the
Fund's custodian, whereby the Fund may borrow up to $10,000,000, 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 year ended October 31, 1995, no borrowings were
made under this arrangement.
5. 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 year
ended October 31, 1995, the total of such fees reduced by the Investment Manager
was $115,000 and the total of such fees reduced by Schwab was $188,000.
6. INVESTMENT TRANSACTIONS
Purchases and sales of investment securities, other than short-term obligations,
aggregated $69,455,000 and $27,327,000, respectively, for the year ended October
31, 1995.
7. EARLY WITHDRAWAL FEES PAID TO THE FUND
The Fund assesses a .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 year ended October 31, 1995, total early withdrawal fees
retained by the Fund amounted to $41,000.
8. COMPOSITION OF NET ASSETS
At October 31, 1995, net assets consisted of:
<TABLE>
<S> <C>
Capital paid in $108,201,000
Accumulated undistributed net investment income 484,000
Accumulated net realized loss on investments sold (237,000)
Net unrealized appreciation on investments 13,626,000
------------
Total $122,074,000
============
</TABLE>
At October 31, 1995, the Fund's Statement of Net Assets included receivable for
Fund shares sold of $194,000 in addition to liabilities of $346,000 for
securities purchased, $48,000 for Fund shares redeemed and $29,000 for
investment advisory and administration fee payable.
<PAGE> 26
SchwabFunds(R) 16
- --------------------------------------------------------------------------------
SCHWAB SMALL-CAP INDEX FUND(R)
NOTES TO FINANCIAL STATEMENTS
For the year ended October 31, 1995
- --------------------------------------------------------------------------------
9. FINANCIAL HIGHLIGHTS
Per share income and capital changes for a share outstanding throughout the
period:
<TABLE>
<CAPTION>
For the period
December 3, 1993
For the (commencement of
year ended operations) to
October 31, 1995 October 31, 1994
---------------- ------------------
<S> <C> <C>
Net asset value at beginning of period $ 10.05 $ 10.00
Income from Investment Operations
- -----------------------------------
Net investment income .10 .06
Net realized and unrealized gain
on investments 1.61 --
-------- -------
Total from investment operations 1.71 .06
Less Distributions
- -----------------
Dividends from net investment income (.06) (.01)
Distributions from realized gain on
investments -- --
-------- -------
Total distributions (.06) (.01)
-------- -------
Net asset value at end of period $ 11.70 $ 10.05
======== =======
Total return (%) 17.11 .63
- ----------------
Ratios/Supplemental Data
- --------------------------
Net assets, end of period (000s) $122,074 $ 68,128
Ratio of expenses to average net assets
(%) .68 .67*
Ratio of net investment income to
average net assets (%) .68 .68*
Portfolio turnover rate (%) 24 16
</TABLE>
The Investment Manager and Schwab have reduced a portion of their fees and
absorbed certain expenses in order to limit the Fund's ratio of operating
expenses to average net assets. Had these fees and expenses not been reduced and
absorbed, the ratio of expenses to average net assets for the periods ended
October 31, 1995 and 1994, would have been 1.02% and 1.19%*, respectively, and
the ratio of net investment income to average net assets would have been .34%
and .16%*, respectively.
* Annualized
<PAGE> 27
SchwabFunds(R) 17
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
To the Board of Trustees
and Shareholders of the Schwab Small-Cap Index Fund(R)
In our opinion, the accompanying statement of net assets and the related
statements of operations and of changes in net assets present fairly, in all
material respects, the financial position of the Schwab Small-Cap Index Fund
(one of the series constituting Schwab Capital Trust, hereafter referred to as
the "Trust") at October 31, 1995, and the results of its operations and the
changes in its net assets for each of the periods presented, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Trust's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at October 31, 1995 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
PRICE WATERHOUSE LLP
San Francisco, California
November 22, 1995
1995 SPECIAL TAX INFORMATION (UNAUDITED)
- --------------------------------------------------------------------------------
NOTICE TO CORPORATE SHAREHOLDERS
100% of the Fund's distributions for the fiscal year ended October 31,
1995 qualify for the corporate dividends received deduction.
- --------------------------------------------------------------------------------
<PAGE> 28
THIS SPACE RESERVED FOR YOUR COMMENTS AND QUESTIONS.
A SCHWAB REPRESENTATIVE WILL BE HAPPY TO ASSIST YOU.
<PAGE> 29
THIS SPACE RESERVED FOR YOUR COMMENTS AND QUESTIONS.
A SCHWAB REPRESENTATIVE WILL BE HAPPY TO ASSIST YOU.
<PAGE> 30
THIS SPACE RESERVED FOR YOUR COMMENTS AND QUESTIONS.
A SCHWAB REPRESENTATIVE WILL BE HAPPY TO ASSIST YOU.
<PAGE> 31
SCHWABFUNDS FAMILY(R)
The SchwabFunds Family includes a variety of funds to help meet your investment
needs. You can diversify your portfolio with one investment in any of three
Asset Director(R) Funds, or choose several different equity markets with our
three equity index funds. You can also select from different maturities with
our bond fund choices and take advantage of an array of money market funds.
SCHWAB ASSET DIRECTOR FUNDS
The three Asset Director Funds offer a mix of stocks, bonds and
cash-equivalents with varying degrees of risk and return potential.
- - High Growth Fund seeks to provide high capital growth with less
volatility than an all-stock portfolio.This Fund has the largest stock
component and offers the highest risk and return potential.
- - Balanced Growth Fund seeks to provide maximum total return, including
capital growth and income.This Fund invests in a more balanced mix of
stocks and bonds and offers moderate risk and return potential.
- - Conservative Growth Fund seeks to provide income with growth
potential. This Fund has the smallest stock component, which is
designed to help offset inflation, and generally keeps the majority of
its assets invested in bonds. It offers the lowest risk and return
potential.
SCHWAB INDEX FUNDS
- - Schwab 1000 Fund(R) is designed to match the total return of the
Schwab 1000 Index,(R) which is comprised of the largest 1,000 publicly
traded U.S. companies-the stocks of which represent about 85% of the
total market capitalization of the U.S. Stock Market. 1
- - Schwab Small-Cap Index Fund(R) is designed to track the total return
of the Schwab Small-Cap Index,(TM) which tracks the performance of
small-capitalization companies. The Schwab Small-Cap Index is
comprised of the second 1,000 largest publicly traded companies in the
United States. 1
- - Schwab International Index Fund(TM) is designed to track the total
return of the Schwab International Index,(R) which is comprised of 350
of the largest companies, based on market capitalization, in foreign
countries with developed securities markets. 2
SCHWAB BOND FUNDS
- - Schwab Government Bond Funds include two different Funds designed to
offer high current yields with the credit safety of high-quality U.S.
Government securities. The level of income you are seeking and your
tolerance for fluctuation in share price should determine your
selection of either our Short/Intermediate Fund or our Long-Term
Fund. 3
- - Schwab Tax-Free Bond Funds help investors take advantage of one of the
last remain-ing tax breaks: tax-free municipal bonds. We offer a
Short/Intermediate Fund and a Long-Term Fund, both of which pay
monthly income free from federal personal income tax. 4, 5
- - Schwab California Tax-Free Bond Funds give California residents two
different opportunities to earn double tax-free income-free from both
federal and California state personal income taxes. Choose from the
Short/Intermediate Fund or the Long-Term Fund. 5
SCHWAB MONEY FUNDS
Schwab offers an array of money funds that seek high current income with safety
and liquidity. Most can be linked to your Schwab account to "sweep" cash
balances automatically when you're in between other investments. 6
To find out more about any of the SchwabFunds,(R) please call the toll-free
number below. We will be happy to provide you with a free prospectus and
brochure. EACH PROSPECTUS PROVIDES MORE COMPLETE INFORMATION, INCLUDING CHARGES
AND EXPENSES. PLEASE READ IT CAREFULLY BEFORE INVESTING.
1-800-2 NO-LOAD (1-800-266-5623)
1 The Schwab 1000 Index and the Schwab Small-Cap Index consist of publicly
traded companies ranked by market capi-talization. These indices do not
include privately held companies, investment companies and companies
incorporated outside of the United States.
2 The Schwab International Index is comprised of publicly traded companies
ranked by market capitalization in countries with developed securities
markets. Currently invested in 15 countries, the Index does not include
privately held companies, investment companies or companies from the
United States.
3 Investors in the Schwab Government Bond Funds may experience a decline in
share price due to prepayment of obliga-tions held by the Funds.
4 Income may be subject to state and local taxes.
5 Income may be subject to the Alternative Minimum Tax (AMT), and capital
appreciation from discounted bonds may be subject to state and federal
income tax.
6 Investments in money market funds are neither insured nor guaranteed by the
U.S. Government, and there is no assurance that the Funds will be able to
maintain a stable share price of $1.
<PAGE> 32
--------------
BULK RATE
U.S. POSTAGE
PAID
CHARLES SCHWAB
--------------
[SCHWABFUNDS FAMILY(R) LOGO]
101 Montgomery Street
San Francisco, California 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
preceded or accompanied by a current prospectus.
(C)1995 Charles Schwab & Co., Inc. All rights reserved. Member SIPC/NYSE.
CRS 3891 2537R(12/95) Printed on recycled paper.
