<PAGE> 1
As filed with the Securities and Exchange Commission on October 10, 1996
File Nos. 33-62470 and 811-7704
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 13 [X]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 15 [X]
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SCHWAB CAPITAL TRUST
(Exact Name of Registrant as Specified in Charter)
101 Montgomery Street, San Francisco, California 94104
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code:
(415) 627-7000
Timothy F. McCarthy, President
Schwab Capital Trust
101 Montgomery Street, San Francisco, California 94104
(Name and Address of Agent for Service)
Copies of communications to:
Martin E. Lybecker, Esq. Frances Cole, Esq.
Ropes & Gray Charles Schwab Investment Management , Inc.
1301 K Street, N.W., Suite 800 East 101 Montgomery Street
Washington, D.C. 20005 San Francisco, CA 94104
It is proposed that this filing will become effective (check appropriate box)
/ / Immediately upon filing pursuant to paragraph (b)
/X/ On October 13, 1996 pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)(1)
/ / On (date) pursuant to paragraph (a)(1)
/ / 75 days after filing pursuant to paragraph (a)(2)
/ / On (date) pursuant to paragraph (a)(2) of Rule 485
if appropriate, check appropriate box:
/ / This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
DECLARATION PURSUANT TO RULE 24f-2: Pursuant to Rule 24f-2 under the Investment
Company Act of 1940, as amended, Registrant has registered an indefinite number
or amount of its shares of beneficial interest under the Securities Act of 1933,
as amended. The Rule 24f-2 Notice for Registrant's fiscal year ending October
31, 1995 was filed on December 18, 1995.
<PAGE> 2
PART A
SCHWAB CAPITAL TRUST
The information required by Items 1 through 9 for the Schwab
International Index Fund(TM) and the Schwab Small-Cap Index Fund(R), each a
separate portfolio of the Registrant, is hereby incorporated by reference to the
Prospectuses for these portfolios filed with the Securities and Exchange
Commission under Rule 497(e) on February 28, 1996.
The information required by Items 1 through 9 for the Schwab Asset
Director(R)-High Growth Fund, Schwab Asset Director(R)-Balanced Growth Fund,
Schwab Asset Director(R)-Conservative Growth Fund and Schwab Analytics Fund(TM),
each a separate portfolio of the Registrant, is hereby incorporated by reference
to the Prospectuses for these portfolios filed with the Securities and Exchange
Commission under Rule 497(e) on May 21, 1996.
In addition, the information required by Items 1 through 9 for the
Schwab OneSource Portfolios-International, a separate portfolio of the
Registrant, is hereby incorporated by reference to the Prospectus for this
portfolio filed with the Securities and Exchange Commission under Rule 497(e) on
September 2, 1996.
<PAGE> 3
CROSS REFERENCE SHEET
SCHWAB CAPITAL TRUST:
SCHWAB ONESOURCE PORTFOLIOS-GROWTH ALLOCATION
SCHWAB ONESOURCE PORTFOLIOS-BALANCED ALLOCATION
<TABLE>
<CAPTION>
Part A Item Prospectus Caption
- ----------- ------------------
<S> <C>
Cover Page Cover Page
Synopsis Key Features of Our Funds; Matching the Funds to Your
Investment Needs
Condensed Financial Information Inapplicable
General Description of Registrant Matching the Funds to Your Investment Needs; Investment
Objectives, Policies, Techniques and Risk Factors;
Organization and Management of Our Funds
Management of the Fund Management Functions and Responsibilities
Management's Discussion of Fund Performance [Discussion to be included in the Funds' Shareholder
Reports]
Capital Stock and Other Securities Investing in Our Funds; Important Information About
Your Investment; Organization and Management of Our
Funds
Purchase of Securities Being Offered Investing In Our Funds; Important Information About
Your Investment
Redemption or Repurchase Investing in Our Funds
Pending Legal Proceedings Inapplicable
</TABLE>
<PAGE> 4
CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Expenses................................... 2
Key Features of Our Funds.................. 3
Matching the Funds to Your Investment
Needs.................................... 5
Investment Objectives, Policies, Techniques
and Risk Factors......................... 6
Investing in Our Funds..................... 14
How to Buy Shares........................ 15
How to Sell or Exchange Shares........... 17
Important Information About
Your Investment.......................... 18
Dividends and Other Distributions........ 18
Federal Income Tax Information........... 19
How We Determine the Price of
Your Shares............................ 20
How Our Funds Report Performance......... 20
Annual and Semi-Annual Report Mailings... 20
Organization and Management of Our Funds... 21
Management Functions and
Responsibilities....................... 21
Operating Fees and Expenses.............. 21
Other Information on the Operation
of Our Funds........................... 23
Glossary of Important Terms................ 24
</TABLE>
READING THIS PROSPECTUS. Explanations of all italicized terms in this Prospectus
are included in the Glossary at the end of this Prospectus. References to "you"
and "your" in this Prospectus refer to prospective investors and/or
shareholders, while references to "we," "us," "our" and "our Funds" refer to the
Funds or in some cases, the Trust.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
SCHWAB ONESOURCE PORTFOLIOS--
GROWTH ALLOCATION
AND BALANCED ALLOCATION
SCHWAB ONESOURCE PORTFOLIOS - GROWTH ALLOCATION (THE "GROWTH ALLOCATION") AND
SCHWAB ONESOURCE PORTFOLIOS - BALANCED ALLOCATION (THE "BALANCED ALLOCATION";
TOGETHER THE "FUNDS") are two portfolios of mutual funds that offer investors
easy access to actively managed funds from well-known fund families. Both Funds
are diversified by asset class and feature a core component of domestic and
international stock funds for growth potential, combined with bond funds and
money market funds for greater price stability. The Investment Manager has the
flexibility to take full advantage of changing markets and favorable asset
classes. The Investment Manager monitors hundreds of mutual funds, analyzing the
relative attractiveness of various funds to identify and select a mix of
underlying funds that seek to achieve each Fund's goals. The primary difference
between the two Funds is the proportion invested in stock funds, providing
investors with a choice in the level of risk exposure. By investing in the
Funds, you bear not only the Funds' expenses, but also the expenses of the
underlying funds. However, we believe that the Funds are a low cost way to
achieve a professionally managed portfolio of mutual funds. The Investment
Manager, CSIM, currently manages over $39 billion in assets. THE FUNDS' STRATEGY
OF INVESTING IN OTHER MUTUAL FUNDS RESULTS IN GREATER EXPENSES THAN YOU WOULD
INCUR IF YOU WERE TO INVEST IN THE SAME FUNDS DIRECTLY. The Funds are
diversified investment portfolios of Schwab Capital Trust, a no-load, open-end
management investment company.
ABOUT THIS PROSPECTUS: THIS PROSPECTUS PROVIDES YOU WITH CONCISE INFORMATION
THAT YOU SHOULD KNOW BEFORE YOU DECIDE IF THE FUNDS PROVIDE THE INVESTMENT
OPPORTUNITIES YOU SEEK. READ IT CAREFULLY, AND RETAIN IT FOR FUTURE REFERENCE.
You can find more detailed information in the Statement of Additional
Information ("SAI") dated October 13, 1996 (as amended from time to time). The
SAI has been filed with the SEC and is incorporated in this Prospectus by
reference (which means that it is legally considered part of this Prospectus
even though it is not printed here). This Prospectus is available electronically
by using our World Wide Web address: http://www.schwab.com. To get a free paper
copy of this Prospectus or the SAI, call Schwab at 800-2 NO-LOAD, or write
Schwab at 101 Montgomery Street, San Francisco, CA 94104.
TO PLACE ORDERS AND FOR ACCOUNT INFORMATION: Contact Schwab at 800-2 NO-LOAD.
TDD users may contact Schwab at 800-345-2550, 24 hours a day.
PROSPECTUS OCTOBER 13, 1996
<PAGE> 5
EXPENSES
SHAREHOLDER TRANSACTION EXPENSES are the fees and charges you pay for buying or
selling shares of a fund. You pay no sales fees or charges when you buy or sell
shares of our Funds.
ANNUAL FUND OPERATING EXPENSES include fund selection and investment management
fees paid to the Investment Manager for analyzing, selecting and monitoring the
underlying funds and direct investments in the portfolio; transfer agency fees;
and other expenses. The Funds' expenses cover, for example, services such as
investment research and management of the Funds, maintaining shareholder records
and issuing shareholder statements. The Funds pay their own annual operating
expenses from their income, which is factored into the dividends paid to
shareholders and into the Funds' share price. As a shareholder, you are not
charged any of these fees directly.
The table below does not reflect any of the operating costs and investment
advisory fees of the underlying funds. By investing in the Funds, you bear not
only the Funds' expenses detailed below, but also the expenses of the underlying
funds. You would not incur the Funds' expenses detailed below if you were to
perform your own asset allocation, fund review and analysis and invest in the
underlying funds directly.
<TABLE>
<CAPTION>
GROWTH BALANCED
ALLOCATION ALLOCATION
---------- ----------
<S> <C> <C>
SHAREHOLDER TRANSACTION
EXPENSES
Sales Charge on Purchases
and Reinvested
Dividends...................... None None
Deferred Sales Charge or
Redemption Fees................ None None
Exchange Fees.................... None None
ANNUAL FUND OPERATING
EXPENSES (AS A PERCENTAGE
OF AVERAGE DAILY NET
ASSETS)
Fund Selection and
Investment Management
Fee (after fee reduction) 1.. 0.50% 0.50%
12b-1 Fees..................... None None
Other Expenses (after fee
reduction and expense
reimbursement) 2,3........... None None
TOTAL FUND OPERATING
EXPENSES (AFTER FEE
REDUCTIONS AND EXPENSE
REIMBURSEMENT) 3,4.............. 0.50% 0.50%
</TABLE>
1 This amount reflects a reduction guaranteed by the Investment Manager
through at least February 28, 1999. If there were no such reduction, the
maximum Fund Selection and Investment Management fees would be 0.74% of each
Fund's average daily net assets.
2 "Other Expenses" are based on estimated amounts for the current fiscal year
for the Funds after fee reductions and expense reimbursements. "Other
Expenses" include Transfer Agent and Shareholder Service fees payable to
Schwab. Schwab currently receives remuneration from fund companies
participating in its Mutual Fund OneSource(R) service equal to 0.25% to
0.35% per annum of assets invested in OneSource Funds and is also entitled
to remuneration in connection with the purchase of shares of fund companies
participating in Schwab's Mutual Fund Marketplace(R). CSIM and Schwab
provide investment management and other services
2
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to all of Schwab's proprietary SchwabFunds and receive compensation from
them. In light of this remuneration and compensation, Schwab guarantees,
through at least December 31, 2001, to waive the Funds' Transfer Agent and
Shareholder Service fees, which normally total 0.25%. After that, the
guarantees may be terminated, modified or continued. If there were no such
reduction, reimbursement or waiver, the current estimated other expenses
would be 0.40% of each Fund's average daily net assets. See "Organization
and Management of Our Funds - Operating Fees and Expenses" for information
regarding the expenses for the Funds.
3 This amount reflects the guarantee by Schwab and the Investment Manager
that, through at least February 28, 1999, each Fund's total operating
expenses will not exceed 0.50% of its average daily net assets. Therefore,
your incremental cost for investing in a portfolio of funds by investing in
the Funds is only 0.50%. After February 28, 1999, the guarantee may be
terminated, modified or continued. If there were no such guarantee, and no
guarantee by Schwab to waive its Transfer Agent and Shareholder Service fees
until December 31, 2001, each Fund's current total operating expenses would
be 1.14% of its average daily net assets.
4 You may be charged a fee if applicable minimum balances are not maintained
in your Schwab brokerage or Schwab One(R) account. Schwab Individual
Retirement Accounts ("IRAs") with balances of $10,000 or more by September
15, 1997 will not be charged Schwab's $29 annual IRA account fee for the
life of the account. Schwab Keogh plans are currently charged an annual fee
of $45. See "Investing in Our Funds" for information regarding minimum
balance and investment requirements.
EXAMPLES. You would pay the following expenses on a $1,000 investment in each
Fund assuming: (1) 5% annual return and (2) redemption at the end of each
period.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
------ -------
<S> <C> <C>
Growth Allocation............ $5 $16
Balanced Allocation.......... $5 $16
</TABLE>
THIS IS AN EXAMPLE ONLY AND DOES NOT REPRESENT PAST OR FUTURE EXPENSES. ACTUAL
EXPENSES MAY BE GREATER OR LESS THAN THE EXPENSES SHOWN IN THE EXAMPLE. This
example reflects the guarantees by Schwab and the Investment Manager that,
through at least February 28, 1999, total fund operating expenses will not
exceed 0.50% of each Fund's average daily net assets. Please remember that,
while this example assumes a 5% annual return on investment, the actual returns
may be more or less than the 5% used in this example.
The purpose of the table above is to help you understand the various costs and
expenses you will bear directly or indirectly when you invest in the Funds. (See
"Organization and Management of Our Funds - Operating Fees and Expenses.")
KEY FEATURES OF OUR FUNDS
The Funds offer easy access to continuously managed portfolios of funds and seek
growth with less volatility than an all stock investment through diversification
among major asset categories. The Funds can provide you with different levels of
exposure to the growth potential of the stock market.
ASSET ALLOCATION STRATEGY: Each Fund seeks to meet its investment objective by
investing in a different mix of stock funds, bond funds and
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money market funds. Research shows that the greatest impact on investment
returns is due to the asset allocation decision (the mix of stocks, bonds and
cash-equivalents) rather than market timing or individual stock and bond
selection. A study of the performance of pension funds indicated that over 90%
of the performance was determined by asset mix. 1
A neutral market position has been established for each asset class in each
Fund. A neutral market position represents a static market model, without
adjustments for prevailing market conditions and other considerations.
The neutral position for the Growth Allocation is as follows:
[GRAPHIC]
Stock funds - 80%
Domestic large company
Domestic small company
International
Bond funds - 15%
Money market funds - 5%
The neutral market position for the Balanced Allocation is as follows:
[GRAPHIC]
Stock funds - 60%
Domestic large company
Domestic small company
International
Bond funds - 35%
Money market funds - 5%
- ---------------
1 Financial Analysts Journal: Brinson, Singer, Beebower: May-June 1991.
Quantitative techniques and tools will be used to assess and rank the relative
growth potential of each asset class. The Investment Manager emphasizes a
particular asset class by allocating some portion of each Fund's assets to
underlying funds which invest primarily in that asset class.
FUND SELECTION STRATEGY: The Investment Manager will seek to enhance the overall
return of the Funds both by utilizing the insight of the Funds' portfolio
manager and by applying quantitative analytical techniques to the selection of a
diversified portfolio of underlying funds with the greatest long-term capital
growth potential. Underlying funds will be selected based on their investment
objective, practices and policies, their management and other factors. The
Investment Manager also performs style analysis on the underlying funds and
their managers. Selection of underlying funds will also be based on quantifiable
factors such as historic total returns, volatility, expenses and size.
DIVERSIFICATION AND RISK: The Funds seek to reduce overall risk by diversifying
investments among major asset categories. Each Fund's portfolio of funds also
reduces the risk associated with investing in a single underlying fund with a
single manager. Holding a diversified portfolio of funds can provide access to a
wider range of management talent, companies, industries, countries and markets
than would be available through any one underlying fund. However, you are still
exposed to the risks associated with investing in each particular asset class,
including stock and bond risk. The Funds are designed to give shareholders a
single investment that offers broad diversification among asset classes, fund
categories, fund management and funds.
4
<PAGE> 8
Stock risk is the possibility that stock prices, and therefore stock funds, will
decline over short or even extended periods. Small-company, international and
emerging market stocks, and therefore the underlying funds that invest in these
instruments, pose additional risks. Bond risk is the potential for decline in
the market value of bonds and bond funds due to interest rate changes or the
ability of an issuer to meet its obligations.
For more details on the Funds and the underlying funds' investments and the
risks associated with them, see "Investment Objectives, Policies, Techniques and
Risk Factors."
MANAGEMENT. The Investment Manager currently manages the SchwabFunds Family(R)
of 26 mutual funds with over $39 billion in assets. For more details about CSIM,
see "Organization and Management of Our Funds."
FEES AND EXPENSES. You pay no sales fees or charges when you buy or sell shares
of the Funds. The Investment Manager guarantees that each Fund's selection and
investment management fee will not exceed 0.50% of its average daily net assets
through at least February 28, 1999; Schwab guarantees that the Transfer Agent
and Shareholder Service fees will be waived entirely through at least December
31, 2001; the Investment Manager and Schwab guarantee that each Fund's total
operating expenses will not exceed 0.50% through at least February 28, 1999.
After these dates, the guarantees may be terminated, modified or continued. By
investing in a Fund, you bear not only that Fund's total operating expenses, but
the operating expenses of the underlying funds as well. For more details, see
"Organization and Management of Our Funds - Investing in Our Funds" and
"Operating Fees and Expenses."
SHAREHOLDER SERVICES. Schwab's professional representatives are available
toll-free 24 hours a day at 800-2 NO-LOAD to service your account, or you can
visit or call your local Schwab office during regular business hours. TDD users
may contact Schwab at 800-345-2550, 24 hours a day. Schwab also enables you to
execute your trading requests through electronic products and services such as
StreetSmart(R), e.Schwab(TM), The Equalizer(R), TeleBroker(R) and the World Wide
Web (address: http://www.schwab.com). See "Investing in Our Funds."
CONVENIENT REPORTING. You receive regular Schwab statements that combine all
your investment activity, including mutual funds, in one report.
FREE AUTOMATIC INVESTMENT PLAN. Schwab's free Automatic Investment Plan allows
you to make regular investments in the Funds in amounts and at intervals that
you select. For more details, see "Investing in Our Funds - Schwab's Automatic
Investment Plan."
RETIREMENT PLANS. Schwab offers tax-advantaged retirement plans for which the
Funds may be an appropriate investment. For more information, see "Investing in
Our Funds - Tax-Advantaged Retirement Plans."
MATCHING THE FUNDS TO YOUR
INVESTMENT NEEDS
If you are looking for broad diversification among actively managed mutual funds
in a single, convenient investment, Schwab OneSource Portfolios may be
appropriate for you. The Growth Allocation and Balanced Allocation are for
investors who prefer to be invested in a comprehensive portfolio representing
major asset classes and want professional, active management of a portfolio of
5
<PAGE> 9
mutual funds from well-known fund families. The Funds are suitable for
intermediate or long-term investing, as well as retirement savings (including
IRAs and other retirement plans). Both Funds are designed to provide exposure to
the growth potential of the stock market with different levels of risk. The
primary difference between the two Funds is the proportion typically invested in
domestic and international stock funds, providing you with a choice in the level
of risk exposure to equity markets.
ACTIVE MANAGEMENT. A primary feature of these Funds is the continuous management
of a skilled and experienced mutual fund portfolio manager. This portfolio
manager has the flexibility to take advantage of changing markets and will
evaluate funds using information often not available to a typical investor,
including data supplied by Schwab's Mutual Fund Research Department. The
Investment Manager's primary focus is to identify and select a portfolio of
domestic and international stock funds, bond funds and money market funds in
order to achieve higher growth potential in a single portfolio.
ASSET ALLOCATION. Another primary feature is diversification of each Fund's
portfolios among asset classes. Commonly referred to as "asset allocation," it
is a strategy that can minimize the risks of investing in a single security or
single class of securities while potentially increasing returns. Because the
performance of asset types does not always move in the same direction at the
same time, investing in a mix of asset classes or types can help improve
performance and reduce volatility. In fact, studies have indicated that the mix
of asset classes has accounted for as much as 90% of a pension fund portfolio's
performance.
INVESTMENT OBJECTIVES, POLICIES,
TECHNIQUES AND RISK FACTORS
The Funds are asset allocation funds that consist of actively managed portfolios
of funds from well-known fund families. The investment objective of the Growth
Allocation is to provide you with capital growth with less volatility than a
portfolio comprised entirely of stock funds. Of course, a portfolio with lower
volatility could have lower growth potential than a portfolio comprised entirely
of stock funds. The investment objective of the Balanced Allocation is to
provide you with capital growth and income with less volatility than the Growth
Allocation. These investment objectives are fundamental to each Fund and may be
changed only with shareholder approval. While there is no assurance that the
Funds will achieve their investment objectives, they will endeavor to do so by
following the investment policies and techniques described below and on the
following pages.
The Funds are asset allocation funds which provide diversification among funds
investing in major asset categories. Each Fund seeks to meet its investment
objective by investing in a different mix of stock funds, bond funds and money
market funds. Both Funds are designed to provide exposure to the growth
potential of the stock market in varying degrees.
A neutral market position and defined ranges have been established for each of
the Funds for each asset category. Assets will be allocated within the defined
ranges among stock funds, bond funds and money market funds, emphasizing
investment in the asset category the Investment Manager's model determines to be
most attractive. The Investment Manager uses various qualitative and
quantitative techniques to mea-
6
<PAGE> 10
sure the relative value of each asset category and to select specific underlying
funds to meet what is considered an appropriate asset allocation mix within the
defined ranges.
In an attempt to improve returns and minimize risk, the Funds may make
investments that do not fall within the specified asset categories, such as
other types of funds and direct investments in domestic and foreign securities.
Each type of such investment will be limited to no more than 5% of a Fund's net
assets.
SCHWAB ONESOURCE PORTFOLIOS - GROWTH ALLOCATION
Of the two Funds being offered by this Prospectus, the Growth Allocation
provides greater exposure to various stock fund categories, including domestic
large and small company stock funds and international stock funds. The Growth
Allocation's neutral market position, as well as the defined ranges for the
different asset categories, are as follows:
<TABLE>
<CAPTION>
NEUTRAL
MARKET DEFINED
POSITION RANGES
-------- -------
<S> <C> <C>
Stock funds........... 80% 65%-95%
Bond funds............ 15% 0%-30%
Money market funds.... 5% 0%-35%
</TABLE>
SCHWAB ONESOURCE PORTFOLIOS - BALANCED ALLOCATION
This Fund represents a more balanced approach between stock funds and bond
funds. The Balanced Allocation's neutral market position as well as the defined
ranges for the different asset categories are as follows:
<TABLE>
<CAPTION>
NEUTRAL
MARKET DEFINED
POSITION RANGES
-------- -------
<S> <C> <C>
Stock funds........... 60% 50%-70%
Bond funds............ 35% 25%-45%
Money market funds.... 5% 0%-25%
</TABLE>
Under normal market conditions, we will invest at least 65% of each Fund's total
assets in stock funds, bond funds and money market funds. Stock funds are funds
which invest primarily in common stocks or securities convertible into or
exchangeable for common stock, including domestic stocks and stocks of foreign
issuers from developed or emerging countries. Bond funds are funds which invest
primarily in long or short-term government or corporate bonds and other fixed
income securities, including securities issued, guaranteed or insured by the
U.S. Government or its agencies or instrumentalities. Money market funds are
funds which invest in short-term money market instruments. At times, under the
Investment Managers model, a substantial amount of the Funds' assets may be
invested in shares of a single investment company, including money market funds.
To the extent the Funds focus their investment in only a few investment
companies, the Funds may be exposed to greater risk than if the Funds were to
invest in a greater number of investment companies. The 1940 Act currently
provides that each Fund may not purchase the securities of an underlying fund
if, as a result, the Fund, together with its affiliates, would own more than 3%
of the total outstanding securities of that underlying fund. Thus, each Fund's
ability to invest in shares of certain underlying funds could be restricted and
the Investment Manager may have to select alternative investments. Assets that
are not invested in stock funds, bond funds and money market funds may be
invested in other types of funds and directly in domestic and foreign securities
and other instruments.
Also, under normal market conditions, we will invest at least 65% of each Fund's
total assets in underlying funds which participate in Schwab's Mutual Fund
OneSource(R) service.
7
<PAGE> 11
With their remaining assets, the Funds may purchase underlying funds other than
OneSource funds, and make direct investments in domestic and foreign securities
and other instruments. Schwab currently receives remuneration from fund
companies other than Schwab's proprietary funds participating in its Mutual Fund
OneSource service equal to 0.25% to 0.35% per annum of assets invested in
OneSource funds and is also entitled to remuneration in connection with the
purchase of shares of fund companies participating in Schwab's Mutual Fund
Marketplace(R). In light of this remuneration, Schwab guarantees, through at
least December 31, 2001, to waive its Transfer Agent and Shareholder Service
fees for each Fund. CSIM and Schwab also guarantee, through at least February
28, 1999, that each Fund's total expenses will not exceed 0.50% of its average
daily net assets.
Schwab's family of proprietary low-cost money market funds, index funds, bond
funds and stock funds (see a complete list in the Glossary under "SchwabFunds")
are included in the universe of OneSource funds in which the Funds may invest
(to the extent permitted by SEC order or interpretation). The Schwab index funds
might be used as an interim investment to be fully invested while selecting an
appropriate underlying fund. CSIM provides investment management and other
services to all of Schwab's proprietary SchwabFunds and receives compensation
from them. The selection of SchwabFunds will be subject to the Investment
Manager's insight and judgment and the same conditions and criteria that apply
to the selection of other funds, except that the Funds will ordinarily invest
all of their assets allocated to money market funds to Schwab's proprietary
money market funds. The remuneration Schwab receives from the fund companies
participating in Schwab's OneSource service will often be less than the
compensation Schwab receives from the proprietary SchwabFunds. Because of these
differences in potential compensation to itself and its affiliates, to the
extent that the Funds may invest in SchwabFunds, the Investment Manager may be
subject to conflicts of interest in selecting between Schwab's proprietary
SchwabFunds and other funds and deciding on the percentage of the Funds' assets
invested in each. The Investment Manager's objective for selecting all funds
will be to select the most suitable funds, taking into consideration the best
interest of each Fund's investors.
To seek to enhance each Fund's overall performance, the Investment Manager will
apply sophisticated quantitative techniques, valuation formulas and optimization
procedures to assess the relative attractiveness of each asset class. After
identifying the most and least attractive asset classes, consideration will be
given to the expected returns and risks before deciding which areas, if any, to
overweight or underweight.
The Investment Manager will attempt to identify and select diversified
portfolios of funds based on an analysis of many factors. The fund selection
process involves the Investment Manager's use of quantitative techniques to
analyze and rank potential underlying funds based on their historic total
return, volatility and operating expenses over various time periods. The second
step of the process involves a review of potential underlying funds' investment
objectives and policies. Potential underlying funds which rank the highest by
these criteria will then be subject to further qualitative and quantitative
evaluation of size, management, portfolio holdings, investment practices and
policies, investment style of the funds and their managers, and other factors
8
<PAGE> 12
prior to their purchase by the Funds. Much of the data used in making these
evaluations is supplied by Schwab's Mutual Fund Research Department.
The Funds are diversified investment companies, and many of the underlying funds
will also be diversified funds. The level of diversification the Funds obtain
from being invested in a number of underlying funds reduces the risk associated
with an investment in a single underlying fund. This risk is further reduced
because each underlying fund's investments are also spread over a range of
issuers, industries and countries.
The Funds will concentrate (i.e., invest 25% or more of their assets) in the
shares of other investment companies, but they will not concentrate in any other
industry. In addition, the Funds will not invest 25% or more of their assets in
underlying funds that concentrate their investments in any one industry. The
Funds may indirectly invest 25% or more of their assets in one industry,
however, if the underlying funds invest their assets in the same industries.
Because the scope of investment alternatives within an industry is limited, the
value of the shares of an underlying fund that is concentrated may be subject to
greater market fluctuation than an investment in a fund which invests in a
broader range of securities. In addition, the underlying funds may use certain
investment strategies, such as trading in options and futures, which may also
involve increased risks to the Funds.
INVESTMENT COMPANIES. The Funds will normally invest in open-end management
investment companies, or "mutual funds." The Funds may also invest in closed-end
management investment companies and/or unit investment trusts.
Under certain circumstances, an underlying fund may determine to make payment of
a redemption by the Funds wholly or in part by a distribution in-kind of
securities from its portfolio in lieu of cash. In such cases, the Funds may hold
securities distributed by an underlying fund until the Investment Manager
determines that it is appropriate to dispose of such securities. Investment
decisions for the underlying funds are made independently of the Funds and the
Investment Manager. Therefore, one underlying fund may be purchasing shares of
an issuer whose shares are being sold by another underlying fund. The result
would be an indirect cost to the Funds without accomplishing any investment
purpose. The Funds may purchase shares of no-load funds that are available
without a transaction fee and load funds that are available to the Funds without
a sales charge.
STOCK FUNDS. Stock funds are those which invest primarily in domestic or foreign
common stocks or securities convertible into or exchangeable for common stock.
The underlying funds may include large company stock funds, small company stock
funds and international stock funds.
Large company stock funds are those which normally select their investments from
a universe of U.S. companies with large and mid-size market capitalization.
These companies' market capitalization currently ranges from about $1.5 billion
to over $100 billion. Many of these companies' stocks are included in the
Standard & Poor's 500 Index, a widely recognized, unmanaged index of common
stock prices. The underlying funds that invest in these stocks, and therefore
the Funds, are exposed to stock market risk. Prices of many stocks or of a
single stock may decline over short or even long periods. While past per-
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<PAGE> 13
formance is no guarantee of future results, a diverse portfolio of large company
stock funds, each with a diverse portfolio of stocks representing various
industries, tends to reduce stock market risk.
Small company stock funds are funds which select their investments from a
universe of companies with a market capitalization below that of the large and
mid-size company universe. The market capitalization of these companies
currently ranges from approximately $1.5 billion down to about $100 million.
Small company stocks have historically been characterized by greater total
returns, greater volatility of returns and lower dividend yields than large
company stocks. The greater price volatility of small company stocks may be the
result of their having less market liquidity or publicly available information
about them than large company stocks. There may also be fewer investors who
monitor the activities of small companies than investors who monitor the
activities of large companies. While past performance is no guarantee of future
results, a diverse portfolio of small company stock funds, each with a diverse
portfolio of stocks representing various industries, tends to reduce market
risk.
International stock funds normally invest up to 100% of their assets in the
stocks or securities of foreign issuers. Therefore, the Funds' investment in
international stock funds involves risks similar to those of investing in a
portfolio of foreign equity securities. International stocks are issued by
publicly traded companies from countries around the world, excluding the United
States. The underlying funds' investments will often be denominated in foreign
currency, and the value of these investments will be affected by changes in
currency exchange rates versus the U.S. dollar in addition to normal market
fluctuations. The rate of exchange between the U.S. dollar and other currencies
is determined by the forces of supply and demand in the foreign exchange market,
by changes in interest rates, as well as by political and economic factors.
Other risks and considerations of international investing include: differences
in accounting, auditing and financial reporting standards; generally higher
transaction costs on foreign portfolio transactions; small trading volumes and
generally lower liquidity of foreign stock markets, which may result in greater
price volatility; foreign withholding taxes payable on portfolio holdings, which
may reduce dividend income payable to shareholders; the possibility of
expropriation, nationalization or confiscatory taxation; adverse changes in
investment or exchange control regulations; political instability, which could
affect U.S. investment in foreign countries; and potential restrictions on the
flow of international capital. These international investment risks are present
when investing in both developed and developing emerging markets. Some of the
underlying funds may attempt to hedge against currency fluctuations by entering
into currency futures, options or forward contracts. The risks of such
investments are discussed below.
As a portion of their international stock fund allocations, the Funds may invest
up to 10% of their net assets in underlying funds which invest primarily in
developing or emerging market countries. These countries tend to have economic
structures that are less diverse and mature and political systems that are less
stable than developed market countries. A developing or emerging market country
generally is considered to be in the initial stages of industrialization. The
risks of investing in developing or emerging markets are similar to
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<PAGE> 14
but greater than the risks of investing in developed international markets.
As a part of their stock fund allocations, the Funds may also invest in
underlying funds which invest primarily in equity securities of issuers located
throughout the world, including the United States. As these funds may invest in
both developed and emerging market countries, the risks associated with
investments in both markets, as discussed above, are present when investing in
them.
BOND FUNDS: Bond funds are those which seek current income and which invest
primarily in short or long-term U.S. Government obligations, investment grade
corporate debt obligations and highly rated asset-backed securities.
The U.S. Government debt securities in which the underlying funds may invest are
obligations issued or guaranteed by the U.S Government, its agencies and
instrumentalities, including bills, notes, bonds, discount notes, stripped
government securities and other newly-created debt securities as may be further
described. Not all obligations issued or guaranteed by U.S. Government agencies
are backed by the full faith and credit of the United States.
The underlying funds may also invest in domestic and foreign issues of corporate
debt obligations having floating or fixed rates of interest. The Funds will only
select underlying funds that invest primarily in government and/or investment
grade corporate debt obligations.
Asset-backed securities, including mortgage-related securities, may also be
included in the underlying funds' portfolios. Asset-backed securities are
secured by company receivables, home equity loans, truck and auto loans, leases
and credit card receivables. The collateral backing asset-backed securities
cannot be foreclosed upon. Mortgage-backed securities are securities
collateralized by pools of mortgage loans and are assembled by various
governmental agencies and organizations, such as GNMA, FNMA and FHLMC. When
interest rates decline, there is an increased likelihood that the mortgages
underlying a mortgage-backed security will be pre-paid, resulting in the loss of
any unamortized premium paid for the securities and the probability of having to
reinvest the proceeds at lower rates. The bond category also includes repurchase
agreements collateralized by eligible investments. The Funds will not select
underlying funds that invest primarily in non-investment grade asset-backed
obligations.
The market value of the underlying funds' debt investments will change in
response to interest rate fluctuations and other factors. During periods of
falling interest rates, the values of outstanding debt securities generally
rise; conversely, during periods of rising interest rates, the values of such
securities generally decline. While securities with longer maturities tend to
produce higher yields, the prices of longer maturity securities are also subject
to greater market fluctuations as a result of changes in interest rates. Changes
in the rating of any debt security by a NSRSO and in the ability of an issuer to
make payments of interest and principal also affect the value of these
investments. Except under condition of default, changes in the value of
portfolio securities will not affect cash income derived from these securities
but will affect the underlying funds' net asset values.
MONEY MARKET FUNDS. The Funds may invest in underlying money market funds that
invest in U.S. dollar denominated short-term money market instruments that the
underlying funds' investment manager has determined present
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<PAGE> 15
minimal credit risk. Under normal circumstances, and to the extent permitted by
SEC order or interpretation, the Funds will invest their money market fund
investments in Schwab's family of money market funds. A current list of Schwab's
entire family of proprietary funds is in the Glossary under the heading
"SchwabFunds." The Funds may also invest directly in these same instruments. The
eligible instruments include:
1. Bank certificates of deposit, time deposits or bankers' acceptances of
domestic banks (including their foreign branches), U.S. branches of foreign
banks and foreign branches of foreign banks, having capital, surplus and
undivided profits in excess of $100 million.
2. Commercial paper rated in one of the two highest rating categories by an
NRSRO, or commercial paper or notes of issuers with an unsecured debt issue
outstanding currently rated in one of the two highest rating categories by any
NRSRO where the obligation is on the same or a higher level of priority and
collateralized to the same extent as the rated issue.
3. Obligations issued or guaranteed by the U.S. Government or its agencies or
instrumentalities.
4. Repurchase agreements involving obligations that are suitable for investment
under the categories set forth above.
CLOSED-END FUNDS. A closed-end fund is a fund with a fixed number of shares.
While an open-end investment company must redeem its shares at net asset value
when they are tendered for redemption by a shareholder, a closed-end investment
company is not continually ready to redeem its shares. Instead, shares of
closed-end investment companies trade on exchanges and over the counter like
conventional stocks.
Shares of a closed-end investment company may, and typically do, trade at a
discount. In addition, there may not be a readily available market for
closed-end investment company shares, in which case the shares will generally be
considered illiquid and subject to the Funds' restriction on holding illiquid
securities.
ILLIQUID SECURITIES. Each Fund may invest up to 15% of its net assets in
illiquid securities. Generally, an "illiquid security" is any security that
cannot be disposed of within seven days at approximately the amount at which the
Fund has valued the instrument.
The 1940 Act currently provides that any underlying fund is not required to
redeem any shares held by the Funds in excess of 1% of the underlying fund's
outstanding shares in any 30-day period, and any of the Funds' holdings in
excess of that amount may be considered illiquid. However, since the Funds have
elected to reserve the right to pay redemption requests in investment
securities, these positions may be treated as liquid.
REPURCHASE AGREEMENTS. The Funds may engage in repurchase agreements as a cash
management technique. In a repurchase agreement, the Funds buy a security at one
price and simultaneously agree to sell it back at a higher price. In the event
of a bankruptcy or other default of a repurchase agreement counterparty, the
Funds may incur expenses in enforcing their rights and could experience losses,
including a decline in the value of the underlying securities and loss of
income. The underlying funds may also engage in repurchase agreements and
thereby incur similar expenses and risks.
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<PAGE> 16
BORROWING POLICY. The Funds may borrow money only for temporary purposes to meet
redemption requests that they cannot otherwise meet without immediately selling
portfolio securities. The Funds may borrow up to one-third of their total assets
or pledge up to one-third of their total assets to secure such borrowings. The
Funds may not borrow to leverage. The Funds' borrowing and pledging policies are
fundamental. The underlying funds may also engage in borrowing, including
borrowing to leverage their portfolio. As a result, the Funds' overall exposure
to borrowing may be greater than their direct exposure.
SECURITIES LENDING. As a means of increasing income, each Fund may lend
securities it owns worth up to one-third of its total assets. Loans must be
fully collateralized by the borrower at all times. If the borrower defaults or
becomes insolvent, the Funds may incur expenses or losses. The Funds may not
recover the loaned securities immediately and may even lose them entirely. The
underlying funds may lend portfolio securities under similar conditions and with
similar risk of loss.
PORTFOLIO TURNOVER. The Funds anticipate that their annual portfolio turnover
rate will not exceed 100%, however, there is no limit on the Funds' or the
underlying funds' portfolio turnover rates.
FUTURES AND OPTIONS. The Funds may purchase futures contracts, which are
agreements to buy or sell a specific amount of a commodity or financial
instrument at a certain price on a certain date in the future. The Funds may
also purchase futures contracts on stocks, stock indices and options contracts
(including options on futures contracts) to accommodate cash flows or in
anticipation of taking a market position when, in the opinion of the Investment
Manager, available cash balances do not permit economically efficient purchases.
Moreover, the Funds may sell futures and options to "close out" futures and
options they may have purchased or to protect against a decrease in the price of
securities they own but intend to sell. Futures contracts and options may also
be used to: maintain cash reserves while simulating full investment; facilitate
trading; seek higher investment returns; or simulate full investment when a
futures contract is priced more attractively or is otherwise considered more
advantageous than the underlying security or index. The Funds may enter into
futures contracts and options on futures contracts provided that the aggregate
deposits required on these contracts do not exceed 5% of a Funds' total assets.
In addition, certain provisions of the Code may limit the Funds' use of futures
contracts and options.
Futures contracts and options pose certain risks. The primary risks associated
with the use of futures contracts and options include imperfect correlation
between the change in market value of the securities held by the Funds and the
prices of futures contracts and options, and possible lack of a liquid secondary
market for a futures contract and the resulting inability to close a futures
position prior to its maturity date. The risk of imperfect correlation will be
minimized by investing only in those contracts whose behavior is expected to
resemble that of the Funds' underlying securities. The risk that the Funds will
be unable to close out a futures position will be minimized by entering into
such transactions on a national exchange with an active and liquid secondary
market.
The risk of loss in trading futures contracts and options in some strategies can
be substantial, due both to the low margin deposits required and the extremely
high degree of leverage that can be involved in futures and options pricing.
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<PAGE> 17
As a result, a relatively small price movement in a futures contract or an
option may result in immediate and substantial loss (or gain) to the investor.
While futures contracts and options can be used as leveraged instruments, the
Funds may not use futures contracts or options to leverage their portfolios.
When investing in futures contracts and options, the Funds will segregate cash,
cash-equivalents or liquid, high quality debt instruments in the amount of the
underlying obligation.
The underlying funds may purchase futures contracts and option contracts for a
variety of reasons under similar conditions and with similar risk of loss.
CURRENCY HEDGING. The underlying funds, and in certain circumstances the Funds,
may engage in foreign currency exchange transactions to protect against
uncertainty in the level of future exchange rates. These transactions may be in
connection with the purchase and sale of portfolio securities and to protect the
value of specific portfolio positions. Hedging does not eliminate fluctuations
in the prices of the underlying securities that the Funds own or expect to
purchase or sell. These techniques may involve derivative transactions, such as
purchasing or selling spot currencies, and entering into currency exchange
forward contracts, currency futures contracts, options on currency futures
contracts and options on currencies. These techniques may increase the
volatility of the Funds, involve a small investment of cash relative to the
magnitude of the risk assumed, and could result in a loss if the counterparty to
the transaction does not perform as promised.
The Funds' investment policies and restrictions apply at the time the Funds make
an investment. Except with respect to futures, options and illiquid securities,
later changes, such as changed market values, do not require the Funds to sell
the investment even if the Funds could not then make the same investment.
OTHER INVESTMENTS. The Funds may also make investments in depositary receipts,
preferred stock, real estate-related investments and precious metal-related
investments. Each of these investments is limited to 5% of each Fund's net
assets. The underlying funds may also invest in restricted securities; invest in
warrants; sell securities short; write (sell) or purchase call or put options on
securities or on stock indices; and invest in master demand notes. The risks
associated with these investments are described in the SAI under the headings
"Investment Securities" and "Underlying Fund Investment Techniques."
INVESTING IN OUR FUNDS
SHAREHOLDER SERVICES
You may place purchase and redemption orders for shares of the Funds as well as
request exchanges at any one of over 230 Schwab offices nationwide or by calling
800-2 NO-LOAD, where trained representatives are available to answer questions
about the Funds and your account. The right to initiate transactions by
telephone, as discussed below, is available automatically through your Schwab
account. TDD users may contact Schwab at 800-345-2550, 24 hours a day.
We will follow reasonable procedures to confirm that your telephone instructions
are genuine. If the Funds follow telephone orders that they reasonably believe
to be genuine, it will not be liable for any losses you may experience. If the
Funds do not follow reasonable procedures to confirm that a telephone order is
genuine, the Funds may be liable for any losses you may suffer from unauthorized
or
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fraudulent orders. These procedures may include requiring a form of personal
identification, providing written confirmation of your telephone instructions
and recording all telephone transactions. You should be aware that telephone
transactions may be difficult to implement during periods of drastic economic or
market changes. If you experience difficulties in reaching us by telephone, you
can mail your orders or place them in person as set forth on the following
pages.
You may buy shares through an account maintained with Schwab or through any
other entity that has been designated by Schwab. The following information
regarding the purchase, exchange and redemption of shares of the Funds through a
Schwab account relates solely to transactions through Schwab accounts and should
not be read to apply to transactions through other designated entities. For more
information, see "Purchase and Redemption of Shares" in the SAI.
HOW TO BUY SHARES
NEW INVESTORS TO SCHWAB need to open a Schwab account by completing and signing
an account application. Mail it, together with your check, to the address
indicated on the application. You may also open your account in person as
described in the table on the following page.
EXISTING SCHWAB INVESTORS must have funds in their Schwab account in order to
buy shares of the Funds. Schwab will charge your Schwab brokerage account a $15
service fee for any check returned because of insufficient or uncollected funds
or because of a stop payment order.
Schwab also enables you to execute your trading requests through electronic
products and services such as StreetSmart(R), e.Schwab(TM), The Equalizer(R),
TeleBroker(R) and the World Wide Web.
Within your Schwab account, you have access to other investments available at
Schwab, such as stocks, bonds and other mutual funds. The Securities Investor
Protection Corporation ("SIPC") will provide account protection in an amount up
to $500,000 for securities, including Fund shares, that you hold in a Schwab
account. Of course, SIPC account protection does not protect you from share
price fluctuations.
SCHWAB ACCOUNT AND FUNDS MINIMUMS AND FEES
- ------------------------------------------------------
<TABLE>
<S> <C>
SCHWAB ACCOUNT MINIMUM BALANCE
Brokerage account................. $1,000
Custodial account................. $500
FUNDS INITIAL PURCHASE:
Brokerage account................. $1,000
IRA, other retirement plan and
custodial account.............. $500
FUNDS ADDITIONAL PURCHASE:
Any type of account............... $100
</TABLE>
Schwab reserves the right to waive these minimums for clients of Schwab
Institutional and The Charles Schwab Trust Company (the "Trust Company") and for
certain tax-advantaged retirement plans.
Schwab will charge a $7.50 fee at the end of each quarter on Schwab brokerage
accounts that have remained below the minimum for the entire quarter. Schwab
will waive the fee if there has been at least one commissionable trade within
the last six months or if your combined account balances at Schwab total $10,000
or more. Schwab currently imposes no fee for opening a Schwab One(R) account
with a minimum balance of $5,000. Schwab will
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charge Schwab One accounts with balances below $5,000 a $5 per month fee if
there have been fewer than 2 commissionable trades within the last 12 months.
The Funds, in their sole discretion and without prior notice to you, reserve the
right to reject orders to buy shares, to change the minimum investment
requirements and to withdraw or suspend any part of the offering made by this
Prospectus. All orders to buy shares must be accepted by the Funds, and orders
are not binding until the Funds confirm or accept them in writing.
METHODS OF BUYING SHARES
Whether you buy shares by phone, by mail, electronically or in person, the
following information is always needed:
- - your Schwab account number.
- - the name of the Fund in which you want to invest.
- - the amount you wish to invest.
BY PHONE
- - Call 800-2 NO-LOAD.
- - Place a buy order for your account.
- - TDD users may contact Schwab at 800-345-2550, 24 hours a day.
BY MAIL
- - Include a letter of instruction with the information requested above, signed
by one of the registered account holders in the exact form specified on the
account.
- - Make your check payable to Charles Schwab & Co., Inc.
- - Mail to 101 Montgomery Street, San Francisco, CA 94104 or your local Schwab
office.
- - Once your letter is mailed, you may not modify or cancel your instructions.
ELECTRONICALLY
- - Refer to product information on StreetSmart(R), e.Schwab(TM), The Equalizer(R)
and TeleBroker(R) for details.
- - World Wide Web address: http://www.schwab.com
IN PERSON
- - Deposit your check at your local Schwab office.
- - For the Schwab office nearest you, call 800-2 NO-LOAD.
BY WIRE
- - Contact Schwab for instructions.
AUTOMATICALLY
- - Use Schwab's Automatic Investment Plan.
- - Sign up for this service when opening your account.
SCHWAB'S AUTOMATIC INVESTMENT PLAN ("AIP") allows you to make periodic
investments in non-money market SchwabFunds(R) (and certain other funds
available through Schwab) automatically and conveniently. You can make automatic
investments in any amount, from $100 to $50,000, once you meet the Funds'
investment minimum. Automatic investments are made from your Schwab account, and
you may select from the following methods to make automatic investments: using
the uninvested cash in your Schwab account; using the proceeds of redemption of
shares of the Schwab Money Fund linked to your Schwab account; or using the
Schwab MoneyLink(R) Transfer Service. As long as you are purchasing a Fund's
shares through AIP, all distributions paid by the Fund must be reinvested in
additional shares of that Fund and may not be received in cash. For more
detailed information about this service, or to establish your AIP, call your
local Schwab office or 800-2 NO-LOAD, 24 hours a day.
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TAX-ADVANTAGED RETIREMENT PLANS. Schwab offers tax-advantaged retirement plans
for which the Funds may be an appropriate investment. Schwab's retirement plans
allow participants to defer taxes while helping them build their retirement
savings. The Schwab IRA is a retirement plan with a wide choice of investments
offering individuals with earned income the opportunity to compound earnings on
a tax-deferred basis. The Schwab Keogh is a tax-advantaged plan for
self-employed individuals and their employees that permits the employer to make
annual tax-deductible contributions of up to $30,000. Schwab also offers
Corporate Retirement Plans to help a company attract and retain valuable
employees. Call your local Schwab office or 800-2 NO-LOAD, 24 hours a day, for
more information.
SPECIAL SUBSCRIPTION OFFERING
The distributor, Schwab, is soliciting subscriptions for shares of the Funds
during an initial offering period, currently scheduled to end November 15, 1996,
subject to extension by the Funds and Schwab. Shares are being offered at the
initial net asset value of $10 per share. The Funds and Schwab reserve the right
to withdraw, cancel or modify the offering without notice and to refuse any
order in whole or in part. The Funds expect to commence continuous offerings of
their shares immediately following the settlement of the subscription offerings.
HOW TO SELL OR EXCHANGE SHARES
You can sell your shares of the Funds at any time, in person, by telephone,
electronically or by mail. When you sell your shares, you may receive more or
less than the amount you invested.
The exchange privilege allows you to exchange your SchwabFunds(R) shares for
shares of any other SchwabFunds class or series available to investors in your
state if your purchase meets that Fund's eligibility requirements. Thus, you can
conveniently modify your investments if your goals or market conditions change.
An exchange of shares will be treated as a sale of the shares for federal income
tax purposes. Note that you must meet the minimum initial or subsequent
investment requirements applicable to the shares you wish to receive in an
exchange. The Funds reserve the right on 60 days' written notice to modify,
limit or terminate the exchange privilege.
Whether you sell or exchange shares by phone, by mail, electronically or in
person, the following information is always needed:
- - your Schwab account number.
- - the number of shares you want to sell or exchange.
- - the name of the Fund from which you wish to sell or exchange shares.
- - the name of the Fund and class into which shares are to be exchanged.
- - if exchanging shares, the distribution option you select.
BY PHONE
- - Call 800-2 NO-LOAD.
- - Place a sell or exchange request for your account.
- - TDD users may contact Schwab to 800-345-2550, 24 hours a day.
BY MAIL
- - Include a letter of instruction with the information requested above, signed
by one of the registered account holders in the exact form specified on the
account.
- - Mail to 101 Montgomery Street, San Francisco, CA 94104 or your local Schwab
office.
- - Once your letter is mailed, you may not modify or cancel your instructions.
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<PAGE> 21
ELECTRONICALLY
- - Refer to product information on StreetSmart(R), e.Schwab(TM), The Equalizer(R)
and TeleBroker(R) for details.
- - World Wide Web address: http://www.schwab.com
IN PERSON
- - Place your sell or exchange request at your local Schwab office.
- - For the Schwab office nearest you, call 800-2 NO-LOAD.
Payment for redeemed shares will be credited directly to your Schwab account no
later than 7 days after the Transfer Agent or its authorized agent receives your
sell instructions in proper form. Proceeds will then be held in your Schwab
account or mailed to you depending on the account standing instructions you have
selected. For information on how to wire funds from your Schwab account to your
bank, contact your local Schwab office.
If you purchased shares by check, your sales proceeds may be held in your Schwab
account until your check clears (which may take up to 15 days). Depending on the
type of Schwab account you have, your money may earn interest during any holding
period.
The Funds may suspend redemption rights or postpone payments when trading on the
New York Stock Exchange (the "Exchange") is restricted or is closed for any
reason other than its customary weekend or holiday closings, emergency
circumstances as determined by the SEC exist or for such other circumstances as
the SEC may permit. Although the Funds normally expect to make all redemption
requests in cash, under certain circumstances the Funds may elect to make
redemptions in-kind by distributing portfolio securities, including underlying
fund shares, rather than cash. Although underlying fund shares are readily
redeemable or marketable, you would normally incur brokerage expenses in
converting any other securities into cash. See "Purchase and Redemption of
Shares" in the SAI.
IMPORTANT INFORMATION ABOUT YOUR INVESTMENT
DIVIDENDS AND OTHER DISTRIBUTIONS
DISTRIBUTION OPTIONS. When you first buy shares in our Funds, you may choose one
of the three following distribution options:
1. AUTOMATIC REINVESTMENT: We will reinvest all distributions in additional
shares of the Funds. The Funds choose this option automatically unless you
specify otherwise. If you are purchasing shares of the Funds through Schwab's
AIP, you must choose this distribution option for this Fund.
2. CASH DIVIDENDS/REINVESTED CAPITAL GAINS: We will pay you income dividends in
cash and invest capital gains for you in additional shares of the Funds.
3. ALL CASH: We will pay you both income dividends and any capital gains in
cash.
The Funds reinvest distributions at the net asset value determined on the
ex-dividend date. We credit your cash distributions to your Schwab account on
the date distributions are payable. We leave them there or mail them to you,
depending on your standing account instructions.
To change the distribution option you have selected, call your local Schwab
office or 800-2 NO-LOAD.
Each Fund intends to distribute substantially all of its net investment income
and net capital gain, if any, each year annually in December, as determined by
the Board of Trustees. You
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should be aware that your per share equity in undistributed net investment
income and net capital gain may be diluted by the continuing purchases and
redemption's of the shares of the Funds. We will reinvest all your distributions
automatically in additional shares of the Funds unless you elect otherwise.
FEDERAL INCOME TAX INFORMATION
The following is only a brief summary for general information purposes of how
some of the federal income tax laws affect you and the Funds. Thus, you must
consult with your own tax adviser about your particular tax situation.
The Funds intend to qualify as regulated investment companies under the Code. To
qualify, each Fund will distribute substantially all of its investment company
taxable income and net capital gain (if any) each year. In addition, each will
meet certain other Code requirements. As a regulated investment company, each
Fund will pay no federal income taxes insofar as its earnings are distributed to
its shareholders.
Dividends that the Funds pay to you from net investment income are generally
taxable to you as ordinary income. So are distributions of the Funds' net
short-term capital gains in excess of any net long-term capital losses.
Distributions that the Funds designate as long-term capital gains (net of
capital losses) are generally taxable to you as long-term capital gains no
matter how long you own your shares of the Funds. These tax rules apply whether
the distributions are received in cash or reinvested.
If you are not subject to tax on your income, you may have different tax
treatment. In general, you will not pay tax on the Funds' distributions to you.
Income received by the underlying funds from sources within various foreign
countries may be subject to foreign income taxes withheld at the source. Since
less than 50% of the value of each Fund's total assets at the close of its
taxable year are expected to consist of foreign securities, the Funds are not
permitted to elect to "pass through" to their shareholders the amount of foreign
income taxes paid by the underlying funds. Each shareholder's respective pro
rata share of foreign taxes paid by the underlying funds will, therefore, be
netted against his or her share of the underlying fund's gross income.
A Fund's transactions in foreign currencies and hedging activities may give rise
to ordinary income or loss to the extent such income or loss results from
fluctuations in value of the foreign currency concerned. In addition, such
activities will likely produce a difference between book income and taxable
income. This difference may cause a portion of a Fund's income distributions to
constitute a return of capital for tax purposes or require a Fund to make
distributions exceeding book income to qualify as a regulated investment company
for tax purposes.
The foregoing discussion relates only to U.S. federal income tax law as
applicable to U.S. citizens or residents. Foreign shareholders (i.e.,
nonresident alien individuals and foreign corporations, partnerships, trusts and
estates) are generally subject to U.S. withholding tax at the rate of 30% (or
lower tax treaty rate) on distributions derived from net investment income and
short-term capital gains. Distributions to foreign shareholders of long-term
capital gains and any gains from the sale or other disposition of shares of the
Funds are generally not subject to U.S. taxation. Different tax consequences may
result if the foreign share-
19
<PAGE> 23
holder is engaged in a U.S. trade or business or is present in the United States
for more than 183 days during the year. In addition, the tax consequences to a
foreign shareholder entitled to claim the benefits of a tax treaty may be
different than those described above. Distributions by the Funds may also be
subject to state, local and foreign taxes, and their treatment under applicable
tax laws may differ from the federal income tax treatment.
We will provide you with a record of all distributions, purchases and sales on
your Schwab brokerage account statement. Each year we will notify you of the
federal income tax status of all distributions made that year to your account.
HOW WE DETERMINE THE PRICE OF YOUR SHARES
The price of a share is its net asset value, which we determine each Business
Day as of the close of trading on the Exchange, generally at 4:00 p.m. (Eastern
time). We determine the price by adding our total assets, subtracting any
liabilities, and then dividing the resulting amount by the number of shares
outstanding.
In accordance with the 1940 Act, the underlying funds are valued at their
respective net asset values as determined by those funds. The underlying money
market funds value their portfolio securities in accordance with Rule 2a-7
promulgated under the 1940 Act. The other underlying funds value their portfolio
securities based on market quotes if they are readily available. The Investment
Manager assigns fair values to the Funds' other investments in good faith under
guidelines adopted by the Board of Trustees. The Board of Trustees reviews these
values regularly.
Purchase or redemption orders and exchange requests will be executed at the NAV
next determined after receipt by the Transfer Agent or its authorized agent.
HOW OUR FUNDS REPORT PERFORMANCE
From time to time the Funds may advertise their total return and yield. These
figures reflect past results and are not intended to predict future performance.
We will often compare our performance to Standard & Poor's 500 Index, Lehman
Long-term Government Bond Index, other indices and combinations of indices.
Total return measures the percentage change in the value of your investment in
the shares of a fund over time. It reflects all share price movements,
distributions and expenses. It assumes the reinvestment of all distributions.
Average annual total return is a measure of the yearly changes in the value of
the investment. It is the constant compound rate of return, which if applied to
the investment each year, would result in the actual total return over that
time. Other total return figures we show may differ. We may base them on
non-standard periods. We may also show aggregate or cumulative returns.
A Fund's yield refers to the income generated by an investment in the Fund over
a given period of time, expressed as an annualized percentage rate. Yields are
calculated according to a standard that is required for all stock and bond
funds. Because this differs from other accounting methods, the quoted yield may
not equal the income actually paid to shareholders.
ANNUAL AND SEMI-ANNUAL REPORT MAILINGS
Twice a year, the Funds provide you a report showing its performance and
outlining its investments. To reduce mailing costs, we combine these mailings by
household. If a house-
20
<PAGE> 24
hold has multiple accounts and the same record address for all the accounts, we
send mailings for all accounts at that address in a single package. If you do
not want to combine mailings for your account, please write to SchwabFunds(R) at
the address on the front of this Prospectus. To request a free copy of the
Funds' Annual or Semi-Annual Report, call Schwab at 800-2 NO-LOAD.
ORGANIZATION AND
MANAGEMENT OF OUR FUNDS
MANAGEMENT FUNCTIONS AND RESPONSIBILITIES
GENERAL OVERSIGHT OF OUR FUNDS. The Board of Trustees and officers meet
regularly to review the Funds' investments, performance, expenses and other
business affairs.
THE INVESTMENT MANAGER. The Investment Manager, Charles Schwab Investment
Management, Inc. or CSIM, manages the Funds' business affairs. Its actions are
subject to the authority of the Board of Trustees and officers of the Trust. The
Investment Manager is also responsible for overall management of the Funds'
investments. The Investment Manager, founded in 1989, is a wholly owned
subsidiary of The Charles Schwab Corporation. It also acts as investment manager
and administrator to the mutual funds in The SchwabFunds Family(R), a family of
26 mutual funds. As of September 11, 1996, the SchwabFunds(R) had aggregate net
assets in excess of $39 billion.
Cynthia Liu is the portfolio manager for the Funds and a Vice President of CSIM.
She is responsible for day-to-day portfolio management of the Funds and any
other CSIM-managed mutual funds that will invest primarily in other mutual
funds. Before joining Schwab, Ms. Liu was most recently Director of Investment
Services at Jardine Fleming Unit Trust Limited in Hong Kong, where she was
responsible for overall investment strategy. She has held portfolio management
and investment research positions at several major firms, including MeesPierson
Securities (Asia) Limited and Union Bank of Switzerland, and has more than ten
years experience in investment research and portfolio management.
Stephen B. Ward, CSIM's Senior Vice President and Chief Investment Officer, has
overall management responsibility for CSIM's portfolio management group.
TRANSFER AGENT AND SHAREHOLDER SERVICES. Schwab serves as the Shareholder
Services Agent and Transfer Agent for the Funds. Schwab was established in 1971
and is America's largest discount broker. Schwab provides low-cost securities
brokerage and related financial services to approximately 3.3 million active
customer accounts and has over 230 branch offices. Schwab also offers convenient
access to financial information services and provides products and services that
help investors make investment decisions. Schwab is a wholly owned subsidiary of
The Charles Schwab Corporation. Charles R. Schwab is the founder, Chairman and
Chief Executive Officer, and a Director of The Charles Schwab Corporation. As a
result of his beneficial ownership interests in and other relationships with The
Charles Schwab Corporation and its affiliates, Mr. Schwab may be deemed to be a
controlling person of Schwab and the Investment Manager.
OPERATING FEES AND EXPENSES
The Investment Manager provides underlying fund analysis, selection, ongoing
monitoring and investment management services under the terms of its Investment
Advisory and Administration Agreement with the Trust. For these services, it is
entitled to a graduated
21
<PAGE> 25
annual fee payable monthly from each Fund. The rate is 0.74% of the first $1
billion of each Fund's average daily net assets; 0.69% of the next $1 billion;
and 0.64% of net assets over $2 billion.
The Investment Manager guarantees that, through at least February 28, 1999, the
management fees for each Fund will not exceed 0.50% of its average daily net
assets.
For its services as Transfer Agent and Shareholder Services Agent, Schwab is
entitled to receive annual fees from each Fund of 0.05% and 0.20%, respectively,
of its average daily net assets. Schwab currently receives remuneration from
fund companies participating in its Mutual Fund OneSource(R) service equal to
0.25% to 0.35% per annum of assets invested in OneSource Funds and is also
entitled to remuneration in connection with the purchase of shares of fund
companies participating in Schwab's Mutual Fund Marketplace(R). In light of this
remuneration, Schwab has agreed, through at least December 31, 2001, to waive
its Transfer Agent and Shareholder Services fees.
The Investment Manager and Schwab also guarantee that, through at least February
28, 1999, total Fund operating expenses will not exceed 0.50% of each Fund's
average daily net assets (after waivers and reimbursements). For purposes of
this guarantee, "operating expenses" do not include interest expenses, taxes,
foreign taxes withheld or paid and capital items such as costs of purchase or
sale of portfolio securities, including brokerage fees or commissions. The
effect of this voluntary expense limitation is to maintain or increase the
Funds' total return to shareholders.
Schwab serves as the distributor for the Funds, but receives no compensation for
this service.
The operating costs and investment advisory fees of the underlying funds are not
included in the discussion of the Funds' fees and expenses above. By investing
in the Funds, you bear not only the Funds' expenses, but also similar expenses
of the underlying funds. You would not incur the Funds' expenses if you were to
invest in the underlying funds directly.
OTHER EXPENSES. The Trust pays the expenses of the Funds' operations. These
expenses include the fees and expenses for independent accountants, legal
counsel and the custodian of its assets; the cost of maintaining books and
records of account; taxes; registration fees; the fees and expenses of
qualifying the Trust and its shares for distribution under federal and state
securities laws; and industry association membership dues. The Funds seek to
keep transaction costs and other expenses low. Schwab may absorb or reimburse
certain expenses incurred by the Funds in order to limit its ratio of operating
expenses.
The Trust generally allocates these expenses among the individual investment
portfolios or series of the Trust, including the Funds. This allocation is based
on the relative net assets of each series at the time the expenses are incurred.
However, expenses directly attributable to a particular Series are charged to
that Series.
PORTFOLIO BROKERAGE. As discussed above, under normal market conditions at least
65% of each Fund's total assets will be invested in OneSource Funds. Orders for
transactions in these underlying funds will be placed with Schwab directly.
When placing orders for the Funds' other securities or for funds not available
at Schwab, the Investment Manager uses its judgment to
22
<PAGE> 26
obtain the best price and execution. It considers the full range and quality of
brokerage services available in making these determinations. For securities
transactions in which Schwab is not a principal, the Investment Manager may use
Schwab or other qualified affiliated brokers or dealers to execute the Funds'
transactions. To do so, it must reasonably believe that commissions (or prices)
paid to and transaction quality received from Schwab or other qualified
affiliated brokers or dealers will be at least comparable to those available
from qualified non-affiliated brokers or dealers.
OTHER INFORMATION ON THE OPERATION
OF OUR FUNDS
The Trust is a business trust formed under the laws of Massachusetts on May 7,
1993. It may issue an unlimited number of shares of beneficial interest in one
or more series or classes. Currently it offers shares of ten series. The Board
of Trustees may authorize the issuance of shares of additional Series or
classes, if it deems it desirable. Shares within each series have equal,
noncumulative voting rights, and have equal rights as to distributions, assets
and liquidation of such series except to the extent that such voting rights or
rights as to distributions, assets and liquidation vary among classes of a
series.
Due to the relatively high cost of maintaining accounts with smaller holdings,
the Funds reserve the right to redeem your shares if, as a result of
redemptions, the aggregate value of your account drops below the Funds' $500
minimum balance requirement ($250 in the case of IRAs, other retirement plans
and custodial accounts). You will be given 30 days' advance written notice and a
chance to increase your Fund's balance to the minimum requirement before the
Funds redeem your shares. Fund shares will be redeemed automatically should the
Schwab account in which they are carried be closed.
SHAREHOLDER MEETINGS. The Trust is not required to hold annual shareholders'
meetings and does not intend to do so. The Trust may, however, hold special
meetings in connection with certain matters. These include changing a Fund's
fundamental policies, electing or removing Trustees, or approving or amending
any investment advisory agreement. In addition, shareholders may remove a
Trustee at a special meeting called upon written request of shareholders owning
in the aggregate at least 10% of the outstanding shares of the Trust.
YOUR VOTING RIGHTS. If we were to make changes to the Funds' management or
fundamental policies, we would ask you to vote as a shareholder. If we hold a
meeting and you cannot attend, you can vote by proxy. Before the meeting, the
Funds will send you proxy materials that explain the issues to be decided and
include a voting card for you to return. Shareholders have one vote for each
share owned. Unless permitted by the 1940 Act, shareholders will vote by Series
and not in the aggregate. For example, when voting to approve an investment
advisory agreement for a Series, only shareholders of that Series may vote. When
voting to elect Trustees, shareholders of all the Series vote in the aggregate.
In addition, holders of shares will vote exclusively as a class on any matter
relating solely to their arrangement as a class and on any matter in which the
interests of that class differ from the interests of any other class in that
Fund.
SHARE CERTIFICATES. To assist in minimizing administrative costs, share
certificates will not be issued. Records regarding share ownership are
maintained by the Transfer Agent.
23
<PAGE> 27
GLOSSARY OF IMPORTANT TERMS
BOND FUNDS: funds which seek current income by investing in long-term or
short-term bonds and other fixed income securities, including securities insured
or guaranteed or insured by the U.S. Government, its agencies or
instrumentalities.
BUSINESS DAY: any day the New York Stock Exchange is open for business. A
Business Day normally begins at 9:30 a.m. (Eastern time) when the Exchange
opens, and usually ends at 4 p.m. (Eastern time) when it closes.
CAPITAL GAIN OR LOSS: the increase or decrease in the value of a security
relative to the original purchase price. A gain is realized when the security
that has increased in value is sold. An unrealized gain or loss occurs when the
value of a security increases or decreases but the security is not sold. If a
security is held for more than 12 months and then sold at a profit, that profit
is a realized long-term capital gain. If it is sold at a profit after being held
for less than 12 months, that profit is a realized short-term capital gain.
CODE: the Internal Revenue Code of 1986, as amended.
CSIM: the Funds' Investment Manager, Charles Schwab Investment Management, Inc.,
101 Montgomery Street, San Francisco, CA 94104.
DISTRIBUTION: payment the Funds make to shareholders. There are two kinds of
distributions: dividends, or the profits (after expenses) from the Funds'
investments, and capital gains distributions.
DIVERSIFIED: under the 1940 Act, a diversified fund generally may not invest
more than 5% of its assets in the securities of any one issuer and may not hold
more than 10% of the voting shares of any one issuer with respect to 75% of the
value of its total assets. As described in the SAI, investments in U.S.
Government securities and other investment companies are excepted from this
policy.
FUND: any investment company, which may include open-end mutual funds,
closed-end funds and unit investment trusts.
FUNDAMENTAL: a policy which cannot be changed without the approval of a majority
of the shareholders of the Fund.
FHLMC: Federal Home Loan Mortgage Corporation.
FNMA: Federal National Mortgage Association.
GNMA: Government National Mortgage Association.
INTERNATIONAL STOCK FUND: an investment company that invests, under normal
market conditions, primarily in equity securities of companies located in one or
more countries, other than the United States, with a developed securities
market.
INVESTMENT GRADE: investment grade bonds are usually considered to be bonds
which are rated in one of the four highest categories ("BBB" or "Baa" or better)
by a NRSRO, or bonds which are unrated but deemed by the underlying funds
investment manager to be of comparable quality.
INVESTMENT MANAGER: Charles Schwab Investment Management, Inc. (or CSIM), 101
Montgomery Street, San Francisco, CA 94104.
MARKET CAPITALIZATION: a corporation's value as determined by multiplying its
total outstanding shares by the current market price of a share.
MONEY MARKET FUNDS: funds which seek as high a level of current income as is
consistent
24
<PAGE> 28
with preservation of capital and liquidity by investing in a broad range of high
quality, short-term money market instruments.
NET ASSET VALUE (NAV): on a per share basis, the value of one share in a fund.
This value is determined by adding the total assets, subtracting all
liabilities, and then dividing the resulting amount by the number of shares
outstanding.
1940 ACT: the Investment Company Act of 1940, as amended.
NRSRO: a nationally recognized statistical rating organization.
ONESOURCE FUNDS: funds that participate in Schwab's Mutual Fund OneSource(R)
service, certain other funds Schwab makes available without a transaction fee,
and Schwab's family of proprietary SchwabFunds (if and to the extent permitted
by SEC order or interpretation).
PORTFOLIO: the total stocks, bonds and other securities held by an individual
investor, a mutual fund or a financial institution.
RISK: the possibility of losing all or part of your investment, that the value
of your investment will decrease or that you will receive little or no return on
your investment.
STATEMENT OF ADDITIONAL INFORMATION OR SAI: the Trust's Statement of Additional
Information, as amended from time to time.
SCHWAB: Charles Schwab & Co., Inc. 101 Montgomery Street, San Francisco, CA
94104.
SCHWABFUNDS(R): Schwab's family of proprietary funds, currently consisting of
the following funds:
Schwab 1000 Fund(R)
Schwab International Index Fund(R)
Schwab Small-Cap Index Fund(R)
Schwab Asset Director(R) - High Growth Fund
Schwab Asset Director(R) - Balanced
Growth Fund
Schwab Asset Director(R) - Conservative
Growth Fund
Schwab S&P 500 Fund - Investor Shares
Schwab S&P 500 Fund - e.Shares(TM)
Schwab Analytics Fund(TM)
Schwab OneSource Portfolios - International
Schwab OneSource Portfolios -
Growth Allocation
Schwab OneSource Portfolios -
Balanced Allocation
Schwab Short/Intermediate Government
Bond Fund
Schwab Long-Term Government Bond Fund
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 Money Market Fund
Schwab Government Money Fund
Schwab U.S. Treasury Money Fund
Schwab Value Advantage Money Fund(R)
Schwab Tax-Exempt Money Fund -
Sweep Shares
Schwab Tax-Exempt Money Fund -
Value Advantage Shares
Schwab California Tax-Exempt Money
Fund -
Sweep Shares
Schwab California Tax-Exempt Money
Fund - Value Advantage Shares(TM)
Schwab Retirement Money Fund(R)
Schwab Institutional Advantage Money Fund(R)
Schwab New York Tax-Exempt Money Fund -
Sweep Shares
Schwab New York Tax-Exempt Money Fund -
Value Advantage Shares(TM)
25
<PAGE> 29
SECURITIES AND EXCHANGE COMMISSION
(SEC): established by Congress to administer the Securities Act of 1933, the
Investment Company Act of 1940 and other securities-related laws.
STOCK FUNDS: funds which invest primarily in domestic or foreign common stocks
or securities convertible into or exchangeable for common stock and which seek
long-term capital growth or appreciation.
STOCK RISK: the possibility that stock prices in general or particular will
decline over short or even extended periods.
TOTAL RETURN: the change in value of an investment in the Fund over a given
period, assuming reinvestment of any dividends and capital gains. Cumulative
total return reflects actual performance over a stated period of time. Average
annual total return is a hypothetical rate of return that would have produced
the same cumulative total return if performance had been constant over the
entire period. Average annual total returns smooth out variations in
performance; they are not the same as actual year-by-year results.
TRANSFER AGENT: Charles Schwab & Co., Inc., 101 Montgomery Street, San
Francisco, CA 94104.
TRUST: Schwab Capital Trust, a no-load open-end management investment company.
VOLATILITY: a measure of the magnitude and frequency of changes in securities
values. Statistically, volatility is the measure of the spread of the prices or
yields around the mean of the prices or yields.
- --------------------------------------------------------------------------------
NO ONE HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY STATEMENTS
ABOUT THIS OFFERING NOT CONTAINED IN THIS PROSPECTUS. IF ANYONE GIVES ANY OTHER
INFORMATION OR MAKES ANY OTHER REPRESENTATIONS, DO NOT RELY ON SUCH INFORMATION
OR REPRESENTATIONS AS HAVING BEEN AUTHORIZED BY THE TRUST OR ITS DISTRIBUTOR.
- --------------------------------------------------------------------------------
THIS PROSPECTUS IS NOT AN OFFER IN ANY STATE IN WHICH SUCH AN OFFER MAY NOT
LAWFULLY BE MADE, NOR IS IT AN OFFER TO ANY PERSON TO WHOM SUCH AN OFFER MAY NOT
LAWFULLY BE MADE.
- --------------------------------------------------------------------------------
26
<PAGE> 30
THIS SPACE RESERVED FOR YOUR COMMENTS AND QUESTIONS.
A SCHWAB REPRESENTATIVE WILL BE HAPPY TO ASSIST YOU.
<PAGE> 31
SchwabFunds(R) Schwab OneSource Portfolios
101 Montgomery Street
San Francisco, CA 94104
Growth Allocation and
Balanced Allocation Funds
Prospectus
October 13, 1996
SchwabFunds(R)
(c)1996 Charles Schwab & Co., Inc. All rights reserved. Member SIPC/NYSE.
(10/96) 2725
<PAGE> 32
CROSS REFERENCE SHEET
SCHWAB CAPITAL TRUST:
SCHWAB S&P 500 FUND
<TABLE>
<CAPTION>
Part A Item Prospectus Caption
- ----------- ------------------
<S> <C>
Cover Page Cover Page
Synopsis Key Features of Our Fund; Matching the Fund to Your
Investment Needs
Condensed Financial Information Financial Highlights
General Description of Registrant Matching the Fund to Your Investment Needs; Investment
Objectives, Policies, and Techniques; Organization and
Management of Our Funds
Management of the Fund Management Functions and Responsibilities
Management's Discussion of Fund Performance [Discussion to be included in the Fund's Shareholder
Reports]
Capital Stock and Other Securities Investing in Our Fund; Important Information About Your
Investment; Organization and Management of Our Fund
Purchase of Securities Being Offered Investing In Our Fund; Important Information About Your
Investment
Redemption or Repurchase Investing in Our Fund
Pending Legal Proceedings Inapplicable
</TABLE>
<PAGE> 33
CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Expenses................................... 2
Financial Highlights....................... 3
Key Features of Our Fund................... 4
Matching the Fund to Your Investment
Needs.................................... 5
Investing in Our Fund...................... 7
How to Buy Investor Shares............... 8
How to Buy e.Shares...................... 9
How to Sell or Exchange Investor
Shares................................. 9
How to Sell or Exchange e.Shares......... 10
Investment Objective and Policies.......... 11
Investments and Techniques Used by
Our Fund and Related Risks............... 12
Important Information About
Your Investment.......................... 14
Dividends and Other Distributions........ 14
Federal Income Tax Information........... 14
How We Determine the Price of
Your Shares............................ 15
How Our Fund Reports Performance......... 15
Annual and Semi-Annual Report Mailings... 16
Organization and Management of Our Fund.... 16
Management Functions and
Responsibilities....................... 16
Operating Fees and Expenses.............. 17
Other Information on the Operation
of Our Fund............................ 18
Glossary of Important Terms................ 20
</TABLE>
READING THIS PROSPECTUS. Explanations of all italicized terms in this Prospectus
are included in the Glossary at the end of this Prospectus. References to "you"
and "your" in this Prospectus refer to prospective investors and/or
shareholders, while references to "we," "us," "our" and "our Fund" refer to the
Fund or in some cases, the Trust.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
SCHWAB S&P 500 FUND
SCHWAB S&P 500 FUND - INVESTOR SHARES
SCHWAB S&P 500 FUND - E.SHARES(TM)
THE SCHWAB S&P 500 FUND (THE "FUND") seeks to track the price and dividend
performance (total return) of common stocks of United States companies, as
represented by the Standard & Poor's Composite Index of 500 Stocks (the "S&P
500(R)" or "Index"). The Fund invests primarily in common stocks of companies
composing the S&P 500. The Fund is a diversified investment portfolio of Schwab
Capital Trust (the "Trust"), a no-load, open-end management investment company
managed by Charles Schwab Investment Management, Inc. (the "Investment Manager"
or "CSIM"). This Prospectus describes both of the Fund's classes of shares - the
Investor Shares and the e.Shares.
ABOUT THIS PROSPECTUS: THIS PROSPECTUS PROVIDES YOU WITH CONCISE INFORMATION
THAT YOU SHOULD KNOW BEFORE YOU DECIDE IF THE FUND PROVIDES THE INVESTMENT
OPPORTUNITIES YOU SEEK. READ IT CAREFULLY, AND RETAIN IT FOR FUTURE REFERENCE.
You can find more detailed information in the Statement of Additional
Information ("SAI") dated October 13, 1996 (as amended from time to time). The
SAI has been filed with the Securities and Exchange Commission ("SEC") and is
incorporated in this Prospectus by reference (which means that it is legally
considered part of this Prospectus even though it is not printed here). This
Prospectus is available electronically by using our Internet address:
http://www.schwab.com. To get a free paper copy of this Prospectus or the SAI,
call Schwab at 800-2 NO-LOAD, or write Schwab at 101 Montgomery Street, San
Francisco, CA 94104.
TO PLACE ORDERS AND FOR ACCOUNT INFORMATION:
INVESTOR SHARES: Contact your local Schwab office, or call 800-2 NO-LOAD
(800-266-5623). TDD users may contact Schwab at 800-345-2550, 24 hours a day.
E.SHARES: Use SchwabLink(R) to contact Schwab Institutional or The Charles
Schwab Trust Company (the "Trust Company").
PROSPECTUS OCTOBER 13, 1996
<PAGE> 34
EXPENSES
SHAREHOLDER TRANSACTION EXPENSES are the fees and charges you pay for buying or
selling shares of a fund. You pay no sales fees or charges when you buy or sell
shares of our Fund.
ANNUAL FUND OPERATING EXPENSES include investment management fees paid to the
Investment Manager, transfer agency fees and other expenses. These expenses
cover, for example, services such as investment research and management of the
Fund, maintaining shareholder records and issuing shareholder statements. Each
class of shares is charged its own annual operating expenses from its income,
which is factored into the dividends paid to shareholders and into the share
price of that class. As a shareholder, you are not charged any of these fees
directly.
<TABLE>
<CAPTION>
INVESTOR
SHARES E.SHARES(TM)
-------- ---------
<S> <C> <C>
SHAREHOLDER TRANSACTION
EXPENSES
Sales Charge on Purchases
and Reinvested
Dividends................. None None
Deferred Sales Charge or
Redemption Fees........... None None
Exchange Fees............... None None
ANNUAL FUND OPERATING
EXPENSES (AS A PERCENTAGE
OF AVERAGE DAILY NET
ASSETS)
Management Fee
(after fee
reduction)1............. 0.13% 0.13%
12b-1 Fees................ None None
Other Expenses (after fee
reduction and expense
reimbursement)2,3....... 0.36% 0.15%
-------- ---------
TOTAL FUND OPERATING
EXPENSES (AFTER FEE
REDUCTION AND EXPENSE
REIMBURSEMENT)3,4......... 0.49% 0.28%
</TABLE>
1 This amount reflects a reduction guaranteed by the Investment Manager through
at least February 28, 1997. If there were no such reduction, the maximum
management fee would be 0.36% of the Fund's average daily net assets.
2 "Other Expenses" are based on estimated amounts for the current fiscal year
for the Fund after fee reductions and expense reimbursements. If there were no
such reductions, the estimated other expenses of the Investor Shares and the
e.Shares would be 0.53% and 1.67%, respectively, of the average daily net
assets of each class of shares. See "Organization and Management of Our Fund -
Operating Fees and Expenses" for information regarding the differing expenses
for the Fund's multiple classes of shares.
3 This amount reflects the guarantee by Schwab and the Investment Manager that,
through at least February 28, 1997, the total operating expenses of the
Investor Shares and the e.Shares will not exceed 0.49% and 0.28% respectively,
of the average daily net assets of each class. After that, the guarantee may
be terminated, modified or continued. If there were no such guarantee, the
total operating expenses of the Investor Shares and the e.Shares would be
0.89% and 2.03%, respectively, of the average daily net assets of each class
of shares.
4 You may be charged a fee if applicable minimum balances are not maintained in
your Schwab brokerage or Schwab One(R) account. Schwab Individual Retirement
Accounts ("IRAs") with balances of $10,000 or more by September 15, 1997 will
not be charged Schwab's $29 annual IRA account fee for the life of the
account. Schwab Keogh plans are currently charged an annual fee of $45. See
"Investing in Our Fund" for information regarding minimum balance and
investment requirements.
2
<PAGE> 35
EXAMPLES. You would pay the following expenses on a $1,000 investment in each
class of the Fund's shares assuming: (1) 5% annual return and (2) redemption at
the end of the period.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
------ -------
<S> <C> <C>
Investor Shares.............. $5 $16
e.Shares(TM)................. $3 $ 9
</TABLE>
THIS IS AN EXAMPLE ONLY AND DOES NOT REPRESENT PAST OR FUTURE EXPENSES. ACTUAL
EXPENSES MAY BE GREATER OR LESS THAN THE EXPENSES SHOWN IN THE EXAMPLE. This
example reflects the guarantee by Schwab and the Investment Manager that,
through at least February 28, 1997, total operating expenses of the Investor
Shares and the e.Shares will not exceed 0.49% and 0.28% of the average daily net
assets of each class, respectively. Please remember that, while this example
assumes a 5% annual return on investment, the actual returns of each class may
be more or less than the 5% used in this example.
The purpose of the table above is to help you understand the various costs and
expenses you will bear directly or indirectly when you invest in the Fund. (See
"Organization and Management of Our Fund - Operating Fees and Expenses.")
FINANCIAL HIGHLIGHTS
The following information with respect to each class of shares covering the
period from May 1, 1996 (commencement of operations) to August 31, 1996 has not
been audited. This information should be read in conjunction with the unaudited
financial statements and accompanying notes which are incorporated from the SAI
by reference. A free copy of the SAI may be obtained by calling the telephone
number or writing to the address on the first page of this Prospectus.
<TABLE>
<CAPTION>
PERIOD ENDED AUGUST
31, 1996
---------------------
INVESTOR
E.SHARES(TM) SHARES
-------- ---------
<S> <C> <C>
Net asset value at beginning
of period................. $ 10.00 $ 10.00
Income from investment
operations
Net investment income..... 0.03 0.06
Net realized and
unrealized gain (loss)
on investments.......... 0.02 (0.02 )
-------- ---------
Total from investment
operations.............. 0.05 0.04
Less distributions
Dividends from net
investment income....... -- --
Distributions from
realized gain on
investments............. -- --
-------- ---------
Total distributions....... 0 0
-------- ---------
Net asset value at end of
period.................... $ 10.05 10.04
======= ========
Total return (%)............ 0.50 0.40
Ratios/Supplemental data
Net assets, end of period
(000s).................... $14,373 $194,914
Ratio of expenses to
average net assets
(%)1.................... 0.28 * 0.49 *
Ratio of net investment
income to average net
assets (%)2............. 2.12 * 2.09 *
Portfolio turnover rate
(%)..................... 0 0
Average commission rate... 0.02 0.02
- ---------------
1 Ratio of expenses to
average net assets prior
to waived fees and reduced
expenses (%)++............ 2.03 * 0.89 *
2 Ratio of net investment
income to average net
assets prior to waived
fees and reduced expenses
(%)++..................... 0.37 * 1.69 *
</TABLE>
++ The Investment Manager and Schwab have reduced a portion of their fees and
absorbed
3
<PAGE> 36
certain expenses in order to limit the Fund's ratio of operating expenses to
average net assets.
* Annualized
KEY FEATURES OF OUR FUND
INVESTMENT OBJECTIVE: seeks to track the price and dividend performance (total
return) of common stocks of United States companies as represented by the S&P
500(R). The S&P 500 is a widely recognized, unmanaged index of the prices of 500
large company common stocks selected by Standard & Poor's ("Index Stocks").
These stocks represent approximately 70% of the market value of all common
stocks publicly traded in the United States.*
The Index Stocks of the 50 largest companies of the S&P 500 account for
approximately 47% of the Index. Total returns for the S&P 500 assume
reinvestment of dividends and do not include fees such as those charged by the
Investment Manager. Total returns for the S&P 500 also do not reflect taxes,
brokerage commissions or other fees that you would pay if you were to invest
directly in all the Index Stocks.
The Fund seeks investment results that track, rather than beat, the total return
of the S&P 500. Thus, it does not "actively" choose investments in the same way
as actively managed stock funds do. Those funds choose investments based on
economic, financial and market factors and investment judgment. In contrast, the
Fund uses a "passive" or "indexing" strategy. It buys and sells stocks primarily
to match the Index, invest cash from Fund share purchases or obtain cash for
redemptions of Fund shares. Thus, the Fund and the Investment Manager normally
do not judge the merits of any particular stock. Under normal market conditions,
the Fund invests at least 80% of its total assets in Index Stocks. For more
detailed information, see "Investment Objective and Policies."
*Source: Standard & Poor's as of August 30, 1996.
STRATEGY: to invest in common stocks of companies composing the S&P 500 and to
minimize trading and other costs.
Common stock prices can be volatile in the short term. Market conditions or
other company, political and economic news often can cause large changes in a
stock's price. You should be comfortable with the volatility of an all-stock
investment and the risks of the stock market. When you sell your shares, they
may be worth more or less than what you paid for them. For more details on the
Fund's investments and the risks associated with them, see "Matching the Fund to
Your Investment Needs - Risk Considerations," "Investment Objective and
Policies" and "Investments and Techniques Used by Our Fund and Related Risks."
MANAGEMENT. The Investment Manager, Charles Schwab Investment Management, Inc.,
currently manages the SchwabFunds Family(R) of 26 mutual funds with over $39
billion in assets. For more details about CSIM, see "Organization and Management
of Our Fund," and for a current list of the SchwabFunds(R), see the glossary.
MARKET PERFORMANCE. For the 20 years ended 1995, the S&P 500(R) provided an
average annual total return of 14.61%.* Total return figures for the S&P 500
assume reinvestment of all dividends paid by stocks included in the Index. These
figures do not include fees such as those charged by the Fund. They also do not
include taxes, brokerage or other fees that
4
<PAGE> 37
you would pay if you invested directly in all the stocks of the Index.
*Source: Standard & Poor's, December 1995. Past performance of the S&P 500(R)
does not necessarily reflect future performance results of the S&P 500 or the
Fund.
LOW-COST INVESTING. You pay no sales fees or charges when you buy or sell shares
of the Fund. The Investment Manager and Schwab guarantee that, through at least
February 28, 1997, total operating expenses for the Investor Shares and the
e.Shares(TM) will not exceed 0.49% and 0.28%, respectively, of the average daily
net assets of each class of shares. After that, the guarantee may be terminated,
modified or continued. For more details, see "Investing in Our Fund" and
"Organization and Management of Our Fund - Operating Fees and Expenses."
REDUCED TAXES. The Fund has adopted trading strategies that will attempt to
minimize capital gains and keep portfolio turnover low. This can help reduce
your current capital gains taxes. See "Investment Objective and Policies."
SHAREHOLDER SERVICES - INVESTOR SHARES. Schwab's professional representatives
are available toll-free 24 hours a day at 800-2 NO-LOAD to service your account,
or you can visit or call your local Schwab office during regular business hours.
SHAREHOLDER SERVICES - E.SHARES(TM). The e.Shares are available only to clients
of Schwab Institutional and the Trust Company and to certain tax-advantaged
retirement plans that can execute their trading and information requests through
SchwabLink(TM). Transactions in the e.Shares are not available by telephone, by
mail or in person. See "Investing in Our Fund."
CONVENIENT REPORTING. You receive regular Schwab statements that combine all
your investment activity, including mutual funds, in one report.
FREE AUTOMATIC INVESTMENT PLAN. Schwab's free Automatic Investment Plan allows
you to make regular investments in the Investor Shares in amounts and at
intervals that you select. For more details, see "Investing in Our Fund -
Schwab's Automatic Investment Plan."
RETIREMENT PLANS. Schwab offers tax-advantaged retirement plans for which the
Fund may be an appropriate investment. For more information, see "Matching the
Fund to Your Investment Needs - Tax Advantaged Retirement Plans."
MATCHING THE FUND TO YOUR INVESTMENT NEEDS
We designed the Fund to provide you exposure to the growth potential of the
stock market. In the past, common stocks have outperformed most other securities
over time. The Fund may be appropriate for you if you have a long-term
investment horizon and want the growth potential of stock investments. Typical
uses for the Fund may include saving for retirement or college funding. The Fund
is also appropriate for use in IRAs and other retirement plans. A broadly-based
stock index fund, like the Fund, is also often used as a component of an asset
allocation plan. While the Fund is not a complete investment plan, you may use
it as a "core" equity investment around which you tailor your overall plan.
The Fund offers two different classes of shares - one of which may be
appropriate for you. Although both classes invest in the same portfolio of
stocks, the classes' operating expense ratios, and therefore their return and
per
5
<PAGE> 38
share net asset value, are different. The lower operating expense ratio of the
e.Shares(TM) reflects the substantially lower costs of entering transactions and
communicating with the Fund electronically through SchwabLink(TM).
The e.Shares are available only to clients of Schwab Institutional and the Trust
Company and to certain tax-advantaged retirement plans that can execute their
trading and information requests through SchwabLink. Transactions in e.Shares
are not available by telephone, by mail or in person.
The Investor Shares are appropriate for investors who desire to transact or
communicate with the Fund in person, by telephone or by mail, or who do not want
to be limited to using a computer for these purposes.
We seek investment results that track, rather than beat, the total return of the
S&P 500(R). Thus, we do not "actively" choose investments in the same way as
actively managed stock funds do. Those funds choose investments based on
economic, financial and market factors and investment judgment. In contrast, we
use a "passive" or "indexing" strategy. This means that we buy and sell stocks
primarily to match the Index, invest cash from purchases or obtain cash for
redemptions of Fund shares. The Fund and the Investment Manager normally do not
judge the merits of any particular stock. Thus, you should not expect our Fund
to match the potential returns of funds that seek growth aggressively.
We designed the Fund for long-term investors. You should not use the Fund to
speculate on short-term market movements. Doing so can disrupt our investment
strategy and operations. It also raises costs for other Fund investors. As a
result, we may refuse any purchase or exchange order that we deem to be
disruptive to the Fund or its investments.
TAX-ADVANTAGED RETIREMENT PLANS. Schwab offers tax-advantaged retirement plans
for which the Fund may be an appropriate investment. Schwab's retirement plans
allow participants to defer taxes while helping them build their retirement
savings. The Schwab IRA is a retirement plan with a wide choice of investments
offering individuals with earned income the opportunity to compound earnings on
a tax-deferred basis. The Schwab Keogh is a tax-advantaged plan for
self-employed individuals and their employees that permits the employer to make
annual tax-deductible contributions of up $30,000. Schwab also offers Corporate
Retirement Plans to help a company attract and retain valuable employees. Call
your local Schwab office or 800-2 NO-LOAD, 24 hours a day, for more information.
RISK CONSIDERATIONS. Because we invest in substantially all of the 500 common
stocks composing the Index, investing in our Fund will expose you to stock risk.
Prices of many stocks or of a single stock may decline over short or even long
periods. However, diversity of stock holdings tends to reduce stock risk.
Because we own so many different stocks, our Fund is less sensitive to the
decline of any one of them than if it invested in fewer stocks. Their wide range
of industries also tends to lessen the impact of one industry's decline. Even
so, these factors cannot protect you from all possible losses.
Also, to better track the investment results of the S&P 500(R), we may engage in
certain stock futures contracts and options, which are types of derivative
transactions. Their potential return and risk can vary widely from type to type.
See "Investments and Techniques Used by Our Fund and Related Risks" in this
6
<PAGE> 39
Prospectus and "Investment Securities" in the SAI for details about the
derivatives that we use and the limits on them. You should pay special attention
to these descriptions of derivatives, for these investments carry more risk
potential than the Fund's other investments.
INVESTING IN OUR FUND
You may purchase shares through an account maintained with Schwab or through any
other entity that has been designated by Schwab. The following information
regarding the purchase, exchange and redemption of Investor Shares and
e.Shares(TM) through a Schwab account relates solely to transactions through
Schwab accounts and should not be read to apply to transactions through other
designated entities. For more information, see "Purchase and Redemption of
Shares" in the SAI.
NEW INVESTORS TO SCHWAB need to open a Schwab account by completing and signing
an account application. Mail it, together with your check, to the address
indicated on the application. You may also open your account in person as
described on page 8.
EXISTING SCHWAB INVESTORS must have funds in their Schwab account to buy shares
in the Fund. Schwab will charge your account a $15 service fee for any check
returned because of insufficient or uncollected funds or because of a stop
payment order.
Within your Schwab account, you have access to other investments available at
Schwab, such as stocks, bonds and other mutual funds. The Securities Investor
Protection Corporation (known as "SIPC") will provide account protection in an
amount up to $500,000 for your securities, including Fund shares, that you hold
in a Schwab account. Of course, SIPC account protection does not protect you
from share price fluctuations.
SCHWAB ACCOUNT AND FUND MINIMUMS AND FEES
- ------------------------------------------------------
<TABLE>
<S> <C>
SCHWAB ACCOUNT MINIMUM BALANCE
Brokerage account................. $1,000
Custodial account................. $500
FUND INITIAL PURCHASE
Brokerage account................. $1,000
IRA, other retirement plan and
custodial account.............. $500
FUND ADDITIONAL PURCHASE
Any type of account............... $100
</TABLE>
Schwab reserves the right to waive these minimums for clients of Schwab
Institutional and the Trust Company and for certain tax-advantaged retirement
plans.
Schwab will charge a $7.50 fee at the end of each quarter on Schwab brokerage
accounts that have remained below the minimum for the entire quarter. Schwab
will waive the fee if there has been at least one commissionable trade within
the last 6 months or if the shareholder's combined account balances at Schwab
total $10,000 or more. Schwab currently imposes no fee for opening a Schwab
One(R) account with a minimum balance of $5,000. Schwab will charge Schwab One
accounts with balances below $5,000 a $5 per month fee if there have been fewer
than 2 commissionable trades within the last 12 months.
The Fund, in its sole discretion and without prior notice to you, reserves the
right to reject orders to buy shares, to change the minimum investment
requirements and to withdraw or suspend any part of the offering made by this
7
<PAGE> 40
Prospectus. Orders to buy shares must be accepted by the Fund to be effective
and are not binding until the Fund confirms or accepts them in writing.
HOW TO BUY INVESTOR SHARES
You may place Investor Shares purchase and redemption orders as well as request
exchanges at any one of over 200 Schwab offices nationwide or by calling 800-2
NO-LOAD, where trained representatives are available to answer questions about
the Investor Shares and your account. The privilege to initiate transactions by
telephone, as discussed below, is available automatically through your Schwab
account.
Schwab also enables you to execute your trading requests through electronic
products and services such as StreetSmart(TM), The Equalizer(R), Telebroker(R)
and the World Wide Web.
We will follow reasonable procedures to confirm that your telephone instructions
are genuine. If we do not follow reasonable procedures to confirm that your
telephone order is genuine, we may be liable for any losses you may suffer from
unauthorized or fraudulent orders. These procedures may include requiring a form
of personal identification, providing written confirmation of your telephone
instructions and recording all telephone transactions. You should be aware that
telephone transactions may be difficult to implement during periods of drastic
economic or market changes. If you experience difficulties in reaching us by
telephone, you can mail your orders or place them in person as set forth below.
- ------------------------------------------------------
Whether by phone, by mail, electronically or in person, you must always provide
the following information:
- - your Schwab account number.
- - the name of the Fund and class of shares you wish to buy.
- - the amount you wish to invest.
BY PHONE
- - Call 800-2 NO-LOAD.
- - Place a buy order for your account.
- - TDD users may contact Schwab at 800-345-2550, 24 hours a day.
BY MAIL
- - Include a letter of instruction with the information requested above, signed
by one of the registered account holders in the exact form specified on the
account.
- - Make your check payable to Charles Schwab & Co., Inc.
- - Mail to 101 Montgomery Street, San Francisco, CA 94104 or your local Schwab
office.
- - Once you mail your letter, you may not modify or cancel your instructions.
ELECTRONICALLY
- - Refer to product information on StreetSmart(TM), The Equalizer(R),
TeleBroker(R) and SchwabLink(TM) for details.
World Wide Web address: http://www.schwab.com
IN PERSON
- - Deposit your check at your local Schwab office.
- - For the Schwab office nearest you, call 800-2 NO-LOAD.
BY WIRE
- - Contact your local Schwab office for instructions.
AUTOMATICALLY (INVESTOR SHARES ONLY)
- - Use Schwab Automatic Investment Plan.
- - Sign up for this service when opening your account.
- ------------------------------------------------------
8
<PAGE> 41
SCHWAB'S AUTOMATIC INVESTMENT PLAN ("AIP") allows you to make periodic
investments in the Investor Shares and other non-money market SchwabFunds(R)
(and certain other funds available through Schwab) automatically and
conveniently. You can make automatic investments in any amount, from $100 to
$50,000, once you meet the Fund's investment minimum. Automatic investments are
made from your Schwab account, and you may select from the following methods to
make automatic investments: using the uninvested cash in your Schwab account;
using the proceeds of redemption of shares of the Schwab Money Fund linked to
your Schwab account; or using the Schwab MoneyLink(R) Transfer Service. For more
detailed information about this service or to establish your AIP, call your
local Schwab office or 800-2 NO-LOAD, 24 hours a day.
As long as you are purchasing Investor Shares through AIP, all distributions
paid by the Investor Shares must be reinvested in additional Investor Shares and
may not be received in cash.
HOW TO BUY E.SHARES(TM)
The e.Shares are available to clients of Schwab Institutional and the Trust
Company and to certain tax-advantaged retirement plans that can communicate with
Schwab through SchwabLink(TM). Transactions in e.Shares are not available by
telephone, by mail or in person.
To enter your transactions, follow the specific transaction instructions in the
SchwabLink user manual.
In the event you experience electronic or mechanical difficulties with
SchwabLink, you should contact the Schwab Institutional trading desk at
800-367-5198 for assistance.
HOW TO SELL OR EXCHANGE SHARES
You can sell your Investor Shares and your e.Shares at any time as described
below. When you sell your shares, you may receive more or less than the amount
you invested.
The exchange privilege allows you to exchange your SchwabFunds shares for shares
of any other SchwabFunds class or series available to investors in your state if
your purchase meets the Fund's eligibility requirements. Thus, you can
conveniently modify your investments if your goals or market conditions change.
An exchange of shares will be treated as a sale of the shares for federal income
tax purposes. Note that you must meet the minimum initial or subsequent
investment requirements applicable to the shares you wish to receive in an
exchange. The Fund reserves the right on 60 days' written notice to modify,
limit or terminate the exchange privilege.
HOW TO SELL OR EXCHANGE INVESTOR SHARES
- ------------------------------------------------------
Whether by phone, by mail, electronically or in person, the following
information is always needed:
- - your Schwab account number.
- - the number of shares you wish to sell or exchange.
- - the name of the Fund and class (if applicable) from which you wish to sell or
exchange shares.
- - if exchanging shares, the distribution option you select.
9
<PAGE> 42
BY PHONE
- - Call 800-2 NO-LOAD.
- - Place a sell or exchange request for your account.
- - TDD users may contact Schwab at 800-345-2550, 24 hours a day.
BY MAIL
- - Include a letter of instruction with the information requested above, signed
by one of the registered account holders in the exact form specified on the
account.
- - Mail to 101 Montgomery Street, San Francisco, CA 94104 or your local Schwab
office.
- - Once your letter is mailed, you may not modify or cancel your instructions.
ELECTRONICALLY
- - Refer to product information on how to sell or exchange Investor Shares
electronically using StreetSmart(TM), The Equalizer(R), TeleBroker(R) and
SchwabLink(TM) for details. World Wide Web address: http://www.schwab.com
IN PERSON
- - Place your sell or exchange request at your local Schwab office.
- - For the Schwab office nearest you, call 800-2 NO-LOAD.
- ------------------------------------------------------
HOW TO SELL OR EXCHANGE E.SHARES(TM)
- ------------------------------------------------------
To sell or exchange your e.Shares through SchwabLink, the following information
is always needed:
- - your SchwabLink master account number and subaccount number.
- - the name of the Fund and class (if applicable) from which you wish to sell or
exchange shares.
- - the number of shares you wish to sell or exchange.
- - if exchanging shares, the distribution option you select.
- ------------------------------------------------------
To enter your transaction, follow the specific transaction instructions in the
SchwabLink user manual. Transactions in e.Shares are not available by telephone,
by mail or in person. In the event you experience electronic or mechanical
difficulties with SchwabLink, you should contact the Schwab Institutional
trading desk at 800-367-5198 for assistance.
Payment for redeemed shares will be credited directly to your Schwab account no
later than 7 days after Schwab's Mutual Fund Transfer Agent or its authorized
agent receives your sell instructions in proper form. Proceeds will then be held
in your Schwab account or mailed to you depending on the account standing
instructions you have selected. For information on how to wire funds from your
Schwab account to your bank, contact your local Schwab office.
If you purchased shares by check, your sales proceeds may be held in your Schwab
account until your check clears (which may take up to 15 days). Depending on the
type of Schwab account you have, your money may earn interest during any holding
period.
The Fund may suspend redemption rights or postpone payments when trading on the
New York Stock Exchange (the "Exchange") is restricted or is closed for any
reason other than its customary weekend or holiday closings, emergency
circumstances as determined by the SEC exist or for any other circumstances as
the SEC may permit. The Fund may also elect to invoke a 7-day period for cash
settlement of individual redemption requests in excess of $250,000 or 1% of the
Fund's net
10
<PAGE> 43
assets, whichever is less. (See "Purchase and Redemption of Shares" in the SAI.)
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is to seek to track the price and dividend
performance (total return) of common stocks of U.S. companies, as represented by
the S&P 500(R).
The Fund seeks investment results that track, rather than beat, the total return
of the S&P 500. Thus, it does not "actively" choose investments in the same way
as actively managed stock funds do. Those funds choose investments based on
economic, financial and market factors and investment judgment. In contrast, the
Fund uses a "passive" or "indexing" strategy. It buys and sells stocks primarily
to match the Index, invest cash from Fund share purchases or obtain cash for
redemptions of Fund shares. Thus, the Fund and the Investment Manager normally
do not judge the merits of any particular stock.
Under normal market conditions, the Fund invests at least 80% of its total
assets in Index Stocks. The Fund generally tries to match its Index Stock
holdings to those Stocks' weightings in the Index. In extraordinary
circumstances, the Fund may exclude an Index Stock from its holdings or include
a similar stock in its place if it believes that doing so will help achieve its
investment objective. The Fund may purchase securities of companies with which
it may be affiliated to the extent that these companies are represented in the
Index.
TAX EFFICIENCY. The Fund is managed to minimize the Fund's current realized
capital gains. This feature can make a real difference in your after-tax return,
especially if you are in a high tax bracket. The Fund has adopted a number of
policies that help reduce its portfolio turnover ratio and minimize the level of
current realized capital gains. These policies include selling the highest tax
cost securities first, not automatically rebalancing the portfolio to reflect
changes in the Index and trading only round-lots or large blocks of securities.
These policies will be utilized only to the extent they do not have a material
effect on the Fund's ability to track the performance of the Index.
Although the Fund focuses on Index Stocks, it may buy and sell other equity
securities and other types of instruments. It also buys and sells short-term
debt securities for cash management purposes. In addition, the Fund may use
options and futures contracts to adjust its correlation to the S&P 500(R).
The Fund typically will not track the performance of the S&P 500 perfectly. Fund
costs, fees and expenses impair the Fund's correlation, as do the amounts and
timing of Fund cash inflows and outflows. Changes in the securities markets can
also inhibit the match. The Fund's strategy of minimizing capital gains and
portfolio turnover may also cause differences. Over the long term, the Fund will
attempt to achieve a correlation between its performance and that of the S&P 500
of 0.9 or better. A figure of 1.0 would indicate perfect correlation. The
Investment Manager monitors performance of the Fund and the S&P 500 on a regular
basis. In the unlikely event that the Fund cannot achieve a long-term
correlation of 0.9 or better, the Board of Trustees will consider alternative
arrangements.
11
<PAGE> 44
INVESTMENTS AND TECHNIQUES
USED BY OUR FUND AND
RELATED RISKS
In seeking its objective, the Fund may buy and sell the investments and employ
the techniques described below. Please see the SAI for more details. The Fund's
investment policies and restrictions apply at the time the Fund makes an
investment. Except with respect to futures and options, later changes, such as
changed market values, do not require the Fund to sell the investment even if
the Fund could not then make the same investment.
The Fund's investment objective is fundamental and cannot be changed without
shareholder approval. The Fund's investment policies and techniques discussed
below are non-fundamental, unless otherwise noted. See "Investment Restrictions"
in the SAI for details. Because any investment involves risk, we cannot
guarantee achieving the Fund's objective.
EQUITY SECURITIES. Equity securities are ownership interests in the net worth of
a corporation. They include common stocks, preferred stocks, convertible
securities and warrants. In the past, they have outperformed most other
securities over time, though their prices can be volatile in the short term.
Market conditions or other company, political and economic news often can cause
large changes in a stock's price for the short term or long term. Smaller
company securities are especially sensitive to these factors.
SHORT-TERM DEBT SECURITIES. While the Fund tries to remain invested in Index
Stocks as fully as possible, it must manage cash flows resulting from the
purchase and sale of Fund shares. Thus, the Fund may also invest in U.S. Dollar
denominated short-term bonds and money market instruments. The Fund may buy debt
securities of or guaranteed by the U.S. government, its agencies or related
bodies. It may also use certificates of deposit, time deposits and bankers'
acceptances. The Fund may also buy commercial paper if the commercial paper has
one of an NRSRO's top two ratings or has comparable quality if it is unrated.
The Fund may enter into repurchase agreements using any of these debt
securities. It may also buy and sell shares of other mutual funds to manage its
cash flows.
THE FUND MAY USE FUTURES CONTRACTS AND OPTIONS. To track the Index in an
efficient and cost-effective manner, the Fund may use stock futures contracts
and options, which are types of derivative transactions. Specifically, the Fund
may enter into futures contracts and options on futures contracts provided that
the aggregate deposits required on these contracts do not exceed 5% of the
Fund's total assets. In addition, certain provisions of the Internal Revenue
Code of 1986, as amended (the "Code"), may limit the Fund's use of futures
contracts and options.
The Fund may use futures contracts and options for several reasons: to more
closely track the performance of the S&P 500(R); to reallocate the Fund's assets
among Index Stocks while minimizing transaction costs; to maintain cash reserves
while simulating full investment; to facilitate trading; or to seek higher
investment returns or simulate full investment when a futures contract is priced
more attractively or is otherwise considered more advantageous than the
underlying security or index.
Trading costs for futures contracts and options often are less than the costs of
direct investments. Thus, the Fund may use these instruments to reduce the
Fund's total trading costs.
12
<PAGE> 45
Also, futures contracts only require a small initial margin deposit. That way,
the Fund is often able to keep a cash reserve for future redemptions but in
effect remain fully invested. The Fund sells futures contracts upon net
redemptions to avoid leverage.
Futures contracts and options pose certain risks. The values of futures
contracts and options may not perfectly track changes in the Index Stocks'
holdings. The secondary market for a futures contract may also not be liquid,
resulting in the Fund's inability to close a futures position before it settles.
The Fund seeks to avoid the risk of tracking error by careful selection of the
futures and options to match the Fund's holdings. It also buys and sells on a
national exchange that has an active and liquid secondary market.
The risk of loss in trading futures contracts in some strategies can be
substantial. Low required margin deposits and the extremely high degree of
leverage of some contracts contribute to this risk. Thus, a relatively small
price change in a security or index linked to a futures contract may result in
immediate and substantial loss (or gain). When investing in futures contracts,
the Fund will segregate cash, cash-equivalents or liquid, high-quality debt
instruments in the amount of the underlying obligation.
Since the Fund will not use futures and options contracts for the purposes of
leveraging its portfolio, the Investment Manager does not believe that the Fund
is subject to the degree of risk frequently associated with futures and options
transactions.
ILLIQUID SECURITIES. As a fundamental policy, the Fund may invest up to 10% of
its net assets, in illiquid securities. Generally, an "illiquid security" is any
security that cannot be disposed of promptly and in the ordinary course of
business at approximately the amount at which the Fund has valued the
instrument.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. The Fund may purchase securities on
a "when-issued" or "delayed delivery" basis. When-issued or delayed delivery
securities are securities purchased for future delivery at a stated price and
yield. Generally, the Fund will not pay for securities or start earning interest
on them until the Fund receives them. Securities purchased on a when-issued or
delayed delivery basis are recorded as assets. During the period between the
agreement date and the settlement date, the value of such securities may change
as the prices of securities in the stock market increase or decrease or as
interest rates change. Default by the other party to the agreement may result in
a loss to the Fund.
REPURCHASE AGREEMENTS. The Fund may engage in repurchase agreements. In a
repurchase agreement, the Fund buys a security at one price and agrees to sell
it back at a higher price. In the event of a bankruptcy or other default of a
repurchase agreement counterparty, the Fund may incur expenses in enforcing its
rights and could experience losses, including a decline in the value of the
underlying securities and loss of income.
BORROWING POLICY. The Fund may borrow money only for temporary purposes to meet
redemption requests that it cannot otherwise meet without immediately selling
portfolio securities. The Fund may borrow up to one-third of its total assets
and pledge up to one-third of its total assets to secure such borrowings. The
Fund may not borrow to leverage. The Fund's borrowing and pledging policies are
fundamental.
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<PAGE> 46
SECURITIES LENDING: As a means of increasing income, the Fund may lend
securities it owns worth up to one-third of its total assets. Any loan must be
fully collateralized by the borrower at all times. If the borrower defaults or
becomes insolvent, the Fund may incur expenses or losses. The Fund may not
recover the loaned securities immediately and may even lose them entirely.
INVESTMENT COMPANIES. The Fund may buy shares of other investment companies,
including those managed by CSIM, the Investment Manager. These purchases will be
subject to the limitations imposed by the 1940 Act, and the Fund will make these
purchases only after obtaining any required regulatory approvals. Investment by
the Fund in other investment companies may cause you to bear duplicative fees
for certain services.
PORTFOLIO TURNOVER. The Fund anticipates that its annual portfolio turnover rate
will not exceed 100%.
IMPORTANT INFORMATION ABOUT
YOUR INVESTMENT
DIVIDENDS AND OTHER DISTRIBUTIONS
DISTRIBUTION OPTIONS. When you first buy shares in our Fund, you may choose one
of the three following distribution options:
1. AUTOMATIC REINVESTMENT: We will reinvest all distributions in additional
shares of the Fund. The Fund chooses this option automatically unless you
specify otherwise. If you are purchasing Investor Shares through Schwab's AIP,
you must choose this distribution option for this Fund.
2. CASH DIVIDENDS/REINVESTED CAPITAL GAINS: We will pay you income dividends in
cash and invest capital gains for you in additional Fund shares.
3. ALL CASH: We will pay you both income dividends and any capital gains.
The Fund reinvests distributions at the NAV determined on the declaration date.
We credit your cash distributions to your Schwab account on the date
distributions are payable. We leave them there or mail them to you, depending on
your standing account instructions.
To change the distribution option you have selected, call your local Schwab
office or 800-2 NO-LOAD.
The Fund intends to distribute substantially all of its net investment income
and net capital gain, if any each year annually in December, as determined by
the Board of Trustees. You should be aware that your per share equity in
undistributed net investment income and net capital gains may be diluted by the
continuing purchases and redemptions of the Fund's shares. We will automatically
reinvest all your distributions in additional class shares unless you elect
otherwise.
FEDERAL INCOME TAX INFORMATION
The following is only a brief summary for general information purposes of how
some of the federal income tax laws affect you and the Fund. Thus, you should
consult with your own tax adviser about your particular tax situation.
The Fund intends to qualify as a regulated investment company under the Code. To
qualify, the Fund will distribute substantially all of its net investment
taxable income and net capital gain (if any) each year. In addition, we will
meet certain other Code requirements. As a regulated investment company, the
Fund will pay no federal income taxes insofar as its
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<PAGE> 47
earnings are distributed to its shareholders. Income we receive from certain
foreign sources, however, may be subject to foreign income taxes and
withholding.
Dividends that the Fund pays to you from net investment income are generally
taxable to you as ordinary income. So are distributions of the Fund's net
short-term capital gains in excess of any net long-term capital losses.
Distributions that the Fund designates as long-term capital gains (net of
capital losses) are generally taxable to you as long-term capital gains no
matter how long you own your Fund shares. These tax rules apply whether
distributions are received in cash or reinvested.
If you are not subject to tax on your income, you may have different tax
treatment. In general, you will not pay tax on the Fund's distributions to you.
You should be aware that an exchange of Fund shares for shares of other
SchwabFunds(R) will be treated as a taxable event for federal income tax
purposes. However, an exchange between the Investor Shares and the e.Shares(TM)
should not be treated as a taxable event.
We will provide you with a record of all distributions, purchases and sales on
your regular Schwab brokerage account statement. Each year we will notify you of
the federal income tax treatment of all distributions made that year to your
account.
HOW WE DETERMINE THE PRICE OF YOUR SHARES
The price of a single Investor Share or e.Share of the Fund on any given day is
the net asset value per share of that class of shares. We determine NAVs each
Business Day at the close of trading on the Exchange, generally at 4:00 p.m.
(Eastern time). We determine the price of each class of shares by first valuing
the total assets of the Fund attributable to that class, then subtracting that
class's share of any liabilities and dividing the balance by the number of
shares outstanding of that class.
The Fund values its portfolio securities based on market quotes if they are
readily available. If they are not readily available, the Investment Manager
assigns fair values pursuant to guidelines adopted in good faith by the Board of
Trustees. The Board of Trustees regularly reviews these values.
Purchase or redemption orders and exchange requests will be executed at the NAV
next determined after receipt by Schwab's Mutual Fund Transfer Agent or its
authorized agent.
HOW OUR FUND REPORTS PERFORMANCE
From time to time the Fund may advertise the total return and yield of each
class of shares. These figures reflect past results and are not intended to
predict future performance. We often will compare our performance to the S&P
500(R) and other indices or combination of indices.
Total return measures the percentage change in the value of an investment in a
class of shares over time. It reflects all share price movements, distributions
and expenses. It assumes the reinvestment of all distributions. Average annual
total return is a measure of the yearly changes in the value of the investment.
It is the constant compound rate of return, which, if applied to the investment
each year, would result in the actual total return over that time. Other total
return figures we show may differ. We may base them on non-standard periods. We
may also show aggregate or cumulative returns.
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<PAGE> 48
Yield refers to the income generated by an investment in a class of shares over
a given period. It is expressed as an annualized percentage rate. Each class of
shares calculates yields according to an SEC standard for all stock and bond
funds. Because this differs from other accounting methods, each class of shares
may quote a yield not equal to the income that class actually pays to you.
The Investor Shares and the e.Shares(TM) are subject to different expenses. As a
result, their performances will differ.
ANNUAL AND SEMI-ANNUAL REPORT MAILINGS
Twice a year, the Fund provides you a report showing the performance of the Fund
and each class of its shares and outlining its investments. To reduce mailing
costs, we combine these mailings by household. If a household has multiple
accounts and the same record address for all the accounts, we send mailings for
all accounts at that address in a single package. If you do not want to combine
mailings for your account, please write to SchwabFunds(R) at the address on the
front of this Prospectus. To request a free copy of the Fund's Annual or
Semi-Annual Reports, call your local Schwab office or 800-2 NO-LOAD.
ORGANIZATION AND
MANAGEMENT OF OUR FUND
MANAGEMENT FUNCTIONS AND RESPONSIBILITIES
GENERAL OVERSIGHT OF OUR FUND. The Board of Trustees and officers meet regularly
to review the Fund's investments, performance, expenses and other business
affairs.
THE INVESTMENT MANAGER. The Investment Manager, Charles Schwab Investment
Management, Inc. or CSIM, manages the Fund's business affairs. Its actions are
subject to the authority of the Board of Trustees and officers of the Trust. The
Investment Manager also manages the Fund's investments and places all orders for
the Fund's securities transactions. The Investment Manager, founded in 1989, is
a wholly owned subsidiary of The Charles Schwab Corporation. It also acts as
investment manager and administrator to the mutual funds in The SchwabFunds
Family(R), a family of 26 mutual funds. As of September 11, 1996, the
SchwabFunds(R) had aggregate net assets in excess of $39 billion.
Geri Hom is the Fund's portfolio manager. She joined Schwab in March 1995 as
Portfolio Manager - Equities and currently manages the four Schwab index funds
and the equity portions of the three Schwab Asset Director(R) Funds with
combined assets of over $2.5 billion. For four years before joining Schwab, she
was a Principal for Wells Fargo Nikko Investment Advisors. For the seven years
previous to that, she was Vice President and Manager of the Domestic Equity
Portfolio Management Group for Wells Fargo Nikko.
Stephen B. Ward, Senior Vice President and Chief Investment Officer, also
participates in the management of the Fund. Before April 1991, Mr. Ward was Vice
President and Portfolio Manager for Federated Investors.
TRANSFER AGENT AND SHAREHOLDER SERVICES. Schwab serves as the Shareholder
Services Agent and Transfer Agent for the Fund. Schwab was established in 1971
and is America's largest discount broker. Schwab provides low-cost securities
brokerage and related financial services to approximately 3.3 million active
customer accounts and has over 230 branch offices. Schwab also offers convenient
access to financial information services and provides
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<PAGE> 49
products and services that help investors make investment decisions. Schwab is a
wholly owned subsidiary of The Charles Schwab Corporation. Charles R. Schwab is
the founder, Chairman and Chief Executive Officer, and a Director of The Charles
Schwab Corporation. As a result of his beneficial ownership interests in and
other relationships with The Charles Schwab Corporation and its affiliates, Mr.
Schwab may be deemed to be a controlling person of Schwab and the Investment
Manager.
OPERATING FEES AND EXPENSES
The Investment Manager provides investment management services under the terms
of its Investment Advisory and Administration Agreement with the Trust. For
these services, it is entitled to a graduated annual fee payable monthly from
the Fund. The rate is 0.36% of the first $1 billion of the Fund's average daily
net assets; 0.33% of the next $1 billion; and 0.31% of net assets over $2
billion.
The Investment Manager guarantees that, through at least February 28, 1997, the
management fees for each class of the Fund's shares will not exceed 0.13% of the
Fund's average daily net assets.
For its services as Transfer Agent, Schwab is entitled to receive an annual fee
from each class of shares of 0.05% of its average daily net assets. In addition,
for shareholder services provided, Schwab is entitled to receive from the
Investor Shares and the e.Shares(TM) an annual fee of 0.20% and 0.05%,
respectively, of the average daily net assets of that class of shares. Schwab
may waive certain expenses incurred by each class of shares of the Fund for
these services in order to limit its ratio of operating expenses to average net
assets.
The Investment Manager and Schwab also guarantee that, through at least February
28, 1997, total operating expenses of the Fund allocable to the Investor Shares
and the e.Shares will not exceed 0.49% and 0.28%, respectively, of the average
daily net assets of that class of shares. For purposes of this guarantee,
"operating expenses" do not include interest expenses, taxes, foreign taxes paid
or withheld and capital items such as costs of purchase or sale of portfolio
securities, including brokerage fees or commissions. The effect of this
voluntary expense limitation is to maintain or increase each class's total
return to shareholders.
Schwab serves as the distributor for the Fund but receives no compensation for
this service.
OTHER EXPENSES. The Trust pays the expenses of the Fund's operations. These
expenses include the fees and expenses for independent auditors, legal counsel
and custodians; the cost of maintaining books and records of account;
registration fees; the fees and expenses of qualifying the Trust and its shares
for distribution under federal and state securities laws; and industry
association membership dues. The Fund seeks to keep transaction costs and other
expenses low. Schwab may absorb or reimburse certain expenses incurred by each
class of shares of the Fund in order to limit its ratio of operating expenses to
average net assets.
These expenses will generally be allocated among the Trust's investment
portfolios or classes on the basis of relative net assets at the time the
expense is incurred. However, expenses directly attributable to a particular
Fund or class are charged to that Fund or class. The differing expenses
applicable to the Investor Shares and the e.Shares(TM) of the Fund
17
<PAGE> 50
will cause the performance of the classes to differ.
PORTFOLIO BROKERAGE. When placing orders for the Fund's securities transactions,
the Investment Manager uses its judgment to obtain the best price and execution.
It considers the full range and quality of brokerage services available in
making these determinations. For securities transactions in which Schwab is not
a principal, the Investment Manager may use Schwab or other qualified affiliated
brokers or dealers to execute the Fund's transactions. To do so, it must
reasonably believe that commissions (or prices) paid to and transaction quality
received from Schwab or other qualified affiliated brokers or dealers will be at
least comparable to those available from qualified non-affiliated brokers or
dealers.
OTHER INFORMATION ON THE OPERATION OF OUR FUND
The Trust is a business trust formed under the laws of Massachusetts on May 7,
1993. It may issue an unlimited number of shares of beneficial interest in one
or more Series or classes. Currently it offers shares of ten Series.
The Board of Trustees may authorize the issuance of shares of additional Series
or classes if it deems it desirable. Shares within each Series have equal,
noncumulative voting rights and have equal rights as to distributions, assets
and liquidation of such Series except to the extent that such voting rights or
rights as to distributions, assets and liquidation vary among classes of a
Series.
The Fund's two classes of shares represent ownership of the same investment
portfolio. The differing expenses applicable to the two classes cause their
distributions and share prices to differ.
Due to the relatively high cost of maintaining accounts with smaller holdings,
the Fund reserves the right to redeem your shares if, as a result of
redemptions, the aggregate value of your account drops below the Fund's $500
minimum balance requirement ($250 in the case of IRAs, other retirement plans
and custodial accounts). You will be given 30 days' advance written notice and a
chance to increase your Fund balance to the minimum requirement before the Fund
redeems your shares. Fund shares will be redeemed automatically should the
Schwab account in which they are carried be closed.
SHAREHOLDER MEETINGS. The Trust is not required to hold annual shareholders'
meetings and does not intend to do so. The Trust may, however, hold special
meetings in connection with certain matters. These include changing a Fund's
fundamental policies, electing or removing Trustees or approving or amending any
investment advisory agreement. In addition, shareholders may remove a Trustee at
a special meeting called upon written request of shareholders owning in the
aggregate at least 10% of the outstanding shares of the Trust.
YOUR VOTING RIGHTS. If we were to make changes to the Fund's management or
fundamental policies, we would ask you to vote as a shareholder. If we hold a
meeting and you cannot attend, you can vote by proxy. Before the meeting, the
Fund will send you proxy materials that explain the issues to be decided and
include a voting card for you to return. Shareholders have one vote for each
share owned. Unless permitted by the 1940 Act, shareholders will vote by Series
and not in the aggregate. For example, when voting to approve an investment
advisory agreement for a Series, only shareholders of that Series may vote. When
voting to elect Trustees, share-
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<PAGE> 51
holders of all the Series vote in the aggregate. In addition, holders of each
class of shares will vote exclusively as a class on any matter relating solely
to their arrangement as a class and on any matter in which the interest of that
class differs from the interest of any other class in that Fund.
SHARE CERTIFICATES. To assist in minimizing administrative costs, share
certificates will not be issued. Records regarding share ownership are
maintained by the Transfer Agent.
S&P 500(R) LICENSE. The Fund is not sponsored, endorsed, sold or promoted by
Standard & Poor's ("S&P"). S&P makes no representation or warranty, express or
implied, to the shareholders of the Fund or any member of the public regarding
the advisability of investing in securities generally or in the Fund
particularly or the ability of the S&P 500 Index to track general stock market
performance. S&P's only relationship to the Fund is the licensing of certain
trademarks and trade names of S&P and of the S&P 500 Index, which is determined,
composed and calculated by S&P without regard to the Fund. S&P has no obligation
to take the needs of the Fund or its shareholders into consideration in
determining, composing or calculating the S&P 500 Index. S&P is not responsible
for and has not participated in the determination of the prices and amount of
Fund shares, the timing of the issuance or sale of Fund shares or in the
determination or calculation of the equation by which the Fund's shares are to
be converted into cash. S&P has no obligation or liability in connection with
the administration, marketing or trading of the Fund's shares.
S&P does not guarantee the accuracy and/or the completeness of the S&P 500 Index
or any data included therein, and S&P shall have no liability for any errors,
omissions or interruptions therein. S&P makes no warranty, express or implied,
as to results to be obtained by the Fund, its shareholders or any other person
or entity from the use of the S&P 500 Index or any data included therein. S&P
makes no express or implied warranties and expressly disclaims all warranties of
merchantability or fitness for a particular purpose or use with respect to the
S&P 500 Index or any data included therein. Without limiting any of the
foregoing, in no event shall S&P have any liability for any special, punitive,
indirect or consequential damages (including lost profits), even if notified of
the possibility of such damages.
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GLOSSARY OF IMPORTANT TERMS
ANNUALIZED: calculated to represent a year; a statement produced by calculating
financial results covering less than a year to show what would happen if the
results were hypothetically extended to cover an entire year.
BOND: a debt obligation that requires the issuer to pay a fixed sum of money
each year (the interest payments) until maturity. Upon maturity, the bond comes
due and the principal (the amount borrowed) must be paid. Floating or variable
rate bonds have an interest rate that rises or falls if general interest rates
or some other security (such as Treasury bills) rises or falls.
BUSINESS DAY: any day the New York Stock Exchange is open for business. A
Business Day normally begins at 9:30 a.m. (Eastern time) when the Exchange opens
and usually ends at 4 p.m. (Eastern time) when it closes.
CAPITAL GAIN OR LOSS: the increase or decrease in the value of a security
relative to the original purchase price. A gain is realized when the security
that has increased in value is sold. An unrealized gain or loss occurs when the
value of a security increases or decreases, but the security is not sold. If a
security is held for more than 12 months and then sold at a profit, that profit
is a realized long-term capital gain. If it is sold at a profit after being held
for less than 12 months, that profit is a realized short-term capital gain.
CODE: the Internal Revenue Code of 1986, as amended.
CSIM: the Fund's Investment Manager, Charles Schwab Investment Management, Inc.,
101 Montgomery Street, San Francisco, CA 94104.
DISTRIBUTION: payment the Fund makes to shareholders. There are two kinds of
distributions: dividends, or the profits (after expenses) from the Fund's
investments, and capital gain distributions.
DIVERSIFIED: under the 1940 Act, a diversified fund generally may not invest
more than 5% of its assets in the securities of any one issuer and may not hold
more than 10% of the voting shares of any one issuer with respect to 75% of the
value of its total assets. Certain minor exceptions apply to this policy, which
are described in the SAI.
FUNDAMENTAL: a policy that cannot be changed without the approval of a majority
of the shareholders of the Fund.
INVESTMENT MANAGER: Charles Schwab Investment Management, Inc. (or CSIM), 101
Montgomery Street, San Francisco, CA 94104.
LARGE COMPANY STOCKS: the stocks of companies with the largest market
capitalizations, i.e., market capitalizations above approximately $1.5 billion.
MARKET VALUE: the total value of a company as represented by the share price
times the number of shares outstanding.
MONEY MARKET INSTRUMENT: short-term liquid debt such as Treasury bills and
commercial paper.
NET ASSET VALUE (NAV): on a per share basis, the value of one share in a fund or
class of a fund. This value is determined by adding the total fund or class
assets, subtracting all liabilities and then dividing the resulting number by
the number of shares outstanding.
1940 ACT: the Investment Company Act of 1940, as amended.
NONCUMULATIVE VOTING RIGHTS: the right of a shareholder to vote only the number
of shares owned at the time of voting.
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<PAGE> 53
NRSRO: nationally recognized statistical rating organization.
PORTFOLIO: the total stocks, bonds and other securities held by an individual
investor, a mutual fund or a financial institution.
RISK: the possibility of losing all or part of an investment, that the value of
an investment will decrease or that there will be little or no return on an
investment.
S&P 500(R): an index of 500 stocks selected, calculated and published by
Standard & Poor's ("S&P"). S&P is neither an affiliate nor sponsor of the Fund,
and inclusion of a stock in the Index does not necessarily imply that it is a
good investment. "Standard & Poor's(R)," "S&P(R)," "S&P 500(R)," "Standard &
Poor's 500" and "500" are trademarks of The McGraw-Hill Companies, Inc. and have
been licensed for use by Schwab Capital Trust.
SAI: the Trust's Statement of Additional Information, as amended from time to
time.
SCHWAB: Charles Schwab & Co., Inc., 101 Montgomery Street, San Francisco, CA
94104.
SCHWABFUNDS(R): Schwab's family of proprietary funds, currently consisting of
the following funds:
Schwab 1000 Fund(R)
Schwab International Index Fund(R)
Schwab Small-Cap Index Fund(R)
Schwab S&P 500 Fund - Investor Shares
Schwab S&P 500 Fund - e.Shares
Schwab Analytics Fund
Schwab OneSource Portfolios - International
Schwab OneSource Portfolios -
Growth Allocation
Schwab OneSource Portfolios -
Balanced Allocation
Schwab Asset Director(R) - High Growth Fund
Schwab Asset Director(R) - Balanced
Growth Fund
Schwab Asset Director(R) - Conservative
Growth Fund
Schwab Short/Intermediate Government
Bond Fund
Schwab Long-Term Government Bond Fund
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 Money Market Fund
Schwab Government Money Fund
Schwab U.S. Treasury Money Fund
Schwab Value Advantage Money Fund(R)
Schwab Tax-Exempt Money Fund -
Sweep Shares
Schwab Tax-Exempt Money Fund -
Value Advantage Shares
Schwab California Tax-Exempt Money Fund -
Sweep Shares
Schwab California Tax-Exempt Money Fund -
Value Advantage Shares
Schwab Retirement Money Fund(R)
Schwab Institutional Advantage Money Fund(R)
Schwab New York Tax-Exempt Money
Fund - Sweep Shares
Schwab New York Tax-Exempt Money
Fund - Value Advantage Shares(TM)
SECURITIES AND EXCHANGE COMMISSION (SEC): established by Congress to administer
the Securities Act of 1933, the Investment Company Act of 1940 and other
securities-related laws.
SHORT-TERM: with respect to the Fund's portfolio investments, maturing in 397
days or less.
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<PAGE> 54
STOCK RISK: the possibility that stock prices in general or particular will
decline over short or even extended periods.
TOTAL RETURN: the change in value of an investment in the Fund over a given
period, assuming reinvestment of any dividends and capital gains. Cumulative
total return reflects actual performance over a stated period of time. Average
annual total return is a hypothetical rate of return that would have produced
the same cumulative total return if performance had been constant over the
entire period. Average annual total returns smooth out variations in
performance; they are not the same as actual year-by-year results.
TRANSFER AGENT: Charles Schwab & Co., Inc., 101 Montgomery Street, San
Francisco, CA 94104.
TRUST: Schwab Capital Trust a no-load, open-end management investment company.
VOLATILITY: a measure of the magnitude and frequency of changes in securities
values. Statistically, volatility is the measure of the spread of the prices or
yields around the mean of the prices or yields.
- ------------------------------------------------------
NO ONE HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY STATEMENTS
ABOUT THIS OFFERING NOT CONTAINED IN THIS PROSPECTUS. IF ANYONE GIVES ANY OTHER
INFORMATION OR MAKES ANY OTHER REPRESENTATIONS, DO NOT RELY ON SUCH INFORMATION
OR REPRESENTATIONS AS HAVING BEEN AUTHORIZED BY THE TRUST OR ITS DISTRIBUTOR.
- ------------------------------------------------------
THIS PROSPECTUS IS NOT AN OFFER IN ANY STATE IN WHICH SUCH AN OFFER MAY NOT
LAWFULLY BE MADE, NOR IS IT AN OFFER TO ANY PERSON TO WHOM SUCH AN OFFER MAY NOT
LAWFULLY BE MADE.
- ------------------------------------------------------
22
<PAGE> 55
THIS SPACE RESERVED FOR YOUR COMMENTS AND QUESTIONS.
A SCHWAB REPRESENTATIVE WILL BE HAPPY TO ASSIST YOU.
<PAGE> 56
-------------------------
SCHWAB
S&P 500 FUND
-------------------------
-------------------------
SCHWABFUNDS(R)
SCHWABFUNDS(R)
101 Montgomery Street
San Francisco, California 94104
2591-1 (10/96) CRS 10268 Printed on recycled paper.
<PAGE> 57
CROSS REFERENCE SHEET
SCHWAB CAPITAL TRUST
<TABLE>
<CAPTION>
Statement of Additional
Part B Item Information Caption
- ----------- -----------------------
<S> <C>
Cover Page Cover Page
Table of Contents Table of Contents
General Information and History General Information; The Benefits of International
Investing; Indexing and the Schwab Index Funds
Investment Objectives and Policies Investment Objectives; Investment Securities;
Investment Restrictions
Management of the Fund Management of the Trust
Control Persons and Principal Holders of Securities Management of the Trust; General Information
Investment Advisory and Other Services Management of the Trust
Brokerage Allocation and Other Practices Portfolio Transactions and Turnover
Capital Stock and Other Securities General Information
Purchase, Redemption and Pricing of Securities Being Share Price Calculation; Purchase and Redemption of
Offered Shares
Tax Status Taxes
Underwriters Management of the Trust
Calculation of Performance Data How the Funds Reflect Performance
Financial Statements Financial Statements
</TABLE>
<PAGE> 58
STATEMENT OF ADDITIONAL INFORMATION
SCHWAB CAPITAL TRUST
101 Montgomery Street, San Francisco, CA 94104
OCTOBER 13, 1996
This Statement of Additional Information is not a prospectus. It should
be read in conjunction with the Prospectuses dated February 28, 1996 (as amended
from time to time) for Schwab International Index Fund(TM) (the "International
Index Fund") and Schwab Small-Cap Index Fund(R) (the "Small-Cap Index Fund");
the joint Prospectus dated May 21, 1996 (as amended from time to time) for
Schwab Asset Director(R)-High Growth Fund (the "High Growth Fund"), Schwab Asset
Director(R)-Balanced Growth Fund (the "Balanced Growth Fund") and Schwab Asset
Director(R)-Conservative Growth Fund (the "Conservative Growth Fund" and
jointly, the "Asset Director Funds"); the joint Prospectus dated October 13,
1996 (as amended from time to time) for the Investor Shares and the e.Shares(TM)
of the Schwab S&P 500 Fund (the "S&P 500 Fund"); the Prospectus dated May 21,
1996 (as amended from time to time) for the Schwab Analytics Fund(TM) (the
"Analytics Fund"); the Prospectus dated September 2, 1996 for Schwab OneSource
Portfolios-International; and the joint Prospectus dated October 13, 1996 for
Schwab OneSource Portfolios-Growth Allocation (the "Growth Allocation") and
Schwab OneSource Portfolios-Balanced Allocation (the "Balanced Allocation"), ten
separately managed investment portfolios (collectively the "Funds") of Schwab
Capital Trust (the "Trust"). To obtain a copy of any of these Prospectuses,
please contact Charles Schwab & Co., Inc. ("Schwab") at 800-2 NO-LOAD, 24 hours
a day, or 101 Montgomery Street, San Francisco, California 94104. TDD users may
contact Schwab at 800-345-2550, 24 hours a day. These Prospectuses are also
available electronically by using our World Wide Web address:
http://www.schwab.com.
SCHWABFunds(R)
800-2 NO-LOAD
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
INVESTMENT OBJECTIVES.................................. 3
INVESTMENT SECURITIES.................................. 4
INVESTMENT RESTRICTIONS................................ 31
MANAGEMENT OF THE TRUST................................ 37
PORTFOLIO TRANSACTIONS AND TURNOVER.................... 47
TAXES.................................................. 49
SHARE PRICE CALCULATION................................ 54
HOW THE FUNDS REFLECT PERFORMANCE...................... 54
THE BENEFITS OF INTERNATIONAL INVESTING................ 56
INDEXING AND THE SCHWAB INDEX FUNDS.................... 57
GENERAL INFORMATION.................................... 61
PURCHASE AND REDEMPTION OF SHARES...................... 63
OTHER INFORMATION...................................... 64
</TABLE>
<PAGE> 59
FINANCIAL STATEMENTS................................... F-1
2
<PAGE> 60
INVESTMENT OBJECTIVES
INTERNATIONAL INDEX FUND
The investment objective of the International Index Fund is to attempt
to track the price and dividend performance (total return) of the Schwab
International Index(R) (the "International Index"), an index created to
represent the performance of common stocks and other equity securities issued by
large publicly traded companies from countries around the world with major
developed securities markets, excluding the United States.
SMALL-CAP INDEX FUND
The investment objective of the Small-Cap Index Fund is to attempt to
track the price and dividend performance (total return) of the Schwab Small-Cap
IndexTM (the "Small-Cap Index"), an index created to represent the performance
of common stocks of the second 1,000 largest United States companies, ranked by
market capitalization (share price times the number of shares outstanding).
HIGH GROWTH FUND
The investment objective of the High Growth Fund is to provide high
capital growth with less volatility than an all-stock portfolio. This Fund
provides the greatest exposure to various stock categories, including domestic
large and small company stocks and international stocks.
BALANCED GROWTH FUND
The investment objective of the Balanced Growth Fund is to provide
maximum total return, including both capital growth and income. This Fund
represents a more balanced approach to stocks and bonds.
CONSERVATIVE GROWTH FUND
The investment objective of the Conservative Growth Fund is to provide
income and more growth potential than an all-bond portfolio. This Fund's stock
component is designed to help offset inflation.
S&P 500 FUND-INVESTOR SHARES
S&P 500 FUND - E.SHARES(TM)
The Fund's investment objective is to track the price and dividend
performance (total return) of common stocks of U. S. companies, as represented
by Standard & Poor's 500 Composite Stock Price Index (the "S&P 500").
ANALYTICS FUND
The investment objective of the Analytics Fund is to achieve long-term
capital growth.
SCHWAB ONESOURCE PORTFOLIOS-
INTERNATIONAL
Schwab OneSource Portfolios-International is a mutual fund that seeks
long-term capital appreciation. To
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achieve this goal, the Investment Manager, Charles Schwab Investment Management,
Inc. ("CSIM"), will attempt to identify and select a diversified portfolio of
international equity funds which presents the greatest capital growth potential
("underlying fund(s)") based on an analysis of many factors, including the
underlying funds' investment objective, the history of portfolio manager(s), and
total return, volatility and expenses.
SCHWAB ONESOURCE PORTFOLIOS-
GROWTH ALLOCATION AND BALANCED
ALLOCATION
The Funds are asset allocation funds that provide easy access to
actively managed portfolios of funds from well-known families. The investment
objective of the Growth Allocation is to provide you with high capital growth
with less volatility than a portfolio comprised entirely of stock funds. Of
course, a portfolio with lower volatility also has lower growth potential than a
portfolio comprised entirely of stock funds. The investment objective of the
Balanced Allocation is to provide you with capital growth and income with less
volatility than the Growth Allocation.
The investment objectives stated above for each of the Funds, along
with certain investment restrictions adopted by the Funds, are fundamental and
cannot be changed without approval by holders of a majority of the Funds'
outstanding voting shares, as defined in the Investment Company Act of 1940, as
amended (the "1940 Act").
INVESTMENT SECURITIES
FOREIGN INVESTMENTS
The International Index Fund and Asset Director Funds expect to invest
in stocks of foreign issuers. The International Index Fund will invest primarily
in such stocks. The Schwab OneSource Portfolios-International expects to invest
primarily in other investment companies which invest in stocks of foreign
issuers, and may invest directly in domestic and foreign securities. The Growth
Allocation and the Balanced Allocation may invest in other investment companies
which invest in stocks of foreign issuers, and may invest directly in domestic
and foreign securities. We expect that many of the underlying funds may invest
up to 100% of their assets in foreign securities. Investing in foreign issuers
involves certain special considerations, including those set forth below, which
are typically not associated with investing in U.S. issuers. Since investments
in the securities of foreign issuers are usually made and held in foreign
currencies, and since the International Index Fund, Asset Director Funds, Schwab
OneSource Portfolios-International, Growth Allocation, Balanced Allocation and
underlying funds may hold cash in foreign currencies, they may be affected
favorably or unfavorably by changes in currency rates and in exchange control
regulations, and may incur costs in connection with conversions
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between various currencies. The rate of exchange between the U.S. dollar and
other currencies is determined by the forces of supply and demand in the foreign
exchange market as well as by political and economic factors.
Since foreign companies are not subject to uniform accounting, auditing
and financial reporting standards, practices and requirements comparable to
those applicable to U.S. companies, there may be less publicly available
information about a foreign company than about a U.S. company. Securities of
foreign companies have less volume, are less liquid and are more volatile than
securities of U.S. companies. Fixed commissions on foreign securities exchanges
are generally higher than negotiated commissions on U.S. exchanges, although the
International Index Fund, Asset Director Funds, Schwab OneSource
Portfolios-International, Growth Allocation and Balanced Allocation endeavor to
achieve the most favorable net results on their portfolio transactions. There is
generally less government supervision and regulation of foreign securities
exchanges, brokers, dealers and listed companies than in the United States, thus
increasing the risk of delayed settlements of portfolio transactions or loss of
certificates for portfolio securities.
Foreign markets also have different clearance and settlement
procedures, and in certain markets there have been times when settlements have
been unable to keep pace with the volume of securities transactions, making it
difficult to conduct such transactions. Such delays in settlement could result
in temporary periods when a portion of the assets of the International Index
Fund, Asset Director Funds, Schwab OneSource Portfolios-International, Growth
Allocation, Balanced Allocation and underlying funds is uninvested and no return
is earned thereon. The inability to make intended security purchases due to
settlement problems could cause the International Index Fund, Asset Director
Funds, Schwab OneSource Portfolios-International, Growth Allocation, Balanced
Allocation and underlying funds to miss attractive investment opportunities.
Losses to the International Index Fund, Asset Director Funds, Schwab OneSource
Portfolios-International, Growth Allocation, Balanced Allocation and underlying
funds arising out of the inability to fulfill a contract to sell such securities
could result in potential liability to the International Index Fund, Asset
Director Funds, Schwab OneSource Portfolios-International, Growth Allocation,
Balanced Allocation and underlying funds.
In addition, with respect to those countries in which the International
Index Fund, Asset Director Funds, Schwab OneSource Portfolios-International,
Growth Allocation, Balanced Allocation and underlying funds may invest or other
countries which may have a significant impact on the companies in which the
International Index Fund, Asset Director Funds, Schwab OneSource
Portfolios-International, Growth Allocation, Balanced Allocation and underlying
funds may invest, there is the possibility of
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expropriation or confiscatory taxation, political or social instability,
diplomatic developments, change of government or war which could affect the
International Index Fund's, Asset Director Funds', Schwab OneSource
Portfolios-International's, Growth Allocation's, Balanced Allocation's and
underlying funds' investments. Moreover, individual foreign economies may differ
favorably or unfavorably from the U.S. economy in such respects as growth of
gross national product, rate of inflation, capital reinvestment, resource
self-sufficiency and balance of payments position.
Each of the Asset Director Funds may invest up to 5% of its net assets
in companies located in developing countries. Schwab OneSource
Portfolios-International may invest directly, or indirectly through underlying
funds which invest primarily in, companies located in developing countries.
Growth Allocation and Balanced Allocation may invest up to 10% of their total
net assets directly, or indirectly through underlying funds which invest
primarily in, companies located in developing countries. Compared to the United
States and other developed countries, developing countries may have relatively
unstable governments, economies based on only a few industries and securities
markets that trade a small number of securities. Prices on these exchanges tend
to be volatile, and securities in these countries have historically offered
greater potential for gain (as well as loss) than securities of companies
located in developed countries.
Hong Kong. In addition to the risks discussed above, it is impossible
to currently foresee what risk, if any, may exist to the International Index
Fund's, Asset Director Funds', Schwab Portfolios-International's, Growth
Allocation's, Balanced Allocation's and underlying funds' investments as a
result of the planned 1997 incorporation of the British Crown Colony of Hong
Kong into the People's Republic of China. Shareholders should note that the
risks discussed above may increase depending on political and economic
developments as the scheduled time for the change in government in Hong Kong
draws nearer.
DEPOSITARY RECEIPTS
Each of the Asset Director Funds, Growth Allocation and Balanced
Allocation may invest in American Depositary Receipts, European Depositary
Receipts, Global Depositary Receipts, Global Depositary Shares ("ADRs," "EDRs,"
"GDRs" and "GDSs," respectively), or other similar global instruments which are
receipts representing ownership of shares of a foreign-based issuer held in
trust by a bank or similar financial institution. The Asset Director Funds',
Growth Allocation's and Balanced Allocation's direct investments in these
instruments currently will not exceed 5% of each Fund's net assets, but the
underlying funds with respect to Growth Allocation may invest in ADRs, EDRs,
GDRs, GDSs or other similar global instruments. These are designed for U.S. and
European securities markets as alternatives to purchasing underlying securities
in their corresponding national markets and currencies. ADRs, EDRs, GDRs and
GDSs can be sponsored or unsponsored.
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Sponsored ADRs, EDRs, GDRs and GDSs are certificates in which a bank or
financial institution participates with a custodian. Issuers of unsponsored
ADRs, EDRs, GDRs and GDSs are not contractually obligated to disclose material
information in the United States. Therefore, there may not be a correlation
between such information and the market value of the unsponsored ADRs, EDRs,
GDRs or GDSs.
OPTIONS ON SECURITIES
Writing Covered Options. The Funds may write (sell) covered call and
put options on any securities in which they may invest. The Funds may purchase
and write such options on securities that are listed on domestic or foreign
securities exchanges or traded in the over-the-counter market. All call options
written by the Funds are covered, which means that the Funds will own the
securities subject to the option so long as the option is outstanding. The
purpose of writing covered call options is to realize greater income than would
be realized on portfolio securities transactions alone. However, in writing
covered call options for additional income, the Funds may forego the opportunity
to profit from an increase in the market price of the underlying security.
All put options the Funds write will be covered, which means that each
of the Funds will have deposited with its custodian cash, U.S. Government
securities or other high-grade debt securities (i.e., securities rated in one of
the top three categories by Moody's Investor Service ("Moody's") or Standard &
Poor's ("S&P") or, if unrated, determined by the Funds' Investment Manager to be
of comparable credit quality) with a value at least equal to the exercise price
of the put option. The purpose of writing such options is to generate additional
income for the Funds. However, in return for the option premium, the Funds
accept the risk that they may be required to purchase the underlying securities
at a price in excess of the securities market value at the time of purchase.
The Funds may terminate their obligations under a written call or put
option by purchasing an option identical to the one it has written. Such
purchases are referred to as "closing purchase transactions."
Purchasing Options. The Funds may purchase put and call options on any
securities in which they may invest or options on any securities index based on
securities in which they may invest. The Funds may also enter into closing sale
transactions in order to realize gains or minimize losses on options they have
purchased.
The writer of an option may have no control over when the underlying
securities must be sold, in the case of a call option, or purchased, in the case
of a put option, since, with regard to certain options, the writer may be
assigned an exercise notice at any time prior to the termination of the
obligation. Whether or not an option expires unexercised, the writer retains the
amount of the premium. This amount may, in the case of a covered call option, be
offset by a
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decline in the market value of the underlying security during the option period.
If a call option is exercised, the writer experiences a profit or loss from the
sale of the underlying security. If a put option is exercised, the writer must
fulfill its obligation to purchase the underlying security at the exercise
price, which will usually exceed the then market value of the underlying
security.
The purchase of a call option would entitle the Funds, in return for
the premium paid, to purchase specified securities at a specified price during
the option period. The Funds would ordinarily realize a gain if, during the
option period, the value of such securities exceeded the sum of the exercise
price, the premium paid and transaction costs; otherwise the Funds would realize
either no gain or a loss on the purchase of the call option.
Risks Associated With Options Transactions. There is no assurance that
a liquid secondary market on a domestic or foreign options exchange will exist
for any particular exchange-traded option or at any particular time. If the
Funds are unable to effect a closing purchase transaction with respect to
covered options they have written, the Funds will not be able to sell the
underlying securities or dispose of assets held in a segregated account until
the options expire or are exercised. Similarly, if the Funds are unable to
effect a closing sale transaction with respect to options they have purchased,
they would have to exercise the options in order to realize any profit and will
incur transaction costs upon the purchase or sale of underlying securities.
Reasons for the absence of a liquid secondary market on an exchange
include the following: (i) there may be insufficient trading interest in certain
options; (ii) an exchange may impose restrictions on opening transactions or
closing transactions or both; (iii) trading halts, suspensions or other
restrictions may be imposed with respect to particular classes or series of
options; (iv) unusual or unforeseen circumstances may interrupt normal
operations on an exchange; (v) the facilities of an exchange or the Options
Clearing Corporation (the "OCC") may not at all times be adequate to handle
current trading volume; or (vi) one or more exchanges could, for economic or
other reasons, decide or be compelled at some future date to discontinue the
trading of options (or a particular class or series of options), although
outstanding options on that exchange that had been issued by the OCC as a result
of trades on that exchange would continue to be exercisable in accordance with
their terms.
The Funds may purchase and sell both options that are traded on U.S.
and foreign exchanges and options traded over-the-counter with broker-dealers
who make markets in these options. The ability to terminate over-the-counter
options is more limited than with exchange-traded options and may involve the
risk that broker-dealers participating in such transactions will not fulfill
their obligations. Until such time as the staff of the Securities and Exchange
Commission (the "SEC") changes its position, the Funds will treat purchased
over-the-
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counter options and all assets used to cover written over-the-counter
options as illiquid securities, except that with respect to options written with
primary dealers in U.S. Government securities pursuant to an agreement requiring
a closing purchase transaction at a formula price, the amount of illiquid
securities may be calculated with reference to a formula the staff of the SEC
approves. Each of the Funds will write or purchase an option only when the
market value of that option, when aggregated with the market value of all other
options transactions made on behalf of the Fund, does not exceed 5% of the
Fund's net assets.
The underlying funds may also write (sell) covered call and put options
and purchase put and call options. The nature of the conditions and risks
associated with such transactions by the underlying funds are similar to those
described for the Funds.
FOREIGN CURRENCY TRANSACTIONS
Forward Foreign Currency Exchange Contracts. The International Index
Fund, Asset Director Funds, Schwab OneSource Portfolios-International, Growth
Allocation and Balanced Allocation may enter into forward foreign currency
exchange contracts in several circumstances. The International Index Fund, Asset
Director Funds, Schwab OneSource Portfolios-International, Growth Allocation and
Balanced Allocation may engage in foreign currency exchange transactions to
protect against uncertainty in the level of future exchange rates. The
International Index Fund, Asset Director Funds, Schwab OneSource
Portfolios-International, Growth Allocation and Balanced Allocation expect to
engage in foreign currency exchange transactions in connection with the purchase
and sale of portfolio securities (so-called "transaction hedging") and to
protect the value of specific portfolio positions ("position hedging"). The
underlying funds may also engage in transaction and position hedging.
For transaction hedging purposes, the International Index Fund, Asset
Director Funds, Schwab OneSource Portfolios-International, Growth Allocation,
Balanced Allocation and underlying funds enter into foreign currency
transactions with respect to specific receivables or payables of the funds
arising in connection with the purchase or sale of portfolio securities. By
transaction hedging, the International Index Fund, Asset Director Funds, Schwab
OneSource Portfolios-International, Growth Allocation and Balanced Allocation
will attempt to protect against a possible loss resulting from an adverse change
in the relationship between (i) the U.S. dollar and the applicable foreign
currency during the period between the date on which the security is purchased
or sold and (ii) the transaction's settlement date. When engaging in position
hedging, the International Index Fund, Asset Director Funds, Schwab OneSource
Portfolios-International, Growth Allocation, Balanced Allocation and underlying
funds enter into foreign currency exchange transactions to protect against a
decline in the values of the foreign currencies in
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which portfolio securities are denominated (or against an increase in the value
of currency for securities which the International Index Fund, Asset Director
Funds, Schwab OneSource Portfolios-International, Growth Allocation, Balanced
Allocation and underlying funds expect to purchase).
When engaging in position and/or transaction hedging, the International
Index Fund, Asset Director Funds, Schwab OneSource Portfolios-International,
Growth Allocation, Balanced Allocation and underlying funds may purchase or sell
foreign currencies on a spot (or cash) basis at the prevailing spot rate and
also may enter into contracts to purchase or sell foreign currencies at a future
date ("forward contracts") and purchase and sell foreign currency futures
contracts ("futures contracts"). International Index Fund, Asset Director Funds,
Schwab OneSource Portfolios-International, Growth Allocation, Balanced
Allocation and underlying funds also may purchase exchange-listed and
over-the-counter call and put options on futures contracts and on foreign
currencies. A put option on a futures contract gives the International Index
Fund, Asset Director Funds, Schwab OneSource Portfolios-International, Growth
Allocation, Balanced Allocation and underlying funds the right to assume a short
position in the futures contract until expiration of the option. A put option on
currency gives the International Index Fund, Asset Director Funds, Schwab
OneSource Portfolios-International, Growth Allocation, Balanced Allocation and
underlying funds the right to sell a currency at an exercise price until the
expiration of the option. A call option on a futures contract gives the
International Index Fund, Asset Director Funds, Schwab OneSource
Portfolios-International, Growth Allocation, Balanced Allocation and underlying
funds the right to assume a long position in the futures contract until the
expiration of the option. A call option on currency gives the International
Index Fund, Asset Director Funds, Schwab OneSource Portfolios-International,
Growth Allocation, Balanced Allocation and underlying funds the right to
purchase a currency at the exercise price until the expiration of the option.
Hedging transactions involve costs and may result in losses, and the
ability of the International Index Fund, Asset Director Funds, Schwab OneSource
Portfolios-International, Growth Allocation, Balanced Allocation and underlying
funds to engage in hedging transactions may be limited by tax considerations.
Transaction and position hedging do not eliminate fluctuations in the underlying
prices of the securities that the Funds or the underlying funds own or expect to
purchase or sell. They simply establish a rate of exchange that may be achieved
at some future point in time. Additionally, although these techniques tend to
minimize the risk of loss due to decline in the value of the hedged currency,
they tend to limit any potential gain that might result from an increase in the
value of such currency.
Although the contracts are not presently are regulated by the Commodity
Futures Trading Commission (the "CFTC"), the CFTC may in the future
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assert authority to regulate these contracts. In such event, the ability of the
International Index Fund, Asset Director Funds, Schwab OneSource
Portfolios-International, Growth Allocation, Balanced Allocation and underlying
funds to utilize forward foreign currency exchange contracts may be restricted.
Each of the Asset Director Funds will enter into a forward foreign
currency exchange contract only when the market value of such contract, when
aggregated with the market value of all other such contracts held by the Fund,
does not exceed 5% of the Fund's net assets.
The International Index Fund, Asset Director Funds, Schwab OneSource
Portfolios-International, Growth Allocation and Balanced Allocation generally
will not enter into a forward contract with a term of greater than one year.
While the International Index Fund, Asset Director Funds, Schwab
OneSource Portfolios-International, Growth Allocation and Balanced Allocation
will, and underlying funds may, enter into forward contracts to reduce currency
exchange rate risks, transactions in such contracts involve certain other risks.
Thus, while the International Index Fund, Asset Director Funds, Schwab OneSource
Portfolios-International, Growth Allocation, Balanced Allocation and underlying
funds may benefit from such transactions, unanticipated changes in currency
prices may result in a poorer overall performance for the International Index
Fund, Asset Director Funds, Schwab OneSource Portfolios-International, Growth
Allocation, Balanced Allocation and underlying funds than if they had not
engaged in any such transactions. Moreover, there may be imperfect correlation
between the International Index Fund's, Asset Director Funds', Schwab OneSource
Portfolios-International's, Growth Allocation's, Balanced Allocation's and
underlying funds' portfolio holdings of securities denominated in a particular
currency and forward contracts into which the International Index Fund, Asset
Director Funds, Schwab OneSource Portfolios-International, Growth Allocation,
Balanced Allocation and underlying funds enter. Such imperfect correlation may
cause the International Index Fund, Asset Director Funds, Schwab OneSource
Portfolios-International, Growth Allocation, Balanced Allocation and underlying
funds to sustain losses, which will prevent the International Index Fund, Asset
Director Funds, Schwab OneSource Portfolios-International, Growth Allocation,
Balanced Allocation and underlying funds from achieving a complete hedge or
expose the International Index Fund, Asset Director Funds, Schwab OneSource
Portfolios-International, Growth Allocation, Balanced Allocation and underlying
funds to risk of foreign exchange loss.
Writing and Purchasing Currency Call and Put Options. The International
Index Fund, Asset Director Funds, Schwab OneSource Portfolios-International,
Growth Allocation, Balanced Allocation and underlying funds may write covered
put and call options and purchase put and call options on
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foreign currencies for the purpose of protecting against declines in the dollar
value of portfolio securities and against increases in the dollar cost of
securities to be acquired. A call option written by the International Index
Fund, Asset Director Funds, Schwab OneSource Portfolios-International, Growth
Allocation, Balanced Allocation and underlying funds obligates the International
Index Fund, Asset Director Funds, Schwab OneSource Portfolios-International,
Growth Allocation, Balanced Allocation and underlying funds to sell specified
currency to the holder of the option at a specified price at any time before the
expiration date. A put option written by the International Index Fund, Asset
Director Funds, Schwab OneSource Portfolios-International, Growth Allocation,
Balanced Allocation and underlying funds would obligate the International Index
Fund, Asset Director Funds, Schwab OneSource Portfolios-International, Growth
Allocation, Balanced Allocation and underlying funds to purchase specified
currency from the option holder at a specified time before the expiration date.
The writing of currency options involves a risk that the International Index
Fund, Asset Director Funds, Schwab OneSource Portfolios-International, Growth
Allocation, Balanced Allocation and underlying funds will, upon exercise of the
option, be required to sell currency subject to a call at a price that is less
than the currency's market value or be required to purchase currency subject to
a put at a price that exceeds the currency's market value.
The International Index Fund, Asset Director Funds, Schwab OneSource
Portfolios-International, Growth Allocation and Balanced Allocation may
terminate their obligations under a call or put option by purchasing an option
identical to the one it has written. Such purchases are referred to as "closing
purchase transactions." The International Index Fund, Asset Director Funds,
Schwab OneSource Portfolios-International, Growth Allocation and Balanced
Allocation would also be able to enter into closing sale transactions in order
to realize gains or minimize losses on options purchased by the International
Index Fund, Asset Director Funds, Schwab OneSource Portfolios-International,
Growth Allocation and Balanced Allocation.
The purchase of a call option would entitle the International Index
Fund, Asset Director Funds, Schwab OneSource Portfolios-International, Growth
Allocation, Balanced Allocation and underlying funds to purchase specified
currency at a specified price during the option period in return for the premium
paid. The International Index Fund, Asset Director Funds, Schwab OneSource
Portfolios-International, Growth Allocation, Balanced Allocation and underlying
funds ordinarily would realize a gain or a loss on the purchase of the call
option.
The purchase of a put option would entitle the International Index
Fund, Asset Director Funds, Schwab OneSource Portfolios-International, Growth
Allocation, Balanced Allocation and underlying funds to sell specific currency
at a specified price during the option period in exchange for the premium paid.
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The purchase of protective puts is designed merely to offset or hedge against a
decline in the dollar value of the International Index Fund's, Asset Director
Funds', Schwab OneSource Portfolios-International's, Growth Allocation's,
Balanced Allocation's and underlying funds' portfolio securities due to currency
exchange rate fluctuations. The International Index Fund, Asset Director Funds,
Schwab OneSource Portfolios-International, Growth Allocation, Balanced
Allocation and underlying funds ordinarily would realize a gain, if, during the
option period, the value of the underlying currency were to decrease below the
exercise price sufficiently to more than cover the premium and transaction
costs; otherwise the International Index Fund, Asset Director Funds, Schwab
OneSource Portfolios-International, Growth Allocation, Balanced Allocation and
underlying funds would realize either no gain or a loss on the purchase of the
put option. Gains and losses on the purchase of protective put options would
tend to be offset by countervailing changes in the value of the underlying
currency.
Special Risks Associated With Options on Foreign Currency. An
exchange-traded option position may be closed out only on an options exchange
that provides a secondary market for an option of the same series. Although the
International Index Fund, Asset Director Funds, Schwab OneSource
Portfolios-International, Growth Allocation and Balanced Allocation generally
will purchase or write only those options for which there appears to be an
active secondary market, there is no assurance that a liquid secondary market on
an exchange will exist for any particular option or at any particular time. For
some options, no secondary market on an exchange may exist. In such event, it
might not be possible to effect closing transactions in particular options, with
the result that the International Index Fund, Asset Director Funds, Schwab
OneSource Portfolios-International, Growth Allocation, Balanced Allocation and
underlying funds would have to exercise their options in order to realize any
profit and would incur transaction costs upon the sale of underlying securities
pursuant to the exercise of put options. If the International Index Fund, Asset
Director Funds, Schwab OneSource Portfolios-International, Growth Allocation,
Balanced Allocation and underlying funds, as covered call option writers, are
unable to effect a closing purchase transaction in a secondary market, they will
not be able to sell the underlying currency (or security denominated in that
currency) until the option expires or they deliver the underlying currency upon
exercise.
There is no assurance that higher than anticipated trading activity or
other unforeseen events might not, at times, render certain of the facilities of
the OCC inadequate. This could result in an exchange instituting special
procedures that may interfere with the timely execution of customers' orders.
The International Index Fund, Asset Director Funds, Schwab OneSource
Portfolios-International, Growth Allocation and Balanced Allocation will
purchase and write over-the-counter
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options only to the extent consistent with their limitations on investments in
illiquid securities, as described in the Prospectuses. Trading in
over-the-counter options is subject to the risk that the other party will be
unable or unwilling to close-out purchasing and writing activities.
FUTURES CONTRACTS
AND OPTIONS ON FUTURES CONTRACTS
The Funds may purchase and sell various kinds of futures contracts and
options on futures contracts. The futures contracts may be based on various
securities (such as U.S. Government securities), securities indices, foreign
currencies and other financial instruments and indices. All futures contracts
entered into by the Funds are traded on U.S. exchanges or boards of trade that
the CFTC licenses and regulates on foreign exchanges. The Funds and the
underlying funds are not permitted to engage in speculative futures trading.
Futures Contracts. A futures contract generally may be described as an
agreement between two parties to buy and sell particular financial instruments
for an agreed upon price during a designated month (or to deliver the final cash
settlement price, in the case of a contract relating to an index or otherwise
not calling for physical delivery at the end of trading in the contract).
When interest rates are rising or securities prices are falling, the
Funds and the underlying funds may seek, through the sale of futures contracts,
to offset a decline in the value of their current portfolio securities. When
rates are falling or prices are rising, the Funds and the underlying funds,
through the purchase of futures contracts, may attempt to secure better rates or
prices than might later be available in the market when they effect anticipated
purchases. Similarly, the International Index Fund, Asset Director Funds, Schwab
OneSource Portfolios-International, Growth Allocation, Balanced Allocation and
the underlying funds may sell futures contracts on a specified currency to
protect against a decline in the value of that currency and their portfolio
securities that are denominated in that currency. The International Index Fund,
Asset Director Funds, Schwab OneSource Portfolios-International, Growth
Allocation, Balanced Allocation and the underlying funds may purchase futures
contracts on a foreign currency to fix the price in U.S. dollars of a security
denominated in that currency that the International Index Fund, Asset Director
Funds, Schwab OneSource Portfolios-International, Growth Allocation, Balanced
Allocation and underlying funds have acquired or expect to acquire.
Although futures contracts, by their terms, generally call for the
actual delivery or acquisition of underlying securities or the cash value of the
index, in most cases the contractual obligation is fulfilled before the date of
the contract without having to make or take such delivery. The contractual
obligation is offset by buying (or selling, as the case may be) on a commodities
exchange an identical futures contract calling for
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delivery in the same month. Such a transaction, which is effected through a
member of an exchange, cancels the obligation to make or take delivery of the
securities or the cash value of the index underlying the contractual
obligations. The Funds and the underlying funds may incur brokerage fees when
they purchase or sell futures contracts.
Positions taken in the futures markets are not normally held to
maturity but are instead liquidated through offsetting transactions, which may
result in a profit or a loss. While the Funds' and the underlying funds' futures
contracts on securities or currency will usually be liquidated in this manner,
the Funds and the underlying funds may instead make or take delivery of the
underlying securities or currency whenever it appears economically advantageous
for them to do so. A clearing corporation associated with the exchange on which
futures on securities or currencies are traded guarantees that, if still open,
the sale or purchase will be performed on the settlement date.
Options on Futures Contracts. The acquisition of put and call options
on futures contracts will give the Funds and the underlying funds the right (but
not the obligation), for a specified price, to sell or to purchase,
respectively, the underlying futures contract at any time during the option
period. As the purchaser of an option on a futures contract, the Funds and the
underlying funds obtain the benefit of the futures position if prices move in a
favorable direction but limit their risk of loss in the event of an unfavorable
price movement to the loss of the premium and transaction costs.
The writing of a call option on a futures contract generates a premium
that may partially offset a decline in the value of the Funds' and the
underlying funds' assets. By writing a call option, the Funds and the underlying
funds become obligated, in exchange for the premium, to sell a futures contract
that may have a value lower than the exercise price. Thus, the loss incurred by
the Funds and the underlying funds in writing options on futures is potentially
unlimited and may exceed the amount of the premium received. The Funds and the
underlying funds will incur transaction costs in connection with the writing of
options on futures.
The holder or writer of an option on a futures contract may terminate
its position by selling or purchasing an offsetting option on the same series.
There is no guarantee that these closing transactions can be effected. The
Funds' and the underlying funds' ability to establish and close out positions on
these options will be subject to the development and maintenance of a liquid
market.
Hedging Strategies With Futures. Hedging by use of futures contracts
seeks to establish more certainty than would otherwise be possible with respect
to the effective price, rate of return or currency exchange rate on portfolio
securities or securities that the Funds own or propose to acquire. Such futures
contracts may include contracts for the future delivery of securities held by
the Funds or securities with characteristics similar to those of the
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Funds' portfolio securities. Similarly, the International Index Fund, Asset
Director Funds, Schwab OneSource Portfolios-International, Growth Allocation and
Balanced Allocation may sell futures contracts on currency in which their
portfolio securities are denominated or in one currency to hedge against
fluctuations in the value of securities denominated in a different currency if
there is an established historical pattern of correlation between the two
currencies. If, in the opinion of the Investment Manager, there is a sufficient
degree of correlation between price trends for the Funds' portfolio securities
and futures contracts based on other financial instruments, securities indices
or other indices, the Funds may also enter into such futures contracts as part
of their hedging strategy. Although, under some circumstances, prices of
securities in the Funds' portfolio may be more or less volatile than prices of
such futures contracts, the Investment Manager will attempt to estimate the
extent of this difference in volatility based on historical patterns. The
Investment Manager will attempt to compensate for it by having the Funds enter
into a greater or lesser number of futures contracts or by attempting to achieve
only a particular hedge against price changes affecting the Funds' portfolio
securities. When hedging of this character is successful, any depreciation in
the value of the portfolio securities will be substantially offset by
appreciation in the value of the futures position. On the other hand, any
unanticipated appreciation in the value of the Funds' portfolio securities will
be substantially offset by a decline in the value of the futures position.
On other occasions, the Funds may take "long" positions by purchasing
such futures contracts. This would be done, for example, when the Funds
anticipate the subsequent purchase of particular securities when they have the
necessary cash but expect the prices or currency exchange rates available on the
intended date of purchase in the applicable market to be less favorable than
prices that are currently available.
The underlying funds may engage in similar hedging transactions using
futures contracts, which would operate in a similar manner and entail similar
risks to the underlying funds.
When buying or selling futures contracts, a Fund and an underlying fund
must deposit an amount of cash, cash equivalents or liquid, high-quality debt
instruments with its broker equal to a fraction of the contract amount. This
amount is known as "initial margin" and is in the nature of a performance bond
or good faith deposit on the contract, which will be returned to the Fund and
underlying fund upon termination of the futures contract, assuming all
contractual obligations have been satisfied. Subsequent payments to and from the
broker, known as "variation margin," will be made at least daily as the price of
the futures contract fluctuates and the Fund's and the underlying funds'
position in the contract becomes more or less valuable. This process is known as
"marking-to-market."
Regulations of the Commodities Futures Trading Commission ("CFTC")
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applicable to the Funds and the underlying funds generally require that all of
their futures transactions constitute "bona fide" hedging transactions. As a
result, a Fund and an underlying fund will normally sell futures contracts to
protect against a decrease in the price of securities it owns but intends to
sell or purchase futures contracts to protect against an increase in the price
of securities it intends to purchase. In addition, the Funds and the underlying
funds may purchase and sell futures contracts and options as a substitute for a
comparable market position in the underlying securities. Futures transactions
need not constitute "bona fide" hedging under CFTC regulations if the aggregate
initial margin and premiums required to establish such positions do not exceed
5% of each Fund's and each underlying fund's net assets.
Risks Involved in Futures and Options Transactions. Futures and options
transactions involve risks, which in some strategies can be substantial due to
the low margin deposits required and the extremely high degree of leverage
involved in futures and options trading. However, to the extent the Funds'
futures and options practices are limited to hedging purposes, the Investment
Manager does not believe that the Funds are subject to the degree of risk
frequently associated with futures and options transactions. To the extent the
Funds and the underlying funds engage in the use of futures and options on
futures other than for hedging purposes, the Funds and the underlying funds may
be subject to additional risk.
Three principal areas of risk are present when futures and options
contracts are used even in a hedging context. First, there may not always be a
liquid secondary market for a futures or option contract at the time when a Fund
or an underlying fund seeks to "close out" its position. If a Fund or an
underlying fund is unable to "close out" a futures or option position and prices
move adversely, the Fund or an underlying fund would have to continue to make
daily cash payments to maintain its required margin, and if the Fund or an
underlying fund has insufficient cash to meet this requirement, it may have to
sell portfolio securities at a disadvantageous time. In addition, the Fund or an
underlying fund might be required to deliver the securities underlying futures
or options contracts it holds. Each Fund will seek to and the underlying funds
may seek to reduce the risk that it will be unable to "close out" contracts by
entering into only futures or options contracts that are traded on national
exchanges and for which there appears to be a liquid secondary market.
It is also possible that changes in the prices of futures or options
contracts might correlate imperfectly, or not at all, with changes in the market
values of the securities being hedged. This situation could result from price
distortions in the futures or options markets due to, among other things, active
trading by speculators and use of offsetting "closing" transactions by other
investors seeking to avoid meeting additional margin deposit requirements. In
the event of significant market distortions, it is possible that a Fund or an
underlying fund could lose money on futures or options contracts and
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experience appreciation in the value of its portfolio securities, or vice versa.
Finally, adverse market movements could cause a Fund or an underlying
fund to lose up to its full investment in an options contract and/or to
experience substantial losses on an investment in a futures contract. However,
barring such significant market distortions, a similar result could be expected
were the Fund or an underlying fund to invest directly in the securities being
hedged. There is also the risk of loss by a Fund or an underlying fund of margin
deposits in the event of bankruptcy of a broker with whom the Fund or an
underlying fund has an open position in a futures contract or option.
The extent to which each Fund may purchase and sell futures, options,
equity index participations and index participation contracts may be limited by
each Fund's intention to meet Internal Revenue Code of 1986, as amended (the
"Code"), requirements for qualification as a regulated investment company. See
"Taxes." An underlying fund's investment in such instruments may similarly be
restricted by Code requirements.
SWAPS
Each of the Asset Director Funds may enter into swaps on various
securities (such as U.S. Government securities), securities indices, interest
rates, prepayment rates, foreign currencies or other financial instruments or
indices in order to protect the value of the Asset Director Funds from interest
rate fluctuations and to hedge against fluctuations in the floating rate market
in which the Asset Director Funds' investments are traded, for both hedging and
non-hedging purposes. While swaps are different from futures contracts (and
options on futures contracts) in that swap contracts are individually negotiated
with specific counterparties, the Asset Director Funds will use swap contracts
for purposes similar to the purposes for which they use options, futures and
options on futures. Those uses of swap contracts (i.e., risk management and
hedging) present the Funds with risks and opportunities similar to those
associated with options contracts, futures contracts and options on futures. See
"Futures Contracts and Options on Futures Contracts" in this Statement of
Additional Information.
The Asset Director Funds may enter into these transactions to manage
their exposure to changing interest rates and other market factors. Some
transactions may reduce each Asset Director Fund's exposure to market
fluctuations while others may tend to increase market exposure.
The use of swaps involves investment techniques and risks different
from and potentially greater than those associated with ordinary fund securities
transactions. If the Investment Manager is incorrect in its expectations of
market values, interest rates or currency exchange rates, the investment
performance of the Asset Director Funds would be less favorable than it would
have been if this investment technique were not used. The Asset Director Funds
will only invest up to 5% of each Fund's net assets in swaps.
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PREFERRED STOCK
The Funds may invest in preferred stock, although Balanced Allocation's
and Growth Allocation's direct investments in preferred stock will not exceed 5%
of each Fund's net assets. Preferred stock has priority over common stock as to
income and generally as to assets of an issuer; however, income is usually
limited to a definitive percentage regardless of the issuer's earnings.
Preferred stock usually has limited voting rights. The Asset Director Funds will
invest up to 5% of each Fund's net assets in preferred stock.
CONVERTIBLE SECURITIES
Each of the Asset Director Funds may invest up to 5% of its net assets
in securities that are convertible into common stock, including convertible
bonds that are investment grade, convertible preferred stocks, and warrants. The
S&P 500 Fund will not purchase convertible securities directly. It may, however,
hold convertible securities to the extent that such holdings are incident to the
Fund's ownership of common stocks.
Convertible bonds are issued with lower coupons than nonconvertible
bonds of the same quality and maturity, but they give holders the option to
exchange their bonds for a specific number of shares of the company's common
stock at a predetermined price. This structure allows the convertible bond
holder to participate in share price movements in the company's common stock.
The actual return on a convertible bond may exceed its stated yield if the
company's common stock appreciates in value and the option to convert to common
shares becomes more valuable.
Convertible preferred stocks are nonvoting equity securities that pay a
fixed dividend. These securities have a convertible feature similar to
convertible bonds; however, they do not have a maturity date. Due to their
fixed-income features, convertible issues typically are more sensitive to
interest rate changes than the underlying common stock. In the event of
liquidation, bondholders would have claims on company assets senior to those of
stockholders; preferred stockholders would have claims senior to those of common
stockholders.
Warrants. The Funds or underlying funds may invest in warrants, which are
options to purchase equity securities at specific prices valid for a specific
period of time. The prices do not necessarily move parallel to the prices of the
underlying securities. Warrants have no voting rights, receive no dividends and
have no rights with respect to the assets of the issuer. If a warrant is not
exercised within the specified time period, it will become worthless and a Fund
or an underlying fund will lose the purchase price and the right to purchase the
underlying security.
REAL ESTATE-RELATED INVESTMENTS
The Asset Director Funds, and the OneSource Portfolios - Growth
Allocation and Balanced Allocation may invest no more than 5% of each Fund's
respective net assets in real estate-related
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investments. Real estate-related instruments include real estate investment
trusts, commercial and residential mortgage-backed securities and real estate
financings. Real estate-related instruments are sensitive to factors such as
changes in real estate values and property taxes, interest rates, cash flow of
underlying real estate assets, overbuilding, and the management skill and
creditworthiness of the issuer. Real estate-related instruments may also be
affected by tax and regulatory requirements, such as those relating to the
environment.
PRECIOUS METAL-RELATED
INVESTMENTS
The Asset Director Funds, OneSource Portfolios - Growth Allocation and
Balanced Allocation may invest no more than 5% of each Fund's respective net
assets in precious metal-related investments. The Asset Director Funds, S&P 500
Fund, Analytics Fund, Growth Allocation and Balanced Allocation may invest in
common stocks of domestic companies principally engaged in precious
metal-related activities, which include companies principally engaged in the
extraction, processing, distribution or marketing of precious metals if at the
time of investment the Investment Manager considers that at least 50% of the
company's assets, revenues or profits are derived from the precious metal
industry. The Asset Director Funds, Growth Allocation and Balanced Allocation
may also invest in securities of foreign companies principally engaged in the
precious metals industry. For further disclosure on foreign securities, see
"Foreign Investments" in this Statement of Additional Information.
The Asset Director Funds, S&P 500 Fund, Analytics Fund, Growth
Allocation and Balanced Allocation also may invest in futures on precious
metals, such as gold futures, and options thereon. Such investments are subject
to the investment limitations on investments in futures and options for the
Asset Director Funds, S&P 500 Fund, Analytics Fund, Growth Allocation and
Balanced Allocation as set forth in "Futures Contracts and Options on Futures
Contracts" in this Statement of Additional Information.
Prices of precious metals can be expected to respond to changes in
rates of inflation and to perceptions of economic and political instability.
Historically, the prices of precious metals and of securities of companies
engaged in the precious metal-related activities have been subject to extreme
fluctuations, reflecting wider economic or political instability or other
reasons.
U.S. GOVERNMENT SECURITIES
The Funds may purchase U.S. Government securities. Direct obligations
of the U.S. Government are supported by the full faith and credit of the U.S.
Treasury. While obligations of certain U.S. Government agencies and
instrumentalities are similarly backed, those of others, such as the Federal
National Mortgage Association and the Student Loan Marketing Association, are
only supported by the right of the issuer to borrow from the U.S. Treasury, the
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discretionary authority of the U.S. Government to purchase the agency's
obligations or the credit of the issuing agency or instrumentality. There can be
no assurance that the U.S. Government would provide financial support to U.S.
Government sponsored agencies or instrumentalities if it were not obligated to
do so by law. A Fund will invest in U.S. Government securities not backed by the
full faith and credit of the U.S. Treasury only when the Investment Manager is
satisfied that the credit risk with respect to their issuer is minimal.
GOVERNMENT
"MORTGAGE BACKED" SECURITIES
Government "mortgage-backed" (or government guaranteed
mortgage-related) securities are among the U.S. Government securities in which
the Funds may invest. Mortgages backing the securities purchased by the Funds
include, among others, conventional 30-year fixed rate mortgages, graduated
payment mortgages, 15-year mortgages and adjustable rate mortgages. All of these
mortgages can be used to create pass-through securities. A pass-through security
is formed when mortgages are pooled together and undivided interests in the pool
or pools are sold. The cash flow from the mortgages is passed through to the
holders of the securities in the form of periodic payments of interest,
principal and prepayments (net of a service fee). Prepayments occur when the
holder of an individual mortgage prepays the remaining principal before the
mortgage's scheduled maturity date. As a result of the pass-through of
prepayments of principal on the underlying securities, mortgage-backed
securities are often subject to more rapid prepayment of principal than their
stated maturity indicates. Because the prepayment characteristics of the
underlying mortgages vary, it is not possible to predict accurately the realized
yield or average life of a particular issue of pass-through certificates.
Prepayment rates are important because of their effect on the yield and price of
the securities. Accelerated prepayments adversely impact yields for
pass-throughs purchased at a premium (i.e., a price in excess of principal
amount) and may involve additional risk of loss of principal because the premium
may not have been fully amortized at the time the obligation is repaid. The
opposite is true for pass-throughs purchased at a discount. The Funds may
purchase mortgage-related securities at a premium or at a discount. Principal
and interest payments on the mortgage-related securities are guaranteed by the
government to the extent described below. Such guarantees do not extend to the
value or yield of the mortgage-related securities themselves or of a Fund's
shares.
GNMA Certificates. Certificates of the Government National Mortgage
Association ("GNMA") are mortgage securities which evidence an undivided
interest in a pool or pools of mortgages. GNMA Certificates that the Funds may
purchase are the "modified pass-through" type, which entitle the holder to
receive timely payment of all interest and principal payments due on the
mortgage pool, net of fees paid to the "issuer" and
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GNMA, regardless of whether or not the mortgagor actually makes the payment.
The National Housing Act authorized GNMA to guarantee the timely
payment of principal and interest on securities backed by a pool of mortgages
insured by the Federal Housing Administration ("FHA") or guaranteed by the
Veterans Administration ("VA"). The GNMA guarantee is backed by the full faith
and credit of the U.S. Government. GNMA is also empowered to borrow without
limitation from the U.S. Treasury if necessary to make any payments required
under its guarantee.
The average life of a GNMA Certificate is likely to be substantially
shorter than the original maturity of the mortgages underlying the securities.
Prepayments of principal by mortgagors and mortgage foreclosures will usually
result in the return of the greater part of principal investment long before the
maturity of the mortgages in the pool. Foreclosures impose no risk to principal
investment because of the GNMA guarantee, except to the extent that a Fund has
purchased the certificates above par in the secondary market.
FHLMC Securities. The Federal Home Loan Mortgage Corporation ("FHLMC")
was created in 1970 to promote development of a nationwide secondary market in
conventional residential mortgages. The FHLMC issues two types of mortgage
pass-through securities ("FHLMC Certificates"): mortgage participation
certificates ("PCs") and guaranteed mortgage certificates ("GMCs"). PCs resemble
GNMA Certificates in that each PC represents a pro rata share of all interest
and principal payments made and owed on the underlying pool. The FHLMC
guarantees timely monthly payment of interest on PCs and the ultimate payment of
principal.
GMCs also represent a pro rata interest in a pool of mortgages.
However, these instruments pay interest semi-annually and return principal once
a year in guaranteed minimum payments. The expected average life of these
securities is approximately 10 years. The FHLMC guarantee is not backed by the
full faith and credit of the U.S. Government.
FNMA Securities. The Federal National Mortgage Association ("FNMA") was
established in 1938 to create a secondary market in mortgages the FHA insures.
FNMA issues guaranteed mortgage pass-through certificates ("FNMA Certificates").
FNMA Certificates resemble GNMA Certificates in that each FNMA Certificate
represents a pro rata share of all interest and principal payments made and owed
on the underlying pool. FNMA guarantees timely payment of interest and principal
on FNMA Certificates. The FNMA guarantee is not backed by the full faith and
credit of the U.S. Government.
OTHER ASSET-BACKED SECURITIES
The Asset Director Funds may invest a portion of their assets in debt
obligations known as "Asset-Backed Securities" that are rated in one of the
three highest rating categories by a
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nationally recognized statistical rating organization (e.g., S&P or Moody's) or,
if not so rated, deemed to be of equivalent quality by the Investment Manager
pursuant to guidelines adopted by the Board of Trustees. Growth Allocation and
Balanced Allocation do not currently intend to invest directly in Asset-Backed
Securities, but they may invest in them indirectly through underlying funds. The
credit quality of most Asset-Backed Securities depends primarily on the credit
quality of the assets underlying such securities, how well the entity issuing
the security is insulated from the credit risk of the originator (or any other
affiliated entities) and the amount and quality of any credit support provided
to the securities. The rate of principal payments on Asset-Backed Securities
generally depends on the rate of principal payments received on the underlying
assets, which in turn may be affected by a variety of economic and other
factors. As a result, the yield on any Asset-Backed Security is difficult to
predict with precision, and actual yield to maturity may be more or less than
the anticipated yield to maturity. Asset-Backed Securities may be classified as
"Pass-Through Certificates" or "Collateralized Obligations."
"Pass-Through Certificates" are asset-backed securities that represent
undivided fractional ownership interests in the underlying pool of assets.
Pass-Through Certificates usually provide for payments of principal and interest
received to be passed through to their holders, usually after deduction for
certain costs and expenses incurred in administering the pool. Because
Pass-Through Certificates represent ownership interests in the underlying
assets, the holders thereof bear directly the risk of any defaults by the
obligors on the underlying assets not covered by any credit support.
Asset-Backed Securities issued in the form of debt instruments, also
known as Collateralized Obligations, are generally issued as the debt of a
special purpose entity organized solely for the purpose of owning such assets
and issuing such debt. The assets collateralizing such Asset-Backed Securities
are pledged to a trustee or custodian for the benefit of the holders thereof.
Such issuers generally hold no assets other than those underlying the
Asset-Backed Securities and any credit support provided. As a result, although
payments on such Asset-Backed Securities are obligations of the issuers, in the
event of default on the underlying assets not covered by any credit support, the
issuing entities are unlikely to have sufficient assets to satisfy their
obligations on the related Asset-Backed Securities.
METHODS OF ALLOCATING
CASH FLOWS
While many Asset-Backed Securities are issued with only one class of
security, many others are issued in more than one class, each with different
payment terms. Multiple class Asset-Backed Securities are issued for two main
reasons. First, multiple classes may be used as a method of providing credit
support. This is typically accomplished by creating one or more classes with a
right to payments on the Asset-Backed Security
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that is subordinate to that of the remaining class or classes. Second, multiple
classes may permit the issuance of securities with payment terms, interest rates
or other characteristics that differ both from those of each other and from
those of the underlying assets. Examples include so-called "multi-tranche CMOs"
(collateralized mortgage obligations) with serial maturities such that all
principal payments received on the mortgages underlying the securities are first
paid to the class with the earliest stated maturity, and then sequentially to
the class with the next stated maturity, "Strips" (Asset-Backed Securities that
entitle the holder to disproportionate interests with respect to the allocation
of interest and principal of the assets backing the security) and securities
with a class or classes having characteristics that mimic the characteristics of
non-Asset-Backed Securities, such as floating interest rates (i.e., interest
rates that adjust as a specified benchmark changes) or scheduled amortization of
principal.
TYPES OF CREDIT SUPPORT
Asset-Backed Securities are often backed by a pool of assets
representing the obligations of a number of different parties. To lessen the
effect of failures by obligors on these underlying assets to make payments, such
securities may contain elements of credit support. Such credit support falls
into two classes: liquidity protection and protection against ultimate default
on the underlying assets. Liquidity protection refers to the provision of
advances, generally by the entity administering the pool of assets, to ensure
that scheduled payments on the underlying pool are made timely. Protection
against ultimate default ensures payment on at least a portion of the assets in
the pool. Such protection may be provided through guarantees, insurance policies
or letters of credit obtained from third parties, through various means of
structuring the transaction, or through a combination of such approaches.
Examples of Asset-Backed Securities with credit support that arises out of the
structure of the transaction include "senior-subordinated securities" (multiple
class Asset-Backed Securities with certain classes subordinate to other classes
as to the payment of principal thereon, so that defaults on the underlying
assets are borne first by the holders of the subordinated class) and
Asset-Backed Securities that have "reserve funds" (cash or investments,
sometimes funded from a portion of the initial payments on the underlying
assets, are held in reserve against future losses) or that have been
"overcollateralized" (the scheduled payments on, or the principal amount of, the
underlying assets substantially exceed that required to make payment on the
Asset-Backed Securities and pay any servicing or other fees). The degree of
credit support provided on each issue is generally based on historical
information respecting the level of credit risk associated with such payments.
Delinquency or loss in excess of that anticipated could adversely affect the
return on an investment in an Asset-Backed Security.
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CREDIT CARD RECEIVABLE SECURITIES
The Asset Director Funds may invest directly, and the Growth Allocation
and Balanced Allocation may invest indirectly through underlying funds, in
Asset-Backed Securities backed by receivables from revolving credit card
agreements ("Credit Card Receivable Securities"). Most of the Credit Card
Receivable Securities issued publicly to date have been Pass-Through
Certificates. In order to lengthen the maturity of Credit Card Receivable
Securities, most such securities provide for a fixed period during which only
interest payments on the underlying accounts are passed through to the security
holder and principal payments received on such accounts are used to fund the
transfer of additional credit card charges made on an account to the pool of
assets supporting the related Credit Card Receivable Securities. The initial
fixed period may usually be shortened upon the occurrence of specified events
that signal a potential deterioration in the quality of the assets backing the
security, such as the imposition of a cap on interest rates. The ability of the
issuer to extend the life of an issue of Credit Card Receivable Securities thus
depends upon the continued generation of additional principal amounts in the
underlying accounts during the initial period and the non-occurrence of
specified events. Competitive and general economic factors could adversely
affect the rate at which new receivables are created in an account and conveyed
to an issuer, shortening the expected weighted average life of the related
Credit Card Receivable Security, and reducing its yield. An acceleration in
cardholders' payment rates or any other event that shortens the period during
which additional credit card charges on an account may be transferred to the
pool of assets supporting the related Credit Card Receivable Security could have
a similar effect on the weighted average life and yield.
Credit card holders are entitled to the protection of a number of state
and federal consumer credit laws, many of which give such holders the right to
set off certain amounts against balances owed on the credit card, thereby
reducing amounts paid on accounts. In addition, unlike most other Asset-Backed
Securities, accounts are unsecured obligations of the cardholder.
CERTIFICATES OF DEPOSIT
AND BANKERS' ACCEPTANCES
The Funds may invest in certificates of deposit, which are certificates
issued against funds deposited in a banking institution for a specified period
of time at a specified interest rate. Bankers' acceptances are credit
instruments evidencing a bank's obligation to pay a draft drawn on it by a
customer. These instruments reflect the obligation both of the bank and of the
drawer to pay the full amount of the instrument upon maturity. Each Fund will
invest only in certificates of deposit and bankers' acceptances of banks that
have capital, surplus and undivided profits in excess of $100 million.
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COMMERCIAL PAPER
The Funds may invest in Commercial Paper, which consists of short-term,
unsecured promissory notes issued to finance short-term credit needs. The Funds
will invest only in commercial paper that at the time of purchase is rated
Prime-1 or Prime-2 by Moody's, A-1 or A-2 by S&P, "Duff 2" or higher by Duff &
Phelps, Inc. ("Duff"), or "F2" or higher by Fitch Investors Services, Inc.
("Fitch") or if unrated by Moody's, S&P, Duff or Fitch, is determined by the
Investment Manager, using guidelines approved by the Board of Trustees, to be at
least equal in quality to one or more of the above ratings.
OTHER INVESTMENT POLICIES
Securities that are acquired by the International Index Fund, Asset
Director Funds, Schwab OneSource Portfolios-International, Growth Allocation and
Balanced Allocation outside the United States and that are publicly traded in
the United States, on a foreign securities exchange or in a foreign securities
market are not considered by the Funds to be illiquid assets provided that: (i)
the Funds acquire and hold the securities with the intention of reselling the
securities in the foreign trading market, (ii) the Funds reasonably believe they
can dispose of the securities readily in the foreign trading market or for cash
in the United States, or (iii) foreign market and current market quotations are
available readily. Investments may be in securities of foreign issuers, whether
located in developed or undeveloped countries. Investments in foreign securities
where delivery takes place outside the United States will have to be made in
compliance with any applicable U.S. and foreign currency restrictions and tax
laws (including laws imposing withholding taxes on any dividend or interest
income) and laws limiting the amount and types of foreign investments. Changes
of government administrations or economic or monetary policies in the United
States or abroad, or changed circumstances regarding convertibility or exchange
rates, could result in investment losses for the Funds. Investments in foreign
securities may also subject the Funds to losses due to nationalization,
expropriation or differing accounting practices and treatments. Moreover,
investors should recognize that foreign securities are often traded with less
frequency and volume, and therefore may have greater price volatility, than many
U.S. securities. Notwithstanding that the Funds generally intend to acquire the
securities of foreign issuers where there are public trading markets, the Funds'
investments in the securities of foreign issuers may tend to increase the risks
with respect to the liquidity of the Funds' portfolio and the Funds' ability to
meet a large number of shareholder redemption requests should there be economic
or political turmoil in a country in which the Funds have a substantial portion
of their assets invested or should relations between the United States and
foreign countries deteriorate markedly. Furthermore, the reporting and
disclosure requirements applicable to foreign issuers may differ from those
applicable to domestic issuers, and there may be difficulties in obtaining or
enforcing judgments against foreign issuers.
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Loans of Portfolio Securities. The Funds or underlying funds may loan
securities to qualified broker-dealers or other institutional investors
provided: (i) the loan is secured continuously by collateral consisting of U.S.
Government securities or cash or cash equivalents maintained on a daily
marked-to-market basis in an amount at least equal to the current market value
of the securities loaned; (ii) the Fund or underlying fund may at any time call
the loan and obtain the return of the securities loaned; (iii) the Fund or
underlying fund will receive any interest or dividends paid on the loaned
securities; and (iv) the aggregate market value of securities loaned will not at
any time exceed one-third of the total assets of the Fund or underlying fund.
The lending of securities is a common practice in the securities
industry. The Funds will engage in security lending arrangements with the
primary objective of increasing the Funds' income through investment of the cash
collateral in short-term, interest-bearing obligations but will do so only to
the extent that the Funds will not lose the tax treatment available to regulated
investment companies. The Funds will be entitled to all dividends or interest on
any loaned securities. Loans of securities involve a risk that the borrower may
fail to return the securities or provide additional collateral.
Repurchase Transactions. Repurchase agreements are instruments under
which a buyer acquires ownership of a security from a seller that agrees to
repurchase the security at a mutually agreed upon time and price (which price is
higher than the purchase price), thereby determining the yield during the
buyer's holding period. Under the 1940 Act, a repurchase agreement is deemed to
be a Fund's loan of money to the seller, collateralized by the underlying
security. The interest rate is effective for the period of time in which the
Funds are invested in the agreement and is not related to the coupon rate on the
underlying security. Any repurchase agreements a Fund enters into will involve
the Fund as the buyer and banks or broker-dealers as sellers (repurchase
agreements with broker-dealers will be limited to obligations of the U.S.
Government or its agencies or instrumentalities). The period of these repurchase
agreements will be usually short--from overnight to one week--and at no time
will the Funds invest in repurchase agreements for more than one year. However,
securities subject to repurchase agreements may have maturity dates in excess of
one year from the effective date of the repurchase agreements. The transaction
requires the initial collateralization of the seller's obligation with
securities having a market value, including accrued interest, equal to at least
102% of the dollar amount the Funds invest with the value marked-to-market daily
to maintain 100% coverage. A default by the seller might cause the Funds to
experience a loss or delay in the liquidation of the collateral securing the
repurchase agreement. The Funds might also incur disposition costs in
liquidating the collateral. The Funds will make payment for such securities only
upon physical delivery or evidence of book entry transfer to the account of its
custodian bank. The Funds may not
27
<PAGE> 85
enter into a repurchase agreement of more than seven days duration if, as a
result, the market value of the Funds' net assets, together with investments in
other securities deemed to be not readily marketable, would be invested in
excess of the Funds' policy on investments in illiquid securities.
In the event of a bankruptcy or other default of a repurchase
agreement's seller, a Fund might incur expenses in enforcing its rights, and
could experience losses, including a decline in the value of the underlying
securities and loss of income. Each Fund will not invest more than 10% of its
net assets at the time of purchase in repurchase agreements maturing in more
than seven days and other illiquid securities.
Illiquid Securities. Each Fund, except the Schwab OneSource
Portfolios-International, Growth Allocation and Balanced Allocation, reserves
the right to invest up to 10% of its net assets in illiquid securities. Each of
the Schwab OneSource Portfolios-International, Growth Allocation and Balanced
Allocation reserves the right to invest up to 15% of its net assets in illiquid
securities. Generally, an "illiquid security" is any security that cannot be
disposed of promptly and in the ordinary course of business at approximately the
amount at which the Funds have valued the instrument. Subject to this
limitation, the Funds may invest in restricted securities when such investment
is consistent with the Funds' investment objectives, and such securities may be
considered to be liquid to the extent the Funds' Investment Manager determines
that there is a liquid institutional or other market for such securities. In
determining whether a restricted security is properly considered a liquid
security, the Funds' Investment Manager, under the direction of the Board of
Trustees, will take into account the following factors: (i) the frequency of
trades and quotes for the security; (ii) the number of dealers willing to
purchase or sell the security and the number of potential purchasers; (iii)
dealer undertakings to make a market in the security; and (iv) the nature of the
security and marketplace trades (e.g., the time needed to dispose of the
security, the method of soliciting offers and the mechanics of transfer). To the
extent the Funds invest in restricted securities that are deemed liquid, the
general level of illiquidity in the Funds' portfolios may be increased if
qualified institutional buyers become uninterested in purchasing these
securities contracts. The Funds will limit their investments in liquid
restricted securities to 5% of their net assets.
When-Issued and Delayed Delivery Securities. The Funds may hold
securities on a "when-issued" or "delayed delivery" basis. When-issued or
delayed delivery securities are securities purchased for future delivery at a
stated price an yield. Generally, a Fund will not pay for securities until the
Fund receives them. Securities purchased on a when-issued or delayed delivery
basis are recorded as assets. During the period between the agreement date and
the settlement date, the value of such securities may change as the prices of
securities in the stock market increase or decrease, or as interest rates
change. Default by the
28
<PAGE> 86
other party to the agreement may result in a loss to a Fund.
UNDERLYING FUND INVESTMENT
TECHNIQUES
The underlying funds for Schwab OneSource Portfolios-International,
Growth Allocation and Balanced Allocation may also engage in foreign currency
transactions with respect to foreign securities investments; invest in
restricted securities; sell securities short; borrow money for investment
purposes (i.e., leverage their portfolio); write (sell) or purchase call or put
options on securities or on stock indices; concentrate their assets in one
industry; invest in master demand notes; invest in domestic equity securities;
and enter into futures contracts and options on futures contracts. The risks
associated with these investments are discussed below.
To the extent that the underlying funds also invest or engage in swaps,
preferred stock, convertible securities, real estate-related investments,
precious metal-related investments, U.S. Government securities, government
"mortgage-backed" securities, asset-backed securities, certificates of deposit
and bankers' acceptances, commercial paper, repurchase transactions, and
when-issued and delayed delivery securities, the underlying funds would be
subject to risks associated with such investments similar to those risks
discussed above regarding such investments by the Funds.
Short Sales. An underlying fund may sell securities short. In a short
sale, the underlying fund sells stock which it does not own, making delivery
with securities "borrowed" from a broker. The underlying fund is then obligated
to replace the security borrowed by purchasing it at the market price at the
time of replacement. This price may or may not be less than the price at which
the security was sold by the underlying fund. Until the security is replaced,
the underlying fund is required to pay the lender any dividends or interest that
accrue during the period of the loan. In order to borrow the security, the
underlying fund may also have to pay a premium which would increase the cost of
the security sold. The broker will retain the proceeds of the short sale to the
extent necessary to meet margin requirements until the short position is closed
out.
The underlying fund must also deposit in a segregated account an amount
of cash or U.S. Government securities equal to the difference between (a) the
market value of the securities sold short at the time they were sold short and
(b) the value of the collateral deposited with the broker in connection with the
short sale (not including the proceeds from the short sale). While the short
position is open, the underlying fund must maintain daily the segregated account
at such a level that (i) the amount deposited in it plus the amount deposited
with the broker as collateral equals the current market value of the securities
sold short and (ii) the amount deposited in it plus the amount deposited with
the broker as collateral is not less than the market value of the securities at
the time they were sold short. Depending upon market
29
<PAGE> 87
conditions, up to 80% of the value of an underlying fund's net assets may be
deposited as collateral for the obligation to replace securities borrowed to
effect short sales and allocated to a segregated account in connection with
short sales. The underlying fund will incur a loss as a result of the short sale
if the price of the security increases between the date of the short sale and
the date on which the underlying fund replaces the borrowed security. The
underlying fund will realize a gain if the security declines in price between
those dates. The amount of any gain will be decreased and the amount of any loss
increased by the amount of any premium dividends or interest the underlying fund
may be required to pay in connection with a short sale.
A short sale is "against the box" if at all times when the short
position is open the underlying fund owns an equal or greater amount of the
securities or securities convertible into, or exchangeable without further
consideration for, securities of the same issue as the securities sold short.
Such a transaction defers a gain or loss for Federal income tax purposes. The
procedures described above regarding deposits in a segregated account are not
required to be followed for short sales "against the box."
Leverage Through Borrowing. An underlying fund may borrow up to 25% of
the value of its net assets on an unsecured basis from banks to increase its
holdings of portfolio securities. Under the 1940 Act, the underlying fund is
required to maintain continuous asset coverage of 300% with respect to such
borrowings and to sell (within three days) sufficient portfolio holdings to
restore such coverage if it should decline to less than 300% due to market
fluctuations or otherwise, even if it is disadvantageous to do so from an
investment standpoint. Leveraging will exaggerate the effect of any increase or
decrease in the value of portfolio securities on the underlying fund's net asset
value. Money borrowed will also be subject to interest costs (which may include
commitment fees and/or the cost of maintaining minimum average balances), which
may or may not exceed the interest and option premiums received from the
securities purchased with borrowed underlying funds.
Derivatives. An underlying fund may invest in the following instruments
that are known commonly as derivatives. Generally, a derivative is a financial
arrangement, the value of which is based on or "received" from a traditional
security, asset or market index.
Hedging. An underlying fund may employ many of the investment
techniques described herein not only for investment purposes which may be
considered speculative, but also for hedging purposes. For example, an
underlying fund may purchase or sell put and call options on common stocks to
hedge against movement in individual common stock prices, or purchase and sell
stock index futures and related options to hedge against marketwide movements in
common stock prices. Although such hedging techniques generally tend to minimize
the risk of loss that is hedged against, they may also limit commensurably the
potential gain that
30
<PAGE> 88
might have resulted had the hedging transaction not occurred. Also, the desired
protection generally resulting from hedging transactions may not always be
achieved.
Master Demand Notes. Although the Fund will not do so, underlying funds
(particularly money market mutual funds) may invest up to 100% of their assets
in master demand notes. Master demand notes are unsecured obligations of U.S.
corporations redeemable upon notice that permit investment by an underlying fund
of fluctuating amounts at varying rates of interest pursuant to direct
arrangements between the fund and the issuing corporation. Because they are
direct arrangements between the underlying fund and the issuing corporation,
there is no secondary market for the notes. However, they are redeemable at face
value, plus accrued interest, at any time.
Domestic Equity Securities. The underlying funds, particularly global
underlying funds, also may be able to purchase equity securities of U.S.
companies. Equity securities are ownership interests in the net worth of a
corporation and include common stocks, convertible securities and warrants.
Common stock prices can be volatile in the short term. Market conditions or
other company, political and economic news can often cause large changes in a
stock's price. Such investments entail market risk, i.e., the risk of being
invested in stocks when the market goes down, resulting in stock prices
declining over short or even long periods.
INVESTMENT RESTRICTIONS
Except as otherwise noted, the restrictions below are fundamental and
cannot be changed without approval of the holders of a majority of the
outstanding voting securities (as defined in the 1940 Act). With respect to the
Analytics Fund and the Schwab OneSource Portfolios-International, investment
restriction numbers 3, 4, 6 and 7 are non-fundamental and may be changed by the
Trust's Board of Trustees. Each of the Funds, with the exception of Growth
Allocation and Balanced Allocation, may not:
1) As to 75% of its assets, purchase securities of any issuer (other
than obligations of, or guaranteed by, the U.S. Government, its agencies or
instrumentalities or investments in other registered investment companies) if,
as a result, more than 5% of the value of its total assets would be invested in
the securities of such issuer.
2) Purchase securities (other than securities issued or guaranteed by
the U.S. Government, its agencies or instrumentalities) if, as a result of such
purchase, 25% or more of the value of its total assets would be invested in any
industry (except that the
31
<PAGE> 89
International Index Fund and Small-Cap Index Fund may purchase securities under
such circumstances only to the extent that the International Index or Small-Cap
Index, respectively, is also so concentrated and that the S&P 500 Fund and
Analytics Fund may purchase securities under such circumstances only to the
extent that the S&P 500 is also so concentrated, and except that the Schwab
OneSource Portfolios-International will invest 25% or more of its total assets
in other investment companies).
3) Invest more than 10% of its net assets in illiquid securities,
including repurchase agreements with maturities in excess of seven days (except
that the Schwab OneSource Portfolios-International may not invest more than 15%
of its net assets in illiquid securities).
4) Purchase or retain securities of an issuer if any of the officers,
Trustees or Directors of the Trust or the Investment Manager individually own
beneficially more than 1/2 of 1% of the securities of such issuer and together
beneficially own more than 5% of the securities of such issuer.
5) Purchase or sell commodities, commodity contracts or real estate,
including interests in real estate limited partnerships, provided that each Fund
may (i) purchase securities of companies that deal in real estate or interests
therein, (ii) purchase or sell futures contracts, options contracts, equity
index participations and index participation contracts, and (iii) for the Asset
Director Funds, S&P 500 Fund, and Analytics Fund, purchase securities of
companies that deal in precious metals or interests therein.
6) Invest for the purpose of exercising control or management of
another issuer.
7) Purchase securities of other investment companies, except as
permitted by the 1940 Act, including any exemptive relief granted by the SEC.
8) Lend money to any person, except that each Fund may (i) purchase a
portion of an issue of short-term debt securities or similar obligations
(including repurchase agreements) that are distributed publicly or customarily
purchased by institutional investors, and (ii) lend its portfolio securities.
9) Borrow money or issue senior securities, except that each Fund may
borrow from banks as a temporary measure to satisfy redemption requests or for
extraordinary or emergency purposes and then only in an amount not to exceed
one-third of the value of its total assets (including the amount borrowed),
provided that each Fund will not purchase securities while borrowings represent
more than 5% of its total assets.
10) Pledge, mortgage or hypothecate any of its assets, except that, to
secure allowable borrowings, each Fund may do so with respect to no more than
one-third of the value of its total assets.
32
<PAGE> 90
11) Underwrite securities issued by others, except to the extent it may
be deemed to be an underwriter, under the federal securities laws, in connection
with the disposition of securities from its investment portfolio.
In order to permit the sale of shares of each Fund in certain
jurisdictions, each Fund may make commitments more restrictive than the
fundamental operating restrictions described above. Should it do so and later
determine that any such commitment is no longer in the best interests of the
Fund and its shareholders, it will revoke the commitment(s) by terminating sales
of its shares in the jurisdiction(s) involved.
The following restrictions are non-fundamental and may be changed by
the Trust's Board of Trustees. Each of the Funds, with the exception of Growth
Allocation and Balanced Allocation, may not:
1) Purchase more than 10% of any class of securities of any issuer if,
as a result of such purchase, it would own more than 10% of such issuer's
outstanding voting securities.
2) Invest more than 5% of its total assets in securities of issuers
(other than obligations of, or guaranteed by the U.S. Government or its agencies
or instrumentalities) that with their predecessors have a record of less than
three years continuous operation.
3) Invest more than 5% of its net assets in warrants, valued at the
lower of cost or market, and no more than 40% of this 5% may be invested in
warrants that are not listed on the New York Stock Exchange or the American
Stock Exchange, provided, however, that for purposes of this restriction,
warrants acquired by a Fund in units or attached to other securities are deemed
to be without value.
4) Purchase puts, calls, straddles, spreads or any combination thereof
if by reason of such purchase the value of its aggregate investment in such
securities would exceed 5% of the Fund's net assets.
5) Make short sales, except for short sales against the box.
6) Purchase or sell interests in oil, gas or other mineral development
programs or leases, although it may invest in companies that own or invest in
such interests or leases.
7) Purchase securities on margin, except such short-term credits as may
be necessary for the clearance of purchases and sales of securities.
33
<PAGE> 91
Investments in Other Mutual Funds. The Schwab OneSource(R)
Portfolios-International intends to purchase shares of underlying funds in
compliance with the requirements of Section 12(d)(1)(F) of the 1940 Act. Under
that provision, the Fund is prohibited from purchasing the securities of an
underlying fund if, as a result, the Fund together with its affiliates would own
more than 3% of the total outstanding securities of that underlying fund. In
addition, the Fund is required to seek voting instructions from its shareholders
regarding underlying fund proxies, and to vote such proxies in accordance with
the instructions received or to vote such proxies in the same proportion as the
vote of all other holders of the underlying fund securities.
GROWTH ALLOCATION AND BALANCED ALLOCATION FUNDAMENTAL INVESTMENT
RESTRICTIONS. The restrictions numbered 1, 2 and 3 immediately below are
fundamental and cannot be changed without approval of the holders of a majority
of the outstanding voting securities (as defined in the 1940 Act). For more
detailed information, see "1940 Act Restrictions" and "Other Investment
Policies" discussed below. The Growth Allocation and Balanced Allocation:
1) May purchase securities of any issuer only when consistent with the
maintenance of its status as a diversified company under the 1940 Act.
2) May not concentrate investments in a particular industry or group of
industries as concentration is defined under the 1940 Act, or the rules or
regulations thereunder; except that the Growth Allocation and Balanced
Allocation may be considered to be concentrated in investments in other
investment companies.
3) May (i) purchase or sell commodities, commodities contracts, or real
estate, (ii) lend or borrow money, (iii) issue senior securities, (iv)
underwrite securities, or (v) pledge, mortgage or hypothecate any of its assets,
only if permitted by the 1940 Act or the rules or regulations thereunder.
The Growth Allocation's and Balanced Allocation's fundamental
investment policies have been adopted to avoid wherever possible the necessity
of shareholder meetings otherwise required under the 1940 Act. This recognizes
the need to react quickly to changes in the law or new investment opportunities
in the securities markets and the cost and time involved in obtaining
shareholder approvals for diversely held investment companies. However, the
Growth Allocation and Balanced Allocation have also adopted non-fundamental
investment policies, set forth below, which are more restrictive than their
fundamental investment policies. The Growth Allocation's and Balanced
Allocation's non-fundamental investment policies may be changed by a vote of the
Board of Trustees. Any changes in either the Growth Allocation's or Balanced
Allocation's non-fundamental investment policies will be communicated to the
Fund's shareholders prior to the effectiveness of the changes.
34
<PAGE> 92
1940 ACT RESTRICTIONS. Under the 1940 Act and the rules, regulations
and interpretations thereunder, a "diversified company," as to 75% of its total
assets, may not purchase securities of any issuer (other than obligations of, or
guaranteed by, the U.S. Government or its agencies or instrumentalities) if, as
a result, more than 5% of the value of its total assets would be invested in the
securities of such issuer or more than 10% of the issuer's voting securities
would be held by the fund. "Concentration" is generally interpreted under the
1940 Act as investing 25% or more of total assets in an industry or group of
industries. The 1940 Act limits the ability of investment companies to borrow
and lend money and to underwrite securities. The 1940 Act currently prohibits an
open-end fund from issuing senior securities, as defined in the 1940 Act, except
under very limited circumstances.
OTHER INVESTMENT POLICIES FOR GROWTH ALLOCATION AND BALANCED
ALLOCATION. The following investment policies and restrictions are
non-fundamental and may be changed by the Trust's Board of Trustees. The Growth
Allocation and Balanced Allocation may not:
1) Invest more than 15% of its net assets in illiquid securities,
including repurchase agreements with maturities in excess of 7 days.
2) Purchase or retain securities of an issuer if any of the officers,
Trustees or Directors of the Trust or the Investment Manager individually own
beneficially more than 1/2 of 1% of the securities of such issuer and together
beneficially own more than 5% of the securities of such issuer.
3) Invest for the purpose of exercising control or management of
another issuer.
4) Purchase securities of other investment companies, except as
permitted by the 1940 Act, including any exemptive relief granted by the SEC.
5) Purchase more than 10% of any class of securities of any issuer if,
as a result of such purchase, it would own more than 10% of such issuer's
outstanding voting securities.
6) Invest more than 5% of its total assets in securities of issuers
(other than obligations of, or guaranteed by the U.S. Government or its agencies
or instrumentalities) that with their predecessors have a record of less than
three years continuous operation.
7) Invest more than 5% of its net assets in warrants, valued at the
lower of cost or market, and no more than 40% of this 5% may be invested in
warrants that are not listed on the New York Stock Exchange or the American
Stock Exchange, provided,
35
<PAGE> 93
however, that for purposes of this restriction, warrants acquired by a Fund in
units or attached to other securities are deemed to be without value.
8) Purchase puts, calls, straddles, spreads or any combination thereof
if by reason of such purchase the value of its aggregate investment in such
securities would exceed 5% of the Fund's net assets.
9) Make short sales, except for short sales against the box.
10) Purchase or sell interests in oil, gas or other mineral development
programs or leases, although it may invest in companies that own or invest in
such interests or leases.
11) Purchase securities on margin, except such short-term credits as
may be necessary for the clearance of purchases and sales of securities.
36
<PAGE> 94
MANAGEMENT OF THE TRUST
OFFICERS AND TRUSTEES. The officers and Trustees of the Trust, their
principal occupations over the past five years and their affiliations, if any,
with The Charles Schwab Corporation, Schwab and the Investment Manager, are as
follows:
<TABLE>
<CAPTION>
POSITION WITH
NAME/DATE OF BIRTH THE TRUST PRINCIPAL OCCUPATION
------------------ ------------- --------------------
<S> <C> <C>
CHARLES R. SCHWAB* Chairman and Trustee Chairman, Chief Executive Officer and
July 29, 1937 Director, The Charles Schwab Corporation;
Chairman and Director, Charles Schwab &
Co., Inc. and Charles Schwab Investment
Management, Inc.; Chairman and Director,
The Charles Schwab Trust Company;
Chairman and Director (current board
positions), and Chairman (officer position)
until December 1995, Mayer & Schweitzer,
Inc. (a securities brokerage subsidiary of
The Charles Schwab Corporation); Director,
The Gap, Inc. (a clothing retailer),
Transamerica Corporation (a financial
services organization), AirTouch
Communications (a telecommunications
company) and Siebel Systems (a software
company).
</TABLE>
- -----------------------
*Mr. Schwab is an "interested person" of the Trust.
37
<PAGE> 95
<TABLE>
<CAPTION>
POSITION WITH
NAME/DATE OF BIRTH THE TRUST PRINCIPAL OCCUPATION
------------------ ------------- --------------------
<S> <C> <C>
TIMOTHY F. McCARTHY** President and Trustee Executive Vice President - Mutual Funds,
September 19, 1951 Charles Schwab & Co., Inc.; Executive Vice
President, President - Financial Products
and International Group, The Charles
Schwab Corporation; Chief Executive
Officer, Charles Schwab Investment
Management, Inc.; President, Chief
Financial Officer and Director, Charles
Schwab Limited; Director, Mayer &
Schweitzer. From 1994 to 1995, Mr.
McCarthy was Chief Executive Officer,
Jardine Fleming Unit Trusts Ltd.;
Executive Director, Jardine Fleming
Holdings Ltd.; Chairman, Jardine Fleming
Taiwan Securities Ltd.; and Director of JF
India and Fleming Flagship, Europe. Prior
to 1994, he was President of Fidelity
Investments Advisor Group, a division of
Fidelity Investments in Boston.
DONALD F. DORWARD Trustee President and Chief Executive Officer,
September 23, 1931 Dorward & Associates (advertising and
marketing/consulting).
ROBERT G. HOLMES Trustee Chairman, Chief Executive Officer and
May 15, 1931 Director, Semloh Financial, Inc.
(international financial services); and
International Investment Consultant,
Cannon Street, Inc. (private investigative
firm).
</TABLE>
- -----------------------
**Mr. McCarthy is an "interested person" of the Trust.
38
<PAGE> 96
<TABLE>
<CAPTION>
POSITION WITH
NAME/DATE OF BIRTH THE TRUST PRINCIPAL OCCUPATION
------------------ ------------- --------------------
<S> <C> <C>
DONALD R. STEPHENS Trustee Managing Partner, D.R. Stephens & Co.
June 28, 1938 (real estate investment). Prior to 1993, Mr.
Stephens was Chairman and Chief
Executive Officer of the Bank of San
Francisco.
MICHAEL W. WILSEY Trustee Chairman, Chief Executive Officer and
August 18, 1943 Director, Wilsey Bennett, Inc. (truck and air
transportation, real estate investment and
management, and investments).
TAI-CHIN TUNG Treasurer and Principal Vice President - Finance, Charles Schwab &
March 7, 1951 Financial Officer Co., Inc.; Controller, Charles Schwab
Investment Management, Inc. From 1994
to 1996, Ms. Tung was Controller for
Robertson Stephens Investment
Management, Inc. From 1993 to 1994, she
was Vice President of Fund Accounting,
Capital Research and Management Co.
Prior to 1993, Ms. Tung was Senior Vice
President of the Sierra Funds and Chief
Operating Officer of Great Western
Financial Securities.
WILLIAM J. KLIPP* Senior Vice President, Senior Vice President, Charles Schwab &
December 9, 1955 Chief Operating Officer Co., Inc.; President and Chief Operating
and Trustee Officer, Charles Schwab Investment
Management, Inc. Prior to 1993, Mr. Klipp
was Treasurer of Charles Schwab & Co.,
Inc. and Mayer & Schweitzer, Inc.
</TABLE>
- -----------------------
*Mr. Klipp is an "interested person" of the Trust.
39
<PAGE> 97
<TABLE>
<CAPTION>
POSITION WITH
NAME/DATE OF BIRTH THE TRUST PRINCIPAL OCCUPATION
------------------ ------------- --------------------
<S> <C> <C>
STEPHEN B. WARD Senior Vice President Senior Vice President and Chief Investment
April 5, 1955 and Chief Investment Officer, Charles Schwab Investment
Officer Management, Inc.
FRANCES COLE Secretary Vice President, Chief Counsel, Chief
September 9, 1955 Compliance Officer and Assistant Corporate
Secretary, Charles Schwab Investment
Management, Inc.
DAVID H. LUI Assistant Secretary Vice President and Senior Counsel - Charles
October 14, 1960 Schwab Investment Management, Inc.
From 1991 to 1992, he was Assistant
Secretary and Assistant Corporate Counsel
for the Franklin Group of Mutual Funds.
CHRISTINA M. PERRINO Assistant Secretary Vice President and Senior Counsel - Charles
June 16, 1961 Schwab Investment Management, Inc.
Prior to 1994, she was Counsel and
Assistant Secretary for North American
Security Life Insurance Company and
Secretary for North American Funds.
</TABLE>
Each of the above-referenced Officers and/or Trustees also serves in
the same capacity as described for the Trust, Schwab Investments, The Charles
Schwab Family of Funds and Schwab Annuity Portfolios. The address of each
individual listed above is 101 Montgomery Street, San Francisco, California
94104.
40
<PAGE> 98
COMPENSATION TABLE(1)
<TABLE>
<CAPTION>
Pension or
Retirement
Benefits Estimated
Accrued as Part Annual Benefits
of Fund upon Total
Aggregate Expenses from Retirement from Compensation
Name of Person, Compensation the Fund the Fund from the Fund
Position from the Trust Complex(2) Complex(2) Complex(2)
- -------------- -------------- --------------- --------------- -------------
<S> <C> <C> <C> <C>
Charles R. Schwab, 0 N/A N/A 0
Chairman and
Trustee
Elizabeth G. Sawi(3), 0 N/A N/A 0
President and
Trustee
Timothy F.
McCarthy(4), 0 N/A N/A 0
President and
Trustee
William J. Klipp, 0 N/A N/A 0
Sr. Vice President,
Chief Operating
Officer and Trustee
Donald F. Dorward, 16,600 N/A N/A 73,000
Trustee
Robert G. Holmes, 16,600 N/A N/A 73,000
Trustee
Donald R. Stephens, 16,600 N/A N/A 73,000
Trustee
Michael W. Wilsey, 16,600 N/A N/A 73,000
Trustee
</TABLE>
(1) Figures are for the Trust's fiscal year ended October 31, 1995.
(2) "Fund Complex" comprises all 26 funds of the Trust, The Charles
Schwab Family of Funds, Schwab Investments and Schwab Annuity
Portfolios.
(3) Ms. Sawi served as President and Trustee until October 1995.
(4) Mr. McCarthy became President and Trustee in October 1995.
--------------------------------------------------------
41
<PAGE> 99
Pursuant to exemptive relief received by the Trust from the SEC, the
Trust may enter into deferred fee arrangements (the "Fee Deferral Plan" or the
"Plan") with the Trust's Trustees who are not "interested persons" of any of the
Funds of the Trust (the "Independent Trustees" or the "Trustees").
As of the date of this Statement of Additional Information, none of the
Independent Trustees has elected to participate in the Fee Deferral Plan. In the
event an Independent Trustee does elect to participate in the Plan, the Plan
would operate as described below.
Under the Plan, deferred Trustee's fees will be credited to a book
reserve account established by the Trust (the "Deferred Fee Account") as of the
date such fees would have been paid to such Trustee. The value of the Deferred
Fee Account as of any date will be equal to the value the Account would have had
as of that date if the amounts credited to the Account had been invested and
reinvested in the securities of the SchwabFund(R) or SchwabFunds selected by the
participating Trustee (the "Selected SchwabFund Securities"). SchwabFunds
include the series or classes of beneficial interest of the Trust, The Charles
Schwab Family of Funds and Schwab Investments.
Pursuant to the exemptive relief granted to the Trust, each Fund will
purchase and maintain the Selected SchwabFund Securities in an amount equal to
the deemed investments in that Fund of the Deferred Fee Accounts of the
Independent Trustees. The exemptive relief granted to the Trust permits the
Funds and the Trustees to purchase the Selected SchwabFund Securities, which
transactions would otherwise be limited or prohibited by the investment policies
and/or restrictions of the Funds. See "Investment Restrictions."
INVESTMENT MANAGER
The Investment Manager, a wholly owned subsidiary of The Charles Schwab
Corporation, serves as the Funds' investment adviser and administrator pursuant
to an Investment Advisory and Administration Agreement (the "Advisory
Agreement") between it and the Trust. The Investment Manager is registered as an
investment adviser under the Investment Advisers Act of 1940, as amended, and
currently provides investment management services to the SchwabFunds Family(R),
a family of 26 mutual funds with over $39 billion in assets as of September 11,
1996. The Investment Manager is an affiliate of: Schwab; the Trust's
distributor; the shareholder services; and the transfer agent. The Advisory
Agreement will continue in effect until May 30, 1997 with respect to each of the
Funds and thereafter will continue for one year terms subject to annual approval
by: (1) the Trust's Board of Trustees or (2) a vote of a majority (as defined in
the 1940 Act) of the outstanding voting securities of a Fund. In either event,
the continuance must also be approved by a majority of the Trust's Board of
Trustees who are not parties to the Agreement or interested persons (as defined
in the 1940 Act) of any such party by vote cast in person at a meeting called
for the purpose of voting
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on such approval. The Advisory Agreement may be terminated at any time upon 60
days' notice by either party, or by a majority vote of the outstanding shares of
a Fund, and will terminate automatically upon assignment.
International Index Fund. For its advisory and administrative services
to the International Index Fund, the Investment Manager is entitled to receive a
graduated annual fee, payable monthly, of 0.70% of the Fund's average daily net
assets not in excess of $300 million and 0.60% of such assets over $300 million.
The Investment Manager and Schwab have guaranteed that, through at
least February 28, 1997, the total fund operating expenses for the International
Index Fund will not exceed 0.69% of its average daily net assets.
For the fiscal years ended October 31, 1995 and 1994 and for the fiscal
period from September 9, 1993 (commencement of operations) to October 31, 1993,
the International Index Fund paid investment advisory fees of $665,000, $474,000
and $0, respectively (fees were reduced by $415,000, $388,000 and $98,000,
respectively).
Small-Cap Index Fund. For its advisory and administrative services to
the Small-Cap Index Fund, the Investment Manager is entitled to receive a
graduated annual fee, payable monthly, of 0.50% of the Fund's average daily net
assets not in excess of $300 million and 0.45% of such assets over $300 million.
The Investment Manager and Schwab have guaranteed that, through at
least February 28, 1997, the total fund operating expenses for the Small-Cap
Index Fund will not exceed 0.59% of its average daily net assets.
For the fiscal year ended October 31, 1995 and for the fiscal period
from December 3, 1993 (commencement of operations) to October 31, 1994, the
Small-Cap Index Fund paid investment advisory fees of $332,000 and $152,000,
respectively (fees were reduced by $115,000 and $107,000, respectively).
Asset Director Funds. For its advisory and administrative services to
the Asset Director Funds, the Investment Manager is entitled to receive a
graduated annual fee, payable monthly, of 0.74% of each Fund's average daily net
assets not in excess of $1 billion, 0.69% of the next $1 billion and 0.64% of
such net assets over $2 billion.
The Investment Manager and Schwab have guaranteed that, through at
least February 28, 1997, the total fund operating expenses for each Asset
Director Fund will not exceed 0.89% of the Fund's average daily net assets.
S&P 500 Fund. For its advisory and administrative services to the S&P
500 Fund, the Investment Manager is entitled to receive a graduated annual fee,
payable monthly, of 0.36% of the Fund's average daily net assets not in excess
of $1 billion, 0.33% of the next $1 billion and 0.31% of such net assets over $2
billion.
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The Investment Manager and Schwab have guaranteed that, through at
least February 28, 1997, the total operating expenses allocable to the Investor
Shares and the e.Shares(TM) will not exceed 0.49% and 0.28%, respectively, of
the average daily net assets of each class of shares.
Analytics Fund. For its advisory and administrative services to the
Analytics Fund, the Investment Manager is entitled to receive a graduated annual
fee, payable monthly, of 0.74% of the Fund's average daily net assets not in
excess of $1 billion, 0.69% of the next $1 billion and 0.64% of net assets over
$2 billion.
The Investment Manager and Schwab have guaranteed that, through at
least July 1, 1997, the total fund operating expenses for the Schwab Analytics
Fund will not exceed 0.75% of its average daily net assets.
Schwab OneSource Portfolios-International. For its advisory and
administrative services to the Schwab OneSource Portfolios-International, the
Investment Manager is entitled to receive a graduated annual fee, payable
monthly, of 0.74% of the Fund's average daily net assets not in excess of $1
billion, 0.69% of the next $1 billion and 0.64% of net assets over $2 billion.
The Investment Manager and Schwab have guaranteed that, through at
least February 28, 1999, the total fund operating expenses for the Schwab
OneSource Portfolios-International will not exceed 0.50% of its average daily
net assets.
Growth Allocation and Balanced Allocation. For its advisory and
administrative services to the Growth Allocation and Balanced Allocation, the
Investment Manager is entitled to receive a graduated annual fee, payable
monthly, of 0.74% of the first $1 billion of each Fund's average daily net
assets, 0.69% of the next $1 billion, and 0.64% of net assets over $2 billion.
The Investment Manager guarantees that, through at least February 28,
1999, the fund selection and investment management fees for each Fund will not
exceed 0.50% of its average daily net assets.
Schwab currently receives remuneration from fund companies
participating in its Mutual Fund OneSource(R) service equal to 0.25% to 0.35%
per annum of assets invested in OneSource Funds. The Investment Manager and
Schwab provide investment management and other services to all of Schwab's
proprietary funds and receive compensation from them. In light of this
remuneration and compensation, Schwab guarantees, through at least December 31,
2001, to waive its Transfer Agent and Shareholder Service fees, which normally
total 0.25%. After December 31, 2001, the guarantees may be terminated, modified
or continued.
Additional Information. The Advisory Agreement provides that the fees
to be paid to the Investment Manager will be less than the amount that would
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cause the aggregate operating expenses of a Fund (excluding interest, taxes, net
brokerage commissions and extraordinary expenses) in any year to exceed the most
stringent limits prescribed by any state in which shares of a Fund are offered
for sale. The most stringent current limit for such expenses is 2.5% of a fund's
first $30 million of average net assets, 2.0% of a fund's next $70 million of
average net assets and 1.5% of a fund's average net assets in excess of $100
million.
From time to time, each Fund may compare its total operating expense
ratio to the total operating expense ratio of other mutual funds or mutual fund
averages with similar investment objectives as reported by Lipper Analytical
Service, Inc., Morningstar, Inc. or other independent sources of such
information ("independent sources").
SUB-ADVISER
With respect to the Asset Director Funds and Analytics Fund the
Investment Manager has entered into an investment sub-advisory agreement (the
"Sub-Advisory Agreement") with Symphony Asset Management, Inc. (the
"Sub-Adviser") pursuant to which Symphony Asset Management, Inc. will act as the
Funds' sub-adviser. The Sub-Adviser is registered as an investment adviser under
the Investment Advisers Act of 1940 and currently manages directly and
indirectly approximately $700 million in institutional and private account
assets.
For the Asset Director Funds, the Sub-Adviser furnishes investment
advice through direct assistance to the Investment Manager in the development
and execution of quantitatively based investment strategies. The Sub-Adviser
uses a sophisticated optimization technique known as "Tactical Asset Allocation"
in evaluating the optimal allocation of the Asset Director Funds' assets among
asset categories (stocks, bonds and cash).
Tactical Asset Allocation is a value-oriented strategy which seeks the
highest reward for a given level of risk. Expected returns are measured for each
asset category; for stocks, the internal rate of return is measured on
forecasted dividend stream; for bonds, the yield to maturity is evaluated on
representative long corporate bonds; and for cash-equivalents, yield to maturity
is evaluated on representative money market instruments. Risks and correlations
of the asset categories are measured from long-term return histories.
For the Analytics Fund, the Sub-Adviser will make investment decisions
for the Fund's non-cash investments. The Sub-Adviser will use quantitative
techniques and proprietary real-time databases and software models to
continually identify and rank stocks that exhibit a favorable combination of
attributes that have historically been associated with aggregate total returns
greater than that of the S&P 500. Once rankings are determined, statistical
methodologies will be used to construct a portfolio of the most attractive
stocks in terms of potential long-term capital growth.
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For the Sub-Adviser's services relating to the Asset Director Funds,
the Investment Manager pays the Sub-Adviser an annual investment sub-advisory
fee, payable monthly, of 0.08% of the first $100 million of the Funds' aggregate
average daily net assets, 0.06% of the next $150 million, 0.04% of the next $600
million and 0.02% of the Funds' aggregate average daily net assets over $850
million. For the Analytics Fund, the Investment Manager pays the Sub-Adviser an
annual investment sub-advisory fee, payable monthly, 0.20% of the Fund's average
daily net assets not in excess of $300 million, 0.15% of the next $500 million
and 0.10% of such assets over $800 million.
As of May 1, 1995 and June 30, 1995, Dimensional Fund Advisors Inc.
("Dimensional") no longer served as the sub-adviser to the Small-Cap Index Fund
and International Index Fund, respectively. As of the same dates, the Investment
Manager became responsible for providing all investment advisory services to the
Funds.
Expenses. Under the Sub-Advisory Agreement between Dimensional and the
Investment Manager, the Investment Manager paid Dimensional the following
amounts for the fiscal periods indicated below.
International Index Fund: for the fiscal years ended October 31, 1995
and 1994 and for the fiscal period from September 9, 1993 (commencement of
operations) to October 31, 1993, $143,000, $185,000 and $21,000, respectively.
Small-Cap Index Fund: for the fiscal year ended October 31, 1995 and
for the fiscal period from December 3, 1993 (commencement of operations) to
October 31, 1994, $36,000 and $51,000, respectively.
DISTRIBUTOR
Pursuant to a Distribution Agreement, Schwab is the principal
underwriter for shares of the Trust and is the Trust's agent for the purpose of
the continuous offering of the Funds' shares. Each Fund pays the cost of the
prospectuses and shareholder reports to be prepared and delivered to existing
shareholders. Schwab pays such costs when the described materials are used in
connection with the offering of shares to prospective investors and for
supplementary sales literature and advertising. Schwab receives no fee under the
Distribution Agreement. Terms of continuation, termination and assignment under
the Distribution Agreement are identical to those described above with respect
to the Advisory Agreement.
CUSTODIAN AND FUND ACCOUNTANT
State Street Bank and Trust Company, at 1 Heritage Drive, North Quincy,
Massachusetts 02171-2197, serves as Custodian and Fund Accountant for the
International Index Fund, Small-Cap Index Fund, Asset Director Funds, Schwab
OneSource Portfolios-International, Growth Allocation and Balanced Allocation.
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PNC Bank, National Association, at the Airport Business Center, 200
Stevens Drive, Suite 440, Lester, Pennsylvania 19113, serves as Custodian for
the S&P 500 Fund and Analytics Fund. PFPC Inc., at 400 Bellevue Parkway,
Wilmington, Delaware 19809, serves as Fund Accountant for the S&P 500 Fund and
Analytics Fund.
ACCOUNTANTS
AND REPORTS TO SHAREHOLDERS
The Trust's independent accountants, Price Waterhouse LLP, audit and
report on the annual financial statements of each series of the Trust and review
certain regulatory reports and each Fund's federal income tax return. Price
Waterhouse LLP also performs other professional accounting, auditing, tax and
advisory services when the Trust engages it to do so. Shareholders will be sent
audited annual and unaudited semi-annual financial statements. The address of
Price Waterhouse LLP is 555 California Street, San Francisco, California 94104.
LEGAL COUNSEL
Ropes & Gray, One Franklin Square, 1301 K Street, N.W., Suite 800 East,
Washington, D.C. 20005, is counsel to the Trust.
PORTFOLIO TRANSACTIONS AND TURNOVER
PORTFOLIO TRANSACTIONS
In effecting securities transactions for the Funds, the Investment
Manager and the Sub-Adviser seek to obtain best price and execution. Subject to
the supervision of the Board of Trustees, the Investment Manager and the
Sub-Adviser will generally select brokers and dealers for the Funds primarily on
the basis of the quality and reliability of brokerage services, including
execution capability and financial responsibility. In assessing these criteria,
the Investment Manager and the Sub-Adviser will, among other things, monitor the
performance of brokers effecting transactions for the Funds to determine the
effect, if any, the Funds' transactions through those brokers have on the market
prices of the stocks involved. This may be of particular importance for the
Funds' investments in relatively smaller companies whose stocks are not as
actively traded as those of their larger counterparts. The Funds will seek to
buy and sell securities in a manner that causes the least possible fluctuation
in the prices of those stocks in view of the size of the transactions.
In an attempt to obtain best execution for the Funds, the Investment
Manager and the Sub-Adviser may also place orders directly with market makers or
with third market brokers, Instinet or brokers on an agency basis. Placing
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orders with third market brokers or through Instinet may enable the Funds to
trade directly with other institutional holders on a net basis. At times, this
may allow the Funds to trade larger blocks than would be possible trading
through a single market maker.
When the execution and price offered by two or more broker-dealers are
comparable, the Investment Manager and the Sub-Adviser may, in its discretion,
in agency transactions (and not principal transactions) utilize the services of
broker-dealers that provide it with investment information and other research
resources. Such resources may also be used by the Investment Manager and the
Sub-Adviser when providing advisory services to other investment advisory
clients, including mutual funds.
In determining when and to what extent to use Schwab or any other
affiliated broker-dealer as its broker for executing orders for the Funds on
securities exchanges, the Investment Manager and the Sub-Adviser will consider
(if relevant) whether the compensation to be paid Schwab or any other affiliated
broker-dealer will be (i) fair and reasonable, (ii) at least as favorable to the
Funds as commissions that would be charged by other qualified brokers having
comparable execution capabilities and (iii) at least as favorable as commissions
contemporaneously charged by Schwab or any other affiliated broker-dealer on
comparable transactions for its most favored unaffiliated customers. The Funds
do not consider it practicable or in the best interests of their shareholders to
solicit competitive bids for commission rates on each transaction. However, the
Board of Trustees, including a majority of the Trustees who are not "interested
persons" of Schwab or any other affiliated broker-dealer within the meaning of
the 1940 Act, (i) has prescribed procedures designed to provide that the Funds
do not pay commissions that do not meet the standards described above, (ii)
reviews those procedures annually to determine whether they remain adequate and
(iii) considers quarterly whether or not the commissions charged by Schwab or
any other affiliated broker-dealer have met the standards.
Brokerage services Schwab provides to the Funds are also subject to
Rule 11a2-2(T) under the Securities Exchange Act of 1934, as amended. Rule
11a2-2(T) permits the Funds to use Schwab as a broker provided certain
conditions are met. Among these requirements are that members of the exchange
not associated with Schwab perform the floor brokerage element of portfolio
transactions (that is, execution on the exchange floor or through use of
exchange facilities) that the orders to such members be transmitted from off the
exchange floor and that neither Schwab nor an associated person of Schwab
participates in the execution of the transaction after the order has been so
transmitted. In connection with transactions in which Schwab acts as broker for
the Funds, Schwab, while not permitted to perform floor brokerage (which is
undertaken by members Schwab selects who are not associated with that firm),
still continues to bear principal responsibility for determining important
elements of overall execution such as
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timing and order size, and also clears and settles such transactions. Schwab
pays the fees charged by those persons performing the described floor brokerage
elements. Schwab will not trade directly with the Funds in any transactions in
which Schwab or an affiliate acts as principal.
Brokerage Commissions. For the fiscal years ended October 31, 1995 and
1994 and for the fiscal period from September 9, 1993 (commencement of
operations) to October 31, 1993, the International Index Fund paid brokerage
commissions of $54,718, $86,127 and $170,195, respectively. For the fiscal year
ended October 31, 1995 and for the fiscal period from December 3, 1993
(commencement of operations) to October 31, 1994, the Small-Cap Index Fund paid
brokerage commissions of $142,785 and $165,997, respectively.
PORTFOLIO TURNOVER
For reporting purposes, each Fund's turnover rate is calculated by
dividing the value of purchases or sales of portfolio securities for the fiscal
year, whichever is less, by the monthly average value of portfolio securities
the Fund owned during the fiscal year. When making the calculation, all
securities whose maturities at the time of acquisition were one year or less
("short-term securities") are excluded.
A 100% portfolio turnover rate would occur, for example, if all
portfolio securities (aside from short-term securities) were sold and either
repurchased or replaced once during the fiscal year. The Funds expect that their
portfolio turnover rate will not exceed 100% in any given year, a turnover rate
lower than that of most non-index mutual funds. In the case of the Asset
Director Funds, this 100% portfolio turnover rate applies to the Funds' stock
and bond categories separately. The International Index Fund's portfolio
turnover rate for the fiscal years ended October 31, 1995 and 1994 was 0% and
6%, respectively. The Small-Cap Index Fund's portfolio turnover rate for the
fiscal year ended October 31, 1995 and for the fiscal period from December 3,
1993 (commencement of operations) to October 31, 1994 was 24% and 16%,
respectively.
From time to time, each Fund may compare its portfolio turnover rate
with that of other mutual funds as reported by independent sources.
TAXES
It is each Fund's policy to qualify for taxation as a "regulated
investment company" by meeting the requirements of Subchapter M of the Code. By
following this policy, each Fund expects to eliminate or reduce to a nominal
amount
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the federal income tax to which it is subject.
In order to qualify as a regulated investment company, each of the
Funds must, among other things, (1) derive at least 90% of its gross income from
dividends, interest, payments with respect to securities loans and gains from
the sale or other disposition of stocks, securities, foreign currencies or other
income (including gains from options, futures or forward contracts) derived with
respect to its business of investing in stocks, securities or currencies; (2)
derive less than 30% of its gross income from gains from the sale or other
disposition of certain assets (including stocks and securities) held for less
than three months; and (3) diversify its holdings so that at the end of each
quarter of its taxable year (i) at least 50% of the market value of the Fund's
total assets is represented by cash or cash items, U.S. Government securities,
securities of other regulated investment companies and other securities limited,
in respect of any one issuer, to a value not greater than 5% of the value of the
Fund's total assets and 10% of the outstanding voting securities of such issuer,
and (ii) not more than 25% of the value of its assets is invested in the
securities of any one issuer (other than U.S. Government securities or
securities of any other regulated investment company) or of two or more issuers
that the Fund controls, within the meaning of the Code, and that are engaged in
the same, similar or related trades or businesses. These requirements may
restrict the degree to which a Fund may engage in short-term trading and certain
hedging transactions and may limit the range of a Fund's investments. If a Fund
qualifies as a regulated investment company, it will not be subject to federal
income tax on the part of its net investment income and net realized capital
gains, if any, which it distributes to shareholders, provided that the Fund
meets certain minimum distribution requirements. To comply with these
requirements, a Fund must distribute at least (a) 90% of its "investment company
taxable income" (as that term is defined in the Code) and (b) 90% of the excess
of its (i) tax-exempt interest income over (ii) certain deductions attributable
to that income (with certain exceptions), for its taxable year. Each Fund
intends to make sufficient distributions to shareholders to meet these
requirements.
The Code imposes a non-deductible excise tax on regulated investment
companies that do not distribute in a calendar year (regardless of whether they
otherwise have a non-calendar taxable year) an amount equal to 98% of their
"ordinary income" (as defined in the Code) for the calendar year plus 98% of
their capital gain net income for the one year period ending on October 31 of
such calendar year. The balance of such income must be distributed during the
next calendar year. For the foregoing purposes, a Fund is treated as having
distributed any amount on which it is subject to income tax for any taxable year
ending in such calendar year. If the distributions during a calendar year were
less than the required amount, the Fund is subject to a non-deductible excise
tax equal to 4% of the deficiency.
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A Fund's transactions in futures contracts, forward contracts, foreign
currency transactions, options and certain other investment and hedging
activities are subject to special tax rules. In a given case, these rules may
accelerate income to a Fund, defer its losses, cause adjustments in the holding
periods of the Fund's assets, convert short-term capital losses into long-term
capital losses or otherwise affect the character of the Fund's income. These
rules could therefore affect the amount, timing and character of distributions
to shareholders. The Funds will endeavor to make any available elections
pertaining to these transactions in a manner believed to be in the best interest
of the Funds and their shareholders.
INCOME TAX INFORMATION
Any dividends declared by the Funds in October, November or December to
shareholders of record during those months and paid during the following January
are treated, for tax purposes, as if they were received by each shareholder on
December 31 of the year in which they were declared.
Dividends the Funds pay from net investment income and distributions
from the Funds' net short-term capital gains in excess of any net long-term
capital losses, whether received in cash or reinvested, will generally be
taxable to shareholders as ordinary income. Distributions received from the
Funds designated as long-term capital gains (net of capital losses), whether
received in cash or reinvested, will be taxable as long-term capital gains
without regard to the length of time a shareholder owned shares in the Funds.
However, if a shareholder receives a long-term capital gain distribution with
respect to Funds' shares held for six months or less, any loss on the sale or
exchange of those shares shall, to the extent of the long-term capital gain
distribution, be treated as a long-term capital loss. For corporate investors in
the Funds, dividend distributions the Funds designate to be from dividends
received from qualifying domestic corporations will be eligible for the 70%
corporate dividends-received deduction to the extent they would qualify if the
Funds were regular corporations. If a shareholder is not subject to income tax,
generally the shareholder will not be taxed on amounts distributed by the Funds.
A Fund will be required in certain cases to withhold and remit to the
U.S. Treasury 31% of taxable dividends paid to any shareholder who (1) fails to
provide a correct taxpayer identification number certified under penalty of
perjury; (2) is subject to withholding by the Internal Revenue Service for
failure to properly report all payments of interest or dividends; or (3) fails
to provide a certified statement that he or she is not subject to "backup
withholding." This "backup withholding" is not an additional tax and any amounts
withheld may be credited against the shareholder's ultimate U.S. tax liability.
The foregoing discussion relates only to federal income tax law as
applicable to U.S. citizens or residents. Foreign shareholders (i.e.,
nonresident alien individuals and foreign corporations,
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partnerships, trusts and estates) are generally subject to U.S. withholding tax
at the rate of 30% (or a lower tax treaty rate) on distributions derived from
net investment income and short-term capital gains. Distributions to foreign
shareholders of long-term capital gains and any gains from the sale or other
disposition of shares of the Funds are generally not subject to U.S. taxation,
unless the recipient is an individual who meets the Code's definition of
"resident alien." Different tax consequences may result if the foreign
shareholder is engaged in a trade or business within the United States. In
addition, the tax consequences to a foreign shareholder entitled to claim the
benefits of a tax treaty may be different than those described above.
Distributions by a Fund also may be subject to state, local and foreign taxes,
and its treatment under applicable tax laws may differ from the federal income
tax treatment.
Income which the International Index Fund, Asset Director Funds, Schwab
OneSource Portfolios-International, Growth Allocation and Balanced Allocation
receive from sources within various foreign countries may be subject to foreign
income taxes withheld at the source. If a Fund has at least 50% of its assets
invested in foreign securities at the end of its taxable year, it may elect to
pass through the foreign tax credit to its shareholders. It is expected that the
International Index Fund will have more than 50% of the value of its total
assets at the close of its taxable year invested in foreign securities, and it
will make this election. Pursuant to this election, U.S. shareholders must
include in gross income, even though not actually received, their respective pro
rata share of foreign taxes, and may either deduct their pro rata share of
foreign taxes (but not for alternative minimum tax purposes) or credit the tax
against U.S. income taxes, subject to certain limitations described in Code
section 904 (but not both). A shareholder who does not itemize deductions may
not claim a deduction for foreign taxes. It is expected that the Asset Director
Funds, Schwab OneSource Portfolios-International, Growth Allocation and Balanced
Allocation will not have 50% of their assets invested in foreign securities at
the close of their taxable years, and therefore will not be permitted to make
this election and "pass through" to their shareholders. Each shareholder's
respective pro rata share of foreign taxes these Funds pay will, therefore, be
netted against their share of the Fund's gross income.
Although the International Index Fund, Asset Director Funds, Schwab
OneSource Portfolios-International, Growth Allocation and Balanced Allocation
will attempt not to invest in any non-U.S. corporation which could be treated as
a passive foreign investment company ("PFIC") or become a PFIC under the Code,
it may do so inadvertently. This could result in adverse tax consequences upon
the disposition of, or the receipt of "excess distributions" with respect to,
such equity investments. To the extent the International Index Fund, Asset
Director Funds, Schwab OneSource Portfolios-International, Growth Allocation and
Balanced Allocation do invest in PFICs, they may adopt certain tax strategies to
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reduce or eliminate the adverse effects of certain federal tax provisions
governing PFIC investments. Many non-U.S. banks and insurance companies may not
be treated as PFICs if they satisfy certain technical requirements under the
Code. To the extent that the International Index Fund, Asset Director Funds,
Schwab OneSource Portfolios-International, Growth Allocation and Balanced
Allocation do invest in foreign securities which are determined to be PFIC
securities and are required to pay a tax on such investments, a credit for this
tax would not be allowed to be passed through to the International Index Fund's,
Asset Director Funds', Schwab OneSource Portfolios-International's, Growth
Allocation's and Balanced Allocation's shareholders. Therefore, the payment of
this tax would reduce the International Index Fund's, Asset Director Funds',
Schwab OneSource Portfolios-International's, Growth Allocation's and Balanced
Allocation's economic return from their PFIC shares, and excess distributions
received with respect to such shares are treated as ordinary income rather than
capital gains.
An underlying fund may inadvertently invest in non-U.S. corporations
which would be treated as Passive Foreign Investment Companies ("PFICs") or
become a PFIC under the Code. This could result in adverse tax consequences upon
the disposition of, or the receipt of "excess distributions" with respect to,
such equity investments. To the extent an underlying fund does invest in PFICs,
it may elect to treat the PFIC as a "qualified electing fund" or mark-to-market
its investments in PFICs annually. In either case, the underlying fund may be
required to distribute amounts in excess of its realized income and gains. To
the extent that the underlying fund itself is required to pay a tax on income or
gain from investment in PFICs, the payment of this tax would reduce Schwab
OneSource Portfolios-International's, Growth Allocation's, or Balanced
Allocation's economic return.
The discussion of federal income taxation presented above only
summarizes some of the important federal tax considerations generally affecting
purchasers of Fund shares. No attempt has been made to present a detailed
explanation of the federal income tax treatment of a Fund and its shareholders,
and the discussion is not intended as a substitute for careful tax planning.
Accordingly, prospective investors (particularly those not residing or domiciled
in the United States) should consult their own tax advisers regarding the
consequences of investing in a Fund.
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SHARE PRICE CALCULATION
Each Fund's net asset value per share is determined each Business Day
at the close of trading on the New York Stock Exchange, generally as of 4:00
p.m. Eastern time. The net asset value of the International Index Fund is
expressed in U.S. dollars by translating the Fund's assets using the bid price
for the U.S. dollar as quoted by generally recognized, reliable sources.
Currently, the New York Stock Exchange is closed on the following holidays: New
Year's Day (observed), Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day and Christmas Day. The Funds value their
portfolio securities daily based on their fair value. Each security the Funds
hold that is listed on a securities exchange and for which market quotations are
available is 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. Price information on each listed security is taken from the
exchange where the security is primarily traded. Unlisted securities for which
market quotations readily are available are valued at the mean between the most
recent bid and asked prices. The value of other assets for which no quotations
are readily available (including any restricted securities) are valued at fair
value as determined in good faith by the Investment Manager pursuant to Board of
Trustees guidelines. Securities may be valued on the basis of prices provided by
pricing services when such prices are believed to reflect fair market value.
In accordance with the 1940 Act, the underlying funds are valued at
their respective net asset values as determined by those funds. The underlying
funds that are money market funds value their portfolio securities based on the
amortized cost method. The other underlying funds value their portfolio
securities based on market quotes if they are readily available. The Investment
Manager assigns fair values to the Funds' other investments in good faith under
Board of Trustees guidelines. The Board of Trustees regularly reviews these
values.
HOW THE FUNDS REFLECT PERFORMANCE
STANDARDIZED TOTAL RETURN
Average annual total return for a period is determined by calculating
the actual dollar amount of investment return on a $1,000 investment in a Fund
made at the beginning of the period, then calculating the average annual
compounded rate of return that would produce the same investment return on the
$1,000 over the same period. In computing average annual total return, a Fund
assumes the reinvestment of all distributions at net asset value on applicable
reinvestment dates. For the one year period ended April 30, 1996, the
International Index Fund's total return was 12.43%. For the fiscal period from
September 9, 1993 (commencement of operations) to April 30, 1996, the
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<PAGE> 112
International Index Fund's average annual total return was 8.91%. For the one
year period ended April 30, 1996, the Small-Cap Index Fund's total return was
31.54% and for the fiscal period from December 3, 1993 (commencement of
operations) to April 30, 1996, the Small-Cap Index Fund's average annual total
return was 14.63%.
NONSTANDARDIZED TOTAL RETURN
Nonstandardized total return for a Fund differs from standardized total
return in that it relates to periods other than the period for standardized
total return and/or that it represents aggregate (rather than average) total
return.
In addition, an after-tax total return for each Fund may be calculated
by taking that Fund's standardized or non-standardized total return and
subtracting applicable federal taxes from the portions of each Fund's total
return attributable to capital gains distributions and ordinary income. This
after-tax total return may be compared to that of other mutual funds with
similar investment objectives as reported by independent sources.
Each Fund also may report the percentage of that Fund's standardized or
non-standardized total return which would be paid to taxes annually (at the
applicable federal personal income and capital gains tax rates) before
redemption of Fund shares. This proportion may be compared to that of other
mutual funds with similar investment objectives as reported by independent
sources.
A Fund may also advertise its cumulative total return since inception.
This number is calculated using the same formula that is used for average annual
total return except that, rather than calculating the total return based on a
one-year period, cumulative total return is calculated from inception to the
date specified. For the fiscal period from September 9, 1993 (commencement of
operations) to April 30, 1996, the International Index Fund's cumulative total
return was 25.30%. For the fiscal period from December 3, 1993 (commencement of
operations) to April 30, 1996, the Small-Cap Index Fund's cumulative total
return was 38.99%. Total return for the High Growth Fund, Balanced Growth Fund,
and Conservative Growth Fund for the period November 20, 1995 (commencement of
operations) to April 30, 1996 was 8.03%, 5.81% and 3.37%, respectively. Total
return for the S&P 500 Fund-Investor Shares and e.Shares(TM) for the period May
1, 1996 (commencement of operations) to August 31, 1996 was 0.40% and 0.50%,
respectively.
YIELD
A Fund's yield refers to the net investment income generated by a
hypothetical investment in the Fund over a specific 30 day period. This net
investment income is then annualized, which means that the net investment income
generated during the 30-day period is assumed to be generated in each 30-day
period over an annual period, and is shown as a percentage of the investment.
EFFECTIVE YIELD
A Fund's effective yield is calculated similarly, but the net
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<PAGE> 113
investment income earned by the investment is assumed to be compounded monthly
when annualized. The effective yield will be slightly higher than the yield due
to this compounding effect.
COMPARING THE PERFORMANCE OF THE
FUNDS WITH OTHER FUNDS AND INDICES
The performance of the Funds may be compared with the performance of
other mutual funds by comparing the ratings of mutual fund rating services,
various indices of investment performance, U.S. Government obligations, bank
certificates of deposit, the consumer price index and other investments for
which reliable data is available.
The Asset Director Funds, OneSource Portfolios-Growth Allocation and
Balanced Allocation also may compare their historical performance figures to the
performance of indices similar to their asset categories and sub-categories, and
to the performance of "blended indices" similar to the Funds' portfolio
strategies, such as those indices names in the Funds' Prospectus under "Market
Performance."
The Schwab OneSource Portfolios-International may compare its
historical performance to the performance of indices such as Morgan Stanley
Capital International's EAFE index, its World ex-U.S. index and other indices or
combination of indices.
THE BENEFITS OF INTERNATIONAL INVESTING
INCREASED DIVERSIFICATION
CAN LOWER RISK
To some extent, all U.S.-based investments -- stocks, bonds, mutual
funds and CDs -- are affected by the same economic forces. Tax cuts, interest
rate changes and the performance of the U.S. stock market can all influence U.S.
investments. Adding international (or overseas) investments to a U.S.-based
portfolio historically has reduced the portfolio's overall volatility. Although
U.S. and international markets may be interrelated, they do not move in tandem
- -- so losses in one market can be offset by gains in another.
POTENTIALLY HIGHER
OVERALL PERFORMANCE
During the past 10 years ending December 31, 1994, international equity
markets outperformed the U.S. equity market and most other U.S. securities
investments -- corporate bonds, CDs and U.S. Treasuries. The returns
international markets produced also have kept investors well ahead of inflation.
This historical performance means that investors diversified overseas earned a
higher level of return.
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<PAGE> 114
BROADER GROWTH OPPORTUNITIES
Investors who limit their portfolios to U.S. securities are missing
these investment opportunities. Ten years ago, the United States made up more
than half of the world's equity investments. As of December 31, 1993, it
represented just over one-third.
INDEXING AND THE SCHWAB INDEX FUNDS
Because the unmanaged performance of a broad-based equity index often
has proven superior to that of many individually selected stock portfolios, a
growing percentage of assets invested in the equity markets are being placed in
"index" portfolios. Institutional investors often devote a substantial
percentage of their assets to indexed strategies.
An index typically tracks the performance of a group of securities
selected to represent a particular market, and most often is used to gauge that
market's performance. The Dow Jones Industrial Average ("DJIA") and S&P 500 are
two indices designed to measure the performance of U.S. stocks. When investment
managers invest indexed separate accounts or index fund assets, they attempt to
replicate the performance of the applicable target index by holding all or a
representative sample of the securities included in the index.
The Funds' performance data assumes the reinvestment of dividends but
does not reflect deductions for administrative and management expenses. The
Funds will be subject to these costs and expenses, while the Index does not have
these expenses. In addition, various factors, such as holding a cash balance,
may cause the Funds' performance to be higher or lower than that of the Index.
INTERNATIONAL INDEX
The International Index is a broad-based stock market index which
contains the common stocks of the 350 largest operating companies (i.e.,
non-investment companies) incorporated outside the United States. To reduce
undue risk, the Index represents equities only from countries that are
considered to have developed markets and economies. By tracking the largest
companies in developed markets, the Index represents the performance of the
"blue chips" of international markets. The Index also is designed to provide a
broad representation of the international market, by limiting each country to no
more than 35% of the total market capitalization of the Index. As the stocks
contained in the Index represent about 35% of the total market capitalization of
international companies, the Index provides a reliable measure of market
57
<PAGE> 115
performance. The International Index was first made available to the public on
July 29, 1993.
SMALL-CAP INDEX
To be included in the Small-Cap Index, a company must satisfy all of
the following criteria: (1) it must be an "operating company" (i.e., not an
investment company) incorporated in the United States, its territories or
possessions; (2) a liquid market for its common shares must exist on the New
York Stock Exchange, American Stock Exchange or the NASDAQ/NMS and (3) its
market value must place it among the second 1,000 such companies as measured by
market capitalization (i.e., from the company with a rank of 1,001 through the
company with a rank of 2,000). Shareholders generally avoid exposure to the
smallest companies, whose shares are often thinly traded and very volatile,
because these stocks are not included in the Index.
A particular stock's weighting in the Small-Cap Index is based on its
relative total market value (i.e., its market price per share times the number
of shares outstanding), divided by the total market capitalization of the
Small-Cap Index. The returns produced by the U.S. stock market during the 25
years ending December 31, 1995 have been exceeded by very few types of
securities investments. Because the unmanaged performance of the U.S. stock
market often has proven superior to that of many individually selected stock
portfolios, a growing percentage of assets invested in the equity markets are
being placed in "index" portfolios. From less than $9 billion in 1980, indexed
institutional holdings have grown to over $280 billion, a figure equal to
approximately one-quarter of all institutional assets. (Source: Callan
Associates Survey, reported in Fall 1990 edition of The Journal of Portfolio
Management.)
Historically, returns in a long-term investment in a group of common
stocks representative of the stock market as a whole, as well as a group of
common stocks representative of small-cap stocks, significantly have exceeded
the returns of U.S. Treasury Bills, CDs, corporate bonds and inflation.
THE S&P 500 INDEX(R)
The S&P 500 is representative of the performance of the U.S. stock
market. The Index consists of 500 stocks chosen for market size, liquidity and
industry group representation. It is a market-value weighted index (stock price
times number of shares outstanding), with each stock's weight in the Index
proportionate to its market value. The S&P 500 does not contain the 500 largest
stocks, as measured by market capitalization. Although many of the stocks in the
Index are among the largest, there also are some relatively small companies in
the Index. Those companies, however, generally are established companies within
their industry group. S&P identifies important industry groups within the U.S.
economy and then allocates a representative sample of stocks with each group to
the S&P 500. There are four major industry sectors within the Index:
Industrials, Utilities, Financial and Transportation.
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ASSET ALLOCATION STRATEGIES
USING SCHWABFUNDS(R)
Shareholders of SchwabFunds may wish to invest in the SchwabFunds as
components of their personal asset allocation plan. They also may choose to
invest in the Schwab Asset Director Funds, OneSource Portfolios-Growth
Allocation or Balanced Allocation, which offer the benefits of asset allocation
in a single fund. An asset allocation program is available through Schwab. This
program may help shareholders select investments, including investments in
SchwabFunds, that match their individual investment needs. The shareholders'
personal investment plan is based on a number of factors, including personal
financial situation, time horizon, investment objectives and goals and risk
tolerance.
ACCESS TO SCHWAB'S MUTUAL
FUND ONESOURCE(R) SERVICE
With Schwab's Mutual Fund OneSource service ("OneSource"), a
shareholder can invest in over 575 mutual funds from many fund companies,
subject to the following. Schwab's standard transaction fee will be charged on
each redemption of fund shares held for 90 days or less to discourage short-term
trading. Mutual fund shares held for more than 90 days are exempt from the
short-term redemption policy and may be sold without penalty. Up to 15
short-term redemption of fund shares per calendar year are permitted. If you
exceed this number, you will no longer be able to buy or sell fund shares
without paying a transaction fee. As a courtesy, we will notify you in advance
if your short-term redemptions are nearing the point where all of your future
trades will be subject to transaction fees. Schwab reserves the right to modify
OneSource's terms and conditions at any time. For more information, a
shareholder should contact his or her Schwab office during its regular business
hours or call 800-2 NO-LOAD, 24 hours a day.
From time to time, the Funds may include discussions in advertisements
of the income tax savings shareholders may experience as a result of their
policy of limiting portfolio trading in order to reduce capital gains. This
information may be supplemented by presentations of statistical data
illustrating the extent of such income tax savings and the impact of such
savings on the yield and/or total return of the Funds. In addition, such
advertisements may include comparisons of the Funds' performance against that of
investment products that do not employ the Funds' policy of seeking to limit
capital gains.
The Funds are intended to make indexed investing easily available to
Schwab customers with the highest level of convenience and economy, thereby
facilitating their ability to participate in the long-term performance of the
U.S. stock market.
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SCHWABFUNDS(R)
SchwabFunds offers a variety of series and classes of shares of beneficial
interest to help you with your investment needs.
EQUITY FUNDS
Schwab 1000 Fund(R)(1)
Schwab International Index Fund(R)(2)
Schwab Small-Cap Index Fund(R)(2)
Schwab Asset Director(R)-High Growth Fund(2)
Schwab Asset Director(R)-Balanced Growth Fund(2)
Schwab Asset Director(R)-Conservative Growth Fund(2)
Schwab S&P 500 Fund-Investor Shares(2)
Schwab S&P 500 Fund-e.Shares(TM)(2, 3)
Schwab Analytics Fund(TM)(2)
Schwab OneSource Portfolios-International
Schwab OneSource Portfolios-Growth Allocation
Schwab OneSource Portfolios-Balanced Allocation
FIXED INCOME FUNDS(1)
Schwab Short/Intermediate Government Bond Fund
Schwab Long-Term Government Bond Fund
Schwab Short/Intermediate Tax-Free Bond Fund
Schwab Long-Term Tax-Free Bond Fund
Schwab California Short/Intermediate Tax-Free Bond Fund(4)
Schwab California Long-Term Tax-Free Bond Fund(4)
MONEY MARKET FUNDS(5)
Schwab Money Market Fund
Schwab Government Money Fund
Schwab U.S. Treasury Money Fund
Schwab Value Advantage Money Fund(R)
Schwab Tax-Exempt Money Fund-Sweep Shares
Schwab Tax-Exempt Money Fund-Value Advantage Shares(TM)
Schwab California Tax-Exempt Money Fund-Sweep Shares
Schwab California Tax-Exempt Money Fund-Value Advantage Shares(TM)
Schwab Retirement Money Fund(R)(6)
Schwab Institutional Advantage Money Fund(R)(6)
Schwab New York Tax-Exempt Money Fund-Sweep Shares
Schwab New York Tax-Exempt Money Fund-Value Advantage Shares(TM)
(1) The Schwab 1000 Fund and all fixed income funds are separate investment
portfolios of Schwab Investments.
(2) The Funds are separate investment portfolios or classes of shares of Schwab
Capital Trust.
(3) Available only through SchwabLink(TM).
(4) Available only to California residents and residents of selected other
states.
(5) All listed money market funds are separate investment portfolios of The
Charles Schwab Family of Funds.
(6) Designed for institutional investors only.
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OTHER INFORMATION
From time to time, the International Index Fund and Small-Cap Index
Fund may compare the historical performance of the International Index and
Small-Cap Index, respectively, to the historical performance of various other
indices, including the S&P 500, as reported by independent sources.
Each Fund, except for the Analytics Fund and Schwab OneSource
Portfolios-International, is managed to offset capital gains with capital losses
in order to minimize each Fund's capital gain distributions. This special
feature can make a real difference in an investor's after-tax return, especially
if the investor is in a high tax bracket. In addition, each Fund has adopted a
number of policies that should cause its portfolio turnover rate to be below the
portfolio turnover rate of many other mutual funds. A lower portfolio turnover
rate acts to minimize associated transaction costs as well as the level of
realized capital gains. By avoiding, where possible, distributing capital gains
to shareholders, the Funds help to build the value of a shareholders shares and
defer payment of capital gains taxes until shares are redeemed. A shareholder's
current tax liability for capital gains should be reduced and the shareholder's
total return increased by these policies.
Each Fund may, from time to time, refer to recent studies that analyze
certain techniques and strategies which either Fund may use. In addition, each
Fund may, from time to time, promote the advantages of investing in a series
that is part of a large, diverse mutual fund complex.
From time to time, each Fund may include discussions in advertisements
of the income tax savings shareholders may experience as a result of that Fund's
policy of limiting portfolio trading in order to reduce capital gains. This
information may be supplemented by presentations of statistical data
illustrating the extent of such income tax savings and the impact of such
savings on the yield and/or total return of each Fund. In addition, such
advertisements may include comparisons of each Fund's performance against that
of investment products that do not employ each Fund's policy of seeking to limit
capital gains.
GENERAL INFORMATION
The Trust generally is not required to hold shareholder meetings.
However, as provided in its Agreement and Declaration of Trust and Bylaws,
shareholder meetings will be held in connection with the following matters: (1)
election or removal of Trustees if a meeting is requested in writing by a
shareholder or shareholders who beneficially own(s) 10% or more of the Trust's
shares; (2) adoption of any contract for which shareholder approval is required
by the 1940 Act; (3) any termination of the Trust to the extent and as provided
in the Declaration of Trust; (4) any amendment of the Declaration of Trust
(other than amendments changing the name of the Trust or any of its investment
portfolios, supplying any omission, curing any ambiguity or curing, correcting
or supplementing any defective or inconsistent provision thereof); (5)
determining whether a court action, proceeding or claim should or should not be
brought or maintained derivatively or as a class action on behalf of the Trust
or
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the shareholders, to the same extent as the stockholders of a Massachusetts
business corporation; and (6) such additional matters as may be required by law,
the Declaration of Trust, the Bylaws or any registration of the Trust with the
SEC or any state or as the Board of Trustees may consider desirable. The
shareholders also would vote upon changes to a Fund's fundamental investment
objective, policies or restrictions.
Each Trustee serves until the next meeting of shareholders, if any,
called for the purpose of electing Trustees and until the election and
qualification of his or her successor or until death, resignation, retirement or
removal by a majority vote of the shares entitled to vote (as described below)
or of a majority of the Trustees. In accordance with the 1940 Act, (i) the Trust
will hold a shareholder meeting for the election of Trustees when less than a
majority of the Trustees have been elected by shareholders and (ii) if, as a
result of a vacancy in the Board of Trustees, less than two-thirds of the
Trustees have been elected by the shareholders, that vacancy will be filled by a
vote of the shareholders.
Upon the written request of 10 or more shareholders who have been such
for at least six months and who hold shares constituting at least 1% of the
Trust's outstanding shares stating that they wish to communicate with the other
shareholders for the purpose of obtaining signatures necessary to demand a
meeting to consider removal of one or more Trustees, the Trust has undertaken to
disseminate appropriate materials at the expense of the requesting shareholders.
The Bylaws provide that a majority of shares entitled to vote shall be
a quorum for the transaction of business at a shareholders' meeting, except that
where any provision of law, of the Declaration of Trust or of the Bylaws permits
or requires that (i) holders of any series shall vote as a series, then a
majority of the aggregate number of shares of that series entitled to vote shall
be necessary to constitute a quorum for the transaction of business by that
series, or (ii) holders of any class shall vote as a class, then a majority of
the aggregate number of shares of that class entitled to vote shall be necessary
to constitute a quorum for the transaction of business by that class. Any lesser
number shall be sufficient for adjournments. Any adjourned session or sessions
may be held, within a reasonable time after the date set for the original
meeting, without the necessity of further notice. The Declaration of Trust
specifically authorizes the Board of Trustees to terminate the Trust (or any of
its investment portfolios) by notice to the shareholders without shareholder
approval.
Under Massachusetts law, shareholders of a Massachusetts business trust
could, under certain circumstances, be held personally liable for the Trust's
obligations. The Declaration of Trust, however, disclaims shareholder liability
for the Trust's acts or obligations and requires that notice of such disclaimer
be given in each agreement, obligation or instrument entered into or executed by
the Trust or the Trustees. In addition, the Declaration of Trust provides for
indemnification out of the property of an investment portfolio in which a
shareholder owns or owned shares for all losses and expenses of such shareholder
or former shareholder if he or she is held personally liable for the obligations
of the Trust solely by reason of being or having been a shareholder. Moreover,
the Trust will be covered by insurance which the Trustees consider adequate to
cover foreseeable tort claims. Thus, the risk of
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a shareholder incurring financial loss on account of shareholder liability is
considered remote, because it is limited to circumstances in which a disclaimer
is inoperative and the Trust itself is unable to meet its obligations.
For further information, please refer to the registration statement and
exhibits for the Trust on file with the SEC in Washington, D.C. and available
upon payment of a copying fee. The statements in the Prospectus and this
Statement of Additional Information concerning the contents of contracts or
other documents, copies of which are filed as exhibits to the registration
statement, are qualified by reference to such contracts or documents.
PRINCIPAL HOLDERS OF SECURITIES
As of September 16, 1996, the officers and Trustees of the Trust, as a
group, owned of record or beneficially 1.8% of the outstanding voting securities
of the Conservative Growth Fund. As of September 16, 1996, the officers and
Trustees of the Trust, as a group, owned of record or beneficially less than 1%
of the outstanding voting securities of the remaining series of Schwab Capital
Trust.
As of September 16, 1996, the following company directly or
beneficially owned 5% or more of the Fund's e.Shares(TM): The Charles Schwab
Trust Company, 1 Montgomery Street, 7th Floor, San Francisco, CA 94104 at
10.071% for the S&P 500 Fund.
PURCHASE AND REDEMPTION OF SHARES
Each Fund has set minimum initial investment requirements, as disclosed
in its respective Prospectus. Subsequent investments of $100 or more may be
made. These minimum investment requirements may be changed at any time and are
not applicable to certain types of investors. The Trust may waive the minimums
for purchases by Trustees, Directors, officers or employees of the Sub-Adviser.
The Funds, other than the Schwab OneSource Portfolios-International,
Growth Allocation and Balanced Allocation have made an election with the SEC to
pay in cash all redemptions requested by any shareholder of record limited in
amount during any 90-day period to the lesser of $250,000 or 1% of its net
assets at the beginning of such period. The Schwab OneSource
Portfolios-International, Growth Allocation and Balanced Allocation have not so
elected. This election is irrevocable without the SEC's prior approval.
Redemption requests in excess of applicable limits (as summarized below) may be
paid, in whole or in part, in investment securities or in cash, as the Trust's
Board of Trustees may deem advisable; however, payment will be made wholly in
cash unless the Board of Trustees believes that economic or market conditions
exist that would make such a practice detrimental to the best interests of the
Fund. If redemption proceeds are paid in investment securities, such securities
will be valued as set forth in the Prospectus of the Fund affected under "Share
Price Calculation" for the International Index and Small Cap Funds and under
"Important Information About Your Investment - How We Determine the Price of
Your Shares" for the Asset Director Funds, Analytics Fund, S&P 500 Fund, and
Schwab OneSource Portfolios-
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International, Growth Allocation and Balanced Allocation and a redeeming
shareholder would normally incur brokerage expenses if he or she were to convert
the securities to cash.
OTHER INFORMATION
The Prospectuses of the Funds and this Statement of Additional
Information do not contain all the information included in the Registration
Statement filed with the SEC under the Securities Act of 1933, as amended, with
respect to the securities offered by the Prospectuses. Certain portions of the
Registration Statement have been omitted from the Prospectuses and this
Statement of Additional Information pursuant to the rules and regulations of the
SEC. The Registration Statement, including the exhibits filed therewith, may be
examined at the office of the SEC in Washington, D.C.
Statements contained in the Prospectuses or in this Statement of
Additional Information as to the contents of any contract or other document
referred to are not necessarily complete, and, in each instance, reference is
made to the copy of such contract or other document filed as an exhibit to the
Registration Statement of which the Prospectuses and this Statement of
Additional Information form a part, each such statement being qualified in all
respects by such reference.
THIS STATEMENT OF ADDITIONAL INFORMATION DOES NOT CONSTITUTE AN
OFFERING BY THE TRUST, ANY SERIES THEREOF, OR BY THE DISTRIBUTOR IN ANY
JURISDICTION IN WHICH SUCH OFFERING MAY NOT BE LAWFULLY MADE.
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SchwabFunds(R)
- --------------------------------------------------------------------------------
SCHWAB INTERNATIONAL INDEX FUND(TM)
STATEMENT OF NET ASSETS
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
COMMON STOCK--97.1%
AUSTRALIA--2.0%
Australia & New Zealand
Banking Group 74,852 $ 358
Broken Hill Proprietary
Co., Ltd. 104,612 1,610
Commonwealth Bank Group 56,568 464
National Australia Bank 74,258 666
News Corp., Ltd. 110,631 648
Western Mining Corp. 53,600 391
Westpac Banking Corp. 99,986 485
--------
4,622
--------
BELGIUM--0.8%
Electrabel 3,100 695
Electrabel, VVPR Strip 500 1
Generale de Banque 840 296
Petrofina SA 1,100 325
Societe Generale de
Belgique 3,040 237
Tractebel Investor
International 600 244
--------
1,798
--------
CANADA--2.9%
Alcan Aluminum Ltd. 15,313 487
BCE Inc. 20,435 804
Bank of Montreal 16,475 396
Bank of Nova Scotia,
Halifax 19,192 435
Barrick Gold Corp. 16,500 506
Canadian Imperial Bank
of Commerce 13,180 409
Canadian Pacific Ltd. 16,700 340
Imperial Oil Ltd. (New) 11,681 475
Northern Telecom Ltd. 14,053 724
Placer Dome Inc. 21,200 590
Royal Bank of Canada,
Montreal Quebec 15,200 360
Seagram Co. Ltd. 17,400 586
Thomson Corp. 33,900 564
Toronto-Dominion Bank 14,000 243
--------
6,919
--------
DENMARK--0.3%
Novo Nordisk A/S
Series B 2,102 273
Tele Danmark A/S
Series B 7,910 398
--------
671
--------
FRANCE--6.7%
AXA Groupe SA 15,275 910
Alcatel Alsthom CGE SA 8,154 767
BQE National de Paris 10,161 424
Carrefour 1,432 1,119
Christian Dior 2,353 314
Cie Financiere de
Paribas (Bearer) 5,425 349
Cie Generale de Eaux 6,721 731
Compagnie de Saint-
Gobain SA 3,931 471
Danone Groupe 3,350 506
Elf Aquitaine 14,835 1,103
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
L'Air Liquide 3,073 $ 558
L'Oreal SA 2,900 896
LVMH Moet Hennessy Louis
Vuitton 7,100 1,816
Lafarge Coppee SA 8,596 551
Lyonnaise des Eaux-Dumez 2,780 279
Michelin (CGDE)
Class B (Reg.) 5,300 263
PSA Peugeot Citroen 2,200 307
Pinault Printemps
Redoute SA 1,255 381
Renault (Regie
Nationale) 14,500 440
Rhone-Poulenc SA A
Shares 15,400 370
Roussel Uclaf 1,526 360
Sanofi 6,110 493
Schneider SA 8,900 415
Societe Generale 4,778 555
Suez Group 7,455 309
TOTAL Class B 12,404 842
Union des Assurances
de Paris 14,389 312
--------
15,841
--------
GERMANY--7.2%
BASF AG 3,153 861
Bankgesell Berlin 1,206 248
Bayer AG 3,767 1,213
Bayerische Hypotheken &
Wechsel Bank AG 11,380 283
Bayerische Motoren Werke
AG 910 491
Bayerische
Vereinsbank AG 11,590 341
Commerzbank AG 2,150 466
Daimler-Benz AG 2,721 1,490
Deutsche Bank AG 27,823 1,333
Dresdner Bank AG 23,930 602
Hoechst AG 3,262 1,099
Linde AG 400 245
Lufthansa AG 1,600 254
Mannesmann AG 1,734 592
Muenchener
Rueckversicherung 11 18
Muenchener
Rueckversicherung
(Reg.) 812 1,475
RWE AG* 18,210 709
RWE AG (Non Voting)* 18,320 533
Sap AG 2,840 368
Siemens AG 3,125 1,711
Thyssen AG 1,411 256
Veba AG 26,470 1,316
Vereinigte
Elektrizitatswerke
Westfalen Series B 903 260
Viag AG 970 380
Viag AG (New)* 277 109
Volkswagen AG 1,246 430
--------
17,083
--------
HONG KONG--3.6%
CITIC Pacific 98,000 385
Cathay Pacific Airways 100,000 175
Cheung Kong Holdings 104,000 743
</TABLE>
F-1
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SchwabFunds(R)
- --------------------------------------------------------------------------------
SCHWAB INTERNATIONAL INDEX FUND(TM)
STATEMENT OF NET ASSETS
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
China Light & Power 94,900 $ 448
Hang Seng Bank Ltd. 95,900 973
Henderson China 304 1
Henderson Land
Development Co. 76,000 545
Hongkong Electric
Holdings Ltd. 99,000 315
Hongkong
Telecommunications
Ltd. 631,067 1,203
Hutchison Whampoa Ltd. 190,000 1,179
New World
Development Co. 91,317 410
Sun Hung Kai Properties 123,500 1,177
Swire Pacific Ltd. Class
A 75,500 644
Wharf Holdings 101,000 374
--------
8,572
--------
ITALY--2.1%
Alleanza Assicurazioni 22,500 212
Alleanza Assicurazioni
di Risp
(Non-Convertible) 3,750 26
Assicurazioni Generali 43,700 1,090
Fiat SpA 168,000 573
Fiat SpA, di Risp
(Non-Convertible) 42,000 76
INA 201,000 309
STET 207,000 700
STET di Risp
(Non-Convertible) 66,000 173
Telecom Italia 320,000 652
Telecom Italia di Risp
(Non-Convertible) 165,000 274
Telecom Italia Mob 320,000 707
Telecom Italia Mob di
Risp 195,000 273
--------
5,065
--------
JAPAN--33.7%
Ajinomoto Co., Inc. 26,000 326
All Nippon Airways
Co., Ltd. 41,000 466
Asahi Bank 79,000 1,020
Asahi Breweries 8,000 97
Asahi Chemical
Industry Co. 41,000 312
Asahi Glass Co., Ltd. 33,000 401
Bank of Fukuoka 11,000 97
Bank of Tokyo Mitsubishi
(Bank of Tokyo shares) 52,000 1,198
Bank of Tokyo Mitsubishi
(Mitsubishi Bank
shares) 93,450 2,162
Bank of Yokohama 44,000 395
Bridgestone Corp. 22,000 408
Canon Inc. 25,000 497
Chiba Bank 31,000 280
Chubu Electric Power Co. 21,100 535
Chugoku Electric Power
Co., Inc. 14,300 340
DDI Corp. 100 859
Dai Nippon Printing Co. 21,000 395
Dai-Ichi Kangyo Bank,
Ltd. 112,000 2,281
Daiei Inc. 24,000 326
Daiwa Bank 48,000 374
Daiwa House
Industries Co. 11,000 176
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
Daiwa Securities Co. 47,000 $ 723
East Japan Railway Co. 150 802
Eisai Co. 5,250 104
Fanuc 8,000 348
Fuji Bank, Ltd. 93,000 2,036
Fuji Photo Film Co. 14,000 436
Fujitsu Ltd. 51,000 527
Gunma Bank 10,000 116
Hachijuni Bank 13,000 150
Hankyu Corp. 17,000 104
Hitachi Ltd. 111,000 1,199
Hitachi Zosen Corp. 19,000 104
Hokkaido Electric
Power Co. 4,000 96
Hokuriku Electric
Power Co. 9,500 227
Honda Motor Co., Ltd. 34,000 777
Industrial Bank of
Japan, Ltd. 76,000 2,034
Ishikawajima-Harima
Heavy Industries 53,000 263
Isuzu Motors Ltd. 39,000 223
Ito-Yokado Co., Ltd. 12,000 708
Itochu Corp. 43,000 328
Japan Air Lines Co.,
Ltd. 50,000 400
Japan Telecom Co. 10 210
Japan Tobacco Inc. 100 925
Joyo Bank 18,000 147
Jusco Co. 12,000 372
Kajima Corp. 34,000 384
Kansai Electric Power
Co. 33,700 818
Kao Corp. 24,000 321
Kawasaki Heavy
Industries 55,000 284
Kawasaki Steel Co. 112,000 410
Kinki Nippon Railway Co. 56,650 441
Kirin Brewery Co., Ltd. 32,000 416
Kobe Steel 104,000 323
Kokusai Denki 1,500 148
Komatsu Ltd. 38,000 367
Kubota Corp. 42,000 293
Kyocera Corp. 5,000 377
Kyushu Electric Power
Co. 13,700 341
Long-Term Credit Bank
of Japan 67,000 581
Marubeni Corp. 34,000 204
Marui Co. 14,000 309
Matsushita Communication
Industrial Co., Ltd. 4,000 107
Matsushita Electric
Industrial Co., Ltd. 70,000 1,238
Matsushita Electric
Works 30,000 341
Mitsubishi Chemical
Corp. 62,000 340
Mitsubishi Corp. 56,000 798
Mitsubishi Electric
Corp. 60,000 473
Mitsubishi Estate Co. 37,000 520
Mitsubishi Heavy
Industries 110,000 982
Mitsubishi Materials Co. 46,000 277
Mitsubishi Motors 37,000 334
Mitsubishi Trust &
Banking Corp. 45,000 779
Mitsui & Co. 45,000 429
Mitsui Fudosan Co. 26,000 343
</TABLE>
F-2
<PAGE> 124
SchwabFunds(R)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
Mitsui Marine &
Fire Insurance 14,000 $ 119
Mitsui Trust &
Banking Co. 35,000 422
Murata Manufacturing Co. 9,000 349
NEC Corp. 55,000 699
NKK Corp. 97,000 304
New Oji Paper Co. 16,000 148
Nikko Securities Co. 41,000 521
Nikon Corp. 11,000 148
Nintendo Co., Ltd. 4,200 324
Nippon Credit Bank 69,000 282
Nippon Express Co. 31,000 323
Nippon Oil Co. 48,000 333
Nippon Paper
Industries Co. 39,000 286
Nippon Steel Corp. 238,000 860
Nippon Telegraph &
Telephone Corp. 596 4,621
Nippon Yusen Kabushiki
Kaisha 27,000 164
Nippondenso Co. 24,000 523
Nissan Motor Co., Ltd. 89,000 752
Nomura Securities
Co., Ltd. 63,000 1,373
Obayashi Corp. 17,000 158
Odakyu Electric
Railway Co. 14,420 103
Oki Electric Industry
Co., Ltd. 12,000 95
Omron Corp. 8,000 180
Ono Pharmaceutical Co. 3,000 113
Osaka Gas Co. 93,000 373
Ricoh Co., Ltd. 27,000 317
Rohm Co. 4,000 255
Sakura Bank 113,000 1,329
Sankyo Co. 13,000 316
Sanwa Bank 92,000 1,865
Sanyo Electric Co., Ltd. 60,000 383
Secom Co. 3,000 212
Seibu Railway Co. 14,000 787
Sekisui Chemical Co. 21,000 265
Sekisui House 26,000 323
Seven-Eleven Japan Co. 13,200 935
Sharp Corp. 31,000 539
Shikoku Electric
Power Co. 6,200 152
Shimizu Corp. 31,000 356
Shin-Etsu Chemical Co. 13,650 299
Shizuoka Bank 26,000 353
Sony Corp. 12,500 813
Sony Music Entertainment 4,600 249
Sumitomo Bank 113,000 2,420
Sumitomo Chemical Co. 63,000 335
Sumitomo Corp. 31,000 370
Sumitomo Electric
Industries 27,000 387
Sumitomo Marine & Fire
Insurance Co. 28,000 267
Sumitomo Metal
Industries 90,000 289
Sumitomo Metal
Mining Co. 11,000 111
Sumitomo Trust & Banking
Co. 35,000 512
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
Suzuki Motor Corp. 10,000 $ 127
TDK 3,000 172
Taisei Corp. 40,000 310
Taisho Pharmaceutical
Co. 8,000 175
Takeda Chemical
Industries 25,000 433
Teijin Ltd. 19,000 104
Tobu Railway Co. 16,000 111
Tohoku Electric Power
Co. 15,100 375
Tokai Bank 67,000 858
Tokio Marine & Fire
Insurance Co. 55,000 757
Tokyo Electric Power
Co., Inc. 43,000 1,172
Tokyo Electron 3,000 112
Tokyo Gas & Electric
Industrial 82,000 322
Tokyu Corp. 43,000 351
Tonen Corp. 23,000 343
Toppan Printing Co. 27,000 397
Toray Industries Inc. 54,000 368
Toshiba Corp. 105,000 817
Tostem Corp. 5,000 155
Toto 8,000 119
Toyo Seikan 8,000 284
Toyo Trust &
Banking Co. 30,000 327
Toyoda Automatic Loom 6,000 124
Toyota Motor Corp. 134,000 3,062
Yamaichi Securities Co. 45,000 356
Yamanouchi
Pharmaceutical Co. 13,000 308
Yasuda Fire & Marine
Insurance Co. 20,000 158
Yasuda Trust &
Banking Co. 23,000 153
--------
79,644
--------
NETHERLANDS--5.7%
ABN Amro Holdings NV 17,167 889
Aegon NV 15,115 720
Akzo Nobel NV 4,185 486
Dordtsche Petrol 1,962 293
Elsevier NV 38,508 580
Heineken NV 3,050 638
ING NV 16,839 1,300
Koninklijke Ahold NV 6,961 343
Koninklijke PTT
Nederland 24,971 937
Philips Electronics NV 19,400 685
PolyGram NV 10,409 620
Royal Dutch Petroleum, Co.
(Bearer) 29,926 4,263
Unilever NV, CVA 8,700 1,187
Wolters Kluwer NV, CVA 4,036 441
--------
13,382
--------
SINGAPORE--2.3%
City Developments 36,000 315
Development Bank of
Singapore (alien
market) 45,000 570
Hong Kong Land Holdings 237,806 509
</TABLE>
F-3
<PAGE> 125
SchwabFunds(R)
- --------------------------------------------------------------------------------
SCHWAB INTERNATIONAL INDEX FUND(TM)
STATEMENT OF NET ASSETS
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
Jardine Matheson
Holdings Ltd. 35,811 $ 286
Keppel Corp. 28,000 253
Overseas Chinese Bank
(alien market) 41,833 574
Singapore Airlines Ltd.
(alien market) 62,000 626
Singapore
Telecommunications 824,000 2,028
United Overseas Bank
(alien market) 39,600 386
--------
5,547
--------
SPAIN--2.1%
Argentaria Corp. 8,052 326
Banco Bilbao-Vizcaya SA
(Reg.) 13,766 523
Banco Popular Espanol
(Reg.) 1,620 268
Banco de Santander SA
(Reg.) 8,600 400
Empresa Nacional de
Electricidad 15,328 963
Gas Natural SDG SA 2,091 380
Iberdrola SA 49,800 487
Repsol, SA 16,600 609
Telefonica Internacional
de Espana, SA 55,184 983
--------
4,939
--------
SWEDEN--1.8%
ASEA AB 3,300 338
ASEA AB Series B 800 81
Astra AB Series A 25,700 1,143
Astra AB Series B 6,700 296
L.M. Ericsson Telephone
Series B 69,080 1,401
Pripps Ringnaes Series
A* 5,300 73
Pripps Ringnaes Series
B* 2,800 38
Sandvik AB Series A 8,600 190
Volvo AB Series A 5,000 115
Volvo AB Series B 20,700 475
--------
4,150
--------
SWITZERLAND--6.6%
BBC Brown Boveri
(Bearer) 420 506
BBC Brown Boveri (Reg.) 189 44
CS Holding (Reg.) 13,670 1,241
Ciba-Geigy Ltd. (Bearer) 170 196
Ciba-Geigy Ltd. (Reg.) 1,275 1,480
Cie Financiere Richemont
Series A (Bearer) 309 453
Nestle Ltd. (Reg.) 2,123 2,361
Roche Group Holding AG 370 2,910
Roche Group Holding AG
(Bearer) 85 1,150
Sandoz Ltd. (Bearer) 491 535
Sandoz Ltd. (Reg.) 1,673 1,827
Schweizerische
Bankgesellschaft
(Bearer) 1,144 1,137
Schweizerische
Bankgesellschaft
(Reg.) 1,150 250
Schweizerische
Bankverein (Bearer) 1,129 423
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
Schweizerische
Bankverein (Reg.) 1,251 $ 234
Winterthur (Reg.) 500 314
Zurich Versicherung (Reg.) 2,095 586
--------
15,647
--------
UNITED KINGDOM--19.3%
Abbey National 72,619 621
Allied Domecq PLC 62,820 486
Argyll Group 55,415 277
Associated British Foods 42,000 252
BAA 60,860 500
BAT Industries 177,692 1,343
BOC Group 22,181 308
BTR 217,579 1,048
Barclays 87,223 968
Bass 51,821 611
Boots Co. 56,881 542
British Aerospace 23,848 313
British Airways 58,777 459
British Gas 241,400 858
British Petroleum Co. 312,203 2,817
British Sky Broadcast 101,400 730
British Steel 94,600 283
British Telecom 354,739 1,946
Cable & Wireless 147,895 1,161
Cadbury Schweppes 58,616 454
Commercial Union
Assurance Co. 31,950 277
General Electric Co. 151,200 816
Glaxo Wellcome 196,965 2,388
Granada Group 35,703 443
Grand Metropolitan, Inc. 120,101 790
Great University Stores 56,903 621
Guinness 108,800 783
HSBC Holdings 47,063 697
HSBC Holdings (Hong
Kong) 101,438 1,502
Hanson Industries 284,416 843
Imperial Chemical
Industries 40,411 547
J. Sainsbury PLC 104,051 573
Kingfisher 29,682 266
Legal & General Group 27,514 297
Lloyds Abbey Life 26,700 215
Lloyds TSB Group 289,004 1,386
Marks & Spencer PLC 152,500 1,018
National Grid Group 94,774 292
National Power
Development 59,600 503
National Westminster
Bancorp 101,036 932
Pearson, Inc. 25,137 266
Powergen 37,400 314
Prudential Corp. 107,865 743
RTZ Corporation PLC 60,025 945
Rank Organisation PLC 40,800 327
Reed International 31,845 548
Rentokil Group 54,815 316
Reuters Holdings PLC 95,074 1,076
Royal Bank of Scotland 37,152 290
Scot & Newcastle 30,100 312
Shell Transport &
Trading Co. (Reg.) 186,721 2,464
</TABLE>
F-4
<PAGE> 126
SchwabFunds(R)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
Siebe 24,030 $ 311
SmithKline Beecham PLC
Series A 74,769 793
SmithKline Beecham PLC
(New) 72,974 774
Standard Chartered PLC 56,012 524
Tesco 119,768 506
Thorn Emi 23,982 665
Tomkins 464 2
Unilever 44,900 822
Vendome Lux Group/ SA
(units) 34,050 300
Vodafone Group 176,316 705
Whitbread 26,922 304
Zeneca Group 51,108 1,065
--------
45,538
--------
TOTAL COMMON STOCK
(Cost $196,132) 229,418
--------
PREFERRED STOCK--0.4%
AUSTRALIA--0.1%
News Corp. (Limited
Voting Shares) 60,981 314
--------
GERMANY--0.3%
Henkel KGaA 629 241
Sap AG (Non-Voting) 2,010 267
Volkswagen AG
(Non-Voting) 350 89
--------
597
--------
ITALY--0.0%
Fiat SpA 38,800 74
--------
TOTAL PREFERRED STOCK
(Cost $805) 985
--------
WARRANTS--0.0%
UNITED KINGDOM--0.0%
BTR (expire 11/26/98)* 4,019 1
--------
TOTAL WARRANTS
(Cost $3) 1
--------
<CAPTION>
Maturity Value
(000s) (000s)
--------- --------
<S> <C> <C>
CASH EQUIVALENTS--2.0%
REPURCHASE AGREEMENT--2.0%
State Street Bank 4.75%
Dated 04/30/96
Due 05/01/96
Collateralized By:
U.S. Treasury Note
$4,750,000 Par; 8.00%
Due 10/15/96 $ 4,724 $ 4,723
--------
TOTAL CASH EQUIVALENTS
(Cost $4,723) 4,723
--------
TOTAL INVESTMENTS--99.5%
(Cost $201,663) 235,127
--------
OTHER ASSETS AND
LIABILITIES--0.5%
Other Assets 7,947
Liabilities (6,890)
--------
1,057
--------
NET ASSETS--100.0%
Applicable to 19,382,890
outstanding $0.00001
par value shares
(unlimited shares authorized) $236,184
========
NET ASSET VALUE PER SHARE $12.19
========
</TABLE>
- ------------------
*Non-Income Producing Security
See accompanying Notes to Financial Statements.
F-5
<PAGE> 127
SchwabFunds(R)
- --------------------------------------------------------------------------------
SCHWAB INTERNATIONAL INDEX FUND(TM)
STATEMENT OF OPERATIONS (in thousands)
Six months ended April 30, 1996 (Unaudited)
<TABLE>
<S> <C>
Investment income:
Dividends (net of foreign tax withheld of $269) $ 1,693
Interest 113
-------
Total investment income 1,806
-------
Expenses:
Investment advisory and administration fee 718
Transfer agency and shareholder service fees 257
Custodian fees 123
Registration fees 25
Professional fees 30
Shareholder reports 33
Trustees' fees 16
Amortization of deferred organization costs 13
Insurance and other expenses 3
-------
1,218
Less expenses reduced (510)
-------
Total expenses incurred by Fund 708
-------
Net investment income 1,098
-------
Net realized gain (loss) on investments and foreign
currency transactions: 15,415
Proceeds from sales of investments (17,035)
Cost of investments sold -------
(1,620)
Net realized loss from changes in market value 361
Net realized gain from changes in foreign exchange rates -------
(1,259)
Net realized loss on investments sold (72)
Net realized loss on foreign currency transactions -------
Net realized loss on investments sold and foreign (1,331)
currency transactions -------
Change in net unrealized gain (loss) on investments and foreign
currency translation:
Changes in market value: 4,832
Beginning of period unrealized gain 33,223
End of period unrealized gain -------
Increase in net unrealized gain from changes in market 28,391
value -------
Changes in foreign exchange rates: 7,646
Beginning of period unrealized gain 241
End of period unrealized gain -------
Decrease in net unrealized gain from changes in foreign (7,405)
exchange rates -------
Increase in net unrealized gain on investments from
changes 20,986
in market value and foreign exchange rates
Decrease in net unrealized gain on translating assets and (35)
liabilities into the reporting currency -------
Increase in net unrealized gain on investments and 20,951
foreign currency translation -------
19,620
Net gain on investments -------
$ 20,718
Increase in net assets resulting from operations =======
</TABLE>
See accompanying Notes to Financial Statements.
F-6
<PAGE> 128
SchwabFunds(R)
- --------------------------------------------------------------------------------
SCHWAB INTERNATIONAL INDEX FUND(TM)
STATEMENT OF CHANGES IN NET ASSETS (in thousands)
<TABLE>
<CAPTION>
Six months
ended Year
April 30, ended
1996 October 31,
(Unaudited) 1995
----------- -----------
<S> <C> <C>
Operations:
Net investment income $ 1,098 $ 2,238
Net realized gain (loss) on investments sold
and foreign currency transactions (1,331) 193
Increase in net unrealized gain on investments
and foreign currency translation 20,951 2,557
-------- --------
Increase in net assets resulting from
operations 20,718 4,988
-------- --------
Dividends to shareholders from net investment
income (2,089) (1,532)
-------- --------
Capital share transactions:
Proceeds from shares sold 59,810 73,349
Net asset value of shares issued in
reinvestment
of dividends 1,809 1,372
Early withdrawal fees 26 49
Less payments for shares redeemed (23,702) (40,969)
-------- --------
Increase in net assets from capital share
transactions 37,943 33,801
-------- --------
Total increase in net assets 56,572 37,257
Net assets:
Beginning of period 179,612 142,355
-------- --------
End of period (including undistributed net
investment income of $1,041 and $2,051,
respectively) $ 236,184 $ 179,612
======== ========
Number of Fund shares:
Sold 5,118 6,778
Reinvested 155 134
Redeemed (2,028) (3,840)
-------- --------
Net increase in shares outstanding 3,245 3,072
Shares outstanding:
Beginning of period 16,138 13,066
-------- --------
End of period 19,383 16,138
======== ========
</TABLE>
See accompanying Notes to Financial Statements.
F-7
<PAGE> 129
SchwabFunds(R)
- --------------------------------------------------------------------------------
SCHWAB INTERNATIONAL INDEX FUND(TM)
NOTES TO FINANCIAL STATEMENTS
Six months ended April 30, 1996 (Unaudited)
1. DESCRIPTION OF THE FUND
The Schwab International Index Fund (the "Fund") is a series of Schwab Capital
Trust (the "Trust"), a no-load, open-end, investment management 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 Small-Cap Index
Fund(R), Schwab Asset Director(R)-High Growth Fund, Schwab Asset
Director-Conservative Growth Fund, Schwab Asset Director-Balanced Growth Fund
and Schwab S&P 500 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 International Index(R), an
index created to represent the performance of common stocks and other equity
securities issued by large, publicly traded companies from countries around the
world with major developed securities markets, excluding the United States.
2. SIGNIFICANT ACCOUNTING POLICIES
The following significant accounting policies are in conformity with generally
accepted accounting principles for investment companies. The preparation of
financial statements in accordance with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could differ
from those estimates.
Security valuation -- Investments in securities traded on an exchange are valued
at the last quoted sale price for a given day, or if a sale is not reported for
that day, at the mean between the most recent quoted bid and asked prices.
Unlisted securities for which market quotations are readily available are valued
at the mean between the most recent bid and asked prices. Securities for which
no quotations are readily available are valued at fair value as determined by
the Fund's investment manager pursuant to guidelines adopted in good faith by
the Board of Trustee. Short-term securities with 60 days or less to maturity are
stated at amortized cost, which approximates market value.
Security transactions and investment income -- Security transactions are
accounted for on a trade date basis (date the order to buy or sell is executed).
Dividend income and distributions to shareholders are recorded on the
ex-dividend date; interest income is recorded on the accrual basis. Realized
gains and losses from security transactions are determined on an identified cost
basis.
Repurchase agreements -- Repurchase agreements are fully collateralized by U.S.
Treasury or government agency securities. All collateral is held by the Fund's
custodian and is monitored daily to ensure that its market value at least equals
the repurchase price under the agreement.
F-8
<PAGE> 130
SchwabFunds(R)
- --------------------------------------------------------------------------------
Foreign currency translation -- The accounting records of the Fund are
maintained in U.S. dollars. Investment securities and all other assets and
liabilities of the Fund denominated in a foreign currency are translated into
U.S. dollars at the exchange rates on April 30. Purchases and sales of
securities, income receipts and expense payments are translated into U.S.
dollars at the exchange rate in effect on the dates of the respective
transactions.
The Fund separates within its statement of operations the portion of realized
and unrealized gains and losses resulting from changes in foreign exchange rates
from that arising from changes in securities' market values.
Forward currency contracts -- A forward currency contract ("Forward") is an
agreement between two parties to buy and sell a currency at a set price on a
future date. The value of the Forward fluctuates with changes in currency
exchange rates. The Forward is marked-to-market daily and the change in value is
recorded by the Fund as an unrealized gain or loss. When the Forward is closed,
the Fund records a realized gain or loss equal to the difference between the
value at the time the contract was opened and the value at the time the contract
was closed. The Fund engages in Forwards in connection with the purchase and
sale of portfolio securities to minimize the uncertainty of changes in future
exchange rates. The Fund could be exposed to risk if counterparties to the
contracts are unable to meet the terms of the contracts or if the value of the
foreign currency changes unfavorably.
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.
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 April 30, 1996, (for financial reporting and federal income tax purposes),
net unrealized gain aggregated $33,464,000, of which $37,810,000 related to
appreciated securities and $4,346,000 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 .70% of the first $300 million
of average daily net assets and .60% of such assets over $300 million. Under
this agreement, the Fund incurred investment advisory and administration fees of
$718,000 during the six months ended April 30, 1996, before the Investment
Manager reduced its fee (see Note 4).
F-9
<PAGE> 131
SchwabFunds(R)
- --------------------------------------------------------------------------------
SCHWAB INTERNATIONAL INDEX FUND(TM)
NOTES TO FINANCIAL STATEMENTS
Six months ended April 30, 1996 (Unaudited)
Transfer agency and shareholder service agreements -- The Trust has transfer
agency and shareholder service agreements with Charles Schwab & Co., Inc.
("Schwab"). For services provided under these agreements, Schwab receives an
annual fee, payable monthly, of .05% of average daily net assets for transfer
agency services and .20% of such assets for shareholder services. For the six
months ended April 30, 1996, the Fund incurred transfer agency and shareholder
service fees of $257,000, before Schwab reduced its fees (see Note 4).
Officers and trustees -- Certain officers and trustees of the Trust were also
officers or directors of the Investment Manager and/or Schwab. During the six
months ended April 30, 1996, 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 $16,000 related to
the Trust's unaffiliated trustees.
4. EXPENSES REDUCED BY THE INVESTMENT MANAGER AND SCHWAB
The Investment Manager and Schwab reduced a portion of their fees in order to
limit the Fund's ratio of operating expenses to average net assets. For the six
months ended April 30, 1996, the total of such fees reduced by the Investment
Manager and Schwab was $314,000 and $196,000, respectively.
5. 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 six months ended April 30, 1996, no borrowings
were made under this arrangement.
6. INVESTMENT TRANSACTIONS
Purchases and sales of investment securities, other than short-term obligations,
aggregated (in thousands) $49,937 and $15,415, respectively, for the six months
ended April 30, 1996.
7. EARLY WITHDRAWAL FEES PAID TO THE FUND
The Fund assesses a .75% early withdrawal fee on redemption proceeds
attributable to shares purchased and held less than six months. The early
withdrawal fee is retained by the Fund and is treated as a contribution to
capital. For the six months ended April 30, 1996, total early withdrawal fees
retained by the Fund amounted to $26,000.
F-10
<PAGE> 132
SchwabFunds(R)
- --------------------------------------------------------------------------------
8. COMPOSITION OF NET ASSETS
At April 30, 1996, net assets consisted of:
<TABLE>
<S> <C>
Capital paid in $203,460,000
Accumulated undistributed net investment income 1,041,000
Accumulated net realized loss on investments sold and
foreign currency transactions (1,767,000)
Net unrealized gain on investments 33,464,000
Net unrealized loss on translating assets and liabilities
into the reporting currency (14,000)
------------
Total $236,184,000
============
</TABLE>
The Fund follows Statement of Position 93-2 Determination, Disclosure, and
Financial Statement Presentation of Income, Capital Gain, and Return of Capital
Distributions by Investment Companies, which will generally present
undistributed income and realized gains on a tax basis. As a result, certain
reclassifications have occurred which decreased undistributed net investment
income by $19,000 and increased net realized loss on investments sold and
foreign currency transactions and capital paid in by $34,000 and $53,000,
respectively. These reclassifications have no impact on the net asset value of
the Fund.
At April 30, 1996, the Fund's Statement of Net Assets included: $3,700,000
payable for investments purchased, $765,000 payable for Fund shares redeemed,
$29,000 payable for investment advisory and administration fee and $576,000
receivable for Fund shares sold.
9. COMMITMENTS
At April 30, 1996, the Fund had various open Forward contracts which obligated
the Fund to deliver U.S. dollars in exchange for foreign currencies at specified
future dates as follows:
<TABLE>
<CAPTION>
Contract In Exchange Settlement Unrealized
Currency Amount For Date Value Gain (Loss)
- ---------------------- ----------- ----------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Hong Kong dollar 350,000 $ 45,248 05/01/96 $ 45,245 ($ 3)
Netherlands guilder 750,000 438,853 05/03/96 437,700 (1,153)
Pound sterling 760,000 1,145,320 05/07/96 1,144,061 (1,259)
Spanish peseta 51,000,000 402,366 05/08/96 400,943 (1,423)
French franc 521,000 101,165 05/31/96 100,822 (343)
---------- ---------- -------
$2,132,952 $2,128,771 ($4,181)
========== ========== =======
</TABLE>
F-11
<PAGE> 133
SchwabFunds(R)
- --------------------------------------------------------------------------------
SCHWAB INTERNATIONAL INDEX FUND(TM)
NOTES TO FINANCIAL STATEMENTS
Six months ended April 30, 1996 (Unaudited)
10. FINANCIAL HIGHLIGHTS
Per share income and capital changes for a share outstanding throughout the
period:
<TABLE>
<CAPTION>
Period ended
April 30, Year ended Period ended
1996 October 31, October 31,
(Unaudited) 1995 1994 1993(1)
------------ -------- -------- ------------
<S> <C> <C> <C> <C>
Net asset value at beginning of
period.............................. $ 11.13 $ 10.89 $ 10.15 $ 10.00
Income from investment operations
- -----------------------------------
Net investment income............... .18 .14 .11 .03
Net realized and unrealized gain on
investments and foreign currency
transactions...................... 1.01 .22 .69 .12
-------- -------- -------- --------
Total from investment operations.... 1.19 .36 .80 .15
Less distributions
- ------------------
Dividends from net investment
income............................ (.13) (.12) (.04) --
Distributions from realized gain on
investments....................... -- -- (.02) --
-------- -------- -------- --------
Total distributions................. (.13) (.12) (.06) --
-------- -------- -------- --------
Net asset value at end of period...... $ 12.19 $ 11.13 $ 10.89 $ 10.15
======== ======== ======== ========
Total return (%) 10.71 3.35 7.89 1.50
- ----------------
Ratios/Supplemental data
- ------------------------
Net assets, end of period (000s).... $236,184 $179,612 $142,355 $106,085
Ratio of expenses to
average net assets (%)............ .69* .85 .90 .60*
Ratio of net investment income to
average net assets (%)............ 1.07* 1.45 1.14 2.15*
Portfolio turnover rate (%)......... 4 0 6 2
Average commission rate............. $ .01
</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
April 30, 1996, October 31, 1995, 1994 and 1993, would have been 1.19%*, 1.22%,
1.30% and 2.10%*, respectively, and the ratio of net investment income to
average net assets would have been .57%*, 1.08%, .74% and .65%*, respectively.
(1) For the period September 9, 1993 (commencement of operations) to October 31,
1993.
* Annualized
F-12
<PAGE> 134
SchwabFunds(R)
- --------------------------------------------------------------------------------
SCHWAB SMALL-CAP INDEX FUND(R)
STATEMENT OF NET ASSETS
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
COMMON STOCK--98.6%
AEROSPACE/DEFENSE--0.8%
AAR Corp. 4,000 $ 82
Alliant Techsystems
Inc.* 4,000 188
Coltec Industries Inc.* 19,900 259
Curtiss-Wright Corp. 1,400 72
Gencorp Inc. 10,100 135
OEA, Inc. 6,100 239
Orbital Sciences Corp.
Class A* 7,300 100
Rohr Industries Inc.* 6,600 120
Thiokol Corp. 5,100 218
Trimble Navigation Ltd.* 6,200 150
--------
1,563
--------
AIR TRANSPORTATION--1.3%
America West Airlines,
Inc. Class B* 12,700 267
Atlantic Southeast
Airlines Inc. 9,600 240
Atlas Air Inc.* 5,900 267
Comair Holdings Inc. 8,800 326
Continental Airlines
Inc. Class B* 7,500 426
Mesa Airlines Inc.* 7,900 97
Offshore Logistics,
Inc.* 5,400 79
Trans World Airlines
Inc. (New)* 20,100 359
USAir Group, Inc.* 19,000 337
--------
2,398
--------
ALCOHOLIC BEVERAGES--0.2%
Adolph Coors Co. Class B 12,100 228
Canandaigua Wine Co.,
Inc. Class A* 5,900 180
--------
408
--------
APPAREL--1.2%
Authentic Fitness Corp. 5,500 131
Brown Group Inc. 5,700 91
Cone Mills Corp.* 10,300 117
Donnkenny Inc. 3,500 69
Fabri-Centers of
America, Inc. Class A 5,900 60
Guilford Mills, Inc. 3,900 95
Justin Industries Inc. 6,800 87
Kellwood Co. 6,100 99
Kenneth Cole
Productions, Inc.
Class A 4,200 84
Men's Wearhouse, Inc. 6,100 225
Nautica Enterprises Inc. 5,650 261
Paragon Trade Brands,
Inc.* 3,200 75
Phillips-Van Heusen
Corp. 7,700 102
Springs Industries Inc. 5,900 271
St. John's Knits, Inc. 3,100 184
Stride Rite Corp. 14,700 141
Wolverine World Wide
Inc. 5,100 157
--------
2,249
--------
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
AUTOMOTIVE PRODUCTS--0.4%
APS Holding Corp. Class
A* 3,200 58
Armor-All Products Corp. 6,800 105
Carlisle Cos. Inc. 4,400 $ 205
Discount Auto Parts
Inc.* 4,900 144
O'Reilly Automotive,
Inc.* 3,200 125
--------
637
--------
BANKS--6.6%
ALBANK Financial Corp. 4,320 116
Associated Banc-Corp. 4,600 178
Banc One Corp. 6,386 222
Bancorp South, Inc. 6,600 159
Banknorth Group Inc. 1,900 67
Bell Bancorp, Inc. 2,800 104
CCB Financial Corp. 4,550 236
CNB Bancshares Inc. 4,801 137
California Bancshares
Inc. 2,600 78
Capital Bancorp 2,100 65
Centura Banks Inc. 6,900 252
Chase Manhattan Corp.
(New) 1,414 97
Chemical Financial Corp. 2,995 117
Chittenden Corp. 2,100 56
Citizens Bancorp 4,800 143
Citizens Banking Corp. 4,600 136
City National Corp. 12,900 182
Cole Taylor Financial
Group Inc. 4,800 143
Colonial BancGroup Inc. 3,400 115
Community First
Bankshares Inc. 3,100 72
Crestar Financial Corp. 1,792 101
Cullen/Frost Bankers
Inc. 3,300 164
Deposit Guaranty Corp. 4,400 210
F & M National Corp. 3,955 63
First Bank System Inc. 5,473 330
First Citizens
BancShares Inc. 3,200 198
First Commercial
Bancshares Inc. 4,500 107
First Commercial Corp. 7,334 228
First Commonwealth
Financial Corp. 6,400 123
First Financial Bancorp 3,900 128
First Michigan Bank
Corp. 5,151 153
First Midwest Bancorp
Inc. 4,100 118
First Union Corp. 2,220 137
Firstbank Illinois Co. 3,600 112
Fort Wayne National
Corp. 4,200 129
Fulton Financial Corp. 9,416 192
HUBCO, Inc. 3,300 62
Hancock Holding Co. 3,000 109
Imperial Bancorp 4,364 105
Investors Financial
Services Corp. 112 2
Jefferson Bankshares,
Inc. 4,400 94
Keystone Financial Inc. 7,300 238
</TABLE>
F-13
<PAGE> 135
SchwabFunds(R)
- --------------------------------------------------------------------------------
SCHWAB SMALL-CAP INDEX FUND(R)
STATEMENT OF NET ASSETS
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
Liberty Bancorp, Inc. 3,900 $ 143
Long Island Bancorp Inc. 7,200 201
Magna Group Inc. 7,800 176
Mark Twain Bancshares
Inc. 4,800 181
Mid-Am, Inc. 4,820 89
National Bancorp of
Alaska, Inc. 2,800 169
National Commerce
Bancorp 7,200 221
New York Bancorp Inc. 3,300 81
North Fork
Bancorporation 7,700 183
Norwest Corp. 5,990 216
ONBANCorp, Inc. 4,500 150
Old National Bancorp 7,601 257
One Valley Bancorp of
West Virginia Inc. 5,500 172
Park National Corp. 2,500 120
People's Bank 10,800 231
Provident Bancorp Inc. 4,800 247
Queens County Bancorp,
Inc. 2,200 97
Regions Financial Corp. 3,952 183
Riggs National Corp. 11,100 139
River Forest Bancorp,
Inc. 4,700 139
S & T Bancorp, Inc. 3,300 99
Security Capital Corp. 3,200 187
Sumitomo Bank 5,100 128
Summit Bancorp 8,154 289
Susquehanna Bancshares,
Inc. 4,500 131
T R Financial Corp. 2,400 64
Trust Company of
New Jersey 5,900 84
TrustCo Bank Corp. NY 5,604 117
Trustmark Corp. 10,200 238
U S Trust Corp. (New) 3,000 165
UMB Financial Corp. 6,297 238
UST Corp. 5,400 71
Union Planters Corp. 7,788 235
United Bankshares, Inc. 3,700 101
United Carolina
Bancshares Corp. 6,600 158
Westamerica Bancorp 3,100 146
Whitney Holding Corp. 5,400 164
Zions Bancorp 4,500 336
--------
12,124
--------
BUSINESS MACHINES & SOFTWARE--7.4%
3COM Corp. 4,134 190
AST Research Inc.* 12,378 94
America Online, Inc. 2,000 128
Applied Magnetics Corp.* 8,100 167
Atria Software, Inc. 4,500 246
Auspex Systems, Inc.* 7,600 146
BBN Corp.* 5,300 150
BancTec, Inc.* 5,100 104
Bell & Howell Co. (New)* 9,100 287
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
Black Box Corp.* 5,100 $ 102
Boole & Babbage Inc. 3,250 85
Borland International
Inc.* 9,300 152
Cheyenne Software Inc.* 9,450 215
Computer Horizons Corp. 4,700 237
Computer Products, Inc.* 8,500 137
Compuware Corp.* 12,500 359
Comshare, Inc. 2,400 59
Comverse Technology Inc.
(New)* 6,300 148
Continuum Inc.* 7,000 399
Control Data Systems,
Inc.* 3,500 83
Cray Research Inc.* 2,408 71
Data General Corp.* 11,200 172
Davidson & Associates,
Inc. 11,200 307
Dell Computer Corp. 6,300 290
Dialogic Corp.* 4,400 203
Digi International Inc.* 4,300 123
Dynatech Corp. 5,900 153
Exabyte Corp.* 6,900 120
Excalibur Technologies
Corp. (New)* 3,000 78
FTP Software Inc.* 6,600 64
FileNet Corp.* 4,600 256
General Magic Inc.* 6,300 35
Geoworks* 3,600 134
Global Village
Communications* 4,600 78
HCIA Inc.* 2,600 138
HNC Software Inc. 4,400 164
Hyperion Software Corp. 4,800 61
INSO Corp. 4,200 227
INTERSOLV Inc.* 6,200 68
In Focus Systems, Inc.* 3,400 173
Intergraph Corp.* 14,000 178
Intuit Inc. 1,200 63
Legato Systems Inc.* 2,900 121
MICROS Systems, Inc. 2,500 70
Maxis Inc.* 2,800 68
McAfee Associates, Inc. 5,950 365
Medic Computer Systems,
Inc.* 3,600 337
Mercury Interactive
Corp.* 5,000 68
National Computer
Systems, Inc. 4,600 101
National Instruments
Corp.* 6,100 147
Network Equipment
Technologies* 6,500 166
Network General Corp.* 7,000 310
Oak Technology 11,400 204
Optical Data Systems,
Inc. 4,700 128
PRI Automation Inc.* 1,800 51
PeopleSoft Inc. 1,200 76
Policy Management
Systems Corp.* 2,000 94
Progress Software Corp. 3,200 51
Quarterdeck Corp.* 7,500 115
Rational Software Corp.
(New)* 4,900 261
</TABLE>
F-14
<PAGE> 136
SchwabFunds(R)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
Safeguard Scientifics
Inc. 4,300 $ 288
Seagate Technology,
Inc.* 6,232 361
Security Dynamics
Technology 4,100 344
Sequent Computer
Systems, Inc.* 10,000 147
Shiva Corp. 9,200 552
Sierra On-Line Inc. 5,800 228
Softkey International
Inc.* 9,200 257
Stac Inc.* 10,500 118
Stratus Computer Inc.* 6,600 186
Structural Dynamics
Research Corp.* 8,300 265
System Software
Associates, Inc. 11,400 270
Systems & Computer
Technology Corp.* 4,100 60
Tech Data Corp.* 10,500 203
Telxon Corp. 5,200 120
Transaction Systems
Architects Inc. Class
A* 3,800 204
Trident Microsystems
Inc.* 4,000 71
Veritas Software Co. 2,300 105
Videoserver Inc.* 3,200 106
Wang Laboratories Inc.
(New)* 10,300 243
Wind River Systems Inc. 2,400 94
--------
13,599
--------
BUSINESS SERVICES--12.4%
ABM Industries, Inc. 2,500 85
ABR Information Services
Inc. 3,600 227
ADVO Inc. 5,700 58
Access Health Inc. 3,600 200
Accustaff Inc. 14,800 441
Acxiom Corp. 7,200 197
Affiliated Computer
Services Inc. Class A* 2,400 114
Alliance Entertainment
Corp.* 8,200 50
Alternative Resources
Corp. 4,100 147
American Business
Information, Inc. 7,650 151
American Business
Products, Inc. 5,200 113
American Management
Systems, Inc. 12,200 323
American Medical
Response, Inc.* 6,000 222
Amresco Inc. 8,600 148
Apollo Group, Inc. Class
A 10,225 451
Applix Inc. 2,400 93
Apria Healthcare Group
Inc.* 12,600 429
Aspen Technology Inc.* 2,600 144
BISYS Group, Inc.* 6,900 262
Borg-Warner Security
Corp.* 6,400 74
Bowne & Co. Inc. 5,000 90
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
Business Records Corp.* 2,200 $ 79
CDI Corp.* 5,500 162
CMG Information Services
Inc. 2,400 72
Cambridge Technology
Partners* 4,800 323
Camco International Inc. 7,500 267
Catalina Marketing
Corp.* 2,900 226
Cerner Corp. 9,900 202
Checkfree Corp.* 11,100 212
Coastal Physician Group
Inc.* 6,200 52
Concord EFS Inc. 15,450 516
Copart Inc.* 3,300 90
Corrections Corp. of
America 7,600 485
Coventry Corp.* 10,000 195
Culligan Water
Technologies Inc.* 3,500 118
Dames & Moore Inc. 6,500 71
Data Broadcasting* 8,500 88
DeVRY Inc. 7,000 261
Dionex Corp. 4,200 155
Electro Rental 3,200 78
Epic Design Technology
Inc. 3,600 122
Express Scripts Inc.
Class A* 5,200 254
Fair Issac & Co. Inc. 3,600 154
Fleming Companies, Inc. 10,700 147
Franklin Quest Co.* 6,900 186
G&K Services, Inc. Class
A 6,350 168
GRC International, Inc.* 2,500 97
Gartner Group Inc. Class
A (New) 11,600 399
HBO & Co. 2,600 309
Health Management
Systems, Inc. 5,000 131
Healthplan Services
Corp.* 3,400 82
Henry Jack & Associates
Inc. 3,100 97
Heritage Media Corp.
Class A (New)* 5,500 211
Hon Industries Inc. 9,400 241
Hunt Manufacturing Co. 4,700 79
ITT Educational Services
Inc. 4,950 153
Ideon Group Inc. 8,100 106
Information
Resources, Inc.* 7,900 114
Inphynet Medical
Management Inc.* 4,900 91
Integrated Health
Services Inc. 6,400 176
Integrated Systems Inc.
Class A 6,400 182
Interim Services Inc.* 3,800 164
Jacobs Engineering Group
Inc.* 9,500 264
Jenny Craig, Inc.* 6,900 83
</TABLE>
F-15
<PAGE> 137
SchwabFunds(R)
- --------------------------------------------------------------------------------
SCHWAB SMALL-CAP INDEX FUND(R)
STATEMENT OF NET ASSETS
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
John H. Harland Co. 8,700 $ 228
Katz Media Group Inc.* 4,300 63
Keane, Inc.* 5,300 209
Kinder Care Learning
Centers Inc.* 5,000 72
Kronos, Inc. 2,100 62
Magellan Health Services
Inc.* 8,700 187
Mariner Health Group
Inc.* 8,300 141
Maxicare Health Plans
Inc. (New)* 5,200 106
Medpartners/Mullikin
Inc.* 15,400 445
Metromedia International
Group, Inc.* 10,900 147
Molten Metal Technology,
Inc.* 6,800 218
Morrison Health Care
Inc. 2,958 47
National Auto Credit
Inc. 8,250 118
National Data Corp. 6,800 240
National Education
Corp.* 11,000 164
National Media Corp.* 4,600 83
Netcom Online
Communications* 3,500 125
New England Business
Service, Inc. 4,800 90
Norrell Corp. 3,000 116
Occusystems Inc.* 5,700 166
OrNda Healthcorp* 9,760 268
Orthodontic Centers of
America Inc. 6,100 239
Owen Healthcare Inc. 4,400 90
PAXAR Corp. 6,687 116
PHH Corp. 5,100 290
PSINet Inc.* 11,500 162
Payment Services Inc. 4,600 132
Peak Technologies Group
Inc.* 2,500 60
PhyCor Inc. 6,900 339
Physician Corp. of
America* 11,100 165
Physician Reliance
Network* 6,000 262
Physicians Computer
Network* 11,800 131
Republic Industries
Inc.* 15,600 510
Robert Half
International Inc.* 7,900 454
Rollins, Inc. 10,200 230
Rykoff-Sexton, Inc. 6,250 95
SEI Corp. 4,700 111
SPS Transaction
Services, Inc. 8,500 227
Sanifill Inc.* 6,500 282
Scientific Games
Holdings Corp. 4,400 141
Standard Register Co. 8,100 205
Steris Corp. 5,100 165
Stewart Enterprises Inc.
Class A 5,300 242
Sun Healthcare Group
Inc.* 14,508 219
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
Synetic Inc.* 5,200 $ 181
True North
Communications 7,000 185
U S Order Inc.* 4,300 87
U.S.A. Waste Services
Inc.* 15,407 401
Unifirst Corp. 5,500 132
United Waste Systems,
Inc.* 5,500 305
Universal Health
Services Inc. Class B 4,400 244
Valassis Communications
Inc.* 12,600 198
Vencor Inc.* 11,687 394
Volt Information
Sciences Inc. 3,500 106
Wallace Computer
Services, Inc. 4,600 272
Western Waste
Industries* 6,200 241
Zebra Technologies Corp.
Class A 7,600 189
--------
22,778
--------
CHEMICAL--2.0%
A. Schulman Inc. 11,262 246
Calgon Carbon Corp. 11,500 144
Cambrex Corp. 2,000 86
Chemed Corp. 3,200 120
Crompton & Knowles Corp. 13,600 209
Cytec Industries Inc.* 4,200 348
Dexter Corp. 7,800 210
Ferro Corp. 7,700 214
First Mississippi Corp. 6,000 140
Geon Co. 7,300 193
H.B. Fuller Co. 4,000 131
Lawter International
Inc. 13,300 145
Lilly Industrial Inc.
Class A 6,950 101
NCH Corp. 2,400 139
NL Industries Inc. (New) 14,500 208
OM Group Inc. 3,700 140
Petrolite Corp. 3,600 114
Scotts Co. Class A* 7,400 128
Sequa Corp. Class A* 2,600 91
Sterling Chemicals Inc.* 15,200 173
Tredegar Industries Inc. 3,400 94
WD-40 Co. 2,700 126
Wellman Inc. 9,500 228
--------
3,728
--------
CONSTRUCTION--1.2%
Blount International
Inc. Class A 5,850 181
Blount International
Inc. Class B 1,500 47
Calmat Co. 9,100 158
Centex Construction
Products Inc. 6,000 86
Del Webb Corp. 4,200 75
Florida Rock Industries,
Inc. 3,200 81
</TABLE>
F-16
<PAGE> 138
SchwabFunds(R)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
Granite Construction
Inc. 4,650 $ 92
Insituform Technologies
Inc. Class A* 7,200 85
Kaufman & Broad Home
Corp. 9,200 130
Lone Star Industries,
Inc. (New) 6,300 226
Medusa Corp. 4,600 135
Oakwood Homes Corp. 6,200 277
Southdown Inc. 6,400 150
Stone & Webster, Inc. 4,200 143
TJ International Inc. 4,900 85
Toll Brothers, Inc.* 10,200 166
Triangle Pacific Corp.
Delaware* 4,400 73
U.S. Home Corp. (New)* 3,200 80
--------
2,270
--------
CONSUMER-DURABLE--1.0%
Bassett Furniture
Industries Inc. 3,600 92
Champion Enterprises
Inc. 4,200 160
Chicago Miniature Lamp
Inc.* 3,500 142
Ethan Allen Interiors
Inc.* 3,700 96
Furniture Brands
International Inc.* 16,700 165
Harman International
Industries Inc. (New) 4,575 216
Kimball International
Inc. Class B 7,000 201
La-Z-Boy Chair Co. 5,000 148
National Presto
Industries, Inc. 2,300 90
Outboard Marine Corp. 6,400 126
Regal Beloit Corp. 6,000 116
Sturm, Ruger & Co., Inc. 4,000 162
Toro Co. 3,500 112
--------
1,826
--------
CONSUMER-NONDURABLE--2.0%
3DO Co.* 7,100 64
A.T. Cross Co. Class A 5,800 87
Acclaim Entertainment
Inc.* 14,000 144
American Greetings Corp.
Class A 200 6
Applebee's
International, Inc. 9,100 239
Buffets Inc.* 9,900 138
CKE Restaurants Inc. 5,000 99
CML Group, Inc. 11,350 51
Department 56 Inc.* 6,300 157
Foxmeyer Health Corp. 5,473 107
Gibson Greetings, Inc. 4,400 62
IHOP Corp. (New)* 3,200 91
International Dairy
Queen Inc. Class A* 6,600 141
Landry's Seafood
Restaurants, Inc. 5,100 122
Luby's Cafeterias, Inc. 6,500 156
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
Mafco Consolidated Group
Inc.* 6,300 $ 113
Mikasa Inc. Class B* 6,900 82
Mohawk Industries Inc.* 9,400 136
Papa John's
International, Inc. 5,100 251
Rexall Sundown, Inc. 8,700 250
Ruby Tuesday Inc. 4,437 90
Russ Berrie & Co. Inc. 8,500 136
Ryan's Family Steak
Houses Inc.* 21,100 206
Sbarro, Inc. 8,000 210
Shoney's Inc.* 12,700 141
Sonic Corp. 3,400 65
Toy Biz Inc. Class A* 5,300 108
Zenith Electronics
Corp.* 17,200 161
--------
3,613
--------
CONTAINERS--0.4%
ACX Technologies Inc. 7,400 143
Ball Corp. 8,900 277
Gaylord Container Corp.
Class A* 16,400 168
Greif Brothers Corp.
Class A 7,000 184
--------
772
--------
ELECTRONICS--4.9%
AMETEK, Inc. 9,800 189
Allen Group Inc. 8,600 213
Alliance Semiconductor
Corp. 10,000 106
Altera Corp. 3,000 158
Altron Inc. 2,500 80
Augat Inc. 6,200 119
Aura Systems, Inc.* 14,800 76
Belden Inc. 12,300 366
Burr Brown 4,200 80
Cable Design
Technologies Corp. 5,100 167
Cadence Design Systems
Inc. 2,700 141
Checkpoint Systems Inc. 11,400 341
CopyTele Inc.* 7,000 84
Cyrix Corp.* 6,000 184
DII Group Inc.* 2,100 72
DSP Communications Inc. 5,600 223
Dallas Semiconductor
Corp. 9,500 185
Electro Scientific
Industries Inc.* 3,200 77
Electroglas Inc. 5,600 110
FORE Systems, Inc. 2,900 229
FSI International Inc. 6,400 93
Fluke Corp. 2,800 108
Gerber Scientific Inc. 7,100 120
Hadco Corp.* 3,400 104
ITI Technologies Inc.* 2,400 66
Identix Inc.* 6,300 75
Integrated Process
Equipment Corp.* 4,600 121
</TABLE>
F-17
<PAGE> 139
SchwabFunds(R)
- --------------------------------------------------------------------------------
SCHWAB SMALL-CAP INDEX FUND(R)
STATEMENT OF NET ASSETS
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
Integrated Silicon
Solution* 4,400 $ 73
Integrated Systems
Consulting Group
(Rights exp. 5/22/96)* 717 13
International Rectifier
Corp. 10,400 234
Itron, Inc.* 3,600 211
Kent Electronics Corp. 7,100 299
Kulicke & Soffa
Industries Inc. 6,000 113
LTX Corp.* 10,700 104
Lattice Semiconductor
Corp.* 6,400 209
Littlefuse, Inc.* 3,400 128
Logicon, Inc. 4,700 140
Macromedia Inc. 8,900 335
Marshall Industries* 5,400 172
Maxim Integrated
Products Inc. 4,200 145
Methode Electronics Inc.
Class A 9,550 158
Osmonics, Inc.* 3,500 73
Pacific Scientific Co. 3,000 59
Park Electrochemical
Corp. 3,600 90
Pioneer Standard
Electronics Inc. 6,525 106
Rexel Inc.* 7,000 94
S3 Inc. 14,200 202
SCI Systems, Inc.* 7,300 313
Sanmina Corp. 5,600 197
Silicon Valley Group
Inc.* 8,200 218
Siliconix Inc. (New)* 2,500 73
Unitrode Corp.* 4,300 116
VLSI Technology, Inc.* 16,200 282
VeriFone, Inc.* 7,000 294
Vicor Corp. 13,100 199
Watkins-Johnson Co. 2,500 84
Wyle Electronics 4,400 184
Zilog Inc.* 5,900 222
--------
9,027
--------
ENERGY-DEVELOPMENT--3.4%
Amcol International
Corp. 5,300 61
Ashland Coal, Inc. 4,000 93
BJ Services Co.* 8,400 322
Benton Oil & Gas Co.* 7,800 137
Cabot Oil & Gas Corp.
Class A 6,600 109
Chesapeake Energy Corp. 5,400 382
Devon Energy Corp. 6,900 176
Energy Ventures, Inc.* 5,000 150
Falcon Drilling Inc.* 8,600 233
Global Industrial
Technologies Inc.* 6,800 125
Global Natural Resources
Inc.* 8,400 122
Helmerich & Payne Inc. 7,900 291
Landmark Graphics Corp.* 5,300 103
Louis Dreyfus Natural
Gas Corp.* 11,400 145
MAXXAM Inc.* 2,300 105
Newfield Exploration
Co.* 5,900 202
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
Nuevo Energy Co.* 4,300 $ 121
Parker & Parsley
Petroleum Co. 10,000 246
Parker Drilling Co.* 21,100 161
Phoenix Resource Cos.,
Inc. (New) 4,700 120
Pride Petroleum Services
Inc.* 7,500 124
Production Operators
Corp. 3,200 108
Reading & Bates Corp.
(New)* 20,600 505
Rowan Cos. Inc.* 25,200 372
Seitel, Inc. (New)* 2,100 58
Solv-Ex Corp.* 6,100 86
Sonat Offshore Drilling
Inc. 6,700 368
Tom Brown Inc. (New)* 5,800 91
United Meridian Corp.* 8,100 251
Varco International
Inc.* 9,900 165
Vintage Petroleum Inc. 7,700 188
Weatherford Enterra
Inc.* 14,054 495
Zeigler Coal Holding Co. 8,000 118
--------
6,333
--------
FOOD-AGRICULTURE--2.3%
AG Chemical Equipment
Inc. 2,700 44
AGCO Corp. 12,300 311
Bob Evans Farms, Inc. 12,900 204
Chiquita Brands
International Inc. 15,000 219
Coca-Cola Bottling Co. 3,000 101
Delta & Pine Land Co. 5,698 254
Dimon Inc. 12,100 206
Dreyers Grand Ice Cream
Inc. 3,300 113
Farmer Brothers Co. 500 68
Flowers Industries, Inc. 17,650 236
Hudson Foods Inc. Class
A 9,350 124
International Multifoods
Corp. 5,100 96
Interstate Bakeries
Corp. (New) 11,100 264
J.M. Smucker Co. Class A 8,900 188
J.M. Smucker Co. Class B
(Non Voting) 3,500 70
JP Foodservice, Inc.* 4,100 90
Lance Inc. 9,200 145
Mississippi Chemical
Corp. (New) 7,000 142
Mycogen Corp.* 8,500 149
Ralcorp Holdings, Inc.* 9,666 213
Richfood Holdings Inc. 9,700 317
Savannah Foods &
Industries Inc. 7,400 80
Seaboard Corp. 500 108
Smithfield Foods Inc.* 6,200 184
Terra Industries Inc. 14,700 193
WLR Foods, Inc. 4,950 60
--------
4,179
--------
</TABLE>
F-18
<PAGE> 140
SchwabFunds(R)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
GOLD--0.3%
Battle Mountain Gold Co. 22,900 $ 203
FMC Gold Co. 21,000 134
FirstMiss Gold Inc.* 7,571 234
--------
571
--------
HEALTHCARE--9.5%
Acuson* 8,600 163
Advanced Technology
Laboratories, Inc.* 4,500 146
Advanced Tissue Sciences
Inc.* 11,300 192
Agouron Pharmaceuticals
Inc.* 3,000 122
Alliance Pharmaceutical
Corp.* 8,000 146
Alpharma, Inc. Class A 6,300 154
Amsco International,
Inc.* 10,700 155
Ballard Medical Products 9,900 197
Benson Eyecare Corp.* 8,700 79
Bio Rad Laboratories
Inc. Class A* 2,700 126
Block Drug Inc. Class A 6,105 227
Boston Scientific Corp.* 6,583 284
CNS, Inc. 5,100 100
Cardinal Health Inc. 1,492 94
Carrington Laboratories
Inc.* 2,200 62
Carter Wallace Inc. 13,500 213
Chantal Pharmaceutical
Corp. (New)* 4,600 31
Cognex Corp. 7,800 207
Community Health Systems
Inc.* 5,700 247
Community Psychiatric
Centers 13,100 121
Conmed Corp. 2,900 87
Copley Pharmaceutical
Inc.* 4,764 73
Cygnus Therapeutic
Systems, Inc.* 6,000 129
Daig Corp. 5,000 117
Datascope Corp.* 5,200 92
Diagnostic Products
Corp. 4,300 180
Enzo Biochem Inc. 5,775 106
Fresenius U.S.A. Inc.* 6,700 134
Genesis Health Ventures,
Inc. 6,900 204
Gilead Sciences Inc.* 8,500 261
GranCare, Inc.* 6,100 110
Gulf South Medical
Supply Inc. 4,000 164
Haemonetics Corp.* 9,700 187
HealthSouth
Rehabilitation Corp. 12,488 464
Herbalife International
Inc. 7,900 109
Human Genome Sciences
Inc.* 5,700 227
I-Stat Corp.* 4,100 119
ICN Pharmaceuticals,
Inc. 9,301 209
IDEXX Laboratories Inc. 6,800 303
Immulogic Pharmaceutical
Corp.* 6,000 66
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
Immunex Corp. (New)* 11,800 $ 185
Interneuron
Pharmaceuticals* 10,100 395
Invacare Corp. 8,400 216
Isis Pharmaceuticals* 8,000 101
Isolyser Inc. 9,100 159
Kinetic Concepts Inc. 13,400 199
Life Technologies, Inc.
(New) 5,100 145
Ligand Pharmaceuticals
Inc. Class B 8,200 121
Lincare Holdings Inc.* 8,200 318
Liposome Inc.* 8,500 209
Living Centers of
America* 6,200 229
Medimmune Inc.* 5,900 99
Medisense Inc.* 5,000 224
Mentor Corp. 6,800 159
Multicare Cos. Inc. 5,200 148
Natures Sunshine
Products Inc. 5,500 136
Nellcor Puritan Bennett
Inc.* 7,496 367
Neoprobe Corp.* 4,500 78
Neurogen Corp.* 4,300 121
Nexstar Pharmaceuticals
Inc.* 7,400 181
North American Vaccine
Inc.* 9,400 194
Novacare Inc.* 19,080 138
Omnicare Inc. 6,600 396
Organogenesis Inc. 4,200 74
Owens & Minor Inc. (New) 8,700 117
PDT Inc. 3,400 162
PHP Healthcare Corp. 3,000 92
PLC Systems Inc.* 5,200 155
Patterson Dental Co.* 4,950 149
Physician Sales &
Service Inc. 10,600 290
Physicians Health
Services, Inc. Class
A* 3,000 98
Protein Design Labs,
Inc.* 4,800 127
Pyxis Corp.* 10,700 272
Quintiles Transnational
Corp. 6,100 446
Regeneron
Pharmaceuticals Inc.* 7,600 108
Renal Treatment Centers
Inc. 6,800 197
Research Medical Inc.* 2,600 65
Respironics Inc. 5,100 110
RoTech Medical Corp. 4,000 166
Roberts Pharmaceutical
Corp.* 5,700 107
Salick Health Care,
Inc.* 3,600 137
Sepracor Inc.* 6,300 88
Sequus Pharmaceuticals
Inc.* 7,700 135
Sofamor/Danek Group
Inc.* 7,000 229
Sola International Inc.* 6,300 206
</TABLE>
F-19
<PAGE> 141
SchwabFunds(R)
- --------------------------------------------------------------------------------
SCHWAB SMALL-CAP INDEX FUND(R)
STATEMENT OF NET ASSETS
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
Somatogen Inc.* 7,400 $ 123
SpaceLabs Medical Inc.* 2,800 63
Summit Technology Inc. 7,650 137
Sunrise Medical Inc.* 4,300 78
Target Therapeutics Inc. 4,300 233
Tecnol Medical Products
Inc.* 6,100 120
Thermedics Inc.* 8,200 248
Thermo Cardiosystems
Inc. 4,700 334
Thermotrex Corp.* 5,700 299
Ventritex Inc.* 7,000 109
Vertex Pharmaceuticals
Inc.* 4,800 142
VISX Inc.* 4,900 167
Vital Signs Inc. 4,400 93
Vivra Inc. 8,850 280
Vivus* 4,400 133
Watson Pharmaceuticals
Inc.* 9,356 447
West Co Inc. 5,300 121
--------
17,582
--------
HOUSEHOLD PRODUCTS--0.3%
Bush Boake Allen Inc.* 5,600 151
Church & Dwight Inc. 6,100 134
Libbey Inc. 4,300 100
Playtex Products Inc.* 18,800 165
--------
550
--------
IMAGING & PHOTO--0.7%
Avid Technology, Inc.* 6,500 126
BMC Industries, Inc. 8,200 219
C-Cube Microsystems,
Inc. 9,400 463
Chyron Corp.* 24,200 97
Circon Corp.* 3,200 47
OIS Optical Imaging
Systems Inc.* 27,400 110
Photronic, Inc. 2,950 78
Robotic Vision Systems
Inc.* 4,100 70
Ultratech Stepper Inc. 5,900 153
--------
1,363
--------
INSURANCE--5.2%
Acordia, Inc. 4,300 137
Alexander & Alexander
Services 12,500 236
Alfa Corp. 11,700 152
Allied Group Inc. 2,600 93
American Annuity Group,
Inc. 12,350 154
American Bankers
Insurance Group, Inc. 5,800 228
American Heritage Life
Investment Corp. 5,200 121
American Travellers
Corp. 3,900 77
Argonaut Group, Inc. 7,700 241
Arthur J. Gallagher &
Co. 4,500 146
CMAC Investment Corp. 3,800 213
Capital Re Corp. 5,400 203
Capitol American
Financial Corp. 6,500 157
Capsure Holdings Corp.* 4,200 74
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
Citizens Corp. 10,800 211
Commerce Group Inc. 10,600 $ 212
Compdent Corp.* 3,500 154
Crawford & Co. Class A 4,300 70
Crawford & Co. Class B 9,900 161
Delphi Financial Group,
Inc. Class A* 6,000 167
E.W. Blanch Holdings
Inc. 3,500 72
Enhance Financial
Services Group Inc. 7,100 193
Executive Risk Inc. 3,100 96
Financial Security
Assured Holdings Ltd. 7,700 208
Foremost Corp. of
America 3,400 182
Fremont General Corp. 7,620 191
Frontier Insurance
Group, Inc. 4,250 137
GAINSCO, Inc. 6,000 70
HCC Insurance Holdings,
Inc. 3,900 228
Harleysville Group Inc. 4,600 127
Home Beneficial Corp.
Class B 4,400 114
Horace Mann Educators
Corp. (New) 6,500 214
Integon Corp. 3,900 75
John Alden Financial
Corp. 8,200 160
Kansas City Life
Insurance Co. 1,600 88
Liberty Corp. 6,300 200
Life Partners Group Inc. 7,900 165
Life Re Corp. 4,400 131
MAIC Holdings Inc. 2,572 84
Markel Corp.* 2,300 189
NAC Re Corp. 5,900 193
National Re Corp. 5,500 195
Nymagic Inc. 2,000 37
Orion Capital Corp. 4,400 195
Oxford Health Plans Inc. 4,400 223
Penncorp Financial Group
Inc. 7,900 242
Presidential Life Corp. 9,800 96
Reinsurance Group of
America Inc. 6,600 274
Selective Insurance
Group, Inc. 4,400 139
Sierra Health Services
Inc.* 5,800 191
State Auto Financial
Corp. 3,100 75
Trenwick Group Inc. 2,300 111
United Companies
Financial Corp. 9,040 290
United Dental Care Inc.* 2,300 91
United Insurance
Companies, Inc. 11,100 236
United Wisconsin
Services, Inc. 4,000 89
Vesta Insurance Group
Inc. 6,750 217
W.R. Berkley Corp. 5,900 254
</TABLE>
F-20
<PAGE> 142
SchwabFunds(R)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
Washington National
Corp. 4,900 $ 135
Zenith National
Insurance Corp. 5,500 138
--------
9,552
--------
MEDIA--3.2%
AMC Entertainment Inc.* 4,700 122
BET Holdings, Inc. Class
A* 3,100 91
Cablevision Systems
Corp. Class A* 3,500 175
Carmike Cinemas Inc.* 2,500 67
Central Newspapers Inc.
Class A 7,500 273
Century Communications
Corp. Class A* 22,637 219
Citicasters Inc. 5,600 168
Clear Channel
Communications 950 64
Emmis Broadcasting Corp.
Class A* 2,800 121
Evergreen Media* 5,500 218
GC Companies Inc.* 2,380 86
Harte Hanks
Communications (New) 8,500 201
Heartland Wireless
Communications, Inc.* 4,500 126
Houghton Mifflin Co. 4,500 209
Interdigital Commerce
Corp.* 11,700 97
International Cabletel
Inc. 9,333 275
International Family
Entertainment Inc.
Class B 13,125 200
Jacor Communications
Inc.* 5,600 120
John Wiley & Son, Inc.
Class A 5,800 200
McClatchy Newspapers
Inc. Class A 8,400 204
Media General, Inc.
Class A 7,800 300
Meredith Corp. 6,800 309
Movie Gallery Inc.* 3,000 93
New World Communications
Class A* 8,000 150
Oak Industries Inc.* 4,500 122
Paxson Communications
Corp. 8,000 119
Pulitzer Publishing Co. 5,325 304
Regal Cinemas, Inc. 5,800 237
Renaissance
Communications Corp. 8,400 232
Silver King
Communications Inc.* 1,800 53
TCA Cable TV Inc. 7,000 206
United International
Holdings Inc. Class A* 7,200 104
United Television Inc. 2,600 230
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
Westcott Communications
Inc.* 5,500 $ 117
Westwood One Inc.* 8,900 157
--------
5,969
--------
MISCELLANEOUS FINANCE--3.3%
1st Source Corp. 3,184 72
AMCORE Financial, Inc. 4,100 83
Aames Financial Corp. 2,500 110
Alex Brown Inc. 4,500 244
Americredit Corp.* 9,000 129
Astoria Financial Corp. 4,000 214
Bok Financial Corp.
(New) 6,050 126
Cal-Federal Bancorp
Inc.* 14,600 261
California Federal Bank* 960 7
Coast Savings Financial
Inc.* 5,600 174
Collective Bancorp Inc. 6,400 155
Commercial Federal Corp. 4,800 184
Downey Financial Corp. 5,515 119
Eaton Vance Corp. (Non
Voting) 3,500 108
First American Financial
Corp. 3,600 99
First Financial Corp. 8,400 198
Fund American
Enterprises Holdings,
Inc. 2,709 207
Glendale Federal Bank
(FSB) (New)* 12,000 210
Great Financial Corp. 4,700 129
Home Financial Corp. 6,700 94
Inter-Regional Financial
Group, Inc. 3,650 80
Interpool Inc. 5,600 101
JSB Financial, Inc. 2,800 95
Leader Financial Corp. 3,500 155
Legg Mason, Inc. 4,500 129
Money Store Inc. 16,575 421
Morgan Keegan, Inc. 5,500 67
North American Mortgage
Co. 3,800 64
Olympic Financial Ltd.* 6,600 147
Peoples Heritage
Financial Group, Inc. 4,900 103
Pioneer Group Inc. 7,300 193
Quick & Reilly Group,
Inc. 7,080 216
RCSB Financial Inc. 3,600 85
Raymond James Financial
Inc. 5,600 127
Roosevelt Financial
Group Inc. 11,400 219
Sovereign Bancorp Inc. 13,312 148
St. Paul Bancorp Inc. 6,000 146
Standard Financial Inc. 4,300 64
Student Loan Corp. 6,000 215
Value Line, Inc. 3,300 115
WFS Financial Inc.* 7,300 146
Westcorp Inc. 8,096 159
--------
6,118
--------
</TABLE>
F-21
<PAGE> 143
SchwabFunds(R)
- --------------------------------------------------------------------------------
SCHWAB SMALL-CAP INDEX FUND(R)
STATEMENT OF NET ASSETS
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
MOTOR VEHICLE--1.4%
A.O. Smith Corp. Class B 6,600 $ 152
Arctco, Inc. 8,150 79
Arvin Industries, Inc. 7,300 164
Borg Warner Automotive
Inc. 7,400 282
Breed Technologies Inc. 9,800 211
Detroit Diesel Corp.* 8,900 170
Federal Mogul Corp. 10,300 196
Gentex Corp.* 5,000 197
Hayes Wheels
International Inc. 5,400 164
Mascotech Inc. 16,500 217
Modine Manufacturing Co. 9,000 248
Standard Products Co. 5,100 129
Superior Industries
International, Inc. 8,700 238
Titan Wheel
International Inc. 7,225 117
--------
2,564
--------
NON-FERROUS--0.8%
A.M. Castle & Co. 3,000 101
Brush Wellman Inc. 4,000 75
Coeur d'Alene Mines
Corp. 6,000 119
Commercial Metals Co. 5,233 157
Hecla Mining Co.* 15,400 119
Imco Recycling Inc. 3,200 70
Minerals Technologies
Inc. 6,500 250
Mueller Industries Inc. 5,600 225
Stillwater Mining Co.* 6,000 143
Sunshine Mining &
Refining Co.* 53,700 87
Wolverine Tube Inc.* 3,800 140
--------
1,486
--------
OIL-DOMESTIC--0.8%
Barrett Resources Corp.* 6,900 191
Cross Timbers Oil Co. 4,900 98
Diamond Shamrock Inc. 9,000 305
Pogo Producing Co. 9,000 325
Quaker State Corp. 9,900 156
Smith International
Inc.* 10,100 300
Snyder Oil Corp. 8,200 74
--------
1,449
--------
PAPER--1.0%
Caraustar Industries
Inc. 7,600 191
Chesapeake Corp. 7,700 222
Longview Fibre Co. 14,700 259
P.H. Glatfelter Co. 12,700 211
Rock Tennessee Co. Class
A 9,000 158
Shorewood Packaging
Corp.* 6,100 105
Thermo Fibertek Inc. 16,050 367
Wausau Paper Mills Co. 11,320 260
--------
1,773
--------
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
PRODUCER GOODS-MANUFACTURING--7.0%
Albany International
Corp. Class A (New) 9,000 $ 194
American Financial
Enterprises Inc. 3,500 85
Applied Power Inc. Class
A 4,600 144
AptarGroup, Inc. 5,500 207
BT Office Products
International Inc.* 10,200 177
BW/IP Holding, Inc.
Class A 6,900 143
Baldor Electric Co. 8,540 185
Barnes Group Inc. 1,600 74
Bearings Inc. (New) 3,700 118
Blyth Industries Inc. 7,200 286
Boise Cascade Office
Products Corp. 7,600 595
Clarcor Inc. 5,000 99
Coherent Inc.* 3,400 183
Collins & Aikman Corp.* 20,700 145
Commercial Intertech
Corp. 4,950 94
Corporate Express, Inc. 5,400 202
Credence Systems Corp. 6,750 146
Donaldson Inc. 7,000 184
Duriron Inc. 6,900 181
Fisher Scientific
International, Inc. 4,700 176
General Binding Corp. 5,000 115
Giddings & Lewis Inc. 9,900 183
Goulds Pumps Inc. 6,400 150
Graco Inc. 5,475 110
Greenfield Industries
Inc. 5,200 197
Griffon Corp.* 7,600 68
Harnischfeger Industries
Corp. 4,369 177
Helix Technology Corp. 3,300 124
Herman Miller Inc. 7,100 218
IDEX Corp. 5,650 222
Insilco Corp.* 3,200 111
Interface Inc. Class A 4,400 57
Intermagnetics General
Corp. 4,300 69
Ionics Inc. 4,200 202
JLG Industries Inc. 4,200 230
Juno Lighting Inc. 5,600 83
Kaydon Corp. 5,100 203
Kennametal Inc. 8,900 337
Keystone International
Inc. 10,100 221
Lawson Products, Inc. 3,900 90
Lincoln Electric Co. 2,600 70
Lincoln Electric Co.
Class A (Non Voting) 7,100 201
Lydall Inc. 5,800 136
Measurex Corp. 4,600 133
Mine Safety Appliances
Co. 1,600 71
Myers Industry Inc. 5,450 99
NN Ball & Roller, Inc. 4,400 110
</TABLE>
F-22
<PAGE> 144
SchwabFunds(R)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
Navistar International
Corp.* 20,550 $ 247
Nu-Kote Holding Inc.
Class A 5,900 105
Precision Castparts
Corp. 5,800 252
Presstek Inc. 4,350 604
Roper Industries 4,400 207
SPS Technologies, Inc. 1,500 98
Standex International
Corp. 4,000 108
Stewart & Stevenson
Services, Inc. 10,400 307
TRINOVA Corp. 8,600 303
Teleflex Inc. 6,150 285
Tencor Instruments 10,000 247
Texas Industries Inc. 3,600 230
TriMas Corp. 10,800 255
Triarc Cos., Inc. Class
A* 8,900 112
U.S. Filter Corp. (New) 8,300 255
UNR Industries, Inc. 14,600 135
Valhi, Inc. (New) 31,200 203
Valmont Industries, Inc. 4,500 145
WMS Industries Inc.* 7,000 127
Watts Industries Inc.
Class A 9,000 185
Westinghouse Air Brake
Co. (New) 8,700 123
Westpoint Stevens Inc.
Class A 10,100 213
Wyman Gordon Co.* 9,900 181
X-Rite, Inc. 6,000 105
Zero Corp. 3,600 65
Zurn Industries, Inc. 5,000 102
--------
12,804
--------
RAILROAD--0.1%
Florida East Coast
Industry Inc. 2,900 258
--------
REAL PROPERTY--0.4%
Avatar Holdings, Inc.* 2,400 94
Catellus Development
Corp.* 28,300 258
Forest City Enterprises,
Inc. Class A 3,100 117
Insignia Financial Group
Class A (New) 8,400 185
Price Enterprises Inc. 6,800 109
--------
763
--------
RETAIL--5.0%
Arbor Drugs, Inc. 6,700 137
Best Buy Co., Inc.* 12,100 233
Blair Corp. 3,100 81
Bruno's Inc. (New)* 402 5
Burlington Coat Factory
Warehouse* 10,900 119
CDW Computer
Centers Inc.* 4,300 332
Carson Pirie Scott &
Co.* 5,200 126
Casey's General Stores
Inc. 8,300 179
Charming Shoppes Inc. 28,900 186
Circle K Corp.* 7,800 244
Claire's Stores Inc. 9,300 202
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
CompUSA Inc. 12,200 $ 422
Consolidated Stores
Corp.* 6,100 220
Dollar Tree Stores Inc. 7,350 246
Duty Free International
Inc. 6,800 91
Family Dollar Stores,
Inc. 17,300 264
Fingerhut Companies,
Inc. 13,100 167
Fred Meyer Inc.* 8,500 244
Gymboree Corp.* 7,500 195
Hollywood Entertainment
Corp. 10,400 170
Home Shopping Network,
Inc.* 25,600 301
Just for Feet Inc. 5,350 256
Lands' End, Inc.* 10,000 198
MacFrugals Bargains-
Close-Out* 8,000 107
Michaels Stores Inc.* 5,600 103
Petco Animal Supplies
Inc. 6,300 183
Pier 1 Imports Inc. 11,745 157
Proffitt's, Inc.* 6,000 197
Quality Food Centers,
Inc. 4,600 121
Regis Corp. 3,500 129
Ross Stores Inc. 7,800 270
Ruddick Corp. 13,200 175
Service Merchandise Co.
Inc.* 28,562 136
Shopko Stores Inc. 12,800 198
Smart & Final Inc. 6,300 143
Smith's Food & Drug
Centers, Inc. Class B 6,700 168
Sotheby's Holdings, Inc.
Class A 17,000 240
Spiegel, Inc. Class A
(Non Voting) 32,600 326
Sports Authority Inc.* 6,100 181
Stanhome Inc. 5,700 168
Stein Mart Inc.* 6,300 100
Strawbridge & Clothier
Class A 2,800 52
Sunglass Hut
International Inc. 9,600 283
Tiffany & Co. (New) 5,100 333
United Stationers Inc. 7,980 181
Vitalink Pharmacy
Services, Inc.* 3,600 81
Waban Inc.* 9,400 230
Williams-Sonoma Inc.* 7,400 185
Zale Corp. (New)* 9,500 179
--------
9,244
--------
STEEL--1.0%
Armco Inc.* 30,400 171
Birmingham Steel Corp. 8,300 133
Carpenter Technology
Corp. 4,700 177
Chaparral Steel Co. 8,000 121
Cleveland Cliffs Inc. 3,700 154
Intermet Corp.* 9,200 135
J & L Specialty Steel
Inc. 12,000 218
Lukens Inc. 4,150 109
</TABLE>
F-23
<PAGE> 145
SchwabFunds(R)
- --------------------------------------------------------------------------------
SCHWAB SMALL-CAP INDEX FUND(R)
STATEMENT OF NET ASSETS
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
National Steel Corp.
Class B* 11,700 $ 159
Oregon Steel Mills Inc. 6,300 100
Quanex Corp. 4,000 88
Rouge Steel Co. Class A 3,500 78
WHX Corp.* 11,700 135
--------
1,778
--------
TELEPHONE--3.3%
American Mobile
Satellite Corp.* 7,300 141
Andrew Corp. 1,912 92
Antec Corp.* 6,900 105
Arch Communications
Group, Inc.* 5,600 133
Aspect
Telecommunications
Corp. 6,600 380
Associated Group Inc.
Class A* 5,600 156
Boston Technology Inc.
(New)* 8,400 147
C-TEC Corp. 8,300 248
California Microwave* 4,700 86
Cellstar Corp.* 6,200 58
Centennial Cellular
Corp. Class A* 4,300 70
Cidco Inc.* 4,300 153
Coherent Communications
Systems Corp. 4,000 76
Colonial Data
Technologies* 4,500 102
Comnet Cellular Inc.* 4,700 156
Echostar Communications
Corp. Class A* 3,500 116
General Datacom
Industries Inc.* 5,000 69
Geotek Communications
Inc.* 14,900 156
InterVoice, Inc.* 4,400 123
LCI International Inc. 16,200 421
Lincoln
Telecommunications 11,400 192
Microcom Inc.* 4,800 118
Midcom Communications
Inc.* 4,100 30
Mobilemedia Corp. Class
A* 8,000 159
Octel Communications
Corp. 7,200 324
P-Com Inc. 5,200 130
Pairgain Technologies
Inc.* 4,400 421
PictureTel Corp. (New) 6,600 224
Plantronics, Inc. (New)* 2,300 92
Stratacom Inc. 2,800 146
U.S. Robotics, Inc. 6,800 1,065
Vanguard Cellular
Systems, Inc. Class A* 12,550 270
--------
6,159
--------
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
TRANSPORTATION-
MISCELLANEOUS--2.0%
Air Express
International Corp. 5,100 $ 142
Airbourne Freight Corp. 6,100 161
Amerco Inc.* 10,500 233
American Freightways
Corp.* 8,800 134
American President
Companies, Ltd. 7,100 170
Arnold Industries Inc. 7,400 118
Expeditores
International of
Washington Inc. 3,900 115
Greyhound Lines Inc. 12,400 44
Harper Group, Inc. 5,000 96
Heartland Express, Inc. 5,864 173
J.B. Hunt Transport
Services Inc. 11,850 244
Kirby Corp.* 7,800 137
Landstar Systems, Inc.* 3,700 103
M.S. Carriers, Inc.* 4,000 77
NACCO Industries, Inc.
Class A 3,300 208
Overseas Shipholding
Group 11,200 225
Rollins Truck Leasing
Corp. 11,900 129
Shurgard Storage Centers
Inc. Class A 6,800 174
Swift Transportation
Inc. 7,500 143
TNT Freightways Corp. 6,700 151
Wabash National Corp. 4,900 97
Werner Enterprises Inc. 7,300 180
XTRA Corp. 5,200 237
Yellow Corp. 8,600 105
--------
3,596
--------
TRAVEL & RECREATION--1.7%
Anchor Gaming* 3,800 168
Anthony Industries, Inc. 6,415 183
Aztar Corp.* 10,400 101
Bally Entertainment
Corp. 13,600 284
Boyd Gaming Corp.* 16,200 227
Doubletree Corp.* 5,800 185
Grand Casinos Inc. 6,900 223
Marcus Corp. 5,550 155
Players International
Inc. 8,900 101
Polaris Industries Inc. 8,200 286
Primadonna Resorts Inc.* 8,900 170
Prime Hospitality Corp.* 8,900 135
Rio Hotel & Casino Inc.* 6,100 110
Showboat, Inc. 5,300 170
Speedway Motorsports,
Inc. 11,000 294
Station Casinos Inc.* 10,300 135
Stratosphere Corp.* 16,700 183
Topps Inc. 12,200 71
--------
3,181
--------
</TABLE>
F-24
<PAGE> 146
SchwabFunds(R)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
UTILITIES--4.1%
Aquila Gas Pipeline
Corp. 8,800 $ 122
Atmos Energy Corp. 4,000 99
Bay State Gas Co. 4,200 117
Black Hills Corp. 4,400 110
Central Hudson Gas &
Electric Corp. 5,300 154
Central Louisiana
Electric Co. (New) 6,200 159
Central Maine Power Co. 9,400 134
Cilcorp Inc. 4,000 173
Commonwealth Energy
System (Shares of
Beneficial Interest) 3,600 165
Destec Energy, Inc.* 16,000 188
Eastern Enterprises 6,300 226
Eastern Utilities
Association 6,000 122
Empire District Electric
Co. 4,400 80
Energen Corp. 2,800 64
IES Industries Inc. 8,300 220
Indiana Energy Inc. 6,700 160
Interstate Power Co. 3,000 92
K N Energy Inc. 8,668 277
Laclede Gas Co. 5,300 125
MDU Resources Group,
Inc. 8,200 179
Madison Gas & Electric
Co. 5,400 132
New Jersey Resources
Corp. 5,400 153
Northwest Natural Gas
Co. 4,500 147
Northwestern Public
Service Co. 2,400 67
Oneok Inc. 7,900 203
Orange & Rockland
Utilities, Inc. 4,600 157
Otter Tail Power Co. 3,500 128
Philadelphia Suburban
Corp. 3,300 77
Piedmont Natural Gas
Inc. 9,400 203
Primark Corp.* 6,600 234
Public Service Co. of
New Mexico 12,000 210
Public Service Co. of
North Carolina Inc. 6,000 97
Seagull Energy Corp.* 11,100 271
Sierra Pacific Resources 8,500 206
Sig Corp. 4,966 166
South Jersey Industries
Inc. 2,800 65
Southern Union Co. (New) 4,133 91
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
Southwest Gas Corp. 6,900 $ 115
Southwestern Energy Co. 6,900 96
Tejas Gas Corp. 3,630 182
Thermo Ecotek Corp. 4,200 99
Tuscon Electric Power
Co.* 47,100 135
UGI Corp. (New) 9,800 219
United Illuminating Co. 4,400 160
United Water Resources
Inc. 9,300 116
WPS Resources Corp. 7,000 221
Washington Energy Co. 7,100 138
Western Gas Resources
Inc. 7,500 111
Wicor Inc. 5,700 196
Williams Cos. Inc. 206 11
Yankee Energy System,
Inc. 3,900 85
--------
7,457
--------
TOTAL COMMON STOCK
(Cost $142,852) 181,721
--------
<CAPTION>
Maturity
(000s)
---------
<S> <C> <C>
CASH EQUIVALENTS--1.1%
REPURCHASE AGREEMENT--1.1%
State Street Bank 4.75%
Dated 04/30/96
Due 05/01/96
Collateralized By:
U.S. Treasury Note
$2,100,000 Par; 8.00%
Due 10/15/96 $ 1,990 1,990
--------
TOTAL CASH EQUIVALENTS
(Cost $1,990) 1,990
--------
TOTAL INVESTMENTS -- 99.7%
(Cost $144,842) 183,711
--------
OTHER ASSETS AND
LIABILITIES--0.3%
Other Assets 860
Liabilities (257)
--------
603
--------
NET ASSETS--100.0%
Applicable to 13,423,537
outstanding $0.00001
par value shares
(unlimited shares authorized) $184,314
========
NET ASSET VALUE PER SHARE $13.73
======
</TABLE>
- ------------------
*Non-Income Producing Security
See accompanying Notes to Financial Statements.
F-25
<PAGE> 147
SchwabFunds(R)
- --------------------------------------------------------------------------------
SCHWAB SMALL-CAP INDEX FUND(R)
STATEMENT OF OPERATIONS (in thousands)
Six months ended April 30, 1996 (Unaudited)
<TABLE>
<S> <C>
Investment income:
Dividends $ 834
Interest 49
--------
Total investment income 883
--------
Expenses:
Investment advisory and administration fee 367
Transfer agency and shareholder service fees 183
Custodian fees 49
Registration fees 38
Professional fees 17
Shareholder reports 28
Trustees' fees 10
Amortization of deferred organization costs 8
Insurance and other expenses 2
--------
702
Less expenses reduced (269)
--------
Total expenses incurred by Fund 433
--------
Net investment income 450
--------
Net realized gain (loss) on investments:
Proceeds from sales of investments 20,951
Cost of investments sold (21,463)
--------
Net realized loss on investments sold (512)
--------
Change in net unrealized gain (loss) on investments:
Beginning of period 13,626
End of period 38,869
--------
Increase in net unrealized gain on investments 25,243
--------
Net gain on investments 24,731
--------
Increase in net assets resulting from operations $ 25,181
========
</TABLE>
See accompanying Notes to Financial Statements.
F-26
<PAGE> 148
SchwabFunds(R)
- --------------------------------------------------------------------------------
SCHWAB SMALL-CAP INDEX FUND(R)
STATEMENT OF CHANGES IN NET ASSETS (in thousands)
<TABLE>
<CAPTION>
Six months
ended Year
April 30, ended
1996 October 31,
(Unaudited) 1995
----------- -----------
<S> <C> <C>
Operations:
Net investment income $ 450 $ 596
Net realized gain (loss) on investments sold (512) 291
Increase in net unrealized gain on
investments 25,243 13,029
-------- --------
Increase in net assets resulting from
operations 25,181 13,916
-------- --------
Dividends to shareholders from
net investment income (673) (408)
-------- --------
Capital share transactions:
Proceeds from shares sold 54,070 64,687
Net asset value of shares issued in
reinvestment of dividends 605 364
Early withdrawal fees 25 41
Less payments for shares redeemed (16,968) (24,654)
-------- --------
Increase in net assets from capital share
transactions 37,732 40,438
-------- --------
Total increase in net assets 62,240 53,946
Net assets:
Beginning of period 122,074 68,128
-------- --------
End of period (including undistributed net
investment income of $261 and $484,
respectively) $ 184,314 $ 122,074
======== ========
Number of Fund shares:
Sold 4,302 5,910
Reinvested 49 38
Redeemed (1,359) (2,296)
-------- --------
Net increase in shares outstanding 2,992 3,652
Shares outstanding:
Beginning of period 10,432 6,780
-------- --------
End of period 13,424 10,432
======== ========
</TABLE>
See accompanying Notes to Financial Statements.
F-27
<PAGE> 149
SchwabFunds(R)
- --------------------------------------------------------------------------------
SCHWAB SMALL-CAP INDEX FUND(R)
NOTES TO FINANCIAL STATEMENTS
Six months ended April 30, 1996 (Unaudited)
1. DESCRIPTION OF THE FUND
The Schwab Small-Cap Index Fund (the "Fund") is a series of Schwab Capital Trust
(the "Trust"), a no-load, open-end investment management 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), Schwab Asset Director(R)-High Growth Fund, Schwab Asset
Director-Conservative Growth Fund, Schwab Asset Director-Balanced Growth Fund
and Schwab S&P 500 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
The following significant accounting policies are in conformity with generally
accepted accounting principles for investment companies. The preparation of
financial statements in accordance with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could differ
from those estimates.
Security valuation -- Investments in securities traded on an exchange are valued
at the last quoted sale price for a given day, or if a sale is not reported for
that day, at the mean between the most recent quoted bid and asked prices.
Unlisted securities for which market quotations are readily available are valued
at the mean between the most recent bid and asked prices. Securities for which
no quotations are readily available are valued at fair value as determined by
the Fund's investment manager pursuant to guidelines adopted in good faith by
the Board of Trustees. Short-term securities with 60 days or less to maturity
are stated at amortized cost, which approximates market value.
Security transactions and investment income -- Security transactions are
accounted for on a trade date basis (date the order to buy or sell is executed).
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.
F-28
<PAGE> 150
SchwabFunds(R)
- --------------------------------------------------------------------------------
Expenses -- Expenses arising in connection with the Fund are charged directly to
the Fund. Expenses common to all series of the Trust are allocated to each
series in proportion to their relative net assets.
Federal income taxes -- It is the Fund's policy to meet the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all net investment income and realized net capital
gains, if any, to shareholders. Therefore, no federal income tax provision is
required. The Fund is considered a separate entity for tax purposes.
At April 30, 1996, (for financial reporting and federal income tax purposes),
net unrealized gain aggregated $38,869,000, of which $44,427,000 related to
appreciated securities and $5,558,000 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
$367,000 during the six months ended April 30, 1996, before the Investment
Manager reduced its fee (see Note 4).
Transfer agency and shareholder service agreements -- The Trust has transfer
agency and shareholder service agreements with Charles Schwab & Co., Inc.
("Schwab"). For services provided under these agreements, Schwab receives an
annual fee, payable monthly, of .05% of the average daily net assets for
transfer agency services and .20% of such assets for shareholder services. For
the six months ended April 30, 1996, the Fund incurred transfer agency and
shareholder service fees of $183,000, before Schwab reduced its fees (see Note
4).
Officers and trustees -- Certain officers and trustees of the Trust were also
officers and/or directors of the Investment Manager and/or Schwab. During the
six months ended April 30, 1996, 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 $10,000
related to the Trust's unaffiliated trustees.
4. EXPENSES REDUCED BY THE INVESTMENT MANAGER AND SCHWAB
The Investment Manager and Schwab reduced a portion of their fees in order to
limit the Fund's ratio of operating expenses to average net assets. For the six
months ended April 30, 1996, the total of such fees reduced by the Investment
Manager and Schwab was $147,000 and $122,000, respectively.
F-29
<PAGE> 151
SchwabFunds(R)
- --------------------------------------------------------------------------------
SCHWAB SMALL-CAP INDEX FUND(R)
NOTES TO FINANCIAL STATEMENTS
Six months ended April 30, 1996 (Unaudited)
5. 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 six months ended April 30, 1996, no borrowings
were made under this arrangement.
6. INVESTMENT TRANSACTIONS
Purchases and sales of investment securities, other than short-term obligations,
aggregated (in thousands) $57,109 and $20,951, respectively, for the six months
ended April 30, 1996.
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 six months ended April 30, 1996, total early withdrawal fees
retained by the Fund amounted to $25,000.
8. COMPOSITION OF NET ASSETS
At April 30, 1996, net assets consisted of:
<TABLE>
<S> <C>
Capital paid in $145,933,000
Accumulated undistributed net investment income 261,000
Accumulated net realized loss on investments sold (749,000)
Net unrealized gain on investments 38,869,000
------------
Total $184,314,000
============
</TABLE>
At April 30, 1996, the Fund's Statement of Net Assets included: $72,000 payable
for investments purchased, $98,000 payable for Fund shares redeemed, $17,000
payable for investment advisory and administration fee and $724,000 receivable
for Fund shares sold.
F-30
<PAGE> 152
SchwabFunds(R)
- --------------------------------------------------------------------------------
9. FINANCIAL HIGHLIGHTS
Per share income and capital changes for a share outstanding throughout the
period:
<TABLE>
<CAPTION>
Six months
ended
April 30, Year ended Period ended
1996 October 31, October 31,
(Unaudited) 1995 1994(1)
----------- ----------- ------------
<S> <C> <C> <C>
Net asset value at beginning of period..... $ 11.70 $ 10.05 $ 10.00
Income from investment operations
- -----------------------------------
Net investment income.................... .06 .10 .06
Net realized and unrealized gain on
investments............................ 2.03 1.61 --
-------- -------- -------
Total from investment operations......... 2.09 1.71 .06
Less distributions
- -----------------
Dividends from net investment income..... (.06) (.06) (.01)
Distributions from realized gain on
investments............................ -- --
-------- -------- -------
Total distributions...................... (.06) (.06) (.01)
-------- -------- -------
Net asset value at end of period........... $ 13.73 $ 11.70 $ 10.05
======== ======== =======
Total return (%)........................... 17.93 17.11 .63
- ----------------
Ratios/Supplemental data
- -------------------------
Net assets, end of period (000s)......... $ 184,314 $ 122,074 $ 68,128
Ratio of expenses to average net assets
(%).................................... .59* .68 .67*
Ratio of net investment income to
average net assets (%)................. .61* .68 .68*
Portfolio turnover rate (%).............. 10 24 16
Average commission rate.................. $ .03
</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
April 30, 1996, October 31, 1995 and 1994, would have been .96%*, 1.02% and
1.19%*, respectively, and the ratio of net investment income to average net
assets would have been .24%*, .34% and .16%*, respectively.
(1) For the period December 3, 1993 (commencement of operations) to October 31,
1994.
* Annualized
F-31
<PAGE> 153
SchwabFunds(R)
- --------------------------------------------------------------------------------
SCHWAB ASSET DIRECTOR(R)-HIGH GROWTH FUND
STATEMENT OF NET ASSETS
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
COMMON STOCK--77.2%
DOMESTIC--57.5%
AEROSPACE/DEFENSE--1.0%
AAR Corp. 500 $ 10,188
Alliant Techsystems
Inc.* 400 18,800
BFGoodrich Co. 300 11,925
Boeing Co. 2,400 197,100
Coltec Industries Inc.* 2,400 31,200
Curtiss-Wright Corp. 100 5,113
Gencorp Inc. 900 12,038
General Dynamics Corp. 400 25,250
Lockheed Martin Corp. 1,400 112,875
McDonnell Douglas Corp. 800 77,200
Northrop Grumman Corp. 400 24,750
OEA, Inc. 1,000 39,250
Orbital Sciences Corp.
Class A* 1,000 13,750
Raytheon Co. 1,700 86,063
Rockwell International
Corp. 1,500 87,750
Rohr Industries Inc.* 400 7,300
Textron Inc. 600 51,450
Thiokol Corp. 500 21,375
Trimble Navigation
Ltd.* 500 12,094
United Technologies
Corp. 900 99,450
-------
944,921
-------
AIR TRANSPORTATION--0.4%
AMR Corp.* 500 44,625
Alaska Air Group Inc.* 300 7,613
America West Airlines,
Inc. Class B* 1,700 35,700
Atlantic Southeast
Airlines Inc. 1,100 27,500
Atlas Air Inc.* 700 31,675
Comair Holdings Inc. 1,300 48,181
Continental Airlines
Inc. Class B* 1,200 68,100
Delta Airlines Inc. 400 32,150
Mesa Airlines Inc.* 900 11,081
Offshore Logistics,
Inc.* 400 5,825
Southwest Airlines Co. 1,400 41,650
Trans World Airlines
Inc. (New)* 1,500 26,813
USAir Group, Inc.* 3,000 53,250
-------
434,163
-------
ALCOHOLIC BEVERAGES--0.3%
Adolph Coors Co.
Class B 1,300 24,456
Anheuser-Busch
Companies, Inc. 1,800 120,825
Brown Forman Corp.
Class B 500 19,750
Canandaigua Wine Co.,
Inc. Class A* 700 21,350
Seagram Ltd 2,800 94,850
-------
281,231
-------
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
APPAREL--0.4%
Authentic Fitness Corp. 500 $ 11,938
Brown Group Inc. 500 8,000
Burlington Industries
Inc.* 1,800 20,925
Cone Mills Corp.* 600 6,825
Donnkenny Inc. 500 9,875
Fabri-Centers of
America, Inc. Class A 200 2,050
Guilford Mills, Inc. 400 9,700
Justin Industries Inc. 600 7,650
Kellwood Co. 500 8,125
Kenneth Cole
Productions, Inc.
Class A 500 10,000
Liz Claiborne 400 14,550
Men's Wearhouse, Inc. 500 18,438
NIKE, Inc. Class B 1,000 87,500
Nautica Enterprises
Inc. 1,000 46,250
Paragon Trade
Brands, Inc.* 400 9,350
Phillips-Van Heusen
Corp. 600 7,950
Reebok International
Ltd. 400 11,600
Russell Corp. 200 5,200
Springs Industries Inc. 1,100 50,600
St. John's Knits, Inc. 200 11,875
Stride Rite Corp. 2,300 22,138
V.F. Corp. 400 22,800
Wolverine World
Wide Inc.
-------
431,127
-------
AUTOMOTIVE PRODUCTS--0.1%
APS Holding Corp.
Class A* 300 5,475
Armor-All Products
Corp. 500 7,750
Carlisle Cos. Inc. 900 41,850
Cooper Tire & Rubber 400 9,800
Discount Auto Parts
Inc.* 400 11,750
Goodyear Tire & Rubber 1,000 52,125
O'Reilly Automotive,
Inc.* 200 7,800
-------
136,550
-------
BANKS--4.1%
ALBANK Financial Corp. 360 9,698
Associated Banc-Corp. 900 34,875
Banc One Corp. 3,150 109,463
Bancorp South, Inc. 1,400 33,775
Bank of Boston Corp. 800 38,700
Bank of New York
Co., Inc. 1,300 63,050
BankAmerica Corp. 2,600 196,950
Bankers Trust New York
Corp. 500 34,688
Banknorth Group Inc. 200 7,000
Barnett Banks, Inc. 600 38,025
Bell Bancorp, Inc. 200 7,425
Boatmens Bancshares
Inc. 1,400 54,075
CCB Financial Corp. 900 46,744
CNB Bancshares Inc. 400 11,450
California Bancshares
Inc. 300 9,038
</TABLE>
F-32
<PAGE> 154
SchwabFunds(R)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
Capital Bancorp 300 $ 9,338
Centura Banks Inc. 1,100 40,150
Chase Manhattan Corp.
(New) 3,140 216,268
Chemical Financial
Corp. 300 11,738
Chittenden Corp. 300 7,988
Citicorp 3,400 267,750
Citizens Bancorp 400 11,900
Citizens Banking Corp. 400 11,850
City National Corp. 1,600 22,600
Cole Taylor Financial
Group Inc. 400 11,900
Colonial BancGroup Inc. 300 10,163
Comerica Inc. 900 39,150
Community First
Bankshares Inc. 400 9,250
Corestates Financial
Corp. 1,600 62,400
Crestar Financial Corp. 128 7,216
Cullen/Frost Bankers
Inc. 300 14,925
F & M National Corp. 400 6,400
Fifth Third Bancorp 700 38,631
First Bank System Inc. 982 59,166
First Chicago NBD Corp. 2,405 99,206
First Citizens
BancShares Inc. 300 18,600
First Commercial
Bancshares Inc. 300 7,125
First Commercial Corp. 1,177 36,634
First Commonwealth
Financial Corp. 1,000 19,250
First Financial Bancorp 800 26,200
First Michigan Bank
Corp. 525 15,619
First Midwest Bancorp
Inc. 300 8,625
First Union Corp. 1,975 121,463
Firstbank Illinois Co. 300 9,338
Fleet Financial Group
Inc. 1,924 82,732
Fort Wayne National
Corp. 300 9,188
Fulton Financial Corp. 880 17,930
HUBCO, Inc. 400 7,550
Hancock Holding Co. 200 7,250
Imperial Bancorp 324 7,817
J.P. Morgan & Co. Inc. 1,300 109,363
Jefferson Bankshares,
Inc. 500 10,688
Keycorp (New) 2,000 77,250
Keystone Financial Inc. 1,100 35,888
Liberty Bancorp, Inc. 300 11,025
Long Island Bancorp
Inc. 800 22,350
MBNA Corp. 1,600 45,400
Magna Group Inc. 1,200 27,150
Mark Twain
Bancshares Inc. 900 33,975
Mellon Bank Corp. 900 48,375
Mercantile Bancorp Inc. 175 7,788
Mid-Am, Inc. 400 7,400
National Bancorp of
Alaska, Inc. 700 42,350
National City Corp. 1,000 36,875
National Commerce
Bancorp 1,100 33,688
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
NationsBank Corp. 2,200 $ 175,450
New York Bancorp Inc. 300 7,350
North Fork
Bancorporation 1,100 26,125
Norwest Corp. 2,510 90,674
ONBANCorp, Inc. 400 13,300
Old National Bancorp 800 27,100
One Valley Bancorp of
West Virginia Inc. 500 15,594
PNC Bank Corp. 2,200 66,550
Park National Corp. 200 9,575
People's Bank 1,400 29,925
Provident Bancorp Inc. 900 46,238
Queens County
Bancorp, Inc. 200 8,775
Regions Financial Corp. 760 35,103
Republic New York Corp. 300 17,813
Riggs National Corp. 700 8,794
River Forest Bancorp,
Inc. 500 14,813
S & T Bancorp, Inc. 300 8,963
Security Capital Corp. 300 17,550
Sumitomo Bank 400 10,050
Summit Bancorp 1,260 44,730
SunTrust Banks Inc. 800 56,400
Susquehanna
Bancshares, Inc. 300 8,738
T R Financial Corp. 300 7,969
Trust Company of
New Jersey 600 8,513
TrustCo Bank Corp. NY 400 8,350
Trustmark Corp. 1,500 35,063
U S Trust Corp. (New) 300 16,538
U.S. Bancorp 1,200 38,700
UMB Financial Corp. 1,050 39,769
UST Corp. 400 5,250
United Bankshares, Inc. 300 8,175
United Carolina
Bancshares Corp. 600 14,325
Valley National Bancorp 1,470 42,630
Wachovia Corp. (New) 1,100 48,400
Wells Fargo & Co. 1,133 274,894
Westamerica Bancorp 300 14,175
Whitney Holding Corp. 400 12,125
---------
3,912,317
---------
BUSINESS MACHINES & SOFTWARE--4.3%
3COM Corp. 1,200 55,275
AST Research Inc.* 1,200 9,150
Amdahl Corporation* 600 7,650
Apple Computer, Inc. 800 19,400
Applied Magnetics
Corp.* 900 18,563
Atria Software, Inc. 400 21,850
Auspex Systems, Inc.* 700 13,475
Autodesk, Inc. 700 28,700
BBN Corp.* 500 14,125
BancTec, Inc.* 700 14,263
Bay Networks, Inc. 1,400 44,100
Bell & Howell Co.
(New)* 700 22,050
Black Box Corp.* 500 10,031
Boole & Babbage Inc. 400 10,450
</TABLE>
F-33
<PAGE> 155
SchwabFunds(R)
- --------------------------------------------------------------------------------
SCHWAB ASSET DIRECTOR(R)-HIGH GROWTH FUND
STATEMENT OF NET ASSETS
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
Borland
International Inc.* 700 $ 11,419
Cabletron Systems Inc.* 500 37,688
Cellular Technical
Services Inc.* 200 5,713
Ceridian Corp.* 428 20,437
Cisco Systems Inc. 3,800 197,363
Compaq Computer Corp.* 2,200 102,575
Computer Associates
International Inc. 1,700 124,738
Computer Horizons Corp. 600 30,225
Computer Products,
Inc.* 800 12,900
Computer Sciences
Corp.* 400 29,600
Compuware Corp.* 1,200 34,500
Comshare, Inc. 300 7,350
Comverse Technology
Inc. (New)* 500 11,750
Continuum Inc.* 1,000 57,000
Control Data Systems,
Inc.* 500 11,844
Cray Research Inc.* 176 5,192
Data General Corp.* 1,500 23,063
Davidson & Associates,
Inc. 1,000 27,375
Dialogic Corp.* 400 18,450
Digi International
Inc.* 300 8,550
Digital Equipment
Corp.* 1,100 65,725
Dynatech Corp. 400 10,400
EMC Corp.* 1,500 30,750
Exabyte Corp.* 500 8,688
Excalibur Technologies
Corp. (New)* 300 7,838
FTP Software Inc.* 700 6,825
FileNet Corp.* 400 22,300
General Magic Inc.* 700 3,938
Geoworks* 500 18,625
Global Village
Communications* 400 6,800
HCIA Inc.* 700 37,275
HNC Software Inc. 400 14,900
Hewlett Packard Co. 3,700 391,738
Honeywell Inc. 900 47,363
Hyperion Software Corp. 400 5,075
INSO Corp. 800 43,300
INTERSOLV Inc.* 800 8,800
In Focus Systems, Inc.* 300 15,225
Intergraph Corp.* 2,300 29,181
International Business
Machines 4,000 430,000
Legato Systems Inc.* 300 12,525
MICROS Systems, Inc. 200 5,600
Maxis Inc.* 300 7,275
McAfee Associates, Inc. 700 42,963
Medic Computer
Systems, Inc.* 800 74,900
Mercury Interactive
Corp.* 400 5,450
Microsoft Corp.* 4,100 464,069
National Computer
Systems, Inc. 500 10,938
National Instruments
Corp.* 500 12,063
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
Network Equipment
Technologies* 500 $ 12,750
Network General Corp.* 1,100 48,675
Novell Inc.* 2,700 39,319
Oak Technology 2,000 35,875
Optical Data Systems,
Inc. 400 10,875
Oracle Systems Corp. 4,950 166,753
PRI Automation Inc.* 300 8,550
Pitney Bowes Inc. 1,000 48,750
Progress Software Corp. 400 6,325
Quarterdeck Corp.* 1,100 16,913
Rational Software Corp.
(New)* 400 21,300
Safeguard Scientifics
Inc. 900 60,300
Seagate Technology,
Inc.* 884 51,272
Security Dynamics
Technology 1,300 109,200
Sequent Computer
Systems, Inc.* 800 11,750
Shiva Corp. 800 48,000
Sierra On-Line Inc. 500 19,688
Silicon Graphics Inc.* 1,100 32,588
Softkey
International Inc.* 1,200 33,525
Stac Inc.* 700 7,875
Stratus Computer Inc.* 1,100 30,938
Structural Dynamics
Research Corp.* 1,300 41,438
Sun Microsystems Inc. 1,200 65,025
Systems & Computer
Technology Corp.* 300 4,388
Tandem Computers Inc.* 600 7,650
Tech Data Corp.* 1,400 27,125
Telxon Corp. 400 9,250
Transaction Systems
Architects Inc.
Class A* 300 16,125
Trident
Microsystems Inc.* 300 5,325
Unisys Corp.* 900 5,400
Veritas Software Co. 200 9,150
Videoserver Inc.* 300 9,975
Wang Laboratories
Inc. (New)* 1,300 30,713
Wind River Systems Inc. 300 11,775
Xerox Corp. 800 117,200
---------
4,089,103
---------
BUSINESS SERVICES--3.2%
ABM Industries, Inc. 300 10,238
ABR Information
Services Inc. 300 18,900
ADVO Inc. 1,000 10,125
Access Health Inc. 400 22,200
Accustaff Inc. 1,500 44,719
Acxiom Corp. 1,100 30,044
Affiliated Computer
Services Inc.
Class A* 200 9,525
Alliance Entertainment
Corp.* 700 4,288
Alternative Resources
Corp. 400 14,350
</TABLE>
F-34
<PAGE> 156
SchwabFunds(R)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
American Business
Information, Inc. 500 $ 9,875
American Business
Products, Inc. 400 8,700
American
Homepatient Inc. 200 8,400
American Management
Systems, Inc. 1,200 31,800
American Medical
Response, Inc.* 1,000 37,000
American Oncology
Resources Inc.* 1,000 48,125
Amresco Inc. 1,000 17,250
Apollo Group, Inc.
Class A 1,500 66,188
Applix Inc. 300 11,588
Apria Healthcare
Group Inc.* 1,800 61,313
Aspen Technology Inc.* 200 11,050
Automatic Data
Processing, Inc. 2,300 89,413
BISYS Group, Inc.* 700 26,600
Borg-Warner Security
Corp.* 800 9,300
Bowne & Co. Inc. 400 7,200
Browning Ferris
Industries Inc. 1,300 41,925
Business Records Corp.* 200 7,225
CDI Corp.* 600 17,700
CMG Information
Services Inc. 300 9,038
Cambridge Technology
Partners* 400 26,950
Camco International
Inc. 1,100 39,188
Catalina Marketing
Corp.* 300 23,363
Cerner Corp. 1,100 22,481
Checkfree Corp.* 1,100 21,038
Coastal Physician
Group Inc.* 700 5,863
Copart Inc.* 400 10,850
Corrections Corp. of
America 900 57,375
Coventry Corp.* 1,300 25,350
Dames & Moore Inc. 500 5,438
Data Broadcasting* 1,100 11,344
DeVRY Inc. 900 33,525
Deluxe Corp. 400 14,000
Dionex Corp. 400 14,750
Dun & Bradstreet Corp. 1,100 66,963
Ecolab Inc. 300 9,750
Electro Rental 400 9,800
Epic Design
Technology Inc. 500 16,938
Express Scripts Inc.
Class A* 900 43,988
Fair, Isaac & Co. Inc. 300 12,825
First Data Corp. 1,500 114,000
Fleming Companies, Inc. 2,900 39,875
Franklin Quest Co.* 1,000 27,000
G&K Services, Inc.
Class A 500 13,250
GRC International,
Inc.* 200 7,750
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
H & R Block Inc. 600 $21,075
Health Management
Systems, Inc. 450 11,756
Healthplan Services
Corp.* 100 2,400
Henry Jack &
Associates Inc. 300 9,356
Heritage Media Corp.
Class A (New)* 500 19,188
Hon Industries Inc. 1,100 28,188
Hunt Manufacturing Co. 500 8,375
ITT Educational
Services Inc. 450 13,950
Ideon Group Inc. 600 7,875
Information Resources,
Inc.* 600 8,663
Inphynet Medical
Management Inc.* 800 14,900
Integrated Health
Services Inc. 1,000 27,500
Integrated Systems Inc.
Class A 600 17,100
Interim Services Inc.* 400 17,275
Interpublic Group of
Companies, Inc. 500 23,375
Jacobs Engineering
Group Inc.* 1,100 30,525
John H. Harland Co. 1,500 39,375
Katz Media Group Inc.* 500 7,375
Keane, Inc.* 800 31,500
Kinder Care Learning
Centers Inc.* 600 8,625
Kronos, Inc. 300 8,925
Laidlaw Inc. Class B
(Non Voting) 1,500 15,750
Magellan Health
Services Inc.* 1,200 25,800
Mariner Health Group
Inc.* 1,100 18,631
Maxicare Health Plans
Inc. (New)* 900 18,338
Medpartners/ Mullikin
Inc.* 1,800 51,975
Molten Metal
Technology, Inc.* 1,100 35,200
Moore Corp. Ltd. 500 9,125
National Auto Credit
Inc. 660 9,405
National Data Corp. 600 21,150
National Education
Corp.* 1,000 14,875
National Media Corp.* 100 1,800
National Service
Industries, Inc. 200 7,400
Netcom Online
Communications* 300 10,706
New England Business
Service, Inc. 400 7,500
Norrell Corp. 400 15,500
Occusystems Inc.* 600 17,475
Ogden Corp. 200 4,050
Orthodontic Centers of
America Inc. 800 31,400
Owen Healthcare Inc. 600 12,225
PAXAR Corp. 500 8,688
</TABLE>
F-35
<PAGE> 157
SchwabFunds(R)
- --------------------------------------------------------------------------------
SCHWAB ASSET DIRECTOR(R)-HIGH GROWTH FUND
STATEMENT OF NET ASSETS
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
PHH Corp. 500 $ 28,438
PSINet Inc.* 1,300 18,281
Payment Services Inc. 500 14,375
Peak Technologies
Group Inc.* 300 7,200
Physician Corp. of
America* 1,100 16,363
Physician Reliance
Network* 1,100 47,988
Physicians Computer
Network* 1,500 16,688
R.R. Donnelley &
Sons Co. 1,000 36,000
Republic Industries
Inc.* 2,100 68,644
Robert Half
International Inc.* 1,300 74,750
Rollins, Inc. 1,200 27,000
Rykoff-Sexton, Inc. 400 6,050
SEI Corp. 500 11,813
SPS Transaction
Services, Inc. 900 24,075
SUPERVALU Inc. 300 9,600
Safety-Kleen Corp. 300 4,500
Sanifill Inc.* 800 34,700
Scientific Games
Holdings Corp. 800 25,600
Service Corp.
International 800 42,500
Shared Medical Systems
Corp. 100 6,888
Standard Register Co. 1,200 30,300
Steris Corp. 500 16,188
Sun Healthcare Group
Inc.* 1,300 19,663
Synetic Inc.* 900 31,388
True North
Communications 700 18,463
U S Order Inc.* 400 8,050
U.S.A. Waste Services
Inc.* 2,100 54,600
Unifirst Corp. 600 14,400
United Waste Systems,
Inc.* 900 49,838
Universal Health
Services Inc. Class B 400 22,200
Valassis
Communications Inc.* 1,700 26,775
Volt Information
Sciences Inc. 300 9,113
WMX Technologies Inc. 3,500 121,625
Western Waste
Industries* 400 15,550
Zebra Technologies
Corp. Class A 1,600 39,800
---------
3,051,433
---------
CHEMICAL--1.7%
A. Schulman Inc. 1,100 24,063
Air Products &
Chemicals Inc. 700 39,988
Calgon Carbon Corp. 1,100 13,750
Cambrex Corp. 100 4,300
Chemed Corp. 300 11,288
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
Crompton & Knowles
Corp. 1,800 $ 27,675
Cytec Industries Inc.* 500 41,438
Dexter Corp. 1,100 29,563
Dow Chemical Co. 1,800 159,975
E.I. Du Pont de Nemours
& Co. 3,900 313,463
Eastman Chemical Co. 500 33,625
Ferro Corp. 1,200 33,300
First Mississippi Corp. 1,000 23,250
Geon Co. 1,100 29,150
Great Lakes Chemical
Corp. 400 27,300
H.B. Fuller Co. 400 13,100
Hercules Inc. 700 42,350
Lawter International
Inc. 1,200 13,050
Lilly Industrial Inc.
Class A 500 7,250
Minnesota Mining &
Manufacturing Co. 2,900 190,675
Monsanto Co. 800 121,200
Morton International
Inc. 1,000 35,375
NCH Corp. 200 11,600
NL Industries Inc.
(New) 2,400 34,500
Nalco Chemical Co. 300 9,150
OM Group Inc. 300 11,381
PPG Industries Inc. 1,300 65,813
Petrolite Corp. 300 9,488
Praxair Inc. 1,000 38,625
Rohm & Haas Co. 500 33,188
Scotts Co. Class A* 500 8,625
Sequa Corp. Class A* 300 10,538
Sigma-Aldrich Corp. 400 21,650
Sterling Chemicals
Inc.* 2,300 26,163
Tredegar Industries
Inc. 300 8,325
Union Carbide Corp. 900 40,950
Uniroyal Chemical
Corp.* 500 5,906
W.R. Grace & Co. 700 54,250
WD-40 Co. 200 9,350
Wellman Inc. 1,200 28,800
---------
1,663,430
---------
CONSTRUCTION--0.4%
Apogee Enterprises,
Inc. 300 7,913
Armstrong World
Industries, Inc. 300 17,100
Blount International
Inc. Class A 1,200 37,200
Calmat Co. 700 12,163
Centex Construction
Products Inc. 500 7,188
Centex Corp. 100 2,700
Crane Co. 100 4,150
Del Webb Corp. 400 7,150
Florida Rock
Industries, Inc. 200 5,050
Fluor Corp. 600 39,675
Granite Construction
Inc. 450 8,916
Insituform Technologies
Inc. Class A* 700 8,225
Kaufman & Broad Home
Corp. 1,000 14,125
</TABLE>
F-36
<PAGE> 158
SchwabFunds(R)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
Lone Star Industries,
Inc. (New) 300 $ 10,763
Medusa Corp. 400 11,700
Oakwood Homes Corp. 1,100 49,088
Owens Corning* 400 16,100
Pulte Corp. 100 2,650
Sherwin Williams Co. 600 28,050
Southdown Inc. 400 9,400
Stanley Works 300 18,825
Stone & Webster, Inc. 400 13,600
TJ International Inc. 400 6,900
Toll Brothers, Inc.* 1,300 21,125
Triangle Pacific Corp.* 300 4,988
U.S. Home Corp. (New)* 300 7,463
-------
372,207
-------
CONSUMER-DURABLE--0.4%
Bassett Furniture
Industries Inc. 400 10,200
Black & Decker Corp. 600 24,150
Champion
Enterprises Inc. 500 19,000
Chicago Miniature
Lamp Inc.* 300 12,188
Ethan Allen Interiors
Inc.* 400 10,400
Furniture Brands
International Inc.* 1,200 11,850
Harman International
Industries Inc. (New) 900 42,525
Kimball International
Inc. Class B 600 17,250
La-Z-Boy Chair Co. 500 14,813
Masco Corp. 1,000 27,250
Maytag Corp. 500 10,750
National Presto
Industries, Inc. 200 7,850
Newell Co. 1,100 31,350
Outboard Marine Corp. 600 11,850
Regal Beloit Corp. 500 9,688
Snap-on Tools Corp. 200 9,600
Sturm, Ruger & Co.,
Inc. 800 32,300
Toro Co. 300 9,563
Whirlpool Corp. 600 36,075
-------
348,652
-------
CONSUMER-NONDURABLE--0.9%
3DO Co.* 600 5,400
A.T. Cross Co. Class A 500 7,500
Acclaim
Entertainment Inc.* 1,800 18,563
American Greetings
Corp. Class A 500 13,844
Applebee's
International, Inc. 900 23,625
Buffets Inc.* 1,200 16,725
CKE Restaurants Inc. 200 3,950
CML Group, Inc. 1,100 4,950
Corning Inc. 1,600 55,600
Darden Restaurants Inc. 800 11,000
Department 56 Inc.* 700 17,413
Foxmeyer Health Corp. 400 7,800
Gibson Greetings, Inc. 600 8,475
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
Hasbro Inc. 600 $ 22,050
IHOP Corp. (New)* 200 5,688
International Dairy
Queen Inc. Class A* 700 14,919
Jostens, Inc. 200 4,500
Landry's Seafood
Restaurants, Inc. 400 9,550
Luby's Cafeterias, Inc. 800 19,200
Mafco Consolidated
Group Inc.* 700 12,600
Mattel Inc. 1,750 45,500
McDonald's Corp. 5,100 244,163
Mikasa Inc. Class B* 500 5,938
Mohawk Industries Inc.* 1,300 18,850
Papa John's
International, Inc. 450 22,163
Premark
International, Inc. 400 20,550
Rexall Sundown, Inc. 700 20,125
Rubbermaid Inc. 1,000 28,250
Ruby Tuesday Inc. 600 12,150
Russ Berrie & Co. Inc. 500 8,000
Ryan's Family Steak
Houses Inc.* 4,400 42,900
Sbarro, Inc. 500 13,125
Shoney's Inc.* 2,700 30,038
Sonic Corp. 400 7,700
Toy Biz Inc. Class A* 400 8,150
Wendy's
International, Inc. 800 15,300
Zenith Electronics
Corp.* 2,100 19,688
-------
845,942
-------
CONTAINERS--0.2%
ACX Technologies Inc. 1,100 21,313
Ball Corp. 1,200 37,350
Bemis Co, Inc. 200 6,475
Crown Cork & Seal Inc. 900 42,413
Gaylord Container Corp.
Class A* 1,500 15,375
Greif Brothers Corp.
Class A 1,100 28,875
Stone Container Corp. 500 8,500
-------
160,301
-------
ELECTRONICS--2.1%
AMETEK, Inc. 1,300 25,025
AMP Inc. 1,400 62,650
Actel Corp.* 400 7,425
Advanced Micro
Devices Inc. 1,220 22,875
Allen Group Inc. 1,000 24,750
Alliance Semiconductor
Corp. 1,400 14,875
Altron Inc. 300 9,600
Applied Materials, Inc. 1,700 67,788
Augat Inc. 600 11,550
Aura Systems, Inc.* 2,200 11,275
Belden Inc. 1,200 35,700
Burr Brown 400 7,600
Cable Design
Technologies Corp. 500 16,375
Checkpoint Systems Inc. 800 23,900
</TABLE>
F-37
<PAGE> 159
SchwabFunds(R)
- --------------------------------------------------------------------------------
SCHWAB ASSET DIRECTOR(R)-HIGH GROWTH FUND
STATEMENT OF NET ASSETS
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
CopyTele Inc.* 700 $ 8,444
Cyrix Corp.* 500 15,344
DII Group Inc.* 300 10,313
DSP
Communications Inc. 600 23,925
Dallas Semiconductor
Corp. 700 13,650
EG&G, Inc. 200 4,400
Electro Scientific
Industries Inc.* 300 7,200
Electroglas Inc. 600 11,775
FORE Systems, Inc. 300 23,644
FSI International Inc. 700 10,150
Fluke Corp. 200 7,725
General Instrument
Corp.* 800 26,200
General Signal Corp. 200 7,600
Gerber Scientific Inc. 700 11,813
Hadco Corp.* 300 9,169
Harris Corp. 200 12,350
ITI Technologies Inc.* 300 8,213
Identix Inc.* 200 2,375
Input/Output Inc. 2,000 69,500
Integrated Process
Equipment Corp.* 400 10,525
Integrated Silicon
Solution* 600 9,975
Integrated Systems
Consulting Group
(Rights exp.
5/22/96)* 150 2,681
Intel Corp. 5,700 386,531
Itron, Inc.* 300 17,550
Kent Electronics Corp. 1,600 67,400
Kulicke & Soffa
Industries Inc. 500 9,375
LSI Logic Corp. 1,000 36,000
LTX Corp.* 800 7,750
Lattice Semiconductor
Corp.* 1,100 35,956
Littlefuse, Inc.* 300 11,325
Logicon, Inc. 800 23,800
Marshall Industries* 500 15,938
Methode Electronics
Inc. Class A 1,000 16,500
Micron Technology Inc. 1,300 47,288
Motorola Inc. 4,400 269,500
National Semiconductor
Corp.* 600 9,450
Osmonics, Inc.* 500 10,375
Pacific Scientific Co. 300 5,925
Park Electrochemical
Corp. 300 7,500
Perkin-Elmer Corp. 200 10,975
Pioneer Standard
Electronics Inc. 500 8,125
Pittway Corp. Class A 600 28,650
Rexel Inc.* 700 9,363
S3 Inc. 1,700 24,225
Sanmina Corp. 400 14,100
Scientific-Atlanta,
Inc. 400 7,400
Silicon Valley Group
Inc.* 1,000 26,625
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
Siliconix Inc. (New)* 400 $ 11,600
Tektronix, Inc. 300 11,888
Teledyne Inc. 400 14,850
Texas Instruments Inc. 1,300 73,450
Thomas & Betts Corp. 200 7,875
Unitrode Corp.* 400 10,750
VLSI Technology, Inc.* 1,300 22,669
VeriFone, Inc.* 700 29,400
Vicor Corp. 1,500 22,781
Watkins-Johnson Co. 200 6,750
Wyle Electronics 300 12,563
Zilog Inc.* 700 26,338
---------
2,006,899
---------
ENERGY-DEVELOPMENT--1.2%
Amcol International
Corp. 600 6,900
Ashland Coal, Inc. 300 6,975
BJ Services Co.* 1,200 46,050
Baker Hughes Inc. 1,000 31,750
Benton Oil & Gas Co.* 600 10,538
Burlington Resources
Inc. 800 29,800
Cabot Oil & Gas Corp.
Class A 500 8,250
Chesapeake Energy Corp. 950 67,213
Devon Energy Corp. 600 15,300
Dresser Industries Inc. 1,300 41,438
Energy Ventures, Inc.* 700 21,000
Falcon Drilling Inc.* 800 21,650
Global Industrial
Technologies Inc.* 700 12,863
Global Natural
Resources Inc.* 700 10,150
Halliburton Co. 800 45,900
Helmerich & Payne Inc. 1,200 44,250
Landmark Graphics
Corp.* 400 7,800
Louis Dreyfus Natural
Gas Corp.* 800 10,200
Louisiana Land &
Exploration Co. 200 10,825
MAXXAM Inc.* 200 9,100
McDermott
International Inc. 200 4,200
Nabors Industries Inc.* 2,800 43,050
Newfield Exploration
Co.* 900 30,825
Noble Drilling Corp.* 3,100 46,500
Nuevo Energy Co.* 300 8,475
Occidental Petroleum
Corp. 2,200 56,650
Parker & Parsley
Petroleum Co. 1,000 24,625
Parker Drilling Co.* 1,300 9,913
Phoenix Resource Cos.,
Inc. (New) 500 12,750
Pride Petroleum
Services Inc.* 900 14,850
Production Operators
Corp. 300 10,088
Reading & Bates Corp.
(New)* 2,100 51,450
Rowan Cos. Inc.* 3,700 54,575
Schlumberger Ltd. 1,700 150,025
Seitel, Inc. (New)* 200 5,525
Solv-Ex Corp.* 800 11,300
Tom Brown Inc. (New)* 800 12,500
</TABLE>
F-38
<PAGE> 160
SchwabFunds(R)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
United Meridian Corp.* 800 $ 24,800
Varco International
Inc.* 700 11,638
Vintage Petroleum Inc. 500 12,188
Weatherford Enterra
Inc.* 1,900 66,975
Zeigler Coal Holding
Co. 800 11,800
---------
1,132,654
---------
FOOD-AGRICULTURE--2.8%
AG Chemical
Equipment Inc. 200 3,275
Archer-Daniels-Midland
Co. 4,200 79,275
Bob Evans Farms, Inc. 1,500 23,719
CPC International Inc. 1,000 69,125
Campbell Soup Co. 1,700 106,250
Chiquita Brands
International Inc. 2,000 29,250
Coca-Cola Bottling Co. 200 6,725
Coca-Cola Co. 9,100 741,650
ConAgra, Inc. 2,000 77,250
Delta & Pine Land Co. 598 26,686
Dimon Inc. 1,100 18,700
Dreyers Grand
Ice Cream Inc. 300 10,275
Earthgrains Co.* 64 2,072
Farmer Brothers Co. 100 13,500
Flowers Industries,
Inc. 2,000 26,750
General Mills Inc. 1,400 77,700
H.J. Heinz Co. 2,800 94,850
Hershey Foods Corp. 500 37,938
Hudson Foods Inc.
Class A 1,200 15,900
International
Multifoods Corp. 500 9,438
Interstate Bakeries
Corp. (New) 1,400 33,250
J.M. Smucker Co.
Class A 1,200 25,350
J.M. Smucker Co. Class
B (Non Voting) 300 6,000
JP Foodservice, Inc.* 400 8,800
Kellogg Co. 1,500 107,063
Lance Inc. 900 14,175
Mississippi Chemical
Corp. (New) 700 14,175
Mycogen Corp.* 1,100 19,250
Pepsico Inc. 5,500 349,250
Pioneer HI Bred
International Inc. 600 33,450
Quaker Oats Co. 900 30,938
Ralcorp Holdings, Inc.* 1,000 22,000
Ralston Purina Co. 700 40,863
Richfood Holdings Inc. 1,400 45,763
Sara Lee Corp. 3,500 108,500
Savannah Foods &
Industries Inc. 600 6,525
Seaboard Corp. 100 21,550
Smithfield Foods Inc.* 900 26,775
Sysco Corp. 1,300 41,763
Unilever 1,100 150,150
WLR Foods, Inc. 400 4,850
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
Whitman Corp. 700 $ 17,675
Wm Wrigley Junior Co. 800 42,100
---------
2,640,543
---------
GOLD--0.3%
Barrick Gold Corp. 2,800 85,750
Battle Mountain
Gold Co. 2,800 24,850
FMC Gold Co. 1,700 10,838
FirstMiss Gold Inc.* 500 15,438
Homestake Mining Co. 700 14,088
Newmont Mining Corp. 600 34,725
Placer Dome Inc. 2,000 55,500
Santa Fe Pacific
Gold Corp. 700 10,413
---------
251,602
---------
HEALTHCARE--5.5%
ALZA Corp.* 400 11,400
Abbott Laboratories 5,700 231,563
Acuson* 600 11,400
Advanced Technology
Laboratories, Inc.* 400 13,000
Advanced Tissue
Sciences Inc.* 800 13,600
Agouron Pharmaceuticals
Inc.* 400 16,300
Allergan Inc. 300 10,613
Alliance Pharmaceutical
Corp.* 900 16,425
Alpharma, Inc. 600 14,700
American Home Products
Corp. 2,200 232,100
Amgen Inc. 1,800 103,388
Amsco
International, Inc.* 900 13,050
Ballard Medical
Products 800 15,900
Bausch & Lomb Inc. 300 11,963
Baxter International
Inc. 2,200 97,350
Becton Dickinson & Co. 500 40,313
Benson Eyecare Corp.* 1,100 10,038
Beverly Enterprises,
Inc.* 500 6,063
Bio Rad Laboratories
Inc. Class A* 200 9,300
Biocraft Laboratories
Inc.* 300 6,113
Biomet Inc.* 600 8,813
Block Drug Inc. Class A 1,030 38,368
Boston Scientific
Corp.* 1,137 49,033
Bristol Myers
Squibb Co. 3,500 287,875
C.R. Bard Inc. 400 14,600
CNS, Inc. 500 9,813
Carrington Laboratories
Inc.* 300 8,438
Carter Wallace Inc. 1,600 25,200
Columbia/HCA Healthcare
Corp. 3,400 180,625
Community Health
Systems Inc.* 1,000 43,375
Community Psychiatric
Centers 1,400 12,950
Conmed Corp. 400 12,050
</TABLE>
F-39
<PAGE> 161
SchwabFunds(R)
- --------------------------------------------------------------------------------
SCHWAB ASSET DIRECTOR(R)-HIGH GROWTH FUND
STATEMENT OF NET ASSETS
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
Copley Pharmaceutical
Inc.* 600 $ 9,150
Cygnus Therapeutic
Systems, Inc.* 700 15,006
Daig Corp. 500 11,719
Datascope Corp.* 400 7,100
Diagnostic Products
Corp. 400 16,750
Eli Lilly & Co. 3,800 224,200
Enzo Biochem Inc. 500 9,188
Fresenius U.S.A. Inc.* 500 10,000
Genesis Health
Ventures, Inc. 1,350 39,994
Gilead Sciences Inc.* 700 21,525
GranCare, Inc.* 600 10,800
Gulf South Medical
Supply Inc. 300 12,263
Haemonetics Corp.* 700 13,475
HealthSouth
Rehabilitation Corp. 1,876 69,647
Herbalife International
Inc. 600 8,250
Human Genome Sciences
Inc.* 900 35,888
Humana Inc.* 1,200 29,550
I-Stat Corp.* 300 8,700
ICN Pharmaceuticals,
Inc. 809 18,203
Immulogic
Pharmaceutical Corp.* 700 7,656
Immunex Corp. (New)* 1,100 17,256
Interneuron
Pharmaceuticals* 1,300 50,863
Invacare Corp. 1,300 33,475
Isis Pharmaceuticals* 700 8,838
Isolyser Inc. 1,100 19,250
Johnson & Johnson 4,600 425,500
Kinetic Concepts Inc. 1,200 17,850
Life Technologies, Inc.
(New) 400 11,400
Ligand Pharmaceuticals
Inc. Class B 700 10,369
Lincare Holdings Inc.* 800 31,000
Liposome Inc.* 1,200 29,475
Living Centers of
America* 1,000 37,000
Mallinckrodt
Group Inc. 400 15,750
Manor Care, Inc. 300 12,038
Medimmune Inc.* 400 6,700
Medisense Inc.* 900 40,388
Medtronic Inc. 1,600 85,000
Mentor Corp. 1,100 25,713
Merck & Co. Inc. 8,900 538,450
Multicare Cos. Inc. 400 11,350
Natures Sunshine
Products Inc. 450 11,138
Nellcor Puritan
Bennett Inc.* 1,300 63,700
Neoprobe Corp.* 500 8,656
Neurogen Corp.* 500 14,094
Nexstar Pharmaceuticals
Inc.* 1,000 24,500
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
North American Vaccine
Inc.* 1,100 $ 22,688
Novacare Inc.* 1,500 10,875
Omnicare Inc. 1,200 72,000
Organogenesis Inc. 500 8,813
Owens & Minor Inc.
(New) 700 9,450
PDT Inc. 300 14,288
PHP Healthcare Corp. 100 3,050
PLC Systems Inc.* 600 17,850
Patterson Dental Co.* 500 15,000
Pfizer Inc. 4,400 303,050
Pharmacia &
Upjohn Inc. 3,500 133,875
Physician Sales &
Service Inc. 1,000 27,375
Physicians Health
Services, Inc.
Class A* 200 6,500
Protein Design
Labs, Inc.* 500 13,188
Pyxis Corp.* 1,200 30,450
Quintiles Transnational
Corp. 600 43,875
Regeneron
Pharmaceuticals Inc.* 700 9,931
Renal Treatment Centers
Inc. 600 17,400
Research Medical Inc.* 300 7,519
Respironics Inc. 400 8,650
RoTech Medical Corp. 400 16,600
Roberts Pharmaceutical
Corp.* 400 7,500
Salick Health Care,
Inc.* 300 11,438
Schering Plough Corp. 2,500 143,438
Sepracor Inc.* 700 9,800
Sequus Pharmaceuticals
Inc.* 900 15,750
Sofamor/Danek Group
Inc.* 1,100 36,025
Sola International
Inc.* 800 26,200
Somatogen Inc.* 500 8,281
SpaceLabs Medical Inc.* 300 6,788
St. Jude Medical, Inc. 400 14,575
Sunrise Medical Inc.* 500 9,125
Target Therapeutics
Inc. 400 21,650
Tecnol Medical Products
Inc.* 600 11,775
Tenet Healthcare Corp.* 1,200 24,600
Thermedics Inc.* 1,400 42,350
U.S. Healthcare, Inc. 1,000 52,188
United Healthcare Corp. 1,200 70,200
United States Surgical
Corp. 300 11,100
Ventritex Inc.* 500 7,781
Vertex Pharmaceuticals
Inc.* 900 26,550
VISX Inc.* 500 17,000
Vital Signs Inc. 300 6,338
Vivra Inc. 1,650 52,181
Vivus* 500 15,063
Warner Lambert Co. 900 100,575
West Co Inc. 400 9,100
---------
5,254,334
---------
</TABLE>
F-40
<PAGE> 162
SchwabFunds(R)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
HOUSEHOLD PRODUCTS--0.9%
Alberto Culver Co.
Class B (Convertible) 100 $ 3,788
Avon Products, Inc. 500 44,438
Bush Boake Allen Inc.* 500 13,500
Church & Dwight Inc. 600 13,200
Clorox Co. 300 24,788
Colgate-Palmolive Co. 1,000 76,625
Dial Corp. 1,100 30,938
Gillette Co. 3,100 167,400
International Flavors &
Fragrances Inc. 800 39,300
Libbey Inc. 400 9,300
Playtex Products Inc.* 1,200 10,500
Procter & Gamble Co. 4,800 405,600
-------
839,377
-------
IMAGING & PHOTO--0.4%
Avid Technology, Inc.* 600 11,663
BMC Industries, Inc. 800 21,400
C-Cube Microsystems,
Inc. 1,000 49,250
Chyron Corp.* 3,200 12,800
Circon Corp.* 400 5,825
Eastman Kodak Co. 2,400 183,600
OIS Optical Imaging
Systems Inc.* 3,500 14,000
Photronic, Inc. 400 10,550
Polaroid Corp. 200 9,000
Robotic Vision
Systems Inc.* 400 6,875
Ultratech Stepper Inc. 1,000 26,000
-------
350,963
-------
INSURANCE--2.3%
Acordia, Inc. 400 12,700
Aetna Life &
Casualty Co. 800 57,000
Alexander & Alexander
Services 3,300 62,288
Alfa Corp. 1,100 14,300
Allied Group Inc. 200 7,175
Allstate Corp. 3,100 120,513
American Annuity Group,
Inc. 1,400 17,500
American Bankers
Insurance Group, Inc. 1,000 39,375
American General Corp. 1,300 45,663
American Heritage Life
Investment Corp. 300 6,975
American International
Group, Inc. 3,300 301,538
American Travellers
Corp. 450 8,859
Aon Corp. 900 48,263
Argonaut Group, Inc. 800 25,000
Arthur J. Gallagher
& Co. 900 29,250
CMAC Investment Corp. 300 16,800
Capital Re Corp. 400 15,000
Capitol American
Financial Corp. 400 9,650
Capsure Holdings Corp.* 600 10,575
Chubb Corp. 600 56,775
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
Cigna Corp. 500 $56,688
Citizens Corp. 1,400 27,300
Commerce Group Inc. 1,100 22,000
Compdent Corp.* 400 17,650
Crawford & Co. Class A 400 6,500
Crawford & Co. Class B 1,000 16,250
Delphi Financial Group,
Inc. Class A* 300 8,363
E.W. Blanch
Holdings Inc. 300 6,188
Enhance Financial
Services Group Inc. 900 24,413
Executive Risk Inc. 300 9,300
Financial Security
Assured
Holdings Ltd. 1,200 32,400
Foremost Corp. of
America 300 16,050
Fremont General Corp. 1,350 33,750
Frontier Insurance
Group, Inc. 300 9,675
GAINSCO, Inc. 800 9,300
General Re Corp. 600 85,725
HCC Insurance Holdings,
Inc. 300 17,550
Harleysville Group Inc. 400 11,000
Highlands Insurance
Group Inc.* 60 1,140
Home Beneficial Corp.
Class B 500 12,938
Horace Mann Educators
Corp. (New) 1,100 36,163
ITT Hartford
Group Inc. 800 39,100
Integon Corp. 500 9,625
Jefferson-Pilot Corp. 450 23,738
John Alden Financial
Corp. 1,100 21,450
Kansas City Life
Insurance Co. 200 11,025
Liberty Corp. 1,000 31,750
Life Partners
Group Inc. 800 16,700
Life Re Corp. 400 11,950
Lincoln National
Corp. Inc. 700 33,775
MAIC Holdings Inc. 212 6,890
Markel Corp.* 200 16,450
Marsh & McLennan
Companies 500 47,000
NAC Re Corp. 500 16,375
National Re Corp. 900 31,950
Orion Capital Corp. 400 17,750
Penncorp Financial
Group Inc. 700 21,438
Presidential Life Corp. 800 7,850
Providian Corp. 700 32,288
Reinsurance Group of
America Inc. 900 37,350
Safeco Corp. 800 26,350
Selective Insurance
Group, Inc. 400 12,600
</TABLE>
F-41
<PAGE> 163
SchwabFunds(R)
- --------------------------------------------------------------------------------
SCHWAB ASSET DIRECTOR(R)-HIGH GROWTH FUND
STATEMENT OF NET ASSETS
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
Sierra Health
Services Inc.* 500 $ 16,500
St. Paul Companies,
Inc. 600 31,875
State Auto Financial
Corp. 400 9,700
Torchmark Corp. 500 21,500
Transamerica Corp. 500 38,000
Trenwick Group Inc. 200 9,625
UNUM Corp. 500 29,750
USF&G Corp. 500 7,938
USLIFE Corp. 100 2,813
United Companies
Financial Corp. 1,200 38,550
United Dental Care
Inc.* 200 7,900
United Insurance
Companies, Inc. 1,400 29,750
United Wisconsin
Services, Inc. 300 6,638
Vesta Insurance
Group Inc. 1,200 38,550
Washington National
Corp. 400 11,050
Zenith National
Insurance Corp. 400 10,050
---------
2,149,135
---------
MEDIA--1.6%
AMC Entertainment Inc.* 400 10,350
BET Holdings, Inc.
Class A* 300 8,775
Cablevision Systems
Corp. Class A* 400 19,950
Carmike Cinemas Inc.* 300 7,988
Central Newspapers Inc.
Class A 1,100 40,013
Century Communications
Corp. Class A* 2,700 26,156
Citicasters Inc. 600 18,000
Comcast Corp. Class A 2,200 38,363
Dow Jones & Co. Inc. 700 26,163
Emmis Broadcasting
Corp. Class A* 200 8,625
Evergreen Media* 600 23,775
GC Companies Inc.* 300 10,838
Gannett Inc. 1,000 68,375
Harte Hanks
Communications (New) 1,500 35,438
Heartland Wireless
Communications, Inc.* 300 8,400
Houghton Mifflin Co. 500 23,188
Interdigital Commerce
Corp.* 1,000 8,313
International
Cabletel Inc. 1,300 38,269
International Family
Entertainment Inc.
Class B 1,625 24,781
Jacor Communications
Inc.* 600 12,900
John Wiley & Son, Inc.
Class A 900 31,050
King World Productions,
Inc.* 300 13,050
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
Knight-Ridder, Inc. 300 $ 21,713
McClatchy Newspapers
Inc. Class A 1,300 31,525
McGraw-Hill, Inc. 600 26,475
Media General,Inc.
Class A 900 34,650
Meredith Corp. 100 4,538
Metromedia
International Group.,
Inc. 1,500 20,250
Movie Gallery Inc.* 300 9,300
New World
Communications
Class A* 1,000 18,688
New York Times Co.
Class A 700 22,750
Oak Industries Inc.* 400 10,800
Paxson Communications
Corp. 600 8,925
Pulitzer Publishing Co. 900 51,300
Regal Cinemas, Inc. 450 18,422
Renaissance
Communications Corp. 1,300 35,913
SBC Communications Inc. 4,200 210,000
Silver King
Communications Inc.* 300 8,850
TCA Cable TV Inc. 1,100 32,313
Tele Communications
Inc. (New)--TCI Group
Series A 5,000 95,938
Time Warner Inc. 2,900 118,538
Times Mirror Co. (New)
Series A 800 34,100
Tribune Co. (New) 400 27,900
United International
Holdings Inc.
Class A* 600 8,700
Viacom Inc. Class B* 2,700 110,700
Westcott Communications
Inc.* 600 12,788
Westwood One Inc.* 900 15,919
---------
1,493,755
---------
MISCELLANEOUS FINANCE--1.9%
1st Source Corp. 420 9,555
AMCORE Financial, Inc. 400 8,100
Aames Financial Corp. 200 8,825
Alex Brown Inc. 900 48,713
American Express Co. 3,500 169,750
Americredit Corp.* 700 10,063
Astoria Financial Corp. 300 16,013
Beneficial Corp. 400 22,100
Bok Financial Corp.
(New) 500 10,375
Cal-Federal
Bancorp Inc.* 1,700 30,388
Charter One
Financial Inc. 1,700 59,606
Coast Savings
Financial Inc.* 500 15,563
Collective Bancorp Inc. 1,000 24,188
Commercial Federal
Corp. 400 15,350
Dean Witter Discover
& Co. 1,100 59,950
Downey Financial Corp. 420 9,083
</TABLE>
F-42
<PAGE> 164
SchwabFunds(R)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
Eaton Vance Corp. (Non
Voting) 200 $ 6,175
Federal Home Loan
Mortgage Corp. 1,200 100,050
Federal National
Mortgage Assoc. 7,600 232,750
First American
Financial Corp. 400 11,000
First Financial Corp. 1,300 30,713
Fund American
Enterprises
Holdings, Inc. 200 15,300
Glendale Federal Bank
(FSB) (New)* 1,500 26,250
Golden West
Financial Corp. 500 26,313
Great Financial Corp. 400 10,975
Great Western
Financial Corp. 1,000 23,000
Green Tree
Financial Corp. 1,000 33,750
H.F. Ahmanson & Co. 600 14,250
Home Financial Corp. 600 8,400
Household International
Inc. 700 48,388
Inter-Regional
Financial Group, Inc. 300 6,563
Interpool Inc. 400 7,200
JSB Financial, Inc. 300 10,200
Leader Financial Corp. 300 13,256
Legg Mason, Inc. 400 11,500
Merrill Lynch & Co.
Inc. 1,200 72,450
Money Store Inc. 2,000 50,750
Morgan Keegan, Inc. 700 8,488
Morgan Stanley
Group Inc. 1,000 50,250
North American Mortgage
Co. 400 6,750
Olympic Financial Ltd.* 500 11,125
Peoples Heritage
Financial Group, Inc. 400 8,400
Pioneer Group Inc. 1,100 29,150
Quick & Reilly
Group, Inc. 1,100 33,550
RCSB Financial Inc. 400 9,425
Raymond James Financial
Inc. 500 11,313
Roosevelt Financial
Group Inc. 1,600 30,800
Salomon Inc. 600 24,375
Sovereign Bancorp Inc. 2,205 24,531
St. Paul Bancorp Inc. 500 12,156
Standard Financial Inc. 400 5,975
Student Loan Corp. 1,000 35,750
Travelers Group Inc. 2,200 135,300
Value Line, Inc. 300 10,425
WFS Financial Inc.* 800 15,950
Westcorp Inc. 1,100 21,588
---------
1,762,156
---------
MOTOR VEHICLE--1.3%
A.O. Smith Corp.
Class B 800 18,400
Arctco, Inc. 700 6,781
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
Arvin Industries, Inc. 1,300 $ 29,250
Borg Warner Automotive
Inc. 1,100 41,938
Breed Technologies Inc. 900 19,350
Chrysler Corp. 2,600 163,150
Cummins Engine Inc. 200 9,350
Dana Corp. 700 23,275
Detroit Diesel Corp.* 600 11,475
Eaton Corp. 500 30,250
Echlin Inc. 300 10,313
Federal Mogul Corp. 1,000 19,000
Fleetwood
Enterprises, Inc. 200 5,250
Ford Motor Co. 8,200 294,175
General Motors Corp. 5,500 298,375
Gentex Corp.* 400 15,750
Genuine Parts Co. 800 35,400
Hayes Wheels
International Inc. 500 15,188
Mascotech Inc. 1,500 19,688
Modine Manufacturing
Co. 1,000 27,500
PACCAR Inc. 200 9,950
Standard Products Co. 500 12,688
Superior Industries
International, Inc. 1,000 27,375
TRW Inc. 400 37,550
Titan Wheel
International Inc. 500 8,063
---------
1,189,484
---------
NON-FERROUS--0.6%
A.M. Castle & Co. 300 10,050
Alcan Aluminum Ltd. 1,600 51,000
Aluminum Company of
America 1,600 99,800
Asarco Inc. 200 6,625
Brush Wellman Inc. 500 9,375
Coeur d'Alene Mines
Corp. 500 9,938
Commercial Metals Co. 500 15,000
Cyprus Amax
Minerals Co. 600 16,275
Echo Bay Mines Ltd 600 7,875
Engelhard Corp. 1,000 25,125
Freeport McMoran Copper
& Gold Class B 1,400 46,025
Hecla Mining Co.* 1,100 8,525
IMCO Recycling Inc. 400 8,700
Inco Ltd. 1,200 40,350
Material Sciences
Corp.* 300 4,800
Minerals Technologies
Inc. 1,000 38,500
Mueller Industries Inc. 900 36,225
Phelps Dodge Corp. 500 36,750
Reynolds Metals Co. 400 21,500
Stillwater Mining Co.* 600 14,250
Sunshine Mining &
Refining Co.* 4,500 7,313
Wolverine Tube Inc.* 400 14,700
---------
528,701
---------
</TABLE>
F-43
<PAGE> 165
SchwabFunds(R)
- --------------------------------------------------------------------------------
SCHWAB ASSET DIRECTOR(R)-HIGH GROWTH FUND
STATEMENT OF NET ASSETS
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
OIL-DOMESTIC--0.7%
Amerada Hess Corp. 700 $ 39,638
Ashland Inc. 400 16,450
Atlantic Richfield Co. 1,100 129,525
Barrett Resources
Corp.* 1,100 30,525
Cross Timbers Oil Co. 400 8,000
Diamond Shamrock Inc. 1,300 44,038
KCS Energy, Inc. 200 4,525
Kerr-McGee Corp. 400 25,550
Oryx Energy Co.* 500 8,000
Pennzoil Co. 200 8,850
Phillips Petroleum Co. 2,100 87,150
Pogo Producing Co. 1,300 46,963
Quaker State Corp. 900 14,175
Santa Fe Energy
Resources, Inc.* 400 4,800
Smith International
Inc.* 1,100 32,725
Snyder Oil Corp. 700 6,300
Sun Inc. 400 12,400
USX Corp. (Marathon
Group) (New) 2,000 44,000
Unocal Corp. 1,700 54,613
---------
618,227
---------
OIL-INTERNATIONAL--2.4%
Amoco Corp. 3,400 248,200
Chevron Corp. 4,800 278,400
Exxon Corp. 9,000 765,000
Mobil Corp. 2,800 322,000
Royal Dutch
Petroleum Co. 3,700 530,025
Texaco Inc. 1,800 153,900
Western Atlas, Inc.* 400 24,000
---------
2,321,525
---------
PAPER--0.9%
Alco Standard Corp. 900 52,088
Boise Cascade Corp. 300 13,950
Caraustar Industries
Inc. 1,100 27,638
Champion International
Corp. 700 33,775
Chesapeake Corp. 1,100 31,763
Georgia Pacific Corp. 600 46,650
International Paper Co. 2,100 83,738
James River Corp. 400 10,700
Kimberly Clark Corp. 2,280 165,585
Longview Fibre Co. 1,800 31,725
Louisiana Pacific Corp. 700 17,588
Mead Corp. 300 16,688
P.H. Glatfelter Co. 1,500 24,938
Potlatch Corp. 100 4,263
Rock Tennessee Co.
Class A 900 15,806
Schweitzer Mauduit
International Inc. 100 2,713
Shorewood Packaging
Corp.* 600 10,350
Temple-Inland Inc. 400 19,400
Thermo Fibertek Inc. 1,500 34,313
Union Camp Corp. 500 27,188
Wausau Paper
Mills Co. 1,625 37,375
Westvaco Corp. 700 21,700
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
Weyerhaeuser Co. 1,300 $ 64,350
Willamette
Industries, Inc. 600 37,050
-------
831,334
-------
PRODUCER GOODS-MANUFACTURING--3.6%
Albany International
Corp. Class A (New) 1,300 27,950
Allied Signal Inc. 2,300 133,688
American Financial
Enterprises Inc. 300 7,275
Applied Power Inc.
Class A 400 12,550
AptarGroup, Inc. 500 18,813
Avery Dennison Corp. 400 22,800
BT Office Products
International Inc.* 1,200 20,850
BW/IP Holding, Inc.
Class A 600 12,450
Baldor Electric Co. 1,200 25,950
Barnes Group Inc. 200 9,275
Bearings Inc. (New) 300 9,600
Blyth Industries Inc. 800 31,800
Boise Cascade Office
Products Corp. 900 70,425
Briggs & Stratton Corp. 100 4,538
Case Corp. 600 30,300
Caterpillar Inc. 1,300 83,200
Cincinnati
Milacron Inc. 100 2,638
Clarcor Inc. 400 7,900
Coherent Inc.* 300 16,106
Collins & Aikman Corp.* 1,900 13,300
Commercial Intertech
Corp. 500 9,500
Cooper Industries Inc. 800 34,000
Corporate Express, Inc. 480 17,970
Credence Systems Corp. 600 12,975
Deere & Co. 1,700 66,088
Donaldson Inc. 1,200 31,500
Dover Corp. 800 41,200
Duriron Inc. 1,100 28,875
Emerson Electric Co. 1,600 133,800
FMC Corp. (New)* 200 13,875
Fisher Scientific
International, Inc. 900 33,638
Foster Wheeler Corp. 300 13,875
General Binding Corp. 500 11,500
General Electric Co. 11,900 922,250
Giddings & Lewis Inc. 1,100 20,350
Goulds Pumps Inc. 1,000 23,438
Graco Inc. 450 9,056
Greenfield
Industries Inc. 400 15,175
Griffon Corp.* 700 6,300
Harnischfeger
Industries Corp. 200 8,100
Helix Technology Corp. 300 11,306
Herman Miller Inc. 1,200 36,900
IDEX Corp. 1,000 39,250
ITT Industries Inc. 800 22,000
</TABLE>
F-44
<PAGE> 166
SchwabFunds(R)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
Illinois Tool
Works Inc. 800 $ 53,800
Ingersoll Rand Co. 700 27,125
Insilco Corp.* 300 10,406
Interface Inc. Class A 400 5,225
Intermagnetics General
Corp. 400 6,400
Ionics Inc. 400 19,200
JLG Industries Inc. 500 27,375
Johnson Controls, Inc. 300 21,450
Juno Lighting Inc. 400 5,950
Kaydon Corp. 900 35,775
Kennametal Inc. 900 34,088
Keystone
International Inc. 1,000 21,875
Lawson Products, Inc. 400 9,200
Lincoln Electric Co. 300 8,025
Lincoln Electric Co.
Class A (Non Voting) 900 25,425
Lydall Inc. 400 9,400
Manitowoc Inc. 300 10,200
Measurex Corp. 400 11,600
Millipore Corp. 200 8,375
Mine Safety
Appliances Co. 200 8,875
Myers Industry Inc. 500 9,063
NN Ball & Roller, Inc. 400 10,000
Navistar International
Corp.* 5,700 68,400
Nu-Kote Holding Inc.
Class A 500 8,875
Pall Corp. 600 16,800
Parker Hannifin Corp. 500 21,125
Precision Castparts
Corp. 1,000 43,375
Presstek Inc. 900 124,988
Raychem Corp. 300 23,363
Roper Industries 400 18,850
SPS Technologies, Inc. 100 6,500
Standex International
Corp. 400 10,800
Stewart & Stevenson
Services, Inc. 900 26,550
TRINOVA Corp. 2,100 74,025
Teleflex Inc. 500 23,188
Tencor Instruments 1,100 27,156
Tenneco Inc. 1,200 65,850
Texas Industries Inc. 300 19,200
Timken Co. 100 3,963
TriMas Corp. 1,300 30,713
Triarc Cos., Inc.
Class A* 700 8,838
Tyco Interest Ltd 1,100 42,488
U.S. Filter Corp. (New) 1,100 33,825
UNR Industries, Inc. 1,200 11,100
Valhi, Inc. (New) 3,900 25,350
Valmont Industries,
Inc. 300 9,675
Varity Corp.* 200 8,525
W.W. Grainger, Inc. 400 27,600
WMS Industries Inc.* 600 10,875
Watts Industries Inc.
Class A 1,300 26,650
Westinghouse Air Brake
Co. (New) 600 8,475
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
Westinghouse Electric
Corp. 2,900 $ 54,738
Westpoint Stevens Inc.
Class A 1,300 27,381
Wyman Gordon Co.* 1,000 18,250
X-Rite, Inc. 500 8,750
Zero Corp. 500 9,000
Zurn Industries, Inc. 400 8,150
---------
3,456,552
---------
RAILROAD--0.4%
Burlington Northern
Santa Fe 1,000 87,500
CSX Corp. 1,400 71,750
Conrail Inc. 500 34,875
Florida East Coast
Industry Inc. 300 26,700
Norfolk Southern Corp. 900 75,600
Union Pacific Corp. 1,400 95,375
---------
391,800
---------
REAL PROPERTY--0.1%
Avatar Holdings, Inc.* 200 7,800
Catellus Development
Corp.* 2,700 24,638
Forest City
Enterprises, Inc.
Class A 200 7,550
Insignia Financial
Group Class A (New) 600 13,200
Lennar Corp. 1,400 35,000
Price Enterprises Inc. 700 11,200
---------
99,388
---------
RETAIL--2.9%
Albertson's Inc. 1,800 69,300
American Stores Co.
(New) 1,000 33,375
AnnTaylor Stores Corp.* 500 8,563
Arbor Drugs, Inc. 1,100 22,413
Best Buy Co., Inc.* 1,500 28,875
Blair Corp. 200 5,225
Burlington Coat Factory
Warehouse* 1,100 11,963
CDW Computer
Centers Inc.* 400 30,900
CUC International Inc. 1,100 36,163
Carson Pirie Scott &
Co.* 400 9,700
Casey's General
Stores Inc. 700 15,094
Charming Shoppes Inc. 3,600 23,175
Circle K Corp.* 900 28,125
Circuit City Stores
Inc. 700 22,225
Claire's Stores Inc. 750 16,313
CompUSA Inc. 2,000 69,250
Dayton Hudson Corp. 600 57,300
Dillard Department
Stores Inc. Class A 800 32,100
Dollar Tree Stores Inc. 600 20,100
Duty Free
International Inc. 800 10,700
Family Dollar
Stores, Inc. 1,900 28,975
</TABLE>
F-45
<PAGE> 167
SchwabFunds(R)
- --------------------------------------------------------------------------------
SCHWAB ASSET DIRECTOR(R)-HIGH GROWTH FUND
STATEMENT OF NET ASSETS
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
Federated Department
Stores Inc.* 1,400 $ 46,725
Fingerhut
Companies, Inc. 1,300 16,575
Fred Meyer Inc.* 800 23,000
Fruit of the Loom Inc.
Class A* 400 10,550
Gap Inc. 2,000 60,250
Giant Food Inc. Class A 300 9,563
Great Atlantic &
Pacific Tea Co., Inc. 200 6,975
Gymboree Corp.* 1,100 28,600
Harcourt General Inc. 400 17,600
Hollywood Entertainment
Corp. 900 14,681
Home Depot Inc. 3,600 170,550
Home Shopping
Network, Inc.* 3,100 36,425
J.C. Penney Inc. 1,600 79,200
Just for Feet Inc. 500 23,906
K Mart Corp. 3,100 31,388
Kroger Co.* 800 32,900
Lands' End, Inc.* 1,000 19,750
Limited Inc. 1,997 41,438
Longs Drug Stores Corp. 100 4,525
Lowe's Cos. Inc. 1,100 35,613
MacFrugals Bargains-
Close-Out* 600 8,025
May Department
Stores Co. 1,700 86,700
Melville Corp. 1,200 46,650
Mercantile Stores Co.,
Inc. 300 18,713
Michaels Stores Inc.* 500 9,219
Nordstrom Inc. 500 25,375
Penn Traffic Co. (New)* 200 2,750
Pep Boys--Manny,
Moe & Jack 300 10,013
Petco Animal
Supplies Inc. 300 8,700
Pier 1 Imports Inc. 1,400 18,725
Price Costco Inc.* 1,900 35,981
Proffitt's, Inc.* 700 23,013
Quality Food
Centers, Inc. 400 10,500
Regis Corp. 300 11,063
Rite Aid Corp. 600 17,775
Ross Stores Inc. 600 20,775
Ruddick Corp. 1,600 21,200
Sears Roebuck & Co. 2,900 144,638
Service Merchandise
Co. Inc.* 2,700 12,825
Shopko Stores Inc. 900 13,950
Smart & Final Inc. 500 11,375
Smith's Food & Drug
Centers, Inc. Class B 900 22,500
Sotheby's Holdings,
Inc. Class A 1,600 22,600
Spiegel, Inc. Class A
(Non Voting) 3,700 37,000
Sports Authority Inc.* 500 14,875
Stanhome Inc. 500 14,750
Stein Mart Inc.* 500 7,938
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
Strawbridge & Clothier
Class A 300 $ 5,550
TJX Companies, Inc. 300 8,850
Tandy Corp. 400 20,750
Tiffany & Co. (New) 900 58,725
Toys "R" Us, Inc.* 2,300 64,113
United Stationers Inc. 400 9,050
Vitalink Pharmacy
Services, Inc.* 300 6,788
Waban Inc.* 1,300 31,850
Wal-Mart Stores, Inc. 16,000 382,000
Walgreen Co. 1,700 54,400
Williams-Sonoma Inc.* 1,100 27,569
Winn Dixie Stores Inc. 1,100 36,300
Woolworth Corp. 700 13,388
Zale Corp. (New)* 1,000 18,813
---------
2,705,822
---------
STEEL--0.3%
Armco Inc.* 3,400 19,125
Bethlehem Steel Corp.* 500 6,813
Birmingham Steel Corp. 1,200 19,200
Carpenter Technology
Corp. 900 33,863
Chaparral Steel Co. 1,200 18,150
Cleveland Cliffs Inc. 300 12,525
Inland Steel
Industries, Inc. 200 4,925
Intermet Corp.* 700 10,238
J & L Specialty Steel
Inc. 1,100 19,938
Lukens Inc. 400 10,550
National Steel Corp.
Class B* 1,200 16,350
Nucor Corp. 600 33,750
Oregon Steel Mills Inc. 400 6,350
Quanex Corp. 300 6,600
Rouge Steel Co. Class A 300 6,713
USX Corp. (U.S.
Steel Group) 500 16,500
WHX Corp.* 600 6,900
Worthington
Industries Inc. 1,100 22,481
---------
270,971
---------
TELEPHONE--3.5%
360 Communications Co.* 900 21,150
AT&T Corp. 11,400 698,250
Airtouch Communications
Inc.* 3,600 112,500
Alltel Corp. 1,200 39,450
American Mobile
Satellite Corp.* 1,100 21,175
Ameritech Corp. (New) 3,800 221,825
Andrew Corp. 300 14,363
Antec Corp.* 500 7,594
Arch Communications
Group, Inc.* 800 19,000
Aspect
Telecommunications
Corp. 1,000 57,500
Associated Group Inc.
Class A* 500 13,906
Bell Atlantic Corp. 3,000 195,000
</TABLE>
F-46
<PAGE> 168
SchwabFunds(R)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
BellSouth Corp. 6,900 $ 276,000
Boston Technology Inc.
(New)* 700 12,250
C-TEC Corp. 1,200 35,850
California Microwave* 400 7,350
Cellstar Corp.* 500 4,688
Centennial Cellular
Corp. Class A* 400 6,500
Cidco Inc.* 400 14,250
Coherent Communications
Systems Corp. 400 7,600
Colonial Data
Technologies* 300 6,825
Comnet Cellular Inc.* 300 9,938
DSC Communications
Corp.* 700 21,963
Echostar Communications
Corp. Class A* 300 9,938
GTE Corp. 6,700 290,613
General Datacom
Industries Inc.* 500 6,875
Geotek Communications
Inc.* 1,200 12,525
InterVoice, Inc.* 500 14,031
Lincoln
Telecommunications 1,400 23,538
Loral Space &
Communications* 1,100 15,813
MCI Communications
Corp. 5,000 146,875
Microcom Inc.* 400 9,800
Mobilemedia Corp.
Class A* 1,000 19,875
Nextel Communications
Inc.* 535 9,630
Northern Telecom Ltd 1,800 92,700
Nynex Corp. 3,200 157,200
Octel Communications
Corp. 1,100 49,500
P-Com Inc. 500 12,531
Pacific Telesis Group 3,200 109,600
Pairgain Technologies
Inc.* 900 86,175
Plantronics, Inc.
(New)* 200 8,025
Sprint Corp. 2,700 113,738
Tellabs Inc. 600 33,225
U S WEST, Inc.
(Communications
Group) 3,400 111,350
U S West Inc.
(Media Group)* 3,800 74,100
Vanguard Cellular
Systems, Inc.
Class A* 1,200 25,800
Worldcom Inc.* 1,300 61,019
---------
3,319,403
---------
TOBACCO--0.7%
American Brands, Inc. 1,200 49,950
Loews Corp. 800 61,000
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
Philip Morris Companies
Inc. 6,200 $558,775
UST Inc. 1,200 38,400
-------
708,125
-------
TRANSPORTATION-MISCELLANEOUS--0.5%
Air Express
International Corp. 500 13,938
Airbourne Freight Corp. 1,000 26,375
Amerco Inc.* 1,600 35,500
American Freightways
Corp.* 700 10,675
American President
Companies, Ltd. 800 19,100
Arnold Industries Inc. 800 12,800
Caliber Systems Inc. 200 8,025
Consolidated
Freightways Inc. 200 5,225
Expeditores
International of
Washington Inc. 300 8,813
Federal Express Corp.* 400 32,300
Greyhound Lines Inc. 2,100 7,481
Harper Group, Inc. 500 9,625
Heartland Express, Inc. 961 28,350
J.B. Hunt Transport
Services Inc. 1,100 22,619
Kirby Corp.* 800 14,100
Landstar Systems, Inc.* 300 8,325
M.S. Carriers, Inc.* 300 5,775
NACCO Industries, Inc.
Class A 400 25,250
Overseas Shipholding
Group 1,400 28,175
Pittston Co.
(Burlington Group) 100 1,988
Pittston Services Group 200 5,575
Roadway Express Inc. 350 5,228
Rollins Truck Leasing
Corp. 1,100 11,963
Ryder System, Inc. 400 11,650
Shurgard Storage
Centers Inc. Class A 700 17,938
Swift Transportation
Inc. 600 11,400
TNT Freightways Corp. 600 13,538
Wabash National Corp. 600 11,850
Werner Enterprises Inc. 1,100 27,088
XTRA Corp. 600 27,300
Yellow Corp. 900 11,025
-------
478,994
-------
TRAVEL & RECREATION--0.8%
Anchor Gaming* 300 13,275
Anthony Industries,
Inc. 400 11,400
Aztar Corp.* 900 8,775
Bally Entertainment
Corp. 2,000 41,750
Bally Total Fitness
Holding Corp.* 375 2,063
Boyd Gaming Corp.* 2,100 29,400
Brunswick Corp. 500 11,000
Doubletree Corp.* 600 19,163
Harrahs Entertainment
Inc.* 700 24,150
</TABLE>
F-47
<PAGE> 169
SchwabFunds(R)
- --------------------------------------------------------------------------------
SCHWAB ASSET DIRECTOR(R)-HIGH GROWTH FUND
STATEMENT OF NET ASSETS
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
Hilton Hotels Corp. 300 $ 31,650
ITT Corp. (New)* 800 48,700
Marcus Corp. 500 13,938
Marriot International
Inc. 900 43,875
Players International
Inc. 700 7,963
Polaris Industries Inc. 1,200 41,850
Primadonna Resorts
Inc.* 900 17,213
Prime Hospitality
Corp.* 700 10,588
Rio Hotel &
Casino Inc.* 500 9,000
Showboat, Inc. 500 16,000
Speedway Motorsports,
Inc. 1,400 37,450
Station Casinos Inc.* 1,000 13,125
Stratosphere Corp.* 1,900 20,781
Topps Inc. 1,100 6,428
Walt Disney Co. 4,973 308,326
-------
787,863
-------
UTILITIES--2.4%
American Electric Power
Co., Inc. 1,200 48,750
Aquila Gas Pipeline
Corp. 700 9,713
Atmos Energy Corp. 500 12,375
Baltimore Gas &
Electric Co. 1,100 29,013
Bay State Gas Co. 300 8,325
Black Hills Corp. 400 10,000
Carolina Power & Light
Co. 1,000 36,000
Central & South West
Corp. 1,600 43,600
Central Hudson Gas &
Electric Corp. 500 14,500
Central Louisiana
Electric Co. (New) 1,100 28,188
Central Maine
Power Co. 900 12,825
Cilcorp Inc. 400 17,250
Cinergy Corp. 1,100 31,900
Coastal Corp. 700 27,738
Columbia Gas
System, Inc. 400 19,450
Commonwealth Energy
System (Shares of
Beneficial Interest) 300 13,763
Consolidated
Edison Co. 2,100 61,688
Consolidated Natural
Gas Co. 600 28,050
DTE Energy Co. 1,000 31,000
Destec Energy, Inc.* 2,000 23,500
Dominion
Resources Inc. 1,100 42,350
Duke Power Co. 1,400 65,800
ENSERCH Corp. 300 6,450
Eastern Enterprises 1,100 39,463
Eastern Utilities
Association 1,000 20,375
Edison International 2,800 44,800
Empire District
Electric Co. 400 7,300
Energen Corp. 300 6,863
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
Enron Corp. 1,800 $ 72,450
Entergy Corp. 1,400 37,100
FPL Group, Inc. 1,200 51,750
General Public
Utilities Corp. 800 25,400
Houston Industries Inc. 1,600 34,200
IES Industries Inc. 1,300 34,450
Indiana Energy Inc. 600 14,325
Interstate Power Co. 300 9,188
K N Energy Inc. 1,200 38,400
Laclede Gas Co. 400 9,400
MDU Resources Group,
Inc. 1,200 26,250
Madison Gas & Electric
Co. 450 11,025
NICOR Inc. 200 5,575
New Jersey Resources
Corp. 500 14,188
Niagara Mohawk Power
Corp. 700 5,250
NorAm Energy Co. 600 6,600
Northern States
Power Co. 500 23,375
Northwest Natural
Gas Co. 400 13,075
Northwestern Public
Service Co. 300 8,363
Ohio Edison Co. 800 16,700
Oneok Inc. 900 23,175
Orange & Rockland
Utilities, Inc. 400 13,650
Otter Tail Power Co. 300 10,988
P P & L Resources Inc. 1,400 31,675
Pacific Enterprises 400 10,300
Pacific Gas &
Electric Co. 2,700 61,425
Pacificorp 1,800 36,000
Panenergy Corp. 1,100 36,850
Peco Energy Co. 1,700 42,288
Peoples Energy Corp. 100 3,150
Philadelphia Suburban
Corp. 400 9,300
Piedmont Natural
Gas Inc. 1,200 25,950
Primark Corp.* 1,100 39,050
Public Service Co. of
New Mexico 1,200 21,000
Public Service Co. of
North Carolina Inc. 400 6,450
Public Service
Enterprise Group 1,500 39,188
Seagull Energy Corp.* 1,400 34,125
Sierra Pacific
Resources 1,300 31,525
Sig Corp. 900 30,038
Sonat Inc. 600 26,175
South Jersey
Industries Inc. 300 7,013
Southern Co. 5,100 112,200
Southern Union Co.
(New) 400 8,800
Southwest Gas Corp. 700 11,638
</TABLE>
F-48
<PAGE> 170
SchwabFunds(R)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
Southwestern
Energy Co. 600 $ 8,325
Tejas Gas Corp. 800 40,000
Texas Utilities Co. 1,900 76,475
Thermo Ecotek Corp. 600 14,175
Tucson Electric
Power Co.* 4,300 12,363
UGI Corp. (New) 1,300 29,088
Unicom Corp. 1,700 46,750
Union Electric Co. 700 27,038
United Illuminating Co. 400 14,550
United Water Resources
Inc. 900 11,250
WPS Resources Corp. 1,100 34,788
Washington Energy Co. 600 11,625
Western Gas
Resources Inc. 600 8,850
Wicor Inc. 900 30,938
Williams Cos. Inc. 700 35,788
Yankee Energy
System, Inc. 300 6,713
-----------
2,278,762
-----------
54,539,746
-----------
INTERNATIONAL--19.7%
AUSTRALIA--0.4%
Australia & New Zealand
Banking Group 6,047 28,881
Broken Hill Proprietary
Co., Ltd. 8,884 136,715
Commonwealth Bank Group 4,031 33,090
National Australia Bank 5,726 51,368
News Corp., Ltd. 8,173 47,895
Western Mining Corp. 4,539 33,089
Westpac Banking Corp. 5,767 27,997
----------
359,035
----------
BELGIUM--0.2%
Electrabel 211 47,321
Electrabel, VVPR Strip 44 119
Generale de Banque 65 22,919
Petrofina SA 95 28,096
Societe Generale de
Belgique 322 25,060
Tractebel Investor
International 32 13,011
Tractebel Investor
International, VVPR
Strip 32 12,961
----------
149,487
----------
CANADA--0.6%
Alcan Aluminum Ltd. 975 31,008
BCE Inc. 1,370 53,884
Bank of Montreal 1,152 27,668
Bank of Nova Scotia,
Halifax 999 22,636
Barrick Gold Corp. 2,344 71,878
Canadian Imperial Bank
of Commerce 1,049 32,591
Canadian Pacific Ltd. 1,482 30,152
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
Imperial Oil Ltd. (New) 835 $ 33,946
Northern Telecom Ltd. 1,107 56,996
Placer Dome Inc. 1,035 28,811
Royal Bank of Canada,
Montreal, Quebec 1,360 32,214
Seagram Co. Ltd. 1,480 49,841
Thomson Corp. 2,550 42,422
Toronto-Dominion Bank 1,305 22,621
---------
536,668
---------
DENMARK--0.1%
Novo Nordisk A/S
Series B 163 21,183
Tele Danmark A/S
Series B 570 28,684
---------
49,867
---------
FRANCE--1.3%
AXA Groupe SA 897 53,447
Alcatel Alsthom
CGE SA 708 66,587
BQE National de Paris 840 35,079
Carrefour 112 87,519
Christian Dior 183 24,400
Cie Financiere de
Paribas (Bearer) 523 33,642
Cie Generale de Eaux 561 61,012
Compagnie de Saint-
Gobain SA 364 43,603
Danone Groupe 310 46,852
Elf Aquitaine 1,250 92,961
L'Air Liquide 289 52,515
L'Oreal SA 285 88,078
LVMH Moet Hennessy
Louis Vuitton 400 102,332
Lafarge Coppee SA 402 25,750
Lyonnaise des Eaux-
Dumez 253 25,410
Michelin (CGDE) Class B
(Reg.) 502 24,879
PSA Peugeot Citroen 218 30,459
Pinault Printemps
Redoute SA 97 29,452
Renault (Regie
Nationale) 1,041 31,567
Rhone-Poulenc SA
A Shares 1,413 33,907
Roussel Uclaf 119 28,049
Sanofi 448 36,152
Schneider SA 579 26,981
Societe Generale 381 44,238
Suez Group 695 28,795
TOTAL Class B 1,097 74,450
Union des Assurances de
Paris 1,341 29,039
---------
1,257,155
---------
GERMANY--1.5%
BASF AG 251 68,534
Bankgesell Berlin 60 12,326
Bayer AG 302 97,254
Bayerische Hypotheken &
Wechsel Bank AG 1,052 26,168
</TABLE>
F-49
<PAGE> 171
SchwabFunds(R)
- --------------------------------------------------------------------------------
SCHWAB ASSET DIRECTOR(R)-HIGH GROWTH FUND
STATEMENT OF NET ASSETS
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
Bayerische Motoren
Werke AG 80 $ 43,190
Bayerische Vereinsbank
AG 984 28,924
Commerzbank AG 168 36,379
Daimler-Benz AG 220 120,498
Deutsche Bank AG 2,271 108,840
Dresdner Bank AG 1,678 42,221
Hoechst AG 256 86,220
Linde AG 31 18,954
Lufthansa AG 133 21,094
Mannesmann AG 153 52,269
Muenchener
Rueckversicherung
(Reg.) 34 61,741
RWE AG* 3,571 139,024
RWE AG (Non Voting)* 1,501 43,680
Sap AG 248 32,156
Siemens AG 242 132,516
Thyssen AG 128 23,202
Veba AG 2,051 101,954
Vereinigte
Elektrizitatswerke
Westfalen Series B 82 23,568
Viag AG 72 28,242
Viag AG (New)* 20 7,845
Volkswagen AG 110 37,974
---------
1,394,773
---------
HONG KONG--0.8%
CITIC Pacific 7,000 27,510
Cheung Kong Holdings 8,000 57,139
China Light & Power 11,000 51,904
Hang Seng Bank Ltd. 8,400 85,243
Henderson China 24 67
Henderson Land
Development Co. 6,000 43,048
Hongkong Electric
Holdings Ltd. 26,000 82,684
Hongkong
Telecommunications
Ltd. 42,800 81,611
Hutchison
Whampoa Ltd. 13,000 80,667
New World Development
Co. 6,138 27,534
Sun Hung Kai Properties 9,000 85,806
Swire Pacific Ltd.
Class A 7,000 59,725
Wharf Holdings 7,000 25,926
---------
708,864
---------
ITALY--0.4%
Alleanza Assicurazioni 1,523 14,382
Assicurazioni Generali 3,653 91,091
Fiat SpA 14,966 51,020
Fiat SpA, di Risp
(Non-Convertible) 6,565 11,957
INA 14,965 22,994
STET 17,472 59,060
STET di Risp
(Non-Convertible) 5,004 13,119
Telecom Italia 30,252 61,685
Telecom Italia di Risp
(Non-Convertible) 9,137 15,150
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
Telecom Italia Mob 30,252 $ 66,818
Telecom Italia Mob
di Risp 11,325 15,878
-------
423,154
-------
JAPAN--7.0%
Ajinomoto Co., Inc. 1,000 12,523
All Nippon Airways Co.,
Ltd. 4,000 45,505
Asahi Bank 6,000 77,434
Asahi Breweries 1,000 12,141
Asahi Chemical Industry
Co. 3,000 22,800
Asahi Glass Co., Ltd. 3,000 36,423
Bank of Fukuoka 2,000 17,552
Bank of Tokyo
Mitsubishi (Bank of
Tokyo shares) 4,000 92,156
Bank of Tokyo
Mitsubishi
(Mitsubishi Bank
shares) 8,400 194,331
Bank of Yokohama 3,000 26,930
Bridgestone Corp. 2,000 37,092
Canon Inc. 2,000 39,769
Chiba Bank 1,000 9,034
Chubu Electric
Power Co. 2,000 50,667
Chugoku Electric Power
Co., Inc. 1,000 23,804
DDI Corp. 5 42,971
Dai Nippon
Printing Co. 2,000 37,666
Dai-Ichi Kangyo
Bank, Ltd. 9,000 183,261
Daiei Inc. 1,000 13,575
Daiwa Bank 4,000 31,165
Daiwa House
Industries Co. 1,000 15,965
Daiwa Securities Co. 4,000 61,565
East Japan Railway Co. 9 48,095
Fanuc 1,000 43,497
Fuji Bank, Ltd. 8,000 175,135
Fuji Photo Film Co. 1,000 31,165
Fujitsu Ltd. 5,000 51,623
Gunma Bank 1,000 11,567
Hachijuni Bank 1,000 11,567
Hankyu Corp. 2,000 12,217
Hitachi Ltd. 9,000 97,223
Hitachi Zosen Corp. 2,000 10,975
Hokkaido Electric Power
Co. 1,000 23,995
Hokuriku Electric Power
Co. 1,000 23,899
Honda Motor Co., Ltd. 3,000 68,544
Industrial Bank of
Japan, Ltd. 7,000 187,372
Ishikawajima-Harima
Heavy Industries 3,000 14,913
Ito-Yokado Co., Ltd. 1,000 58,984
Itochu Corp. 4,000 30,477
Japan Air Lines Co.,
Ltd. 4,000 32,006
Japan Telecom Co. 1 21,032
Japan Tobacco Inc. 4 37,015
Joyo Bank 1,000 8,183
Jusco Co. 1,000 30,974
</TABLE>
F-50
<PAGE> 172
SchwabFunds(R)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
Kajima Corp. 2,000 $ 22,561
Kansai Electric
Power Co. 2,600 63,133
Kao Corp. 1,000 13,384
Kawasaki Heavy
Industries 2,000 10,344
Kawasaki Steel Co. 8,000 29,291
Kinki Nippon
Railway Co. 4,120 32,060
Kirin Brewery Co., Ltd. 3,000 39,004
Kobe Steel 5,000 15,535
Kokusai Denki 1,000 98,466
Komatsu Ltd. 2,000 19,311
Kubota Corp. 4,000 27,876
Kyocera Corp. 1,000 75,331
Kyushu Electric
Power Co. 1,000 24,855
Long-Term Credit Bank
of Japan 6,000 52,024
Marubeni Corp. 4,000 23,976
Marui Co. 1,000 22,083
Matsushita
Communication
Industrial Co., Ltd. 1,000 26,767
Matsushita Electric
Industrial Co., Ltd. 6,000 106,113
Matsushita Electric
Works 1,000 11,376
Mitsubishi Chemical
Corp. 5,000 27,437
Mitsubishi Corp. 4,000 56,976
Mitsubishi Electric
Corp. 5,000 39,386
Mitsubishi Estate Co. 3,000 42,159
Mitsubishi Heavy
Industries 9,000 80,359
Mitsubishi
Materials Co. 2,000 12,045
Mitsubishi Motors 2,000 18,049
Mitsubishi Trust &
Banking Corp. 4,000 69,213
Mitsui & Co. 4,000 38,124
Mitsui Fudosan Co. 2,000 26,385
Mitsui Marine & Fire
Insurance 2,000 16,959
Mitsui Trust & Banking
Co. 3,000 36,136
Murata Manufacturing
Co. 1,000 38,813
NEC Corp. 4,000 50,858
NKK Corp. 8,000 25,085
New Oji Paper Co. 1,000 9,244
Nikko Securities Co. 4,000 50,858
Nikon Corp. 1,000 13,479
Nintendo Co., Ltd. 1,000 77,243
Nippon Credit Bank 3,000 12,246
Nippon Express Co. 3,000 31,260
Nippon Oil Co. 3,000 20,793
Nippon Paper Industries
Co. 2,000 14,646
Nippon Steel Corp. 19,000 68,658
Nippon Telegraph &
Telephone Corp. 40 310,119
Nippon Yusen Kabushiki
Kaisha 2,000 12,141
Nippondenso Co. 2,000 43,593
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
Nissan Motor Co., Ltd. 6,000 $ 50,705
Nomura Securities
Co., Ltd. 5,000 108,981
Obayashi Corp. 1,000 9,302
Odakyu Electric Railway
Co. 2,060 14,770
Oki Electric Industry
Co., Ltd. 1,000 7,935
Omron Corp. 1,000 22,561
Ono Pharmaceutical Co. 1,000 37,761
Osaka Gas Co. 7,000 28,039
Ricoh Co., Ltd. 1,000 11,759
Rohm Co. 1,000 63,668
Sakura Bank 9,000 105,827
Sankyo Co. 1,000 24,282
Sanwa Bank 8,000 162,134
Sanyo Electric Co.,
Ltd. 5,000 31,930
Secom Co. 1,000 70,742
Seibu Railway Co. 1,000 56,211
Sekisui Chemical Co. 1,000 12,619
Sekisui House 2,000 24,855
Seven-Eleven Japan Co. 1,100 77,922
Sharp Corp. 3,000 52,196
Shikoku Electric
Power Co. 1,000 24,569
Shimizu Corp. 2,000 22,943
Shin-Etsu Chemical Co. 1,050 22,986
Shizuoka Bank 2,000 27,150
Sony Corp. 1,000 65,006
Sony Music
Entertainment 1,000 54,204
Sumitomo Bank 9,000 192,725
Sumitomo
Chemical Co. 3,000 15,974
Sumitomo Corp. 3,000 35,849
Sumitomo Electric
Industries 2,000 28,679
Sumitomo Marine & Fire
Insurance Co. 2,000 19,043
Sumitomo Metal
Industries 7,000 22,485
Sumitomo Trust &
Banking Co. 3,000 43,879
Suzuki Motor Corp. 1,000 12,715
TDK 1,000 57,263
Taisei Corp. 2,000 15,487
Taisho Pharmaceutical
Co. 1,000 21,892
Takeda Chemical
Industries 2,000 34,606
Teijin Ltd. 2,000 10,994
Tobu Railway Co. 2,000 13,843
Tohoku Electric
Power Co. 1,000 24,855
Tokai Bank 5,000 64,050
Tokio Marine & Fire
Insurance Co. 4,000 55,064
Tokyo Electric Power
Co., Inc. 3,600 98,083
Tokyo Electron 1,000 37,188
Tokyo Gas & Electric
Industrial 7,000 27,503
</TABLE>
F-51
<PAGE> 173
SchwabFunds(R)
- --------------------------------------------------------------------------------
SCHWAB ASSET DIRECTOR(R)-HIGH GROWTH FUND
STATEMENT OF NET ASSETS
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
Tokyu Corp. 2,000 $ 16,309
Tonen Corp. 2,000 29,826
Toppan Printing Co. 2,000 29,444
Toray Industries Inc. 4,000 27,226
Toshiba Corp. 8,000 62,253
Tostem Corp. 1,000 31,069
Toto 1,000 14,818
Toyo Seikan 1,000 35,467
Toyo Trust &
Banking Co. 1,000 10,898
Toyoda Automatic Loom 1,000 20,745
Toyota Motor Corp. 10,000 228,479
Yamaichi Securities Co. 3,000 23,718
Yamanouchi
Pharmaceutical Co. 1,000 23,708
Yasuda Fire & Marine
Insurance Co. 2,000 15,774
Yasuda Trust & Banking
Co. 2,000 13,269
---------
6,676,778
---------
NETHERLANDS--1.1%
ABN Amro
Holdings NV 1,465 75,836
Aegon NV 1,246 59,337
Akzo Nobel NV 309 35,886
Dordtsche Petrol 152 22,665
Elsevier NV 2,881 43,379
Heineken NV 218 45,623
ING NV 1,339 103,385
Koninklijke Ahold NV 541 26,679
Koninklijke PTT
Nederland 2,152 80,755
Philips Electronics NV 1,640 57,905
PolyGram NV 784 46,669
Royal Dutch Petroleum
Co. (Bearer) 2,443 348,022
Unilever NV, CVA 734 100,151
Wolters Kluwer NV, CVA 292 31,918
---------
1,078,210
---------
SINGAPORE--0.4%
City Developments 3,000 26,248
Development Bank
of Singapore
(alien market) 3,000 37,985
Hong Kong Land Holdings 11,000 23,540
Jardine Matheson
Holdings Ltd. 3,000 24,000
Overseas Chinese Bank
(alien market) 4,000 54,915
Singapore Airlines Ltd.
(alien market) 5,000 50,505
Singapore
Telecommunications 66,000 162,441
United Overseas Bank
(alien market) 4,000 38,981
---------
418,615
---------
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
SPAIN--0.4%
Argentaria Corp. 546 $ 22,106
Banco Bilbao-Vizcaya SA
(Reg.) 983 37,365
Banco Popular Espanol
(Reg.) 126 20,881
Banco de Santander SA
(Reg.) 695 32,291
Empresa Nacional de
Electricidad 1,185 74,435
Gas Natural SDG SA 162 29,445
Iberdrola SA 4,042 39,562
Repsol, SA 1,306 47,897
Telefonica
Internacional de
Espana, SA 4,281 76,230
---------
380,212
---------
SWEDEN--0.3%
ASEA AB 273 27,938
ASEA AB Series B 106 10,754
Astra AB Series A 2,285 101,588
Astra AB Series B 316 13,956
L.M. Ericsson Telephone
Series B 3,967 80,433
Sandvik AB Series A 577 12,720
Sandvik AB Series B 929 20,480
Volvo AB Series A 518 11,878
Volvo AB Series B 1,315 30,153
---------
309,900
---------
SWITZERLAND--1.3%
BBC Brown Boveri
(Bearer) 30 36,147
BBC Brown Boveri (Reg.) 45 10,583
CS Holding (Reg.) 805 73,102
Ciba-Geigy Ltd.
(Bearer) 12 13,850
Ciba-Geigy Ltd. (Reg.) 110 127,666
Cie Financiere
Richemont Series A
(Bearer) 20 29,317
Nestle Ltd. (Reg.) 175 194,648
Roche Group
Holding AG 32 251,675
Roche Group Holding AG
(Bearer) 7 94,716
Sandoz Ltd. (Bearer) 12 13,067
Sandoz Ltd. (Reg.) 153 167,097
Schweizerische
Bankgesellschaft
(Bearer) 97 96,406
Schweizerische
Bankgesellschaft
(Reg.) 61 13,265
Schweizerische
Bankverein (Bearer) 90 33,707
Schweizerische
Bankverein (Reg.) 76 14,201
Winterthur 24 15,058
Winterthur (Reg.) 19 11,921
Zurich Versicherung
(Reg.) 207 57,852
---------
1,254,278
---------
</TABLE>
F-52
<PAGE> 174
SchwabFunds(R)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
UNITED KINGDOM--3.9%
Abbey National 5,749 $ 49,156
Allied Domecq PLC 4,581 35,411
Argyll Group 4,993 24,954
Associated British
Foods 5,339 31,987
BAA 4,509 37,060
BAT Industries 13,438 101,549
BOC Group 2,115 29,387
BTR 16,969 81,741
Barclays 6,981 77,450
Bass 3,824 45,102
Boots Co. 4,144 39,519
British Aerospace 1,669 21,871
British Airways 4,216 32,938
British Gas 20,257 71,965
British Petroleum Co. 25,484 229,981
British Sky Broadcast 7,467 53,729
British Steel 8,787 26,257
British Telecom 28,410 155,885
Cable & Wireless 10,268 80,608
Cadbury Schweppes 4,293 33,282
Commercial Union
Assurance Co. 2,898 25,150
General Electric Co. 11,967 64,582
Glaxo Wellcome 15,797 191,547
Granada Group 2,573 31,896
Grand Metropolitan,
Inc. 9,340 61,442
Great University Stores 4,379 47,758
Guinness 8,753 62,983
HSBC Holdings 3,718 55,045
HSBC Holdings
(Hong Kong) 8,086 119,714
Hanson Industries 22,158 65,710
Imperial Chemical
Industries 3,152 42,704
J. Sainsbury PLC 7,879 43,410
Kingfisher 2,910 26,042
Legal & General Group 2,138 23,044
Lloyds Abbey Life 3,041 24,525
Lloyds TSB Group 35,714 171,231
Marks & Spencer PLC 12,927 86,303
National Grid Group 7,363 22,666
National Power
Development 5,153 43,478
National Westminster
Bancorp 7,607 70,138
Pearson, Inc. 2,410 25,468
Powergen 3,165 26,585
Prudential Corp. 8,291 57,100
RTZ Corp. PLC 5,009 78,871
Rank Organisation PLC 3,625 29,085
Reed International 2,461 42,344
Rentokil Group 4,259 24,555
Reuters Holdings PLC 7,731 87,516
Royal Bank of Scotland 3,556 27,755
Scot & Newcastle 2,662 27,550
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
Shell Transport &
Trading Co. (Reg.) 15,103 $ 199,274
Siebe 2,000 25,862
SmithKline Beecham PLC
Series A 6,110 64,797
SmithKline Beecham PLC
(New) 5,819 61,755
Standard Chartered PLC 4,214 39,457
Tesco 8,995 37,981
Thorn Emi 1,870 51,866
Unilever 3,534 64,690
Vodafone Group 13,360 53,396
Whitbread 2,092 23,650
Zeneca Group 4,357 90,194
----------
3,678,951
----------
18,675,947
----------
TOTAL COMMON STOCK
(Cost $66,911,872) 73,215,693
----------
PREFERRED STOCK--0.1%
AUSTRALIA--0.0%
News Corp. (Limited
Voting Shares) 3,743 19,259
----------
GERMANY--0.1%
Henkel KGaA 55 21,089
Sap AG (Non-Voting) 175 23,240
Volkswagen AG
(Non-Voting) 42 10,672
----------
55,001
----------
ITALY--0.0%
Fiat SpA 5,589 10,681
----------
GERMANY--0.0%
Lufthansa AG
(Non-Voting) 95 14,875
----------
UNITED STATES--0.0%
Teledyne, Inc. Series E 2 29
----------
TOTAL PREFERRED STOCK
(Cost $97,452) 99,845
----------
</TABLE>
<TABLE>
<CAPTION>
Par
-----------
<S> <C> <C>
U.S. TREASURY OBLIGATIONS--17.4%(a)
U.S. Treasury Bonds
7.25%, 05/15/16 $ 3,200,000 3,261,056
7.50%, 11/15/16 500,000 522,530
7.13%, 02/15/23 12,700,000 12,766,167
-----------
TOTAL U.S. TREASURY
OBLIGATIONS
(Cost $16,982,287) 16,549,753
-----------
</TABLE>
F-53
<PAGE> 175
SchwabFunds(R)
- --------------------------------------------------------------------------------
SCHWAB ASSET DIRECTOR(R)-HIGH GROWTH FUND
STATEMENT OF NET ASSETS
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
Par Value
----------- -----------
<S> <C> <C>
CASH EQUIVALENTS--5.1%(b)
AGENCY OBLIGATIONS-
DISCOUNT NOTES--4.6%
Federal Home
Loan Bank
5.21%, 05/28/96 $ 2,700,000 $2,689,490
Federal National
Mortgage Assoc.
5.28%, 07/12/96 1,700,000 1,682,201
---------
4,371,691
---------
<CAPTION>
Maturity Value
----------- -----------
<S> <C> <C>
REPURCHASE AGREEMENT--0.5%
State Street Bank 4.75%
Dated 04/30/96
Due 05/01/96
Collateralized By:
U.S. Treasury Note
$430,000 Par; 8.00%
Due 10/15/96 $427,055 $ 427,000
-----------
TOTAL CASH EQUIVALENTS
(Cost $4,798,776) 4,798,691
-----------
TOTAL INVESTMENTS--99.8%
(Cost $88,790,387) 94,663,982
-----------
OTHER ASSETS AND
LIABILITIES--0.2%
Other Assets 1,177,780
Liabilities (985,059)
-----------
192,721
-----------
NET ASSETS--100.0%
Applicable to 8,797,524
outstanding $0.00001
par value shares
(unlimited shares authorized) $94,856,703
===========
NET ASSET VALUE PER SHARE $10.78
======
</TABLE>
See accompanying Notes to Statements of Net Assets.
F-54
<PAGE> 176
SchwabFunds(R)
- --------------------------------------------------------------------------------
SCHWAB ASSET DIRECTOR(R)-BALANCED GROWTH FUND
STATEMENT OF NET ASSETS
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
COMMON STOCK--57.6%
DOMESTIC--43.1%
AEROSPACE/DEFENSE--0.7%
AAR Corp. 200 $ 4,075
Alliant Techsystems
Inc.* 200 9,400
BFGoodrich Co. 200 7,950
Boeing Co. 1,300 106,763
Coltec Industries Inc.* 1,000 13,000
Curtiss-Wright Corp. 100 5,113
Gencorp Inc. 400 5,350
General Dynamics Corp. 200 12,625
Lockheed Martin Corp. 900 72,563
McDonnell Douglas Corp. 400 38,600
Northrop Grumman Corp. 200 12,375
OEA, Inc. 300 11,775
Orbital Sciences Corp.
Class A* 300 4,125
Raytheon Co. 1,000 50,625
Rockwell International
Corp. 1,000 58,500
Rohr Industries Inc.* 200 3,650
Textron Inc. 300 25,725
Thiokol Corp. 300 12,825
Trimble Navigation Ltd.* 300 7,256
United Technologies
Corp. 500 55,250
-------
517,545
-------
AIR TRANSPORTATION--0.3%
AMR Corp.* 300 26,775
Alaska Air Group Inc.* 200 5,075
America West Airlines,
Inc. Class B* 900 18,900
Atlantic Southeast
Airlines Inc. 600 15,000
Atlas Air Inc.* 400 18,100
Comair Holdings Inc. 700 25,944
Continental Airlines
Inc. Class B* 700 39,725
Delta Airlines Inc. 200 16,075
Mesa Airlines Inc.* 400 4,925
Offshore Logistics,
Inc.* 200 2,913
Southwest Airlines Co. 600 17,850
Trans World Airlines
Inc. (New)* 800 14,300
USAir Group, Inc.* 1,800 31,950
-------
237,532
-------
ALCOHOLIC BEVERAGES--0.2%
Adolph Coors Co. Class B 900 16,931
Anheuser-Busch
Companies, Inc. 1,100 73,838
Brown Forman Corp.
Class B 300 11,850
Canandaigua Wine Co.,
Inc. Class A* 300 9,150
Seagram Ltd 1,400 47,425
-------
159,194
-------
APPAREL--0.3%
Authentic Fitness Corp. 300 7,163
Brown Group Inc. 300 4,800
Burlington
Industries Inc.* 1,100 12,788
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
Cone Mills Corp. 300 $ 3,413
Guilford Mills, Inc.* 200 4,850
Justin Industries Inc. 300 3,825
Kellwood Co. 300 4,875
Liz Claiborne 200 7,275
Men's Wearhouse, Inc. 400 14,750
NIKE, Inc. Class B 700 61,250
Nautica Enterprises Inc. 300 13,875
Paragon Trade
Brands, Inc.* 200 4,675
Phillips-Van Heusen
Corp. 300 3,975
Reebok International
Ltd. 200 5,800
Russell Corp. 100 2,600
Springs Industries Inc. 700 32,200
St. John's Knits, Inc. 100 5,938
Stride Rite Corp. 700 6,738
V.F. Corp. 200 11,400
Wolverine World
Wide Inc. 500 15,438
-------
227,628
-------
AUTOMOTIVE PRODUCTS--0.1%
APS Holding Corp. Class
A* 200 3,650
Armor-All Products Corp. 300 4,650
Carlisle Cos. Inc. 500 23,250
Cooper Tire & Rubber 200 4,900
Discount Auto Parts
Inc.* 500 14,688
Goodyear Tire & Rubber 600 31,275
O'Reilly
Automotive, Inc.* 100 3,900
-------
86,313
-------
BANKS--3.0%
ALBANK Financial Corp. 240 6,465
Associated Banc-Corp. 500 19,375
Banc One Corp. 1,988 69,083
Bancorp South, Inc. 500 12,063
Bank of Boston Corp. 500 24,188
Bank of New York
Co., Inc. 800 38,800
BankAmerica Corp. 1,400 106,050
Bankers Trust
New York Corp. 300 20,813
Barnett Banks, Inc. 300 19,013
Bell Bancorp, Inc. 100 3,713
Boatmens
Bancshares Inc. 600 23,175
CCB Financial Corp. 500 25,969
CNB Bancshares Inc. 200 5,725
California
Bancshares Inc. 200 6,025
Centura Banks Inc. 600 21,900
Chase Manhattan Corp.
(New) 1,932 133,067
Chemical Financial Corp. 400 15,650
Citicorp 1,900 149,625
Citizens Bancorp 200 5,950
Citizens Banking Corp. 200 5,925
City National Corp. 600 8,475
Cole Taylor Financial
Group Inc. 200 5,950
</TABLE>
F-55
<PAGE> 177
SchwabFunds(R)
- --------------------------------------------------------------------------------
SCHWAB ASSET DIRECTOR(R)-BALANCED GROWTH FUND
STATEMENT OF NET ASSETS
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
Colonial
BancGroup Inc. 200 $ 6,775
Comerica Inc. 600 26,100
Community First
Bankshares Inc. 200 4,625
Corestates Financial
Corp. 900 35,100
Crestar Financial Corp. 64 3,608
Cullen/Frost
Bankers Inc. 200 9,950
F & M National Corp. 200 3,200
Fifth Third Bancorp 400 22,075
First Bank System Inc. 764 46,031
First Chicago NBD Corp. 1,343 55,399
First Citizens
BancShares Inc. 200 12,400
First Commercial
Bancshares Inc. 200 4,750
First Commercial Corp. 642 19,982
First Commonwealth
Financial Corp. 300 5,775
First Financial Bancorp 200 6,550
First Michigan Bank
Corp. 315 9,371
First Midwest
Bancorp Inc. 200 5,750
First Union Corp. 1,105 67,958
Firstbank Illinois Co. 100 3,113
Fleet Financial
Group Inc. 1,156 49,708
Fort Wayne National
Corp. 200 6,125
Fulton Financial Corp. 440 8,965
Hancock Holding Co. 100 3,625
Imperial Bancorp 216 5,211
J.P. Morgan & Co. Inc. 700 58,888
Jefferson
Bankshares, Inc. 200 4,275
Keycorp (New) 900 34,763
Keystone Financial Inc. 600 19,575
Liberty Bancorp, Inc. 100 3,675
Long Island
Bancorp Inc. 400 11,175
MBNA Corp. 800 22,700
Magna Group Inc. 400 9,050
Mark Twain
Bancshares Inc. 500 18,875
Mellon Bank Corp. 500 26,875
Mercantile Bancorp Inc. 117 5,207
Mid-Am, Inc. 200 3,700
National Bancorp of
Alaska, Inc. 400 24,200
National City Corp. 600 22,125
National Commerce
Bancorp 600 18,375
NationsBank Corp. 1,200 95,700
New York Bancorp Inc. 200 4,900
North Fork
Bancorporation 600 14,250
Norwest Corp. 1,610 58,161
ONBANCorp, Inc. 200 6,650
Old National Bancorp 315 10,671
One Valley Bancorp of
West Virginia Inc. 500 15,594
PNC Bank Corp. 1,400 42,350
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
Park National Corp. 100 $ 4,788
People's Bank 800 17,100
Provident Bancorp Inc. 500 25,688
Queens County Bancorp,
Inc. 200 8,775
Regions Financial Corp. 228 10,531
Republic New York Corp. 200 11,875
Riggs National Corp. 400 5,025
River Forest
Bancorp, Inc. 200 5,925
S & T Bancorp, Inc. 200 5,975
Security Capital Corp. 200 11,700
Sumitomo Bank 200 5,025
Summit Bancorp 450 15,975
SunTrust Banks Inc. 400 28,200
Susquehanna Bancshares,
Inc. 200 5,825
T R Financial Corp. 200 5,313
Trust Company of
New Jersey 200 2,838
TrustCo Bank
Corp. NY 200 4,175
Trustmark Corp. 800 18,700
U S Trust Corp. (New) 200 11,025
U.S. Bancorp 500 16,125
UMB Financial Corp. 330 12,499
UST Corp. 200 2,625
United Bankshares, Inc. 200 5,450
United Carolina
Bancshares Corp. 300 7,163
Valley National Bancorp 840 24,360
Wachovia Corp. (New) 600 26,400
Wells Fargo & Co. 400 97,050
Westamerica Bancorp 200 9,450
Whitney Holding Corp. 200 6,063
---------
2,092,522
---------
BUSINESS MACHINES & SOFTWARE--3.2%
3COM Corp. 600 27,638
AST Research Inc.* 600 4,575
Amdahl Corporation* 300 3,825
Apple Computer, Inc. 400 9,700
Applied Magnetics Corp.* 500 10,313
Atria Software, Inc. 200 10,925
Auspex Systems, Inc.* 300 5,775
Autodesk, Inc. 100 4,100
BBN Corp.* 300 8,475
BancTec, Inc.* 400 8,150
Bay Networks, Inc. 700 22,050
Bell & Howell Co. (New)*
300 9,450
Black Box Corp.* 200 4,013
Boole & Babbage Inc. 200 5,225
Borland
International Inc.* 400 6,525
Cabletron Systems Inc.* 300 22,613
Cellular Technical
Services Inc.* 100 2,856
Ceridian Corp.* 214 10,219
Cisco Systems Inc. 2,300 119,456
Compaq Computer Corp.* 1,100 51,288
Computer Associates
International Inc. 900 66,038
</TABLE>
F-56
<PAGE> 178
SchwabFunds(R)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
Computer Horizons Corp. 300 $ 15,113
Computer
Products, Inc.* 400 6,450
Computer Sciences Corp.* 200 14,800
Compuware Corp.* 800 23,000
Comverse Technology Inc.
(New)* 300 7,050
Continuum Inc.* 500 28,500
Control Data
Systems, Inc.* 300 7,106
Cray Research Inc.* 154 4,543
Data General Corp.* 1,000 15,375
Davidson &
Associates, Inc. 500 13,688
Dialogic Corp.* 200 9,225
Digi International Inc.* 200 5,700
Digital Equipment Corp.* 600 35,850
Dynatech Corp. 200 5,200
EMC Corp.* 800 16,400
Exabyte Corp.* 200 3,475
Excalibur Technologies
Corp. (New)* 200 5,225
FTP Software Inc.* 400 3,900
FileNet Corp.* 300 16,725
General Magic Inc.* 300 1,688
Geoworks* 300 11,175
Global Village
Communications* 200 3,400
HCIA Inc.* 400 21,300
HNC Software Inc. 200 7,450
Hewlett Packard Co. 1,900 201,163
Honeywell Inc. 500 26,313
Hyperion Software Corp. 200 2,538
INSO Corp. 200 10,825
INTERSOLV Inc.* 200 2,200
In Focus Systems, Inc.* 200 10,150
Intergraph Corp.* 1,000 12,688
International Business
Machines 2,400 258,000
Iomega Corp. 900 49,163
Legato Systems Inc.* 200 8,350
MICROS Systems, Inc. 100 2,800
Maxis Inc.* 200 4,850
McAfee Associates, Inc. 400 24,550
Medic Computer Systems,
Inc.* 200 18,725
Mercury Interactive
Corp.* 200 2,725
Microsoft Corp.* 2,300 260,331
National Computer
Systems, Inc. 200 4,375
National Instruments
Corp.* 300 7,238
Network Equipment
Technologies* 300 7,650
Network General Corp.* 600 26,550
Novell Inc.* 1,100 16,019
Oak Technology 600 10,763
Optical Data
Systems, Inc. 200 5,438
Oracle Systems Corp. 2,400 80,850
Pitney Bowes Inc. 500 24,375
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
Progress Software Corp. 200 $ 3,163
Quarterdeck Corp.* 600 9,225
Rational Software Corp.
(New)* 300 15,975
Safeguard Scientifics Inc.
500 33,500
Seagate
Technology, Inc.* 442 25,636
Security Dynamics
Technology 200 16,800
Sequent Computer
Systems, Inc.* 400 5,875
Shiva Corp. 400 24,000
Sierra On-Line Inc. 500 19,688
Silicon Graphics Inc.* 500 14,813
Softkey
International Inc.* 600 16,763
Stac Inc.* 500 5,625
Stratus Computer Inc.* 600 16,875
Structural Dynamics
Research Corp.* 700 22,313
Sun Microsystems Inc. 700 37,931
Systems & Computer
Technology Corp.* 200 2,925
Tandem Computers Inc.* 300 3,825
Tech Data Corp.* 500 9,688
Telxon Corp. 200 4,625
Transaction Systems
Architects Inc.
Class A* 200 10,750
Trident
Microsystems Inc.* 200 3,550
Unisys Corp.* 400 2,400
Veritas Software Co. 200 9,150
Videoserver Inc.* 200 6,650
Wang Laboratories Inc.
(New)* 700 16,538
Wind River Systems Inc. 200 7,850
Xerox Corp. 400 58,600
---------
2,178,909
---------
BUSINESS SERVICES--2.4%
ABM Industries, Inc. 200 6,825
ABR Information Services
Inc. 200 12,600
ADVO Inc. 300 3,038
Access Health Inc. 150 8,325
Accustaff Inc. 900 26,831
Acxiom Corp. 600 16,388
Affiliated Computer
Services Inc. Class A* 100 4,763
Alliance Entertainment
Corp.* 400 2,450
Alternative Resources
Corp. 200 7,175
American Business
Information, Inc. 300 5,925
American Business
Products, Inc. 200 4,350
American
Homepatient Inc. 100 4,200
American Management
Systems, Inc. 600 15,900
American Medical
Response, Inc.* 300 11,100
</TABLE>
F-57
<PAGE> 179
SchwabFunds(R)
- --------------------------------------------------------------------------------
SCHWAB ASSET DIRECTOR(R)-BALANCED GROWTH FUND
STATEMENT OF NET ASSETS
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
American Oncology
Resources Inc.* 300 $14,438
Amresco Inc. 300 5,175
Apollo Group, Inc.
Class A 900 39,713
Applix Inc. 200 7,725
Apria Healthcare
Group Inc.* 900 30,656
Aspen Technology Inc.* 200 11,050
Automatic Data
Processing, Inc. 1,100 42,763
BISYS Group, Inc.* 600 22,800
Borg-Warner Security
Corp.* 500 5,813
Bowne & Co. Inc. 200 3,600
Browning Ferris
Industries Inc. 800 25,800
Business Records Corp.* 100 3,613
CDI Corp.* 500 14,750
CMG Information Services
Inc. 200 6,025
Cambridge Technology
Partners* 200 13,475
Camco International Inc. 600 21,375
Catalina Marketing
Corp.* 200 15,575
Cerner Corp. 500 10,219
Checkfree Corp.* 600 11,475
Coastal Physician
Group Inc.* 300 2,513
Copart Inc.* 200 5,425
Corrections Corp. of
America 700 44,625
Coventry Corp.* 700 13,650
Dames & Moore Inc. 300 3,263
Data Broadcasting* 600 6,188
DeVRY Inc. 500 18,625
Deluxe Corp. 200 7,000
Dionex Corp. 200 7,375
Dun & Bradstreet Corp. 800 48,700
Ecolab Inc. 300 9,750
Electro Rental 200 4,900
Epic Design
Technology Inc. 200 6,775
Express Scripts Inc.
Class A* 500 24,438
Fair Isaac & Co. Inc. 200 8,550
First Data Corp. 1,000 76,000
Fleming
Companies, Inc. 2,000 27,500
Franklin Quest Co.* 300 8,100
G&K Services, Inc.
Class A 300 7,950
GRC International, Inc.* 200 7,750
H & R Block Inc. 300 10,538
Health Management
Systems, Inc. 300 7,838
Healthplan Services Corp.*
200 4,800
Henry Jack & Associates
Inc. 200 6,238
Heritage Media Corp.
Class A (New)* 500 19,188
Hon Industries Inc. 500 12,813
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
Hunt Manufacturing Co. 200 $ 3,350
ITT Educational Services
Inc. 300 9,300
Ideon Group Inc. 300 3,938
Information
Resources, Inc.* 300 4,331
Inphynet Medical
Management Inc.* 200 3,725
Integrated Health
Services Inc. 300 8,250
Integrated Systems Inc.
Class A 400 11,400
Interim Services Inc.* 200 8,638
Interpublic Group of
Companies, Inc. 300 14,025
Jacobs Engineering
Group Inc.* 600 16,650
John H. Harland Co. 800 21,000
Keane, Inc.* 200 7,875
Kinder Care Learning
Centers Inc.* 200 2,875
Laidlaw Inc. Class B
(Non Voting) 800 8,400
Magellan Health Services
Inc.* 700 15,050
Mariner Health
Group Inc.* 200 3,388
Maxicare Health Plans
Inc. (New)* 500 10,188
Medpartners/Mullikin
Inc.* 1,000 28,875
Molten Metal
Technology, Inc.* 600 19,200
Moore Corp. Ltd. 200 3,650
Morrison Health
Care Inc. 200 3,175
National Auto
Credit Inc. 330 4,703
National Data Corp. 500 17,625
National Education
Corp.* 600 8,925
National Service
Industries, Inc. 100 3,700
Netcom Online
Communications* 200 7,138
New England Business
Service, Inc. 200 3,750
Norrell Corp. 200 7,750
Occusystems Inc.* 300 8,738
Ogden Corp. 100 2,025
Orthodontic Centers of
America Inc. 400 15,700
Owen Healthcare Inc. 300 6,113
PAXAR Corp. 400 6,950
PHH Corp. 300 17,063
PSINet Inc. 700 9,844
Payment Services Inc. 300 8,625
Physician Corp. of
America* 800 11,900
Physician Reliance
Network* 600 26,175
Physicians Computer
Network* 800 8,900
</TABLE>
F-58
<PAGE> 180
SchwabFunds(R)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
R.R. Donnelley
& Sons Co. 500 $ 18,000
Republic Industries
Inc.* 1,100 35,956
Robert Half
International Inc.* 700 40,250
Rollins, Inc. 500 11,250
Rykoff-Sexton, Inc. 200 3,025
SEI Corp. 300 7,088
SPS Transaction
Services, Inc. 400 10,700
SUPERVALU Inc. 300 9,600
Safety-Kleen Corp. 100 1,500
Sanifill Inc. 300 13,013
Scientific Games
Holdings Corp. 200 6,400
Service Corp.
International 400 21,250
Shared Medical
Systems Corp. 100 6,888
Standard Register Co. 400 10,100
Steris Corp. 300 9,713
Sun Healthcare
Group Inc.* 900 13,613
Synetic Inc.* 500 17,438
True North
Communications 300 7,913
U S Order Inc.* 300 6,038
U.S.A. Waste
Services Inc.* 1,100 28,600
Unifirst Corp. 500 12,000
United Waste
Systems, Inc.* 500 27,688
Universal Health
Services Inc. Class B 200 11,100
Valassis Communications
Inc.* 600 9,450
WMX Technologies Inc. 2,100 72,975
Western Waste
Industries* 200 7,775
Zebra Technologies Corp.
Class A 400 9,950
---------
1,648,582
---------
CHEMICAL--1.4%
A. Schulman Inc. 700 15,313
Air Products &
Chemicals Inc. 400 22,850
Calgon Carbon Corp. 500 6,250
Cambrex Corp. 100 4,300
Chemed Corp. 200 7,525
Crompton & Knowles Corp. 900 13,838
Cytec Industries Inc.* 300 24,863
Dexter Corp. 600 16,125
Dow Chemical Co. 1,000 88,875
E.I. Du Pont de
Nemours & Co. 2,100 168,788
Eastman Chemical Co. 300 20,175
Ferro Corp. 700 19,425
First Mississippi Corp. 300 6,975
Geon Co. 600 15,900
Great Lakes Chemical
Corp. 200 13,650
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
H.B. Fuller Co. 200 $ 6,550
Hercules Inc. 600 36,300
Lawter
International Inc. 600 6,525
Lilly Industrial Inc.
Class A 300 4,350
Minnesota Mining &
Manufacturing Co. 1,600 105,200
Monsanto Co. 500 75,750
Morton International
Inc. 500 17,688
NCH Corp. 400 23,200
NL Industries Inc. (New) 1,000 14,375
Nalco Chemical Co. 300 9,150
OM Group Inc. 200 7,588
PPG Industries Inc. 700 35,438
Petrolite Corp. 200 6,325
Praxair Inc. 600 23,175
Rohm & Haas Co. 200 13,275
Scotts Co. Class A* 200 3,450
Sequa Corp. Class A* 100 3,513
Sigma-Aldrich Corp. 200 10,825
Sterling Chemicals Inc.* 700 7,963
Tredegar Industries Inc. 300 8,325
Union Carbide Corp. 500 22,750
Uniroyal Chemical Corp.* 300 3,544
W.R. Grace & Co. 400 31,000
WD-40 Co. 100 4,675
Wellman Inc. 600 14,400
-------
940,186
-------
CONSTRUCTION--0.3%
Apogee Enterprises, Inc. 100 2,638
Armstrong World
Industries, Inc. 100 5,700
Blount International
Inc. Class A 300 9,300
Calmat Co. 300 5,213
Centex Construction
Products Inc. 300 4,313
Centex Corp. 100 2,700
Crane Co. 100 4,150
Del Webb Corp. 200 3,575
Florida Rock
Industries, Inc. 100 2,525
Fluor Corp. 300 19,838
Granite
Construction Inc. 300 5,944
Insituform Technologies
Inc. Class A* 500 5,875
Kaufman & Broad Home
Corp. 500 7,063
Lone Star Industries,
Inc. (New) 200 7,175
Medusa Corp. 200 5,850
Oakwood Homes Corp. 600 26,775
Owens Corning* 100 4,025
Pulte Corp. 500 13,250
Sherwin Williams Co. 300 14,025
Southdown Inc. 200 4,700
Stanley Works 200 12,550
Stone & Webster, Inc. 200 6,800
TJ International Inc. 200 3,450
Toll Brothers, Inc.* 700 11,375
</TABLE>
F-59
<PAGE> 181
SchwabFunds(R)
- --------------------------------------------------------------------------------
SCHWAB ASSET DIRECTOR(R)-BALANCED GROWTH FUND
STATEMENT OF NET ASSETS
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
Triangle Pacific Corp.* 300 $ 4,988
U.S. Home Corp. (New)* 200 4,975
-------
198,772
-------
CONSUMER-DURABLE--0.3%
Bassett Furniture
Industries Inc. 200 5,100
Black & Decker Corp. 300 12,075
Champion
Enterprises Inc. 200 7,600
Chicago Miniature Lamp
Inc.* 200 8,125
Ethan Allen
Interiors Inc.* 200 5,200
Furniture Brands
International Inc.* 1,600 15,800
Harman International
Industries Inc. (New) 500 23,625
Kimball International
Inc. Class B 300 8,625
La-Z-Boy Chair Co. 300 8,888
Masco Corp. 500 13,625
Maytag Corp. 300 6,450
National Presto
Industries, Inc. 100 3,925
Newell Co. 600 17,100
Outboard Marine Corp. 400 7,900
Regal Beloit Corp. 300 5,813
Snap-on Tools Corp. 100 4,800
Sturm, Ruger & Co., Inc. 200 8,075
Toro Co. 200 6,375
Whirlpool Corp. 300 18,038
-------
187,139
-------
CONSUMER-NONDURABLE--0.7%
3DO Co.* 300 2,700
A.T. Cross Co. Class A 200 3,000
Acclaim
Entertainment Inc.* 900 9,281
American Greetings Corp.
Class A 200 5,538
Applebee's
International, Inc. 700 18,375
Buffets Inc.* 400 5,575
CKE Restaurants Inc. 400 7,900
CML Group, Inc. 600 2,700
Corning Inc. 1,000 34,750
Darden Restaurants Inc. 400 5,500
Department 56 Inc.* 300 7,463
Foxmeyer Health Corp. 200 3,900
Hasbro Inc. 300 11,025
IHOP Corp. (New)* 100 2,844
International Dairy
Queen Inc. Class A* 300 6,394
Jostens, Inc. 100 2,250
Landry's Seafood
Restaurants, Inc. 200 4,775
Luby's Cafeterias, Inc. 700 16,800
Mafco Consolidated Group
Inc.* 300 5,400
Mattel Inc. 1,125 29,250
McDonald's Corp. 2,800 134,050
Mikasa Inc. Class B* 300 3,563
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
Mohawk Industries Inc.* 700 $ 10,150
Morrison Fresh Cooking
Inc. 150 1,088
Papa John's
International, Inc. 300 14,775
Premark
International, Inc. 200 10,275
Rexall Sundown, Inc. 600 17,250
Rubbermaid Inc. 600 16,950
Ruby Tuesday Inc. 300 6,075
Russ Berrie & Co. Inc. 300 4,800
Ryan's Family Steak
Houses Inc.* 1,200 11,700
Sbarro, Inc. 300 7,875
Shoney's Inc.* 2,200 24,475
Sonic Corp. 300 5,775
Toy Biz Inc. Class A* 200 4,075
Wendy's
International, Inc. 300 5,738
Zenith Electronics
Corp.* 1,200 11,250
-------
475,284
-------
CONTAINERS--0.2%
ACX Technologies Inc. 600 11,625
Ball Corp. 1,600 49,800
Bemis Co, Inc. 100 3,238
Crown Cork & Seal Inc. 500 23,563
Gaylord Container Corp.
Class A* 700 7,175
Greif Brothers Corp.
Class A 600 15,750
Stone Container Corp. 200 3,400
-------
114,551
-------
ELECTRONICS--1.5%
AMETEK, Inc. 700 13,475
AMP Inc. 1,000 44,750
Advanced Micro Devices
Inc. 520 9,750
Allen Group Inc. 500 12,375
Alliance Semiconductor
Corp. 700 7,438
Altron Inc. 100 3,200
Applied Materials, Inc. 600 23,925
Augat Inc. 200 3,850
Aura Systems, Inc.* 1,200 6,150
Belden Inc. 400 11,900
Burr Brown 200 3,800
Cable Design
Technologies Corp. 300 9,825
Checkpoint Systems Inc. 400 11,950
Cyrix Corp.* 300 9,206
DSP
Communications Inc. 400 15,950
Dallas Semiconductor
Corp. 400 7,800
EG&G, Inc. 100 2,200
Electro Scientific
Industries Inc.* 100 2,400
Electroglas Inc. 400 7,850
FORE Systems, Inc. 200 15,763
Fluke Corp. 100 3,863
General Instrument
Corp.* 500 16,375
</TABLE>
F-60
<PAGE> 182
SchwabFunds(R)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
General Signal Corp. 100 $ 3,800
Gerber Scientific Inc. 300 5,063
Hadco Corp.* 100 3,056
Harris Corp. 100 6,175
Identix Inc.* 500 5,938
Input/Output Inc. 1,200 41,700
Integrated Process
Equipment Corp.* 300 7,894
Integrated Silicon
Solution* 300 4,988
Integrated Systems
Consulting Group
(Rights exp. 5/22/96)* 84 1,502
Intel Corp. 3,200 217,000
Itron, Inc.* 200 11,700
Kent Electronics Corp. 400 16,850
Kulicke & Soffa
Industries Inc. 300 5,625
LSI Logic Corp. 500 18,000
LTX Corp.* 400 3,875
Lattice Semiconductor Corp.*
600 19,613
Littlefuse, Inc.* 400 15,100
Logicon, Inc. 200 5,950
Marshall Industries* 300 9,563
Methode Electronics Inc.
Class A 500 8,250
Micron Technology Inc. 900 32,738
Motorola Inc. 2,300 140,875
National Semiconductor
Corp.* 300 4,725
Park Electrochemical
Corp. 200 5,000
Perkin-Elmer Corp. 100 5,488
Pioneer Standard
Electronics Inc. 300 4,875
Pittway Corp. Class A 300 14,325
Rexel Inc.* 300 4,013
S3 Inc. 800 11,400
Sanmina Corp. 200 7,050
Scientific-Atlanta, Inc. 200 3,700
Silicon Valley
Group Inc.* 400 10,650
Siliconix Inc. (New)* 200 5,800
Tektronix, Inc. 100 3,963
Teledyne Inc. 200 7,425
Texas Instruments Inc. 900 50,850
Thomas & Betts Corp. 200 7,875
Unitrode Corp.* 200 5,375
VLSI Technology, Inc.* 700 12,206
VeriFone, Inc.* 600 25,200
Vicor Corp. 600 9,113
Watkins-Johnson Co. 100 3,375
Wyle Electronics 200 8,375
Zilog Inc.* 300 11,288
---------
1,051,121
---------
ENERGY-DEVELOPMENT--0.9%
Amcol International
Corp. 200 2,300
Ashland Coal, Inc. 200 4,650
BJ Services Co.* 700 26,863
Baker Hughes Inc. 500 15,875
Benton Oil & Gas Co.* 300 5,269
Burlington
Resources Inc. 400 14,900
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
Cabot Oil & Gas Corp.
Class A 300 $ 4,950
Chesapeake Energy Corp. 300 21,225
Devon Energy Corp. 300 7,650
Dresser Industries Inc. 700 22,313
Energy Ventures, Inc.* 300 9,000
Falcon Drilling Inc.* 500 13,531
Global Industrial
Technologies Inc.* 300 5,513
Global Natural Resources
Inc.* 300 4,350
Halliburton Co. 500 28,688
Helmerich & Payne Inc. 700 25,813
Landmark Graphics Corp.* 500 9,750
Louis Dreyfus Natural
Gas Corp.* 300 3,825
Louisiana Land &
Exploration Co. 100 5,413
MAXXAM Inc.* 100 4,550
McDermott International
Inc. 100 2,100
Nabors Industries Inc.* 1,400 21,525
Newfield
Exploration Co.* 500 17,125
Noble Drilling Corp.* 1,500 22,500
Nuevo Energy Co.* 200 5,650
Occidental Petroleum
Corp. 1,200 30,900
Parker & Parsley
Petroleum Co. 800 19,700
Parker Drilling Co.* 700 5,338
Phoenix Resource Cos.,
Inc. (New) 200 5,100
Pride Petroleum Services
Inc.* 500 8,250
Production Operators
Corp. 100 3,363
Reading & Bates Corp.
(New)* 1,100 26,950
Rowan Cos. Inc.* 1,900 28,025
Schlumberger Ltd. 900 79,425
Seitel, Inc. (New)* 100 2,763
Solv-Ex Corp.* 300 4,238
Tom Brown Inc. (New)* 300 4,688
United Meridian Corp.* 400 12,400
Varco International
Inc.* 600 9,975
Vintage Petroleum Inc. 300 7,313
Weatherford Enterra
Inc.* 1,000 35,250
Zeigler Coal Holding Co. 300 4,425
-------
593,431
-------
FOOD-AGRICULTURE--2.1%
AG Chemical Equipment
Inc. 100 1,638
Archer-Daniels-
Midland Co. 2,200 41,525
Bob Evans Farms, Inc. 800 12,650
CPC International Inc. 500 34,563
Campbell Soup Co. 1,100 68,750
Chiquita Brands
International Inc. 1,000 14,625
Coca-Cola Bottling Co. 100 3,363
Coca-Cola Co. 5,000 407,500
ConAgra, Inc. 1,000 38,625
Delta & Pine Land Co. 799 35,655
</TABLE>
F-61
<PAGE> 183
SchwabFunds(R)
- --------------------------------------------------------------------------------
SCHWAB ASSET DIRECTOR(R)-BALANCED GROWTH FUND
STATEMENT OF NET ASSETS
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
Dimon Inc. 800 $ 13,600
Dreyers Grand
Ice Cream Inc. 200 6,850
Earthgrains Co.* 44 1,425
Farmer Brothers Co. 100 13,500
Flowers Industries, Inc. 800 10,700
General Mills Inc. 600 33,300
H.J. Heinz Co. 1,400 47,425
Hershey Foods Corp. 300 22,763
Hudson Foods Inc. Class
A 400 5,300
International Multifoods
Corp. 200 3,775
Interstate Bakeries
Corp. (New) 800 19,000
J.M. Smucker Co. Class A 700 14,788
J.M. Smucker Co. Class B
(Non Voting) 300 6,000
JP Foodservice, Inc.* 300 6,600
Kellogg Co. 900 64,238
Lance Inc. 400 6,300
Mississippi Chemical
Corp. (New) 600 12,150
Mycogen Corp.* 400 7,000
Pepsico Inc. 3,000 190,500
Pioneer HI Bred
International Inc. 300 16,725
Quaker Oats Co. 400 13,750
Ralcorp Holdings, Inc.* 500 11,000
Ralston Purina Co. 400 23,350
Richfood Holdings Inc. 700 22,881
Sara Lee Corp. 1,900 58,900
Savannah Foods &
Industries Inc. 300 3,263
Seaboard Corp. 100 21,550
Smithfield Foods Inc.* 500 14,875
Sysco Corp. 700 22,488
Unilever 600 81,900
WLR Foods, Inc. 200 2,425
Whitman Corp. 300 7,575
Wm Wrigley Junior Co. 400 21,050
---------
1,465,840
---------
GOLD--0.2%
Barrick Gold Corp. 1,300 39,813
Battle Mountain Gold Co. 1,200 10,650
FMC Gold Co. 900 5,738
FirstMiss Gold Inc.* 500 15,438
Homestake Mining Co. 600 12,075
Newmont Mining Corp. 300 17,363
Placer Dome Inc. 1,000 27,750
Santa Fe Pacific Gold
Corp. 300 4,463
---------
133,290
---------
HEALTHCARE--4.2%
ALZA Corp.* 200 5,700
Abbott Laboratories 3,100 125,938
Acuson* 300 5,700
Advanced Technology
Laboratories, Inc.* 200 6,500
Advanced Tissue Sciences
Inc.* 400 6,800
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
Agouron Pharmaceuticals
Inc.* 200 $ 8,150
Allergan Inc. 300 10,613
Alliance Pharmaceutical
Corp.* 400 7,300
Alpharma, Inc. 300 7,350
American Home Products
Corp. 1,200 126,600
Amgen Inc. 1,200 68,925
Amsco International,
Inc.* 400 5,800
Ballard Medical Products 600 11,925
Bausch & Lomb Inc. 200 7,975
Baxter International
Inc. 1,100 48,675
Becton Dickinson & Co. 200 16,125
Benson Eyecare Corp.* 600 5,475
Beverly Enterprises,
Inc.* 200 2,425
Bio Rad Laboratories
Inc. Class A* 100 4,650
Biomet Inc.* 300 4,406
Block Drug Inc. Class A 309 11,510
Boston Scientific Corp.* 637 27,471
Bristol Myers
Squibb Co. 1,900 156,275
C.R. Bard Inc. 200 7,300
CNS, Inc. 300 5,888
Carter Wallace Inc. 900 14,175
Columbia/HCA Healthcare
Corp. 1,800 95,625
Community Health Systems
Inc.* 300 13,013
Community Psychiatric
Centers 700 6,475
Conmed Corp. 200 6,025
Copley Pharmaceutical
Inc.* 200 3,050
Cygnus Therapeutic
Systems, Inc.* 300 6,431
Daig Corp. 200 4,688
Datascope Corp.* 200 3,550
Diagnostic Products
Corp. 200 8,375
Eli Lilly & Co. 2,300 135,700
Enzo Biochem Inc. 300 5,513
Fresenius U.S.A. Inc.* 300 6,000
Genesis Health Ventures,
Inc. 750 22,219
Gilead Sciences Inc.* 600 18,450
GranCare, Inc.* 400 7,200
Gulf South Medical
Supply Inc. 200 8,175
Haemonetics Corp.* 400 7,700
HealthSouth
Rehabilitation Corp. 938 34,823
Herbalife International
Inc. 300 4,125
Human Genome Sciences
Inc.* 500 19,938
Humana Inc.* 700 17,238
I-Stat Corp.* 200 5,800
ICN Pharmaceuticals,
Inc. 404 9,090
Immulogic Pharmaceutical
Corp.* 400 4,375
Immunex Corp. (New)* 800 12,550
</TABLE>
F-62
<PAGE> 184
SchwabFunds(R)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
Interneuron
Pharmaceuticals* 700 $ 27,388
Invacare Corp. 700 18,025
Isis Pharmaceuticals* 300 3,788
Isolyser Inc. 600 10,500
Johnson & Johnson 2,600 240,500
Kinetic Concepts Inc. 600 8,925
Life Technologies, Inc.
(New) 200 5,700
Ligand Pharmaceuticals
Inc. Class B 500 7,406
Lincare Holdings Inc.* 400 15,500
Liposome Inc.* 700 17,194
Living Centers of
America* 300 11,100
Mallinckrodt Group Inc. 200 7,875
Manor Care, Inc. 200 8,025
Medimmune Inc.* 400 6,700
Medisense Inc.* 500 22,438
Medtronic Inc. 1,000 53,125
Mentor Corp. 600 14,025
Merck & Co. Inc. 4,900 296,450
Multicare Cos. Inc. 500 14,188
Natures Sunshine
Products Inc. 300 7,425
Nellcor Puritan Bennett
Inc.* 700 34,300
Neoprobe Corp.* 300 5,194
Neurogen Corp.* 200 5,638
Nexstar Pharmaceuticals
Inc.* 400 9,800
North American Vaccine
Inc.* 500 10,313
Novacare Inc.* 800 5,800
Omnicare Inc. 400 24,000
Owens & Minor Inc. (New)
400 5,400
PDT Inc. 200 9,525
PHP Healthcare Corp. 200 6,100
PLC Systems Inc.* 300 8,925
Patterson Dental Co.* 500 15,000
Pfizer Inc. 2,400 165,300
Pharmacia & Upjohn Inc. 1,900 72,675
Physician Sales &
Service Inc. 300 8,213
Physicians Health
Services, Inc. Class
A* 100 3,250
Protein Design Labs,
Inc.* 300 7,913
Pyxis Corp.* 700 17,763
Quintiles Transnational
Corp. 400 29,250
Regeneron
Pharmaceuticals Inc.* 400 5,675
Renal Treatment Centers
Inc. 400 11,600
Respironics Inc. 200 4,325
RoTech Medical Corp. 200 8,300
Roberts Pharmaceutical
Corp.* 200 3,750
Salick Health Care,
Inc.* 200 7,625
Schering Plough Corp. 1,500 86,063
Sepracor Inc.* 300 4,200
Sequus Pharmaceuticals
Inc.* 500 8,750
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
Sofamor/Danek Group
Inc.* 600 $ 19,650
Sola International Inc.* 400 13,100
Somatogen Inc.* 500 8,281
SpaceLabs Medical Inc.* 100 2,263
St. Jude Medical, Inc. 300 10,931
Sunrise Medical Inc.* 200 3,650
Target Therapeutics Inc. 200 10,825
Tecnol Medical Products
Inc.* 300 5,888
Tenet Healthcare Corp.* 800 16,400
Thermedics Inc.* 500 15,125
U.S. Healthcare, Inc. 600 31,313
United Healthcare Corp. 800 46,800
United States Surgical
Corp. 100 3,700
Ventritex Inc. 300 4,669
Vertex Pharmaceuticals
Inc.* 500 14,750
VISX Inc.* 300 10,200
Vital Signs Inc. 200 4,225
Vivra Inc. 900 28,463
Vivus* 200 6,025
Warner Lambert Co. 600 67,050
West Co Inc. 200 4,550
---------
2,884,561
---------
HOUSEHOLD PRODUCTS--0.7%
Alberto Culver Co. Class
B (Convertible) 100 3,788
Avon Products, Inc. 300 26,663
Bush Boake Allen Inc.* 300 8,100
Church & Dwight Inc. 300 6,600
Clorox Co. 200 16,525
Colgate-Palmolive Co. 600 45,975
Dial Corp. 400 11,250
Gillette Co. 1,800 97,200
International Flavors &
Fragrances Inc. 400 19,650
Libbey Inc. 200 4,650
Playtex Products Inc.* 600 5,250
Procter & Gamble Co. 2,600 219,700
---------
465,351
---------
IMAGING & PHOTO--0.3%
Avid Technology, Inc.* 300 5,831
BMC Industries, Inc. 600 16,050
C-Cube Microsystems,
Inc. 600 29,550
Chyron Corp.* 1,800 7,200
Eastman Kodak Co. 1,400 107,100
OIS Optical Imaging
Systems Inc.* 1,700 6,800
Photronic, Inc. 200 5,275
Polaroid Corp. 100 4,500
Robotic Vision Systems
Inc.* 300 5,156
Ultratech Stepper Inc. 300 7,800
-------
195,262
-------
</TABLE>
F-63
<PAGE> 185
SchwabFunds(R)
- --------------------------------------------------------------------------------
SCHWAB ASSET DIRECTOR(R)-BALANCED GROWTH FUND
STATEMENT OF NET ASSETS
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
INSURANCE--1.7%
Acordia, Inc. 200 $ 6,350
Aetna Life &
Casualty Co. 400 28,500
Alexander & Alexander
Services 2,400 45,300
Alfa Corp. 800 10,400
Allied Group Inc. 100 3,588
Allstate Corp. 1,800 69,975
American Annuity Group,
Inc. 500 6,250
American Bankers
Insurance Group, Inc. 300 11,813
American General Corp. 800 28,100
American Heritage Life
Investment Corp. 200 4,650
American International
Group, Inc. 1,800 164,475
American Travellers
Corp. 300 5,906
Aon Corp. 500 26,813
Argonaut Group, Inc. 500 15,625
Arthur J. Gallagher
& Co. 500 16,250
CMAC Investment Corp. 200 11,200
Capital Re Corp. 200 7,500
Capitol American
Financial Corp. 200 4,825
Capsure Holdings Corp.* 300 5,288
Chubb Corp. 300 28,388
Cigna Corp. 300 34,013
Citizens Corp. 800 15,600
Commerce Group Inc. 800 16,000
Compdent Corp.* 200 8,825
Crawford & Co. Class A 200 3,250
Crawford & Co. Class B 500 8,125
Delphi Financial Group,
Inc. Class A* 200 5,575
E.W. Blanch Holdings
Inc. 200 4,125
Enhance Financial
Services Group Inc. 500 13,563
Executive Risk Inc. 200 6,200
Financial Security
Assured Holdings Ltd. 400 10,800
Foremost Corp. of
America 200 10,700
Fremont General Corp. 750 18,750
Frontier Insurance
Group, Inc. 200 6,450
General Re Corp. 300 42,863
HCC Insurance Holdings,
Inc. 200 11,700
Harleysville Group Inc. 200 5,500
Highlands Insurance
Group Inc.* 30 570
Home Beneficial Corp.
Class B 500 12,938
Horace Mann Educators
Corp. (New) 600 19,725
ITT Hartford Group Inc. 400 19,550
Integon Corp. 200 3,850
Jefferson-Pilot Corp. 300 15,825
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
John Alden Financial
Corp. 600 $ 11,700
Kansas City Life
Insurance Co. 100 5,513
Liberty Corp. 300 9,525
Life Partners Group Inc. 600 12,525
Life Re Corp. 200 5,975
Lincoln National Corp.
Inc. 400 19,300
MAIC Holdings Inc. 106 3,445
Markel Corp.* 100 8,225
Marsh & McLennan
Companies 300 28,200
NAC Re Corp. 300 9,825
National Re Corp. 500 17,750
Orion Capital Corp. 200 8,875
Penncorp Financial Group
Inc. 600 18,375
Presidential Life Corp. 400 3,925
Providian Corp. 300 13,838
Reinsurance Group of
America Inc. 500 20,750
Safeco Corp. 400 13,175
Selective Insurance
Group, Inc. 200 6,300
Sierra Health Services
Inc.* 500 16,500
St. Paul Companies, Inc. 300 15,938
State Auto Financial
Corp. 200 4,850
Torchmark Corp. 200 8,600
Transamerica Corp. 300 22,800
Trenwick Group Inc. 100 4,813
UNUM Corp. 300 17,850
USF&G Corp. 300 4,763
USLIFE Corp. 100 2,813
United Companies
Financial Corp. 700 22,488
United Dental Care Inc.* 100 3,950
United Insurance
Companies, Inc. 800 17,000
United Wisconsin
Services, Inc. 200 4,425
Vesta Insurance Group
Inc. 300 9,638
W.R. Berkley Corp. 300 12,900
Washington National
Corp. 200 5,525
Zenith National
Insurance Corp. 200 5,025
---------
1,192,792
---------
MEDIA--1.1%
AMC Entertainment Inc.* 200 5,175
BET Holdings, Inc.
Class A* 200 5,850
Cablevision Systems
Corp. Class A* 200 9,975
Carmike Cinemas Inc.* 100 2,663
Central Newspapers Inc.
Class A 600 21,825
Century Communications
Corp. Class A* 1,300 12,594
Citicasters Inc. 300 9,000
Comcast Corp. Class A 700 12,206
</TABLE>
F-64
<PAGE> 186
SchwabFunds(R)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
Dow Jones & Co. Inc. 400 $ 14,950
Emmis Broadcasting Corp.
Class A* 200 8,625
Evergreen Media* 300 11,888
GC Companies Inc.* 100 3,613
Gannett Inc. 700 47,863
Harte Hanks
Communications (New) 450 10,631
Heartland Wireless
Communications, Inc.* 200 5,600
Houghton Mifflin Co. 200 9,275
Interdigital Commerce
Corp.* 500 4,156
International Cabletel
Inc. 700 20,606
International Family
Entertainment Inc.
Class B 875 13,344
Jacor Communications
Inc.* 200 4,300
John Wiley & Son, Inc.
Class A 500 17,250
King World Productions,
Inc.* 100 4,350
Knight-Ridder, Inc. 200 14,475
McClatchy Newspapers
Inc. Class A 700 16,975
McGraw-Hill, Inc. 400 17,650
Media General, Inc.
Class A 400 15,400
Meredith Corp. 100 4,538
Metromedia International
Group., Inc. 700 9,450
Movie Gallery Inc.* 200 6,200
New World Communications
Class A* 400 7,475
New York Times Co.
Class A 400 13,000
Oak Industries Inc.* 200 5,400
Paxson Communications
Corp. 300 4,463
Pulitzer Publishing Co. 500 28,500
Regal Cinemas, Inc. 300 12,281
Renaissance
Communications Corp. 700 19,338
SBC Communications Inc. 2,500 125,000
TCA Cable TV Inc. 600 17,625
Tele Communications
Inc. (New)--TCI
Group Series A 2,700 51,806
Time Warner Inc. 1,600 65,400
Times Mirror Co. (New)
Series A 400 17,050
Tribune Co. (New) 200 13,950
United International
Holdings Inc. Class A* 200 2,900
Viacom Inc. Class B* 1,400 57,400
Westcott Communications
Inc.* 200 4,263
Westwood One Inc.* 400 7,075
-------
793,353
-------
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
MISCELLANEOUS FINANCE--1.4%
1st Source Corp. 210 $ 4,778
AMCORE Financial, Inc. 200 4,050
Aames Financial Corp. 200 8,825
Alex Brown Inc. 500 27,063
American Express Co. 1,900 92,150
Americredit Corp.* 400 5,750
Astoria Financial Corp. 200 10,675
Beneficial Corp. 200 11,050
Bok Financial Corp.
(New) 300 6,225
Cal-Federal Bancorp
Inc.* 1,600 28,600
Charter One Financial
Inc. 900 31,556
Coast Savings Financial
Inc.* 300 9,338
Collective Bancorp Inc. 300 7,256
Commercial Federal Corp. 200 7,675
Dean Witter Discover &
Co. 600 32,700
Downey Financial Corp. 210 4,541
Eaton Vance Corp. (Non
Voting) 100 3,088
Federal Home Loan
Mortgage Corp. 700 58,363
Federal National
Mortgage Assoc. 4,200 128,625
First American Financial
Corp. 200 5,500
First Financial Corp. 700 16,538
Fund American
Enterprises Holdings,
Inc. 400 30,600
Glendale Federal Bank
(FSB) (New)* 800 14,000
Golden West Financial
Corp. 200 10,525
Great Financial Corp. 200 5,488
Great Western Financial
Corp. 400 9,200
Green Tree Financial
Corp. 500 16,875
H.F. Ahmanson & Co. 300 7,125
Home Financial Corp. 300 4,200
Household International
Inc. 400 27,650
Inter-Regional Financial
Group, Inc. 150 3,281
Interpool Inc. 200 3,600
JSB Financial, Inc. 200 6,800
Leader Financial Corp. 200 8,838
Legg Mason, Inc. 200 5,750
Merrill Lynch & Co. Inc. 700 42,263
Money Store Inc. 1,050 26,644
Morgan Stanley Group
Inc. 600 30,150
North American Mortgage
Co. 200 3,375
Olympic Financial Ltd.* 300 6,675
Peoples Heritage
Financial Group, Inc. 200 4,200
Pioneer Group Inc. 600 15,900
</TABLE>
F-65
<PAGE> 187
SchwabFunds(R)
- --------------------------------------------------------------------------------
SCHWAB ASSET DIRECTOR(R)-BALANCED GROWTH FUND
STATEMENT OF NET ASSETS
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
Quick & Reilly Group,
Inc. 600 $ 18,300
RCSB Financial Inc. 200 4,713
Raymond James Financial
Inc. 300 6,788
Roosevelt Financial
Group Inc. 800 15,400
Salomon Inc. 400 16,250
Sovereign Bancorp Inc. 630 7,009
St. Paul Bancorp Inc. 300 7,294
Standard Financial Inc. 200 2,988
Student Loan Corp. 300 10,725
Travelers Group Inc. 1,300 79,950
Value Line, Inc. 200 6,950
WFS Financial Inc.* 400 7,975
Westcorp Inc. 300 5,888
-------
977,715
-------
MOTOR VEHICLE--1.0%
A.O. Smith Corp. Class B 400 9,200
Arctco, Inc. 400 3,875
Arvin Industries, Inc. 700 15,750
Borg Warner Automotive
Inc. 600 22,875
Breed Technologies Inc. 700 15,050
Chrysler Corp. 1,500 94,125
Cummins Engine Inc. 100 4,675
Dana Corp. 400 13,300
Detroit Diesel Corp.* 600 11,475
Eaton Corp. 300 18,150
Echlin Inc. 200 6,875
Federal Mogul Corp. 800 15,200
Fleetwood Enterprises,
Inc. 100 2,625
Ford Motor Co. 4,500 161,438
General Motors Corp. 3,000 162,750
Gentex Corp.* 200 7,875
Genuine Parts Co. 400 17,700
Hayes Wheels
International Inc. 500 15,188
Mascotech Inc. 1,000 13,125
Modine Manufacturing Co. 400 11,000
PACCAR Inc. 100 4,975
Standard Products Co. 200 5,075
Superior Industries
International, Inc. 400 10,950
TRW Inc. 300 28,163
Titan Wheel
International Inc. 300 4,838
-------
676,252
-------
NON-FERROUS--0.4%
A.M. Castle & Co. 200 6,700
Alcan Aluminum Ltd. 900 28,688
Aluminum Company of
America 700 43,663
Asarco Inc. 100 3,313
Brush Wellman Inc. 200 3,750
Coeur d'Alene Mines
Corp. 500 9,938
Commercial Metals Co. 200 6,000
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
Cyprus Amax Minerals Co. 400 $ 10,850
Echo Bay Mines Ltd 300 3,938
Engelhard Corp. 400 10,050
Freeport McMoran Copper
& Gold Class B 900 29,588
Hecla Mining Co.* 600 4,650
Inco Ltd. 500 16,813
Minerals Technologies
Inc. 500 19,250
Mueller Industries Inc. 500 20,125
Phelps Dodge Corp. 300 22,050
Reynolds Metals Co. 200 10,750
Stillwater Mining Co.* 500 11,875
Sunshine Mining &
Refining Co.* 2,400 3,900
Wolverine Tube Inc.* 200 7,350
---------
273,241
---------
OIL-DOMESTIC--0.5%
Amerada Hess Corp. 300 16,988
Ashland Inc. 200 8,225
Atlantic Richfield Co. 600 70,650
Barrett Resources Corp.* 600 16,650
Cross Timbers Oil Co. 200 4,000
Diamond Shamrock Inc. 700 23,713
Kerr-McGee Corp. 200 12,775
Oryx Energy Co.* 200 3,200
Pennzoil Co. 100 4,425
Phillips Petroleum Co. 1,000 41,500
Pogo Producing Co. 700 25,288
Quaker State Corp. 400 6,300
Santa Fe Energy
Resources, Inc.* 200 2,400
Smith International
Inc.* 800 23,800
Snyder Oil Corp. 400 3,600
Sun Inc. 200 6,200
USX Corp. (Marathon
Group) (New) 1,100 24,200
Unocal Corp. 1,000 32,125
---------
326,039
---------
OIL-INTERNATIONAL--1.9%
Amoco Corp. 2,000 146,000
Chevron Corp. 2,500 145,000
Exxon Corp. 4,900 416,500
Mobil Corp. 1,500 172,500
Royal Dutch
Petroleum Co. 2,300 329,475
Texaco Inc. 1,100 94,050
Western Atlas, Inc.* 200 12,000
---------
1,315,525
---------
PAPER--0.6%
Alco Standard Corp. 500 28,938
Boise Cascade Corp. 100 4,650
Caraustar Industries
Inc. 600 15,075
Champion International
Corp. 300 14,475
Chesapeake Corp. 600 17,325
Georgia Pacific Corp. 300 23,325
International Paper Co. 1,100 43,863
James River Corp. 200 5,350
</TABLE>
F-66
<PAGE> 188
SchwabFunds(R)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
Kimberly Clark Corp. 1,190 $ 86,424
Longview Fibre Co. 1,000 17,625
Louisiana Pacific Corp. 300 7,538
Mead Corp. 200 11,125
P.H. Glatfelter Co. 600 9,975
Potlatch Corp. 100 4,263
Rock Tennessee Co.
Class A 400 7,025
Schweitzer Mauduit
International Inc. 50 1,356
Shorewood Packaging
Corp.* 200 3,450
Temple-Inland Inc. 200 9,700
Thermo Fibertek Inc. 800 18,300
Union Camp Corp. 200 10,875
Wausau Paper Mills Co. 875 20,125
Westvaco Corp. 400 12,400
Weyerhaeuser Co. 1,000 49,500
Willamette Industries,
Inc. 200 12,350
-------
435,032
-------
PRODUCER GOODS-MANUFACTURING--2.8%
Albany International
Corp. Class A (New) 700 15,050
Allied Signal Inc. 1,200 69,750
American Financial
Enterprises Inc. 200 4,850
Applied Power Inc.
Class A 200 6,275
AptarGroup, Inc. 300 11,288
Avery Dennison Corp. 200 11,400
BT Office Products
International Inc.* 600 10,425
BW/IP Holding, Inc.
Class A 300 6,225
Baldor Electric Co. 400 8,650
Barnes Group Inc. 100 4,638
Bearings Inc. (New) 150 4,800
Blyth Industries Inc. 400 15,900
Boise Cascade Office
Products Corp. 700 54,775
Briggs & Stratton Corp. 100 4,538
Case Corp. 300 15,150
Caterpillar Inc. 900 57,600
Cincinnati Milacron Inc. 100 2,638
Clarcor Inc. 200 3,950
Coherent Inc.* 200 10,738
Collins & Aikman Corp.* 1,400 9,800
Commercial Intertech
Corp. 200 3,800
Cooper Industries Inc. 400 17,000
Corporate Express, Inc. 240 8,985
Credence Systems Corp. 300 6,488
Deere & Co. 1,000 38,875
Donaldson Inc. 400 10,500
Dover Corp. 400 20,600
Duriron Inc. 600 15,750
Emerson Electric Co. 900 75,263
FMC Corp. (New)* 100 6,938
Fisher Scientific
International, Inc. 500 18,688
Foster Wheeler Corp. 100 4,625
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
General Binding Corp. 200 $ 4,600
General Electric Co. 6,500 503,750
Giddings & Lewis Inc. 800 14,800
Goulds Pumps Inc. 300 7,031
Graco Inc. 300 6,038
Greenfield Industries
Inc. 500 18,969
Griffon Corp.* 400 3,600
Harnischfeger Industries
Corp. 100 4,050
Helix Technology Corp. 100 3,769
Herman Miller Inc. 400 12,300
IDEX Corp. 300 11,775
ITT Industries Inc. 400 11,000
Illinois Tool Works Inc. 400 26,900
Ingersoll Rand Co. 400 15,500
Insilco Corp.* 100 3,469
Interface Inc. Class A 200 2,613
Ionics Inc. 200 9,600
JLG Industries Inc. 300 16,425
Johnson Controls, Inc. 200 14,300
Juno Lighting Inc. 200 2,975
Kaydon Corp. 500 19,875
Kennametal Inc. 400 15,150
Keystone International
Inc. 800 17,500
Lawson Products, Inc. 200 4,600
Lincoln Electric Co. 100 2,675
Lincoln Electric Co.
Class A (Non Voting) 400 11,300
Lydall Inc. 200 4,700
Measurex Corp. 200 5,800
Millipore Corp. 100 4,188
Mine Safety
Appliances Co. 100 4,438
Myers Industry Inc. 200 3,625
NN Ball & Roller, Inc. 300 7,500
Navistar International
Corp.* 4,300 51,600
Nu-Kote Holding Inc.
Class A 300 5,325
Pall Corp. 300 8,400
Parker Hannifin Corp. 200 8,450
Precision Castparts
Corp. 600 26,025
Presstek Inc. 500 69,438
Raychem Corp. 200 15,575
Roper Industries 500 23,563
SPS Technologies, Inc. 100 6,500
Standex International
Corp. 200 5,400
Stewart & Stevenson
Services, Inc. 500 14,750
TRINOVA Corp. 1,600 56,400
Teleflex Inc. 300 13,913
Tencor Instruments 400 9,875
Tenneco Inc. 600 32,925
Texas Industries Inc. 200 12,800
Timken Co. 100 3,963
TriMas Corp. 700 16,538
Triarc Cos., Inc.
Class A* 400 5,050
Tyco Interest Ltd 600 23,175
U.S. Filter Corp. (New) 600 18,450
UNR Industries, Inc. 700 6,475
</TABLE>
F-67
<PAGE> 189
SchwabFunds(R)
- --------------------------------------------------------------------------------
SCHWAB ASSET DIRECTOR(R)-BALANCED GROWTH FUND
STATEMENT OF NET ASSETS
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
Valhi, Inc. (New) 1,600 $ 10,400
Valmont Industries, Inc. 200 6,450
Varity Corp.* 100 4,263
W.W. Grainger, Inc. 200 13,800
WMS Industries Inc.* 300 5,438
Watts Industries Inc.
Class A 700 14,350
Westinghouse Air Brake
Co. (New) 300 4,238
Westinghouse Electric
Corp. 1,500 28,313
Westpoint Stevens Inc.
Class A 700 14,744
Wyman Gordon Co.* 700 12,775
X-Rite, Inc. 300 5,250
Zero Corp. 200 3,600
Zurn Industries, Inc. 300 6,113
---------
1,915,091
---------
RAILROAD--0.3%
Burlington Northern
Santa Fe 500 43,750
CSX Corp. 800 41,000
Conrail Inc. 300 20,925
Florida East Coast
Industry Inc. 200 17,800
Norfolk Southern Corp. 500 42,000
Union Pacific Corp. 900 61,313
---------
226,788
---------
REAL PROPERTY--0.1%
Avatar Holdings, Inc.* 100 3,900
Catellus Development
Corp.* 900 8,213
Forest City Enterprises,
Inc. Class A 100 3,775
Insignia Financial Group
Class A (New) 800 17,600
Lennar Corp. 800 20,000
Price Enterprises Inc. 300 4,800
---------
58,288
---------
RETAIL--2.1%
Albertson's Inc. 1,100 42,350
American Stores Co.
(New) 600 20,025
AnnTaylor Stores Corp.* 300 5,138
Arbor Drugs, Inc. 600 12,225
Best Buy Co., Inc.* 800 15,400
Blair Corp. 100 2,613
Burlington Coat Factory
Warehouse* 500 5,438
CDW Computer Centers
Inc.* 200 15,450
CUC International Inc. 800 26,300
Carson Pirie Scott &
Co.* 200 4,850
Casey's General Stores
Inc. 400 8,625
Cato Corp. (New) 300 2,850
Charming Shoppes Inc. 1,500 9,656
Circle K Corp.* 400 12,500
Circuit City Stores Inc. 400 12,700
Claire's Stores Inc. 450 9,788
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
CompUSA Inc. 800 $27,700
Dayton Hudson Corp. 300 28,650
Dillard Department
Stores Inc. Class A 400 16,050
Dollar Tree Stores Inc. 750 25,125
Duty Free International
Inc. 600 8,025
Family Dollar Stores,
Inc. 1,000 15,250
Federated Department
Stores Inc.* 900 30,038
Fingerhut Companies,
Inc. 600 7,650
Fred Meyer Inc.* 400 11,500
Fruit of the Loom Inc.
Class A* 200 5,275
Gap Inc. 1,000 30,125
Giant Food Inc. Class A 100 3,188
Great Atlantic & Pacific
Tea Co., Inc. 100 3,488
Gymboree Corp.* 600 15,600
Harcourt General Inc. 200 8,800
Hollywood Entertainment
Corp. 500 8,156
Home Depot Inc. 2,000 94,750
Home Shopping Network,
Inc.* 1,400 16,450
J.C. Penney Inc. 800 39,600
Just for Feet Inc. 500 23,906
K Mart Corp. 1,800 18,225
Kroger Co.* 500 20,563
Lands' End, Inc.* 700 13,825
Limited Inc. 1,144 23,738
Longs Drug Stores Corp. 100 4,525
Lowe's Cos. Inc. 500 16,188
MacFrugals Bargains-
Close-Out* 300 4,013
May Department
Stores Co. 900 45,900
Melville Corp. 400 15,550
Mercantile Stores Co.,
Inc. 100 6,238
Michaels Stores Inc.* 300 5,531
Nordstrom Inc. 400 20,300
Pep Boys--Manny,
Moe & Jack 200 6,675
Petco Animal Supplies
Inc. 300 8,700
Pier 1 Imports Inc. 500 6,688
Price Costco Inc.* 700 13,256
Proffitt's, Inc.* 400 13,150
Quality Food Centers,
Inc. 200 5,250
Regis Corp. 200 7,375
Rite Aid Corp. 200 5,925
Ross Stores Inc. 600 20,775
Ruddick Corp. 600 7,950
Sears Roebuck & Co. 1,500 74,813
Service Merchandise Co.
Inc.* 1,300 6,175
Shopko Stores Inc. 400 6,200
Smart & Final Inc. 300 6,825
Smith's Food & Drug
Centers, Inc. Class B 400 10,000
</TABLE>
F-68
<PAGE> 190
SchwabFunds(R)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
Sotheby's Holdings, Inc.
Class A 800 $ 11,300
Spiegel, Inc. Class A
(Non Voting) 1,700 17,000
Sports Authority Inc.* 300 8,925
Stanhome Inc. 300 8,850
Stein Mart Inc.* 400 6,350
TJX Companies, Inc. 200 5,900
Tandy Corp. 300 15,563
Tiffany & Co. (New) 500 32,625
Toys 'R' Us, Inc.* 1,000 27,875
United Stationers Inc. 200 4,525
Vitalink Pharmacy
Services, Inc.* 200 4,525
Waban Inc.* 700 17,150
Wal-Mart Stores, Inc. 8,900 212,488
Walgreen Co. 1,100 35,200
Williams-Sonoma Inc.* 600 15,038
Winn Dixie Stores Inc. 600 19,800
Woolworth Corp. 300 5,738
Zale Corp. (New)* 500 9,406
---------
1,477,845
---------
STEEL--0.2%
Armco Inc.* 1,700 9,563
Bethlehem Steel Corp.* 300 4,088
Birmingham Steel Corp. 400 6,400
Carpenter Technology
Corp. 500 18,813
Chaparral Steel Co. 600 9,075
Cleveland Cliffs Inc. 200 8,350
Inland Steel Industries,
Inc. 100 2,463
Intermet Corp.* 300 4,388
J & L Specialty Steel
Inc. 800 14,500
Lukens Inc. 200 5,275
National Steel Corp.
Class B* 600 8,175
Nucor Corp. 300 16,875
Oregon Steel Mills Inc. 200 3,175
Quanex Corp. 200 4,400
Rouge Steel Co. Class A 200 4,475
USX Corp.
(U.S. Steel Group) 200 6,600
WHX Corp.* 300 3,450
Worthington Industries
Inc. 200 4,088
---------
134,153
---------
TELEPHONE--2.6%
360 Communications Co.* 466 10,951
AT&T Corp. 6,200 379,750
Airtouch Communications
Inc.* 1,900 59,375
Alltel Corp. 700 23,013
American Mobile
Satellite Corp.* 600 11,550
Ameritech Corp. (New) 2,300 134,263
Andrew Corp. 150 7,181
Antec Corp.* 400 6,075
Arch Communications
Group, Inc.* 500 11,875
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
Aspect
Telecommunications
Corp. 300 $ 17,250
Associated Group Inc.
Class A* 200 5,563
Bell Atlantic Corp. 1,700 110,500
BellSouth Corp. 3,900 156,000
Boston Technology Inc.
(New)* 300 5,250
C-TEC Corp. 400 11,950
California Microwave* 200 3,675
Cellstar Corp.* 300 2,813
Cidco Inc.* 200 7,125
Coherent Communications
Systems Corp. 600 11,400
Colonial Data
Technologies* 300 6,825
Comnet Cellular Inc.* 200 6,625
DSC Communications
Corp.* 300 9,413
Echostar Communications
Corp. Class A* 200 6,625
GTE Corp. 3,800 164,825
General Datacom
Industries Inc.* 300 4,125
Geotek Communications
Inc.* 600 6,263
InterVoice, Inc.* 200 5,613
Lincoln
Telecommunications 800 13,450
Loral Space &
Communications* 600 8,625
MCI Communications Corp. 2,700 79,313
Microcom Inc.* 300 7,350
Mobilemedia Corp.
Class A* 400 7,950
Nextel Communications
Inc.* 214 3,852
Northern Telecom Ltd 1,100 56,650
Nynex Corp. 1,600 78,600
Octel Communications
Corp. 600 27,000
P-Com Inc. 300 7,519
Pacific Telesis Group 1,600 54,800
Pairgain Technologies
Inc.* 500 47,875
Plantronics, Inc. (New)* 200 8,025
Sprint Corp. 1,400 58,975
Tellabs Inc. 300 16,613
U S WEST, Inc.
(Communications Group) 1,700 55,675
U S West Inc.
(Media Group)* 2,000 39,000
Vanguard Cellular
Systems, Inc. Class A* 600 12,900
Worldcom Inc.* 700 32,856
---------
1,802,901
---------
</TABLE>
F-69
<PAGE> 191
SchwabFunds(R)
- --------------------------------------------------------------------------------
SCHWAB ASSET DIRECTOR(R)-BALANCED GROWTH FUND
STATEMENT OF NET ASSETS
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
TOBACCO--0.6%
American Brands, Inc. 600 $ 24,975
Loews Corp. 400 30,500
Philip Morris Companies
Inc. 3,400 306,425
UST Inc. 700 22,400
-------
384,300
-------
TRANSPORTATION-MISCELLANEOUS--0.4%
Air Express
International Corp. 300 8,363
Airbourne Freight Corp. 300 7,913
Amerco Inc.* 800 17,750
American Freightways
Corp.* 400 6,100
American President
Companies, Ltd. 400 9,550
Arnold Industries Inc. 600 9,600
Caliber Systems Inc. 100 4,013
Consolidated Freightways
Inc. 100 2,613
Expeditores
International of
Washington Inc. 200 5,875
Federal Express Corp.* 200 16,150
Harper Group, Inc. 200 3,850
Heartland Express, Inc. 307 9,057
J.B. Hunt Transport
Services Inc. 500 10,281
Kirby Corp.* 400 7,050
Landstar Systems, Inc.* 200 5,550
M.S. Carriers, Inc.* 200 3,850
NACCO Industries, Inc.
Class A 300 18,938
Overseas Shipholding
Group 800 16,100
Pittston Co.
(Burlington Group) 50 994
Pittston Services Group 100 2,788
Roadway Express Inc. 50 747
Rollins Truck Leasing
Corp. 600 6,525
Ryder System, Inc. 200 5,825
Shurgard Storage Centers
Inc. Class A 600 15,375
Swift Transportation
Inc. 300 5,700
TNT Freightways Corp. 300 6,769
Wabash National Corp. 300 5,925
Werner Enterprises Inc. 600 14,775
XTRA Corp. 300 13,650
Yellow Corp. 400 4,900
-------
246,576
-------
TRAVEL & RECREATION--0.6%
Anchor Gaming* 100 4,425
Anthony Industries, Inc. 200 5,700
Aztar Corp.* 500 4,875
Bally Entertainment
Corp. 1,200 25,050
Bally Total Fitness
Holding Corp.* 250 1,375
Boyd Gaming Corp.* 1,000 14,000
Brunswick Corp. 200 4,400
Doubletree Corp.* 300 9,581
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
Harrahs Entertainment
Inc.* 400 $ 13,800
Hilton Hotels Corp. 200 21,100
ITT Corp. (New)* 400 24,350
Marcus Corp. 300 8,363
Marriot International
Inc. 400 19,500
Players International
Inc. 400 4,550
Polaris Industries Inc. 700 24,413
Primadonna Resorts Inc.* 400 7,650
Prime Hospitality Corp.* 400 6,050
Rio Hotel & Casino Inc.* 200 3,600
Showboat, Inc. 200 6,400
Speedway Motorsports,
Inc. 600 16,050
Station Casinos Inc.* 700 9,188
Stratosphere Corp.* 1,100 12,031
Topps Inc. 600 3,506
Walt Disney Co. 2,539 157,418
-------
407,375
-------
UTILITIES--1.8%
American Electric Power
Co., Inc. 700 28,438
Aquila Gas Pipeline
Corp. 400 5,550
Atmos Energy Corp. 200 4,950
Baltimore Gas &
Electric Co. 400 10,550
Bay State Gas Co. 200 5,550
Black Hills Corp. 200 5,000
Carolina Power &
Light Co. 700 25,200
Central & South West
Corp. 800 21,800
Central Hudson Gas &
Electric Corp. 500 14,500
Central Louisiana
Electric Co. (New) 600 15,375
Central Maine Power Co. 700 9,975
Cilcorp Inc. 200 8,625
Cinergy Corp. 600 17,400
Coastal Corp. 300 11,888
Columbia Gas System,
Inc. 100 4,863
Commonwealth Energy
System (Shares of
Beneficial Interest) 200 9,175
Consolidated Edison Co. 800 23,500
Consolidated Natural
Gas Co. 300 14,025
DTE Energy Co. 600 18,600
Destec Energy, Inc.* 1,100 12,925
Dominion Resources Inc. 700 26,950
Duke Power Co. 900 42,300
ENSERCH Corp. 100 2,150
Eastern Enterprises 400 14,350
Eastern Utilities
Association 300 6,113
Edison International 1,900 30,400
Empire District Electric
Co. 200 3,650
Energen Corp. 100 2,288
Enron Corp. 1,100 44,275
Entergy Corp. 900 23,850
</TABLE>
F-70
<PAGE> 192
SchwabFunds(R)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
FPL Group, Inc. 700 $30,188
General Public Utilities
Corp. 500 15,875
Houston Industries Inc. 1,000 21,375
IES Industries Inc. 700 18,550
Indiana Energy Inc. 600 14,325
Interstate Power Co. 100 3,063
K N Energy Inc. 700 22,400
Laclede Gas Co. 200 4,700
MDU Resources
Group, Inc. 400 8,750
Madison Gas &
Electric Co. 300 7,350
NICOR Inc. 100 2,788
New Jersey Resources
Corp. 500 14,188
Niagara Mohawk Power
Corp. 400 3,000
NorAm Energy Co. 300 3,300
Northern States Power
Co. 200 9,350
Northwest Natural Gas
Co. 200 6,538
Ohio Edison Co. 400 8,350
Oneok Inc. 500 12,875
Orange & Rockland
Utilities, Inc. 200 6,825
Otter Tail Power Co. 200 7,325
P P & L Resources Inc. 500 11,313
Pacific Enterprises 200 5,150
Pacific Gas & Electric
Co. 1,700 38,675
Pacificorp 1,100 22,000
Panenergy Corp. 600 20,100
Peco Energy Co. 900 22,388
Peoples Energy Corp. 100 3,150
Philadelphia Suburban
Corp. 200 4,650
Piedmont Natural
Gas Inc. 700 15,138
Primark Corp.* 600 21,300
Public Service Co. of
New Mexico 900 15,750
Public Service Co. of
North Carolina Inc. 200 3,225
Public Service
Enterprise Group 900 23,513
Seagull Energy Corp.* 800 19,500
Sierra Pacific Resources 700 16,975
Sig Corp. 500 16,688
Sonat Inc. 300 13,088
South Jersey
Industries Inc. 100 2,338
Southern Co. 2,800 61,600
Southern Union Co. (New) 300 6,600
Southwest Gas Corp. 300 4,988
Southwestern
Energy Co. 300 4,163
Tejas Gas Corp. 200 10,000
Texas Utilities Co. 800 32,200
Thermo Ecotek Corp. 300 7,088
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
Tucson Electric
Power Co.* 2,000 $ 5,750
UGI Corp. (New) 700 15,663
Unicom Corp. 800 22,000
Union Electric Co. 300 11,588
United Illuminating Co. 200 7,275
United Water
Resources Inc. 400 5,000
WPS Resources Corp. 600 18,975
Washington Energy Co. 300 5,813
Western Gas
Resources Inc. 300 4,425
Wicor Inc. 500 17,188
Williams Cos. Inc. 400 20,450
Yankee Energy
System, Inc. 100 2,238
----------
1,223,275
----------
29,719,554
----------
INTERNATIONAL--14.5%
AUSTRALIA--0.3%
Australia & New Zealand
Banking Group 3,541 16,912
Broken Hill Proprietary
Co., Ltd. 4,741 72,959
Commonwealth Bank Group 2,412 19,800
National Australia Bank 3,427 30,743
News Corp., Ltd. 4,891 28,662
Western Mining Corp. 2,717 19,807
Westpac Banking Corp. 4,468 21,691
----------
210,574
----------
BELGIUM--0.1%
Electrabel 134 30,052
Electrabel, VVPR Strip 25 68
Generale de Banque 38 13,399
Petrofina SA 57 16,857
Societe Generale de
Belgique 173 13,464
Tractebel Investor
International 18 7,319
Tractebel Investor
International, VVPR
Strip 15 6,075
----------
87,234
----------
CANADA--0.4%
Alcan Aluminum Ltd. 551 17,524
BCE Inc. 764 30,049
Bank of Montreal 651 15,635
Bank of Nova Scotia,
Halifax 565 12,802
Barrick Gold Corp. 1,453 44,556
Canadian Imperial Bank
of Commerce 643 19,977
Canadian Pacific Ltd. 838 17,049
Imperial Oil Ltd. (New) 472 19,189
Northern Telecom Ltd. 621 31,974
Placer Dome Inc. 585 16,285
Royal Bank of Canada,
Montreal Quebec 769 18,215
Seagram Co. Ltd. 738 24,853
</TABLE>
F-71
<PAGE> 193
SchwabFunds(R)
- --------------------------------------------------------------------------------
SCHWAB ASSET DIRECTOR(R)-BALANCED GROWTH FUND
STATEMENT OF NET ASSETS
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
Thomson Corp. 1,442 $ 23,989
Toronto-Dominion Bank 738 12,792
-------
304,889
-------
DENMARK--0.0%
Novo Nordisk A/S
Series B 94 12,216
Tele Danmark A/S
Series B 321 16,153
-------
28,369
-------
FRANCE--1.0%
AXA Groupe SA 453 26,992
Alcatel Alsthom
CGE SA 369 34,704
BQE National de Paris 471 19,669
Carrefour 63 49,230
Christian Dior 105 14,000
Cie Financiere de
Paribas (Bearer) 294 18,912
Cie Generale de Eaux 287 31,213
Compagnie de Saint-
Gobain SA 204 24,437
Danone Groupe 174 26,298
Elf Aquitaine 665 49,455
L'Air Liquide 162 29,437
L'Oreal SA 150 46,357
LVMH Moet Hennessy Louis
Vuitton 213 54,492
Lafarge Coppee SA 225 14,412
Lyonnaise des Eaux-Dumez 139 13,961
Michelin (CGDE) Class B
(Reg.) 265 13,133
PSA Peugeot Citroen 123 17,185
Pinault Printemps
Redoute SA 56 17,003
Renault (Regie
Nationale) 585 17,740
Rhone-Poulenc SA
A Shares 786 18,861
Roussel Uclaf 68 16,028
Sanofi 251 20,255
Schneider SA 312 14,539
Societe Generale 214 24,848
Suez Group 390 16,158
TOTAL Class B 575 39,023
Union des Assurances de
Paris 737 15,959
-------
684,301
-------
GERMANY--1.1%
BASF AG 149 40,683
Bankgesell Berlin 53 10,888
Bayer AG 170 54,746
Bayerische Hypotheken &
Wechsel Bank AG 629 15,646
Bayerische Motoren
Werke AG 43 23,215
Bayerische
Vereinsbank AG 572 16,814
Commerzbank AG 73 15,807
Daimler-Benz AG 126 69,012
Deutsche Bank AG 1,161 55,642
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
Dresdner Bank AG 929 $ 23,375
Hoechst AG 160 53,887
Linde AG 13 7,948
Lufthansa AG 87 13,798
Mannesmann AG 92 31,430
Muenchener
Rueckversicherung 3 4,919
Muenchener
Rueckversicherung
(Reg.) 18 32,687
RWE AG* 846 32,936
RWE AG (Non Voting)* 500 14,550
Sap AG 132 17,115
Siemens AG 137 75,019
Thyssen AG 77 13,957
Veba AG 1,190 59,154
Vereinigte
Elektrizitatswerke
Westfalen Series B 43 12,359
Viag AG 44 17,259
Viag AG (New)* 12 4,707
Volkswagen AG 59 20,368
-------
737,921
-------
HONG KONG--0.5%
CITIC Pacific 6,000 23,580
Cheung Kong Holdings 3,000 21,427
China Light & Power 6,000 28,311
Hang Seng Bank Ltd. 3,400 34,503
Henderson China 12 33
Henderson Land
Development Co. 3,000 21,524
Hongkong Electric
Holdings Ltd. 8,500 27,031
Hongkong
Telecommunications
Ltd. 22,400 42,712
Hutchison
Whampoa Ltd. 6,000 37,231
New World Development
Co. 5,115 22,945
Sun Hung Kai Properties 5,000 47,670
Swire Pacific Ltd.
Class A 4,000 34,128
Wharf Holdings 6,000 22,222
-------
363,317
-------
ITALY--0.3%
Alleanza Assicurazioni 850 8,027
Assicurazioni Generali 1,963 48,949
Fiat SpA 8,042 27,416
Fiat SpA, di Risp
(Non-Convertible) 5,394 9,825
INA 10,028 15,408
STET 8,327 28,148
STET di Risp
(Non-Convertible) 2,791 7,317
Telecom Italia 16,255 33,145
Telecom Italia di Risp
(Non-Convertible) 5,096 8,450
Telecom Italia Mob 14,418 31,845
Telecom Italia Mob
di Risp 5,913 8,290
-------
226,820
-------
</TABLE>
F-72
<PAGE> 194
SchwabFunds(R)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
JAPAN--5.1%
Ajinomoto Co., Inc. 1,000 $ 12,523
All Nippon Airways Co.,
Ltd. 2,000 22,752
Asahi Bank 2,000 25,811
Asahi Breweries 1,000 12,141
Asahi Chemical Industry
Co. 2,000 15,200
Asahi Glass Co., Ltd. 1,000 12,141
Bank of Fukuoka 1,000 8,776
Bank of Tokyo Mitsubishi
(Bank of Tokyo shares) 1,600 36,862
Bank of Tokyo Mitsubishi
(Mitsubishi Bank
shares) 4,200 97,166
Bank of Yokohama 1,000 8,977
Bridgestone Corp. 1,000 18,546
Canon Inc. 1,000 19,884
Chiba Bank 1,000 9,034
Chubu Electric
Power Co. 1,000 25,333
DDI Corp. 2 17,188
Dai Nippon
Printing Co. 1,000 18,833
Dai-Ichi Kangyo
Bank, Ltd. 5,000 101,812
Daiei Inc. 1,000 13,575
Daiwa Bank 2,000 15,582
Daiwa House
Industries Co. 1,000 15,965
Daiwa Securities Co. 1,000 15,391
East Japan Railway Co. 4 21,376
Fuji Bank, Ltd. 4,000 87,568
Fuji Photo Film Co. 1,000 31,165
Fujitsu Ltd. 2,000 20,649
Gunma Bank 1,000 11,567
Hachijuni Bank 1,000 11,567
Hankyu Corp. 1,000 6,109
Hitachi Ltd. 4,000 43,210
Hitachi Zosen Corp. 1,000 5,487
Hokkaido Electric Power
Co. 1,000 23,995
Hokuriku Electric Power
Co. 1,000 23,899
Honda Motor Co., Ltd. 1,000 22,848
Industrial Bank of
Japan, Ltd. 3,000 80,302
Ishikawajima-Harima
Heavy Industries 3,000 14,913
Ito-Yokado Co., Ltd. 1,000 58,984
Itochu Corp. 2,000 15,238
Japan Air Lines
Co., Ltd. 2,000 16,003
Japan Tobacco Inc. 2 18,508
Joyo Bank 1,000 8,183
Kajima Corp. 1,000 11,281
Kansai Electric
Power Co. 1,000 24,282
Kao Corp. 1,000 13,384
Kawasaki Heavy
Industries 1,000 5,172
Kawasaki Steel Co. 3,000 10,984
Kinki Nippon
Railway Co. 2,060 16,030
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
Kirin Brewery Co., Ltd. 1,000 $ 13,001
Kobe Steel 3,000 9,321
Kokusai Denki 1,000 98,466
Komatsu Ltd. 1,000 9,655
Kubota Corp. 2,000 13,938
Kyocera Corp. 1,000 75,331
Kyushu Electric
Power Co. 2,000 49,711
Long-Term Credit
Bank of Japan 3,000 26,012
Marubeni Corp. 2,000 11,988
Matsushita Communication
Industrial Co., Ltd. 1,000 26,767
Matsushita Electric
Industrial Co., Ltd. 3,000 53,057
Matsushita Electric
Works 1,000 11,376
Mitsubishi Chemical
Corp. 2,000 10,975
Mitsubishi Corp. 2,000 28,488
Mitsubishi Electric
Corp. 2,000 15,755
Mitsubishi Estate Co. 1,000 14,053
Mitsubishi Heavy
Industries 4,000 35,715
Mitsubishi Materials Co. 1,000 6,023
Mitsubishi Motors 1,000 9,024
Mitsubishi Trust &
Banking Corp. 1,000 17,303
Mitsui & Co. 2,000 19,062
Mitsui Fudosan Co. 1,000 13,192
Mitsui Marine & Fire
Insurance 1,000 8,480
Mitsui Trust &
Banking Co. 1,000 12,045
NEC Corp. 2,000 25,429
NKK Corp. 3,000 9,407
New Oji Paper Co. 1,000 9,244
Nikko Securities Co. 2,000 25,429
Nikon Corp. 1,000 13,479
Nippon Credit Bank 2,000 8,164
Nippon Express Co. 1,000 10,420
Nippon Oil Co. 1,000 6,931
Nippon Paper
Industries Co. 1,000 7,323
Nippon Steel Corp. 7,000 25,295
Nippon Telegraph &
Telephone Corp. 22 170,565
Nippon Yusen Kabushiki
Kaisha 1,000 6,070
Nippondenso Co. 1,000 21,796
Nissan Motor Co., Ltd. 3,000 25,353
Nomura Securities
Co., Ltd. 2,000 43,593
Obayashi Corp. 1,000 9,302
Odakyu Electric Railway
Co. 1,030 7,385
Oki Electric Industry
Co., Ltd. 1,000 7,935
Omron Corp. 1,000 22,561
Ono Pharmaceutical Co. 1,000 37,761
Osaka Gas Co. 2,000 8,011
Ricoh Co., Ltd. 1,000 11,759
</TABLE>
F-73
<PAGE> 195
SchwabFunds(R)
- --------------------------------------------------------------------------------
SCHWAB ASSET DIRECTOR(R)-BALANCED GROWTH FUND
STATEMENT OF NET ASSETS
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
Rohm Co. 1,000 $ 63,668
Sakura Bank 5,000 58,793
Sankyo Co. 1,000 24,282
Sanwa Bank 4,000 81,067
Sanyo Electric Co., Ltd. 2,000 12,772
Seibu Railway Co. 1,000 56,211
Sekisui Chemical Co. 1,000 12,619
Sekisui House 1,000 12,428
Seven-Eleven Japan Co. 1,100 77,922
Sharp Corp. 1,000 17,399
Shimizu Corp. 1,000 11,472
Shizuoka Bank 1,000 13,575
Sony Corp. 1,000 65,006
Sony Music Entertainment 1,000 54,204
Sumitomo Bank 5,000 107,069
Sumitomo
Chemical Co. 2,000 10,650
Sumitomo Corp. 1,000 11,950
Sumitomo Electric
Industries 1,000 14,340
Sumitomo Marine & Fire
Insurance Co. 1,000 9,522
Sumitomo Metal
Industries 3,000 9,636
Sumitomo Trust & Banking
Co. 1,000 14,626
Suzuki Motor Corp. 1,000 12,715
Taisei Corp. 1,000 7,743
Taisho
Pharmaceutical Co. 1,000 21,892
Takeda Chemical
Industries 1,000 17,303
Teijin Ltd. 1,000 5,497
Tobu Railway Co. 1,000 6,921
Tohoku Electric
Power Co. 1,000 24,855
Tokai Bank 2,000 25,620
Tokio Marine & Fire
Insurance Co. 2,000 27,532
Tokyo Electric Power
Co., Inc. 2,000 54,491
Tokyo Electron 1,000 37,188
Tokyo Gas & Electric
Industrial 3,000 11,787
Tokyu Corp. 1,000 8,154
Tonen Corp. 1,000 14,913
Toppan Printing Co. 1,000 14,722
Toray Industries Inc. 2,000 13,613
Toshiba Corp. 4,000 31,127
Toto 1,000 14,818
Toyo Seikan 1,000 35,467
Toyo Trust &
Banking Co. 1,000 10,898
Toyoda Automatic Loom 1,000 20,745
Toyota Motor Corp. 5,000 114,239
Yamaichi Securities Co. 1,000 7,906
Yasuda Fire & Marine
Insurance Co. 1,000 7,887
Yasuda Trust & Banking
Co. 1,000 6,634
---------
3,522,024
---------
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
NETHERLANDS--0.9%
ABN Amro
Holdings NV 758 $ 39,238
Aegon NV 634 30,192
Akzo Nobel NV 174 20,208
Dordtsche Petrol 88 13,122
Elsevier NV 1,615 24,317
Heineken NV 123 25,741
ING NV 766 59,143
Koninklijke Ahold NV 311 15,337
Koninklijke PTT
Nederland 1,132 42,479
Philips Electronics NV 841 29,694
PolyGram NV 441 26,252
Royal Dutch Petroleum
Co. (Bearer) 1,349 192,174
Unilever NV, CVA 392 53,487
Wolters Kluwer NV, CVA 164 17,927
-------
589,311
-------
SINGAPORE--0.3%
City Developments 1,000 8,749
Development Bank
of Singapore
(alien market) 1,000 12,662
Hong Kong Land Holdings 5,000 10,700
Jardine Matheson
Holdings Ltd. 1,600 12,800
Overseas Chinese Bank
(alien market) 2,000 27,458
Singapore Airlines Ltd.
(alien market) 2,000 20,202
Singapore
Telecommunications 27,000 66,453
United Overseas Bank
(alien market) 2,000 19,491
-------
178,515
-------
SPAIN--0.3%
Argentaria Corp. 307 12,430
Banco Bilbao-Vizcaya SA
(Reg.) 556 21,134
Banco Popular Espanol
(Reg.) 72 11,932
Banco de Santander SA
(Reg.) 391 18,167
Empresa Nacional de
Electricidad 637 40,013
Gas Natural SDG SA 94 17,086
Iberdrola SA 2,266 22,179
Repsol, SA 735 26,956
Telefonica Internacional
de Espana, SA 2,300 40,955
-------
210,852
-------
SWEDEN--0.3%
ASEA AB 164 16,783
ASEA AB Series B 59 5,986
Astra AB Series A 1,228 54,595
Astra AB Series B 176 7,773
L.M. Ericsson Telephone
Series B 2,340 47,445
</TABLE>
F-74
<PAGE> 196
SchwabFunds(R)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
Sandvik AB Series A 322 $ 7,098
Sandvik AB Series B 338 7,451
Volvo AB Series A 289 6,627
Volvo AB Series B 787 18,046
-------
171,804
-------
SWITZERLAND--1.0%
BBC Brown Boveri
(Bearer) 20 24,098
BBC Brown Boveri (Reg.) 25 5,880
CS Holding (Reg.) 453 41,137
Ciba-Geigy Ltd. (Bearer) 7 8,079
Ciba-Geigy Ltd. (Reg.) 60 69,636
Cie Financiere Richemont
Series A (Bearer) 10 14,659
Nestle Ltd. (Reg.) 100 111,227
Roche Group
Holding AG 18 141,567
Roche Group Holding AG
(Bearer) 4 54,124
Sandoz Ltd. (Bearer) 7 7,622
Sandoz Ltd. (Reg.) 86 93,924
Schweizerische
Bankgesellschaft
(Bearer) 51 50,688
Schweizerische
Bankgesellschaft
(Reg.) 34 7,394
Schweizerische
Bankverein (Bearer) 49 18,351
Schweizerische
Bankverein (Reg.) 82 15,322
Winterthur 9 5,647
Winterthur (Reg.) 11 6,902
Zurich Versicherung
(Reg.) 108 30,184
-------
706,441
-------
UNITED KINGDOM--2.9%
Abbey National 3,214 27,481
Allied Domecq PLC 2,553 19,735
Argyll Group 2,802 14,004
Associated British Foods 2,656 15,913
BAA 2,534 20,827
BAT Industries 7,550 57,054
BOC Group 1,184 16,451
BTR 10,075 48,532
Barclays 3,947 43,790
Bass 2,160 25,476
Boots Co. 2,323 22,153
British Aerospace 1,067 13,982
British Airways 2,370 18,516
British Gas 10,622 37,736
British Petroleum Co. 14,132 127,535
British Sky Broadcast 4,306 30,984
British Steel 4,942 14,767
British Telecom 15,266 83,764
Cable & Wireless 5,413 42,494
Cadbury Schweppes 2,412 18,699
Commercial Union
Assurance Co. 1,628 14,128
General Electric Co. 6,722 36,276
Glaxo Wellcome 8,483 102,861
Granada Group 1,435 17,789
Grand
Metropolitan, Inc. 5,229 34,398
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
Great University Stores 2,463 $ 26,862
Guinness 4,948 35,604
HSBC Holdings 2,089 30,928
HSBC Holdings
(Hong Kong) 4,332 64,136
Hanson Industries 13,006 38,570
Imperial Chemical
Industries 1,772 24,007
J. Sainsbury PLC 4,430 24,407
Kingfisher 1,636 14,641
Legal & General Group 1,231 13,268
Lloyds Abbey Life 1,751 14,122
Lloyds TSB Group 12,929 61,988
Marks & Spencer PLC 6,856 45,772
National Grid Group 4,240 13,053
National Power
Development 2,904 24,502
National Westminster
Bancorp 4,208 38,799
Pearson, Inc. 1,355 14,319
Powergen 1,778 14,935
Prudential Corp. 4,658 32,079
RTZ Corp. PLC 2,634 41,475
Rank Organisation PLC 2,031 16,296
Reed International 1,374 23,641
Rentokil Group 2,452 14,137
Reuters Holdings PLC 4,084 46,232
Royal Bank of Scotland 1,980 15,454
Scot & Newcastle 1,495 15,472
Shell Transport &
Trading Co. (Reg.) 8,498 112,125
Siebe 1,075 13,901
SmithKline Beecham PLC
Series A 3,387 35,920
SmithKline Beecham PLC
(New) 3,271 34,714
Standard Chartered PLC 2,368 22,172
Tesco 5,056 21,349
Thorn Emi 1,049 29,095
Unilever 1,987 36,372
Vendome Lux Group/SA
(units) 1,749 15,402
Vodafone Group 7,507 30,003
Whitbread 1,204 13,611
Zeneca Group 2,316 47,861
----------
2,022,569
----------
10,044,941
----------
TOTAL COMMON STOCK
(Cost $36,329,746) 39,764,495
----------
PREFERRED STOCK--0.1%
AUSTRALIA--0.0%
News Corp. (Limited
Voting Shares) 2,384 12,266
-----------
GERMANY--0.1%
Henkel KGaA 36 13,804
Sap AG (Non-Voting) 99 13,147
Volkswagen AG
(Non-Voting) 24 6,098
----------
33,049
----------
</TABLE>
F-75
<PAGE> 197
SchwabFunds(R)
- --------------------------------------------------------------------------------
SCHWAB ASSET DIRECTOR(R)-BALANCED GROWTH FUND
STATEMENT OF NET ASSETS
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
ITALY--0.0%
Fiat SpA 3,117 $ 5,957
----------
GERMANY--0.0%
Lufthansa AG
(Non-Voting) 49 7,672
----------
UNITED STATES--0.0%
Teledyne, Inc. Series E 1 15
----------
TOTAL PREFERRED STOCK
(Cost $58,320) 58,959
----------
</TABLE>
<TABLE>
<CAPTION>
Par
---------
<S> <C> <C>
U.S. TREASURY OBLIGATIONS--33.4%(a)
U.S. Treasury Bonds
10.00%, 05/15/10 $ 475,000 575,648
7.25%, 05/15/16 1,400,000 1,426,712
7.50%, 11/15/16 500,000 522,530
8.13%, 08/15/19 300,000 334,728
7.13%, 02/15/23 7,200,000 7,237,512
6.25%, 08/15/23 1,725,000 1,556,657
U.S. Treasury Notes
5.88%, 05/31/96 500,000 500,355
6.25%, 01/31/97 550,000 553,053
5.63%, 10/31/97 1,700,000 1,692,894
5.13%, 02/28/98 600,000 590,694
7.88%, 04/15/98 800,000 826,656
5.88%, 08/15/98 1,275,000 1,268,549
5.00%, 02/15/99 500,000 485,170
7.00%, 04/15/99 600,000 612,432
7.50%, 10/31/99 900,000 932,877
5.75%, 10/31/00 1,500,000 1,462,380
6.38%, 08/15/02 1,900,000 1,884,762
6.50%, 05/15/05 400,000 394,624
6.50%, 08/15/05 200,000 197,240
----------
TOTAL U.S. TREASURY
OBLIGATIONS
(Cost $23,726,129) 23,055,473
----------
<CAPTION>
Par Value
---------- -----------
<S> <C> <C>
AGENCY OBLIGATIONS-
COUPON NOTES--2.5%(a)
Federal National
Mortgage Assoc.
8.50%, 02/01/05 $1,050,000 $ 1,099,571
7.25%, 06/01/05 650,000 644,839
----------
TOTAL AGENCY OBLIGATIONS-
COUPON NOTES
(Cost $1,761,351) 1,744,410
----------
CASH EQUIVALENTS--6.3%(b)
AGENCY OBLIGATIONS-
DISCOUNT NOTES--5.4%
Federal Home
Loan Bank
5.21%, 05/28/96 2,900,000 2,888,712
Federal National
Mortgage Assoc.
5.28%, 07/12/96 800,000 791,624
----------
3,680,336
----------
<CAPTION>
Maturity
----------
<S> <C> <C>
REPURCHASE AGREEMENT--0.9%
State Street Bank 4.75%
Dated 04/30/96
Due 05/01/96
Collateralized By:
U.S. Treasury Note
$625,000 Par; 8.00%
Due 10/15/96 621,081 621,000
----------
TOTAL CASH EQUIVALENTS
(Cost $4,301,376) 4,301,336
----------
TOTAL INVESTMENTS--99.9%
(Cost $66,176,922) 68,924,673
----------
OTHER ASSETS AND
LIABILITIES--0.1%
Other Assets 1,012,661
Liabilities (927,304)
-----------
85,357
----------
NET ASSETS--100.0%
Applicable to 6,538,196
outstanding $0.00001
par value shares
(unlimited shares authorized) $69,010,030
===========
NET ASSET VALUE PER SHARE $10.55
======
</TABLE>
See accompanying Notes to Statements of Net Assets.
F-76
<PAGE> 198
SchwabFunds(R)
- --------------------------------------------------------------------------------
SCHWAB ASSET DIRECTOR(R)-CONSERVATIVE GROWTH FUND
STATEMENT OF NET ASSETS
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
COMMON STOCK--40.2%
DOMESTIC--29.6%
AEROSPACE/DEFENSE--0.5%
Alliant Techsystems
Inc.* 100 $ 4,700
BFGoodrich Co. 100 3,975
Boeing Co. 100 8,213
Coltec Industries Inc.* 200 2,600
Gencorp Inc. 100 1,338
General Dynamics Corp. 100 6,313
Lockheed Martin Corp. 200 16,125
McDonnell Douglas Corp. 100 9,650
Northrop Grumman Corp. 100 6,188
OEA, Inc. 100 3,925
Orbital Sciences Corp.
Class A* 100 1,375
Raytheon Co. 200 10,125
Rockwell International
Corp. 200 11,700
Rohr Industries Inc.* 100 1,825
Textron Inc. 100 8,575
Thiokol Corp. 100 4,275
Trimble Navigation
Ltd.* 100 2,419
United Technologies
Corp. 100 11,050
-------
114,371
-------
AIR TRANSPORTATION--0.2%
AMR Corp.* 100 8,925
America West Airlines,
Inc. Class B* 100 2,100
Atlantic Southeast
Airlines Inc. 100 2,500
Atlas Air Inc.* 100 4,525
Comair Holdings Inc. 100 3,706
Continental Airlines
Inc. Class B* 100 5,675
Delta Airlines Inc. 100 8,038
Mesa Airlines Inc.* 100 1,231
Offshore Logistics,
Inc.* 100 1,456
Southwest Airlines Co. 100 2,975
Trans World Airlines
Inc. (New)* 200 3,575
USAir Group, Inc.* 600 10,650
-------
55,356
-------
ALCOHOLIC BEVERAGES--0.2%
Adolph Coors Co.
Class B 500 9,406
Anheuser-Busch
Companies, Inc. 400 26,850
Brown Forman Corp.
Class B 100 3,950
Canandaigua Wine Co.,
Inc. Class A* 100 3,050
Seagram Ltd 300 10,163
-------
53,419
-------
APPAREL--0.3%
Authentic Fitness Corp. 100 2,388
Brown Group Inc. 100 1,600
Cone Mills Corp.* 100 1,138
Justin Industries Inc. 100 1,275
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
Kellwood Co. 100 $ 1,625
Liz Claiborne 100 3,638
Men's Wearhouse, Inc. 100 3,688
NIKE, Inc. Class B 100 8,750
Nautica Enterprises
Inc. 100 4,625
Phillips-Van Heusen
Corp. 100 1,325
Reebok International
Ltd. 100 2,900
Springs Industries Inc. 400 18,400
St. John's Knits, Inc. 200 11,875
Stride Rite Corp. 200 1,925
V.F. Corp. 100 5,700
Wolverine World
Wide Inc. 100 3,088
------
73,940
------
AUTOMOTIVE PRODUCTS--0.1%
Armor-All Products
Corp. 100 1,550
Carlisle Cos. Inc. 100 4,650
Cooper Tire & Rubber 100 2,450
Discount Auto Parts
Inc.* 100 2,938
Goodyear Tire & Rubber 100 5,213
------
16,801
------
BANKS--2.1%
Associated Banc-Corp. 100 3,875
Banc One Corp. 507 17,618
Bancorp South, Inc. 100 2,413
Bank of Boston Corp. 100 4,838
Bank of New York
Co., Inc. 200 9,700
BankAmerica Corp. 100 7,575
Bankers Trust New York
Corp. 100 6,938
Barnett Banks, Inc. 100 6,338
Boatmens Bancshares
Inc. 100 3,863
CCB Financial Corp. 100 5,194
Centura Banks Inc. 100 3,650
Chase Manhattan Corp.
(New) 408 28,101
Citicorp 200 15,750
Citizens Bancorp 100 2,975
City National Corp. 100 1,413
Comerica Inc. 100 4,350
Corestates Financial
Corp. 100 3,900
Cullen/Frost
Bankers Inc. 100 4,975
F & M National Corp. 100 1,600
Fifth Third Bancorp 100 5,519
First Bank System Inc. 188 11,327
First Chicago NBD Corp. 281 11,591
First Citizens
BancShares Inc. 100 6,200
First Commercial Corp. 107 3,330
First Commonwealth
Financial Corp. 100 1,925
First Financial Bancorp 200 6,550
First Michigan Bank
Corp. 105 3,124
First Union Corp. 435 26,753
Fleet Financial
Group Inc. 189 8,127
</TABLE>
F-77
<PAGE> 199
SchwabFunds(R)
- --------------------------------------------------------------------------------
SCHWAB ASSET DIRECTOR(R)-CONSERVATIVE GROWTH FUND
STATEMENT OF NET ASSETS
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
Fulton Financial Corp. 110 $ 2,241
Hancock Holding Co. 100 3,625
Imperial Bancorp 108 2,606
J.P. Morgan & Co. Inc. 200 16,825
Keycorp (New) 200 7,725
Keystone Financial Inc. 100 3,263
Long Island
Bancorp Inc. 100 2,794
MBNA Corp. 150 4,256
Magna Group Inc. 100 2,263
Mark Twain
Bancshares Inc. 100 3,775
Mellon Bank Corp. 100 5,375
Mid-Am, Inc. 100 1,850
National Bancorp of
Alaska, Inc. 100 6,050
National City Corp. 100 3,688
National Commerce
Bancorp 100 3,063
NationsBank Corp. 100 7,975
North Fork
Bancorporation 100 2,375
Norwest Corp. 300 10,838
ONBANCorp, Inc. 100 3,325
Old National Bancorp 100 3,388
One Valley Bancorp of
West Virginia Inc. 100 3,119
PNC Bank Corp. 300 9,075
People's Bank 100 2,138
Provident Bancorp Inc. 100 5,138
Regions Financial Corp. 76 3,510
Republic New York Corp. 100 5,938
Riggs National Corp. 100 1,256
Security Capital Corp. 100 5,850
Sumitomo Bank 100 2,513
Summit Bancorp 90 3,195
SunTrust Banks Inc. 100 7,050
Trust Company of
New Jersey 100 1,419
TrustCo Bank
Corp. NY 100 2,088
Trustmark Corp. 100 2,338
U S Trust Corp. (New) 100 5,513
U.S. Bancorp 100 3,225
UMB Financial Corp. 110 4,166
UST Corp. 100 1,313
United Carolina
Bancshares Corp. 150 3,581
Wachovia Corp. (New) 100 4,400
Wells Fargo & Co. 166 40,276
Westamerica Bancorp 200 9,450
Whitney Holding Corp. 100 3,031
-------
446,394
-------
BUSINESS MACHINES & SOFTWARE--2.2%
3COM Corp. 200 9,213
AST Research Inc.* 100 763
Apple Computer, Inc. 100 2,425
Atria Software, Inc. 100 5,463
Auspex Systems, Inc.* 100 1,925
BBN Corp.* 100 2,825
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
Bay Networks, Inc. 200 $ 6,300
Bell & Howell Co.
(New)* 100 3,150
Borland International
Inc.* 100 1,631
Cabletron Systems Inc.* 100 7,538
Cellular Technical
Services Inc.* 100 2,856
Ceridian Corp.* 57 2,722
Cisco Systems Inc. 400 20,775
Compaq Computer Corp.* 200 9,325
Computer Associates
International Inc. 200 14,675
Computer Horizons Corp. 100 5,038
Computer Sciences
Corp.* 100 7,400
Compuware Corp.* 200 5,750
Comverse Technology
Inc. (New)* 100 2,350
Continuum Inc.* 100 5,700
Cray Research Inc.* 22 649
Data General Corp.* 300 4,613
Davidson &
Associates, Inc. 100 2,738
Dialogic Corp.* 100 4,613
Digital Equipment
Corp.* 100 5,975
Dynatech Corp. 100 2,600
EMC Corp.* 200 4,100
Exabyte Corp.* 100 1,738
FTP Software Inc.* 100 975
FileNet Corp.* 100 5,575
General Magic Inc.* 100 563
HCIA Inc.* 200 10,650
HNC Software Inc. 100 3,725
Hewlett Packard Co. 400 42,350
Honeywell Inc. 100 5,263
Hyperion Software Corp. 200 2,538
INSO Corp. 100 5,413
INTERSOLV Inc.* 100 1,100
In Focus Systems, Inc.* 100 5,075
Intergraph Corp.* 500 6,344
International Business
Machines 400 43,000
MICROS Systems, Inc. 100 2,800
McAfee Associates, Inc. 100 6,138
Medic Computer
Systems, Inc.* 100 9,363
Microsoft Corp.* 400 45,275
National Instruments
Corp.* 100 2,413
Network Equipment
Technologies* 100 2,550
Network General Corp.* 100 4,425
Novell Inc.* 300 4,369
Oak Technology 200 3,588
Oracle Systems Corp. 300 10,106
Pitney Bowes Inc. 100 4,875
Progress Software Corp. 100 1,581
Quarterdeck Corp.* 100 1,538
Rational Software Corp.
(New)* 100 5,325
Safeguard Scientifics
Inc. 100 6,700
</TABLE>
F-78
<PAGE> 200
SchwabFunds(R)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
Seagate Technology,
Inc.* 88 $ 5,104
Security Dynamics
Technology 100 8,400
Sequent Computer
Systems, Inc.* 100 1,469
Shiva Corp. 200 12,000
Sierra On-Line Inc. 100 3,938
Silicon Graphics Inc.* 100 2,963
Softkey International
Inc.* 100 2,794
Stratus Computer Inc.* 100 2,813
Structural Dynamics
Research Corp.* 100 3,188
Sun Microsystems Inc. 200 10,838
Tandem Computers Inc.* 100 1,275
Tech Data Corp.* 100 1,938
Transaction Systems
Architects Inc.
Class A* 100 5,375
Trident Microsystems
Inc.* 100 1,775
Unisys Corp.* 200 1,200
Wang Laboratories
Inc. (New)* 100 2,363
Xerox Corp. 100 14,650
-------
470,550
-------
BUSINESS SERVICES--1.6%
ADVO Inc. 100 1,013
Access Health Inc. 150 8,325
Accustaff Inc. 300 8,944
Acxiom Corp. 100 2,731
Affiliated Computer
Services Inc.
Class A* 100 4,763
Alliance Entertainment
Corp.* 100 613
Alternative Resources
Corp. 100 3,588
American Business
Information, Inc. 100 1,975
American Business
Products, Inc. 100 2,175
American Management
Systems, Inc. 150 3,975
American Medical
Response, Inc.* 100 3,700
American Oncology
Resources Inc.* 100 4,813
Amresco Inc. 100 1,725
Apollo Group, Inc.
Class A 150 6,619
Automatic Data
Processing, Inc. 200 7,775
BISYS Group, Inc.* 100 3,800
Bowne & Co. Inc. 100 1,800
Browning Ferris
Industries Inc. 100 3,225
CDI Corp.* 100 2,950
Cambridge Technology
Partners* 100 6,738
Camco International
Inc. 100 3,563
Catalina Marketing
Corp.* 100 7,788
Cerner Corp. 100 2,044
Checkfree Corp.* 200 3,825
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
Coastal Physician Group
Inc.* 100 $ 838
Corrections Corp.
of America 100 6,375
Coventry Corp.* 100 1,950
Dames & Moore Inc. 100 1,088
DeVRY Inc. 100 3,725
Deluxe Corp. 100 3,500
Dun & Bradstreet Corp. 200 12,175
Express Scripts Inc.
Class A* 100 4,888
Fair Issac & Co. Inc. 100 4,275
First Data Corp. 200 15,200
Fleming Companies, Inc. 400 5,500
Franklin Quest Co.* 100 2,700
G&K Services, Inc.
Class A 100 2,650
H & R Block Inc. 100 3,513
Health Management
Systems, Inc. 150 3,919
Heritage Media Corp.
Class A (New)* 100 3,838
Hon Industries Inc. 100 2,563
Ideon Group Inc. 100 1,313
Information Resources,
Inc.* 100 1,444
Integrated Health
Services Inc. 100 2,750
Interim Services Inc.* 200 8,638
Interpublic Group of
Companies, Inc. 100 4,675
Jacobs Engineering
Group Inc.* 100 2,775
John H. Harland Co. 300 7,875
Kinder Care Learning
Centers Inc.* 100 1,438
Laidlaw Inc. Class B
(Non Voting) 200 2,100
Magellan Health
Services Inc.* 100 2,150
Mariner Health
Group Inc.* 100 1,694
Maxicare Health Plans
Inc. (New)* 100 2,038
Medpartners/ Mullikin
Inc.* 200 5,775
Molten Metal
Technology, Inc.* 100 3,200
Moore Corp. Ltd. 100 1,825
National Auto Credit
Inc. 110 1,568
National Data Corp. 100 3,525
Netcom Online
Communications* 100 3,569
Orthodontic Centers of
America Inc. 100 3,925
PAXAR Corp. 100 1,738
PHH Corp. 100 5,688
PSINet Inc.* 100 1,406
Physician Corp. of
America* 100 1,488
Physician Reliance
Network* 100 4,363
</TABLE>
F-79
<PAGE> 201
SchwabFunds(R)
- --------------------------------------------------------------------------------
SCHWAB ASSET DIRECTOR(R)-CONSERVATIVE GROWTH FUND
STATEMENT OF NET ASSETS
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
Physicians Computer
Network* 200 $ 2,225
R.R. Donnelley & Sons
Co. 100 3,600
Republic Industries
Inc.* 200 6,538
Robert Half
International Inc.* 100 5,750
Rollins, Inc. 200 4,500
SEI Corp. 100 2,363
SPS Transaction
Services, Inc. 100 2,675
Sanifill Inc. 100 4,338
Scientific Games
Holdings Corp. 100 3,200
Service Corp.
International 100 5,313
Standard Register Co. 100 2,525
Steris Corp. 100 3,238
Sun Healthcare
Group Inc.* 100 1,513
Synetic Inc.* 100 3,488
True North
Communications 100 2,638
U S Order Inc.* 100 2,013
U.S.A. Waste
Services Inc.* 200 5,200
Unifirst Corp. 100 2,400
United Waste
Systems, Inc.* 100 5,538
Universal Health
Services Inc. Class B 100 5,550
Valassis Communications
Inc.* 100 1,575
WMX Technologies Inc. 500 17,375
Western Waste
Industries* 100 3,888
Zebra Technologies
Corp. Class A 200 4,975
-------
356,542
-------
CHEMICAL--0.9%
A. Schulman Inc. 100 2,188
Air Products &
Chemicals Inc. 100 5,713
Calgon Carbon Corp. 100 1,250
Crompton & Knowles
Corp. 100 1,538
Cytec Industries Inc.* 100 8,288
Dexter Corp. 100 2,688
Dow Chemical Co. 200 17,775
E.I. Du Pont de
Nemours & Co. 300 24,113
Eastman Chemical Co. 100 6,725
Ferro Corp. 100 2,775
First Mississippi Corp. 100 2,325
Geon Co. 100 2,650
Great Lakes
Chemical Corp. 100 6,825
H.B. Fuller Co. 200 6,550
Hercules Inc. 100 6,050
Lawter International
Inc. 100 1,088
Lilly Industrial Inc.
Class A 100 1,450
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
Minnesota Mining &
Manufacturing Co. 200 $ 13,150
Monsanto Co. 100 15,150
Morton International
Inc. 100 3,538
NCH Corp. 100 5,800
NL Industries Inc.
(New) 200 2,875
OM Group Inc. 200 7,588
PPG Industries Inc. 200 10,125
Praxair Inc. 100 3,863
Rohm & Haas Co. 100 6,638
Scotts Co. Class A* 100 1,725
Sterling Chemicals
Inc.* 200 2,275
Union Carbide Corp. 100 4,550
W.R. Grace & Co. 100 7,750
Wellman Inc. 100 2,400
-------
187,418
-------
CONSTRUCTION--0.2%
Apogee Enterprises,
Inc. 100 2,638
Blount International
Inc. Class A 150 4,650
Calmat Co. 100 1,738
Centex Construction
Products Inc. 100 1,438
Fluor Corp. 100 6,613
Del Webb Corp. 100 1,788
Kaufman & Broad
Home Corp. 100 1,413
Oakwood Homes Corp. 100 4,463
Pulte Corp. 100 2,650
Sherwin Williams Co. 100 4,675
Southdown Inc. 100 2,350
Stone & Webster, Inc. 100 3,400
TJ International Inc. 100 1,725
Toll Brothers, Inc.* 100 1,625
-------
41,166
-------
CONSUMER-DURABLE--0.2%
Bassett Furniture
Industries Inc. 100 2,550
Black & Decker Corp. 100 4,025
Furniture Brands
International Inc.* 200 1,975
Harman International
Industries Inc. (New) 100 4,725
Kimball International
Inc. Class B 100 2,875
La-Z-Boy Chair Co. 100 2,963
Masco Corp. 100 2,725
Maytag Corp. 100 2,150
Newell Co. 100 2,850
Outboard Marine Corp. 100 1,975
Regal Beloit Corp. 100 1,938
Toro Co. 200 6,375
Whirlpool Corp. 100 6,013
-------
43,139
-------
CONSUMER-NONDURABLE--0.4%
3DO Co.* 100 900
A.T. Cross Co. Class A 100 1,500
Acclaim
Entertainment Inc.* 200 2,063
</TABLE>
F-80
<PAGE> 202
SchwabFunds(R)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
American Greetings
Corp. Class A 100 $ 2,769
Applebee's
International, Inc. 100 2,625
Buffets Inc.* 100 1,394
CML Group, Inc. 200 900
Corning Inc. 200 6,950
Darden Restaurants Inc. 100 1,375
Department 56 Inc.* 100 2,488
Foxmeyer Health Corp. 100 1,950
Hasbro Inc. 100 3,675
IHOP Corp. (New)* 100 2,844
International Dairy
Queen Inc. Class A* 100 2,131
Landry's Seafood
Restaurants, Inc. 100 2,388
Luby's Cafeterias, Inc. 100 2,400
Mafco Consolidated
Group Inc.* 100 1,800
Mattel Inc. 250 6,500
McDonald's Corp. 400 19,150
Mikasa Inc. Class B* 100 1,188
Mohawk Industries Inc.* 100 1,450
Papa John's
International, Inc. 150 7,388
Premark International,
Inc. 100 5,138
Rubbermaid Inc. 100 2,825
Russ Berrie & Co. Inc. 100 1,600
Ryan's Family Steak
Houses Inc.* 200 1,950
Sbarro, Inc. 100 2,625
Shoney's Inc.* 100 1,113
Toy Biz Inc. Class A* 100 2,038
Wendy's International,
Inc. 100 1,913
Zenith Electronics
Corp.* 100 938
------
95,968
------
CONTAINERS--0.1%
ACX Technologies Inc. 100 1,938
Ball Corp. 600 18,675
Crown Cork & Seal Inc. 100 4,713
Gaylord Container Corp.
Class A* 200 2,050
Greif Brothers Corp.
Class A 100 2,625
Stone Container Corp. 100 1,700
------
31,701
------
ELECTRONICS--1.1%
AMETEK, Inc. 100 1,925
AMP Inc. 300 13,425
Advanced Micro Devices
Inc. 180 3,375
Allen Group Inc. 100 2,475
Alliance Semiconductor
Corp. 100 1,063
Applied Materials, Inc. 300 11,963
Augat Inc. 100 1,925
Belden Inc. 100 2,975
Burr Brown 100 1,900
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
Cable Design
Technologies Corp. 100 $ 3,275
Checkpoint Systems Inc. 400 11,950
Cyrix Corp.* 100 3,069
Dallas Semiconductor
Corp. 100 1,950
Electroglas Inc. 200 3,925
FORE Systems, Inc. 200 15,763
General Instrument Corp.* 100 3,275
Gerber Scientific Inc. 100 1,688
Harris Corp. 100 6,175
Input/Output Inc. 200 6,950
Integrated Systems
Consulting Group
(Rights exp.
5/22/96)* 17 304
Intel Corp. 500 33,906
Itron, Inc.* 100 5,850
Kent Electronics Corp. 200 8,425
Kulicke & Soffa
Industries Inc. 100 1,875
LSI Logic Corp. 100 3,600
LTX Corp.* 100 969
Lattice Semiconductor
Corp.* 100 3,269
Marshall Industries* 100 3,188
Methode Electronics
Inc. Class A 100 1,650
Micron Technology Inc. 200 7,275
Motorola Inc. 400 24,500
National Semiconductor
Corp.* 100 1,575
Pioneer Standard
Electronics Inc. 100 1,625
Pittway Corp. Class A 150 7,163
Rexel Inc.* 100 1,338
S3 Inc. 200 2,850
Silicon Valley
Group Inc.* 100 2,663
Teledyne Inc. 100 3,713
Texas Instruments Inc. 200 11,300
VLSI Technology, Inc.* 200 3,488
VeriFone, Inc.* 100 4,200
Vicor Corp. 200 3,038
Wyle Electronics 100 4,188
Zilog Inc.* 100 3,763
-------
244,761
-------
ENERGY-DEVELOPMENT--0.6%
Amcol International
Corp. 100 1,150
BJ Services Co.* 100 3,838
Baker Hughes Inc. 100 3,175
Benton Oil & Gas Co.* 100 1,756
Burlington Resources
Inc. 100 3,725
Cabot Oil & Gas Corp.
Class A 100 1,650
Chesapeake Energy Corp. 150 10,613
Devon Energy Corp. 100 2,550
Dresser Industries Inc. 100 3,188
Falcon Drilling Inc.* 100 2,706
Global Industrial
Technologies Inc.* 100 1,838
Global Natural
Resources Inc.* 100 1,450
</TABLE>
F-81
<PAGE> 203
SchwabFunds(R)
- --------------------------------------------------------------------------------
SCHWAB ASSET DIRECTOR(R)-CONSERVATIVE GROWTH FUND
STATEMENT OF NET ASSETS
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
Halliburton Co. 100 $ 5,738
Helmerich & Payne Inc. 400 14,750
Landmark Graphics
Corp.* 100 1,950
Louis Dreyfus Natural
Gas Corp.* 100 1,275
Nabors Industries Inc.* 300 4,613
Newfield Exploration
Co.* 100 3,425
Noble Drilling Corp.* 300 4,500
Occidental Petroleum
Corp. 200 5,150
Parker & Parsley
Petroleum Co. 100 2,463
Parker Drilling Co.* 200 1,525
Reading & Bates Corp.
(New)* 200 4,900
Rowan Cos. Inc.* 500 7,375
Schlumberger Ltd. 100 8,825
United Meridian Corp.* 100 3,100
Varco International
Inc.* 100 1,663
Vintage Petroleum Inc. 100 2,438
Weatherford Enterra Inc.* 200 7,050
Zeigler Coal Holding
Co. 100 1,475
-------
119,854
-------
FOOD-AGRICULTURE--1.5%
Archer-Daniels-
Midland Co. 400 7,550
Bob Evans Farms, Inc. 200 3,163
CPC International Inc. 100 6,913
Campbell Soup Co. 200 12,500
Chiquita Brands
International Inc. 200 2,925
Coca-Cola Co. 800 65,200
ConAgra, Inc. 200 7,725
Delta & Pine Land Co. 300 13,388
Dimon Inc. 100 1,700
Earthgrains Co.* 16 518
Flowers Industries,
Inc. 200 2,675
General Mills Inc. 100 5,550
H.J. Heinz Co. 300 10,163
Hershey Foods Corp. 100 7,588
Hudson Foods Inc.
Class A 100 1,325
International
Multifoods Corp. 100 1,888
Interstate Bakeries
Corp. (New) 100 2,375
J.M. Smucker Co.
Class A 100 2,113
JP Foodservice, Inc.* 100 2,200
Kellogg Co. 200 14,275
Lance Inc. 100 1,575
Mississippi Chemical
Corp. (New) 100 2,025
Pepsico Inc. 500 31,750
Pioneer HI Bred
International Inc. 100 5,575
Quaker Oats Co. 100 3,438
Ralcorp Holdings, Inc.* 100 2,200
Ralston Purina Co. 100 5,838
Richfood Holdings Inc. 100 3,269
Sara Lee Corp. 500 15,500
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
Savannah Foods &
Industries Inc. 100 $ 1,088
Seaboard Corp. 200 43,100
Smithfield Foods Inc.* 100 2,975
Sysco Corp. 100 3,213
Unilever 200 27,300
WLR Foods, Inc. 100 1,213
Whitman Corp. 100 2,525
Wm Wrigley Junior Co. 100 5,263
-------
329,581
-------
GOLD--0.2%
Barrick Gold Corp. 400 12,250
Battle Mountain
Gold Co. 300 2,663
FMC Gold Co. 200 1,275
FirstMiss Gold Inc.* 100 3,088
Homestake Mining Co. 100 2,013
Newmont Mining Corp. 100 5,788
Placer Dome Inc. 200 5,550
Santa Fe Pacific Gold
Corp. 100 1,488
-------
34,115
-------
HEALTHCARE--2.6%
ALZA Corp.* 100 2,850
Abbott Laboratories 400 16,250
Acuson* 100 1,900
Advanced Tissue
Sciences Inc.* 100 1,700
Agouron Pharmaceuticals
Inc.* 100 4,075
Alpharma, Inc. 100 2,450
American Home Products
Corp. 300 31,650
Amgen Inc. 200 11,488
Amsco International,
Inc.* 100 1,450
Ballard Medical
Products 100 1,988
Baxter International
Inc. 200 8,850
Becton Dickinson & Co. 100 8,063
Biomet Inc.* 100 1,469
Block Drug Inc.
Class A 103 3,837
Boston Scientific
Corp.* 167 7,202
Bristol Myers
Squibb Co. 400 32,900
Carter Wallace Inc. 100 1,575
Columbia/HCA Healthcare
Corp. 200 10,625
Community Health
Systems Inc.* 100 4,338
Community Psychiatric
Centers 100 925
Copley Pharmaceutical
Inc.* 100 1,525
Cygnus Therapeutic
Systems, Inc.* 100 2,144
Datascope Corp.* 100 1,775
Diagnostic Products
Corp. 100 4,188
Eli Lilly & Co. 400 23,600
Enzo Biochem Inc. 100 1,838
Fresenius U.S.A. Inc.* 100 2,000
</TABLE>
F-82
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- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
Genesis Health
Ventures, Inc. 150 $ 4,444
Gilead Sciences Inc.* 100 3,075
Gulf South Medical
Supply Inc. 100 4,088
Haemonetics Corp.* 100 1,925
HealthSouth
Rehabilitation Corp. 117 4,344
Herbalife International
Inc. 100 1,375
Human Genome Sciences
Inc.* 100 3,988
Humana Inc.* 200 4,925
ICN Pharmaceuticals,
Inc. 101 2,273
Immulogic
Pharmaceutical Corp.* 100 1,094
Immunex Corp. (New)* 100 1,569
Interneuron
Pharmaceuticals* 100 3,913
Invacare Corp. 100 2,575
Isis Pharmaceuticals* 100 1,263
Isolyser Inc. 100 1,750
Johnson & Johnson 400 37,000
Kinetic Concepts Inc. 100 1,488
Ligand Pharmaceuticals
Inc. Class B 100 1,481
Lincare Holdings Inc.* 100 3,875
Liposome Inc.* 100 2,456
Living Centers of
America* 100 3,700
Mallinckrodt
Group Inc. 100 3,938
Medimmune Inc.* 100 1,675
Medisense Inc.* 100 4,488
Medtronic Inc. 200 10,625
Mentor Corp. 100 2,338
Merck & Co. Inc. 800 48,400
Multicare Cos. Inc. 100 2,838
Nellcor Puritan
Bennett Inc.* 100 4,900
Nexstar Pharmaceuticals
Inc.* 100 2,450
Novacare Inc.* 200 1,450
Omnicare Inc. 100 6,000
Owens & Minor Inc.
(New) 100 1,350
PDT Inc. 100 4,763
Patterson Dental Co.* 100 3,000
Pfizer Inc. 400 27,550
Pharmacia &
Upjohn Inc. 200 7,650
Physician Sales &
Service Inc. 100 2,738
Pyxis Corp.* 200 5,075
Quintiles Transnational
Corp. 200 14,625
Renal Treatment Centers
Inc. 400 11,600
Respironics Inc. 100 2,163
RoTech Medical Corp. 100 4,150
Roberts Pharmaceutical
Corp.* 100 1,875
Salick Health Care,
Inc.* 200 7,625
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
Schering Plough Corp. 200 $ 11,475
Sepracor Inc.* 100 1,400
Sofamor/Danek
Group Inc.* 100 3,275
Sola International
Inc.* 100 3,275
Somatogen Inc.* 100 1,656
St. Jude Medical, Inc. 100 3,644
Sunrise Medical Inc.* 100 1,825
Target Therapeutics
Inc. 200 10,825
Tecnol Medical Products
Inc.* 100 1,963
Tenet Healthcare Corp.* 100 2,050
Thermedics Inc.* 100 3,025
U.S. Healthcare, Inc. 100 5,219
United Healthcare Corp. 300 17,550
Ventritex Inc. 100 1,556
Vertex Pharmaceuticals
Inc.* 100 2,950
VISX Inc.* 100 3,400
Vivra Inc. 150 4,744
Warner Lambert Co. 100 11,175
West Co Inc. 100 2,275
-------
561,804
-------
HOUSEHOLD PRODUCTS--0.4%
Avon Products, Inc. 100 8,888
Bush Boake Allen Inc.* 100 2,700
Church & Dwight Inc. 100 2,200
Clorox Co. 100 8,263
Colgate-Palmolive Co. 100 7,663
Dial Corp. 100 2,813
Gillette Co. 200 10,800
International Flavors &
Fragrances Inc. 100 4,913
Playtex Products Inc.* 200 1,750
Procter & Gamble Co. 500 42,250
-------
92,240
-------
IMAGING & PHOTO--0.2%
Avid Technology, Inc.* 100 1,944
BMC Industries, Inc. 100 2,675
C-Cube Microsystems,
Inc. 200 9,850
Eastman Kodak Co. 100 7,650
Electronics for
Imaging Inc. 200 12,275
Ultratech Stepper Inc. 100 2,600
-------
36,994
-------
INSURANCE--1.4%
Aetna Life &
Casualty Co. 100 7,125
Alexander & Alexander
Services 1,200 22,650
Alfa Corp. 100 1,300
Allstate Corp. 400 15,550
American Annuity
Group, Inc. 100 1,250
American Bankers
Insurance
Group, Inc. 100 3,938
American General Corp. 200 7,025
</TABLE>
F-83
<PAGE> 205
SchwabFunds(R)
- --------------------------------------------------------------------------------
SCHWAB ASSET DIRECTOR(R)-CONSERVATIVE GROWTH FUND
STATEMENT OF NET ASSETS
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
American International
Group, Inc. 300 $27,413
Aon Corp. 100 5,363
Argonaut Group, Inc. 100 3,125
Arthur J. Gallagher
& Co. 100 3,250
CMAC Investment Corp. 100 5,600
Capital Re Corp. 100 3,750
Capitol American
Financial Corp. 100 2,413
Chubb Corp. 100 9,463
Cigna Corp. 100 11,338
Citizens Corp. 100 1,950
Commerce Group Inc. 100 2,000
Crawford & Co.
Class A 100 1,625
Crawford & Co.
Class B 100 1,625
Enhance Financial
Services Group Inc. 100 2,713
Financial Security
Assured Holdings Ltd. 100 2,700
Foremost Corp. of
America 100 5,350
Fremont General Corp. 150 3,750
General Re Corp. 100 14,288
HCC Insurance
Holdings, Inc. 200 11,700
Harleysville Group Inc. 100 2,750
Highlands Insurance
Group Inc.* 10 190
Home Beneficial Corp.
Class B 100 2,588
Horace Mann Educators
Corp. (New) 100 3,288
ITT Hartford
Group Inc. 100 4,888
Jefferson-Pilot Corp. 300 15,825
John Alden Financial
Corp. 100 1,950
Kansas City Life
Insurance Co. 100 5,513
Liberty Corp. 100 3,175
Life Partners
Group Inc. 100 2,088
Lincoln National
Corp. Inc. 100 4,825
Marsh & McLennan
Companies 100 9,400
NAC Re Corp. 100 3,275
National Re Corp. 100 3,550
Orion Capital Corp. 100 4,438
Penncorp Financial
Group Inc. 100 3,063
Presidential Life Corp. 100 981
Providian Corp. 100 4,613
Reinsurance Group of
America Inc. 100 4,150
Safeco Corp. 200 6,588
Selective Insurance
Group, Inc. 100 3,150
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
Sierra Health
Services Inc.* 100 $ 3,300
St. Paul Companies,
Inc. 100 5,313
Torchmark Corp. 100 4,300
Transamerica Corp. 100 7,600
UNUM Corp. 100 5,950
USF&G Corp. 100 1,588
United Companies
Financial Corp. 100 3,213
United Insurance
Companies, Inc. 100 2,125
Vesta Insurance
Group Inc. 150 4,819
Zenith National
Insurance Corp. 100 2,513
-------
309,263
-------
MEDIA--0.8%
AMC Entertainment Inc.* 100 2,588
Cablevision Systems
Corp. Class A* 100 4,988
Central Newspapers Inc.
Class A 100 3,638
Century Communications
Corp. Class A* 300 2,906
Citicasters Inc. 100 3,000
Comcast Corp. Class A 200 3,488
Dow Jones & Co. Inc. 100 3,738
Evergreen Media* 100 3,963
Gannett Inc. 100 6,838
Harte Hanks
Communications (New) 150 3,544
Houghton Mifflin Co. 100 4,638
Interdigital Commerce
Corp.* 100 831
International Cabletel
Inc. 100 2,944
International Family
Entertainment Inc.
Class B 125 1,906
Jacor Communications
Inc.* 100 2,150
John Wiley & Son, Inc.
Class A 100 3,450
Knight-Ridder, Inc. 100 7,238
McClatchy Newspapers
Inc. Class A 100 2,425
McGraw-Hill, Inc. 200 8,825
Media General, Inc.
Class A 100 3,850
Meredith Corp. 100 4,538
Metromedia
International
Group., Inc. 100 1,350
New World
Communications
Class A* 100 1,869
New York Times Co.
Class A 100 3,250
Oak Industries Inc.* 100 2,700
Paxson Communications
Corp. 100 1,488
Pulitzer Publishing Co. 100 5,700
Regal Cinemas, Inc. 150 6,141
</TABLE>
F-84
<PAGE> 206
SchwabFunds(R)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
Renaissance
Communications Corp. 100 $ 2,763
SBC Communications Inc. 400 20,000
TCA Cable TV Inc. 100 2,938
Tele Communications
Inc. (New)--TCI
Group Series A 500 9,594
Time Warner Inc. 300 12,263
Times Mirror Co. (New)
Series A 100 4,263
Tribune Co. (New) 100 6,975
United International
Holdings Inc.
Class A* 100 1,450
Viacom Inc. Class B* 300 12,300
Westcott
Communications Inc.* 100 2,131
Westwood One Inc.* 100 1,769
-------
180,430
-------
MISCELLANEOUS FINANCE--0.9%
AMCORE Financial, Inc. 100 2,025
Alex Brown Inc. 100 5,413
American Express Co. 200 9,700
Americredit Corp.* 100 1,438
Astoria Financial Corp. 100 5,338
Beneficial Corp. 100 5,525
Bok Financial Corp.
(New) 100 2,075
Cal-Federal Bancorp
Inc.* 200 3,575
Charter One
Financial Inc. 200 7,013
Coast Savings
Financial Inc.* 100 3,113
Collective Bancorp Inc. 100 2,419
Commercial Federal
Corp. 100 3,838
Dean Witter
Discover & Co. 100 5,450
Eaton Vance Corp. (Non
Voting) 100 3,088
Federal Home Loan
Mortgage Corp. 200 16,675
Federal National
Mortgage Assoc. 800 24,500
First Financial Corp. 100 2,363
Fund American
Enterprises
Holdings, Inc. 100 7,650
Glendale Federal Bank
(FSB) (New)* 100 1,750
Great Western Financial
Corp. 100 2,300
Green Tree Financial
Corp. 100 3,375
H.F. Ahmanson & Co. 100 2,375
Home Financial Corp. 100 1,400
Household International
Inc. 100 6,913
Interpool Inc. 100 1,800
Merrill Lynch & Co.
Inc. 200 12,075
Money Store Inc. 250 6,344
Morgan Stanley
Group Inc. 200 10,050
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
Olympic Financial Ltd.* 100 $ 2,225
Peoples Heritage
Financial Group, Inc. 100 2,100
Pioneer Group Inc. 100 2,650
Quick & Reilly
Group, Inc. 100 3,050
Raymond James
Financial Inc. 100 2,263
Roosevelt
Financial Group Inc. 200 3,850
Salomon Inc. 100 4,063
Sovereign Bancorp Inc. 105 1,168
St. Paul Bancorp Inc. 100 2,431
Standard Financial Inc. 100 1,494
Student Loan Corp. 100 3,575
Travelers Group Inc. 200 12,300
Westcorp Inc. 100 1,963
-------
202,712
-------
MOTOR VEHICLE--0.7%
Arctco, Inc. 100 969
Arvin Industries, Inc. 500 11,250
Borg Warner
Automotive Inc. 100 3,813
Breed Technologies Inc. 100 2,150
Chrysler Corp. 300 18,825
Dana Corp. 100 3,325
Detroit Diesel Corp.* 100 1,913
Eaton Corp. 100 6,050
Echlin Inc. 100 3,438
Federal Mogul Corp. 100 1,900
Ford Motor Co. 700 25,113
General Motors Corp. 600 32,550
Gentex Corp.* 100 3,938
Genuine Parts Co. 100 4,425
Hayes Wheels
International Inc. 100 3,038
Mascotech Inc. 200 2,625
Modine
Manufacturing Co. 100 2,750
Standard Products Co. 100 2,538
Superior Industries
International, Inc. 100 2,738
TRW Inc. 100 9,388
Titan Wheel
International Inc. 100 1,613
-------
144,349
-------
NON-FERROUS--0.4%
Alcan Aluminum Ltd. 300 9,563
Aluminum Company of
America 200 12,475
Cyprus Amax
Minerals Co. 100 2,713
Echo Bay Mines Ltd 200 2,625
Engelhard Corp. 100 2,513
Freeport McMoran Copper
& Gold Class B 100 3,288
Hecla Mining Co.* 100 775
Inco Ltd. 100 3,363
</TABLE>
F-85
<PAGE> 207
SchwabFunds(R)
- --------------------------------------------------------------------------------
SCHWAB ASSET DIRECTOR(R)-CONSERVATIVE GROWTH FUND
STATEMENT OF NET ASSETS
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
Minerals
Technologies Inc. 600 $ 23,100
Mueller Industries Inc. 100 4,025
Phelps Dodge Corp. 100 7,350
Reynolds Metals Co. 100 5,375
Stillwater Mining Co.* 100 2,375
Sunshine Mining &
Refining Co.* 600 975
Wolverine Tube Inc.* 200 7,350
-------
87,865
-------
OIL-DOMESTIC--0.4%
Amerada Hess Corp. 100 5,663
Atlantic Richfield Co. 300 35,325
Barrett Resources
Corp.* 100 2,775
Cross Timbers Oil Co. 100 2,000
Diamond Shamrock Inc. 100 3,388
Kerr-McGee Corp. 100 6,388
Phillips Petroleum Co. 200 8,300
Pogo Producing Co. 100 3,613
Quaker State Corp. 100 1,575
Smith International
Inc.* 100 2,975
Snyder Oil Corp. 100 900
Sun Inc. 100 3,100
USX Corp. (Marathon
Group) (New) 200 4,400
Unocal Corp. 200 6,425
-------
86,827
-------
OIL-INTERNATIONAL--1.0%
Amoco Corp. 300 21,900
Chevron Corp. 500 29,000
Exxon Corp. 800 68,000
Mobil Corp. 200 23,000
Royal Dutch
Petroleum Co. 300 42,975
Texaco Inc. 200 17,100
Western Atlas, Inc.* 100 6,000
-------
207,975
-------
PAPER--0.5%
Alco Standard Corp. 100 5,788
Caraustar Industries
Inc. 100 2,513
Champion International
Corp. 100 4,825
Chesapeake Corp. 100 2,888
Georgia Pacific Corp. 100 7,775
International Paper Co. 200 7,975
James River Corp. 100 2,675
Kimberly Clark Corp. 178 12,927
Longview Fibre Co. 200 3,525
Louisiana Pacific Corp. 100 2,513
Mead Corp. 100 5,563
P.H. Glatfelter Co. 200 3,325
Rock Tennessee Co.
Class A 100 1,756
Schweitzer Mauduit
International Inc. 10 271
Shorewood Packaging
Corp.* 100 1,725
Temple-Inland Inc. 100 4,850
Union Camp Corp. 100 5,438
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
Wausau Paper
Mills Co. 125 $ 2,875
Westvaco Corp. 100 3,100
Weyerhaeuser Co. 200 9,900
Willamette
Industries, Inc. 100 6,175
------
98,382
------
PRODUCER GOODS-MANUFACTURING--2.0%
Albany International
Corp. Class A (New) 100 2,150
Allied Signal Inc. 300 17,438
AptarGroup, Inc. 100 3,763
Avery Dennison Corp. 100 5,700
BT Office Products
International Inc.* 100 1,738
BW/IP Holding, Inc.
Class A 100 2,075
Baldor Electric Co. 100 2,163
Blyth Industries Inc. 200 7,950
Case Corp. 100 5,050
Caterpillar Inc. 200 12,800
Coherent Inc.* 100 5,369
Collins & Aikman Corp.* 200 1,400
Cooper Industries Inc. 100 4,250
Credence Systems Corp. 100 2,163
Deere & Co. 300 11,663
Donaldson Inc. 100 2,625
Dover Corp. 100 5,150
Duriron Inc. 100 2,625
Emerson Electric Co. 200 16,725
FMC Corp. (New)* 100 6,938
Fisher Scientific
International, Inc. 100 3,738
General Electric Co. 1,200 93,000
Giddings & Lewis Inc. 200 3,700
Goulds Pumps Inc. 100 2,344
Greenfield Industries
Inc. 100 3,794
Griffon Corp.* 100 900
Helix Technology Corp. 100 3,769
Herman Miller Inc. 100 3,075
IDEX Corp. 100 3,925
ITT Industries Inc. 100 2,750
Illinois Tool
Works Inc. 100 6,725
Ingersoll Rand Co. 100 3,875
Insilco Corp.* 100 3,469
Interface Inc. Class A 100 1,306
Ionics Inc. 100 4,800
JLG Industries Inc. 100 5,475
Johnson Controls, Inc. 100 7,150
Juno Lighting Inc. 100 1,488
Kaydon Corp. 100 3,975
Kennametal Inc. 100 3,788
Keystone
International Inc. 100 2,188
Lincoln Electric Co.
Class A (Non Voting) 100 2,825
Lydall Inc. 100 2,350
Myers Industry Inc. 100 1,813
Navistar International
Corp.* 1,200 14,400
</TABLE>
F-86
<PAGE> 208
SchwabFunds(R)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
Nu-Kote Holding Inc.
Class A 100 $ 1,775
Pall Corp. 100 2,800
Parker Hannifin Corp. 100 4,225
Precision Castparts
Corp. 100 4,338
Presstek Inc. 100 13,888
Raychem Corp. 100 7,788
Roper Industries 100 4,713
Standex International
Corp. 100 2,700
Stewart & Stevenson
Services, Inc. 100 2,950
TRINOVA Corp. 600 21,150
Teleflex Inc. 100 4,638
Tencor Instruments 100 2,469
Tenneco Inc. 200 10,975
Texas Industries Inc. 100 6,400
TriMas Corp. 200 4,725
Triarc Cos., Inc.
Class A* 100 1,263
Tyco Interest Ltd 100 3,863
U.S. Filter Corp. (New) 100 3,075
UNR Industries, Inc. 200 1,850
Valhi, Inc. (New) 500 3,250
W.W. Grainger, Inc. 100 6,900
WMS Industries Inc.* 100 1,813
Watts Industries Inc.
Class A 100 2,050
Westinghouse Air Brake
Co. (New) 100 1,413
Westinghouse Electric
Corp. 300 5,663
Westpoint Stevens Inc.
Class A 100 2,106
Wyman Gordon Co.* 100 1,825
X-Rite, Inc. 100 1,750
-------
438,712
-------
RAILROAD--0.3%
Burlington Northern
Santa Fe 100 8,750
CSX Corp. 200 10,250
Conrail Inc. 100 6,975
Florida East Coast
Industry Inc. 100 8,900
Norfolk Southern Corp. 100 8,400
Union Pacific Corp. 200 13,625
-------
56,900
-------
REAL PROPERTY--0.1%
Catellus Development
Corp.* 200 1,825
Insignia Financial
Group Class A (New) 400 8,800
Price Enterprises Inc. 100 1,600
-------
12,225
-------
RETAIL--1.3%
Albertson's Inc. 200 7,700
American Stores Co.
(New) 100 3,338
Arbor Drugs, Inc. 100 2,038
Best Buy Co., Inc.* 200 3,850
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
Burlington Coat Factory
Warehouse* 100 $ 1,088
CDW Computer
Centers Inc.* 100 7,725
CUC International Inc. 100 3,288
Carson Pirie Scott & Co.*
100 2,425
Casey's General
Stores Inc. 100 2,156
Charming Shoppes Inc. 300 1,931
Circle K Corp.* 100 3,125
Circuit City Stores
Inc. 100 3,175
Claire's Stores Inc. 150 3,263
CompUSA Inc. 200 6,925
Dayton Hudson Corp. 100 9,550
Dillard Department
Stores Inc. Class A 100 4,013
Dollar Tree Stores Inc. 150 5,025
Duty Free
International Inc. 100 1,338
Family Dollar
Stores, Inc. 300 4,575
Federated Department
Stores Inc.* 100 3,338
Fingerhut
Companies, Inc. 100 1,275
Fred Meyer Inc.* 100 2,875
Fruit of the Loom Inc.
Class A* 100 2,638
Gap Inc. 200 6,025
Gymboree Corp.* 100 2,600
Harcourt General Inc. 100 4,400
Hollywood Entertainment
Corp. 100 1,631
Home Depot Inc. 200 9,475
Home Shopping
Network, Inc.* 400 4,700
J.C. Penney Inc. 200 9,900
Just for Feet Inc. 100 4,781
K Mart Corp. 300 3,038
Kroger Co.* 100 4,113
Lands' End, Inc.* 100 1,975
Limited Inc. 109 2,262
Lowe's Cos Inc. 100 3,238
MacFrugals Bargains-
Close-Out* 100 1,338
May Department
Stores Co. 200 10,200
Melville Corp. 100 3,888
Michaels Stores Inc.* 100 1,844
Nordstrom Inc. 100 5,075
Pier 1 Imports Inc. 100 1,338
Price Costco Inc.* 100 1,894
Proffitt's, Inc.* 100 3,288
Rite Aid Corp. 100 2,963
Ross Stores Inc. 100 3,463
Ruddick Corp. 100 1,325
Sears Roebuck & Co. 200 9,975
Service Merchandise
Co. Inc.* 300 1,425
Shopko Stores Inc. 100 1,550
Smart & Final Inc. 100 2,275
</TABLE>
F-87
<PAGE> 209
SchwabFunds(R)
- --------------------------------------------------------------------------------
SCHWAB ASSET DIRECTOR(R)-CONSERVATIVE GROWTH FUND
STATEMENT OF NET ASSETS
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
Smith's Food & Drug
Centers, Inc. Class B 100 $ 2,500
Sotheby's Holdings,
Inc. Class A 100 1,413
Spiegel, Inc. Class A
(Non Voting) 400 4,000
Sports Authority Inc.* 100 2,975
Stanhome Inc. 100 2,950
Stein Mart Inc.* 100 1,588
Tandy Corp. 100 5,188
Tiffany & Co. (New) 100 6,525
Toys 'R' Us, Inc.* 200 5,575
Waban Inc.* 100 2,450
Wal-Mart Stores, Inc. 1,600 38,200
Walgreen Co. 200 6,400
Williams-Sonoma Inc.* 100 2,506
Winn Dixie Stores Inc. 200 6,600
Woolworth Corp. 100 1,913
Zale Corp. (New)* 100 1,881
-------
289,297
-------
STEEL--0.2%
Armco Inc.* 300 1,688
Bethlehem Steel Corp.* 100 1,363
Birmingham Steel Corp. 100 1,600
Carpenter Technology
Corp. 100 3,763
Chaparral Steel Co. 100 1,513
Cleveland Cliffs Inc. 100 4,175
Intermet Corp.* 100 1,463
J & L Specialty
Steel Inc. 100 1,813
Lukens Inc. 100 2,638
National Steel Corp.
Class B* 100 1,363
Nucor Corp. 100 5,625
Oregon Steel Mills Inc. 100 1,588
USX Corp. (U.S. Steel
Group) 100 3,300
WHX Corp.* 100 1,150
Worthington
Industries Inc. 100 2,044
-------
35,086
-------
TELEPHONE--1.6%
360 Communications Co.* 100 2,350
AT&T Corp. 1,100 67,375
Airtouch
Communications Inc.* 500 15,625
Alltel Corp. 100 3,288
American Mobile
Satellite Corp.* 100 1,925
Ameritech Corp. (New) 600 35,025
Antec Corp.* 100 1,519
Arch Communications
Group, Inc.* 100 2,375
Aspect
Telecommunications
Corp. 100 5,750
Associated Group Inc.
Class A* 100 2,781
Bell Atlantic Corp. 200 13,000
BellSouth Corp. 600 24,000
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
Boston Technology Inc.
(New)* 100 $ 1,750
C-TEC Corp. 100 2,988
Cellstar Corp.* 100 938
Comnet Cellular Inc.* 100 3,313
DSC Communications
Corp.* 100 3,138
GTE Corp. 600 26,025
General Datacom
Industries Inc.* 100 1,375
Geotek
Communications Inc.* 200 2,088
InterVoice, Inc.* 100 2,806
Lincoln
Telecommunications 100 1,681
Loral Space &
Communications* 100 1,438
MCI Communications
Corp. 500 14,688
Microcom Inc.* 100 2,450
Mobilemedia Corp.
Class A* 100 1,988
Nextel
Communications Inc.* 107 1,926
Northern Telecom Ltd 200 10,300
Nynex Corp. 200 9,825
Octel Communications
Corp. 100 4,500
Pacific Telesis Group 500 17,125
Pairgain Technologies
Inc.* 100 9,575
Sprint Corp. 300 12,638
Tellabs Inc. 100 5,538
U S WEST, Inc.
(Communications
Group) 400 13,100
U S West Inc. (Media
Group)* 300 5,850
Vanguard Cellular
Systems, Inc.
Class A* 200 4,300
Worldcom Inc.* 200 9,388
-------
345,744
-------
TOBACCO--0.3%
American Brands, Inc. 100 4,163
Loews Corp. 200 15,250
Philip Morris
Companies Inc. 600 54,075
UST Inc. 100 3,200
-------
76,688
-------
TRANSPORTATION-MISCELLANEOUS--0.3%
Air Express
International Corp. 100 2,788
Airbourne Freight Corp. 100 2,638
Amerco Inc.* 100 2,219
American Freightways
Corp.* 100 1,525
American President
Companies, Ltd. 100 2,388
Arnold Industries Inc. 100 1,600
Federal Express Corp.* 100 8,075
</TABLE>
F-88
<PAGE> 210
SchwabFunds(R)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
Harper Group, Inc. 200 $ 3,850
Heartland Express, Inc. 100 2,950
J.B. Hunt Transport
Services Inc. 100 2,056
Kirby Corp.* 100 1,763
NACCO Industries, Inc.
Class A 200 12,625
Overseas Shipholding
Group 100 2,013
Rollins Truck Leasing
Corp. 100 1,088
Ryder System, Inc. 100 2,913
Shurgard Storage
Centers Inc. Class A 100 2,563
Swift Transportation
Inc. 100 1,900
TNT Freightways Corp. 100 2,256
Wabash National Corp. 100 1,975
Werner Enterprises Inc. 100 2,463
XTRA Corp. 100 4,550
Yellow Corp. 100 1,225
-------
67,423
-------
TRAVEL & RECREATION--0.5%
Anthony Industries,
Inc. 100 2,850
Aztar Corp.* 100 975
Bally Entertainment
Corp. 500 10,438
Bally Total Fitness
Holding Corp.* 25 138
Boyd Gaming Corp.* 200 2,800
Brunswick Corp. 100 2,200
Doubletree Corp.* 100 3,194
Harrahs
Entertainment Inc.* 100 3,450
Hilton Hotels Corp. 100 10,550
ITT Corp. (New)* 100 6,088
Marcus Corp. 100 2,788
Marriot International
Inc. 100 4,875
Players International
Inc. 100 1,138
Polaris Industries Inc. 100 3,488
Primadonna Resorts
Inc.* 100 1,913
Prime Hospitality
Corp.* 100 1,513
Rio Hotel &
Casino Inc.* 100 1,800
Speedway
Motorsports, Inc. 200 5,350
Station Casinos Inc.* 100 1,313
Stratosphere Corp.* 100 1,094
Topps Inc. 100 584
Walt Disney Co. 609 37,758
-------
106,297
-------
UTILITIES--1.3%
American Electric Power
Co., Inc. 100 4,063
Aquila Gas Pipeline
Corp. 100 1,388
Baltimore Gas &
Electric Co. 100 2,638
Carolina Power &
Light Co. 100 3,600
Central & South West
Corp. 200 5,450
Central Hudson Gas &
Electric Corp. 100 2,900
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
Central Louisiana
Electric Co. (New) 100 $ 2,563
Central Maine
Power Co. 100 1,425
Cilcorp Inc. 100 4,313
Cinergy Corp. 100 2,900
Coastal Corp. 100 3,963
Commonwealth Energy
System (Shares of
Beneficial Interest) 100 4,588
Consolidated Edison Co. 200 5,875
Consolidated Natural
Gas Co. 100 4,675
DTE Energy Co. 100 3,100
Destec Energy, Inc.* 300 3,525
Dominion Resources Inc. 100 3,850
Duke Power Co. 200 9,400
Eastern Enterprises 300 10,763
Eastern Utilities
Association 100 2,038
Edison International 300 4,800
Enron Corp. 200 8,050
Entergy Corp. 200 5,300
FPL Group, Inc. 200 8,625
General Public
Utilities Corp. 100 3,175
Houston Industries Inc. 200 4,275
IES Industries Inc. 100 2,650
Indiana Energy Inc. 100 2,388
K N Energy Inc. 100 3,200
Laclede Gas Co. 100 2,350
MDU Resources
Group, Inc. 100 2,188
New Jersey Resources
Corp. 100 2,838
Niagara Mohawk Power
Corp. 100 750
NorAm Energy Co. 200 2,200
Northern States
Power Co. 100 4,675
Northwest Natural
Gas Co. 100 3,269
Ohio Edison Co. 100 2,088
Oneok Inc. 200 5,150
Orange & Rockland
Utilities, Inc. 100 3,413
Otter Tail Power Co. 200 7,325
P P & L Resources Inc. 100 2,263
Pacific Enterprises 100 2,575
Pacific Gas &
Electric Co. 300 6,825
Pacificorp 200 4,000
Panenergy Corp. 100 3,350
Peco Energy Co. 200 4,975
Piedmont Natural
Gas Inc. 100 2,163
Primark Corp.* 100 3,550
Public Service Co. of
New Mexico 100 1,750
Public Service Co. of
North Carolina Inc. 100 1,613
</TABLE>
F-89
<PAGE> 211
SchwabFunds(R)
- --------------------------------------------------------------------------------
SCHWAB ASSET DIRECTOR(R)-CONSERVATIVE GROWTH FUND
STATEMENT OF NET ASSETS
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
Public Service
Enterprise Group 200 $ 5,225
Seagull Energy Corp.* 100 2,438
Sierra Pacific
Resources 100 2,425
Sig Corp. 100 3,338
Sonat Inc. 100 4,363
South Jersey
Industries Inc. 100 2,338
Southern Co. 500 11,000
Southwest Gas Corp. 100 1,663
Southwestern Energy Co. 100 1,388
Tejas Gas Corp. 100 5,000
Texas Utilities Co. 200 8,050
Tucson Electric
Power Co.* 500 1,438
UGI Corp. (New) 100 2,238
Unicom Corp. 300 8,250
Union Electric Co. 100 3,863
United Illuminating Co. 100 3,638
United Water
Resources Inc. 100 1,250
WPS Resources Corp. 100 3,163
Washington Energy Co. 100 1,938
Western Gas
Resources Inc. 100 1,475
Wicor Inc. 100 3,438
Williams Cos. Inc. 100 5,113
---------
277,822
---------
6,430,111
---------
INTERNATIONAL--10.6%
AUSTRALIA--0.2%
Australia & New Zealand
Banking Group 594 2,837
Broken Hill Proprietary
Co., Ltd. 1,134 17,451
Commonwealth Bank Group 523 4,293
National Australia Bank 820 7,356
News Corp., Ltd. 797 4,671
Western Mining Corp. 650 4,738
Westpac Banking Corp. 1,069 5,190
---------
46,536
---------
BELGIUM--0.1%
Electrabel 32 7,177
Electrabel, VVPR Strip 6 16
Petrofina SA 11 3,253
Societe Generale de
Belgique 24 1,868
Tractebel Investor
International 4 1,626
Tractebel Investor
International, VVPR
Strip 4 1,620
---------
15,560
---------
CANADA--0.3%
Alcan Aluminum Ltd. 132 4,198
BCE Inc. 183 7,198
Bank of Montreal 156 3,747
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
Bank of Nova Scotia,
Halifax 135 $ 3,059
Barrick Gold Corp. 286 8,770
Canadian Imperial Bank
of Commerce 127 3,946
Canadian Pacific Ltd. 200 4,069
Imperial Oil Ltd. (New) 113 4,594
Northern Telecom Ltd. 149 7,672
Placer Dome Inc. 140 3,897
Royal Bank of Canada,
Montreal Quebec 184 4,358
Seagram Co. Ltd. 176 5,927
Thomson Corp. 345 5,739
Toronto-Dominion Bank 176 3,051
-------
70,225
-------
DENMARK--0.0%
Tele Danmark A/S
Series B 52 2,617
-------
2,617
-------
FRANCE--0.7%
AXA Groupe SA 106 6,316
Alcatel Alsthom CGE SA 88 8,276
BQE National de Paris 113 4,719
Carrefour 15 11,721
Cie Financiere de
Paribas (Bearer) 70 4,503
Cie Generale de Eaux 69 7,504
Compagnie de
Saint-Gobain SA 49 5,870
Danone Groupe 42 6,348
Elf Aquitaine 159 11,825
L'Air Liquide 39 7,087
L'Oreal SA 36 11,126
LVMH Moet Hennessy
Louis Vuitton 51 13,047
Lafarge Coppee SA 54 3,459
Lyonnaise des Eaux-
Dumez 30 3,013
Michelin (CGDE)
Class B (Reg.) 43 2,131
PSA Peugeot Citroen 29 4,052
Renault (Regie
Nationale) 140 4,245
Rhone-Poulenc SA A
Shares 188 4,511
Sanofi 60 4,842
Schneider SA 75 3,495
Societe Generale 51 5,922
Suez Group 93 3,853
TOTAL Class B 137 9,298
Union des Assurances de
Paris 176 3,811
-------
150,974
-------
GERMANY--0.8%
BASF AG 36 9,830
Bankgesell Berlin 13 2,671
Bayer AG 41 13,203
Bayerische Hypotheken &
Wechsel Bank AG 151 3,756
Bayerische Motoren
Werk AG 12 6,479
</TABLE>
F-90
<PAGE> 212
SchwabFunds(R)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
Bayerische Vereinsbank AG 154 $ 4,527
Commerzbank AG 20 4,331
Daimler-Benz AG 30 16,432
Deutsche Bank AG 278 13,323
Dresdner Bank AG 260 6,542
Hoechst AG 34 11,451
Linde AG 5 3,057
Lufthansa AG 21 3,331
Mannesmann AG 21 7,174
Muenchener
Rueckversicherung (Reg.) 5 9,080
RWE AG* 120 4,672
RWE AG (Non Voting)* 70 2,037
Sap AG 30 3,890
Siemens AG 33 18,070
Thyssen AG 18 3,263
Veba AG 285 14,167
Vereinigte
Elektrizitatswerke
Westfalen Series B 12 3,449
Viag AG 12 4,707
Viag AG (New)* 3 1,177
Volkswagen AG 14 4,833
-------
175,452
-------
HONG KONG--0.6%
CITIC Pacific 2,000 7,860
Cheung Kong Holdings 2,000 14,285
Hang Seng Bank Ltd. 2,000 20,296
Henderson China 4 11
Henderson Land
Development Co. 1,000 7,175
Hongkong Electric
Holdings Ltd. 2,000 6,360
Hongkong
Telecommunications
Ltd. 8,400 16,017
Hutchison Whampoa Ltd. 2,000 12,410
New World
Development Co. 2,046 9,178
Sun Hung Kai Properties 1,000 9,534
Swire Pacific Ltd.
Class A 1,000 8,532
Wharf Holdings 2,000 7,407
-------
119,065
-------
ITALY--0.2%
Alleanza Assicurazioni 191 1,804
Assicurazioni Generali 469 11,695
Fiat SpA 1,924 6,559
Fiat SpA, di Risp
(Non-Convertible) 830 1,512
INA 1,382 2,123
STET 2,246 7,592
STET di Risp
(Non-Convertible) 627 1,644
Telecom Italia 3,888 7,928
Telecom Italia di Risp
(Non-Convertible) 1,145 1,899
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
Telecom Italia Mob 3,367 $ 7,437
Telecom Italia Mob
di Risp 1,431 2,006
------
52,199
------
JAPAN--3.9%
Asahi Bank 1,000 12,906
Bank of Tokyo
Mitsubishi
(Bank of Tokyo shares) 800 18,431
Bank of Tokyo
Mitsubishi
(Mitsubishi Bank shares) 1,050 24,291
DDI Corp. 1 8,594
Dai-Ichi Kangyo
Bank, Ltd. 1,000 20,362
East Japan Railway Co. 1 5,344
Fuji Bank, Ltd. 1,000 21,892
Fujitsu Ltd. 1,000 10,325
Hitachi Ltd. 1,000 10,803
Industrial Bank of
Japan, Ltd. 1,000 26,767
Ishikawajima-Harima
Heavy Industries 1,000 4,971
Ito-Yokado Co., Ltd. 1,000 58,984
Joyo Bank 1,000 8,183
Kansai Electric
Power Co. 1,000 24,282
Kawasaki Heavy
Industries 1,000 5,172
Kawasaki Steel Co. 1,000 3,661
Kobe Steel 1,000 3,107
Kokusai Denki 1,000 98,466
Long-Term Credit
Bank of Japan 1,000 8,671
Matsushita Electric
Industrial Co., Ltd. 1,000 17,686
Mitsubishi Chemical
Corp. 1,000 5,487
Mitsubishi Electric
Corp. 1,000 7,877
Mitsubishi Heavy
Industries 1,000 8,929
NKK Corp. 1,000 3,136
Nippon Paper
Industries Co. 1,000 7,323
Nippon Steel Corp. 2,000 7,227
Nippon Telegraph &
Telephone Corp. 4 31,012
Nissan Motor Co., Ltd. 1,000 8,451
Nomura Securities
Co., Ltd. 1,000 21,796
Obayashi Corp. 1,000 9,302
Oki Electric Industry
Co., Ltd. 1,000 7,935
Omron Corp. 1,000 22,561
Osaka Gas Co. 1,000 4,006
Sakura Bank 1,000 11,759
Sanwa Bank 1,000 20,267
Seven-Eleven Japan Co. 1,100 77,922
Sumitomo Bank 1,000 21,414
Sumitomo Metal
Industries 1,000 3,212
Taisei Corp. 1,000 7,743
Tokai Bank 1,000 12,810
</TABLE>
F-91
<PAGE> 213
SchwabFunds(R)
- --------------------------------------------------------------------------------
SCHWAB ASSET DIRECTOR(R)-CONSERVATIVE GROWTH FUND
STATEMENT OF NET ASSETS
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
Tokyo Electric Power
Co., Inc. 1,000 $ 27,245
Tokyo Electron 1,000 37,188
Tokyo Gas & Electric
Industrial 1,000 3,929
Toshiba Corp. 1,000 7,782
Toyo Seikan 1,000 35,467
Toyo Trust &
Banking Co. 1,000 10,898
Toyota Motor Corp. 1,000 22,848
Yasuda Fire & Marine
Insurance Co. 1,000 7,887
-------
846,311
-------
NETHERLANDS--0.6%
ABN Amro
Holdings NV 181 9,370
Aegon NV 152 7,239
Akzo Nobel NV 42 4,878
Elsevier NV 386 5,812
Heineken NV 29 6,069
ING NV 168 12,971
Koninklijke PTT
Nederland 271 10,169
Philips Electronics NV 201 7,097
PolyGram NV 105 6,250
Royal Dutch Petroleum
Co. (Bearer) 314 44,731
Unilever NV, CVA 94 12,826
Wolters Kluwer NV, CVA 29 3,170
-------
130,582
-------
SINGAPORE--0.1%
Hong Kong Land Holdings 1,000 2,140
Singapore Airlines Ltd.
(alien market) 1,000 10,101
Singapore
Telecommunications 6,000 14,767
-------
27,008
-------
SPAIN--0.2%
Argentaria Corp. 50 2,024
Banco Bilbao-Vizcaya SA
(Reg.) 133 5,055
Banco de Santander SA
(Reg.) 68 3,159
Empresa Nacional de
Electricidad 152 9,548
Iberdrola SA 542 5,305
Repsol, SA 176 6,455
Telefonica
Internacional de
Espana, SA 550 9,794
-------
41,340
-------
SWEDEN--0.2%
ASEA AB 39 3,991
ASEA AB Series B 13 1,319
Astra AB Series A 294 13,071
Astra AB Series B 40 1,767
L.M. Ericsson Telephone
Series B 560 11,354
Sandvik AB Series A 72 1,587
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
Sandvik AB Series B 82 $ 1,808
Volvo AB Series A 65 1,490
Volvo AB Series B 167 3,829
-------
40,216
-------
SWITZERLAND--0.7%
CS Holding (Reg.) 108 9,808
Ciba-Geigy Ltd.
(Bearer) 1 1,154
Ciba-Geigy Ltd. (Reg.) 14 16,248
Nestle Ltd. (Reg.) 25 27,807
Roche Group
Holding AG 4 31,459
Roche Group Holding AG
(Bearer) 1 13,531
Sandoz Ltd. (Bearer) 2 2,178
Sandoz Ltd. (Reg.) 21 22,935
Schweizerische
Bankgesellschaft
(Bearer) 12 11,927
Schweizerische
Bankgesellschaft
(Reg.) 13 2,827
schweizerische
Bankverein (Bearer) 14 5,243
Schweizerische
Bankverein (Reg.) 16 2,990
Winterthur (Reg.) 4 2,510
Zurich Versicherung
(Reg.) 27 7,546
-------
158,163
-------
UNITED KINGDOM--2.0%
Abbey National 769 6,575
Allied Domecq PLC 610 4,715
Argyll Group 669 3,343
Associated British
Foods 443 2,654
BAA 605 4,973
BAT Industries 1,806 13,648
BOC Group 193 2,682
BTR 2,162 10,415
Barclays 944 10,473
Bass 517 6,098
Boots Co. 556 5,302
British Airways 567 4,430
British Gas 2,541 9,027
British Petroleum Co. 3,245 29,285
British Sky Broadcast 1,030 7,411
British Steel 806 2,408
British Telecom 3,652 20,038
Cable & Wireless 1,294 10,158
Cadbury Schweppes 577 4,473
Commercial Union
Assurance Co. 389 3,376
General Electric Co. 1,608 8,678
Glaxo Wellcome 2,029 24,603
Granada Group 343 4,252
Grand Metropolitan,
Inc. 1,251 8,230
Great University Stores 589 6,424
Guinness 1,184 8,520
HSBC Holdings 500 7,403
HSBC Holdings (Hong
Kong) 1,036 15,338
Hanson Industries 2,132 6,323
Imperial Chemical
Industries 424 5,744
</TABLE>
F-92
<PAGE> 214
SchwabFunds(R)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
J. Sainsbury PLC 1,060 $ 5,840
Kingfisher 391 3,499
Lloyds TSB Group 2,345 11,243
Marks & Spencer PLC 1,640 10,949
National Power
Development 695 5,864
National Westminster
Bancorp 1,007 9,285
Pearson, Inc. 309 3,265
Powergen 425 3,570
Prudential Corp. 1,114 7,672
RTZ Corporation PLC 571 8,991
Rank Organisation PLC 486 3,899
Reed International 329 5,661
Reuters Holdings PLC 977 11,060
Royal Bank of Scotland 473 3,692
RTZ Corp. (Bearer) 57 884
Scot & Newcastle 358 3,705
Shell Transport &
Trading Co. (Reg.) 1,941 25,610
SmithKline Beecham PLC
Series A 810 8,590
SmithKline Beecham PLC
(New) 782 8,299
Standard Chartered PLC 566 5,300
Tesco 1,209 5,105
Thorn Emi 251 6,962
Unilever 475 8,695
Vodafone Group 1,228 4,908
Zeneca Group 554 11,320
---------
440,867
---------
2,317,115
---------
TOTAL COMMON STOCK
(Cost $7,997,220) 8,747,226
---------
PREFERRED STOCK--0.1%
AUSTRALIA--0.0%
News Corp. (Limited
Voting Shares) 388 1,996
---------
GERMANY--0.1%
Henkel KGaA 9 3,451
Sap AG (Non-Voting) 24 3,187
Volkswagen AG
(Non-Voting) 6 1,525
---------
8,163
---------
ITALY--0.0%
Fiat SpA 701 1,340
---------
GERMANY--0.0%
Lufthansa AG
(Non-Voting) 12 1,879
---------
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
UNITED STATES--0.0%
Teledyne, Inc. Series E 1 $ 15
----------
TOTAL PREFERRED STOCK
(Cost $13,259) 13,393
----------
</TABLE>
<TABLE>
<CAPTION>
Par
----------
<S> <C> <C>
U.S. TREASURY OBLIGATIONS--54.1%(a)
U.S. Treasury Bonds
10.00%, 05/15/10 $ 300,000 363,567
7.25%, 05/15/16 470,000 478,968
8.13%, 08/15/19 325,000 362,622
U.S. Treasury Bonds
7.13%, 02/15/23 2,850,000 2,864,849
6.25%, 08/15/23 775,000 699,368
U.S. Treasury Notes
5.88%, 05/31/96 200,000 200,142
6.25%, 01/31/97 800,000 804,440
5.63%, 10/31/97 1,100,000 1,095,402
5.13%, 02/28/98 150,000 147,674
5.88%, 08/15/98 800,000 795,952
5.00%, 02/15/99 600,000 582,204
7.00%, 04/15/99 300,000 306,216
7.50%, 10/31/99 500,000 518,265
7.13%, 02/29/00 200,000 205,100
5.75%, 10/31/00 1,050,000 1,023,666
6.38%, 08/15/02 525,000 520,790
6.50%, 05/15/05 150,000 147,984
6.50%, 08/15/05 650,000 641,030
----------
TOTAL U.S. TREASURY
OBLIGATIONS
(Cost $12,122,972) 11,758,239
----------
AGENCY OBLIGATIONS-
COUPON NOTES--1.8%(a)
Federal National
Mortgage Assoc.
7.250%, 06/01/05 400,000 396,824
----------
TOTAL AGENCY OBLIGATIONS-
COUPON NOTES
(Cost $403,958) 396,824
----------
CASH EQUIVALENTS--3.4%(b)
AGENCY OBLIGATIONS-
DISCOUNT NOTES--2.3%
Federal Home Loan Bank
5.21%, 05/28/96 500,000 498,054
----------
</TABLE>
F-93
<PAGE> 215
SchwabFunds(R)
- --------------------------------------------------------------------------------
SCHWAB ASSET DIRECTOR(R)-CONSERVATIVE GROWTH FUND
STATEMENT OF NET ASSETS
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
Maturity Value
-------- -----------
<S> <C> <C>
REPURCHASE AGREEMENT--1.1%
State Street Bank 4.75%
Dated 04/30/96
Due 05/01/96
Collateralized By:
U.S. Treasury Note
$245,000 Par; 8.00%
Due 10/15/96 $242,032 $ 242,000
----------
TOTAL CASH EQUIVALENTS
(Cost $740,054) 740,054
----------
TOTAL INVESTMENTS--99.6%
(Cost $21,277,463) 21,655,736
----------
OTHER ASSETS AND
LIABILITIES--0.4%
Other Assets 296,971
Liabilities (218,792)
----------
78,179
----------
NET ASSETS--100.0%
Applicable to 2,123,836
outstanding $0.00001
par value shares
(unlimited shares authorized) $21,733,915
===========
NET ASSET VALUE PER SHARE $10.23
======
</TABLE>
NOTES TO STATEMENTS OF NET ASSETS
(a) Interest rates represent stated coupon rate of security.
(b) Interest rates represent effective yield at the time of purchase.
- ---------------
*Non-Income Producing Security
See accompanying Notes to Financial Statements.
F-94
<PAGE> 216
SchwabFunds(R)
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
For the period November 20, 1995
(commencement of operations) to April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
------Schwab Asset Director(R)----------
High Balanced Conservative
Growth Fund Growth Fund Growth Fund
----------- ----------- -----------
<S> <C> <C> <C>
Investment income:
Dividends (net of foreign tax
withheld of $18,774, $7,667 and
$2,379, respectively) $ 519,839 $ 274,650 $ 64,508
Interest 450,271 607,495 301,956
-------- -------- --------
Total investment income 970,110 882,145 366,464
-------- -------- --------
Expenses:
Investment advisory and
administration fee 264,862 189,136 65,101
Transfer agency and
shareholder service fees 89,480 63,897 21,993
Custodian fees 141,565 122,061 85,816
Registration fees 41,952 34,105 17,293
Professional fees 18,854 17,495 15,300
Shareholder reports 24,964 17,779 6,341
Trustees' fees 4,671 3,526 1,540
Amortization of deferred
organization costs 1,630 1,630 1,630
Insurance and other expenses 2,583 2,314 2,044
-------- -------- --------
590,561 451,943 217,058
Less expenses reduced and absorbed (272,011) (224,468) (138,760)
-------- -------- --------
Total expenses incurred by Fund 318,550 227,475 78,298
-------- -------- --------
Net investment income 651,560 654,670 288,166
-------- -------- --------
Net realized gain (loss) on
investments and foreign currency
transactions:
Proceeds from sales of investments 37,502,807 22,479,790 8,331,437
Cost of investments sold (37,849,936) (22,724,569) (8,402,243)
-------- -------- ---------
Net realized loss from changes
in market value (347,129) (244,779) (70,965)
Net realized loss from changes
in foreign exchange rates (72) (69) (8)
-------- -------- --------
Net realized loss on
investments sold (347,201) (244,848) (70,973)
Net realized gain (loss) on
foreign currency transactions 3,590 1,675 (103)
-------- -------- --------
Net realized loss on
investments sold and
foreign currency
transactions (343,611) (243,173) (71,076)
</TABLE>
Statement continued on next page.
F-95
<PAGE> 217
SchwabFunds(R)
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS (continued)
For the period November 20, 1995
(commencement of operations) to April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
------Schwab Asset Director(R)----------
High Balanced Conservative
Growth Fund Growth Fund Growth Fund
----------- ----------- -----------
<S> <C> <C> <C>
Net unrealized gain (loss) on
investments and foreign currency
translation:
Net unrealized gain from changes
in market value $ 6,422,873 $ 3,049,139 $ 453,450
Net unrealized loss from changes
in foreign exchange rates (549,278) (301,388) (75,177)
-------- -------- --------
Net unrealized gain on
investments from changes in
market value and foreign
exchange rates 5,873,595 2,747,751 378,273
Net unrealized loss on translating
assets and liabilities into the
reporting currency (271) (12) (242)
-------- -------- --------
Net unrealized gain on
investments and foreign
currency translation 5,873,324 2,747,739 378,031
-------- -------- --------
Net gain on investments 5,529,713 2,504,566 306,955
-------- -------- --------
Increase in net assets resulting
from operations $ 6,181,273 $ 3,159,236 $ 595,121
======== ======== ========
</TABLE>
See accompanying Notes to Financial Statements.
F-96
<PAGE> 218
SchwabFunds(R)
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the period November 20, 1995
(commencement of operations) to April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
------Schwab Asset Director(R)----------
High Balanced Conservative
Growth Fund Growth Fund Growth Fund
----------- ----------- -----------
<S> <C> <C> <C>
Operations:
Net investment income $ 651,560 $ 654,670 $ 288,166
Net realized loss on investments
sold and foreign currency
transactions (343,611) (243,173) (71,076)
Net unrealized gain on investments
and foreign currency
translation 5,873,324 2,747,739 378,031
----------- ----------- -----------
Increase in net assets resulting
from operations 6,181,273 3,159,236 595,121
----------- ----------- -----------
Dividends to shareholders from net
investment income (158,402) (150,875) (214,428)
----------- ----------- -----------
Capital share transactions:
Proceeds from shares sold 97,345,157 71,109,119 24,570,535
Net asset value of shares issued
in reinvestment of dividends 152,276 138,204 193,730
Less payments for shares redeemed (8,664,601) (5,246,654) (3,412,043)
----------- ----------- -----------
Increase in net assets from
capital
share transactions 88,832,832 66,000,669 21,352,222
----------- ----------- -----------
Total increase in net assets 94,855,703 69,009,030 21,732,915
Net assets:
Beginning of period 1,000 1,000 1,000
----------- ----------- -----------
End of period (including
undistributed net investment
income of $493,158, $503,795
and $73,738, respectively) $94,856,703 $69,010,030 $21,733,915
=========== =========== ===========
Number of Fund shares:
Sold 9,610,666 7,030,800 2,440,024
Reinvested 14,842 13,523 19,030
Redeemed (828,084) (506,227) (335,318)
----------- ----------- -----------
Net increase in shares outstanding 8,797,424 6,538,096 2,123,736
Shares outstanding:
Beginning of period 100 100 100
----------- ----------- -----------
End of period 8,797,524 6,538,196 2,123,836
=========== =========== ===========
</TABLE>
See accompanying Notes to Financial Statements.
F-97
<PAGE> 219
SchwabFunds(R)
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
For the period November 20, 1995
(commencement of operations) to April 30, 1996 (Unaudited)
1. DESCRIPTION OF THE FUNDS
The Schwab Asset Director(R) - High Growth Fund, Schwab Asset
Director - Balanced Growth Fund and Schwab Asset Director - Conservative Growth
Fund (the "Funds") are series of Schwab Capital Trust (the "Trust"), a no-load,
open-end investment management 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 three Funds described above, the Trust also offers the Schwab
International Index Fund(TM), Schwab Small-Cap Index Fund(R) and Schwab S&P 500
Fund. The assets of each series are segregated and accounted for separately.
The investment objective of the Schwab Asset Director - High Growth Fund (the
"High Growth Fund") is to provide high capital growth with less volatility than
an all-stock portfolio. The investment objective of the Schwab Asset
Director - Balanced Growth Fund (the "Balanced Growth Fund") is to provide a
maximum total return including both capital growth and income. The investment
objective of the Schwab Asset Director - Conservative Growth Fund (the
"Conservative Growth Fund") is to provide income and more growth potential than
an all-bond portfolio. Each Fund invests in a diversified mix of stocks, bonds
and cash equivalents.
2. SIGNIFICANT ACCOUNTING POLICIES
The following significant accounting policies are in conformity with generally
accepted accounting principles for investment companies. The preparation of
financial statements in accordance with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could differ
from those estimates.
Security valuation -- Investments in securities traded on an exchange are valued
at the last quoted sale price for a given day, or if a sale is not reported for
that day, at the mean between the most recent quoted bid and asked prices.
Unlisted securities for which market quotations are readily available are valued
at the mean between the most recent bid and asked prices. Securities for which
no quotations are readily available are valued at fair value as determined by
the Funds' investment manager pursuant to guidelines adopted in good faith by
the Board of Trustees. Bonds and notes are generally valued at prices obtained
from an independent bond-pricing service. These securities are valued at the
mean between the representative quoted bid and asked prices, or if such prices
are not available, at prices for securities of comparable maturity, quality and
type. Short-term securities with 60 days or less to maturity are stated at
amortized cost, which approximates market value.
Security transactions and investment income -- Security transactions are
accounted for on a trade date basis (date the order to buy or sell is executed).
Dividend income and distributions to shareholders are recorded on the
ex-dividend date. Interest income is recorded on the accrual basis and includes
amortization of premium and accretion of discount on investments. Realized gains
and losses from security transactions are determined on an identified cost
basis. For callable bonds purchased at a premium, the excess of the purchase
price over the call value is amortized against interest income through the call
date. If the call provision is not exercised, any remaining premium is amortized
through the final maturity date.
F-98
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SchwabFunds(R)
- --------------------------------------------------------------------------------
Repurchase agreements -- Repurchase agreements are fully collateralized by U.S.
Treasury or government agency securities. All collateral is held by the Funds'
custodian and is monitored daily to ensure that its market value at least equals
the repurchase price under the agreement.
Foreign currency translation -- The accounting records of the Funds are
maintained in U.S. dollars. Investment securities and all other assets and
liabilities of the Funds denominated in a foreign currency are translated into
U.S. dollars at the exchange rates on April 30. Purchases and sales of foreign
securities, foreign income receipts and foreign expense payments are translated
into U.S. dollars at the exchange rate in effect on the dates of the respective
transactions.
The Funds separate within their statement of operations the portion of realized
and unrealized gains and losses resulting from changes in foreign exchange rates
from that arising from changes in securities' market values.
Forward currency contracts -- A forward currency contract ("Forward") is an
agreement between two parties to buy and sell a currency at a set price on a
future date. The value of the Forward fluctuates with changes in currency
exchange rates. The Forward is marked-to-market daily and the change in value is
recorded by the Funds as an unrealized gain or loss. When the Forward is closed,
the Funds record a realized gain or loss equal to the difference between the
value at the time the contract was opened and the value at the time the contract
was closed. The Funds engage in Forwards in connection with the purchase and
sale of portfolio securities to minimize the uncertainty of changes in future
exchange rates. The Funds could be exposed to risk if counterparties to the
contracts are unable to meet the terms of the contracts or if the value of the
foreign currency changes unfavorably.
Deferred organization costs -- Costs incurred in connection with the
organization of the Funds are amortized on a straight-line basis over a
five-year period from each Fund's commencement of operations.
Expenses -- Expenses arising in connection with a Fund are charged directly to
that Fund. Expenses common to all series of the Trust are allocated to each
series in proportion to their relative net assets.
Federal income taxes -- It is each 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. Each Fund is considered a separate entity for tax purposes.
At April 30, 1996, (for financial reporting and federal income tax purposes),
net unrealized gain for the High Growth Fund, Balanced Growth Fund and
Conservative Growth Fund aggregated $5,873,595, $2,747,751 and $378,273,
respectively, of which $7,575,579, $4,123,657 and $931,787, respectively,
related to appreciated securities and $1,701,984, $1,375,906 and $553,514,
respectively, related to depreciated securities.
F-99
<PAGE> 221
SchwabFunds(R)
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
For the period November 20, 1995
(commencement of operations) to April 30, 1996 (Unaudited)
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,
each Fund pays an annual fee, payable monthly, of .74% of each Fund's average
daily net assets not in excess of $1 billion, .69% of such assets over $1
billion and .64% of such assets over $2 billion. Under this agreement, the High
Growth Fund, Balanced Growth Fund and Conservative Growth Fund incurred
investment advisory and administration fees of $264,862, $189,136 and $65,101,
respectively, for the period ended April 30, 1996, before the Investment Manager
reduced its fee (see Note 4).
Sub-advisory agreement -- The Investment Manager has a sub-advisory agreement
with Symphony Asset Management, Inc. ("Symphony") to serve as sub-adviser to the
Funds. Symphony does not receive compensation directly from the Funds. However,
the Investment Manager pays Symphony an annual fee, payable monthly, of .08% of
the Funds' aggregate average net assets on the first $100 million, .06% of the
next $150 million, .04% of the next $600 million and .02% of such net assets
over $850 million.
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 each Fund's average daily net assets for
transfer agency services and .20% of such assets for shareholder services. For
the period ended April 30, 1996, the High Growth Fund, Balanced Growth Fund and
Conservative Growth Fund incurred transfer agency and shareholder service fees
of $89,480, $63,897 and $21,993, respectively, before Schwab reduced its fees
(see Note 4).
Officers and trustees -- Certain officers and trustees of the Trust are also
officers and/or directors of the Investment Manager and/or Schwab. During the
period ended April 30, 1996, 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 Funds incurred fees aggregating $9,737
related to the Trust's unaffiliated trustees.
4. EXPENSES REDUCED AND ABSORBED BY THE INVESTMENT MANAGER AND SCHWAB
The Investment Manager and Schwab reduced a portion of their fees and absorbed
certain expenses in order to limit each Fund's ratio of operating expenses to
average net assets. For the period ended April 30, 1996, the total of such fees
and expenses reduced and absorbed by the Investment Manager was $183,280,
$160,571 and $116,767 for the High Growth Fund, Balanced Growth Fund and
Conservative Growth Fund, respectively, and the total of such fees reduced by
Schwab was $88,731, $63,897 and $21,993 for the High Growth Fund, Balanced
Growth Fund and Conservative Growth Fund, respectively.
F-100
<PAGE> 222
SchwabFunds(R)
- --------------------------------------------------------------------------------
5. BORROWING AGREEMENT
The Trust has an agreement with State Street Bank and Trust Company, the Funds'
custodian, whereby each 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 period ended April 30, 1996, no borrowings were made under this
arrangement.
6. INVESTMENT TRANSACTIONS
Purchases, sales and maturities of investment securities, other than short-term
obligations, for the period ended April 30, 1996, were as follows:
<TABLE>
<CAPTION>
High Balanced Conservative
Growth Fund Growth Fund Growth Fund
------------ ----------- -----------
<S> <C> <C> <C>
Purchases $126,123,992 $88,257,569 $29,443,551
Proceeds of sales and
maturities $37,849,936 $22,724,569 $8,402,243
</TABLE>
7. COMPOSITION OF NET ASSETS
At April 30, 1996, net assets for each Fund consisted of:
<TABLE>
<CAPTION>
High Balanced Conservative
Growth Fund Growth Fund Growth Fund
----------- ----------- -----------
<S> <C> <C> <C>
Capital paid in $88,833,832 $66,001,669 $21,353,222
Accumulated undistributed
net investment income 493,158 503,795 73,738
Accumulated net realized
loss on investments sold
and foreign currency
transactions (343,611) (243,173) (71,076)
Net unrealized gain on
investments 5,873,595 2,747,751 378,273
Net unrealized loss on
translating assets and
liabilities into the
reporting currency (271) (12) (242)
----------- ----------- -----------
Total $94,856,703 $69,010,030 $21,733,915
=========== =========== ===========
</TABLE>
At April 30, 1996, the High Growth Fund's Statement of Net Assets included:
$398,586 payable for investments purchased, $78,838 payable for Fund shares
redeemed, $13,851 payable for investment advisory and administration fee and
$161,244 receivable for Fund shares sold. The Balanced Growth Fund's Statement
of Net Assets included: $316,281 payable for investment purchased, $140,768
payable for Fund shares redeemed, $9,088 payable for investment advisory and
administration fee and $116,223 receivable for Fund shares sold. The
Conservative Growth Fund's Statement of Net Assets included: $84,926 payable for
Fund shares redeemed, $2,867 payable for investment advisory and administration
fee and $15,048 receivable for Fund shares sold.
F-101
<PAGE> 223
SchwabFunds(R)
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
For the period November 20, 1995
(commencement of operations) to April 30, 1996 (Unaudited)
8. COMMITMENTS
At April 30, 1996, the Funds had various open Forward contracts as follows:
The High Growth Fund and Balanced Growth Fund had open Forward contracts which
obligated the Funds to deliver U.S. dollars in exchange for foreign currencies
at specified future dates as follows:
High Growth Fund
<TABLE>
<CAPTION>
Contract In Exchange Settlement Unrealized
Currency Amount For Date Value Gain (Loss)
- ----------------------- ------------ ----------- ---------- -------- -----------
<S> <C> <C> <C> <C> <C>
Swedish krona 64,555 $ 9,543 05/02/96 $ 9,519 ($ 24)
Netherlands guilder 78,400 45,875 05/03/96 45,754 (121)
Swiss franc 21,000 16,935 05/06/96 16,914 (21)
Italian lira 174,152,000 111,422 05/07/96 111,493 71
Pound sterling 35,000 52,745 05/07/96 52,687 (58)
Spanish peseta 3,264,670 25,754 05/08/96 25,663 (91)
Belgian franc 315,000 10,032 05/14/96 10,006 (26)
French franc 125,000 24,272 05/31/96 24,190 (82)
---------- -------- -------
$ 296,578 $296,226 ($352)
========== ======== =======
</TABLE>
Balanced Growth Fund
<TABLE>
<CAPTION>
Contract In Exchange Settlement Unrealized
Currency Amount For Date Value Gain (Loss)
- ------------------------ ----------- ----------- ---------- -------- -----------
<S> <C> <C> <C> <C> <C>
Canadian dollar 17,500 $ 12,853 05/02/96 $ 12,853 $ --
Danish krona 72,375 12,288 05/02/96 12,263 (25)
Deutsche mark 13,400 8,772 05/02/96 8,753 (19)
Netherlands guilder 66,400 38,853 05/03/96 38,751 (102)
Italian lira 9,262,900 5,926 05/07/96 5,930 4
Pound sterling 82,000 123,574 05/07/96 123,438 (136)
Spanish peseta 3,758,000 29,649 05/08/96 29,544 (105)
Belgian franc 421,000 13,408 05/14/96 13,374 (34)
French franc 244,000 47,379 05/31/96 47,218 (161)
---------- -------- -------
$ 292,702 $292,124 ($578)
========== ======== =======
</TABLE>
The Conservative Growth Fund had open Forward contracts which obligated the Fund
to deliver foreign currencies in exchange for U.S. dollars at specified future
dates as follows:
<TABLE>
<CAPTION>
Contract In Exchange Settlement Unrealized
Currency Amount For Date Value Gain (Loss)
- ------------------------ ----------- ----------- ---------- -------- -----------
<S> <C> <C> <C> <C> <C>
Canadian dollar 4,200 $ 3,084 05/02/96 $ 3,085 ($ 1)
Deutsche mark 4,500 2,945 05/02/96 2,939 6
Australian dollar 9,700 7,639 05/06/96 7,620 19
Swiss franc 1,800 1,453 05/06/96 1,450 3
Pound sterling 3,100 4,672 05/07/96 4,667 5
---------- -------- -------
$ 19,793 $ 19,761 $ 32
========== ======== =======
</TABLE>
F-102
<PAGE> 224
SchwabFunds(R)
- --------------------------------------------------------------------------------
9. FINANCIAL HIGHLIGHTS
Per share income and capital changes for a share outstanding throughout the
period from November 20, 1995 (commencement of operations) to April 30, 1996:
<TABLE>
<CAPTION>
High Balanced Conservative
Growth Fund Growth Fund Growth Fund
----------- ----------- -----------
<S> <C> <C> <C>
Net asset value at beginning of period....... $ 10.00 $ 10.00 $ 10.00
Income from investment operations
- ---------------------------------
Net investment income...................... .08 .11 .15
Net realized and unrealized gain on
investments and foreign currency
transactions............................. .72 .47 .19
----------- ----------- -----------
Total from investment operations........... .80 .58 .34
Less distributions
- ------------------
Dividends from net investment income....... (.02) (.03) (.11)
Distributions from realized gain on
investments.............................. -- -- --
----------- ----------- -----------
Total distributions........................ (.02) (.03) (.11)
----------- ----------- -----------
Net asset value at end of period............. $ 10.78 $ 10.55 $ 10.23
=========== =========== ===========
Total return (%)............................. 8.03 5.81 3.37
- ----------------
Ratios/Supplemental data
- ------------------------
Net assets, end of period.................. $94,856,703 $69,010,030 $21,733,915
Ratio of expenses to average
net assets (%)........................... .89* .89* .89*
Ratio of net investment income to
average net assets (%)................... 1.82* 2.56* 3.28*
Portfolio turnover rate (%)................ 52 42 46
Average commission rate.................... $ .02 $ .02 $ .02
</TABLE>
The Investment Manager and Schwab have reduced a portion of their fees and
absorbed certain expenses in order to limit each 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 and the ratio of net
investment income to average net assets for the High Growth Fund for the period
ended April 30, 1996, would have been 1.65%* and 1.06%*, respectively. With
respect to the Balanced Growth Fund, the ratio of expenses to average net assets
and the ratio of net investment income to average net assets for the period
ended April 30, 1996 would have been 1.77%* and 1.68%*, respectively. With
respect to the Conservative Growth Fund the ratio of expenses to average net
assets and the ratio of net investment income to average net assets for the
period ended April 30, 1996 would have been 2.47%* and 1.70%*, respectively.
* Annualized
F-103
<PAGE> 225
Schwabfunds
- --------------------------------------------------------------------------------
Schwab S&P 500 Fund
Statement of Net Assets
August 31, 1996
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- ------
<S> <C> <C>
COMMON STOCK - 98.5%
AEROSPACE/DEFENSE - 2.3%
BFGoodrich Co. 2,100 $ 79
Boeing Co. 14,700 1,330
General Dynamics Corp. 2,700 173
Lockheed Martin Corp. 8,700 732
McDonnell Douglas Corp. 8,700 436
Northrop Grumman Corp. 2,400 172
Raytheon Co. 10,000 515
Rockwell International Corp. 9,000 468
Textron Inc. 3,500 299
United Technologies Corp. 5,100 575
------
4,779
------
AIR TRANSPORTATION - 0.4%
AMR Corp.* 4,300 353
Delta Airlines Inc. 3,300 234
Southwest Airlines Co. 6,700 153
USAir Group, Inc.* 1,400 25
------
765
------
ALCOHOLIC BEVERAGES - 0.7%
Adolph Coors Co. Class B 800 16
Anheuser-Busch Companies, Inc. 10,900 826
Brown Forman Corp. Class B 2,300 83
Seagram Ltd 15,300 507
------
1,432
------
APPAREL - 0.5%
Liz Claiborne 2,600 90
NIKE, Inc. Class B 5,900 637
Reebok International Ltd. 3,600 130
Russell Corp. 800 26
Springs Industries Inc. 400 18
Stride Rite Corp. 1,100 9
V.F. Corp. 2,800 165
------
1,075
------
</TABLE>
F-104
<PAGE> 226
SchwabFunds
- --------------------------------------------------------------------------------
Schwab S&P 500 Fund
Statement of Net Assets
August 31, 1996
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- -------
<S> <C> <C>
AUTOMOTIVE PRODUCTS - 0.2%
Cooper Tire & Rubber 2,800 $ 55
Goodyear Tire & Rubber 6,400 292
-------
347
-------
BANKS - 7.6%
Banc One Corp. 18,600 714
Bank of Boston Corp. 7,500 396
Bank of New York Co., Inc. 17,200 479
BankAmerica Corp. 15,000 1,163
Bankers Trust New York Corp. 3,300 257
Barnett Banks, Inc. 3,700 243
Boatmens Bancshares Inc. 6,200 331
Chase Manhattan Corp. (New) 18,300 1,361
Citicorp 19,900 1,657
Comerica Inc. 4,900 239
Corestates Financial Corp. 9,800 405
Fifth Third Bancorp 4,000 213
First Bank System Inc. 5,400 347
First Chicago NBD Corp. 13,500 575
First Union Corp. 11,500 735
Fleet Financial Group Inc. 11,200 468
J.P. Morgan & Co. Inc. 8,200 719
Keycorp (New) 10,300 413
MBNA Corp. 9,600 292
Mellon Bank Corp. 6,100 338
National City Corp. 8,900 335
NationsBank Corp. 12,600 1,073
Norwest Corp. 14,900 561
PNC Bank Corp. 14,100 441
Republic New York Corp. 2,700 179
Suntrust Banks, Inc. 9,900 380
U.S. Bancorp 6,400 246
Wachovia Corp. (New) 7,700 352
Wells Fargo & Co. 4,000 995
-------
15,907
-------
BUSINESS MACHINES & SOFTWARE - 7.3%
3COM Corp.* 7,200 337
Amdahl Corporation* 2,700 27
Apple Computer, Inc.* 6,300 153
</TABLE>
F-105
<PAGE> 227
SchwabFunds
- --------------------------------------------------------------------------------
Schwab S&P 500 Fund
Statement of Net Assets
August 31, 1996
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- -------
<S> <C> <C>
Autodesk, Inc. 1,000 $ 23
Bay Networks, Inc.* 6,900 190
Cabletron Systems Inc.* 2,900 177
Ceridian Corp.* 2,300 98
Cisco Systems Inc.* 26,600 1,401
Compaq Computer Corp.* 11,000 623
Computer Assoc. International Inc. 15,700 824
Computer Sciences Corp.* 3,600 252
Data General Corp.* 800 9
Digital Equipment Corp.* 6,500 251
EMC Corp.* 9,400 181
Hewlett Packard Co. 42,700 1,868
Honeywell Inc. 4,900 285
Intergraph Corp.* 1,000 9
International Business Machines 22,300 2,551
Microsoft Corp.* 25,000 3,064
Novell Inc.* 14,800 154
Oracle Systems Corp.* 27,500 968
Pitney Bowes Inc. 5,700 275
Seagate Technology, Inc.* 3,900 187
Silicon Graphics Inc.* 9,400 219
Sun Microsystems Inc.* 8,000 435
Tandem Computers Inc.* 2,600 27
Unisys Corp.* 3,800 22
Xerox Corp. 13,200 724
-------
15,334
-------
BUSINESS SERVICES - 1.9%
Automatic Data Processing, Inc. 12,000 500
Browning Ferris Industries Inc. 10,400 265
Deluxe Corp. 2,800 107
Dun & Bradstreet Corp. 6,700 386
Ecolab Inc. 2,400 73
First Data Corp. 9,100 710
Fleming Companies, Inc. 800 13
H & R Block Inc. 3,300 83
Interpublic Group of Companies, Inc. 3,700 167
John H. Harland Co. 600 15
Laidlaw Inc. Class B (Non Voting) 11,900 115
Moore Corp. Ltd. 5,200 91
National Service Industries, Inc. 2,000 76
Ogden Corp. 1,100 22
</TABLE>
F-106
<PAGE> 228
SchwabFunds
- --------------------------------------------------------------------------------
Schwab S&P 500 Fund
Statement of Net Assets
August 31, 1996
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- ------
<S> <C> <C>
R.R. Donnelley & Sons Co. 6,100 $ 199
SUPERVALU Inc. 3,000 84
Safety-Kleen Corp. 1,300 22
Service Corp. International 4,700 265
Shared Medical Systems Corp. 500 27
Viad Corp. 3,000 43
WMX Technologies Inc. 20,600 651
------
3,914
------
CHEMICAL - 3.5%
Air Products & Chemicals Inc. 4,300 235
Dow Chemical Co. 10,000 798
E.I. Du Pont de Nemours & Co. 23,000 1,889
Eastman Chemical Co. 3,600 201
Great Lakes Chemical Corp. 2,300 132
Hercules Inc. 4,100 204
Minnesota Mining & Manufacturing Co. 17,300 1,189
Monsanto Co. 25,000 803
Morton International Inc. 5,900 219
Nalco Chemical Co. 3,200 103
PPG Industries Inc. 8,600 425
Praxair Inc. 7,100 292
Rohm & Haas Co. 2,800 175
Sigma-Aldrich Corp. 2,000 106
Union Carbide Corp. 5,100 221
W.R. Grace & Co. 4,600 302
------
7,294
------
CONSTRUCTION - 0.4%
Armstrong World Industries, Inc. 1,700 105
Centex Corp. 600 19
Crane Co. 600 24
Fluor Corp. 4,700 301
Kaufman & Broad Home Corp. 700 9
Owens Corning* 2,100 76
Pulte Corp. 600 15
Sherwin Williams Co. 3,700 162
Stanley Works 3,800 105
------
816
------
</TABLE>
F-107
<PAGE> 229
SchwabFunds
- --------------------------------------------------------------------------------
Schwab S&P 500 Fund
Statement of Net Assets
August 31, 1996
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- ------
<S> <C> <C>
CONSUMER-DURABLE - 0.4%
Black & Decker Corp. 2,900 $ 115
Masco Corp. 6,400 186
Maytag Corp. 3,600 72
Newell Co. 6,200 193
Outboard Marine Corp. 400 7
Snap-on Tools Corp. 1,900 87
Whirlpool Corp. 3,100 152
------
812
------
CONSUMER-NONDURABLE - 1.3%
American Greetings Corp. Class A 2,600 67
Corning Inc. 10,700 399
Darden Restaurants Inc.* 3,500 28
Hasbro Inc. 4,400 162
Jostens, Inc. 800 15
Luby's Cafeterias, Inc. 500 12
Mattel Inc. 10,400 274
McDonald's Corp. 29,300 1,359
Premark International, Inc. 2,100 38
Rubbermaid Inc. 6,600 175
Ryan's Family Steak Houses Inc.* 1,200 10
Shoney's Inc.* 900 8
Wendy's International, Inc. 6,600 134
------
2,681
------
CONTAINERS - 0.2%
Ball Corp. 600 14
Bemis Co., Inc. 2,900 87
Crown Cork & Seal Inc. 5,000 234
Stone Container Corp. 2,200 31
------
366
------
ELECTRONICS - 2.9%
AMP Inc. 9,300 356
Advanced Micro Devices Inc.* 3,900 50
Applied Materials, Inc.* 6,800 165
EG&G, Inc. 1,000 19
General Instrument Corp.* 6,200 170
General Signal Corp. 2,500 100
</TABLE>
F-108
<PAGE> 230
SchwabFunds
- --------------------------------------------------------------------------------
Schwab S&P 500 Fund
Statement of Net Assets
August 31, 1996
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- ------
<S> <C> <C>
Harris Corp. 1,300 $ 80
Intel Corp. 35,200 2,809
LSI Logic Corp.* 6,600 144
Micron Technology Inc. 8,700 198
Motorola Inc. 24,100 1,286
National Semiconductor Corp.* 4,200 77
Perkin-Elmer Corp. 1,300 67
Scientific-Atlanta, Inc. 1,700 23
Tektronix, Inc. 700 27
Texas Instruments Inc. 8,300 388
Thomas & Betts Corp. 900 33
------
5,992
------
ENERGY-DEVELOPMENT - 1.0%
Baker Hughes Inc. 6,000 182
Burlington Resources Inc. 6,500 277
Dresser Industries Inc. 6,800 197
Halliburton Co. 4,400 232
Helmerich & Payne Inc. 500 20
Louisiana Land & Exploration Co. 1,600 91
McDermott International Inc. 1,200 25
Occidental Petroleum Corp. 12,000 279
Rowan Cos. Inc. 1,900 29
Schlumberger Ltd. 10,200 861
------
2,193
------
FOOD-AGRICULTURE - 6.5%
Archer-Daniels-Midland Co. 23,835 423
CPC International Inc. 6,100 420
Campbell Soup Co. 10,000 651
Coca-Cola Co. 104,600 5,230
ConAgra, Inc. 10,200 430
General Mills Inc. 6,800 374
H.J. Heinz Co. 15,500 488
Hershey Foods Corp. 3,000 261
Kellogg Co. 9,000 608
Pepsico Inc. 65,400 1,880
Pioneer HI Bred International Inc. 3,300 182
Quaker Oats Co. 5,500 181
Ralston Purina Co. 4,200 263
Sara Lee Corp. 20,900 658
</TABLE>
F-109
<PAGE> 231
SchwabFunds
- --------------------------------------------------------------------------------
Schwab S&P 500 Fund
Statement of Net Assets
August 31, 1996
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- -------
<S> <C> <C>
Sysco Corp. 6,700 $ 215
Unilever 6,500 933
Whitman Corp. 3,300 74
Wm Wrigley Junior Co. 4,600 249
-------
13,520
-------
GOLD - 0.5%
Barrick Gold Corp. 15,600 421
Battle Mountain Gold Co. 7,000 60
Homestake Mining Co. 4,500 74
Newmont Mining Corp. 3,600 190
Placer Dome, Inc. 10,200 245
Santa Fe Pacific Gold Corp. 5,400 70
-------
1,060
-------
HEALTHCARE - 10.2%
ALZA Corp.* 2,800 77
Abbott Laboratories 33,300 1,503
Allergan Inc. 2,400 93
American Home Products Corp. 26,800 1,588
Amgen Inc.* 11,100 647
Bausch & Lomb Inc. 2,000 66
Baxter International Inc. 11,800 527
Becton Dickinson & Co. 5,200 213
Beverly Enterprises, Inc.* 2,200 23
Biomet Inc.* 5,300 82
Boston Scientific Corp.* 7,500 344
Bristol Myers Squibb Co. 21,100 1,852
C.R. Bard Inc. 2,200 68
Columbia/HCA Healthcare Corp. 19,300 1,088
Community Psychiatric Centers* 900 7
Eli Lilly & Co. 22,400 1,282
Humana Inc.* 8,200 154
Johnson & Johnson 55,300 2,724
Mallinckrodt Group Inc. 2,600 105
Manor Care, Inc. 2,400 83
Medtronic Inc. 9,600 499
Merck & Co. Inc. 50,700 3,327
Pfizer Inc. 26,900 1,910
Pharmacia & Upjohn Inc. 21,700 911
Schering Plough Corp. 15,200 849
</TABLE>
F-110
<PAGE> 232
SchwabFunds
- --------------------------------------------------------------------------------
Schwab S&P 500 Fund
Statement of Net Assets
August 31, 1996
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- -------
<S> <C> <C>
St. Jude Medical, Inc.* 2,500 $ 90
Tenet Healthcare Corp.* 7,600 160
United Healthcare Corp. 8,300 321
United States Surgical Corp. 2,200 80
Warner Lambert Co. 11,000 655
-------
21,328
-------
HOUSEHOLD PRODUCTS - 2.4%
Alberto Culver Co. Class B Convertible 600 25
Avon Products, Inc. 5,400 259
Clorox Co. 2,900 272
Colgate-Palmolive Co. 6,100 496
Dial Corp. New* 3,000 35
Gillette Co. 18,900 1,205
International Flavors & Fragrances Inc. 4,500 194
Procter & Gamble Co. 28,500 2,533
Tupperware Corp.* 2,100 92
-------
5,111
-------
IMAGING & PHOTO - 0.6%
Eastman Kodak Co. 14,300 1,037
Polaroid Corp. 2,800 119
-------
1,156
-------
INSURANCE - 3.5%
Aetna Inc. 7,745 512
Alexander & Alexander Services 1,000 16
Allstate Corp. 18,800 839
American General Corp. 9,700 354
American International Group, Inc. 19,900 1,891
Aon Corp. 4,400 222
Chubb Corp. 7,000 311
Cigna Corp. 3,100 360
General Re Corp. 3,400 493
ITT Hartford Group Inc. 4,500 237
Jefferson-Pilot Corp. 3,000 154
Lincoln National Corp. Inc. 4,200 186
MGIC Investment Corp. 3,000 190
Marsh & McLennan Companies 3,600 335
Providian Corp. 4,400 182
</TABLE>
F-111
<PAGE> 233
SchwabFunds
- --------------------------------------------------------------------------------
Schwab S&P 500 Fund
Statement of Net Assets
August 31, 1996
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- ------
<S> <C> <C>
Safeco Corp. 5,800 $ 193
St. Paul Companies, Inc. 3,500 181
Torchmark Corp. 2,400 102
Transamerica Corp. 2,700 184
UNUM Corp. 3,000 191
USF&G Corp. 6,000 97
USLIFE Corp. 700 20
------
7,250
------
MEDIA - 2.0%
Comcast Corp. Class A 10,100 163
Dow Jones & Co. Inc. 4,700 184
Gannett Inc. 6,400 429
King World Productions, Inc.* 800 28
Knight-Ridder, Inc. 3,800 128
McGraw-Hill, Inc. 4,100 168
Meredith Corp. 600 26
New York Times Co. Class A 5,100 159
SBC Communications Inc. 24,700 1,152
Tele Communications Inc. (New) - TCI Group Series
A* 27,400 406
Time Warner Inc. 15,700 524
Times Mirror Co. (New) Series A 4,400 191
Tribune Co. (New) 2,200 158
Viacom Inc. Class B* 14,500 457
------
4,173
------
MISCELLANEOUS FINANCE - 3.0%
American Express Co. 20,300 888
Beneficial Corp. 2,100 118
Dean Witter Discover & Co. 7,600 380
Federal Home Loan Mortgage Corp. 7,400 654
Federal National Mortgage Assoc 46,100 1,429
Golden West Financial Corp. 2,900 161
Great Western Financial Corp. 6,600 163
Green Tree Financial Corp. 5,700 198
H.F. Ahmanson & Co. 5,900 149
Household International Inc. 3,800 301
Merrill Lynch & Co. Inc. 7,000 429
Morgan Stanley Group Inc. 6,500 310
Salomon Inc. 4,600 207
</TABLE>
F-112
<PAGE> 234
SchwabFunds
- --------------------------------------------------------------------------------
Schwab S&P 500 Fund
Statement of Net Assets
August 31, 1996
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- ------
<S> <C> <C>
Travelers Group Inc. 20,450 $ 887
------
6,274
------
MOTOR VEHICLE - 2.4%
Chrysler Corp. 30,400 885
Cummins Engine Inc. 2,400 90
Dana Corp. 3,300 99
Eaton Corp. 3,100 172
Echlin Inc. 2,300 70
Fleetwood Enterprises, Inc. 1,000 28
Ford Motor Co. 49,300 1,652
General Motors Corp. 31,100 1,547
Genuine Parts Co. 5,600 240
PACCAR Inc. 1,800 82
TRW Inc. 2,500 231
------
5,096
------
NON-FERROUS - 0.9%
Alcan Aluminum Ltd. 8,500 267
Aluminum Company of America 8,000 497
Asarco Inc. 900 23
Cyprus Amax Minerals Co. 4,100 87
Echo Bay Mines Ltd 2,800 28
Engelhard Corp. 7,200 147
Freeport McMoran Copper & Gold Class B 8,400 247
Inco Ltd. 8,500 274
Phelps Dodge Corp. 2,800 169
Reynolds Metals Co. 2,700 144
------
1,883
------
OIL-DOMESTIC - 1.2%
Amerada Hess Corp. 3,900 198
Ashland Inc. 2,400 89
Atlantic Richfield Co. 6,600 771
Kerr-McGee Corp. 1,900 109
Oryx Energy Co.* 5,500 96
Pennzoil Co. 2,000 107
Phillips Petroleum Co. 11,300 458
Santa Fe Energy Resources, Inc.* 2,000 24
Sun Inc. 3,600 85
</TABLE>
F-113
<PAGE> 235
SchwabFunds
- --------------------------------------------------------------------------------
Schwab S&P 500 Fund
Statement of Net Assets
August 31, 1996
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- -------
<S> <C> <C>
USX Corp. (Marathon Group) (New) 11,200 $ 234
Unocal Corp. 10,900 373
-------
2,544
-------
OIL-INTERNATIONAL - 6.5%
Amoco Corp. 20,300 1,401
Chevron Corp. 27,100 1,596
Exxon Corp. 51,800 4,215
Mobil Corp. 16,800 1,894
Royal Dutch Petroleum Co. 22,200 3,316
Texaco, Inc. 11,200 994
Western Atlas, Inc.* 2,000 122
-------
13,538
-------
PAPER - 1.6%
Alco Standard Corp. 4,900 214
Boise Cascade Corp. 1,900 64
Champion International Corp. 4,000 172
Georgia Pacific Corp. 3,500 260
International Paper Co. 13,100 524
James River Corp. 3,900 101
Kimberly Clark Corp. 12,100 948
Louisiana Pacific Corp. 3,600 78
Mead Corp. 2,000 115
Potlatch Corp. 600 23
Temple-Inland Inc. 1,900 94
Union Camp Corp. 3,000 146
Westvaco Corp. 4,000 115
Weyerhaeuser Co. 9,100 406
Willamette Industries, Inc. 2,000 124
-------
3,384
-------
PRODUCER GOODS - MANUFACTURING - 5.6%
Allied Signal Inc. 12,400 766
Avery Dennison Corp. 1,700 87
Briggs & Stratton Corp. 600 26
Case Corp. 2,400 109
Caterpillar Inc. 8,300 572
Cincinnati Milacron Inc. 700 14
Cooper Industries Inc. 5,800 235
</TABLE>
F-114
<PAGE> 236
SchwabFunds
- --------------------------------------------------------------------------------
Schwab S&P 500 Fund
Statement of Net Assets
August 31, 1996
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- -------
<S> <C> <C>
Deere & Co. 11,400 $ 453
Dover Corp. 4,600 202
Emerson Electric Co. 9,500 796
FMC Corp. (New)* 1,100 70
Foster Wheeler Corp. 2,200 95
General Electric Co. 68,600 5,702
Giddings & Lewis Inc. 700 9
Harnischfeger Industries Corp. 2,500 94
ITT Industries Inc. 3,700 85
Illinois Tool Works Inc. 4,600 318
Ingersoll Rand Co. 4,900 209
Johnson Controls, Inc. 1,800 127
Millipore Corp. 2,700 103
Navistar International Corp.* 1,600 16
Pall Corp. 3,600 85
Parker Hannifin Corp. 4,000 156
Raychem Corp. 2,400 165
TRINOVA Corp. 600 19
Tenneco, Inc. 7,000 348
Timken Co. 700 27
Tyco Interest Ltd 5,900 249
Varity Corp.* 2,300 116
W.W. Grainger, Inc. 1,900 128
Westinghouse Electric Corp. 16,100 264
-------
11,645
-------
RAILROAD - 1.1%
Burlington Northern Santa Fe 6,300 504
CSX Corp. 8,900 451
Conrail Inc. 3,200 218
Norfolk Southern Corp. 5,600 467
Union Pacific Corp. 8,200 598
-------
2,238
-------
REAL PROPERTY - 0.2%
HFS, Inc.* 5,600 335
-------
RETAIL - 5.3%
Albertson's, Inc. 10,900 462
American Stores Co. (New) 6,000 247
CUC International Inc.* 10,200 351
</TABLE>
F-115
<PAGE> 237
SchwabFunds
- --------------------------------------------------------------------------------
Schwab S&P 500 Fund
Statement of Net Assets
August 31, 1996
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- -------
<S> <C> <C>
Charming Shoppes Inc.* 2,300 $ 15
Circuit City Stores Inc. 3,200 101
Dayton Hudson Corp. 8,700 300
Dillard Department Stores Inc. Class A 5,100 173
Federated Department Stores Inc.* 9,000 312
Fruit of the Loom Inc. Class A* 4,200 117
Gap Inc. 12,100 424
Giant Food Inc. Class A 3,200 108
Great Atlantic & Pacific Tea Co., Inc. 800 21
Harcourt General Inc. 2,500 120
Home Depot Inc. 19,500 1,036
J.C. Penney Inc. 9,400 497
K Mart Corp.* 20,100 201
Kroger Co.* 4,900 208
Limited Inc. 11,800 218
Longs Drug Stores Corp. 400 16
Lowes Cos Inc. 7,400 267
May Department Stores Co. 10,600 482
Melville Corp. 4,900 207
Mercantile Stores Co., Inc. 1,700 90
Nordstrom Inc. 4,000 156
Payless Shoesource Inc.* 1,040 37
Pep Boys - Manny, Moe & Jack 2,800 94
Price Costco Inc.* 8,600 171
Rite Aid Corp. 2,900 92
Sears Roebuck & Co. 16,200 713
TJX Companies, Inc. 2,600 83
Tandy Corp. 1,900 84
Toys "R" Us, Inc.* 12,500 369
Wal-Mart Stores, Inc. 94,400 2,502
Walgreen Co. 11,000 363
Winn Dixie Stores Inc. 6,300 217
Woolworth Corp.* 6,800 145
-------
10,999
-------
STEEL - 0.3%
Allegheny Teldyne Inc.* 7,235 147
Armco Inc.* 2,400 11
Bethlehem Steel Corp.* 2,500 26
Inland Steel Industries, Inc. 1,100 19
Nucor Corp. 3,000 140
USX Corp. (U.S. Steel Group) 2,800 77
</TABLE>
F-116
<PAGE> 238
SchwabFunds
- --------------------------------------------------------------------------------
Schwab S&P 500 Fund
Statement of Net Assets
August 31, 1996
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- -------
<S> <C> <C>
Worthington Industries Inc. 5,300 $ 108
-------
528
-------
TELEPHONE - 7.1%
AT&T Corp. 66,200 3,476
Airtouch Communications Inc.* 19,800 545
Alltel Corp. 9,000 254
Ameritech Corp. (New) 23,400 1,208
Andrew Corp.* 2,200 98
Bell Atlantic Corp. 18,300 1,029
BellSouth Corp. 42,300 1,533
DSC Communications Corp.* 5,400 160
GTE Corp. 41,400 1,630
MCI Communications Corp. 30,200 761
Northern Telecom Ltd 10,200 509
Nynex Corp. 17,500 755
Pacific Telesis Group 17,300 560
Sprint Corp. 18,300 743
Tellabs Inc.* 3,900 247
U S WEST, Inc. (Communications Group) 19,900 587
U S West Inc. (Media Group)* 20,700 375
Worldcom, Inc.* 17,200 360
-------
14,830
-------
TOBACCO - 1.9%
American Brands, Inc. 7,600 309
Loews Corp. 4,700 351
Philip Morris Companies, Inc. 34,500 3,096
UST Inc. 7,500 225
-------
3,981
-------
TRANSPORTATION-MISCELLANEOUS - 0.1%
Caliber Systems Inc. 800 14
Consolidated Freightways Inc. 900 21
Federal Express Corp.* 2,200 165
NACCO Industries, Inc. Class A 200 10
Ryder Sys Inc. 2,700 77
</TABLE>
F-117
<PAGE> 239
SchwabFunds
- --------------------------------------------------------------------------------
Schwab S&P 500 Fund
Statement of Net Assets
August 31, 1996
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- ------
<S> <C> <C>
Yellow Corp.* 600 $ 8
------
295
------
TRAVEL & RECREATION - 1.3%
Bally Entertainment Corp.* 3,200 87
Brunswick Corp. 4,700 99
Harrahs Entertainment Inc.* 3,300 63
Hilton Hotels Corp. 2,400 257
ITT Corp. (New)* 4,700 250
Marriot International Inc. 5,100 280
Walt Disney Co. 28,000 1,596
------
2,632
------
UTILITIES - 4.1%
American Electric Power Co., Inc. 7,700 320
Baltimore Gas & Electric Co. 8,100 211
Carolina Power & Light Co. 5,900 206
Central & South West Corp. 8,700 229
Cinergy Corp. 6,200 186
Coastal Corp. 4,900 194
Columbia Gas System, Inc. 2,600 146
Consolidated Edison Co. 8,900 233
Consolidated Natural Gas Co. 3,600 196
DTE Energy Co. 7,700 219
Dominion Resources Inc. 6,900 258
Duke Power Co. 9,200 430
ENSERCH Corp. 1,500 30
Eastern Enterprises 400 15
Edison International 17,300 301
Enron Corp. 10,900 437
Entergy Corp. 9,600 244
FPL Group, Inc. 7,400 327
GPU Inc. 6,000 189
Houston Industries Inc. 10,000 218
NICOR Inc. 2,900 91
Niagara Mohawk Power Corp.* 3,200 26
NorAm Energy Co. 4,800 70
Northern States Power Co. 3,000 137
Ohio Edison Co. 7,000 147
Oneok Inc. 600 16
P P & L Resources Inc. 7,000 158
</TABLE>
F-118
<PAGE> 240
SchwabFunds
- --------------------------------------------------------------------------------
Schwab S&P 500 Fund
Statement of Net Assets
August 31, 1996
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
Pacific Enterprises 3,900 $ 117
Pacific Gas & Electric Co. 20,500 464
Pacificorp 12,000 242
Panenergy Corp. 6,200 205
Peco Energy Co. 8,200 193
Peoples Energy Corp. 700 24
Public Service Enterprise Group 10,100 274
Sonat Inc. 4,700 207
Southern Co. 29,300 663
Texas Utilities Co. 9,500 390
Unicom Corp. 8,400 193
Union Electric Co. 3,900 146
Williams Cos. Inc. 4,500 201
--------
8,553
--------
TOTAL COMMON STOCK
(Cost $207,534) 206,060
--------
PREFERRED STOCK - 0.0%
Aetna Inc. 6.25% Class C Voting Preferred 381 26
--------
TOTAL PREFERRED STOCK
(Cost $25) 26
--------
</TABLE>
F-119
<PAGE> 241
SchwabFunds
- --------------------------------------------------------------------------------
Schwab S&P 500 Fund
Statement of Net Assets
August 31, 1996
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
(000s) (000s)
------- -----------
<S> <C> <C>
SHORT-TERM INVESTMENT - 1.9%(a)
Temporary Investment Fund, Inc.
TempCash Portfolio
5.06% , 09/06/96 3,918 $ 3,918
TOTAL SHORT-TERM INVESTMENT
(Cost $3,918)
TOTAL INVESTMENTS -- 100.3%
(Cost $211,478) 210,004
-----------
OTHER ASSETS AND LIABILITIES -- (0.3%)
Other Assets 587
Liabilities (1,304)
-----------
(717)
-----------
NET ASSETS -- 100.0%
Applicable to 19,416,613 outstanding Investor
Shares and 1,430,808 outstanding
e.shares, $0.00001 par value (unlimited shares
authorized) $ 209,287
===========
NET ASSET VALUE PER INVESTOR SHARE $ 10.04
===========
NET ASSET VALUE PER e.SHARE $ 10.05
===========
</TABLE>
- ---------
*Non-Income Producing Security
See accompanying Notes to Financial Statements.
F-120
<PAGE> 242
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS (in thousands)
For the period May 1, 1996 (commencement of operations) to August 31, 1996
(Unaudited)
<TABLE>
<S> <C>
Investment income:
Dividends $ 1,411
Interest 59
-------
Total investment income 1,470
-------
Expenses:
Investment advisory and administration fee 204
Transfer agency and shareholder
service fees:
Investor shares 138
e.Shares 2
Custodian fees 38
Registration fees 88
Professional fees 15
Shareholder reports 15
Trustees' fees 3
Amortization of deferred organization costs 2
Insurance and other expenses 10
-------
515
Less expenses reduced and absorbed (240)
-------
Total expenses incurred by Fund 275
-------
Net investment income 1,195
-------
Net realized loss on investments sold (6)
-------
Net unrealized loss on investments (1,474)
-------
Net loss on investments (1,480)
-------
Decrease in net assets resulting from operations ($ 285)
=======
</TABLE>
See accompanying Notes to Financial Statements.
F-121
<PAGE> 243
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS (in thousands)
For the period May 1, 1996 (commencement of operations) to August 31, 1996
(Unaudited)
<TABLE>
<S> <C>
Operations:
Net investment income $ 1,195
Net realized loss on investments sold (6)
Net unrealized loss on investments (1,474)
---------
Decrease in net assets resulting from operations (285)
---------
Dividends to shareholders from net investment income:
Investor shares 0
e.Shares 0
---------
Total dividends to shareholders 0
Capital share transactions:
Proceeds from shares sold 231,112
Net asset value of shares issued in reinvestment
of dividends 0
Less payments for shares redeemed (21,540)
---------
Increase in net assets from capital
share transactions 209,572
---------
Total increase in net assets 209,287
Net assets:
Beginning of period 0
---------
End of period (including undistributed net investment
income of $1,195) $ 209,287
=========
Number of Fund shares:
Sold 22,999
Reinvested 0
Redeemed (2,152)
---------
Net increase in shares outstanding 20,847
Shares Outstanding:
Beginning of period 0
---------
End of period 20,847
=========
</TABLE>
See accompanying Notes to Financial Statements.
F-122
<PAGE> 244
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
For the period May 1, 1996 (commencement of operations) to August 31, 1996
(Unaudited)
1. DESCRIPTION OF THE FUND
The S&P 500 Fund (the "Fund"), a multi-class fund, is a series of Schwab Capital
Trust (the "Trust"), a no-load, 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.
The Fund offers two classes of shares - Investor Shares and e.Shares(TM). The
Investor Shares are available to all investors. The e.Shares are available only
to clients of Schwab Institutional and The Charles Schwab Trust Company and to
certain tax-advantaged retirement plans who can execute their trading and
information requests through SchwabLink(TM). Both classes represent interests in
the same portfolio of investments of the Fund and are subtantially the same in
all respects except that the classes are subject to different transfer agency
and shareholder service fees (see Note 3), investment minimums and certain other
expenses.
In addition to the Fund, the Trust also offers the International Index Fund(TM),
Schwab Small-Cap Index Fund(R), Schwab Analytics Fund, Schwab Asset Director(R)
- - High Growth Fund, Schwab Asset Director(R) - Balanced Growth Fund, Schwab
Asset Director(R) - Conservative Growth Fund and Schwab OneSource(R) Portfolios
- - International. The assets of each series are segregated and accounted for
separately.
The investment objective of the Fund is to track the price and dividend
performance (total return) of common stocks of United States companies, as
represented by the S&P 500.
2. SIGNIFICANT ACCOUNTING POLICIES
The following significant accounting policies are in conformity with generally
accepted accounting principles for investment companies. The preparation of
financial statements in accordance with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could differ
from those estimates.
Security valuation - Investments in securities traded on an exchange are valued
at the last 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 - Security transactions are accounted for on a trade date
basis (date the order to buy or sell is executed).
F-123
<PAGE> 245
- --------------------------------------------------------------------------------
Deferred organization costs - Costs incurred in connection with the organization
of the Fund and its initial registration with the Securities and Exchange
Commission 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. Expenses attributable to both
classes of shares of a Fund are allocated daily to each class of that Fund based
on their relative net assets. Transfer agency, shareholder service fees and
certain other expenses which are class specific, are calculated daily at the
class level.
Investment income and realized gains (losses) - 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. Income and realized
gains (losses) are allocated daily to each class of shares based on their
relative net assets.
Federal income taxes - It is the Fund's policy to meet the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all net investment income and realized net capital gains, if any, to
shareholders. Therefore, no federal income tax provision is required. The Fund
is considered a separate entity for tax purposes.
At August 31, 1996, (for financial reporting and federal income tax purposes),
net unrealized loss for the Fund aggregated $1,474,000 of which $6,118,000
related to appreciated securities and $7,592,000 related to depreciated
securities.
3. TRANSACTIONS WITH AFFILIATES
Investment advisory and administration agreement - The Trust has an investment
advisory and administration agreement with Charles Schwab Investment Management,
Inc. (the "Investment Manager"). For advisory services and facilities furnished,
the Fund pays an annual fee, payable monthly, of 0.36% of the first $1 billion
of average daily net assets, 0.33% of such net assets over $1 billion, and 0.31%
of such assets in excess of $2 billion. Under this agreement, the Fund incurred
investment advisory and administration fees of $204,000, for the period ended
August 31, 1996, before the Investment Manager reduced its fee (see Note 5).
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 from each class of shares, payable monthly, of 0.05% of its average
daily net assets for transfer agency services. For shareholder services
provided, Schwab receives from the Investor Shares and e.Shares(TM) an annual
fee of 0.20% and 0.05%, respectively, of the average daily net assets of that
class of shares. For the period ended August 31, 1996, the Fund incurred
transfer agency and shareholder service fees of $138,000 and $2,000 for the
Investor Shares and e.Shares(TM), respectively, before Schwab reduced its fees
(see Note 5).
F-124
<PAGE> 246
- -------------------------------------------------------------------------------
Officers and trustees - Certain officers and trustees of the Trust were also
officers and/or directors of the Investment Manager and/or Schwab. During the
period ended August 31, 1996, 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 $3,000 related to the
Trust's unaffiliated trustees.
4. BORROWING AGREEMENT
The Trust has an arrangement with PNC Bank, N.A., 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 period ended August 31, 1996, no borrowings were made under
this arrangement.
5. EXPENSES REDUCED AND ABSORBED BY THE INVESTMENT MANAGER AND SCHWAB
During the period ended August 31, 1996, the Investment Manager and Schwab
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. The total of such
fees and expenses reduced and absorbed by the Investment Manager and Schwab were
$153,000 and $87,000, respectively.
6. INVESTMENT TRANSACTIONS
Purchases and sales of investment securities, other than short-term obligations,
aggregated $207,778,000 and $38,000, respectively, during the period ended
August 31, 1996.
7. COMPOSITION OF NET ASSETS
<TABLE>
<CAPTION>
At August 31, 1996, net assets consisted of: (in 000's)
----------
<S> <C>
Capital paid in $ 209,572
Accumulated undistributed net investment income 1,195
Accumulated net realized loss on investments sold (6)
Net unrealized loss on investments (1,474)
---------
Total $ 209,287
=========
</TABLE>
At August 31, 1996, the Fund's Statement of Net Assets included liabilities of
$8,000 for investment advisory and administration fee payable, $4,000 for
transfer agency and shareholder service fees payable and $1,217,000 for
portfolio securities purchased.
F-125
<PAGE> 247
- --------------------------------------------------------------------------------
8. CAPITAL SHARE TRANSACTIONS
The Fund offers two classes of shares: Investor Shares and e.Shares(TM). Shares
of each class represent interests in the same portfolio of investments of the
Fund. Transactions in capital shares for the period ended August 31, 1996 were
as follows (in thousands):
<TABLE>
<CAPTION>
Investor
Shares e.Shares Total
--------- -------- ---------
<S> <C> <C> <C>
Capital Share Transactions (in dollars):
Proceeds from shares sold $ 210,681 $ 20,431 $ 231,112
Net asset value of shares issued in
reinvestment of dividends -0- -0- -0-
Less payments for shares redeemed (15,710) (5,830) (21,540)
--------- -------- ---------
Total increase in net assets from
capital share transactions $ 194,971 $ 14,601 $ 209,572
========= ======== =========
Number of Fund Shares:
Sold 20,988 2,011 22,999
Reinvested -0- -0- -0-
Redeemed (1,571) (581) (2,152)
--------- -------- ---------
Net increase in shares outstanding 19,417 1,430 20,847
========= ======== =========
</TABLE>
F-126
<PAGE> 248
- ------------------------------------------------------------------------------
9. FINANCIAL HIGHLIGHTS
Per share income and capital changes for a share outstanding throughout the
period:
<TABLE>
<CAPTION>
Period ended August 31, 1996+
e.Shares(TM) Investor Shares
------------ ---------------
<S> <C> <C>
Net asset value at
beginning of period $ 10.00 $ 10.00
Income from investment
- ----------------------
operations
----------
Net investment income 0.03 0.06
Net realized and unrealized
gain (loss) on investments 0.02 (0.02)
---------- -----------
Total from investment
operations 0.05 0.04
Less distributions
- ------------------
Dividends from
net investment income -- --
Distributions from
realized gain on investments -- --
---------- -----------
Total distributions 0 0
---------- -----------
Net asset value at end of period $ 10.05 $ 10.04
========== ===========
Total return (%) 0.50 0.40
- ----------------
Ratios/Supplemental data
- ------------------------
Net assets, end of period (000s) $ 14,373 $ 194,914
Ratio of expenses to
average net assets (%)++ 0.28* 0.49*
Ratio of net investment income
to average net assets (%)++ 2.12* 2.09*
Portfolio turnover rate (%) 0 0
Average commission rate $ 0.02 $ 0.02
- ----------
Ratio of expenses to average
net assets prior to reduced
fees and absorbed expenses (%)++ 2.03* 0.89*
Ratio of net investment income
to average net assets prior to
reduced fees and absorbed expenses (%)++ 0.37* 1.69*
</TABLE>
+ For the period May 1, 1996 (commencement of operations) to August 31, 1996.
++ 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.
* Annualized
F-127
<PAGE> 249
SchwabFunds(R) 1
- --------------------------------------------------------------------------------
SCHWAB INTERNATIONAL INDEX FUND(TM)
STATEMENT OF NET ASSETS
October 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
COMMON STOCK--97.3%
AUSTRALIA--2.4%
Australia & New Zealand
Banking Group 53,322 $ 223
BTR Nylex, Ltd. 116,332 316
Broken Hill Proprietary Co.,
Ltd. 83,813 1,135
CRA 27,600 426
Coles Myer, Ltd. 51,855 179
Commonwealth Bank Group 41,124 313
National Australia Bank 63,258 542
News Corp., Ltd. 91,896 463
Western Mining Corp. 53,600 344
Westpac Banking Corp. 79,986 328
--------
4,269
--------
BELGIUM--0.6%
Electrabel 2,000 449
Electrabel, AFV1 500 114
Petrofina SA 1,100 341
Societe Generale de Belgique 3,040 230
--------
1,134
--------
CANADA--3.0%
Alcan Aluminum 10,050 322
BCE Inc. 14,279 481
Bank of Montreal 11,886 268
Bank of Nova Scotia 8,524 184
Barrick Gold Corp. 16,500 385
Canadian Imperial Bank of
Commerce 9,595 260
Canadian Pacific Ltd. 16,700 266
Imperial Oil Ltd. 8,919 327
Newbridge Networks Corp.* 3,300 101
Northern Telecom Ltd. 12,000 433
Nova Corp. 19,200 149
PanCanadian Petroleum Ltd. 5,000 168
Placer Dome Inc. 21,200 467
Royal Bank of Canada 15,200 342
Seagram Co. Ltd. 17,400 633
Thomson Corp. 27,100 367
Toronto-Dominion Bank 14,000 248
--------
5,401
--------
DENMARK--0.4%
D/S 1912 Series B 10 196
D/S Svendborg Series B 5 140
Tele Danmark AS Series B 5,910 308
--------
644
--------
FRANCE--7.2%
AXA Groupe SA 13,366 742
Alcatel Alsthom Cie Generale
d'Electricite SA 6,954 594
Alcatel Cable 1,723 100
Assurances Generales de
France 15,800 456
Banque Nationale de Paris 10,161 418
Canal Plus 819 142
Carrefour 1,200 705
Cie Financiere de Paribas
(Bearer) 5,425 298
Cie Generale des Eaux 5,221 485
Compagnie de Saint-Gobain SA 3,931 469
Danone Groupe 3,350 535
Elf Aquitaine 12,835 874
L'Air Liquide 3,073 515
L'Oreal SA 2,900 709
LVMH Moet Hennessy Louis
Vuitton 7,100 1,413
Lafarge Coppee SA 8,596 570
Lyonnaise des Eaux-Dumez 2,780 271
Michelin Class B (Reg.) 5,300 214
PSA Peugeot Citroen 2,200 287
Renault (Regie Nationale) 10,500 329
Rhone-Poulenc SA A Shares 15,400 336
Sanofi 4,510 288
Schneider SA 8,900 343
Societe Generale 3,978 456
Suez Group 7,455 281
TOTAL Class B 10,604 655
Union des Assurances de Paris 14,389 374
--------
12,859
--------
GERMANY--8.1%
BASF Group 2,653 582
Bankgesellschaft Berlin 1,206 356
Bayer AG 3,167 842
Bayerische Hypotheken &
Wechsel Bank AG 11,380 275
Bayerische Motoren Werke AG 910 488
Bayerische Vereinsbank AG 11,590 328
Commerzbank AG 1,535 355
Daimler-Benz AG 2,721 1,312
Deutsche Bank AG 21,400 968
Dresdner Bank AG 20,130 538
Hoechst AG 2,762 725
Linde AG 400 246
Lufthansa AG (Bearer) 1,600 223
Mannesmann AG 1,734 571
Muenchener Rueckversicherung 11 19
Muenchener Rueckversicherung
(Reg.) 744 1,544
Preussag AG 721 205
RWE AG 1,581 563
SAP AG 2,840 450
Schering AG 3,500 244
Siemens AG 2,610 1,368
Thyssen AG 1,411 254
VIAG AG 970 394
Veba AG 22,470 923
Vereinigte Elektrizitatswerke
Westfalen Series B 903 300
Volkswagen AG 1,246 393
--------
14,466
--------
HONG KONG--3.7%
CITIC Pacific 98,000 306
Cathay Pacific Airways 141,000 208
Cheung Kong Holdings 50,000 282
China Light & Power 94,900 506
Hang Seng Bank Ltd. 88,900 745
Henderson Land
Development Co. 76,000 455
Hongkong Electric Holdings
Ltd. 99,000 337
Hongkong Telecom
International 520,000 908
Hutchison Whampoa Ltd. 165,000 909
New World Development Co. 69,709 271
Sun Hung Kai Properties 107,500 859
Swire Pacific Ltd. Class A 75,500 566
Wharf Holdings 101,000 341
--------
6,693
--------
</TABLE>
See accompanying Notes to Financial Statements.
F-128
<PAGE> 250
SchwabFunds(R) 2
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
ITALY--2.3%
Alleanza Assicurazioni 22,500 $ 192
Alleanza Assicurazioni
(Non-Convertible) 3,750 26
Assicurazioni Generali 37,200 867
Banco di Roma SpA 141,900 127
Fiat Finance SpA 113,000 368
Fiat Finance SpA
(Non-Convertible) 42,000 79
First Bank San Paolo di
Torino 27,700 153
IMI 24,800 136
INA 201,000 264
Montedison SpA 213,000 147
RAS Assicurazioni 6,310 63
RAS Assicurazioni
(Non-Convertible) 2,790 15
STET 177,000 501
STET (Non-Convertible) 66,000 144
Telecom Italia 260,000 395
Telecom Italia
(Non-Convertible) 65,000 77
Telecom Italia Mob* 260,000 436
Telecom Italia Mob di Risp* 65,000 72
--------
4,062
--------
JAPAN--30.4%
Ajinomoto Co., Inc. 14,000 138
All Nippon Airways Co., Ltd. 31,000 300
Asahi Bank 48,000 479
Asahi Breweries 8,000 87
Asahi Chemical Industry Co. 28,000 197
Asahi Glass Co., Ltd. 24,000 235
Ashikaga Bank 15,000 89
Bank of Fukuoka 11,000 81
Bank of Tokyo 58,000 845
Bank of Yokohama 24,000 170
Bridgestone Corp. 15,000 208
Canon Inc. 18,000 308
Chiba Bank 16,000 133
Chubu Electric Power Co. 16,100 375
Chugoku Electric Power
Co., Inc. 7,854 183
Cosmo Oil Co. 11,000 54
DDI Corp. 100 810
Dai Nippon Printing Co. 15,000 239
Dai-Ichi Kangyo Bank, Ltd. 97,000 1,640
Daiei Inc. 14,000 146
Daiichi Pharmaceutical Co. 5,000 70
Daiwa Bank 33,000 197
Daiwa House Industry Co. 11,000 165
Daiwa Securities Co. 29,000 340
East Japan Railway Co. 100 472
Ebara Corp. 5,000 69
Eisai Co. 5,000 85
Fanuc 5,000 217
Fuji Bank, Ltd. 93,000 1,727
Fuji Photo Film Co. 11,000 272
Fujitsu Ltd. 38,000 453
Furukawa Electric Co., Ltd. 13,000 58
Gunma Bank 10,000 102
Hachijuni Bank 13,000 145
Hankyu Corp. 17,000 88
Hanwa Co. 5,000 15
Hiroshima Bank 13,000 64
Hitachi Ltd. 96,000 985
Hitachi Zosen 19,000 93
Hokkaido Electric Power Co. 4,080 95
Hokkaido Takushoku Bank 12,000 30
Hokuriku Bank 13,000 76
Hokuriku Electric Power Co. 4,080 94
Honda Motor Co., Ltd. 20,000 348
Industrial Bank of Japan,
Ltd. 76,000 2,073
Ishikawajima-Harima Heavy
Industries 25,000 101
Isuzu Motors Ltd. 20,000 81
Ito-Yokado Co., Ltd. 9,000 492
Itochu Corp. 28,000 166
Japan Airlines Co., Ltd. 35,000 210
Japan Energy Co. 21,000 60
Japan Telecom Co. 10 222
Japan Tobacco Inc. 100 854
Joyo Bank 18,000 129
Jusco Co. 6,000 141
Kajima Corp. 20,000 185
Kandenko Co., Ltd. 5,000 62
Kansai Electric Power Co. 20,200 474
Kao Corp. 12,000 145
Kawasaki Heavy Industries 25,000 105
Kawasaki Steel Co. 72,000 239
Keio Teito Railway Co. 8,000 45
Kinden Co. 3,000 52
Kinki Nippon Railway Co. 35,000 270
Kirin Brewery Co., Ltd. 22,000 222
Kobe Steel 59,000 155
Kokusai Denki 1,500 121
Komatsu Ltd. 22,000 172
Kubota Corp. 27,000 167
Kyocera Corp. 4,000 328
Kyowa Hakko Kogyo 6,000 56
Kyushu Electric Power Co. 9,797 232
Kyushu Matsushita Electric
Co. 3,000 48
Long-Term Credit Bank of
Japan 52,000 406
Marubeni Corp. 34,000 166
Marui Co. 7,000 121
Matsushita Communication
Industrial 4,000 90
Matsushita Electric
Industrial Co., Ltd. 61,000 865
Matsushita Electric Works 15,000 148
Matsushita-Kotokuki
Electronics 3,000 61
Mazda Motor Corp. 21,000 66
Mitsubishi Bank 82,000 1,603
Mitsubishi Chemical Corp. 34,000 154
Mitsubishi Corp. 33,000 365
Mitsubishi Electric Corp. 43,000 321
Mitsubishi Estate Co. 28,000 298
Mitsubishi Heavy Industries 71,000 548
Mitsubishi Materials Co. 21,000 95
Mitsubishi Motors 17,000 142
Mitsubishi Oil Co. 8,000 64
Mitsubishi Trust & Banking
Corp. 27,000 377
Mitsui & Co. 34,000 271
Mitsui Fudosan Co. 16,000 183
Mitsui Marine & Fire
Insurance 14,000 84
Mitsui O.S.K. Lines 14,000 37
Mitsui Trust & Banking Co. 25,000 200
Mitsukoshi Ltd. 9,000 71
Murata Manufacturing Co. 5,000 175
NEC Corp. 34,000 449
NGK Insulators 5,000 46
</TABLE>
See accompanying Notes to Financial Statements.
F-129
<PAGE> 251
SchwabFunds(R) 3
- --------------------------------------------------------------------------------
SCHWAB INTERNATIONAL INDEX FUND(TM)
STATEMENT OF NET ASSETS
October 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
NKK Corp. 67,000 $ 162
Nagoya Railroad Co. 10,000 47
New Oji Paper Co. 16,000 147
Nichii Co. 4,000 47
Nikko Securities Co. 29,000 270
Nikon Corp. 11,000 157
Nintendo Co., Ltd. 3,000 221
Nippon Credit Bank 34,000 133
Nippon Express Co. 21,000 170
Nippon Fire & Marine
Insurance Co. 7,000 38
Nippon Oil Co. 26,000 138
Nippon Paper Industries Co. 39,000 268
Nippon Steel Corp. 145,000 481
Nippon Telegraph &
Telephone Corp. 596 4,888
Nippon Yusen Kabushiki Kaisha 27,000 144
Nippondenso 17,000 311
Nissan Motor Co., Ltd. 54,000 364
Nisshin Steel Co. 20,000 74
Nomura Securities Co., Ltd. 51,000 932
Obayashi Corp. 17,000 126
Odakyu Electric Railway Co. 14,000 94
Oki Electric Industry Co.,
Ltd. 12,000 111
Omron Corp. 8,000 187
Ono Pharmaceutical Co. 3,000 119
Osaka Gas Co. 53,000 178
Pioneer Electronic Corp. 4,000 61
Ricoh Co., Ltd. 13,000 140
Rohm Co. 4,000 243
SEGA Enterprises, Ltd. 2,000 106
Sakura Bank 86,000 832
Sankyo Co. 7,000 154
Sanwa Bank 92,000 1,565
Sanyo Electric Co., Ltd. 40,000 207
Secom Co. 3,000 195
Seibu Railway Co. 11,000 484
Sekisui Chemical Co. 11,000 143
Sekisui House 14,000 161
Seven-Eleven Japan Co. 7,000 467
Sharp Corp. 22,000 305
Shikoku Electric Power Co. 6,222 145
Shimizu Corp. 17,000 158
Shin-Etsu Chemical Co. 6,000 123
Shiseido Co., Ltd. 8,000 81
Shizuoka Bank 16,000 189
Showa Shell Sekiyu 8,000 64
Sony Corp. 8,000 360
Sony Music Entertainment
(Japan) 2,100 90
Sumitomo Bank 90,000 1,592
Sumitomo Chemical Co. 35,000 163
Sumitomo Corp. 21,000 191
Sumitomo Electric Industries 15,000 173
Sumitomo Marine & Fire
Insurance Co. 13,000 93
Sumitomo Metal Industries 60,000 162
Sumitomo Metal Mining Co. 11,000 87
Sumitomo Trust & Banking Co. 25,000 288
Suzuki Motor Corp. 10,000 101
TDK 3,000 155
Taisei Corp. 19,000 113
Taisho Pharmaceutical Co. 8,000 145
Takeda Chemical Industries 17,000 239
Teijin Ltd. 19,000 87
Tobu Railway Co. 16,000 91
Tohoku Electric Power Co. 10,100 237
Tokai Bank 42,000 439
Tokio Marine & Fire
Insurance Co. 33,000 339
Tokyo Electric Power Co.,
Inc. 39,087 1,024
Tokyo Electron 3,000 130
Tokyo Gas & Electric
Industrial 57,000 201
Tokyu Corp. 23,000 146
Tonen 13,000 184
Toppan Printing Co. 15,000 198
Toray Industries 29,000 181
Toshiba Corp. 68,000 493
Tostem Corp. 5,000 153
Toto 8,000 108
Toyo Seikan 4,000 115
Toyo Trust & Banking Co. 17,000 115
Toyoda Automatic Loom 6,000 94
Toyota Motor Corp. 118,000 2,192
Yamaichi Securities Co. 25,000 131
Yamanouchi Pharmaceutical Co. 6,000 134
Yamazaki Baking Co. 5,000 88
Yasuda Fire & Marine
Insurance Co. 20,000 121
Yasuda Trust & Banking Co. 23,000 103
--------
54,676
--------
NETHERLANDS--5.1%
ABN-AMRO Holding NV 12,240 514
Aegon NV 11,115 422
Akzo Nobel NV 3,300 376
Elsevier NV 31,600 409
Heineken NV 2,250 399
Internationale Nederlanden
Groep 13,042 778
Koninklijke PTT Nederland 22,140 779
Philips Electronics NV 15,400 595
PolyGram NV 8,700 543
Royal Dutch/Shell Group
(Bearer) 25,200 3,129
Unilever NV 7,500 983
Wolters Kluwer CVA 3,139 286
--------
9,213
--------
SINGAPORE--2.2%
Development Bank Singapore 45,000 516
Hong Kong Land Holdings 233,331 420
Jardine Matheson Holdings
Ltd. 35,811 218
OCBC Bank 41,833 491
Singapore Airlines Ltd. 62,000 575
Singapore Telecom 709,000 1,445
United Overseas Bank 39,600 348
--------
4,013
--------
SPAIN--1.6%
Argentaria 5,700 201
Banco Central SA (Reg.) 5,500 114
Banco Espanol de Credito 26,000 176
Banco de Bilbao Vizcaya SA
(Reg.) 11,200 342
Banco de Santander SA (Reg.) 6,800 296
Empresa Nacional de
Electricidad 11,700 582
Iberdrola SA 39,600 298
Repsol, SA 12,800 382
Telefonica Internacional de
Espana, SA 42,300 534
--------
2,925
--------
</TABLE>
See accompanying Notes to Financial Statements.
F-130
<PAGE> 252
SchwabFunds(R) 4
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
SWEDEN--2.2%
ASEA AB Series A Free shares 3,300 $ 330
ASEA AB Series B Free shares 800 79
Astra AB Series A Free shares 22,400 823
Astra AB Series B Free shares 3,400 123
Branded Consumer Products
(Compulsory Acquisition)
Series A* 5,300 75
Branded Consumer Products
(Compulsory Acquisition)
Series B* 2,800 39
Ericsson(LM) Telephone* 6,280 133
Ericsson(LM) Telephone
Series B 62,800 1,333
Pharmacia AB Series A
Free shares 5,300 184
Pharmacia AB Series B
Free shares 2,800 98
Sandvik AB Series A
Free shares 8,600 161
Volvo AB Series A Free shares 5,000 114
Volvo AB Series B Free shares 20,700 466
--------
3,958
--------
SWITZERLAND--8.0%
BBC Brown Boveri 370 429
BBC Brown Boveri (Reg.) 189 43
CS Holding (Reg.) 13,670 1,397
Ciba-Geigy Ltd. (Bearer) 170 147
Ciba-Geigy Ltd. (Reg.) 1,175 1,017
Cie Financiere Richemont
Series A (Bearer) 259 360
Holderbank Fn Glarus (Bearer) 1,000 803
Nestle Ltd. (Reg.) 1,823 1,911
Roche Group 323 2,347
Roche Group (Bearer) 75 960
SMH AG (Bearer) 156 97
SMH AG (Reg.) 682 92
Sandoz Ltd. (Bearer) 491 409
Sandoz Ltd. (Reg.) 1,673 1,381
Schweizerische
Bankgesellschaft (Bearer) 979 1,061
Schweizerische
Bankgesellschaft (Reg.) 950 218
Schweizerische Bankverein
(Bearer) 1,129 463
Schweizerische Bankverein
(Reg.) 1,251 256
Winterthur (Reg.) 500 329
Zurich Versicherun (Reg.) 2,095 600
--------
14,320
--------
UNITED KINGDOM--20.1%
Abbey National 61,900 524
Allied-Lyons 48,700 393
Argyll Group 54,708 278
BAA PLC 48,456 377
BAT Industries PLC 144,756 1,188
BOC Group 21,850 300
BTR PLC 165,615 880
Barclays PLC 75,223 883
Bass PLC 42,400 444
Boots Co. PLC 46,648 413
British Airways PLC 46,400 334
British Gas PLC 201,400 767
British Petroleum Co. PLC 259,375 1,907
British Sky Broadcast 76,400 457
British Steel 94,600 244
British Telecommunications
PLC 294,200 1,749
Cable & Wireless PLC 146,900 959
Cadbury Schweppes PLC 40,210 332
Commercial Union
Assurance Co. 31,400 304
General Accident 17,300 177
General Electric Co. PLC 125,200 622
Glaxo PLC 149,529 2,017
Grand Metropolitan PLC 98,003 679
Great Universal Stores 47,800 431
Guinness PLC 93,500 749
HSBC Holdings PLC 40,757 606
HSBC Holdings PLC
(Hong Kong) 82,896 1,217
Hanson PLC 240,444 737
Imperial Chemical
Industries PLC 32,100 393
Inchcape 22,221 110
J. Sainsbury PLC 85,028 569
Kingfisher 29,415 221
Lloyds Abbey Life 26,700 193
Lloyds Bank 59,098 727
Marks & Spencer PLC 127,500 855
National Power Development 59,600 465
National Westminster Bank PLC 75,443 753
Pearson PLC 25,137 250
Peninsular & Oriental Steam
Navigation Co. 26,291 200
Powergen PLC 37,400 336
Prudential Corp. 85,865 537
RTZ Corp. PLC (Reg.) 48,503 672
Rank Organisation PLC 40,800 272
Redland 22,248 123
Reed International PLC 26,000 395
Reuters Holdings PLC 86,500 804
Royal Bank of Scotland 36,413 295
Scot & Newcastle 20,100 186
Scottish Power 31,400 173
Shell Transport & Trading
Co. (Reg.) 157,000 1,837
SmithKline Beecham PLC
Series A 65,635 685
SmithKline Beecham PLC
(units) 62,700 642
Standard Chartered PLC 10,264 84
Sun Alliance Group 31,988 191
TSB Group PLC 76,700 452
Tesco 95,403 453
Thorn EMI PLC 19,666 458
Tomkins 47,801 189
Unilever PLC 36,900 717
Vendome (units) 34,050 301
Vodafone Group PLC 146,192 604
Waste Management
International* 16,000 75
Zeneca Group 45,200 842
--------
36,027
--------
TOTAL COMMON STOCK
(Cost $162,414) 174,660
--------
</TABLE>
See accompanying Notes to Financial Statements.
F-131
<PAGE> 253
SchwabFunds(R) 5
- --------------------------------------------------------------------------------
SCHWAB INTERNATIONAL INDEX FUND(TM)
STATEMENT OF NET ASSETS
October 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
PREFERRED STOCK--0.7%
AUSTRALIA--0.1%
News Corp. Ltd. (Limited
Voting Shares) 39,718 $ 182
--------
GERMANY--0.6%
Henkel KGaA 629 235
RWE AG (Non Voting) 1,832 519
SAP AG Non Voting Preference 2,010 308
Volkswagen AG (Non Voting) 350 80
--------
1,142
--------
ITALY--0.0%
Fiat Finance SpA 38,800 77
--------
TOTAL PREFERRED STOCK
(Cost $1,168) 1,401
--------
WARRANTS--0.0%
UNITED KINGDOM--0.0%
BTR Nylex Ltd.
(expire 11/26/98)* 4,019 2
--------
TOTAL WARRANTS
(Cost $3) 2
--------
</TABLE>
<TABLE>
<CAPTION>
Maturity Value
(000s) (000s)
-------- ------
<S> <C> <C>
REPURCHASE AGREEMENT--1.2%
UNITED STATES--1.2%
State Street Bank & Trust
4.75%
Dated 10/31/95
Due 11/01/95
Collateralized By:
U.S. Treasury Bond
$1,440,000 Par; 12%
Due 8/15/13 $ 2,144 2,144
--------
TOTAL REPURCHASE AGREEMENT
(Cost $2,144) 2,144
--------
TOTAL INVESTMENTS--99.2%
(Cost $165,729) 178,207
--------
OTHER ASSETS AND LIABILITIES--0.8%
Other Assets 1,793
Liabilities (388)
--------
1,405
--------
NET ASSETS--100.0%
Applicable to 16,137,640
outstanding $0.00001
par value shares
(unlimited shares
authorized) $179,612
========
NET ASSET VALUE PER SHARE $11.13
=====
</TABLE>
- ------------------
*Non-Income Producing Security
See accompanying Notes to Financial Statements.
F-132
<PAGE> 254
SchwabFunds(R) 6
- --------------------------------------------------------------------------------
SCHWAB INTERNATIONAL INDEX FUND(TM)
STATEMENT OF OPERATIONS (in thousands)
For the year ended October 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Investment income:
Dividends (net of foreign tax withheld of $515) $ 3,386
Interest 161
-------
Total investment income 3,547
-------
Expenses:
Investment advisory and administration fee 1,080
Transfer agency and shareholder service fees 386
Custodian fees 206
Registration fees 45
Professional fees 50
Shareholder reports 46
Trustees' fees 43
Amortization of deferred organization costs 24
Insurance and other expenses 6
-------
1,886
Less expenses reduced (577)
-------
Total expenses incurred by Fund 1,309
-------
Net investment income 2,238
-------
Net realized gain (loss) on investments and foreign currency
transactions:
Proceeds from sales of investments 9,597
Cost of investments sold (9,437)
-------
Net realized gain on investments from changes in market
value 160
Net realized loss on investments from changes in foreign
exchange rates (137)
-------
Net realized gain on investments sold 23
Net realized gain on foreign currency transactions 170
-------
Net realized gain on investments sold and foreign
currency transactions 193
-------
Change in net unrealized gain (loss) on investments and foreign
currency translation:
Changes in market value:
Beginning of period unrealized gain 413
End of period unrealized gain 4,832
-------
Increase in net unrealized gain in market value 4,419
-------
Changes in foreign exchange rates:
Beginning of period unrealized gain 9,494
End of period unrealized gain 7,646
-------
Decrease in net unrealized gain in foreign exchange rates (1,848)
-------
Increase in net unrealized gain on investments from
changes in market value and foreign exchange rates 2,571
Decrease in net unrealized gain on translating assets
and liabilities into the reporting currency (14)
-------
Increase in net unrealized gain on investments and
foreign currency translation 2,557
-------
Net gain on investments 2,750
-------
Increase in net assets resulting from operations $ 4,988
=======
</TABLE>
See accompanying Notes to Financial Statements.
F-133
<PAGE> 255
SchwabFunds(R) 7
- --------------------------------------------------------------------------------
SCHWAB INTERNATIONAL INDEX FUND(TM)
STATEMENT OF CHANGES IN NET ASSETS (in thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the year ended
October 31,
1995 1994
-------- --------
<S> <C> <C>
Operations:
Net investment income $ 2,238 $ 1,412
Net realized gain (loss) on investments sold
and foreign currency transactions 193 (580)
Increase in net unrealized gain on investments
and foreign currency translation 2,557 8,889
-------- --------
Increase in net assets resulting from
operations 4,988 9,721
-------- --------
Distributions to Shareholders From:
Net investment income (1,532) (433)
Capital gains -- (188)
-------- --------
Total distributions to shareholders (1,532) (621)
-------- --------
Capital Share Transactions:
Proceeds from shares sold 73,349 61,237
Net asset value of shares issued in
reinvestment of distributions 1,372 560
Early withdrawal fees 49 129
Less payments for shares redeemed (40,969) (34,756)
-------- --------
Increase in net assets from capital share
transactions 33,801 27,170
-------- --------
Total increase in net assets 37,257 36,270
Net Assets:
Beginning of period 142,355 106,085
-------- --------
End of period (including undistributed
net investment income of $2,051 and
$1,306, respectively) $179,612 $142,355
======== ========
Number of Fund Shares:
Sold 6,778 5,947
Reinvested 134 56
Redeemed (3,840) (3,392)
-------- --------
Net increase in shares outstanding 3,072 2,611
Shares Outstanding:
Beginning of period 13,066 10,455
-------- --------
End of period 16,138 13,066
======== ========
</TABLE>
See accompanying Notes to Financial Statements.
F-134
<PAGE> 256
SchwabFunds(R) 8
- --------------------------------------------------------------------------------
SCHWAB INTERNATIONAL INDEX FUND(TM)
NOTES TO FINANCIAL STATEMENTS
For the year ended October 31, 1995
- --------------------------------------------------------------------------------
1. DESCRIPTION OF THE FUND
The Schwab International 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 Small-Cap Index
Fund(R), 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 International Index(R), an
index created to represent the performance of common stocks and other equity
securities issued by large, publicly traded companies from countries around the
world with major developed securities markets, excluding the United States.
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.
Foreign currency translation -- The accounting records of the Fund are
maintained in U.S. dollars. Investment securities and all other assets and
liabilities of the Fund denominated in a foreign currency are translated into
U.S. dollars at the exchange rates on October 31. Purchases and sales of
securities, income receipts and expense payments are translated into U.S.
dollars at the exchange rate in effect on the dates of the respective
transactions.
The Fund separates within its statement of operations the portion of realized
and unrealized gains and losses resulting from changes in foreign exchange rates
from that arising from changes in securities' market values.
F-135
<PAGE> 257
SchwabFunds(R) 9
- --------------------------------------------------------------------------------
SCHWAB INTERNATIONAL INDEX FUND(TM)
NOTES TO FINANCIAL STATEMENTS
For the year ended October 31, 1995
- --------------------------------------------------------------------------------
Forward currency contracts -- A forward currency contract ("Forward") is an
agreement between two parties to buy and sell a currency at a set price on a
future date. The value of the Forward fluctuates with changes in currency
exchange rates. The Forward is marked-to-market daily and the change in value is
recorded by the Fund as an unrealized gain or loss. When the Forward is closed,
the Fund records a realized gain or loss equal to the difference between the
value at the time the contract was opened and the value at the time the contract
was closed. The Fund engages in Forwards in connection with the purchase and
sale of portfolio securities to minimize the uncertainty of changes in future
exchange rates.
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.
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 gain aggregated $12,478,000, of which $22,819,000 related to
appreciated securities and $10,341,000 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 .70% of the first $300 million
of average daily net assets and .60% of such assets over $300 million. Under
this agreement, the Fund incurred investment advisory and administration fees of
$1,080,000 during the year ended October 31, 1995, before the Investment Manager
reduced its fee (see Note 5).
Sub-advisory agreement -- Prior to June 30, 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 .15%
of the first $300 million of average daily net assets and .05% of such assets
over $300 million. Effective June 30, 1995, the sub-advisory agreement for the
Fund was terminated and the Investment Manager assumed day-to-day portfolio
management responsibility for the Fund.
F-136
<PAGE> 258
SchwabFunds(R) 10
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Transfer agency and shareholder service agreements -- The Trust has transfer
agency and shareholder service agreements with Charles Schwab & Co., Inc.
("Schwab"). For services provided under these agreements, Schwab receives an
annual fee, payable monthly, of .05% of average daily net assets for transfer
agency services and .20% of such assets for shareholder services. For the year
ended October 31, 1995, the Fund incurred transfer agency and shareholder
service fees of $386,000, 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 $43,000
related to the Trust's unaffiliated trustees.
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 $415,000 and the total of such fees reduced by Schwab was $162,000.
6. INVESTMENT TRANSACTIONS
Purchases and sales of investment securities, other than short-term obligations,
aggregated $43,932,000 and $9,597,000, respectively, for the year ended October
31, 1995.
7. EARLY WITHDRAWAL FEES PAID TO THE FUND
The Fund assesses a .75% 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 $49,000.
F-137
<PAGE> 259
SchwabFunds(R) 11
- --------------------------------------------------------------------------------
SCHWAB INTERNATIONAL INDEX FUND(TM)
NOTES TO FINANCIAL STATEMENTS
For the year ended October 31, 1995
- --------------------------------------------------------------------------------
8. COMPOSITION OF NET ASSETS
At October 31, 1995, net assets consisted of:
<TABLE>
<S> <C>
Capital paid in $165,464,000
Accumulated undistributed net investment income 2,051,000
Accumulated net realized loss on investments sold and
foreign currency transactions (402,000)
Net unrealized gain on investments 12,478,000
Net unrealized gain on translating assets and liabilities
into the reporting currency 21,000
------------
Total $179,612,000
============
</TABLE>
The Fund follows Statement of Position 93-2 Determination, Disclosure, and
Financial Statement Presentation of Income, Capital Gain, and Return of Capital
Distributions by Investment Companies, which will generally present
undistributed income and realized gains on a tax basis. As a result, certain
reclassifications to increase undistributed net investment income and net
realized loss on investments sold and foreign currency transactions by $39,000
and $15,000 respectively, and to decrease capital paid in by $24,000 have
occurred. These reclassifications have no impact on the net asset value of the
Fund.
At October 31, 1995, the Fund's Statement of Net Assets included liabilities of
$149,000 for Fund shares redeemed and $61,000 for investment advisory and
administration fee payable.
F-138
<PAGE> 260
SchwabFunds(R) 12
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
9. FINANCIAL HIGHLIGHTS
Per share income and capital changes for a share outstanding throughout the
period:
<TABLE>
<CAPTION>
For the period
September 9,
1993
(commencement of
For the year ended operations) to
October 31, October 31,
1995 1994 1993
-------- -------- ----------------
<S> <C> <C> <C>
Net asset value at beginning of period $ 10.89 $ 10.15 $ 10.00
Income from Investment Operations
- -------------------------------
Net investment income .14 .11 .03
Net realized and unrealized gain on
investments and foreign currency
transactions .22 .69 .12
-------- -------- --------
Total from investment operations .36 .80 .15
Less Distributions
- ---------------
Dividends from net investment income (.12) (.04) --
Distributions from realized gain
on investments -- (.02) --
-------- -------- --------
Total distributions (.12) (.06) --
-------- -------- --------
Net asset value at end of period $ 11.13 $ 10.89 $ 10.15
======== ======== ========
Total return (%) 3.35 7.89 1.50
- --------------
Ratios/Supplemental Data
- -----------------------
Net assets, end of period (000s) $179,612 $142,355 $106,085
Ratio of expenses to
average net assets (%) .85 .90 .60*
Ratio of net investment income to
average net assets (%) 1.45 1.14 2.15*
Portfolio turnover rate (%) 0 6 2
</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, 1994 and 1993, would have been 1.22%, 1.30% and 2.10%*,
respectively, and the ratio of net investment income to average net assets would
have been 1.08%, .74% and .65%*, respectively.
* Annualized
F-139
<PAGE> 261
SchwabFunds(R) 13
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
To the Board of Trustees
and Shareholders of the Schwab International Index Fund(TM)
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 International 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, provide a reasonable basis for the opinion
expressed above.
PRICE WATERHOUSE LLP
San Francisco, California
November 22, 1995
F-140
<PAGE> 262
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.
F-141
<PAGE> 263
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.
F-142
<PAGE> 264
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.
F-143
<PAGE> 265
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.
F-144
<PAGE> 266
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.
F-145
<PAGE> 267
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.
F-146
<PAGE> 268
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.
F-147
<PAGE> 269
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.
F-148
<PAGE> 270
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.
F-149
<PAGE> 271
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.
F-150
<PAGE> 272
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.
F-151
<PAGE> 273
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.
F-152
<PAGE> 274
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.
F-153
<PAGE> 275
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.
F-154
<PAGE> 276
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.
F-155
<PAGE> 277
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
F-156
<PAGE> 278
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.
- --------------------------------------------------------------------------------
F-157
<PAGE> 279
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Shareholder
of the Schwab Asset Director(R) - High Growth Fund
In our opinion, the accompanying statement of assets and liabilities presents
fairly, in all material respects, the financial position of the Schwab Asset
Director - High Growth Fund (the "Fund"), a series of Schwab Capital Trust, at
October 31, 1995, in conformity with generally accepted accounting principles.
This financial statement is the responsibility of the Fund's management; our
responsibility is to express an opinion on this financial statement based on our
audit. We conducted our audit of this financial statement in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statement is
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statement,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for the opinion expressed
above.
/s/ Price Waterhouse LLP
- ------------------------
Price Waterhouse
San Francisco, California
November 22, 1995
F-158
<PAGE> 280
SCHWAB ASSET DIRECTOR(R) - HIGH GROWTH FUND
(A SERIES OF SCHWAB CAPITAL TRUST)
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1995
<TABLE>
<S> <C>
Cash $ 1,000
Deferred organization costs 17,810
Payable to Charles Schwab Investment Management, Inc. (17,810)
--------
Net Assets $ 1,000
========
Number of shares of beneficial interest issued and
outstanding, $0.00001 par value (unlimited shares authorized) 100
========
Net Asset Value and Offering Price Per Share at October 31, 1995 $ 10.00
========
</TABLE>
The Notes to the Statement of Assets and Liabilities are an integral part of
this financial statement.
F-159
<PAGE> 281
SCHWAB ASSET DIRECTOR(R) - HIGH GROWTH FUND
(A SERIES OF SCHWAB CAPITAL TRUST)
NOTES TO STATEMENT OF ASSETS AND LIABILITIES
1. ORGANIZATION
The Schwab Asset Director - High Growth Fund (the "Fund") is a series of Schwab
Capital Trust (the "Trust"), which is registered under the Investment Company
Act of 1940, as amended, as a diversified, open-end, no-load, management
investment company. The Trust was established on May 7, 1993 under the laws of
the Commonwealth of Massachusetts as a Massachusetts business trust. As of
October 31, 1995, the Fund has had no operations other than activities relating
to its organization and the registration of its shares of beneficial interest
under the Securities Act of 1933 and the sale and issuance of 100 shares to
Charles Schwab & Co., Inc. at $10.00 per share.
In addition to the Fund, the Trust also offers the Schwab International Index
Fund(TM), the Schwab Small-Cap Index Fund(R), the Schwab Asset Director-Balanced
Growth Fund and the Schwab Asset Director -Conservative Growth Fund.
2. INVESTMENT ADVISORY AND ADMINISTRATION AGREEMENT
The Trust has an investment advisory and administration agreement with Charles
Schwab Investment Management, Inc. (the "Investment Manager") under which the
Fund will pay a fee for investment advisory and administrative services upon
commencement of the Fund. For advisory services and facilities furnished, the
Fund will pay an annual fee, payable, monthly, of .74% of the first $1 billion
of average daily net assets, .69% of such net assets over $1 billion, and .64%
of such net assets in excess of $2 billion.
The Investment Manager has executed a sub-advisory agreement with Symphony Asset
Management, Inc. ("Symphony"), a wholly-owned subsidiary of BARRA, Inc. Under
this agreement, Symphony will be responsible for recommending the target asset
allocation mix for the tactical asset allocation component of the Fund. Symphony
does not receive compensation directly from the Fund. However, the Investment
Manager will pay Symphony an annual fee, payable monthly, of .08% of the first
$100 million of aggregate average daily net assets of the three Asset Director
Funds, .06% of such net assets of the next $150 million, .04% of such net assets
of the next $600 million and .02% of such net assets over $850 million.
The Trust has transfer agency and shareholder service agreements with Charles
Schwab & Co., Inc. ("Schwab"), under which the Fund will pay fees for transfer
agency and shareholder services. Upon commencement of operations, Schwab will
receive an annual fee, payable monthly, of .05% of average daily net assets for
transfer agency services and .20% of such net assets for shareholder services.
F-160
<PAGE> 282
SCHWAB ASSET DIRECTOR(R) - HIGH GROWTH FUND
(A SERIES OF SCHWAB CAPITAL TRUST)
NOTES TO STATEMENT OF ASSETS AND LIABILITIES
The Investment Manager and Schwab are, respectively, direct and indirect
wholly-owned subsidiaries of The Charles Schwab Corporation.
3. DEFERRED ORGANIZATION COSTS
Costs incurred in connection with the Fund's organization have been incurred by
the Investment Manager and are an obligation to be paid by the Fund. These costs
will be amortized over the period of benefit, but not to exceed 60 months from
the commencement of operations of the Fund.
F-161
<PAGE> 283
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Shareholder
of the Schwab Asset Director(R) - Balanced Growth Fund
In our opinion, the accompanying statement of assets and liabilities presents
fairly, in all material respects, the financial position of the Schwab Asset
Director - Balanced Growth Fund (the "Fund"), a series of Schwab Capital Trust,
at October 31, 1995, in conformity with generally accepted accounting
principles. This financial statement is the responsibility of the Fund's
management; our responsibility is to express an opinion on this financial
statement based on our audit. We conducted our audit of this financial statement
in accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statement is free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statement, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for the opinion expressed above.
/s/ Price Waterhouse LLP
- ------------------------
Price Waterhouse
San Francisco, California
November 22, 1995
F-162
<PAGE> 284
SCHWAB ASSET DIRECTOR(R) - BALANCED GROWTH FUND
(A SERIES OF SCHWAB CAPITAL TRUST)
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1995
<TABLE>
<S> <C>
Cash $ 1,000
Deferred organization costs 17,810
Payable to Charles Schwab Investment Management, Inc. (17,810)
--------
Net Assets $ 1,000
========
Number of shares of beneficial interest issued and
outstanding, $0.00001 par value (unlimited shares authorized) 100
========
Net Asset Value and Offering Price Per Share at October 31, 1995 $ 10.00
========
</TABLE>
The Notes to the Statement of Assets and Liabilities are an integral part of
this financial statement.
F-163
<PAGE> 285
SCHWAB ASSET DIRECTOR(R) - BALANCED GROWTH FUND
(A SERIES OF SCHWAB CAPITAL TRUST)
NOTES TO STATEMENT OF ASSETS AND LIABILITIES
1. ORGANIZATION
The Schwab Asset Director - Balanced Growth Fund (the "Fund") is a series of
Schwab Capital Trust (the "Trust"), which is registered under the Investment
Company Act of 1940, as amended, as a diversified, open-end, no-load, management
investment company. The Trust was established on May 7, 1993 under the laws of
the Commonwealth of Massachusetts as a Massachusetts business trust. As of
October 31, 1995, the Fund has had no operations other than activities relating
to its organization and the registration of its shares of beneficial interest
under the Securities Act of 1933 and the sale and issuance of 100 shares to
Charles Schwab & Co., Inc. at $10.00 per share.
In addition to the Fund, the Trust also offers the Schwab International Index
Fund(TM), the Schwab Small-Cap Index Fund(R), the Schwab Asset Director - High
Growth Fund and the Schwab Asset Director - Conservative Growth Fund.
2. INVESTMENT ADVISORY AND ADMINISTRATION AGREEMENT
The Trust has an investment advisory and administration agreement with Charles
Schwab Investment Management, Inc. (the "Investment Manager") under which the
Fund will pay a fee for investment advisory and administrative services upon
commencement of the Fund. For advisory services and facilities furnished, the
Fund will pay an annual fee, payable, monthly, of .74% of the first $1 billion
of average daily net assets, .69% of such net assets over $1 billion, and .64%
of such net assets in excess of $2 billion.
The Investment Manager has executed a sub-advisory agreement with Symphony Asset
Management, Inc. ("Symphony"), a wholly-owned subsidiary of BARRA, Inc. Under
this agreement, Symphony will be responsible for recommending the target asset
allocation mix for the tactical asset allocation component of the Fund. Symphony
does not receive compensation directly from the Fund. However, the Investment
Manager will pay Symphony an annual fee, payable monthly, of .08% of the first
$100 million of aggregate average daily net assets of the three Asset Director
Funds, .06% of such net assets of the next $150 million, .04% of such net assets
of the next $600 million and .02% of such net assets over $850 million.
The Trust has transfer agency and shareholder service agreements with Charles
Schwab & Co., Inc. ("Schwab"), under which the Fund will pay fees for transfer
agency and shareholder services. Upon commencement of operations, Schwab will
receive an annual fee, payable monthly, of .05% of average daily net assets for
transfer agency services and .20% of such net assets for shareholder services.
F-164
<PAGE> 286
SCHWAB ASSET DIRECTOR(R) - BALANCED GROWTH FUND
(A SERIES OF SCHWAB CAPITAL TRUST)
NOTES TO STATEMENT OF ASSETS AND LIABILITIES
The Investment Manager and Schwab are, respectively, direct and indirect
wholly-owned subsidiaries of The Charles Schwab Corporation.
3. DEFERRED ORGANIZATION COSTS
Costs incurred in connection with the Fund's organization have been incurred by
the Investment Manager and are an obligation to be paid by the Fund. These costs
will be amortized over the period of benefit, but not to exceed 60 months from
the commencement of operations of the Fund.
F-165
<PAGE> 287
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Shareholder
of the Schwab Asset Director(R) - Conservative Growth Fund
In our opinion, the accompanying statement of assets and liabilities presents
fairly, in all material respects, the financial position of the Schwab Asset
Director - Conservative Growth Fund (the "Fund"), a series of Schwab Capital
Trust, at October 31, 1995, in conformity with generally accepted accounting
principles. This financial statement is the responsibility of the Fund's
management; our responsibility is to express an opinion on this financial
statement based on our audit. We conducted our audit of this financial statement
in accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statement is free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statement, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for the opinion expressed above.
/s/ Price Waterhouse LLP
- ------------------------
Price Waterhouse
San Francisco, California
November 22, 1995
F-166
<PAGE> 288
SCHWAB ASSET DIRECTOR(R) - CONSERVATIVE GROWTH FUND
(A SERIES OF SCHWAB CAPITAL TRUST)
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1995
<TABLE>
<S> <C>
Cash $ 1,000
Deferred organization costs 17,810
Payable to Charles Schwab Investment Management, Inc. (17,810)
--------
Net Assets $ 1,000
========
Number of shares of beneficial interest issued and
outstanding, $0.00001 par value (unlimited shares authorized) 100
========
Net Asset Value and Offering Price Per Share at October 31, 1995 $ 10.00
========
</TABLE>
The Notes to the Statement of Assets and Liabilities are an integral part of
this financial statement.
F-167
<PAGE> 289
SCHWAB ASSET DIRECTOR(R) - CONSERVATIVE GROWTH FUND
(A SERIES OF SCHWAB CAPITAL TRUST)
NOTES TO STATEMENT OF ASSETS AND LIABILITIES
1. ORGANIZATION
The Schwab Asset Director - Conservative Growth Fund (the "Fund") is a series of
Schwab Capital Trust (the "Trust"), which is registered under the Investment
Company Act of 1940, as amended, as a diversified, open-end, no-load, management
investment company. The Trust was established on May 7, 1993 under the laws of
the Commonwealth of Massachusetts as a Massachusetts business trust. As of
October 31, 1995, the Fund has had no operations other than activities relating
to its organization and the registration of its shares of beneficial interest
under the Securities Act of 1933 and the sale and issuance of 100 shares to
Charles Schwab & Co., Inc. at $10.00 per share.
In addition to the Fund, the Trust also offers the Schwab International Index
Fund(TM), the Schwab Small-Cap Index Fund(R), the Schwab Asset Director - High
Growth Fund and the Schwab Asset Director - Balanced Growth Fund.
2. INVESTMENT ADVISORY AND ADMINISTRATION AGREEMENT
The Trust has an investment advisory and administration agreement with Charles
Schwab Investment Management, Inc. (the "Investment Manager") under which the
Fund will pay a fee for investment advisory and administrative services upon
commencement of the Fund. For advisory services and facilities furnished, the
Fund will pay an annual fee, payable, monthly, of .74% of the first $1 billion
of average daily net assets, .69% of such net assets over $1 billion, and .64%
of such net assets in excess of $2 billion.
The Investment Manager has executed a sub-advisory agreement with Symphony Asset
Management, Inc. ("Symphony"), a wholly-owned subsidiary of BARRA, Inc. Under
this agreement, Symphony will be responsible for recommending the target asset
allocation mix for the tactical asset allocation component of the Fund. Symphony
does not receive compensation directly from the Fund. However, the Investment
Manager will pay Symphony an annual fee, payable monthly, of .08% of the first
$100 million of aggregate average daily net assets of the three Asset Director
Funds, .06% of such net assets of the next $150 million, .04% of such net assets
of the next $600 million and .02% of such net assets over $850 million.
The Trust has transfer agency and shareholder service agreements with Charles
Schwab & Co., Inc. ("Schwab"), under which the Fund will pay fees for transfer
agency and shareholder services. Upon commencement of operations, Schwab will
receive an annual fee, payable monthly, of .05% of average daily net assets for
transfer agency services and .20% of such net assets for shareholder services.
F-168
<PAGE> 290
SCHWAB ASSET DIRECTOR(R) - CONSERVATIVE GROWTH FUND
(A SERIES OF SCHWAB CAPITAL TRUST)
NOTES TO STATEMENT OF ASSETS AND LIABILITIES
The Investment Manager and Schwab are, respectively, direct and indirect
wholly-owned subsidiaries of The Charles Schwab Corporation.
3. DEFERRED ORGANIZATION COSTS
Costs incurred in connection with the Fund's organization have been incurred by
the Investment Manager and are an obligation to be paid by the Fund. These costs
will be amortized over the period of benefit, but not to exceed 60 months from
the commencement of operations of the Fund.
F-169
<PAGE> 291
PART C
OTHER INFORMATION
OCTOBER 10, 1996
SCHWAB CAPITAL TRUST
Item 24. Financial Statements and Exhibits.
(a) Financial Statements
Financial Highlights--Included in Part B, Statement of
Additional Information:
Incorporated by reference to the joint Statement of Additional
Information for Schwab International Index Fund(TM), Schwab
Small-Cap Index Fund(R), Schwab Asset Director(R) -- High
Growth Fund, Schwab Asset Director(R) -- Balanced Growth Fund,
Schwab Asset Director(R) -- Conservative Growth Fund and
Schwab S&P 500 Fund
-- Statement of Net Assets for the Schwab International Index
Fund as of April 30, 1996 (Unaudited)
-- Statement of Operations for the Schwab International Index
Fund for the six months ended April 30, 1996 (Unaudited)
-- Statement of Changes in Net Assets for the Schwab
International Index Fund for the six months ended April 30,
1996 (Unaudited)
-- Notes to Financial Statements the for Schwab International
Index Fund for the six months ended April 30, 1996 (Unaudited)
-- Statement of Net Assets for the Schwab Small-Cap Index Fund as
of April 30, 1996 (Unaudited)
-- Statement of Operations for the Schwab Small-Cap Index Fund
for the six months ended April 30, 1996 (Unaudited)
-- Statement of Changes in Net Assets for the Schwab Small-Cap
Index Fund for the six months ended April 30, 1996 (Unaudited)
-- Notes to Financial Statements for the Schwab Small-Cap Index
Fund for the six months ended April 30, 1996 (Unaudited)
C-1
<PAGE> 292
-- Statement of Net Assets for the Schwab Asset Director-High
Growth Fund as of April 30, 1996 (Unaudited)
-- Statement of Net Assets for the Schwab Asset Director-Balanced
Growth Fund as of April 30, 1996 (Unaudited)
-- Statement of Net Assets for the Schwab Asset
Director-Conservative Growth Fund as of April 30, 1996
(Unaudited)
-- Statement of Operations for the Schwab Asset Director(R)-High
Growth Fund, the Schwab Asset Director(R)-Balanced Growth Fund
and the Schwab Asset Director(R)-Conservative Growth Fund
(collectively, "Schwab Asset Director(R) Funds") for the
period November 20, 1995 (commencement of operations) to April
30, 1996 (Unaudited)
-- Statement of Changes in Net Assets for Schwab Asset
Director(R) Funds for the period November 20, 1995
(commencement of operations) to April 30, 1996 (Unaudited)
-- Notes to Financial Statements for the Schwab Asset Director(R)
Funds for the period November 20, 1995 (commencement of
operations) to April 30, 1996 (Unaudited)
-- Statement of Net Assets for the Schwab S&P 500 Fund for the
period May 1, 1996 (commencement of operations) to August 31,
1996(Unaudited)
-- Statement of Operations for the Schwab S&P 500 Fund for the
period May 1, 1996 (commencement of operations) to August 31,
1996 (Unaudited)
-- Statement of Changes in Net Assets for the Schwab S&P 500 Fund
for the period May 1, 1996 (commencement of operations) to
August 31, 1996 (Unaudited)
-- Notes to Financial Statements for the Schwab S&P 500 Fund for
the period May 1, 1996 (commencement of operations) to August
31, 1996 (Unaudited)
C-2
<PAGE> 293
-- Statement of Net Assets for the Schwab International Index
Fund as of October 31, 1995 (Audited)
-- Statement of Operations for the Schwab International Index
Fund for the year ended October 31, 1995 (Audited)
-- Statement of Changes in Net Assets for the Schwab
International Index Fund for the year ended October 31, 1995
(Audited)
-- Notes to Financial Statements for the Schwab International
Index Fund for the year ended October 31, 1995 (Audited)
-- Report of the Independent Accountants for the Schwab
International Index Fund, dated November 22, 1995
-- Statement of Net Assets for the Schwab Small-Cap Index Fund
for the year ended October 31, 1995 (Audited)
-- Statement of Operations for the Schwab Small-Cap Index Fund
for the year ended October 31, 1995 (Audited)
-- Statement of Changes in Net Assets for the Schwab Small-Cap
Index Fund for the year ended October 31, 1995 (Audited)
-- Notes to Financial Statements for the Schwab Small-Cap
Index Fund for the year ended October 31, 1995 (Audited)
-- Report of the Independent Accountants for Schwab Small-Cap
Index Fund, dated November 22, 1995
-- Report of the Independent Accountants for the Schwab Asset
Director(R)-High Growth Fund, dated November 22, 1995
-- Statement of Assets and Liabilities for the Schwab Asset
Director-High Growth Fund as of October 31, 1995 (Audited)
-- Notes to Statement of Assets and Liabilities for the Schwab
Asset Director-High Growth Fund as of October 31, 1995
(Audited)
-- Report of the Independent Accountants for the Schwab Asset
Director(R)-Balanced Growth Fund, dated November 22, 1995
-- Statement of Assets and Liabilities for the Schwab Asset
Director-Balanced Growth Fund as of October 31, 1995 (Audited)
-- Notes to Statement of Assets and Liabilities for the Schwab
Asset Director-Balanced Growth Fund as of October 31, 1995
(Audited)
-- Report of the Independent Accountants for the Schwab Asset
Director(R)-Conservative Growth Fund, dated November 22, 1995
-- Statement of Assets and Liabilities for the Schwab Asset
Director-Conservative Growth Fund as of October 31, 1995
(Audited)
-- Notes to Statement of Assets and Liabilities for the Schwab
Asset Director-Conservative Growth Fund as of October 31,
1995 (Audited)
C-3
<PAGE> 294
(b) Exhibits:
(1) -- Agreement and Declaration of Trust is incorporated by
reference to Exhibit (1) to Registrant's Registration
Statement on Form N-1A, filed on May 10, 1993
(2) -- Amended and Restated Bylaws are incorporated by reference
to Exhibit (2) to Post-Effective Amendment No. 7 to
Registrant's Registration Statement on Form N-1A, filed
on February 27, 1996
(3) -- Inapplicable
(4)(a) -- Article III, Section 5, Article V, Article VI, Article VIII,
Section 4 and Article IX, Sections 1, 5 and 7 of the
Agreement and Declaration of Trust is incorporated by
reference to Exhibit(1) to Registrant's Registration
Statement on Form N-1A, filed on May 10, 1993
(b) -- Articles 9 and 11 of the Amended and Restated Bylaws are
incorporated by reference to Exhibit (2) to Post-Effective
Amendment No. 7 to Registrant's Registration Statement on
Form N-1A, filed on February 27, 1996
(5)(a) -- Investment Advisory and Administration Agreement between
Registrant and Charles Schwab Investment Management, Inc.
(the "Investment Manager") is incorporated by reference to
Exhibit (5)(a) to Post-Effective Amendment No. 4 to
Registrant's Registration Statement on Form N-1A, filed on
February 24, 1995
(b) -- Amended Schedules to Investment Advisory and Administration
Agreement referred to at Exhibit (5)(a) above are filed
herewith
(c) -- Amended and Restated Investment Sub-Advisory Agreement
between Investment Manager, on behalf of the Schwab Asset
Director(R) Funds and Schwab Asset Director(R)-High Growth
Portfolio and Symphony Asset Management, Inc. ("Symphony") is
incorporated by reference to Exhibit (5)(c) to Post-Effective
Amendment No. 10 to Registrant's Registration Statement on
Form N-1A, filed on May 17, 1996
(d) -- Investment Sub-Advisory Agreement between Investment Manager,
on behalf of the Schwab Analytics Fund(TM), and Symphony is
incorporated by reference to Exhibit (5)(d) to Post-Effective
Amendment No. 10 to Registrant's Registration Statement on
Form N-1A, filed on May 17, 1996
(6)(a) -- Distribution Agreement between Registrant and Charles Schwab
& Co., Inc. ("Schwab") is incorporated by reference to
Exhibit (6)(a) to Post-Effective Amendment No. 1 to
Registrant's Registration Statement on Form N-1A, filed on
August 16, 1993
(b) -- Amended Schedule to the Distribution Agreement referred to at
Exhibit (6)(a) above is filed herewith
(7) -- Inapplicable
(8)(a) -- Custodian Agreement between Registrant, on behalf of the
Schwab International Index Fund(TM)et al, and State Street
Bank and Trust Company ("State Street") is incorporated by
reference to Exhibit (8)(a) to Post-
C-4
<PAGE> 295
Effective Amendment No. 2 to Registrant's Registration
Statement on Form N-1A, filed on February 25, 1994
(b) -- Custodian Agreement between Registrant, on behalf of the
Schwab OneSource Portfolios-International, Growth Allocation
and Balanced Allocation, and State Street is filed herewith
(c) -- Custodian Services Agreement between Registrant, on behalf of
the Schwab S&P 500 Fund, and PNC Bank, National Association
("PNC Bank") is incorporated by reference to Exhibit (8)(c) to
Post-Effective Amendment No. 7 to Registrant's Registration
Statement on Form N-1A, filed on February 27, 1996
(d) -- Amended Schedule to the Custodian Services Agreement referred
to at Exhibit (8)(c) above between Registrant, on behalf of
the Schwab S&P 500 Fund and the Schwab Analytics Fund(TM), and
PNC Bank are incorporated by reference to Exhibit (8)(d) to
Post-Effective Amendment No. 10 to Registrant's Registration
Statement on Form N-1A, filed on May 17, 1996
(e) -- Accounting Services Agreement between Registrant, on behalf of
the Schwab S&P 500 Fund, and PFPC Inc. is incorporated by
reference to Exhibit (8)(d) to Post-Effective Amendment No. 7
to Registrant's Registration Statement on Form N-1A, filed on
February 27, 1996
(f) -- Amended Schedule to the Accounting Services Agreement referred
to at Exhibit (8)(e) above between Registrant, on behalf of
the Schwab S&P 500 Fund and the Schwab Analytics Fund, and
PFPC Inc. is incorporated by reference to Exhibit (8)(f) to
Post-Effective Amendment No. 10 to Registrant's Registration
Statement on Form N-1A, filed on May 17, 1996
(g) -- Transfer Agency Agreement between Registrant and Schwab is
incorporated by reference to Exhibit (8)(b) to Post-Effective
Amendment No. 1 to Registrant's Registration Statement on Form
N-1A, filed on August 16, 1993
(h) -- Amended Schedules to the Transfer Agency Agreement referred to
at Exhibit (8)(g) above are filed herewith
C-5
<PAGE> 296
(i) -- Shareholder Service Agreement between Registrant and Schwab is
incorporated by reference to Exhibit (8)(c) to Post-Effective
Amendment No. 1 to Registrant's Registration Statement on Form
N-1A, filed on August 16, 1993
(j) -- Amended Schedules to the Shareholder Service Agreement
referred to at Exhibit (8)(i) above are filed herewith
(9) -- License Agreement between Schwab Capital Trust, on behalf of
Schwab S&P 500 Fund, and Standard & Poor's is incorporated by
reference to Exhibit (9) to Post-Effective Amendment No. 10 to
Registrant's Registration Statement on Form N-1A, filed on May
17, 1996
(10) -- Opinion and Consent of Ropes & Gray as to legality of the
securities being registered is incorporated by reference to
Registrant's Rule 24f-2 Notice, filed on December 18, 1995
(11)(a) -- Consent of Ropes & Gray is filed herewith
(b) -- Consent of Price Waterhouse LLP, Independent Accountants, is
filed herewith
(12) -- Inapplicable
(13)(a) -- Purchase Agreement for the Schwab International Index
Fund(TM)is incorporated by reference to Exhibit (13) to
Post-Effective Amendment No. 1 to Registrant's Registration
Statement on Form N-1A, filed on August 16, 1993
(b) -- Purchase Agreement for the Schwab Small-Cap Index Fund(R) is
incorporated by reference to Exhibit (13)(b) to Post-Effective
Amendment No. 2 to Registrant's Registration Statement on Form
N-1A, filed on February 25, 1994
(c) -- Purchase Agreement for the Schwab Asset Director(R) Funds is
incorporated by reference to Exhibit (13)(c) to Post-Effective
Amendment No. 6 to Registrant's Registration Statement on
Form N-1A, filed on December 15, 1995
(d) -- Purchase Agreement for the Schwab S&P 500 Fund-Investor Shares
and e.Shares(TM) is incorporated by reference to Exhibit
(13)(d) to Post-Effective Amendment No. 7 to Registrant's
Registration Statement on Form N-1A, filed on February 27,
1996
C-6
<PAGE> 297
(e) -- Purchase Agreement for the Schwab Analytics Fund(TM) is filed
herewith
(f) -- Purchase Agreement for Schwab OneSource
Portfolios-International is filed herewith
(g) -- Form of Purchase Agreement for Schwab OneSource
Portfolios-Growth Allocation and Schwab OneSource
Portfolios-Balanced Allocation is filed herewith
(14) -- Inapplicable
(15) -- Inapplicable
(16)(a) -- Performance calculation for the Schwab International Index
Fund(TM)is incorporated by reference to Exhibit (16) to
Post-Effective Amendment No. 2 to Registrant's Registration
Statement on Form N-1A, filed on February 25, 1994
(b) -- Performance calculation for the Schwab Small-Cap Index Fund(R)
is incorporated by reference to Exhibit (16)(b) to
Post-Effective Amendment No. 4 to Registrant's Registration
Statement on Form N-1A, filed on February 24, 1995
(c) -- Performance calculation for the Schwab Asset Director(R)-High
Growth Fund is incorporated by reference to Exhibit (16)(c) to
Post-Effective Amendment No. 10 to Registrant's Registration
Statement on Form N-1A, filed on May 17, 1996
(d) -- Performance calculation for the Schwab Asset
Director(R)-Balanced Growth Fund is incorporated by reference
to Exhibit (16)(d) to Post-Effective Amendment No. 10 to
Registrant's Registration Statement on Form N-1A, filed on May
17, 1996
(e) -- Performance calculation for the Schwab Asset
Director(R)-Conservative Growth Fund is incorporated by
reference to Exhibit (16)(e) to Post-Effective Amendment No.
10 to Registrant's Registration Statement on Form N-1A, filed
on May 17, 1996
(f) -- Performance calculation for the Schwab S&P 500 Fund is filed
herewith
(17)(a) -- Financial Data Schedule for the Schwab International Index
Fund is filed herewith
C-7
<PAGE> 298
(b) -- Financial Data Schedule for the Schwab Small-Cap Index Fund(R)
is filed herewith
(c) -- Financial Data Schedule for the Schwab Asset Director(R)-High
Growth Fund is filed herewith
(d) -- Financial Data Schedule for the Schwab Asset Director(R)
-Balanced Growth Fund is filed herewith
(e) -- Financial Data Schedule for the Schwab Asset Director(R)
-Conservative Growth Fund is filed herewith
(f) -- Financial Data Schedule for the Schwab S&P 500 Fund-Investor
Shares is filed herewith
(g) -- Financial Data Schedule for the Schwab S&P 500 Fund-e.Shares
is filed herewith
(h) -- Financial Data Schedule for the Schwab International Index
Fund is filed herewith
(i) -- Financial Data Schedule for the Schwab Small-Cap Index Fund
is filed herewith
(j) -- Financial Data Schedule for the Schwab Asset Director-High
Growth Fund is filed herewith
(k) -- Financial Data Schedule for the Schwab Asset Director-
Balanced Growth Fund is filed herewith
(l) -- Financial Data Schedule for the Schwab Asset Director-
Conservative Growth Fund is filed herewith
(18) -- Multiple Class Plan for the Schwab S&P 500 Fund-Investor
Shares and e.Shares(TM) dated February 28, 1996 is
incorporated by reference to Exhibit (18) to Post-Effective
Amendment No. 7 to Registrant's Registration Statement on
Form N-1A, filed on February 27, 1996
Item 25. Persons Controlled by or under Common Control with Registrant.
The Charles Schwab Family of Funds, Schwab Investments and Schwab
Annuity Portfolios each are Massachusetts business trusts registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), are advised by the
Investment Manager, and employ Schwab as their principal underwriter, transfer
agent and shareholder services agent. As a result, The Charles Schwab Family of
Funds, Schwab Investments and Schwab Annuity Portfolios may be deemed to be
under common control with Registrant.
Item 26. Number of Holders of Registrant's Securities.
As of September 16, 1996, the number of record holders of shares of
beneficial interest for the series of Registrant was:
<TABLE>
<CAPTION>
Name of Fund/Class Number of Record Holders
- ------------------ ------------------------
<S> <C>
Schwab International Index Fund(TM) 1 (for the benefit of 29,178 accounts)
Schwab Small-Cap Index Fund(R) 1 (for the benefit of 25,518 accounts)
Schwab Asset Director(R)-High Growth Fund 1 (for the benefit of 14,564 accounts)
Schwab Asset Director(R)-Balanced Growth Fund 1 (for the benefit of 2,486 accounts)
</TABLE>
C-8
<PAGE> 299
<TABLE>
<CAPTION>
Name of Fund/Class Number of Record Holders
- ------------------ ------------------------
<S> <C>
Schwab Asset Director(R)-Conservative Growth Fund 1 (for the benefit of 2,655 accounts)
Schwab S&P 500 Fund-Investor Shares 1 (for the benefit of 29,211 accounts)
Schwab S&P 500 Fund-e.Shares(TM) 1 (for the benefit of 1,686 accounts)
Schwab Analytics Fund(TM) 1 (for the benefit of 13,779 accounts)
Schwab OneSource Portfolios-International 0
Schwab OneSource Portfolios-Growth Allocation 0
Schwab OneSource Portfolios-Balanced Allocation 0
</TABLE>
Item 27. Indemnification.
Article VIII of Registrant's Agreement and Declaration of Trust
(Exhibit (1) hereto, which is incorporated by reference) provides in effect that
Registrant will indemnify its officers and trustees against all liabilities and
expenses, including but not limited to amounts paid in satisfaction of
judgments, in compromise, or as fines and penalties, and counsel fees reasonably
incurred by any such officer or trustee in connection with the defense or
disposition of any action, suit, or other proceeding. However, in accordance
with Section 17(h) and 17(i) of the 1940 Act and its own terms, said Agreement
and Declaration of Trust does not protect any person against any liability to
Registrant or its shareholders to which he or she would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his or her office. In any event,
Registrant will comply with 1940 Act Releases No. 7221 and 11330 respecting the
permissible boundaries of indemnification by an investment company of its
officers and trustees.
Insofar as indemnification for liability arising under the Securities
Act of 1933, as amended (the "1933 Act"), may be permitted to trustees, officers
and controlling persons of the Registrant pursuant to the foregoing provisions,
or otherwise, Registrant has been advised that, in the opinion of the Securities
and Exchange Commission, such indemnification is against public policy as
expressed in the 1933 Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
Registrant of expenses incurred or paid by a trustee, officer or controlling
person of Registrant in the successful defense of any action, suit or
proceeding) is asserted by such trustee, officer or controlling person in
connection with the securities being registered, Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the 1933 Act and
will be governed by the final adjudication of such issue.
C-9
<PAGE> 300
Item 28. Business and Other Connections of Investment Manager.
(a) Information pertaining to business and other connections of
Registrant's Investment Manager is incorporated by reference to the Prospectus
section captioned "Management of the Fund" and to the section of the Statement
of Additional Information captioned "Management of the Trust" for the Schwab
International Index Fund(TM) and the Schwab Small-Cap Index Fund(R).
Information pertaining to business and other connections of
Registrant's Investment Manager and sub-adviser is incorporated by reference to
the Prospectus section captioned "Management Functions and Responsibilities" and
to the section of the Statement of Additional Information captioned "Management
of the Trust" for the Schwab Asset Director(R) Funds and Schwab Analytics
Fund(TM).
Information pertaining to business and other connections of
Registrant's Investment Manager is incorporated by reference to the Prospectus
section captioned "Management Functions and Responsibilities" and to the section
of the Statement of Additional Information captioned "Management of the Trust"
for the Schwab S&P 500 Fund, Schwab OneSource Portfolios-International, Growth
Allocation and Balanced Allocation.
Registrant's Investment Manager, Charles Schwab Investment Management,
Inc., a Delaware corporation, organized in October 1989 to serve as Investment
Manager to The Charles Schwab Family of Funds, also serves as the Investment
Manager to Schwab Investments and Schwab Annuity Portfolios, each an open-end
management investment company. The principal place of business of the Investment
Manager is 101 Montgomery Street, San Francisco, California 94104. The only
business in which the Investment Manager engages is that of investment manager
and administrator to Registrant, The Charles Schwab Family of Funds, Schwab
Investments, Schwab Annuity Portfolios and any other investment companies that
Schwab may sponsor in the future.
Registrant's sub-investment adviser for the Schwab Asset Director(R)
Funds and the Schwab Analytics Fund(TM) is Symphony.
(b) Each director and/or executive officer of Schwab and /or the
Investment Manager is or has been engaged in no other business, profession
vocation or employment of a substantial nature during the past two fiscal years
of his or her own account in the capacity of director, employee, partner or
trustee except with the Investment Manager and its affiliates and as listed
below.
<TABLE>
<CAPTION>
Name and Position
with Registrant Name of Company Capacity
- ----------------- --------------- --------
<S> <C> <C>
Charles R. Schwab, Charles Schwab & Co., Inc. Chairman and Director
Chairman and Trustee
</TABLE>
C-10
<PAGE> 301
<TABLE>
<CAPTION>
Name and Position
with Registrant Name of Company Capacity
- ----------------- --------------- --------
<S> <C> <C>
The Charles Schwab Corporation Chairman, Chief Executive Officer
and Director
Charles Schwab Investment Management, Chairman and Director
Inc.
The Charles Schwab Trust Chairman and Director
Company
Mayer & Schweitzer, Inc. Chairman and Director
The Gap, Inc. Director
Transamerica Corporation Director
AirTouch Communications Director
Siebel Systems Director
Lawrence J. Stupski Charles Schwab & Co., Inc. Director until February 1995; Vice
Chairman until August 1994
The Charles Schwab Corporation Vice Chairman and Director; Chief
Operating Officer until March 1994
Mayer & Schweitzer, Inc. Director until February 1995
The Charles Schwab Trust Director
Company
David S. Pottruck Charles Schwab & Co., Inc. President, Chief Executive Officer
and Director
The Charles Schwab Corporation President, Chief Operating Officer
and Director
</TABLE>
C-11
<PAGE> 302
<TABLE>
<CAPTION>
Name and Position
with Registrant Name of Company Capacity
- ----------------- --------------- --------
<S> <C> <C>
Charles Schwab Investment Management, Director
Inc.
Mayer & Schweitzer, Inc. Chairman, Chief Executive Officer
and Director
Ronald W. Readmond Charles Schwab & Co., Inc. Vice Chairman and Director until
January 1996; Senior Executive
Vice President and Chief Operating
Officer until January 1995
The Charles Schwab Corporation Executive Vice President until
January 1996; Senior Executive
Vice President until January 1995
Mayer & Schweitzer, Inc. Director until January 1996
John P. Coghlan Charles Schwab & Co., Inc. Executive Vice President - Schwab
Institutional
The Charles Schwab Corporation Executive Vice President - Schwab
Institutional
The Charles Schwab Trust Company Director and Executive Vice
President
Dawn G. Lepore Charles Schwab & Co., Inc. Executive Vice President and Chief
Information Officer
The Charles Schwab Corporation Executive Vice President and Chief
Information Officer
Daniel O. Leemon The Charles Schwab Corporation Executive Vice President -
Business Strategy
</TABLE>
C-12
<PAGE> 303
<TABLE>
<CAPTION>
Name and Position
with Registrant Name of Company Capacity
- ----------------- --------------- --------
<S> <C> <C>
Charles Schwab & Co., Inc. Executive Vice President -
Business Strategy
Timothy F. McCarthy, Charles Schwab Investment Management, Chief Executive Officer
Trustee and President Inc.
Charles Schwab & Co., Inc. Executive Vice President - Mutual
Funds
The Charles Schwab Corporation Executive Vice President,
President-Financial Products and
International Group
Jardine Fleming Unit Trusts Ltd. Chief Executive Officer until
October 1995
Fidelity Investment Advisor Group President until 1994
Mayer & Schweitzer Director
Elizabeth G. Sawi Charles Schwab & Co., Inc. Executive Vice President -
Electronic Brokerage
The Charles Schwab Corporation Executive Vice President -
Electronic Brokerage
Steven L. Scheid The Charles Schwab Corporation Executive Vice President - Chief
Financial Officer
Charles Schwab & Co., Inc. Director and Chief Financial
Officer
Charles Schwab Investment Management, Director and Chief Financial
Inc. Officer
The Charles Schwab Trust Company Chief Financial Officer
</TABLE>
C-13
<PAGE> 304
<TABLE>
<CAPTION>
Name and Position
with Registrant Name of Company Capacity
- ----------------- --------------- --------
<S> <C> <C>
Schwab Retirement Plan Services, Inc. Director
Performance Technologies, Inc. Director
TrustMark, Inc. Director
ShareLink Investment Services Director
Mayer & Schweitzer Director
Tom D. Seip Charles Schwab & Co., Inc. Executive Vice President - Retail
Brokerage
The Charles Schwab Corporation Executive Vice President - Retail
Brokerage
Charles Schwab Investment Management, President and Chief Operating
Inc. Officer until 1994
John N. Tognino Charles Schwab & Co., Inc. Executive Vice President - Capital
Markets and Trading until February
1996
The Charles Schwab Corporation Executive Vice President - Capital
Markets and Trading until February
1996
Mayer & Schweitzer, Inc. Director and Vice Chairman until
February 1996
Luis E. Valencia Charles Schwab & Co., Inc. Executive Vice President - Human
Resources and Corporate Support
The Charles Schwab Corporation Executive Vice President and Chief
Administrative Officer
</TABLE>
C-14
<PAGE> 305
<TABLE>
<CAPTION>
Name and Position
with Registrant Name of Company Capacity
- ----------------- --------------- --------
<S> <C> <C>
Commercial Credit Corporation Managing Director until February
1994
Christopher V. Dodds Charles Schwab & Co., Inc. Treasurer and Senior Vice President
The Charles Schwab Corporation Treasurer and Senior Vice President
Mayer & Schweitzer, Inc. Treasurer
William J. Klipp, Charles Schwab & Co., Inc. Senior Vice President - SchwabFunds
Trustee, Senior Vice President
and Chief Operating Officer
Charles Schwab Investment Management, President and Chief Operating
Inc. Officer
Stephen B. Ward, Charles Schwab Investment Management, Senior Vice President and Chief
Senior Vice President and Chief Inc. Investment Officer
Investment Officer
Frances Cole, Charles Schwab Investment Management, Vice President, Chief Counsel,
Secretary Inc. Chief Compliance Officer and
Assistant Corporate Secretary
Tai-Chin Tung, Charles Schwab & Co., Inc. Vice President-Finance
Treasurer and
Principal Financial Officer
Charles Schwab Investment Management, Controller
Inc.
Robertson Stephens Investment Controller until 1996
Management, Inc.
Cynthia K. Holbrook The Charles Schwab Corporation Assistant Corporate Secretary
</TABLE>
C-15
<PAGE> 306
<TABLE>
<CAPTION>
Name and Position
with Registrant Name of Company Capacity
- ----------------- --------------- --------
<S> <C> <C>
Charles Schwab & Co., Inc. Assistant Corporate Secretary
Charles Schwab Investment Management, Corporate Secretary
Inc.
The Charles Schwab Trust Assistant Corporate Secretary
Company
David J. Neuman The Charles Schwab Trust Corporate Secretary
Company
Mary B. Templeton Charles Schwab Investment Management, Assistant Corporate Secretary
Inc.
The Charles Schwab Corporation Senior Vice President, General
Counsel and Corporate Secretary
Charles Schwab & Co., Inc. Senior Vice President, General
Counsel and Corporate Secretary
Mayer & Schweitzer Assistant Corporate Secretary
The Charles Schwab Trust Assistant Corporate Secretary
Company until February 1996
David H. Lui Charles Schwab Investment Management, Vice President and Senior Counsel
Assistant Secretary Inc.
Christina M. Perrino Charles Schwab Investment Management, Vice President and Senior Counsel
Assistant Secretary Inc.
</TABLE>
(c) The following information, which is believed to be accurate, is based upon
information provided by Symphony. The business, profession, vocation or
employment of a substantial nature in which each director and/or officer of
Symphony is or has been engaged during the past two fiscal years for his or her
own account in the capacity of director, officer, employee, partner or trustee
is as follows:
C-16
<PAGE> 307
<TABLE>
<CAPTION>
Name Name of Company Capacity
- ---- --------------- --------
<S> <C> <C>
Andrew T. Rudd Symphony Asset Management, Inc. Director and Chairman
BARRA, Inc. Director, Chief Executive Officer and
Chairman
Jeffrey L. Skelton Symphony Asset Management, Inc. Director, Chief Executive Officer and
President
BARRA, Inc. President, BARRA Ventures Div. until 1994
BARRA, Inc. Chief Legal Officer
Neil L. Rudolph Symphony Asset Management, Inc. Chief Operating Officer/Chief Compliance
Officer
Wells Fargo Nikko Investment Advisors Managing Director, Chief Operating
Officer -- Mutual Fund Group until 1994
Praveen K. Gottipalli Symphony Asset Management, Inc. Director of Investments
BARRA, Inc. Director of Active Strategies until 1994
Michael J. Henman Symphony Asset Management, Inc. Director of Business Development
Wells Fargo Nikko Investment Advisors Managing Director until 1994
</TABLE>
Item 29. Principal Underwriter.
(a) Schwab acts as principal underwriter and distributor of
Registrant's shares. Schwab currently also acts as principal underwriter for The
Charles Schwab Family of Funds, Schwab Investments and Schwab Annuity
Portfolios, and intends to act as such for any other investment company which
Schwab may sponsor in the future.
(b) See Item 28(b) for information on the officers and directors of
Schwab. The principal business address of Schwab is 101 Montgomery Street, San
Francisco, California 94104.
C-17
<PAGE> 308
(c) Not applicable.
Item 30. Location of Accounts and Records.
All accounts, books and other documents required to be maintained
pursuant to Section 31(a) of the 1940 Act and the Rules thereunder are
maintained at the offices of: Registrant (transfer agency and shareholder
records); Registrant's investment manager and administrator, Charles Schwab
Investment Management, Inc., 101 Montgomery Street, San Francisco, California
94104; Registrant's former sub-investment adviser, Dimensional Fund Advisors
Inc., 1299 Ocean Avenue, Suite 1100, Santa Monica, California 90401;
Registrant's sub-investment adviser for the Schwab Asset Director(R) Funds and
the Schwab Analytics Fund(TM) is Symphony Asset Management, Inc., 555 California
Street, Suite 2975, San Francisco, California 94104; Registrant's principal
underwriter, Charles Schwab & Co., Inc., 101 Montgomery Street, San Francisco,
California 94104; Registrant's custodians and fund accountants, State Street
Bank and Trust Company, 225 Franklin Street, Boston, Massachusetts 02180 and PNC
Bank, National Association/PFPC Inc., 400 Bellevue Parkway, Wilmington, Delaware
19809 (ledgers, receipts, and brokerage orders); or Ropes & Gray, counsel to
Registrant, 1301 K Street, N.W., Suite 800 East, Washington, District of
Columbia 20005 (minute books, bylaws, and declaration of trust).
Item 31. Management Services.
Not applicable.
Item 32. Undertakings.
(a) Registrant undertakes to call a meeting of Shareholders, at the
request of at least 10% of Registrant's outstanding shares, for the purpose of
voting upon the question of removal of a trustee or trustees and to assist in
communications with other Shareholders as required by Section (16) of the 1940
Act.
(b) Registrant undertakes to furnish to each person to whom a
prospectus is delivered a copy of Registrant's latest Annual Report to
Shareholders upon request and without charge.
(c) Registrant undertakes to file a post-effective amendment using
financial statements, which need not be audited, for the Schwab Analytics
Fund(TM), within four to six months from the commencement of operations for the
Schwab Analytics Fund.
(d) Registrant undertakes to file a post-effective amendment using
financial statements, which need not be audited, for Schwab OneSource
Portfolios-International, within four to six months from the commencement of
operations for Schwab OneSource Portfolios-International.
C-18
<PAGE> 309
(e) Registrant undertakes to file a post-effective amendment using
financial statements, which need not be audited, for Schwab OneSource
Portfolios-Growth Allocation and Schwab OneSource Portfolios-Balanced
Allocation, within four to six months from the commencement of operations for
Schwab OneSource Portfolios-Growth Allocation and Schwab OneSource
Portfolios-Balanced Allocation.
C-19
<PAGE> 310
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended
(the "1933 Act"), and the Investment Company Act of 1940, as amended, Registrant
certifies that its meets all of the requirements for effectiveness of this
Post-Effective Amendment No. 13 to Registrant's Registration Statement pursuant
to rule 485(b) under the 1933 Act and has duly caused this Post-Effective
Amendment No. 13 to be signed on its behalf by the undersigned, thereunto duly
authorized, in the District of Columbia, on this 10th day of October 1996.
SCHWAB CAPITAL TRUST
Registrant
Charles R. Schwab*
-------------------------------
Charles R. Schwab, Chairman
Pursuant to the requirements of the 1933 Act, this Post-Effective
Amendment No. 13 to Registrant's Registration Statement on Form N-1A has been
signed below by the following persons in the capacities indicated this 10th day
of October 1996.
Signature Title
- --------- -----
Charles R. Schwab* Chairman and Trustee
- --------------------------
Charles R. Schwab
Timothy F. McCarthy* President and Trustee
- --------------------------
Timothy F. McCarthy
William J. Klipp* Senior Vice President,
- -------------------------- Chief Operating Officer and Trustee
William J. Klipp
Donald F. Dorward* Trustee
- --------------------------
Donald F. Dorward
Robert G. Holmes* Trustee
- --------------------------
Robert G. Holmes
Donald R. Stephens* Trustee
- --------------------------
Donald R. Stephens
Michael W. Wilsey* Trustee
- --------------------------
Michael W. Wilsey
Tai-Chin Tung** Treasurer and Principal Financial Officer
- --------------------------
Tai-Chin Tung
*By: /s/ Alan G. Priest
--------------------------
Alan G. Priest, Attorney-in-Fact pursuant
to Powers of Attorney filed previously
** Power of Attorney filed herewith
<PAGE> 311
POWER OF ATTORNEY
I, the undersigned trustee and officer of The Charles Schwab Family of
Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and
Schwab Advantage Trust (each a "Trust" and collectively the "Trusts"),
Massachusetts business trusts, do hereby constitute and appoint William J.
Klipp, Frances Cole, Martin E. Lybecker and Alan G. Priest, and each of them
singly, my true and lawful attorneys, with full power to them and each of them,
to sign for me and in my name and in the capacity listed below, any and all
amendments to the Registration Statement on Form N-1A of each Trust, and to file
the same with all exhibits thereto, and other documents in connection
thereunder, with the Securities and Exchange Commission, granting unto my said
attorneys, and each of them acting alone, full power and authority to do and
perform each and every act and thing requisite or necessary to be done in the
premises, as fully as to all intents and purposes as he or she might or could do
in person, hereby ratifying and confirming all that said attorneys or any of
them may lawfully do or cause to be done by virtue thereof.
WITNESS my hand on the date set forth below.
August 13, 1996 /s/ Tai-Chin Tung
--------------------------
Tai-Chin Tung
Principal Financial Officer
<PAGE> 312
EXHIBIT INDEX
EXH. NO. DOCUMENT
-------- --------
5(b) Amended Schedules to Investment Advisory and Administration
Agreement
6(b) Amended Schedule to Distribution Agreement
8(b) Custodian Agreement for the Schwab OneSource
Portfolios-International, Growth Allocation and Balanced
Allocation
8(h) Amended Schedules to Transfer Agency Agreement
8(j) Amended Schedules to Shareholder Service Agreement
11(a) Consent of Ropes & Gray
11(b) Consent of Price Waterhouse LLP
13(e) Purchase Agreement for Schwab Analytics Fund
13(f) Purchase Agreement for Schwab OneSource
Portfolios-International
13(g) Form of Purchase Agreement for Schwab OneSource
Portfolios-Growth Allocation and Schwab OneSource
Portfolios-Balanced Allocation
16(f) Performance Calculation for Schwab S&P 500 Fund
17(a) Financial Data Schedule for Schwab International Index
Fund(TM)
17(b) Financial Data Schedule for Schwab Small-Cap Index Fund(R)
17(c) Financial Data Schedule for Schwab Asset Director(R)-High
Growth Fund
17(d) Financial Data Schedule for Schwab Asset Director(R)-Balanced
Growth Fund
17(e) Financial Data Schedule for Schwab Asset
Director(R)-Conservative Growth Fund
17(f) Financial Data Schedule for Schwab S&P 500 Fund-Investor
Shares
17(g) Financial Data Schedule for the Schwab S&P 500 Fund-e.Shares
17(h) Financial Data Schedule for the Schwab International Index
Fund
17(i) Financial Data Schedule for the Schwab Small-Cap Index Fund
17(j) Financial Data Schedule for the Schwab Asset Director-High
Growth Fund
17(k) Financial Data Schedule for the Schwab Asset
Director-Balanced Growth Fund
17(l) Financial Data Schedule for the Schwab Asset
Director-Conservative Growth Fund
<PAGE> 1
EXHIBIT 5(b)
AMENDED SCHEDULE A
TO THE INVESTMENT ADVISORY AND
ADMINISTRATION AGREEMENT
FOR SCHWAB CAPITAL TRUST
<TABLE>
<CAPTION>
Fund Effective Date
<S> <C>
Schwab International Index Fund July 21, 1993
Schwab Small-Cap Index Fund October 14, 1993
Schwab Asset Director-High Growth Fund September 25, 1995
Schwab Asset Director-Balanced Growth Fund September 25, 1995
Schwab Asset Director-Conservative Growth Fund September 25, 1995
Schwab S&P 500 Fund February 28, 1996
Schwab Analytics Fund May 21, 1996
Schwab OneSource Portfolios-International September 2, 1996
Schwab OneSource Portfolios-Growth Allocation October 13, 1996
Schwab OneSource Portfolios-Balanced Allocation October 13, 1996
</TABLE>
SCHWAB CAPITAL TRUST
By: /s/ William J. Klipp
--------------------------
Name: William J. Klipp
Title: Senior Vice President and
Chief Operating Officer
CHARLES SCHWAB INVESTMENT
MANAGEMENT, INC.
By: /s/ Stephen B. Ward
--------------------------
Name: Stephen B. Ward
Title: Senior Vice President and
Chief Investment Officer
A-1
<PAGE> 2
AMENDED SCHEDULE B
TO THE INVESTMENT ADVISORY AND
ADMINISTRATION AGREEMENT
FOR SCHWAB CAPITAL TRUST
ADVISORY FEE SCHEDULE
THE FEES LISTED BELOW ARE FOR SERVICES PROVIDED UNDER THIS
AGREEMENT AND ARE TO BE ACCRUED DAILY AND PAID MONTHLY IN
ARREARS:
Fund Fee
- ---- ---
Schwab International Index Fund Seventy one-hundredths of one percent
(0.70%) of the Fund's average daily net
assets not in excess of $300,000,000 and
sixty one-hundredths of one percent (0.60%)
of such assets over $300,000,000
Schwab Small-Cap Index Fund Fifty one-hundredths of one percent (0.50%)
of the Fund's average daily net assets not
in excess of $300,000,000 and forty-five
one-hundredths of one percent (0.45%) of
such assets over $300,000,000
Schwab Asset Director-High Seventy-four one-hundredths of one percent
Growth Fund (0.74%) of the Fund's average daily net
assets not in excess of $1 billion;
sixty-nine one-hundredths of one percent
(0.69%)of such net assets over $1 billion,
but not more than $2 billion; and sixty-four
one-hundredths of one percent (0.64%) of
such net assets over $2 billion
Schwab Asset Director-Balanced Seventy-four one-hundredths of one percent
Growth Fund (0.74%) of the Fund's average daily net
assets not in excess of $1 billion;
sixty-nine one-hundredths of one percent
(0.69%)of such net assets over $1 billion,
but not more than $2 billion; and sixty-four
one-hundredths of one percent (0.64%) of
such net assets over $2 billion
Schwab Asset Director-Conservative Seventy-four one-hundredths of one percent
Growth Fund (0.74%) of the Fund's average daily net
assets not in excess of $1 billion;
sixty-nine one-hundredths of one percent
(0.69%) of such net assets over $1 billion,
but not more than $2 billion; and sixty-four
one-hundredths of one percent (0.64%) of
such net assets over $2 billion
B-1
<PAGE> 3
Fund Fee
- ---- ---
Schwab S&P 500 Fund Thirty-six one-hundredths of one percent
(0.36%) of the Fund's average daily net
assets not in excess of $1 billion;
thirty-three one hundredths of one percent
(0.33%) of such net assets over $1 billion,
but not more than $2 billion; and thirty-one
one hundredths of one percent (0.31%) of
such net assets over $2 billion.
Schwab Analytics Fund Seventy-four one hundredths of one percent
(0.74%) of the Fund's average daily net
assets not in excess of $1 billion;
sixty-nine one hundredths of one percent
(0.69%) of such net assets over $1 billion,
but not more than $2 billion; and sixty-four
one hundredths of one percent (0.64%) of
such net assets over $2 billion.
Schwab OneSource Portfolios- Seventy-four one hundredths of one percent
International (0.74%) of the Fund's average daily net
assets not in excess of $1 billion;
sixty-nine one hundredths of one percent
(0.69%) of such net assets over $1 billion,
but not more than $2 billion; and sixty-four
one hundredths of one percent (0.64%) of
such net assets over $2 billion.
Schwab OneSource Portfolios- Seventy-four one hundredths of one percent
Growth Allocation (0.74%) of the Fund's average daily net
assets not in excess of $1 billion;
sixty-nine one hundredths of one percent
(0.69%) of such net assets over $1 billion,
but not more than $2 billion; and sixty-four
one hundredths of one percent (0.64%) of
such net assets over $2 billion.
Schwab OneSource Portfolios- Seventy-four one hundredths of one percent
Balanced Allocation (0.74%) of the Fund's average daily net
assets not in excess of $1 billion;
sixty-nine one hundredths of one percent
(0.69%) of such net assets over $1 billion,
but not more than $2 billion; and sixty-four
one hundredths of one percent (0.64%) of
such net assets over $2 billion.
SCHWAB CAPITAL TRUST
By: /s/ William J. Klipp
--------------------------------------
Name: William J. Klipp
Title: Senior Vice President and
Chief Operating Officer
B-2
<PAGE> 4
CHARLES SCHWAB INVESTMENT
MANAGEMENT, INC.
By: /s/ Stephen B. Ward
-------------------------------------
Name: Stephen B. Ward
Title: Senior Vice President and
Chief Investment Officer
B-3
<PAGE> 1
EXHIBIT 6(b)
AMENDED SCHEDULE A
TO THE DISTRIBUTION AGREEMENT
FOR SCHWAB CAPITAL TRUST
<TABLE>
<CAPTION>
Fund Effective Date
- ---- --------------
<S> <C>
Schwab International Index Fund July 21, 1993
Schwab Small-Cap Index Fund October 14, 1993
Schwab Asset Director-High Growth Fund September 25, 1995
Schwab Asset Director-Balanced Growth Fund September 25, 1995
Schwab Asset Director-Conservative Growth Fund September 25, 1995
Schwab S&P 500 Fund February 28, 1996
Schwab Analytics Fund May 21, 1996
Schwab OneSource Portfolios-International September 2, 1996
Schwab OneSource Portfolios-Growth Allocation October 13, 1996
Schwab OneSource Portfolios-Balanced Allocation October 13, 1996
</TABLE>
SCHWAB CAPITAL TRUST
By: /s/ William J. Klipp
--------------------------------------
Name: William J. Klipp
Title: Senior Vice President and
Chief Operating Officer
CHARLES SCHWAB & CO., INC.
By: /s/ Colleen M. Hummer
--------------------------------------
Name: Colleen M. Hummer
Title: Senior Vice President
<PAGE> 1
EXHIBIT 8(b)
CUSTODIAN CONTRACT
Between
SCHWAB CAPITAL TRUST
on behalf of
THE PORTFOLIOS LISTED ON SCHEDULE C HERETO
and
STATE STREET BANK AND TRUST COMPANY
<PAGE> 2
TABLE OF CONTENTS
Page
----
1. Employment of Custodian and Property to be
Held By It............................................. 1
2. Duties of the Custodian with Respect to Property of
the Funds Held by the Custodian in the United States... 2
2.1 Holding Securities.............................. 2
2.2 Delivery of Securities.......................... 2
2.3 Registration of Securities...................... 4
2.4 Bank Accounts................................... 4
2.5 Availability of Federal Funds................... 5
2.6 Collection of Income............................ 5
2.7 Payment of Fund Monies.......................... 5
2.8 Liability for Payment in Advance of
Receipt of Securities Purchased.......... 7
2.9 Appointment of Agents........................... 7
2.10 Deposit of U.S. Securities in Securities System. 7
2.10A Fund Assets Held in the Custodian's Direct
Paper System............................. 8
2.11 Deposit of Mutual Fund Shares with Fund Agent... 9
2.12 Deposit of Schwab Mutual Fund Shares with Schwab 10
2.13 Segregated Account.............................. 11
2.14 Ownership Certificates for Tax Purposes......... 12
2.15 Proxies......................................... 12
2.16 Communications Relating to Portfolio Securities. 12
2.17 Reports to Trust by Independent Public
Accountants.............................. 12
3. Duties of the Custodian with Respect to Property of
the Funds Held Outside of the United States............ 13
3.1 Appointment of Foreign Sub-Custodians........... 13
3.2 Assets to be Held............................... 13
3.3 Foreign Securities Depositories................. 13
3.4 Holding Securities.............................. 13
3.5 Agreements with Foreign Banking Institutions.... 14
3.6 Access of Independent Accountants of the Trust.. 14
3.7 Reports by Custodian............................ 14
3.8 Transactions in Foreign Custody Account......... 14
3.9 Liability of Foreign Sub-Custodians............. 15
3.10 Liability of Custodian.......................... 15
3.11 Monitoring Responsibilities..................... 15
3.12 Branches of U.S. Banks.......................... 16
3.13 Tax Law......................................... 16
<PAGE> 3
4. Payments for Repurchases or Redemptions and Sales
of Shares of a Fund.................................... 16
5. Proper Instructions.................................... 17
6. Actions Permitted Without Express Authority............ 17
7. Evidence of Authority.................................. 17
8. Duties of Custodian with Respect to the Books of
Account and Calculations of Net Asset Value and
Net Income............................................. 18
9. Settlement Provisions.................................. 20
10. Records................................................ 24
11. Opinion of Trust's Independent Accountant.............. 25
12. Compensation of Custodian.............................. 25
13. Responsibility of Custodian............................ 25
14. Effective Period, Termination and Amendment............ 26
15. Successor Custodian.................................... 26
16. Interpretive and Additional Provisions................. 27
17. Massachusetts Law to Apply............................. 27
18. Prior Contracts........................................ 25
19. Limitation of Liability................................ 28
20. Shareholder Communications Election.................... 28
21. Additional Portfolios.................................. 29
<PAGE> 4
CUSTODIAN CONTRACT
This Contract between Schwab Capital Trust, a business trust
organized and existing under the laws of The Commonwealth of Massachusetts,
having its principal place of business at 101 Montgomery Street, San Francisco,
California 94104 , hereinafter called the "Trust", on behalf of the portfolios
listed on Schedule C hereto and any other portfolios which may be come subject
to this Contract pursuant to Section 21 hereof, and State Street Bank and Trust
Company, a Massachusetts trust company, having its principal place of business
at 225 Franklin Street, Boston, Massachusetts 02110, hereinafter called the
"Custodian",
WITNESSETH: That in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows:
1. Employment of Custodian and Property to be Held by It
Pursuant to the provisions of the Trust's Agreement and Declaration of
Trust, the Trust hereby employs the Custodian as the custodian of the assets of
each of the Portfolios of the Trust listed on Schedule C hereto, each
hereinafter referred to as a "Fund" and together with any other portfolios which
may become subject to this Contract, as the "Funds", including securities it
desires to be held in places within the United States ("domestic securities")
and securities it desires to be held outside the United States ("foreign
securities") as permitted by paragraph (c) (1) of Rule 17f-5 under the 1940 Act,
as amended (the "1940 Act").
Each Fund agrees to deliver to the Custodian all securities and cash
owned by it, and all payments of income, payments of principal or capital
distributions received by it with respect to all securities owned by the Fund
from time to time, and the cash consideration received by it for such new or
treasury shares of capital stock, $.00001 par value, ("Shares") of such Fund as
may be issued or sold from time to time. The Custodian shall not be responsible
for any property of a Fund held or received by the Fund and not delivered to the
Custodian.
Upon receipt of "Proper Instructions" (within the meaning of Article 5),
the Custodian shall from time to time employ one or more sub-custodians located
in the United States, but only in accordance with an applicable vote by the
Board of Trustees of the Trust, and provided that each agreement between the
Custodian and any sub-custodian shall provide that the sub-custodian will be
liable to the Custodian for losses arising from the negligence or willful
misconduct of the sub-custodian and the Custodian shall be responsible and
liable to the Fund on account of any actions or omissions of any sub-custodian
so employed to the same extent as such sub-custodian is liable to the Custodian.
The Custodian may employ as sub-custodians for the Fund's foreign securities and
other assets the foreign banking institutions and foreign securities
depositories designated in Schedule "A" hereto, but only in accordance with the
provisions of Article 3.
<PAGE> 5
2. Duties of the Custodian with Respect to Property of the Funds Held By
the Custodian in the United States
2.1 Holding Securities. The Custodian shall hold and physically segregate
for the account of each Fund all non-cash property to be held by it in
the United States, including all domestic securities owned by the Fund,
other than (a) securities which are maintained pursuant to Section 2.10
in a clearing agency which acts as a securities depository or in a
book-entry system authorized by the U.S. Department of the Treasury,
collectively referred to herein as " U.S. Securities System", (b)
commercial paper of an issuer for which State Street Bank and Trust
Company acts as issuing and paying agent ("Direct Paper") which is
deposited and/or maintained in the Direct Paper System of the Custodian
pursuant to Section 2.10A, (c) securities which are maintained pursuant
to Section 2.11 in an account with the transfer agent for a mutual fund
whose shares are purchased by the Fund (a "Fund Agent") and (d)
securities which are maintained pursuant to Section 2.12 in an account
with Charles Schwab & Co. ("Schwab"), as sub-transfer agent for a mutual
fund whose shares are purchased by the Fund.
2.2 Delivery of Securities. The Custodian shall release and deliver domestic
securities owned by a Fund held by the Custodian, in a U.S. Securities
System account of the Custodian, in the Custodian's Direct Paper
book-entry system account ("Direct Paper System Account") or in an
account with a Fund Agent or at Schwab only upon receipt of Proper
Instructions, which may be continuing instructions when deemed
appropriate by the parties, and only in the following cases:
1) Upon sale of such securities for the account of the Fund and
simultaneous receipt of payment therefor;
2) Upon the receipt of payment in connection with any repurchase
agreement related to such securities entered into by the Fund;
3) In the case of a sale effected through a U.S. Securities System,
in accordance with the provisions of Section 2.10 hereof;
4) In the case of a sale of domestic mutual fund shares owned by a
Fund which are issued by funds for which Schwab does not act as
sub-transfer agent ("Mutual Fund Shares"), in accordance with the
provisions of Section 2.11 hereof;
5) In the case of a sale of domestic mutual fund shares owned by a
Fund which are issued by funds for which Schwab acts as
sub-transfer agent ("Schwab Mutual Fund Shares"), in accordance
with the provisions of Section 2.12 hereof;
6) To the depository agent in connection with tender or other
similar offers for portfolio securities of the Fund;
2
<PAGE> 6
7) To the issuer thereof or its agent when such securities are
called, redeemed, retired or otherwise become payable; provided
that, in any such case, the cash or other consideration is to be
delivered to the Custodian;
8) To the issuer thereof, or its agent, for transfer into the name
of the Fund or into the name of any nominee or nominees of the
Custodian or into the name or nominee name of any agent appointed
pursuant to Section 2.9 or into the name or nominee name of any
sub-custodian appointed pursuant to Article 1; or for exchange
for a different number of bonds, certificates or other evidence
representing the same aggregate face amount or number of units;
provided that, in any such case, the new securities are to be
delivered to the Custodian;
9) Upon the sale of such securities for the account of the Fund, to
the broker or its clearing agent, against a receipt, for
examination in accordance with "street delivery" custom;
10) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment
of the securities of the issuer of such securities, or pursuant
to provisions for conversion contained in such securities, or
pursuant to any deposit agreement; provided that, in any such
case, the new securities and cash, if any, are to be delivered to
the Custodian;
11) In the case of warrants, rights or similar securities, the
surrender thereof in the exercise of such warrants, rights or
similar securities or the surrender of interim receipts or
temporary securities for definitive securities; provided that, in
any such case, the new securities and cash, if any, are to be
delivered to the Custodian;
12) For delivery in connection with any loans of securities made by
the Fund, but only against receipt of adequate collateral as
agreed upon from time to time by the Custodian and the Fund and
as set forth in the operating resolutions adopted by the Trust's
Board of Trustees or in the Fund's prospectus, which may be in
the form of cash or obligations issued by the United States
government, its agencies or instrumentalities, it being
understood that in connection with any loans for which collateral
is to be credited to the Custodian's account in the book-entry
system authorized by the U.S. Department of the Treasury, the
Custodian may rely on advice of credit received from the
book-entry system as evidence of receipt of such collateral;
13) For delivery as security in connection with any borrowings by the
Fund requiring a pledge of assets by the Fund, but only against
receipt of amounts borrowed;
14) For delivery in accordance with the provisions of any agreement
among the Fund, the Custodian and a broker-dealer registered
under the Securities
3
<PAGE> 7
Exchange Act of 1934 (the "Exchange Act") and a member of The
National Association of Securities Dealers, Inc. ("NASD"),
relating to compliance with the rules of The Options Clearing
Corporation and of any registered national securities exchange,
or of any similar organization or organizations, regarding escrow
or other arrangements in connection with transactions by the
Fund;
15) For delivery in accordance with the provisions of any agreement
among the Fund, the Custodian, and a Futures Commission Merchant
registered under the Commodity Exchange Act, relating to
compliance with the rules of the Commodity Futures Trading
Commission and/or any Contract Market, or any similar
organization or organizations, regarding account deposits in
connection with transactions by the Fund;
16) Upon receipt of instructions from the Trust's transfer agent
("Transfer Agent"), for delivery to such Transfer Agent or to the
holders of shares in connection with distributions in kind, as
may be described from time to time in a Fund's currently
effective prospectus and statement of additional information
("prospectus"), in satisfaction of requests by holders of Shares
for repurchase or redemption; and
17) For any other proper corporate purpose, but only upon receipt of,
in addition to Proper Instructions, a certified copy of a
resolution of the Board of Trustees or of a duly authorized
Committee thereof signed by an officer of the Trust and certified
by the Secretary or an Assistant Secretary, specifying the
securities to be delivered, setting forth the purpose for which
such delivery is to be made, declaring such purpose to be a
proper corporate purpose, and naming the person or persons to
whom delivery of such securities shall be made.
2.3 Registration of Securities. Domestic securities held by the Custodian
(other than bearer securities) shall be registered in the name of the
Fund or in the name of any nominee of the Fund or of any nominee of the
Custodian which nominee shall be assigned exclusively to the Fund,
unless the Fund has authorized in writing the appointment of a nominee
to be used in common with other registered investment companies having
the same investment adviser as the Fund, or in the name or nominee name
of any agent appointed pursuant to Section 2.9 or in the name or nominee
name of any sub-custodian appointed pursuant to Article 1. All
securities accepted by the Custodian on behalf of a Fund under the terms
of this Contract shall be in "street name" or other good delivery form.
If, however, a Fund directs the Custodian to maintain securities in
"street name", the Custodian shall utilize its best efforts only to
timely collect income due the Fund on such securities and to notify the
Fund on a best efforts basis only of relevant corporate actions
including, without limitation, pendency of calls, maturities, tender or
exchange offers.
2.4 Bank Accounts. The Custodian shall open and maintain a separate bank
account or accounts in the United States in the name of the Fund,
subject only to draft or order by
4
<PAGE> 8
the Custodian acting pursuant to the terms of this Contract, and shall
hold in such account or accounts, subject to the provisions hereof, all
cash received by it from or for the account of the Fund, other than cash
maintained by the Fund in a bank account established and used in
accordance with Rule 17f-3 under the 1940 Act. Funds held by the
Custodian for a Fund may be deposited by it to its credit as Custodian
in the Banking Department of the Custodian or in such other banks or
trust companies as it may in its discretion deem necessary or desirable;
provided, however, that every such bank or trust company shall be
qualified to act as a custodian under the 1940 Act and that each such
bank or trust company and the funds to be deposited with each such bank
or trust company shall be approved by vote of a majority of the Board of
Trustees of the Trust. Such funds shall be deposited by the Custodian in
its capacity as Custodian and shall be withdrawable by the Custodian
only in that capacity.
2.5 Availability of Federal Funds. Upon mutual agreement between a Fund and
the Custodian, the Custodian shall, upon the receipt of Proper
Instructions, make federal funds available to the Fund as of specified
times agreed upon from time to time by the Fund and the Custodian in the
amount of checks received in payment for Shares of the Fund which are
deposited into the Fund's account.
2.6 Collection of Income. Subject to the provisions of Section 2.3, the
Custodian shall collect on a timely basis all income and other payments
with respect to United States registered securities held hereunder to
which the Fund shall be entitled either by law or pursuant to custom in
the securities business, and shall collect on a timely basis all income
and other payments with respect to United States bearer securities if,
on the date of payment by the issuer, such securities are held by the
Custodian or its agent thereof and shall credit such income, as
collected, to the Fund's custodian account. Without limiting the
generality of the foregoing, the Custodian shall detach and present for
payment all coupons and other income items requiring presentation as and
when they become due and shall collect interest when due on securities
held hereunder. Income due the Fund on domestic securities loaned
pursuant to the provisions of Section 2.2 (10) shall be the
responsibility of the Fund. The Custodian will promptly supply to the
Trust each list of Passive Foreign Investment Companies ("PFICs")
received by the Custodian from the Investment Company Institute from
time to time (it being understood that neither the Investment Company
Institute nor the Custodian has independently verified any of the
information contained in such lists).
2.7 Payment of Fund Monies. Upon receipt of Proper Instructions, which may
be continuing instructions when deemed appropriate by the parties
hereto, the Custodian shall pay out monies of a Fund in the following
cases only:
1) Upon the purchase of domestic securities, options, futures
contracts or options on futures contracts for the account of the
Fund but only (a) against the simultaneous delivery of such
securities, or evidence of title to such options, futures
contracts or options on futures contracts, to the Custodian (or
any bank,
5
<PAGE> 9
banking firm or trust company doing business in the United States
or abroad which is qualified under the 1940 Act to act as a
custodian and has been designated by the Custodian as its agent
for this purpose) registered in the name of the Fund or in the
name of a nominee of the Custodian referred to in Section 2.3
hereof or in proper form for transfer; (b) in the case of a
purchase effected through a U.S. Securities System, in accordance
with the conditions set forth in Section 2.10 hereof; (c) in the
case of a purchase involving the Direct Paper System, in
accordance with the conditions set forth in Section 2.10A; (d) in
the case of a purchase of Mutual Fund Shares, in accordance with
the conditions set forth in Section 2.11 hereof; (c) in the case
of a purchase of Schwab Mutual Fund Shares, in accordance with
the conditions set forth in Section 2.12 hereof; (e) in the case
of repurchase agreements entered into between the Fund and the
Custodian, or another bank, or a broker-dealer which is a member
of NASD, (i) against simultaneous delivery of the securities
either in certificate form or through a prior or simultaneous
entry crediting the Custodian's account at the Federal Reserve
Bank with such securities or (ii) against simultaneous delivery
of the receipt evidencing purchase by the Fund of securities
owned by the Custodian along with written evidence of the
agreement by the Custodian to repurchase such securities from the
Fund or (f) for transfer to a time deposit account of the Fund in
any bank, whether domestic or foreign if authorized in advance by
Charles Schwab Investment Management Inc. ("CSIM"); such transfer
may be effected prior to receipt of a confirmation from a broker
and/or the applicable bank, but only pursuant to Proper
Instructions from the Fund as defined in Article 5;
2) In connection with conversion, exchange or surrender of
securities owned by the Fund as set forth in Section 2.2 hereof;
3) For the redemption or repurchase of Shares issued by the Fund as
set forth in Article 4 hereof;
4) For the payment of any expense or liability incurred by the Fund,
including but not limited to the following payments for the
account of the Fund: interest, taxes, management, accounting,
transfer agent and legal fees, and operating expenses of the Fund
whether or not such expenses are to be in whole or part
capitalized or treated as deferred expenses;
5) For the payment of any dividends declared pursuant to the
governing documents of the Fund;
6) For payment of the amount of dividends received in respect of
securities sold short;
7) For any other proper purpose, but only upon receipt of, in
addition to Proper Instructions, a certified copy of a resolution
of the Board of Trustees of the
6
<PAGE> 10
Trust or of a duly authorized Committee thereof signed by an
officer of the Trust and certified by its Secretary or an
Assistant Secretary, specifying the amount of such payment,
setting forth the purpose for which such payment is to be made,
declaring such purpose to be a proper purpose, and naming the
person or persons to whom such payment is to be made.
2.8 Liability for Payment in Advance of Receipt of Securities Purchased.
Except for payments for securities held by a Fund Agent or Schwab as
contemplated by Sections 2.11 and 2.12 hereof, and as specifically
stated otherwise elsewhere in this Contract, in any and every case where
payment for purchase of domestic securities for the account of a Fund is
made by the Custodian in advance of receipt of the securities purchased
in the absence of specific written instructions from the Fund to so pay
in advance, the Custodian shall be absolutely liable to the Fund for
such securities to the same extent as if the securities had been
received by the Custodian.
2.9 Appointment of Agents. The Custodian may at any time or times in its
discretion appoint (and may at any time remove) any other bank or trust
company which is itself qualified under the 1940 Act to act as a
custodian, as its agent to carry out such of the provisions of this
Article 2 as the Custodian may from time to time direct; provided,
however, that the appointment of any agent shall not relieve the
Custodian of its responsibilities or liabilities hereunder. Neither
Schwab or any Fund Agent shall be deemed an agent or subcustodian of the
Custodian for purposes of this Section 2.9 or any other provision of
this Agreement.
2.10 Deposit of Securities in U.S. Securities Systems. The Custodian may
deposit and/or maintain domestic securities owned by a Fund in a
clearing agency registered with the Securities and Exchange Commission
under Section 17A of the Exchange Act, which acts as a securities
depository, or in the book-entry system authorized by the U.S.
Department of the Treasury and certain federal agencies, collectively
referred to herein as "U.S. Securities System" in accordance with
applicable Federal Reserve Board and Securities and Exchange Commission
rules and regulations, if any, and subject to the following provisions:
1) The Custodian may keep domestic securities of the Fund in a U.S.
Securities System, provided that such securities are represented
in an account ("Account") of the Custodian in the U.S. Securities
System which shall not include any assets of the Custodian other
than assets held as a fiduciary, custodian or otherwise for
customers;
2) The records of the Custodian with respect to domestic securities
of the Fund which are maintained in a U.S. Securities System
shall identify by book-entry those securities belonging to the
Fund;
3) The Custodian shall pay for domestic securities purchased for the
account of the Fund upon (i) receipt of advice from the U.S.
Securities System that such
7
<PAGE> 11
securities have been transferred to the Account, and (ii) the
making of an entry on the records of the Custodian to reflect
such payment and transfer for the account of the Fund. The
Custodian shall transfer domestic securities sold for the account
of the Fund upon (i) receipt of advice from the U.S. Securities
System that payment for such securities has been transferred to
the Account, and (ii) the making of an entry on the records of
the Custodian to reflect such transfer and payment for the
account of the Fund. Copies of all advices from the U.S.
Securities System of transfers of domestic securities for the
account of the Fund shall identify the Fund, be maintained for
the Fund by the Custodian and be provided to the Fund at its
request. Upon request, the Custodian shall furnish the Fund
confirmation of each transfer to or from the account of the Fund
in the form of a written advice or notice and shall furnish to
the Fund copies of daily transaction sheets reflecting each day's
transactions in the U.S. Securities System for the account of the
Fund.
4) The Custodian shall provide the Fund with any report obtained by
the Custodian on the U.S. Securities System's accounting system,
internal accounting control and procedures for safeguarding
domestic securities deposited in the U.S. Securities System;
5) The Custodian shall have received the initial certificate
required by Article 14 hereof; and
6) Anything to the contrary in this Contract notwithstanding, the
Custodian shall be liable to the Fund for any loss or damage to
the Fund resulting from use of the U.S. Securities System by
reason of any negligence, misfeasance or misconduct of the
Custodian or any of its agents or of any of its or their
employees or from failure of the Custodian or any such agent to
enforce effectively such rights as it may have against the U.S.
Securities System; at the election of the Fund, it shall be
entitled to be subrogated to the rights of the Custodian with
respect to any claim against the U.S. Securities System or any
other person which the Custodian may have as a consequence of any
such loss or damage if and to the extent that the Fund has not
been made whole for any such loss or damage.
2.10A Fund Assets Held in the Custodian's Direct Paper System. The Custodian
may deposit and/or maintain securities owned by a Fund in the Direct
Paper System of the Custodian subject to the following provisions:
1) No transaction relating to securities in the Direct Paper System
will be effected in the absence of Proper Instructions;
2) The Custodian may keep securities of the Fund in the Direct Paper
System only if such securities are represented in an account
("Account") of the Custodian
8
<PAGE> 12
in the Direct Paper System which shall not include any assets of
the Custodian other than assets held as a fiduciary, custodian or
otherwise for customers;
3) The records of the Custodian with respect to securities of the
Fund which are maintained in the Direct Paper System shall
identify by book-entry those securities belonging to the Fund;
4) The Custodian shall pay for securities purchased for the account
of the Fund upon the making of an entry on the records of the
Custodian to reflect such payment and transfer of securities to
the account of the Fund. The Custodian shall transfer securities
sold for the account of the Fund upon the making of an entry on
the records of the Custodian to reflect such transfer and receipt
of payment for the account of the Fund;
5) The Custodian shall furnish the Fund confirmation of each
transfer to or from the account of the Fund, in the form of a
written advice or notice, of Direct Paper on the next business
day following such transfer and shall furnish to the Fund copies
of daily transaction sheets reflecting each day's transaction in
the Direct Paper System for the account of the Fund; and
6) The Custodian shall promptly provide the Trust with any report on
its system of internal accounting control received by the
Custodian.
2.11 Deposit of Mutual Fund Shares with a Fund Agent. Mutual Fund Shares
shall be deposited and/or maintained with a Fund Agent acting as
transfer agent for such fund. Each such Fund Agent shall be deemed to be
a "depositary" for purposes of Rule 17f-4 of the Investment Company Act
of 1940. The Fund hereby directs the Custodian to deposit and/or
maintain such securities with a Fund Agent, subject to the following
provisions:
1) The Custodian may keep Mutual Fund Shares with a Fund Agent,
provided that such securities are represented in an account with
the Fund Agent, in the name of the Custodian as custodian of the
Fund, in which the Custodian shall not deposit any assets of the
Custodian other than assets held on behalf of the Fund;
2) The records of the Custodian with respect to Mutual Fund Shares
which are maintained with a Fund Agent shall identify by
book-entry those securities which the Fund or its investment
advisor identifies to the Custodian as belonging to the Fund;
3) The Custodian shall pay for Mutual Fund Shares purchased for the
account of the Fund upon (i) receipt of advice from the Fund'
investment adviser that such securities have been purchased and
will be transferred to the Custodian's account with the Fund
Agent, and (ii) the making of an entry on the records of
9
<PAGE> 13
the Custodian to reflect such payment and transfer for the
account of the Fund. The Custodian shall receive confirmation of
the purchase of such securities and the transfer of such
securities to the Custodian's account with the Fund Agent only
after such payment is made. The Custodian shall transfer Mutual
Fund Shares sold for the account of the Fund upon (i) receipt of
advice from the Fund's investment adviser that such securities
have been sold and that payment for such securities will be
transferred to the Custodian, and (ii) the making of an entry on
the records of the Custodian to reflect such transfer and payment
for the account of the Fund. The Custodian will receive
confirmation of the sale of such securities and payment therefor
only after such securities are transferred. Copies of all advices
from a Fund Agent of transfers of Mutual Fund Shares for the
account of the Fund shall identify the Fund, be maintained for
the Fund by the Custodian and be provided to the Fund at its
request. Upon request, the Custodian shall furnish the Fund
confirmation of each transfer to or from the account of the Fund
in the form of a written advice or notice and shall furnish to
the Fund copies of daily transaction sheets reflecting each day's
transactions with each Fund Agent for the account of the Fund;
and
4) The Custodian shall not be liable to the Fund for any loss or
damage to the Fund resulting from the maintenance of Mutual Fund
Shares with a Fund Agent except for losses resulting directly
from the negligence, misfeasance or misconduct of the Custodian
or any of its agents or of any of its or their employees.
2.12 Deposit of Schwab Mutual Fund Shares with Schwab. Schwab Mutual Fund
Shares shall be deposited and/or maintained in an account maintained
with Schwab as sub-transfer agent for the funds. Schwab shall be deemed
to be a "depositary" for purposes of Rule 17f-4 of the Investment
Company Act of 1940. The Fund hereby directs the Custodian to deposit
and/or maintain such securities with Schwab, subject to the following
provisions:
1) The Custodian shall keep Schwab Mutual Fund Shares with Schwab,
provided that such securities are represented in an account with
Schwab, in the name of the Custodian as custodian for the Fund,
in which the Custodian will not deposit any assets of the
Custodian other than assets held on behalf of the Fund and which
Schwab represents to the Custodian will not include any assets of
Schwab other than assets held as a fiduciary, custodian or
otherwise for customers;
2) The records of the Custodian with respect to Schwab Mutual Fund
Shares which are maintained with Schwab shall identify by
book-entry those securities which the Fund or its investment
advisor have identified to the Custodian as belonging to the
Fund;
3) The Custodian shall pay for Schwab Mutual Fund Shares purchased for the
account of the Fund upon (i) receipt of advice from the Fund' investment
adviser that such
10
<PAGE> 14
securities have been purchased and will be transferred to the
Custodian's account with Schwab, and (ii) the making of an entry on the
records of the Custodian to reflect such payment and transfer for the
account of the Fund. The Custodian shall receive confirmation of the
purchase of such securities and the transfer of such securities to the
Custodian's account with Schwab only after such payment is made. The
Custodian shall transfer Schwab Mutual Fund Shares sold for the account
of the Fund upon (i) receipt of advice from the Fund's investment
adviser that such securities have been sold and that payment for such
securities will be transferred to the Custodian, and (ii) the making of
an entry on the records of the Custodian to reflect such transfer and
payment for the account of the Fund. The Custodian will receive
confirmation of the sale of such securities and payment therefor only
after such securities are transferred. Copies of all advices from Schwab
of transfers of Schwab Mutual Fund Shares for the account of the Fund
shall identify the Fund, be maintained for the Fund by the Custodian and
be provided to the Fund at its request. Upon request, the Custodian
shall furnish the Fund confirmation of each transfer to or from the
account of the Fund in the form of a written advice or notice and shall
furnish to the Fund copies of daily transaction sheets reflecting each
day's transactions with Schwab for the account of the Fund; and
4) The Custodian shall be not be liable to the Fund for any loss or damage
to the Fund resulting from maintenance of Schwab Mutual Fund Shares with
Schwab except for losses resulting directly from the negligence,
misfeasance or misconduct of the Custodian or any of its agents or of
any of its or their employees. The Fund acknowledges that the
maintenance of Schwab Mutual Fund Shares with Schwab as contemplated by
this Section 2.12 may be deemed to be "self-custody" for purposes of the
Investment Company Act of 1940 and the regulations thereunder.
2.13 Segregated Account. The Custodian shall upon receipt of Proper
Instructions establish and maintain a segregated account or accounts for
and on behalf of a Fund, into which account or accounts may be
transferred cash and/or securities, including securities maintained in
an account by the Custodian pursuant to Section 2.10 hereof, (i) in
accordance with the provisions of any agreement among the Fund, the
Custodian and a broker-dealer registered under the Exchange Act and a
member of the NASD (or any futures commission merchant registered under
the Commodity Exchange Act), relating to compliance with the rules of
The Options Clearing Corporation and of any registered national
securities exchange (or the Commodity Futures Trading Commission or any
registered contract market), or of any similar organization or
organizations, regarding escrow or other arrangements in connection with
transactions by the Fund, (ii) for purposes of segregating cash or
government securities in connection with options purchased, sold or
written by the Fund or commodity futures contracts or options thereon
purchased or sold by the Fund, (iii) for the purposes of compliance by
the Fund with the procedures required by Investment Company Act Release
No. 10666, or any subsequent release or releases of the Securities and
Exchange Commission relating to the maintenance of segregated accounts
by registered investment companies and (iv) for other proper corporate
purposes, but only, in the case of clause (iv), upon receipt of, in
addition to Proper Instructions, a
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<PAGE> 15
certified copy of a resolution of the Board of Trustees of the Trust or
a duly authorized Committee thereof signed by an officer of the Trust
and certified by the Secretary or an Assistant Secretary, setting forth
the purpose or purposes of such segregated account and declaring such
purposes to be proper corporate purposes.
2.14 Ownership Certificates for Tax Purposes. The Custodian shall execute
ownership and other certificates and affidavits for all federal and
state tax purposes in connection with receipt of income or other
payments with respect to domestic securities of a Fund held by it and in
connection with transfers of such securities.
2.15 Proxies. The Custodian shall, with respect to the securities held by it
hereunder, cause to be promptly executed by the registered holder of
such securities, if the securities are registered otherwise than in the
name of a Fund or a nominee of a Fund, all proxies, without indication
of the manner in which such proxies are to be voted, and shall promptly
deliver to the Fund's Adviser such proxies, all proxy soliciting
materials and all notices relating to such securities.
2.16 Communications Relating to Portfolio Securities. Subject to the
provisions of Section 2.3, the Custodian shall transmit promptly to a
Fund all written information (including, without limitation, pendency of
calls and maturities of domestic securities and expirations of rights in
connection therewith and notices of exercise of call and put options
written by the Fund and the maturity of futures contracts purchased or
sold by the Fund) received by the Custodian from issuers of the domestic
securities being held for the Fund. With respect to tender or exchange
offers, the Custodian shall transmit promptly to the Fund all written
information received by the Custodian from issuers of the domestic
securities whose tender or exchange is sought and from the party (or his
agents) making the tender or exchange offer. If the Fund desires to take
action with respect to any tender offer, exchange offer or any other
similar transaction, the Fund shall notify the Custodian at least three
business days prior to the date on which the Custodian is to take such
action.
2.17 Reports to Trust by Independent Public Accountants. The Custodian shall
provide the Trust, at such times as the Trust may reasonably require,
with reports by independent public accountants on the accounting system,
internal accounting control and procedures for safeguarding securities,
futures contracts and options on futures contracts, including domestic
securities deposited and/or maintained in a U.S. Securities System,
relating to the services provided by the Custodian under this Contract;
such reports shall be of sufficient scope and in sufficient detail as
may be required by the Trust to provide reasonable assurance that any
material inadequacies would be disclosed by such examination, and, if
there are no such inadequacies, the reports shall so state.
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<PAGE> 16
3. Duties of the Custodian with Respect to Property of the Funds Held
Outside of the United States.
3.1 Appointment of Foreign Sub-Custodians. The Trust hereby authorizes and
instructs the Custodian to employ as sub-custodians for each Fund's
foreign securities and other assets maintained outside the United States
the foreign banking institutions and foreign securities depositories
designated on Schedule A hereto ("foreign sub-custodians"). Upon receipt
of Proper Instructions, as defined in Section 5 of this Contract,
together with a certified resolution of the Trust's Board of Trustees,
the Custodian and the Trust may agree to amend Schedule A hereto from
time to time to designate additional foreign banking institutions and
foreign securities depositories to act as sub-custodian. Upon receipt of
Proper Instructions, a Fund may instruct the Custodian to cease the
employment of any one or more such sub-custodians for maintaining
custody of such Fund's assets.
3.2 Assets to be Held. The Custodian shall limit the securities and other
assets maintained in the custody of the foreign sub-custodians to: (a)
"foreign securities", as defined in paragraph (c)(1) of Rule 17f-5 under
the 1940 Act, and (b) cash and cash equivalents in such amounts as the
Custodian or a Fund may determine to be reasonably necessary to effect
the Fund's foreign securities transactions. The Custodian shall identify
on its books as belonging to the Fund, the foreign securities of the
Fund held by each foreign sub-custodian.
3.3 Foreign Securities Depositories. Except as may otherwise be agreed upon
in writing by the Custodian and the Trust, assets of a Fund shall be
maintained in a clearing agency which acts as a Securities depository or
in a book-entry system for the central handling of securities located
outside of the United States (each a "Foreign Securities System") only
through arrangements implemented by the foreign banking institutions
serving as foreign sub-custodians pursuant to the terms of Section 3.1
(Foreign Securities Systems and U.S. Securities Systems are collectively
referred to herein as the "Securities Systems."). Unless otherwise
authorized by the Board of Trustees of the Trust, such arrangements
shall include entry into written agreements containing the provisions
set forth in Section 3.5 hereof.
3.4 Holding Securities. The Custodian may hold securities and other non-cash
property for all of its customers, including the Trust, with a foreign
sub-custodian in a single account that is identified as belonging to the
Custodian for the benefit of its customers, provided however, that (i)
the records of the Custodian with respect to securities and other
non-cash property of the Fund which are maintained in such account shall
identify by book-entry those securities and other non-cash property
belonging to the Fund and (ii) the Custodian shall require that
securities and other non-cash property so held by the foreign
sub-custodian be held separately from any assets of the foreign
sub-custodian or of others.
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<PAGE> 17
3.5 Agreements with Foreign Banking Institutions. Each agreement with a
foreign banking institution shall provide that: (a) a Fund's assets will
not be subject to any right, charge, security interest, lien or claim of
any kind in favor of the foreign banking institution or its creditors or
agents, except a claim of payment for their safe custody or
administration; (b) beneficial ownership of a Fund's assets will be
freely transferable without the payment of money or value other than for
custody or administration; (c) adequate records will be maintained
identifying the assets as belonging to each Fund; (d) officers of,
auditors employed by, or other representatives of the Custodian,
including to the extent permitted under applicable law the independent
public accountants for the Trust, will be given access to the books and
records of the foreign banking institution relating to its actions under
its written agreement with the Custodian; and (e) assets of a Fund held
by the foreign sub-custodian will be subject only to the instructions of
the Custodian or its agents.
3.6 Access of Independent Accountants of the Trust. Upon request of the
Trust, the Custodian will use its best efforts to arrange for the
independent accountants of the Trust to be afforded access to the books
and records of any foreign banking institution employed as a foreign
sub-custodian insofar as such books and records relate to the
performance of such foreign banking institution under its written
agreement with the Custodian.
3.7 Reports by Custodian. The Custodian will supply to the Trust a daily
list of foreign securities and other assets of each Fund held by foreign
sub-custodians. In addition, the Custodian will supply to the Trust
periodic statements, on a monthly basis or more frequently if agreed
upon by the Trust and the Custodian, in respect of the foreign
securities and other assets of each Fund held by foreign sub-custodians,
including but not limited to an identification of entities having
possession of each Fund's securities and other assets and advices or
notifications of any transfers of securities to or from each custodial
account maintained by a foreign banking institution for the Custodian on
behalf of each Fund indicating, as to securities acquired for such Fund,
the identity of the entity having physical possession of such
securities.
3.8 Transactions in Foreign Custody Account (a) Except as otherwise provided
in paragraph (b) of this Section 3.8, the provision of Sections 2.2 and
2.7 of this Contract shall apply, mutatis mutandis to the foreign
securities of a Fund held outside the United States by foreign
sub-custodians. (b) Notwithstanding any provision of this Contract to
the contrary, settlement and payment for securities received for the
account of a Fund and delivery of securities maintained for the account
of a Fund may be effected in accordance with the customary established
securities trading or securities processing practices and procedures in
the jurisdiction or market in which the transaction occurs, including,
without limitation, delivering securities to the purchaser thereof or to
a dealer therefor (or an agent for such purchaser or dealer) against a
receipt with the expectation of receiving later payment for such
securities from such purchaser or dealer. (c) Foreign securities
maintained in the custody of a foreign sub-custodian may be maintained
in the name of such entity's nominee to the
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<PAGE> 18
same extent as set forth in Section 2.3 of this Contract. The Trust
agrees to hold any such nominee harmless from any liability as a holder
of record of such securities other than liabilities arising out of the
negligence or willful misconduct of such nominee.
3.9 Liability of Foreign Sub-Custodians. Each written agreement pursuant to
which the Custodian employs a foreign banking institution as a foreign
sub-custodian shall require the institution to exercise reasonable care
in the performance of its duties and to indemnify and hold harmless the
Custodian and each Fund from and against any loss, damage, cost,
expense, liability or claim arising out of or in connection with the
institutions performance of such obligations. At the election of a Fund,
it shall be entitled to be subrogated to the rights of the Custodian
with respect to any claims against a foreign banking institution as a
consequence of any such loss, damage, cost, expense, liability or claim
if and to the extent that the Fund has not been made whole for any such
loss, damage, cost, expense, liability or claim.
3.10 Liability of Custodian. The Custodian shall be liable for the acts or
omissions of a foreign banking institution to the same extent as set
forth with respect to sub-custodians generally in this Contract and,
regardless of whether assets are maintained in the custody of a foreign
banking institution, a foreign securities depository or a branch of a
U.S. Bank as contemplated by paragraph 3.12 hereof, the Custodian shall
not be liable for any loss, damage, cost, expense, liability or claim
respecting a Fund's foreign securities and cash and cash equivalents
held by a foreign sub-custodian pursuant to Section 3.2 hereof resulting
from nationalization, expropriation, currency restrictions, or acts of
war or terrorism or where the sub-custodian has otherwise exercised
reasonable care. Notwithstanding the foregoing provisions of this
paragraph 3.10, in delegating custody duties to State Street London
Ltd., the Custodian shall not be relieved of any responsibility to a
Fund for any loss due to such delegation, except such loss as may result
from (a) political risk (including, but not limited to, exchange control
restrictions, confiscation, expropriation, nationalization,
insurrection, civil strife or armed hostilities) or (b) other losses
(excluding a bankruptcy or insolvency of State Street London Ltd. not
caused by political risk) due to Acts of God, nuclear incident or other
losses under circumstances where the Custodian and State Street London
Ltd. have exercised reasonable care.
3.11 Monitoring Responsibilities. The Custodian shall furnish annually to the
Trust, during the month of June, information concerning the foreign
sub-custodians employed by the Custodian. Such information shall be
similar in kind and scope to that furnished to the Trust in connection
with the initial approval of this Contract. In addition, the Custodian
will promptly inform the Trust in the event that the Custodian learns of
a material adverse change in the financial condition of a foreign
sub-custodian or any material loss involving the assets of a Fund or in
the case of any foreign sub-custodian not the subject of an exemptive
order from the Securities and Exchange Commission, is notified by such
foreign sub-custodian that there appears to be a substantial likelihood
that its shareholders' equity will decline below $200 million (U.S.
dollars or the equivalent thereof) or that its shareholders' equity has
declined below $200
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<PAGE> 19
million (in each case computed in accordance with generally accepted
U.S. accounting principles).
3.12 Branches of U.S. Banks. (a) Except as otherwise set forth in this
Contract, the provisions hereof shall not apply where the custody of a
Fund's assets is maintained in a foreign branch of a banking institution
which is a "bank" as defined by Section 2(a)(5) of the 1940 Act meeting
the qualifications set forth in Section 26(a) of said Act. The
appointment of any such branch as a sub-custodian shall be governed by
Article 1 of this Contract. (b) Cash held for the Fund in the United
Kingdom shall be maintained in an interest bearing account established
for the Fund with the Custodian's London branch, which account shall be
subject to the direction of the Custodian, State Street London Ltd. or
both.
3.13 Tax Law. The Custodian shall have no responsibility or liability for any
obligations now or hereafter imposed on a Fund or the Custodian as
custodian of the Fund by the tax law of the United States of America or
any state or political subdivision thereof. It shall be the
responsibility of the Trust to notify the Custodian of the obligations
imposed on a Fund or the Custodian as custodian of the Fund by the tax
law of jurisdictions other than those mentioned in the above sentence,
including responsibility for withholding and other taxes, assessments or
other governmental charges, certifications and governmental reporting.
The sole responsibility of the Custodian with regard to such tax law
shall be to use reasonable efforts to assist a Fund with respect to any
claim for exemption, reclaim or refund under the tax law of
jurisdictions for which the Fund has provided such information.
4. Payments for Repurchases or Redemptions and Sales of Shares of a Fund.
From such funds as may be available for the purpose but subject to the
limitations of the Trust's Agreement and Declaration of Trust and any applicable
votes of the Board of Trustees of the Trust pursuant thereto, the Custodian
shall, upon receipt of instructions from the Transfer Agent, make funds
available for payment to holders of Shares who have delivered to the Transfer
Agent a request for redemption or repurchase of their Shares. In connection with
the redemption or repurchase of Shares of a Fund, the Custodian is authorized
upon receipt of instructions from the Transfer Agent to wire funds to or through
a commercial bank designated by the redeeming shareholder(s). In connection with
the redemption or repurchase of Shares of a Fund, the Custodian shall honor
checks drawn on the Custodian by a holder of Shares, which checks have been
furnished by the Fund to the holder of Shares, when presented to the Custodian
in accordance with such procedures and controls as are mutually agreed upon from
time to time between the Trust and the Custodian. The Custodian shall receive
from the distributor for the Trust's Shares or from the Transfer Agent and
deposit into a Fund's account such payments as are received for Shares of the
Fund issued or sold from time to time by the Fund. The Custodian will provide
timely notification to a Fund and the Transfer Agent of any receipt by it of
payments for Shares of the Fund.
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5. Proper Instructions.
Unless otherwise provided in this Contract, the Custodian shall act only
upon Proper Instructions. Proper Instructions as used herein means a writing
signed or initialed by one or more person or persons as the Board of Trustees or
a duly authorized committee thereof shall have from time to time authorized.
Each such writing shall set forth the specific transaction or type of
transaction involved, including a specific statement of the purpose for which
such action is requested. Oral instructions will be considered Proper
Instructions if the Custodian reasonably believes them to have been given by a
person authorized to give such instructions with respect to the transaction
involved. Each Fund shall cause all oral instructions to be confirmed in
writing. The fact that confirming written instructions are not received by the
Custodian shall in no way invalidate the transactions authorized by the oral
instructions. Upon receipt of a certificate of the Secretary or an Assistant
Secretary of the Trust as to the authorization by the Board of Trustees of the
Trust or a duly authorized committee thereof accompanied by a detailed
description of procedures approved by the Board of Trustees, Proper Instructions
may include communications effected directly between electro-mechanical or
electronic devices provided that the Board of Trustees and the Custodian are
satisfied that such procedures afford adequate safeguards for a Fund's assets.
For purposes of this Section , Proper Instructions shall include duly authorized
instructions received by the Custodian pursuant to any three-party agreement
which requires a segregated asset account in accordance with Section 2.13.
6. Actions Permitted without Express Authority.
The Custodian may in its discretion and without express authority from
the Trust: 1) make payments to itself or others for minor expenses of handling
securities or other similar items relating to its duties under this Contract,
provided that all such payments shall be accounted for to the Trust; 2)
surrender securities in temporary form for securities in definitive form; 3)
endorse for collection, in the name of a Fund, checks, drafts and other
negotiable instruments; and 4) in general, attend to all non-discretionary
details in connection with the sale, exchange, substitution, purchase, transfer
and other dealings with the securities and property of a Fund except as
otherwise directed by the Board of Trustees of the Trust or a duly authorized
committee thereof.
7. Evidence of Authority.
The Custodian shall be protected in acting upon any instructions,
notice, request, consent, certificate or other instrument or paper reasonably
believed by it to be genuine and to have been properly executed by or on behalf
of the Trust or a Fund. The Custodian may receive and accept a certified copy of
a vote of the Board of Trustees of the Trust or a duly authorized committee
thereof as conclusive evidence (a) of the authority of any person to act in
accordance with such vote or (b) of any determination or of any action by the
Board of Trustees pursuant to the Trust's Agreement and Declaration of Trust as
described in such vote, and such vote may be considered as in full force and
effect until receipt by the Custodian of written notice to the contrary.
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<PAGE> 21
8. Duties of Custodian with Respect to the Books of Account and Calculation
of Net Asset Value and Net Income.
The Custodian shall cooperate with and supply necessary information to
the entity or entities appointed by the Board of Trustees of the Trust to keep
the books of account of each Fund and compute the net asset value per share of
the outstanding shares of each Fund and unless directed in writing to do
otherwise by the Trust, shall itself keep such books of account and compute such
net asset value per share. The Trust acknowledges and agrees that, with respect
to investments maintained with a Fund Agent or Schwab, the Fund Agent or Schwab
is the sole source of information on the number of shares of a fund held by it
on behalf of a Fund and that the Custodian has the absolute right to rely on
holdings information furnished by a Fund Agent or Schwab to the Custodian in
performing its duties under this Contract, including without limitation, the
duties set forth in this Section 8 and in Section 10 hereof. Provided that each
Fund Agent and Schwab have transmitted to the Custodian information as to the
number and nature of any mutual fund shares held by the Fund Agent or Schwab, as
applicable, on behalf of the Fund within the time and delivery requirements
specified by the Custodian, the records and calculations prepared and maintained
by the Custodian shall be made available to the Trust, in both written and
electronic format, each day within the time and delivery requirements specified
by the Trust. Unless otherwise directed in writing by the Trust, the Custodian
shall also calculate daily the net income of each Fund as described in the
Fund's currently effective prospectus and shall advise the Fund and the Transfer
Agent daily of the total amount of such net income and, if instructed in writing
by an officer of the Trust to do so, shall advise the Transfer Agent
periodically of the division of such net income among its various components.
The calculations of net asset value per share and the daily income of each Fund
shall be made at the time or times described from time to time in each Fund's
currently effective prospectus. The records to be kept by the Custodian shall
include, but not be limited to:
(a) all books and records with respect to each Fund's books of
account;
(b) records of each Fund's securities transactions;
(c) all other books and records as the Custodian is required to
maintain pursuant to Rule 31a-1 of the 1940 Act including, but
not necessarily limited to the following:
(i) Journals containing an itemized daily record in detail of
all purchases and sales of securities, all receipts and
disbursements of cash, and all other debits and credits,
as required by subsection (b)(1) of the Rule;
(ii) General and auxiliary ledgers reflecting all asset,
liability, reserve, capital, income and expense accounts
including interest accrued and interest received, as
required by subsection (b)(2)(i) of the Rule;
(iii) Separate ledger accounts required by subsection (b)(2)(ii)
and (iii) of the Rule; and
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<PAGE> 22
(iv) A monthly trial balance of all ledger accounts except
shareholder account as required by subsection (b)(8) of
the Rule.
The Custodian will perform continuing accounting functions for each
Fund, including, without limitation, the following:
(i) Journalize each Fund's investment, capital share and
income and expense activities;
(ii) Verify investment buy/sell trade tickets when received
from the Fund's sub-adviser or investment adviser for
proper settlement;
(iii) Maintain individual ledgers for investment securities;
(iv) Maintain historical tax lots for each security;
(v) Reconcile cash and investment balances of the Fund with
the Custodian, and provide the Fund's investment adviser
with the beginning cash balance available for investment
purposes;
(vi) Update the cash availability throughout the day as
required by the Fund's investment adviser;
(vii) Post to and prepare the Fund's Statement of Assets and
Liabilities and the Statement of Operations;
(viii) Calculate various contractual expenses (e.g., advisory and
custody fees);
(ix) Utilize expense accruals provided by the Fund's investment
adviser;
(x) Control all disbursements from the Fund and authorize such
disbursements upon Proper Instructions;
(xi) Calculate realized and unrealized capital gains and losses
both for market and currency fluctuations;
(xii) Determine the Fund's net income;
(xiii) Obtain security market quotes from independent pricing
services approved by the Fund's investment adviser
pursuant to the price service authorization letter
attached hereto as Exhibit 2. If such quotes are
unavailable, then obtain such prices from the Fund's
investment
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<PAGE> 23
adviser, and in either case calculate the market value of
each Fund's investments;
(xiv) Electronically transmit and/or mail a copy of the daily
portfolio valuation to the Fund's investment adviser;
(xv) Compute the net asset value of the Fund;
(xvi) As appropriate, compute the Fund's yields, total return,
expense ratios, Portfolio turnover rate, and, if required,
average dollar-weighted maturity; and
(xvii) Prepare a monthly financial statement, which will include
the following items:
Schedule of Investments
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
Cash Statement
Schedule of Capital Gains and Losses
The Custodian will provide the Fund's investment adviser with the
following services:
(i) Assist with preparation of: Federal and State Tax Returns,
Excise Tax Returns, Annual and Semi-Annual Shareholder
Reports, Rules 24 (e)-2 and 24 (f)-2 Notices;
(ii) Assist in the review of registration statements; and
(iii) Assist in monitoring compliance with SubChapter M of the
Internal Revenue Code.
9. Settlement Provisions.
9.1 Except as otherwise provided in this Section 9, the Custodian shall
credit or debit the appropriate cash account of each Fund in connection
with the purchase, sale, maturity, redemption, or other disposition of
securities and other assets held for the time being in such Fund on an
actual settlement basis.
9.2 Unless a Fund instructs the Custodian in writing that transactions in a
specified market shall be settled on an actual settlement basis, the
purchase, sale, maturity, redemption or other disposition of securities
by such Fund in the markets listed on Schedule B hereto shall be settled
in the manner and subject to the terms and limitations described in
Sections 9.3 through 9.10 below. A transaction to which these
contractual settlement provisions applies shall be called a "Covered
Transaction".
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<PAGE> 24
9.3 With respect to a Covered Transaction that represents a purchase, the
Custodian shall debit the Fund's cash account in accordance with Proper
Instructions as of the time and date that monies would ordinarily be
required to settle such a transaction in the applicable market as set
forth on Schedule B hereto. Such amounts shall be recredited to the
Fund's appropriate cash account upon the Fund's notice to the Custodian
that it has canceled the Covered Transaction.
9.4 With regard to the settlement of a Covered Transaction which is a sale,
maturity, redemption or other disposition, provisional credit of an
amount equal to the net sale, maturity, redemption or other disposition
proceeds of the transaction (hereinafter called the "Settlement Amount")
shall be made to the Fund as if the Settlement Amount is received as of
the time and date that monies would ordinarily be required to settle
such transaction in the applicable market as set forth on Schedule B.
The provisional credit will be made if the Custodian has received Proper
Instructions or reasonable notice of the Covered Transaction, as
applicable, and if the Custodian or its agents are in possession of the
asset associated with the Covered Transaction in good deliverable form
and are not aware of any facts which would lead them to reasonably
believe that the Covered Transaction will not settle in the time period
ordinarily applicable to transactions in the applicable market as set
forth on Schedule B. In the event that the Custodian determines not to
provide a provisional credit in respect of a particular transaction, the
Custodian will promptly notify the Fund of this determination. The
provisional credit shall not be more than the Settlement Amount.
9.5 With respect to each Covered Transaction for which the Custodian shall
procure that the Settlement Amount be credited to the Fund, the
following provisions shall apply .
(a) Simultaneously with the making of the provisional credit, all
right and title to any asset purchased or sold, as applicable in
the Covered Transaction together with the Fund's contractual
rights against the Fund's counterparty in the Covered Transaction
shall vest in the Custodian.
(b) Subject to the general terms of this Agreement, the Custodian
shall perform the Fund's obligations to a counterparty under any
contract that is associated with the Covered Transaction.
(c) Notwithstanding Section 9.5(b), the Custodian shall remain the
beneficial owner of the assets concerned under a Covered
Transaction and the beneficiary of any contract associated
therewith and shall not be bound to complete such Covered
Transaction until (i) actual receipt of the Settlement Amount for
which provisional credit shall have been given in accordance with
Subsection 9.4 or, (ii) where such provisional credit is reversed
in accordance with Subsection 9.6 or 9.7, the Fund's liability to
the Custodian in respect of such reversal shall have been
satisfied in full. In relation to any such securities located in
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<PAGE> 25
Germany, the ownership held by the Custodian shall be governed by
the German law and shall be agreed to be "Sicherungseiggentum".
(d) Upon the satisfaction of Subsection 9.5(c)(i) the legal and
beneficial ownership in the securities concerned shall pass from
the Custodian in accordance with the terms of the contract
associated with the Covered Transaction and the Settlement Amount
received in accordance with the contract shall inure to the
benefit of the Custodian. In such event, the benefit of all
dividends, interest and other distributions which are declared,
or which are paid or payable on the securities under the terms of
the contract associated with the Covered Transaction shall pass
in accordance with the terms of such contract.
9.6 The Custodian shall have the right, upon sending notice to the Fund, to
reverse any provisional credit given in accordance with Subsection 9.4
above in the event that the actual proceeds of such transaction have not
been received by the Custodian, its agents or its sub-custodians within
thirty days of having made the provisional credit or at any time when
the Custodian believes for reasonable cause that such Covered
Transaction will not settle in accordance with its terms (in which case
the notice required here will contain a description of such cause),
whereupon a sum equal to the Settlement Amount shall become payable by
the Fund to the Custodian and, if not paid by the Fund within five (5)
days after receipt of the notice required hereunder, may be debited from
any cash account held for benefit of the Fund in accordance with the
terms of any notice given hereunder. In the case that the Custodian
shall make the debit allowed by this subsection or that the Fund shall
otherwise return the Settlement Amount, in consideration for such debit
or other return, Custodian shall transfer to the account of the Fund
assets of the same type, nominal value, description, issue and amount as
the assets transferred to the Custodian under subsection 9.5(a) above
("Equivalent Assets"), which assets shall be described in the notice
given to the Fund as provided above in this Section 9.6. Further in such
event, the Custodian shall subrogate to the Fund the rights involved in
any contract associated with the Covered Transaction that were assigned
to it under Subsection 9.5(a). The amount of any dividends, interest and
other distributions with respect to assets associated with the Covered
Transactions that have accrued to the benefit of the Custodian shall be
set off against the Settlement Amount.
9.7 In the event that the Custodian is unable to debit the Fund and the Fund
fails to pay any sums due to the Custodian at the time the same becomes
payable in accordance with Section 9.5 and such failure is not cured
upon notice of such failure to the Fund or if any of the following
conditions occurs, the Custodian may charge the Fund for reasonable
costs and expenses associated with the provisional credit and the
provisions of Section 9.8 will apply:
(a) If a final judgment for the payment of money shall be rendered
against the Fund and such judgment shall not have been discharged
or its execution stayed
22
<PAGE> 26
pending appeal within sixty days of entry or such judgment shall
not have been discharged within sixty days of expiration of any
such stay;
(b) the Fund passing a resolution for its voluntary winding-up
(otherwise than for the purpose of corporate reconstruction or
amalgamation);
(c) the presentation of a petition for the winding-up of or the
making of an administration order in relation to the Fund;
(d) the appointment of a receiver or administrator over any of the
assets of the Fund;
(e) the Fund ceasing or threatening to cease to carry on its
business;
(f) the Fund calling a meeting of its creditors pursuant to Section
98 of the Insolvency Act 1986 (or any statutory modification or
re-enactment thereof for the time being in force) or any similar
law affecting the Fund in its own jurisdiction.
9.8 If an event outlined in Subsection 9.7 occurs:
(a) The obligation of the Custodian to deliver Equivalent Assets in
accordance with Section 9.6 shall cease;
(b) the value of the Equivalent Assets shall be established by
reference to the last available bid price thereof on the most
appropriate market at the date and time of such event ("Value
Date");
(c) the value of the Fund's obligations in respect of payment of any
sums which have become repayable in accordance with Subsection
9.5 and 9.6 shall be established as of the Value Date), such
value to be increased by any cost of funds expense allowable to
the Custodian under Subsection 9.7 and reduced by the amount of
any dividends, interest or other distributions in connection with
the assets associated with the Covered Transaction that have
accrued to the Custodian under these settlement provisions, any
amount in non-U.S. currency shall be converted into US dollars at
the Custodian's prevailing exchange rate for the currencies
concerned on Value Date;
(d) the values established under Subsection 9.8(b) shall be offset
against the value established under 9.8(c) as of the Value Date;
(e) the amount by which the greater of the amounts calculated
pursuant to Subsection 9.8(b) and (c) exceeds the lower amount so
calculated shall be payable as of Value Date by the party having
the claim valued at the lower amount pursuant to the foregoing.
23
<PAGE> 27
9.9 The Custodian shall not be obliged to transfer any sums credited to the
Fund in accordance with Subsection 9.4 to or to the order or benefit of
the Fund while any amount which is payable to the Custodian under the
terms of Sections 9.5 through 9.8.
9.10 The operation of the set-off provisions in accordance with Subsection
9.6 or 9.7 shall be without prejudice to any other remedies provided
herein or under any applicable law. The Fund agrees that the Custodian
shall have a right of set-off against cash held for the Fund in any
currency for any amount provided to the Fund by the Custodian hereunder
or from time to time arising out of or in connection with this Contract
and/or the operation of any account hereunder and the Custodian shall
have the right to debit the Fund with all or part of such sums and apply
or appropriate the cash in or towards the discharge of such amounts in
such manner and order as the Custodian reasonably sees fit. For the
purposes of this right of set-off, the Custodian may make such currency
conversions or effect any transactions in such currencies at then
prevailing rates as it thinks fit at such times as it reasonably thinks
proper and may effect any transfers between, or entries on, any account
comprised in the Account as the Custodian considers proper.
10. Records.
The Custodian shall create and maintain all records relating to its
activities and obligations under this Contract in such manner as will meet the
obligations of the Trust and each Fund under the 1940 Act, with particular
attention to Section 31 thereof and Rules 31a-1 and 31a-2 and Rule 17f-5
thereunder. All such records shall be the property of the Trust and shall at all
times during the regular business hours of the Custodian be open for inspection
and copying by duly authorized officers, employees or agents of the Trust, the
Trust's independent accountants and employees and agents of the Securities and
Exchange Commission. The Custodian shall (on a daily basis) supply the Fund with
a tabulation of securities owned by the Fund and held by the Custodian. The
Custodian shall make available to the Trust such tabulations of securities owned
by each Fund, in both written and electronic format, each day within the time
and delivery requirements specified by the Trust. The Custodian agrees to keep
confidential all records of the Funds and information relative to each Fund and
its shareholders (past, present and potential), unless the release of such
records or information is otherwise consented to, in writing, by the Trust. The
Trust agrees that such consent shall not be unreasonably withheld. The Trust
further agrees that, should the Custodian be required to provide such
information or records to duly constituted authorities (who may institute civil
or criminal contempt proceedings for failure to comply), the Custodian shall not
be required to seek the Trust's prior written consent before disclosing such
information, but shall instead notify an officer of the Trust and obtain the
officer's oral consent prior to disclosing the information, which consent shall
be timely and not unreasonably withheld.
24
<PAGE> 28
11. Opinion of Trust's Independent Accountant.
The Custodian shall take all reasonable action to assist the Trust in
obtaining from year to year favorable opinions from the Trust's independent
accountants with respect to its activities hereunder in connection with the
preparation of the Trust's Form N-1A, and Form N-SAR and/or other reports to the
Securities and Exchange Commission and with respect to any other requirements of
the Commission. The Custodian shall act as liaison with the Fund's independent
accountants and shall provide them with account analyses, fiscal year summaries,
and other audit-related schedules. The Custodian shall take all reasonable
action in the performance of its obligations under this Contract to assure that
the necessary information is made available to such accountants for the
expression of their opinion, as such may be required by the Trust from time to
time. The Custodian will also provide Fund information to, and act as the
liaison with industry reporting services such as NASDAQ, Morningstar and Lipper
Analytical Services as designated by the Trust from time to time.
12. Compensation of Custodian.
The Custodian shall be entitled to such compensation for its services
and expenses as Custodian as set forth in Exhibit 1 hereto, as amended as agreed
upon from time to time between the Trust and the Custodian.
13. Responsibility of Custodian.
So long as and to the extent that it exercises reasonable care, the
Custodian shall not be responsible to the Trust for the title, validity or
genuineness of any property or evidence of title thereto received by it or
delivered by it pursuant to this Contract and shall be held harmless in acting
upon any notice, request, consent, certificate or other instrument reasonably
believed by it to be genuine and to be signed by the proper party or parties,
including any futures commission merchant acting pursuant to the terms of a
three-party futures or options agreement. The Custodian shall be held to the
exercise of reasonable care in carrying out the provisions of this Contract, but
shall be kept indemnified by and shall be without liability to the Trust for any
action taken or omitted by it in good faith without negligence. It shall be
entitled to rely on and may act upon advice of counsel acceptable to the Trust
(who may be counsel for the Trust) on all matters pertaining to its
responsibilities hereunder, and shall be without liability for any action
reasonably taken or omitted pursuant to such advice.
If any Fund requires the Custodian to take any action with respect to
securities, which action involves the payment of money or which action may, in
the reasonable opinion of the Custodian, result in the Custodian or its nominee
being liable for the payment of money or incurring material liability of some
other form, the Trust, as a prerequisite to requiring the Custodian to take such
action, shall provide indemnity to the Custodian in an amount and form
satisfactory to it.
25
<PAGE> 29
If any Fund requires the Custodian or its affiliates, subsidiaries or
agents, to advance cash or securities for any purpose (including but not limited
to securities settlements, foreign exchange contracts and assumed settlement),
or in the event that the Custodian or its nominee shall incur or be assessed any
taxes, charges, expenses, assessments, claims or liabilities in connection with
the performance of this Contract, except such as may arise from its or its
nominee's own negligent action, negligent failure to act or willful misconduct,
any property at any time held for the account of such Fund shall be security
therefor and should such Fund fail to repay the Custodian promptly, the
Custodian shall be entitled to utilize available cash and to dispose of such
Fund's assets to the extent necessary to obtain reimbursement of the amount owed
by the Fund to the Custodian. The Custodian shall give the Fund prior written
notice of its intention to utilize Fund assets pursuant to this Section 13 and
the Fund shall have the right to pay or to designate to the Custodian the assets
to be utilized; provided, that if the Fund does not do so promptly, the
Custodian shall be entitled to designate the assets to be utilized.
14. Effective Period, Termination and Amendment.
This Contract shall become effective as of its execution, shall continue
in full force and effect until terminated as hereinafter provided, may be
amended at any time by mutual, written agreement of the parties hereto, and may
be terminated by either party by an instrument in writing delivered or mailed,
postage prepaid, to the other party, such termination to take effect on the date
stated therein, which date shall not be sooner than sixty (60) days after the
date of such delivery or mailing; provided, however that (a) the Custodian shall
not act under Section 2.10 hereof in the absence of receipt of an initial
certificate of the Secretary or an Assistant Secretary that the Board of
Trustees of the Trust has approved the initial use of a particular Securities
System as required by Rule 17f-4 under the 1940 Act; and (b) the Custodian shall
not act under Section 2.10A hereof in the absence of receipt of an initial
certificate of the Secretary or an Assistant Secretary that the Board of
Trustees has approved the initial use of the Direct Paper System; and provided
further, however, that the Trust shall not amend or terminate this Contract in
contravention of any applicable federal or state regulations, or any provision
of the Trust's Agreement and Declaration of Trust, and further provided, that
the Trust may at any time by action of its Board of Trustees (i) substitute
another bank or trust company for the Custodian by giving notice as described
above to the Custodian, or (ii) immediately terminate this Contract in the event
of the appointment of a conservator or receiver for the Custodian by the
Comptroller of the Currency or upon the happening of a like event at the
direction of an appropriate regulatory agency or court of competent
jurisdiction.
Upon termination of the Contract, the Fund shall pay to the Custodian
such compensation as may be due as of the date of such termination and shall
likewise reimburse the Custodian for its reasonable and related costs, expenses
and disbursements.
15. Successor Custodian.
If a successor custodian shall be appointed by the Board of Trustees of
the Trust, the Custodian shall, upon termination, deliver to such successor
custodian at the office of the
26
<PAGE> 30
Custodian, duly endorsed and in the form for transfer, all securities then held
by it hereunder and shall transfer to an account of the successor custodian all
of each Fund's securities held in a Securities System, at a Fund Agent or at
Schwab.
If no such successor custodian shall be appointed, the Custodian shall,
in like manner, upon receipt of a certified copy of a vote of the Board of
Trustees of the Trust, deliver at the office of the Custodian and transfer such
securities, funds and other properties in accordance with such vote.
In the event that no written order designating a successor custodian or
certified copy of a vote of the Board of Trustees shall have been delivered to
the Custodian on or before the date when such termination shall become
effective, then the Custodian shall have the right to deliver to a bank or trust
company, which is a "bank" as defined in the 1940 Act, doing business in Boston,
Massachusetts, of its own selection, having an aggregate capital, surplus, and
undivided profits, as shown by its last published report, of not less than
$25,000,000, all securities, funds and other properties held by the Custodian
and all instruments held by the Custodian relative thereto and all other
property held by it under this Contract and to transfer to an account of such
successor custodian all of each Fund's securities held in any Securities System,
at a Fund Agent or at Schwab. Thereafter, such bank or trust company shall be
the successor of the Custodian under this Contract.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Trust to procure the certified copy of the vote referred to or of
the Board of Trustees to appoint a successor custodian, the Custodian shall be
entitled to fair compensation for its services during such period as the
Custodian retains possession of such securities, funds and other properties and
the provisions of this Contract relating to the duties and obligations of the
Custodian shall remain in full force and effect.
16. Interpretive and Additional Provisions.
In connection with the operation of this Contract, the Custodian and the
Trust may from time to time agree on such provisions interpretive of or in
addition to the provisions of this Contract as may in their joint opinion be
consistent with the general tenor of this Contract. Any such interpretive or
additional provisions shall be in a writing signed by both parties and shall be
annexed hereto, provided that no such interpretive or additional provisions
shall contravene any applicable federal or state regulations or any provision of
the Agreement and Declaration of Trust of the Trust. No interpretive or
additional provision made as provided in the preceding sentence shall be deemed
to be an amendment of this Contract.
17. Massachusetts Law to Apply
This Contract shall be construed and the provisions thereof
interpreted under and in accordance with laws of the Commonwealth of
Massachusetts.
27
<PAGE> 31
18. Prior Contracts
This Contract supersedes and terminates, as of the date hereof, all
prior contracts between the Fund and the Custodian relating to the custody of
the Funds' assets.
19. Limitation of Liability
The names "Schwab Capital Trust" and "Trustees of Schwab Capital Trust"
refer respectively to the Trust created and the Trustees, as trustees but not
individually or personally, acting from time to time under the Declaration of
Trust, to which reference is hereby made and a copy of which is on file at the
office of the Secretary of the Commonwealth of Massachusetts and elsewhere as
required by law, and to any and all amendments thereto so filed or hereafter
filed. The obligations of "Schwab Capital Trust" entered into in the name or on
behalf thereof by any of the Trustees, representatives or agents are made not
individually, but in such capacities, and are not binding upon any of the
Trustees, interest holders or representatives of the Trust personally, but bind
only the assets of the Trust, and all persons dealing with any series of units
of interest of the Trust must look solely to the assets of the Trust belonging
to such series for the enforcement of any claims against the Trust.
20. Shareholder Communications Election
Exchange Act Rule 14b-2 requires banks which hold securities for the
account of customers to respond to requests by issuers of securities for the
names, addresses and holdings of beneficial owners of securities of that issuer
held by the bank unless the beneficial owner has expressly objected to
disclosure of this information. In order to comply with the rule, the Custodian
needs the Fund to indicate whether it authorizes the Custodian to provide the
Fund's name, address, and share position to requesting companies whose
securities the Fund owns. If the Fund tells the Custodian "no", the Custodian
will not provide this information to requesting companies. If the Fund tells the
Custodian "yes" or does not check either "yes" or "no" below, the Custodian is
required by the rule to treat the Fund as consenting to disclosure of this
information for all securities owned by the Fund or any funds or accounts
established by the Fund. For the Fund's protection, the Rule prohibits the
requesting company from using the Fund's name and address for any purpose other
than corporate communications. Please indicate below whether the Fund consents
or objects by checking one of the alternatives below.
YES [ ] The Custodian is authorized to release the Fund's name, address, and
share positions.
NO [X] The Custodian is not authorized to release the Fund's name, address, and
share positions.
28
<PAGE> 32
21. Additional Funds
In the event that the Trust establishes one or more series of Shares in
addition to the portfolios listed on Schedule C hereto with respect to which it
desires to have the Custodian render services as custodian under the terms
hereof, it shall so notify the Custodian in writing, and if the Custodian agrees
in writing to provide such services, such series of Shares shall become a Fund
hereunder.
IN WITNESS WHEREOF, each of the parties has caused this instrument
to be executed in its name and behalf by its duly authorized representative and
its seal to be hereunder affixed as of the 1st day of October, 1996.
ATTEST SCHWAB CAPITAL TRUST
/s/ T. M. PERRINO By /s/ TAI-CHIN TUNG
- ------------------------ -------------------------------------
Tai-Chin Tung
Treasurer and Principal Financial Officer
ATTEST STATE STREET BANK AND TRUST COMPANY
/s/ JANICE DUFFY By /s/ RONALD E. LOGUE
- ------------------- -------------------------------------
Ronald E. Logue
Executive Vice President
Charles Schwab & Co., Inc. hereby
acknowledges and agrees to the provisions of the foregoing agreement relating to
Schwab Mutual Fund Shares and Schwab's representations and responsibilities with
respect thereto, including without limitation Sections 2.12 and 8 hereof:
CHARLES SCHWAB & CO., INC.
By: /s/ TAI-CHIN TUNG
__________________________
Title: Vice President
_________________________
29
<PAGE> 33
SCHEDULE A
17F-5 APPROVAL
The Board of Directors/Trustees of Schwab Capital Trust on behalf of the
portfolios listed on Schedule C has approved certain foreign banking
institutions and foreign securities depositories within State Street's Global
Custody Network for use as subcustodians for the Fund's securities, cash and
cash equivalents held outside of the United States. Board approval is as
indicated by the Fund's Authorized Officer:
<TABLE>
<CAPTION>
FUND
OFFICER
INITIALS COUNTRY SUBCUSTODIAN CENTRAL DEPOSITORY
- -------- ------- ------------ ------------------
<S> <C> <C> <C>
______ Argentina Citibank, N.A. Caja de Valores S.A.
TC Australia Westpac Banking Corporation Austraclear Limited;
- ------ Reserve Bank Information and
Transfer System (RITS)
TC Austria GiroCredit Bank Aktiengesellschaft Oesterreichische Kontrollbank AG
- ------ der Sparkassen (Wertpapiersammelbank Division)
______ Bangladesh Standard Chartered Bank None
TC Belgium Generale Bank Caisse Interprofessionnelle de Depots
- ------ et de Virements de Titres S.A. (CIK);
Banque Nationale de Belgique
______ Botswana Barclays Bank of Botswana Limited None
______ Brazil Citibank, N.A. Bolsa de Valores de Sao Paulo (Bovespa);
Banco Central do Brasil,
Systema Especial de Liquidacao e
Custodia (SELIC)
TC Canada Canada Trustco Mortgage Company The Canadian Depository
- ------ for Securities Limited (CDS)
______ Chile Citibank, N.A. None
</TABLE>
<PAGE> 34
SCHEDULE A: 17F-5 APPROVAL
PAGE 2
<TABLE>
<CAPTION>
FUND
OFFICER
INITIALS COUNTRY SUBCUSTODIAN CENTRAL DEPOSITORY
- -------- ------- ------------ ------------------
<S> <C> <C> <C>
______ People's The Hongkong and Shanghai Shanghai Securities Central Clearing and
Republic Banking Corporation Limited, Registration Corporation (SSCCRC);
of China
Shanghai and Shenzhen branches Shenzhen Securities Central Clearing Co., Ltd. (SSCC)
______ Colombia Cititrust Colombia S.A. None
Sociedad Fiduciaria
______ Cyprus Barclays Bank PLC None
Cyprus Offshore Banking Unit
______ Czech Ceskoslovenska Obchodni Stredisko cennych papiru(SCP);
Republic Banka A.S.
Czech National Bank (CNB)
TC Denmark Den Danske Bank Vaerdipapircentralen - The Danish
- ------ Securities Center (VP)
______ Ecuador Citibank, N.A. None
______ Egypt National Bank of Egypt None
TC Finland Merita Bank Limited The Central Share Register of
- ------ Finland
TC France Banque Paribas Societe Interprofessionnelle
- ------ pour la Compensation des
Valeurs Mobilieres (SICOVAM);
Banque de France,
Saturne System
TC Germany Dresdner Bank AG The Deutscher Kassenverein AG
- ------
______ Ghana Barclays Bank of Ghana Limited None
______ Greece National Bank of Greece S.A The Central Securities Depository
(Apothetirion Titlon A.E.)
</TABLE>
<PAGE> 35
SCHEDULE A: 17F-5 APPROVAL
PAGE 3
<TABLE>
<CAPTION>
FUND
OFFICER
INITIALS COUNTRY SUBCUSTODIAN CENTRAL DEPOSITORY
- -------- ------- ------------ ------------------
<S> <C> <C> <C>
TC Hong Kong Standard Chartered Bank The Central Clearing and
- ------ Settlement System (CCASS)
______ Hungary Citibank Budapest Rt. The Central Depository and Clearing
House (Budapest) Ltd. (KELER Ltd.)
______ India Deutsche Bank AG None
______ The Hongkong and Shanghai None
Banking Corporation Limited
TC Indonesia Standard Chartered Bank None
- ------
______ Ireland Bank of Ireland None;
The Central Bank of Ireland,
The Gilt Settlement Office (GSO)
______ Israel Bank Hapoalim B.M. The Clearing House of the
Tel Aviv Stock Exchange
TC Italy Morgan Guaranty Trust Company Monte Titoli S.p.A.;
- ------ (Present Subcustodian)
Banca d'Italia
TC Banque Paribas Monte Titoli S.p.A.;
- ------ (Future Subcustodian) Banca d'Italia
_______ Ivory Coast Societe Generale de Banques None
en Cote d'Ivoire
TC Japan The Daiwa Bank, Limited Japan Securities Depository
- ------ Center (JASDEC);
Bank of Japan Net System
TC The Fuji Bank, Limited Japan Securities Depository
- ------ Center (JASDEC);
Bank of Japan Net System
TC The Sumitomo Trust Japan Securities Depository
- ------ & Banking Co., Ltd. Center (JASDEC);
Bank of Japan Net System
</TABLE>
<PAGE> 36
SCHEDULE A: 17F-5 APPROVAL
PAGE 4
<TABLE>
<CAPTION>
FUND
OFFICER
INITIALS COUNTRY SUBCUSTODIAN CENTRAL DEPOSITORY
- -------- ------- ------------ ------------------
<S> <C> <C> <C>
______ Jordan The British Bank of the Middle East None
______ Kenya Barclays Bank of Kenya Limited None
______ Republic of SEOULBANK Korea Securities Depository (KSD)
Korea
TC Malaysia Standard Chartered Bank Malaysian Central Depository Sdn.
- ------ Malaysia Berhad Bhd. (MCD)
______ Mauritius The Hongkong and Shanghai None
Banking Corporation Limited
______ Mexico Citibank Mexico, S.A. S.D. INDEVAL, S.A. de C.V.
(Instituto para el Deposito de
Valores);
Banco de Mexico
______ Morocco Banque Commerciale du Maroc None
TC Netherlands MeesPierson N.V. Nederlands Centraal Instituut voor
______ Giraal Effectenverkeer B.V. (NECIGEF)
TC New Zealand ANZ Banking Group New Zealand Central Securities
- ------ (New Zealand) Limited Depository Limited (NZCSD)
TC Norway Christiania Bank og Verdipapirsentralen - The Norwegian
- ------ Kreditkasse Registry of Securities (VPS)
______ Pakistan Deutsche Bank AG None
______ Peru Citibank, N.A. Caja de Valores (CAVAL)
TC Philippines Standard Chartered Bank None
- ------
______ Poland Citibank Poland S.A. The National Depository of Securities
(Krajowy Depozyt Papierow
Wartosciowych);
National Bank of Poland
</TABLE>
<PAGE> 37
SCHEDULE A: 17F-5 APPROVAL
PAGE 5
<TABLE>
<CAPTION>
FUND
OFFICER
INITIALS COUNTRY SUBCUSTODIAN CENTRAL DEPOSITORY
- -------- ------- ------------ ------------------
<S> <C> <C> <C>
______ Portugal Banco Comercial Portugues Central de Valores Mobiliarios (Central)
______ Russia Credit Suisse, Zurich None
via Credit Suisse (Moscow) Limited
TC Singapore The Development Bank The Central Depository (Pte)
______ of Singapore Ltd. Limited (CDP)
______ Slovak Ceskoslovenska Obchodna Stredisko Cennych Papierov (SCP);
Republic Banka A.S.
National Bank of Slovakia
______ South Africa Standard Bank of South Africa The Central Depository Limited
Limited
TC Spain Banco Santander, S.A. Servicio de Compensacion y
______ Liquidacion de Valores, S.A. (SCLV);
Banco de Espana,
Anotaciones en Cuenta
______ Sri Lanka The Hongkong and Shanghai Central Depository System
Banking Corporation Limited (Pvt) Limited
______ Swaziland Barclays Bank of Swaziland Limited None
TC Sweden Skandinaviska Enskilda Banken Vardepapperscentralen VPC AB -
______ The Swedish Central Securities
Depository
TC Switzerland Union Bank of Switzerland Schweizerische Effekten - Giro AG
______ (SEGA)
______ Taiwan Central Trust of China The Taiwan Securities Central
- R.O.C. Depository Company, Ltd. (TSCD)
TC Thailand Standard Chartered Bank Thailand Securities Depository
______ Company Limited (TSD)
______ Turkey Citibank, N.A. Takas ve Saklama Bankasi A.S.
(TAKASBANK);
Central Bank of Turkey
</TABLE>
<PAGE> 38
SCHEDULE A: 17F-5 APPROVAL
Page 6
<TABLE>
<CAPTION>
FUND
OFFICER
INITIALS COUNTRY SUBCUSTODIAN CENTRAL DEPOSITORY
- -------- ------- ------------ ------------------
<S> <C> <C> <C>
TC United State Street Bank and Trust Company None;
______ Kingdom The Bank of England,
The Central Gilts Office (CGO);
The Central Moneymarkets Office (CMO)
______ Uruguay Citibank, N.A. None
______ Venezuela Citibank, N.A. None
______ Zambia Barclays Bank of Zambia Limited Lusaka Central Depository (LCD)
______ Zimbabwe Barclays Bank of Zimbabwe Limited None
TC Euroclear (The Euroclear System)/State Street London Limited
______
TC Cedel (Cedel Bank, societe anonyme)/State Street London Limited
______
</TABLE>
CERTIFIED BY:
/s/ TAI-CHIN TUNG 10-1-96
- ----------------------------- ------------------------
FUND'S AUTHORIZED OFFICER DATE
<PAGE> 39
SCHEDULE B
The standard settlement periods for securities transactions in foreign
markets for purposes of Section 9 of the Custodian Contract between Schwab
Capital Trust on behalf of the portfolios listed on Schedule C shall be as
follows:
Country Settlement Period
------- -----------------
(TD = Trade Date)
Australia TD plus 5
Austria Second Monday after TD
Belgium Forward market equities- next
fortnightly settlement period
Cash market securities-
TD plus 3
Canada TD plus 5
Denmark TD plus 3
France Forward market equities-
last business day of month
Cash market securities-
TD plus 5
Germany TD plus 2
Hong Kong TD plus 2
Italy Forward market equities- next two-
week settlement cycle
Cash market equities-
TD plus 3
Japan TD plus 3
Netherlands TD plus 5
New Zealand TD plus 5
Norway TD plus 3
<PAGE> 40
Singapore TD plus 5
Spain Friday of week following TD
Sweden TD plus 3
Switzerland Forward market equities-
Last trading day of month
Cash market securities-
TD plus 3
United Kingdom Next fixed fortnightly
settlement date
Euroclear-Cedel Book-entry entirely within
Euroclear- Cedel-TD plus 5
Cross-border or physical
settlements-applicable
market settlement period
<PAGE> 41
SCHEDULE C
1. Schwab OneSource(R) Portfolios - International
2. Schwab OneSource(R) Portfolios - Growth Allocation
3. Schwab OneSource(R) Portfolios - Balanced Allocation
<PAGE> 42
EXHIBIT 1
---------
STATE STREET BANK AND TRUST COMPANY
Fee Schedule
Schwab OneSource Portfolios - International
Schwab OneSource Portfolios - Growth Allocation
Schwab OneSource Portfolios - Balanced Allocation
----------------------------------------------------------------------------
1. Administration
Custody, Portfolio and Fund Accounting Service - Maintain custody of
fund assets. Settle portfolio purchases and sales. Report buy and sell
fails. Determine and collect portfolio income. Make cash disbursements
and report cash transactions. Maintain investment ledgers, provide
selected portfolio transactions, position and income reports. Maintain
general ledger and capital stock accounts. Prepare daily trials balance.
Calculate net asset value daily. Provide selected general ledger
reports. Market value quotations will be provided via State Street's
Automated Pricing Service.
ANNUAL FEES PER PORTFOLIO
Fees for Direct Investments* Annual fees
---------------------------- -----------
(in basis points)
First $50 Million 3 Basis Points
Next $50 Million 2 Basis Points
Excess over $100 Million 1 Basis Point
Fund of Funds
Annual administration fee for fund purchases $15,000.00
*All asset based administration fees will be waived for three months
from the commencement of operations of the fund.
II. Global Custody (Direct Investments) - Comprised of asset charges and
transaction charges
Asset charges all foreign locations
(in Basis Points)
First $50 Million 7 Basis Points
Over $50 Million 5 Basis Points
Transaction Charges
(all foreign equity and bond trades) $ 28.00
III. Portfolio Trades - For each line item processed
State Street Bank Repos $ 7.00
DTC or Fed Book Entry $ 10.00
New York Physical Settlements $ 20.00
Maturity Collections. $ 8.00
<PAGE> 43
PTC Purchase, Sale, Deposit or Withdrawal $ 20.00
All other trades $ 16.00
Fund of fund trades $ 8.00
IV. Options
Option charge for each option written or
closing contract, per issue per broker $ 25.00
Option expiration charge, per issue,
per broker $ 15.00
Option exercised charge, per issue,
per broker $ 15.00
V. Interest Rate Futures
Transactions - no security movement $ 8.00
VI. Holding Charge
For each issue maintain - monthly charge $ 1.00
VII. Principal Reduction Payments
Per Paydown $ 10.00
VIII. Dividend Charges
(For items held at the request of traders
over record date in street form) $ 50.00
IX. Special Services
Fees for activities of a non-recurring nature such as fund
consolidations or reorganizations, extraordinary security shipments and
the preparation of special reports will be subject to negotiation. Fees
for automated pricing, yield calculation and other special items will be
negotiated separately.
X. Automated Pricing: This service provides daily securities pricing.
Monthly base fee per portfolio $375.00
Monthly Quote Charge (based on the average number of positions in the
portfolio)
- Municipal Bond via Muller Data $ 16.00
- Municipal Bond via Kenny information System $ 16.00
- Government, Corporate and Convertible
Bonds via Merrill Lynch $ 11.00
- Corporate and Government Bonds via
Muller Data $ 11.00
- Options, Futures and Private Placements $ 6.00
- Foreign Equities and Bonds via Extel Ltd $ 6.00
- Listed Equities, DTC Equities and Bonds $ 2.00
<PAGE> 44
- Corporate, Municipal, Convertible and
Government Bonds, Adjustable Rate
Preferred Stocks via IDSI $ 6.00
- Fund of Fund purchases $ 4.00
XI. Balance Credits
A balance credit will be applied against the custody fee above based on
the 90 day T-Bill rate adjusted by the current Federal Reserve
requirements. The rate will be utilized against the average collected
balances in the Custody Demand Deposit Account maintained at State
Street. Excess balance credits will be carried forward from month to
month until December 31st.
XII. Out-of-Pocket Expenses
A billing for the recovery of applicable out-of-pocket expenses will be
made as of the end of each month. Out-of-pocket expenses include, but
are not limited to the following:
Telephone
Wire Charges ($5.25 per wire in and $5.00 out)
Postage and Insurance
Courier Service
Duplicating
Legal Fees
Supplies Related to Fund Records
Rush Transfers - $8.00 each
Transfer Fees
Sub-custodian Charges (Out of Pockets issued by Sub-Custodians)
Price Waterhouse Audit Letter
Federal Reserve Fee for Return Check items over $2,500 - $4.25
GNMA Transfer - $15.00 each
PTC Deposit/Withdrawal for same day turnaround - $50.00
Schwab Capital Trust State Street Bank & Trust Company
Schwab OneSource Portfolios - International;
Schwab OneSource Portfolios - Growth Allocation
Schwab OneSource Portfolios - Balanced Allocation
Signed: /s/ TAI-CHIN TUNG Signed: /s/ NANCY GRADY
--------------------------- -----------------------------
Name: Tai-Chin Tung Name: Nancy Grady
--------------------------- ----------------------------
Title: Treasurer Title: Vice President
--------------------------- ----------------------------
Date: 10-3-96 Date: 9-30-96
--------------------------- ----------------------------
<PAGE> 45
EXHIBIT 2
To: Mutual Fund Client
Re: PRICE SOURCE AUTHORIZATION
Reference is made to the Custodian Agreement dated __________________ between
Schwab Capital Trust on behalf of the portfolios listed on Schedule C thereto
(each a "Fund") and State Street Bank and Trust Company ("State Street").
Pursuant to the Custodian Agreement, the Fund has directed State Street to
calculate the net asset value of the Fund in accordance with the terms of the
Fund's currently effective prospectus.
The Fund hereby authorizes State Street to use the pricing sources specified on
the attached forms(s) as sources for securities' prices in calculating the net
asset value of the Fund. The Fund further agrees that State Street shall have no
liability for the incorrect data provided by the Fund's choice of pricing
sources, except as may arise from State Street's lack of reasonable care in:
- - performing agreed upon tolerance checks as to the data furnished,
- - calculating the net asset value of the Fund in accordance with the data
furnished to State Street, and
- - State Street's performance of the agreed upon tolerance checks.
Kindly acknowledge the Fund's acceptance of the terms of this letter in the
space provided below.
Sincerely,
STATE STREET BANK AND TRUST COMPANY
By:_________________________________________
Vice President
Date:_______________________________________
The foregoing terms are hereby accepted.
SCHWAB CAPITAL TRUST
By: /s/ TAI-CHIN TUNG
________________________________________
Title: Treasurer and Principal Financial
Officer
_____________________________________
Date: October 4, 1996
______________________________________
<PAGE> 46
STATE STREET BANK - MUTUAL FUNDS
PRICE SOURCE AUTHORIZATION
<TABLE>
<S> <C>
FUND: Schwab Capital Trust: Schwab OneSource Portfolios- International; SIGNATURE:
--------------------------------------------------------------------- ------------------------------------------
Growth Allocation; Balanced Allocation
---------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-------- ------ ---- ------ ------- -------- --------- --------- ------ ------- ------- ----------
SECURITY TELEKURS OPTIONS PRICE (3) (2) (1) (1)
TYPE NYSE NASDAQ REPORTING AUTHORITY MANUAL BACK-UP TOLERANCE
AMEX BID MEAN LS/BID LS/MEAN TELEKURS LS BID LS/MEAN QUOTES SOURCE INDEX PERCENTAGE
-------- ------ ---- ------ ------- -------- --------- --------- ------ ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
I. LISTED EQUITIES Bridge S&P 500 5%
-------- ------ ---- ------ ------- -------- --------- --------- ------ ------- ------- ----------
II. OTC EQUITIES OA Bridge S&P 500 5%
-------- ------ ---- ------ ------- -------- --------- --------- ------ ------- ------- ----------
III. FOREIGN
EQUITIES FE,CN Reuters EAFE 5%
-------- ------ ---- ------ ------- -------- --------- --------- ------ ------- ------- ----------
IV. EQUITY OPTIONS
-------- ------ ---- ------ ------- -------- --------- --------- ------ ------- ------- ----------
V. FUTURES N/A
-------- ------ ---- ------ ------- -------- --------- --------- ------ ------- ------- ----------
</TABLE>
INSTRUCTIONS: For each security type, allowed by the Fund prospectus, please
indicate the primary price source and a back-up source to be used in calculating
Net Asset Value for the Fund identified above. Also, please indicate a published
market index and tolerance range (in terms of percent) to be used for
reasonability testing. If you do not wish to use a published index please
indicate N/A but do not leave blank.
(1) * INDEX/TOLERANCE CHECK: The price movement for a particular security is
compared to the index movement. If the security price movement exceeds the index
movement by more than the percentage authorized on this form, then the security
price will be verified using the back-upsource authorized. The index and
tolerance information authorized here will be the basis for this reasonability
test.
(2) BACK-UP SOURCE: The following sources are available for back-up, price
verification and historical price and yield information: Bloomberg, Bridge,
Reuters, and Telerate. Please do not leave blank.
(3) MANUAL QUOTES AND PRIVATE PLACEMENTS: Please specify the source for private
placements or manual quotes as necessary. See page 3 to list additional
information if needed.
<PAGE> 47
WP14104C
Page 2 of 3
STATE STREET BANK - MUTUAL FUNDS
PRICE SOURCE AUTHORIZATION
<TABLE>
<CAPTION>
------- -------- --- ------ --- ----------- --- -----------
SECURITY TYPE MERRILL INTERACTIVE
LYNCH STANDARD MULLER DATA KENNY
CAPITAL & POORS DATA SERVICES INFORMATION
MARKETS MEAN BID MEAN BID MEAN BID SYSTEMS
------- -------- --- ------ --- ----------- --- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
VI. LISTED BONDS
IS LAST SALE
REQUIRED
WHEN
AVAILABLE
YES_____
NO_______
------- -------- --- ------ --- ----------- --- -----------
VII. CORPORATE
BONDS
------- -------- --- ------ --- ----------- --- -----------
VIII. U.S. U2
GOVERNMENT
OBLIGATIONS
------- -------- --- ------ --- ----------- --- -----------
IX. MORTGAGE -
BACKED
SECURITIES
------- -------- --- ------ --- ----------- --- -----------
X. MUNICIPAL
BONDS
------- -------- --- ------ --- ----------- --- -----------
XI. FIXED INCOME
OPTIONS
------- -------- --- ------ --- ----------- --- -----------
XII. FOREIGN BONDS
------- -------- --- ------ --- ----------- --- -----------
</TABLE>
<TABLE>
<CAPTION>
----- ------ --------- -------- ----------
SECURITY TYPE
(3) (2) (1) (1)
IDC/ MANUAL BACK-UP TOLERANCE
EXTEL QUOTES QUOTES INDEX PERCENTAGE
----- ------ --------- -------- ----------
<S> <C> <C> <C> <C> <C>
VI. LISTED BONDS
IS LAST SALE
REQUIRED
WHEN
AVAILABLE
YES_____
NO_______
----- ------ --------- -------- ----------
VII. CORPORATE
BONDS
----- ------ --------- -------- ----------
VIII. U.S. Bloomberg US 3%
GOVERNMENT Treasury
OBLIGATIONS
----- ------ --------- -------- ----------
IX. MORTGAGE -
BACKED
SECURITIES
----- ------ --------- -------- ----------
X. MUNICIPAL
BONDS
----- ------ --------- -------- ----------
XI. FIXED INCOME
OPTIONS
----- ------ --------- -------- ----------
XII. FOREIGN BONDS
----- ------ --------- -------- ----------
</TABLE>
<PAGE> 48
WP1404C/2
Page 3 of 3
STATE STREET BANK - MUTUAL FUNDS
PRICE SOURCE AUTHORIZATION
XIII. Private Placements and Other Manual Quotes Information
- ------------- ------------ ------ ----- ------------------------------
SECURITY TYPE ADVISOR BROKER OTHER ADDITIONAL INFORMATION:
CONTACT NAME, TELEPHONE NUMBER
- ------------- ------------ ------ ----- ------------------------------
FX London Close
- ------------- ------------ ------ ----- ------------------------------
- ------------- ------------ ------ ----- ------------------------------
- ------------- ------------ ------ ----- ------------------------------
- ------------- ------------ ------ ----- ------------------------------
- ------------- ------------ ------ ----- ------------------------------
- ------------- ------------ ------ ----- ------------------------------
- ------------- ------------ ------ ----- ------------------------------
- ------------- ------------ ------ ----- ------------------------------
- ------------- ------------ ------ ----- ------------------------------
- ------------- ------------ ------ ----- ------------------------------
INSTRUCTIONS: For all securities types which require manual quotes, please list
the source of the quotes and any additional information needed to obtain these
quotes.
<PAGE> 1
EXHIBIT 8(h)
AMENDED SCHEDULE A
TO THE TRANSFER AGENCY AGREEMENT
FOR SCHWAB CAPITAL TRUST
<TABLE>
<CAPTION>
Fund Effective Date
- ---- --------------
<S> <C>
Schwab International Index Fund July 21, 1993
Schwab Small-Cap Index Fund October 14, 1993
Schwab Asset Director-High Growth Fund September 25, 1995
Schwab Asset Director-Balanced Growth Fund September 25, 1995
Schwab Asset Director-Conservative Growth Fund September 25, 1995
Schwab S&P 500 Fund-Investor Shares February 28, 1996
Schwab S&P 500 Fund-e.Shares February 28, 1996
Schwab Analytics Fund May 21, 1996
Schwab OneSource Portfolios-International September 2, 1996
Schwab OneSource Portfolios-Growth Allocation October 13, 1996
Schwab OneSource Portfolios-Balanced Allocation October 13, 1996
</TABLE>
SCHWAB CAPITAL TRUST
By: /s/ William J. Klipp
--------------------------------------------
Name: William J. Klipp
Title: Senior Vice President and
Chief Operating Officer
CHARLES SCHWAB & CO., INC.
By: /s/ Colleen M. Hummer
-------------------------------------------
Name: Colleen M. Hummer
Title: Senior Vice President
A-1
<PAGE> 2
AMENDED SCHEDULE C
TO THE TRANSFER AGENCY AGREEMENT
FOR SCHWAB CAPITAL TRUST
FEES
THE FEES LISTED BELOW ARE FOR SERVICES PROVIDED UNDER THIS
AGREEMENT AND ARE TO BE ACCRUED DAILY AND PAID MONTHLY IN
ARREARS:
<TABLE>
<CAPTION>
FUND FEE
- ---- ---
<S> <C>
Schwab International Index Five one-hundredths of one percent (.05%)
Fund of the Fund's average daily net assets
Schwab Small-Cap Index Five one-hundredths of one percent (.05%)
Fund of the Fund's average daily net assets
Schwab Asset Director-High Five one-hundredths of one percent (.05%)
Growth Fund of the Fund's average daily net assets
Schwab Asset Director- Five one-hundredths of one percent (.05%)
Balanced Growth Fund of the Fund's average daily net assets
Schwab Asset Director- Five one-hundredths of one percent (.05%)
Conservative Growth Fund of the Fund's average daily net assets
Schwab S&P 500 Fund- Five one-hundredths of one percent (.05%)
Investor Shares of the Fund's average daily net assets
Schwab S&P 500 Fund- Five one-hundredths of one percent (.05%)
e.Shares of the Fund's average daily net assets
Schwab Analytics Fund Five one-hundredths of one percent (.05%)
of the Fund's average daily net assets.
Schwab OneSource Five one-hundredths of one percent (.05%)
Portfolios-International of the Fund's average daily net assets.
Schwab OneSource Five one-hundredths of one percent (.05%)
Portfolios-Growth of the Fund's average daily net assets.
Allocation
Schwab OneSource Five one-hundredths of one percent (.05%)
Portfolios-Balanced of the Fund's average daily net assets.
Allocation
</TABLE>
SCHWAB CAPITAL TRUST
By: /s/ William J. Klipp
-------------------------------
Name: William J. Klipp
Title: Senior Vice President and
Chief Operating Officer
CHARLES SCHWAB & CO., INC.
By: /s/ Colleen M. Hummer
-------------------------------
Name: Colleen M. Hummer
Title: Senior Vice President
C-1
<PAGE> 1
EXHIBIT 8(j)
AMENDED SCHEDULE A
TO THE SHAREHOLDER SERVICE AGREEMENT
FOR SCHWAB CAPITAL TRUST
<TABLE>
<CAPTION>
Fund Effective Date
- ---- --------------
<S> <C>
Schwab International Index Fund July 21, 1993
Schwab Small-Cap Index Fund October 14, 1993
Schwab Asset Director-High Growth Fund September 25, 1995
Schwab Asset Director-Balanced Growth Fund September 25, 1995
Schwab Asset Director-Conservative Growth Fund September 25, 1995
Schwab S&P 500 Fund - February 28, 1996
Investor Shares
Schwab S&P 500 Fund - February 28, 1996
e.Shares
Schwab Analytics Fund May 21, 1996
Schwab OneSource Portfolios-International September 2, 1996
Schwab OneSource Portfolios-Growth Allocation October 13, 1996
Schwab OneSource Portfolios-Balanced Allocation October 13, 1996
</TABLE>
SCHWAB CAPITAL TRUST
By: /s/ William J. Klipp
---------------------------------------
Name: William J. Klipp
Title: Senior Vice President and
Chief Operating Officer
CHARLES SCHWAB & CO., INC.
By: /s/ Colleen M. Hummer
--------------------------------------
Name: Colleen M. Hummer
Title: Senior Vice President
A-1
<PAGE> 2
AMENDED SCHEDULE C
TO THE SHAREHOLDER SERVICE AGREEMENT
FOR SCHWAB CAPITAL TRUST
THE FEES LISTED BELOW ARE FOR SERVICES PROVIDED UNDER THIS
AGREEMENT AND ARE TO BE ACCRUED DAILY AND PAID MONTHLY IN
ARREARS:
<TABLE>
<CAPTION>
Fund Fee
- ---- ---
<S> <C>
Schwab International Index Twenty one-hundredths of one percent
Fund (.20%) of the Fund's average daily
net assets
Schwab Small-Cap Index Fund Twenty one-hundredths of one percent
(.20%) of the Fund's average daily
net assets
Schwab Asset Director-High Twenty one-hundredths of one percent
Growth Fund (.20%) of the Fund's average daily
net assets
Schwab Asset Director- Twenty one-hundredths of one percent
Balanced Growth Fund (.20%) of the Fund's average daily
net assets
Schwab Asset Director- Twenty one-hundredths of one percent
Conservative Growth Fund (.20%) of the Fund's average daily
net assets
Schwab S&P 500 Fund - Twenty one-hundredths of one percent
Investor Shares (.20%) of the class' average daily
net assets
Schwab S&P 500 Fund - Five one-hundredths of one percent
e.Shares (0.05%) of the class' average daily
net assets
</TABLE>
C-1
<PAGE> 3
<TABLE>
<CAPTION>
Fund Fee
- ---- ---
<S> <C>
Schwab Analytics Fund Twenty one-hundredths of one percent
(.20%) of the Fund's average daily
net assets.
Schwab OneSource Twenty one-hundredths of one percent
Portfolios-International (.20%) of the Fund's average daily
net assets.
Schwab OneSource Twenty one-hundredths of one percent
Portfolios-Growth (.20%) of the Fund's average daily
Allocation net assets.
Schwab OneSource Twenty one-hundredths of one percent
Portfolios-Balanced (.20%) of the Fund's average daily
Allocation net assets.
</TABLE>
SCHWAB CAPITAL TRUST
By: /s/ William J. Klipp
---------------------------------
Name: William J. Klipp
Title: Senior Vice President and
Chief Operating Officer
CHARLES SCHWAB & CO., INC.
By: /s/ Colleen M. Hummer
----------------------------------
Name: Colleen M. Hummer
Title: Senior Vice President
C-2
<PAGE> 1
EXHIBIT 11(a)
CONSENT OF COUNSEL
We hereby consent to the use of our name and to the reference to our
firm under the caption "Legal Counsel" included in or made a part of
Post-Effective Amendment No. 13 to the Registration Statement of Schwab Capital
Trust on Form N-1A (Nos. 33-62470 and 811-07704) under the Securities Act of
1933, as amended.
Ropes & Gray
Washington, D.C.
October 8, 1996
<PAGE> 1
EXHIBIT 11(b)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 13 to the registration
statement on Form N-1A of Schwab Capital Trust (the "Registration Statement") of
our reports dated November 22, 1995, relating to the financial statements and
financial highlights of Schwab International Index Fund and Schwab Small-Cap
Index Fund and the statements of assets and liabilities of Schwab Asset
Director(R)-High Growth Fund, Schwab Asset Director(R) - Balanced Growth Fund,
and Schwab Asset Director(R)-Conservative Growth Fund, which appear in such
Statement of Additional Information, and to the incorporation by reference of
our reports into the Prospectuses for the aforementioned funds, which are
incorporated by reference into this Registration Statement. We also consent to
the reference to us under the heading "Accountants and Reports to Shareholders"
in such Statement of Additional Information and to the reference to us under the
heading "Financial Highlights" in such Prospectuses.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
San Francisco, California
October 7, 1996
<PAGE> 1
EXHIBIT 13(e)
PURCHASE AGREEMENT
Schwab Capital Trust (the "Trust"), a Massachusetts business
trust, and Charles Schwab & Co., Inc. ("Schwab"), a California corporation,
hereby agree on the 22nd day of May, 1996 as follows:
1. The Trust hereby offers and Schwab hereby purchases 100 units of
beneficial interest of Series G representing interest in the Schwab Analytics
Fund, (such 100 units of beneficial interest being hereafter collectively known
as "Shares") at a price of $10.00 per Share. Schwab hereby acknowledges purchase
of the Shares, and the Trust hereby acknowledges receipt from Schwab of funds in
the amount of $1,000 in full payment for the Shares. It is further agreed that
no certificate for the Shares will be issued by the Trust.
2. Schwab represents and warrants to the Trust that the Shares are
being acquired for investment purposes and not with a view to the distribution
thereof.
3. The names "Schwab Capital Trust" and "Trustees of Schwab Capital
Trust" refer, respectively to the Trust created and the Trustees as Trustees but
not individually or personally, acting from time to time under an Agreement and
Declaration of Trust dated as of May 6, 1993, to which reference is hereby made
and a copy of which is on file at the Office of the Secretary of State of the
Commonwealth of Massachusetts and elsewhere as required by law, and to any and
all amendments thereto so filed or hereafter filed. The obligations of "Schwab
Capital Trust" entered into in the name or on behalf thereof by any of the
Trustees, representatives or agents are not made individually, but only in such
capacities, and are not binding upon any of the Trustees, Shareholders or
representatives of the Trust personally, but bind only the assets of the Trust,
and all persons dealing with any series of Shares of the Trust must look solely
to the assets for the Trust belonging to such series for the enforcement of any
claims against the Trust.
-1 of 2-
<PAGE> 2
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed day and year first written above.
Attest: SCHWAB CAPITAL TRUST
/s/ Christina Perrino By: /s/ Stephen B. Ward
- ---------------------
-------------------------------------
Name: Stephen B. Ward
Title: Senior Vice President
and Chief Investment Officer
Attest: CHARLES SCHWAB & CO., INC.
/s/ Christina Perrino By: /s/ William J. Klipp
- ---------------------
-------------------------------------
Name: William J. Klipp
Title: Senior Vice President
-2 of 2-
<PAGE> 1
EXHIBIT 13(f)
PURCHASE AGREEMENT
Schwab Capital Trust (the "Trust"), a Massachusetts business trust, and
Charles Schwab & Co., Inc. ("Schwab"), a California corporation, hereby agree on
September 3rd, 1996 as follows:
1. The Trust hereby offers and Schwab hereby purchases 100 units of
beneficial interest for Series H of the Trust representing interests in the
series of shares known as SCHWAB ONESOURCE PORTFOLIOS-INTERNATIONAL (each such
100 units of beneficial interest being hereafter collectively known as "Shares")
at a price of $10.00 per Share. Schwab hereby acknowledges purchase of the
Shares, and the Trust hereby acknowledges receipt from Schwab of funds in the
amount of $1,000 for the series of the Trust in full payment for the Shares. It
is further agreed that no certificate for the Shares will be issued by the
Trust.
2. Schwab represents and warrants to the Trust that the Shares are
being acquired for investment purposes and not with a view to the distribution
thereof.
3. The names "Schwab Capital Trust" and "Trustees of Schwab Capital
Trust" refer, respectively to the Trust created and the Trustees as Trustees but
not individually or personally, acting from time to time under an Agreement and
Declaration of Trust dated as of May 6, 1993, to which reference is hereby made
and a copy of which is on file at the Office of the Secretary of State of the
Commonwealth of Massachusetts and elsewhere as required by law, and to any and
all amendments thereto so filed or hereafter filed. The obligations of "Schwab
Capital Trust" entered into in the name or on behalf thereof by any of the
Trustees, representatives or agents are not made individually, but only in such
capacities, and are not binding upon any of the Trustees, Shareholders or
representatives of the Trust personally, but bind only the assets of the Trust,
and all persons dealing with any series of Shares of the Trust must look solely
to the assets for the Trust belonging to such series for the enforcement of any
claims against the Trust.
-1 of 2-
<PAGE> 2
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed day and year first written above.
Attest: SCHWAB CAPITAL TRUST
/s/ Heidi Wagner By: /s/ Stephen B. Ward
- ------------------------------ ---------------------------------------
Name: Stephen B. Ward
Title: Senior Vice President
and Chief Investment
Officer
Attest: CHARLES SCHWAB & CO., INC.
/s/ Heidi Wagner By: /s/ William J. Klipp
- ------------------------------ ---------------------------------------
Name: William J. Klipp
Title: Senior Vice President
-2 of 2-
<PAGE> 1
EXHIBIT 13(g)
FORM OF PURCHASE AGREEMENT
Schwab Capital Trust (the "Trust"), a Massachusetts business trust, and
Charles Schwab & Co., Inc. ("Schwab"), a California corporation, hereby agree on
October ___, 1996 as follows:
1. The Trust hereby offers and Schwab hereby purchases 100 units of
beneficial interest for each Series I and J of the trust representing interests
in the series of shares known as SCHWAB ONESOURCE PORTFOLIOS-GROWTH ALLOCATION,
and SCHWAB ONESOURCE PORTFOLIOS-BALANCED ALLOCATION (each such 100 units of
beneficial interest being hereafter collectively known as "Shares") at a price
of $10.00 per Share. Schwab hereby acknowledges purchase of the Shares, and the
Trust hereby acknowledges receipt from Schwab of funds in the amount of $1,000
for each such series of the Trust in full payment for the Shares. It is further
agreed that no certificate for the Shares will be issued by the Trust.
2. Schwab represents and warrants to the Trust that the Shares are
being acquired for investment purposes and not with a view to the distribution
thereof.
3. The names "Schwab Capital Trust" and "Trustees of Schwab Capital
Trust" refer, respectively to the Trust created and the Trustees as Trustees but
not individually or personally, acting from time to time under an Agreement and
Declaration of Trust dated as of May 6, 1993, to which reference is hereby made
and a copy of which is on file at the Office of the Secretary of State of the
Commonwealth of Massachusetts and elsewhere as required by law, and to any and
all amendments thereto so filed or hereafter filed. The obligations of "Schwab
Capital Trust" entered into in the name or on behalf thereof by any of the
Trustees, representatives or agents are not made individually, but only in such
capacities, and are not binding upon any of the Trustees, Shareholders or
representatives of the Trust personally, but bind only the assets of the Trust,
and all persons dealing with any series of Shares of the Trust must look solely
to the assets for the Trust belonging to such series for the enforcement of any
claims against the Trust.
-1 of 2-
<PAGE> 2
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed day and year first written above.
Attest: SCHWAB CAPITAL TRUST
_________________________ By: _____________________________
Name: Stephen B. Ward
Title: Senior Vice President and
Chief Investment Officer
Attest: CHARLES SCHWAB & CO., INC.
_________________________ By: _____________________________
Name: Colleen M. Hummer
Title: Senior Vice President
-2 of 2-
<PAGE> 1
EXHIBIT 16 (f)
SCHWAB S&P 500 FUND - INVESTOR SHARES
TOTAL RETURN
INCEPTION TO DATE ENDING: 5/1/96 TO 08/31/96
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Distribution Reinvest Period Dividends Dividends
Shares Factor NAV End Dollars Shares
====================================================================================================
<S> <C> <C> <C> <C> <C>
NAV - Period Beginning $10.00
====================================================================================================
100.000 0.00000000 $10.00 31-May-96 $0.00 0.000
100.000 0.00000000 $10.00 30-Jun-96 $0.00 0.000
100.000 0.00000000 $10.00 31-Jul-96 $0.00 0.000
100.000 0.00000000 $10.00 31-Aug-96 $0.00 0.000
Period Ending Shares 100.000
====================================================================================================
NAV - Period Ending $10.04
====================================================================================================
Ending Redeemable $1,004.00
Value
TOTAL RETURN 0.40%
- ----------------------------------------------------------------------------------------------------
</TABLE>
SCHWAB S&P 500 FUND - e.SHARES
TOTAL RETURN
INCEPTION TO DATE ENDING: 5/1/96 TO 08/31/96
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Distribution Reinvest Period Dividends Dividends
Shares Factor NAV End Dollars Shares
========================================================================================================
<S> <C> <C> <C> <C> <C>
NAV - Period Beginning $10.00
========================================================================================================
100.000 0.00000000 $10.00 31-May-96 $0.00 0.000
100.000 0.00000000 $10.00 30-Jun-96 $0.00 0.000
100.000 0.00000000 $10.00 31-Jul-96 $0.00 0.000
100.000 0.00000000 $10.00 31-Aug-96 $0.00 0.000
Period Ending Shares 100.000
========================================================================================================
NAV - Period Ending $10.05
========================================================================================================
Ending Redeemable $1,005.00
Value
TOTAL RETURN 0.50%
- --------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 1
[ARTICLE] 6
[SERIES]
[NUMBER] 1
[NAME] SCHWAB INTERNATIONAL INDEX FUND
[MULTIPLIER] 1,000
<TABLE>
<S> <C>
[PERIOD-TYPE] 6-MOS
[FISCAL-YEAR-END] OCT-31-1996
[PERIOD-START] NOV-01-1995
[PERIOD-END] APR-30-1996
[INVESTMENTS-AT-COST] 201662
[INVESTMENTS-AT-VALUE] 235127
[RECEIVABLES] 7231
[ASSETS-OTHER] 716
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 243074
[PAYABLE-FOR-SECURITIES] 3700
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 3190
[TOTAL-LIABILITIES] 6890
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 203460
[SHARES-COMMON-STOCK] 19383
[SHARES-COMMON-PRIOR] 16138
[ACCUMULATED-NII-CURRENT] 1041
[OVERDISTRIBUTION-NII] 991
[ACCUMULATED-NET-GAINS] (1767)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 33450
[NET-ASSETS] 236184
[DIVIDEND-INCOME] 1693
[INTEREST-INCOME] 113
[OTHER-INCOME] 0
[EXPENSES-NET] 708
[NET-INVESTMENT-INCOME] 1098
[REALIZED-GAINS-CURRENT] (1331)
[APPREC-INCREASE-CURRENT] 20951
[NET-CHANGE-FROM-OPS] 20718
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 2089
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 5118
[NUMBER-OF-SHARES-REDEEMED] 2028
[SHARES-REINVESTED] 155
[NET-CHANGE-IN-ASSETS] 56572
[ACCUMULATED-NII-PRIOR] 2051
[ACCUMULATED-GAINS-PRIOR] (402)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 718
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 1218
[AVERAGE-NET-ASSETS] 230633
[PER-SHARE-NAV-BEGIN] 11.13
[PER-SHARE-NII] .18
[PER-SHARE-GAIN-APPREC] 1.01
[PER-SHARE-DIVIDEND] .13
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 12.19
[EXPENSE-RATIO] .69
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
<PAGE> 1
[ARTICLE] 6
[SERIES]
[NUMBER] 2
[NAME] SCHWAB SMALL-CAP INDEX FUND
[MULTIPLIER] 1,000
<TABLE>
<S> <C>
[PERIOD-TYPE] 6-MOS
[FISCAL-YEAR-END] OCT-31-1996
[PERIOD-START] NOV-01-1995
[PERIOD-END] APR-30-1996
[INVESTMENTS-AT-COST] 144842
[INVESTMENTS-AT-VALUE] 183711
[RECEIVABLES] 802
[ASSETS-OTHER] 58
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 184571
[PAYABLE-FOR-SECURITIES] 72
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 185
[TOTAL-LIABILITIES] 257
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 145933
[SHARES-COMMON-STOCK] 13424
[SHARES-COMMON-PRIOR] 10432
[ACCUMULATED-NII-CURRENT] 261
[OVERDISTRIBUTION-NII] 223
[ACCUMULATED-NET-GAINS] (749)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 38869
[NET-ASSETS] 184314
[DIVIDEND-INCOME] 834
[INTEREST-INCOME] 49
[OTHER-INCOME] 0
[EXPENSES-NET] 433
[NET-INVESTMENT-INCOME] 450
[REALIZED-GAINS-CURRENT] (512)
[APPREC-INCREASE-CURRENT] 25243
[NET-CHANGE-FROM-OPS] 25181
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 673
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 4302
[NUMBER-OF-SHARES-REDEEMED] 1359
[SHARES-REINVESTED] 49
[NET-CHANGE-IN-ASSETS] 62240
[ACCUMULATED-NII-PRIOR] 484
[ACCUMULATED-GAINS-PRIOR] (237)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 367
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 702
[AVERAGE-NET-ASSETS] 172868
[PER-SHARE-NAV-BEGIN] 11.70
[PER-SHARE-NII] .06
[PER-SHARE-GAIN-APPREC] 2.03
[PER-SHARE-DIVIDEND] .06
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 13.73
[EXPENSE-RATIO] .59
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
<PAGE> 1
[ARTICLE] 6
[SERIES]
[NUMBER] 3
[NAME] SCHWAB ASSET DIRECTOR-HIGH GROWTH FUND
<TABLE>
<S> <C>
[PERIOD-TYPE] 6-MOS
[FISCAL-YEAR-END] OCT-31-1996
[PERIOD-START] NOV-01-1995
[PERIOD-END] APR-30-1996
[INVESTMENTS-AT-COST] 88790387
[INVESTMENTS-AT-VALUE] 94663982
[RECEIVABLES] 1065983
[ASSETS-OTHER] 111797
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 95841762
[PAYABLE-FOR-SECURITIES] 398586
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 586473
[TOTAL-LIABILITIES] 985059
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 88833832
[SHARES-COMMON-STOCK] 8797524
[SHARES-COMMON-PRIOR] 100
[ACCUMULATED-NII-CURRENT] 493158
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (343611)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 5873324
[NET-ASSETS] 94856703
[DIVIDEND-INCOME] 519839
[INTEREST-INCOME] 450271
[OTHER-INCOME] 0
[EXPENSES-NET] 318550
[NET-INVESTMENT-INCOME] 651560
[REALIZED-GAINS-CURRENT] (343611)
[APPREC-INCREASE-CURRENT] 5873324
[NET-CHANGE-FROM-OPS] 6181273
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 158402
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 9610666
[NUMBER-OF-SHARES-REDEEMED] 828084
[SHARES-REINVESTED] 14842
[NET-CHANGE-IN-ASSETS] 94855703
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 264862
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 590561
[AVERAGE-NET-ASSETS] 92295315
[PER-SHARE-NAV-BEGIN] 10.00
[PER-SHARE-NII] .08
[PER-SHARE-GAIN-APPREC] .72
[PER-SHARE-DIVIDEND] .02
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 10.78
[EXPENSE-RATIO] .89
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
<PAGE> 1
[ARTICLE] 6
[SERIES]
[NUMBER] 4
[NAME] SCHWAB ASSET DIRECTOR-BALANCED GROWTH FUND
<TABLE>
<S> <C>
[PERIOD-TYPE] 6-MOS
[FISCAL-YEAR-END] OCT-31-1996
[PERIOD-START] NOV-01-1995
[PERIOD-END] APR-30-1996
[INVESTMENTS-AT-COST] 66176922
[INVESTMENTS-AT-VALUE] 68924673
[RECEIVABLES] 933839
[ASSETS-OTHER] 78822
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 69937334
[PAYABLE-FOR-SECURITIES] 316281
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 611023
[TOTAL-LIABILITIES] 927304
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 66001669
[SHARES-COMMON-STOCK] 6538196
[SHARES-COMMON-PRIOR] 100
[ACCUMULATED-NII-CURRENT] 503795
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (243173)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 2747739
[NET-ASSETS] 69010030
[DIVIDEND-INCOME] 274650
[INTEREST-INCOME] 607495
[OTHER-INCOME] 0
[EXPENSES-NET] 227475
[NET-INVESTMENT-INCOME] 654670
[REALIZED-GAINS-CURRENT] (243173)
[APPREC-INCREASE-CURRENT] 2747739
[NET-CHANGE-FROM-OPS] 3159236
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 150875
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 7030800
[NUMBER-OF-SHARES-REDEEMED] 506227
[SHARES-REINVESTED] 13523
[NET-CHANGE-IN-ASSETS] 69009030
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 189136
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 451943
[AVERAGE-NET-ASSETS] 66775932
[PER-SHARE-NAV-BEGIN] 10.00
[PER-SHARE-NII] .11
[PER-SHARE-GAIN-APPREC] .47
[PER-SHARE-DIVIDEND] .03
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 10.55
[EXPENSE-RATIO] .89
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
<PAGE> 1
[ARTICLE] 6
[SERIES]
[NUMBER] 5
[NAME] SCHWAB ASSET DIRECTOR-CONSERVATIVE GROWTH FUND
<TABLE>
<S> <C>
[PERIOD-TYPE] 6-MOS
[FISCAL-YEAR-END] OCT-31-1996
[PERIOD-START] NOV-01-1995
[PERIOD-END] APR-30-1996
[INVESTMENTS-AT-COST] 21277457
[INVESTMENTS-AT-VALUE] 21655736
[RECEIVABLES] 250038
[ASSETS-OTHER] 46933
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 21952707
[PAYABLE-FOR-SECURITIES] 978
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 217814
[TOTAL-LIABILITIES] 218792
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 21353222
[SHARES-COMMON-STOCK] 2123836
[SHARES-COMMON-PRIOR] 100
[ACCUMULATED-NII-CURRENT] 73738
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (71076)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 378031
[NET-ASSETS] 21733915
[DIVIDEND-INCOME] 64508
[INTEREST-INCOME] 301956
[OTHER-INCOME] 0
[EXPENSES-NET] 78298
[NET-INVESTMENT-INCOME] 288166
[REALIZED-GAINS-CURRENT] (71076)
[APPREC-INCREASE-CURRENT] 378031
[NET-CHANGE-FROM-OPS] 595121
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 214428
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 2440024
[NUMBER-OF-SHARES-REDEEMED] 335318
[SHARES-REINVESTED] 19030
[NET-CHANGE-IN-ASSETS] 21732915
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 65101
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 217058
[AVERAGE-NET-ASSETS] 22050869
[PER-SHARE-NAV-BEGIN] 10.00
[PER-SHARE-NII] .15
[PER-SHARE-GAIN-APPREC] .19
[PER-SHARE-DIVIDEND] .11
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 10.23
[EXPENSE-RATIO] .89
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
<PAGE> 1
[ARTICLE] 6
[SERIES]
[NUMBER] 6
[NAME] S&P 500 INVESTOR SHARES
[MULTIPLIER] 1000
<TABLE>
<S> <C>
[PERIOD-TYPE] 4-MOS
[FISCAL-YEAR-END] OCT-31-1996
[PERIOD-START] MAY-01-1996
[PERIOD-END] AUG-31-1996
[INVESTMENTS-AT-COST] 211478
[INVESTMENTS-AT-VALUE] 210004
[RECEIVABLES] 505
[ASSETS-OTHER] 82
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 210591
[PAYABLE-FOR-SECURITIES] 1217
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 87
[TOTAL-LIABILITIES] 1304
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 194972
[SHARES-COMMON-STOCK] 19417
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 1151
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (6)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] (1203)
[NET-ASSETS] 194914
[DIVIDEND-INCOME] 1362
[INTEREST-INCOME] 58
[OTHER-INCOME] 0
[EXPENSES-NET] 257
[NET-INVESTMENT-INCOME] 1151
[REALIZED-GAINS-CURRENT] (6)
[APPREC-INCREASE-CURRENT] (1203)
[NET-CHANGE-FROM-OPS] (57)
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 20988
[NUMBER-OF-SHARES-REDEEMED] 1571
[SHARES-REINVESTED] 0
[NET-CHANGE-IN-ASSETS] 194914
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 196
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 479
[AVERAGE-NET-ASSETS] 164123
[PER-SHARE-NAV-BEGIN] 10.00
[PER-SHARE-NII] 0.06
[PER-SHARE-GAIN-APPREC] (0.02)
[PER-SHARE-DIVIDEND] 0.00
[PER-SHARE-DISTRIBUTIONS] 0.00
[RETURNS-OF-CAPITAL] 0.00
[PER-SHARE-NAV-END] 10.04
[EXPENSE-RATIO] 0.49
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0.00
</TABLE>
<PAGE> 1
[ARTICLE] 6
[SERIES]
[NUMBER] 7
[NAME] S&P 500 E.SHARES
[MULTIPLIER] 1000
<TABLE>
<S> <C>
[PERIOD-TYPE] 4-MOS
[FISCAL-YEAR-END] OCT-31-1996
[PERIOD-START] MAY-01-1996
[PERIOD-END] AUG-31-1996
[INVESTMENTS-AT-COST] 211478
[INVESTMENTS-AT-VALUE] 210004
[RECEIVABLES] 505
[ASSETS-OTHER] 82
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 210591
[PAYABLE-FOR-SECURITIES] 1217
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 87
[TOTAL-LIABILITIES] 1304
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 14600
[SHARES-COMMON-STOCK] 1430
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 44
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 0
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] (271)
[NET-ASSETS] 14373
[DIVIDEND-INCOME] 49
[INTEREST-INCOME] 1
[OTHER-INCOME] 0
[EXPENSES-NET] 0
[NET-INVESTMENT-INCOME] 44
[REALIZED-GAINS-CURRENT] 0
[APPREC-INCREASE-CURRENT] (271)
[NET-CHANGE-FROM-OPS] (228)
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 2011
[NUMBER-OF-SHARES-REDEEMED] 581
[SHARES-REINVESTED] 0
[NET-CHANGE-IN-ASSETS] 14373
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 8
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 36
[AVERAGE-NET-ASSETS] 6136
[PER-SHARE-NAV-BEGIN] 10.00
[PER-SHARE-NII] 0.03
[PER-SHARE-GAIN-APPREC] 0.02
[PER-SHARE-DIVIDEND] 0.00
[PER-SHARE-DISTRIBUTIONS] 0.00
[RETURNS-OF-CAPITAL] 0.00
[PER-SHARE-NAV-END] 10.05
[EXPENSE-RATIO] 0.28
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0.00
</TABLE>
<PAGE> 1
[ARTICLE] 6
[SERIES]
[NUMBER] 1
[NAME] SCHWAB INTERNATIONAL INDEX FUND
[MULTIPLIER] 1000
<TABLE>
<S> <C>
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] OCT-31-1995
[PERIOD-START] NOV-01-1994
[PERIOD-END] OCT-31-1995
[INVESTMENTS-AT-COST] 165729
[INVESTMENTS-AT-VALUE] 178207
[RECEIVABLES] 945
[ASSETS-OTHER] 848
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 180000
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 388
[TOTAL-LIABILITIES] 388
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 165464
[SHARES-COMMON-STOCK] 16138
[SHARES-COMMON-PRIOR] 13066
[ACCUMULATED-NII-CURRENT] 2051
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (402)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 12499
[NET-ASSETS] 179612
[DIVIDEND-INCOME] 3386
[INTEREST-INCOME] 161
[OTHER-INCOME] 0
[EXPENSES-NET] 1309
[NET-INVESTMENT-INCOME] 2238
[REALIZED-GAINS-CURRENT] 193
[APPREC-INCREASE-CURRENT] 2557
[NET-CHANGE-FROM-OPS] 4988
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 1532
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 6778
[NUMBER-OF-SHARES-REDEEMED] 3840
[SHARES-REINVESTED] 134
[NET-CHANGE-IN-ASSETS] 37257
[ACCUMULATED-NII-PRIOR] 1306
[ACCUMULATED-GAINS-PRIOR] (580)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 1080
[INTEREST-EXPENSE] 0886
[GROSS-EXPENSE] 1886
[AVERAGE-NET-ASSETS] 180165
[PER-SHARE-NAV-BEGIN] 10.89
[PER-SHARE-NII] 0.14
[PER-SHARE-GAIN-APPREC] 0.22
[PER-SHARE-DIVIDEND] 0.12
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 11.13
[EXPENSE-RATIO] 0.85
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
<PAGE> 1
[ARTICLE] 6
[SERIES]
[NUMBER] 2
[NAME] SCHWAB SMALL-CAP INDEX FUND
[MULTIPLIER] 1000
<TABLE>
<S> <C>
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] OCT-31-1995
[PERIOD-START] NOV-01-1994
[PERIOD-END] OCT-31-1995
[INVESTMENTS-AT-COST] 108606
[INVESTMENTS-AT-VALUE] 122232
[RECEIVABLES] 257
[ASSETS-OTHER] 68
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 122557
[PAYABLE-FOR-SECURITIES] 346
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 137
[TOTAL-LIABILITIES] 483
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 108201
[SHARES-COMMON-STOCK] 10432
[SHARES-COMMON-PRIOR] 6780
[ACCUMULATED-NII-CURRENT] 484
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (237)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 13626
[NET-ASSETS] 122074
[DIVIDEND-INCOME] 1072
[INTEREST-INCOME] 133
[OTHER-INCOME] 0
[EXPENSES-NET] 609
[NET-INVESTMENT-INCOME] 596
[REALIZED-GAINS-CURRENT] 291
[APPREC-INCREASE-CURRENT] 13029
[NET-CHANGE-FROM-OPS] 13916
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 408
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 5910
[NUMBER-OF-SHARES-REDEEMED] 2296
[SHARES-REINVESTED] 38
[NET-CHANGE-IN-ASSETS] 53946
[ACCUMULATED-NII-PRIOR] 296
[ACCUMULATED-GAINS-PRIOR] (528)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 447
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 912
[AVERAGE-NET-ASSETS] 121873
[PER-SHARE-NAV-BEGIN] 10.05
[PER-SHARE-NII] 0.10
[PER-SHARE-GAIN-APPREC] 1.61
[PER-SHARE-DIVIDEND] 0.06
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 11.70
[EXPENSE-RATIO] 0.68
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
<PAGE> 1
[ARTICLE] 6
[SERIES]
[NUMBER] 3
[NAME] SCHWAB ASSET DIRECTOR - HIGH GROWTH FUND
<TABLE>
<S> <C>
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] OCT-31-1995
[PERIOD-START] SEP-25-1995
[PERIOD-END] OCT-31-1995
[INVESTMENTS-AT-COST] 0
[INVESTMENTS-AT-VALUE] 0
[RECEIVABLES] 0
[ASSETS-OTHER] 1000
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 1000
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 0
[TOTAL-LIABILITIES] 0
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 0
[SHARES-COMMON-STOCK] 100
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 0
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 1000
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 0
[OTHER-INCOME] 0
[EXPENSES-NET] 0
[NET-INVESTMENT-INCOME] 0
[REALIZED-GAINS-CURRENT] 0
[APPREC-INCREASE-CURRENT] 0
[NET-CHANGE-FROM-OPS] 0
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 0
[NUMBER-OF-SHARES-REDEEMED] 0
[SHARES-REINVESTED] 0
[NET-CHANGE-IN-ASSETS] 1000
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 0
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 0
[AVERAGE-NET-ASSETS] 1000
[PER-SHARE-NAV-BEGIN] 0
[PER-SHARE-NII] 0
[PER-SHARE-GAIN-APPREC] 0
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 10.00
[EXPENSE-RATIO] 0
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
<PAGE> 1
[ARTICLE] 6
[SERIES]
[NUMBER] 4
[NAME] SCHWAB ASSET DIRECTOR - BALANCED GROWTH FUND
<TABLE>
<S> <C>
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] OCT-31-1995
[PERIOD-START] SEP-25-1995
[PERIOD-END] OCT-31-1995
[INVESTMENTS-AT-COST] 0
[INVESTMENTS-AT-VALUE] 0
[RECEIVABLES] 0
[ASSETS-OTHER] 1000
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 1000
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 0
[TOTAL-LIABILITIES] 0
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 0
[SHARES-COMMON-STOCK] 100
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 0
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 1000
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 0
[OTHER-INCOME] 0
[EXPENSES-NET] 0
[NET-INVESTMENT-INCOME] 0
[REALIZED-GAINS-CURRENT] 0
[APPREC-INCREASE-CURRENT] 0
[NET-CHANGE-FROM-OPS] 0
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 0
[NUMBER-OF-SHARES-REDEEMED] 0
[SHARES-REINVESTED] 0
[NET-CHANGE-IN-ASSETS] 1000
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 0
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 0
[AVERAGE-NET-ASSETS] 1000
[PER-SHARE-NAV-BEGIN] 0
[PER-SHARE-NII] 0
[PER-SHARE-GAIN-APPREC] 0
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 10.00
[EXPENSE-RATIO] 0
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
<PAGE> 1
[ARTICLE] 6
[SERIES]
[NUMBER] 5
[NAME] SCHWAB ASSET DIRECTOR - CONSERVATIVE GROWTH FUND
<TABLE>
<S> <C>
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] OCT-31-1995
[PERIOD-START] SEP-25-1995
[PERIOD-END] OCT-31-1995
[INVESTMENTS-AT-COST] 0
[INVESTMENTS-AT-VALUE] 0
[RECEIVABLES] 0
[ASSETS-OTHER] 1000
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 1000
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 0
[TOTAL-LIABILITIES] 0
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 0
[SHARES-COMMON-STOCK] 100
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 0
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 1000
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 0
[OTHER-INCOME] 0
[EXPENSES-NET] 0
[NET-INVESTMENT-INCOME] 0
[REALIZED-GAINS-CURRENT] 0
[APPREC-INCREASE-CURRENT] 0
[NET-CHANGE-FROM-OPS] 0
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 0
[NUMBER-OF-SHARES-REDEEMED] 0
[SHARES-REINVESTED] 0
[NET-CHANGE-IN-ASSETS] 1000
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 0
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 0
[AVERAGE-NET-ASSETS] 1000
[PER-SHARE-NAV-BEGIN] 0
[PER-SHARE-NII] 0
[PER-SHARE-GAIN-APPREC] 0
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 10.00
[EXPENSE-RATIO] 0
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
