<PAGE> 1
SCHWABFUNDS(R)
SCHWAB
ANALYTICS
FUND(TM)
Semi-Annual Report
April 30, 1997
<PAGE> 2
Dear Shareholder,
[PHOTO OF With the support of investors like you, SchwabFunds(R)
CHARLES continues to be among the largest and fastest-growing mutual
R. SCHWAB] fund complexes in the nation. Charles Schwab Investment
Management, Inc. (CSIM) manages over $47 billion in assets for
more than 2.5 million SchwabFunds shareholders. Today, CSIM
offers investors 30 funds spanning a spectrum of financial
markets and investing styles. You'll find in-depth information
on the performance of your SchwabFunds investment in the following pages.
LONG-TERM INVESTMENT STRATEGIES
When it comes to investing, patience is a virtue. Given the recent market
volatility, it is important to maintain the discipline to adhere to your asset
allocation plan and to ensure you have a diversified investment portfolio. We
created the SchwabFunds Family to offer time-tested strategies for long-term
investing--Indexing, Asset Allocation, Quantitative Models and
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help achieve portfolio diversification. Furthermore, the tax-efficient strategy
employed by our index funds can help you retain more of what your investments
earn.
COMMITMENT TO VALUE
In our ongoing commitment to provide cost-efficient ways for you to invest, we
recently reduced the operating expense ratios and introduced a new class of
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EXPANDING CHANNELS OF COMMUNICATION
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and the effects of those trends on fund performance.
Thank you for placing your trust in SchwabFunds. We will continue to explore new
strategies to help meet your investment needs and to provide you with timely
information on SchwabFunds.
/s/ Charles R. Schwab
Charles R. Schwab
<PAGE> 3
KEEP YOUR
MONEY WORKING
HARDER!
----------------------------
USE THIS ENVELOPE TO EASILY
ADD TO YOUR SCHWAB FUNDS.
CHARLES SCHWAB
<PAGE> 4
WE'VE MADE IT EASIER FOR YOU! TAKE ADVANTAGE OF THIS OPPORTUNITY TO ADD TO YOUR
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Now, you can add to your account by using this convenient Schwab investment
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SCHWAB ACCOUNT NUMBER
Please indicate to which SchwabFund your investment should go:
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<PAGE> 5
CHARLES SCHWAB
JUST FOLLOW THESE EASY STEPS TO INVEST IN YOUR SCHWABFUNDS(R) ACCOUNT:
1. Fill out the Schwab investment coupon completely, including your name,
account number, amount of your check and signature. Please use one coupon
for each account.
2. Make your check payable to CHARLES SCHWAB & CO., INC., and enclose your
check with the completed coupon in this postage-paid envelope.
3. Then just drop your SchwabFunds investment envelope in the mail today -
and start putting your money to work. If you have any questions, don't
hesitate to call 1-800-2 NO-LOAD.
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<PAGE> 6
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<PAGE> 7
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
A WORD FROM SCHWABFUNDS(R) ..................................... 2
FUND PERFORMANCE ............................................... 3
FUND HOLDINGS .................................................. 4
THE PORTFOLIO MANAGEMENT TEAM .................................. 6
MARKET OVERVIEW ................................................ 7
QUESTIONS TO THE PORTFOLIO MANAGEMENT TEAM ..................... 12
FINANCIAL STATEMENTS AND NOTES ................................. 16
</TABLE>
1
<PAGE> 8
A WORD FROM SCHWABFUNDS(R)
We are pleased to provide to you the semi-annual report for the Schwab Analytics
Fund(TM) (the Fund) for the six-month period ended April 30, 1997. The Fund's
investment objective is to achieve long-term capital growth. While the Fund
seeks to maintain broad industry diversification similar to that of the Standard
& Poor's 500(R) Index (the S&P 500 Index), it also uses quantitative techniques
and proprietary software models to select stocks that have superior growth
potential. By doing so, the Fund seeks to outperform the S&P 500 Index over the
long term without significantly increasing risk to the investor.
The Schwab Analytics Fund has experienced steady growth in both assets and
number of shareholders in its first 10 months. Net assets have risen over 55%
from $76 million to approximately $118 million since the Fund's inception on
July 1, 1996. The number of shareholders in the Fund increased from 12,000 to
over 15,000.
We invite you to call our special toll-free line for shareholders at 1-888-9
NO-LOAD (1-888-966-5623), which provides monthly updates on top holdings and
market commentary from the portfolio management team.
NET ASSET VALUE (NAV) IN $
<TABLE>
<S> <C>
10/31/96 11.01
4/30/97 11.87
Change 0.86
</TABLE>
2
<PAGE> 9
FUND PERFORMANCE
The table below compares total returns for various periods ended April 30, 1997
for the Schwab Analytics Fund(TM), the S&P 500(R) Index and the average growth
fund.1 The S&P 500 Index includes 500 large market capitalization stocks as
determined by the Standard & Poor's Index Committee. They are chosen for market
size, liquidity, and industry group representation. The Schwab Analytics Fund
seeks to maintain broad industry diversification similar to that of the S&P 500
Index but strives to outperform the Index over the long term.
TOTAL RETURNS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Cumulative Since
Six-Month Fund Inception (7/1/96)
- --------------------------------------------------------------------------------
<S> <C> <C>
Schwab Analytics Fund 9.73% 20.81%
S&P 500 Index 14.71% 21.53%
Average Growth Fund 1 4.63% 8.44%
</TABLE>
As of March 31, 1997, the six-month and cumulative since fund inception total
returns were 6.28% and 12.87%, respectively, for the Schwab Analytics Fund.
TOTAL RETURN ASSUMES REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAIN
DISTRIBUTIONS, IF ANY. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
PRINCIPAL VALUE AND INVESTMENT RETURNS WILL FLUCTUATE SO THAT AN INVESTOR'S
SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. The
Investment Manager and Schwab waived a portion of their fees during the
reporting period, and have guaranteed that maximum total operating expenses will
not exceed 0.75% through at least 2/28/98. Without fee waivers and guarantees,
for the period ended 4/30/97, the Fund's six-month and cumulative since fund
inception total returns would have been 9.55% and 20.35%, respectively. Without
fee waivers and guarantees, for the period ended 3/31/97, the Fund's six-month
and cumulative since fund inception total returns would have been 6.05% and
12.44%, respectively. Indices are unmanaged and unlike the Fund, do not reflect
the payment of advisory fees and other expenses associated with an investment in
the Fund. Investors cannot invest in an index directly.
1 Source: Morningstar, Inc. Average for 1,041 growth funds for the period from
7/1/96 through 4/30/97.
3
<PAGE> 10
FUND HOLDINGS 2
(AS OF APRIL 30, 1997)
The Schwab Analytics Fund(TM) invests primarily in the common stocks of publicly
traded U.S. companies with market capitalization greater than $500 million.
Following is a list of the Fund's ten largest holdings and a chart showing the
economic sectors in which the Fund is invested.
TOP TEN HOLDINGS AS A
PERCENTAGE OF FUND INVESTMENTS
<TABLE>
<CAPTION>
INVESTMENT %
<S> <C>
General Electric Co. 4.31
Bristol-Myers Squibb Co. 4.17
Intel Corp. 4.06
BellSouth Corp. 3.50
Coca-Cola Co. 2.89
Campbell Soup Co. 2.41
Merck & Co., Inc. 2.35
Compaq Computer Corp. 2.35
Bell Atlantic Corp. 2.33
Microsoft Corp. 2.27
TOTAL 30.64%
</TABLE>
2 This information is not indicative of the Fund's asset mix or holdings after
April 30, 1997. A complete listing of the Fund's portfolio holdings as of April
30, 1997 can be found in the Statement of Net Assets section of this report.
While the Statement of Net Assets presents information as a percentage of the
Fund's net assets, information is shown here as a percentage of the Fund's
investments.
4
<PAGE> 11
SCHWAB ANALYTICS FUND(TM)
ECONOMIC SECTOR DIVERSIFICATION
[PIE CHART]
<TABLE>
<S> <C>
Utilities 8.87%
Capital Goods 6.82%
Consumer Non-Durables 34.76%
Energy 7.79%
Finance 17.12%
Materials & Services 6.84%
Technology 16.61%
Transportation 1.19%
</TABLE>
5
<PAGE> 12
THE PORTFOLIO MANAGEMENT TEAM
STEPHEN B. WARD - Senior Vice President and Chief Investment Officer, has
overall responsibility for the management of the Fund's portfolio. Steve joined
Charles Schwab Investment Management, Inc. (CSIM) as Vice President and
Portfolio Manager in 1991, and was promoted to his current position in 1993.
Prior to joining CSIM, Steve was the Vice President and Portfolio Manager at
Federated Investors.
GERI HOM - Vice President and Senior Portfolio Manager, has primary supervisory
responsibility over day-to-day management of the Fund. She joined CSIM in 1995
and was promoted to her current position in December 1996. She currently manages
approximately $4 billion in assets. Prior to joining CSIM, Geri was a Principal
for Wells Fargo Nikko Investment Advisors and Vice President and Manager of the
Domestic Equity Portfolio Management Group for Wells Fargo Nikko.
PRAVEEN GOTTIPALLI - Portfolio Manager, is Director of Investments for Symphony
Asset Management (Symphony), the Fund's Sub-Adviser. He joined Symphony in May
1994. Prior to that, he was Director of the Active Strategies Group of BARRA,
Inc. Symphony, a wholly owned subsidiary of BARRA, Inc., serves as Sub-Adviser
to the Fund. BARRA, founded in 1975, provides innovative analytical models,
software, and services. Symphony, subject to the supervision of CSIM, provides
investment assistance and day-to-day management of the Fund's non-cash
investments, as well as investment research and statistical information.
The following market overview and answers to questions are provided by the
Portfolio Management Team.
6
<PAGE> 13
MARKET OVERVIEW
REAL GDP GROWTH RATE
[BAR GRAPH]
Real GDP
Real Gross Domestic Product
Chain Weighted
Percent change from preceeding quarter, seasonally adjusted at annual rates
Source: Bloomberg
<TABLE>
<CAPTION>
Real GDP
<S> <C>
Q1 1990 4.1%
Q2 1990 1.3%
Q3 1990 -1.9%
Q4 1990 -4.1%
Q1 1991 -2.2%
Q2 1991 1.7%
Q3 1991 1.0%
Q4 1991 1.0%
Q1 1992 4.7%
Q2 1992 2.5%
Q3 1992 3.0%
Q4 1992 4.3%
Q1 1993 -0.1%
Q2 1993 1.9%
Q3 1993 2.3%
Q4 1993 4.8%
Q1 1994 2.5%
Q2 1994 4.9%
Q3 1994 3.5%
Q4 1994 3.0%
Q1 1995 0.4%
Q2 1995 0.7%
Q3 1995 3.8%
Q4 1995 0.3%
Q1 1996 2.0%
Q2 1996 4.7%
Q3 1996 2.1%
Q4 1996 3.8%
Q1 1997 5.8%
</TABLE>
- - The economy continued to expand at a healthy rate during the reporting
period. The GDP growth rate was 3.2% for the 1996 calendar year and a very
strong 5.8% for the first quarter of 1997 -- the highest level since the
fourth quarter of 1987.
- - These strong growth rates resulted in a focus on the apparent strength of the
economy, its potential impact on future inflation, and the potential for more
restrictive Federal Reserve policy.
- - At the time of this writing, the economy appears to be on track for moderate
growth, continuing the six-year expansion which began in 1991.
7
<PAGE> 14
U.S. UNEMPLOYMENT RATE
[LINE GRAPH]
<TABLE>
<S> <C>
Jan-90 5.3%
Feb-90 5.3%
Mar-90 5.2%
Apr-90 5.4%
May-90 5.3%
Jun-90 5.1%
Jul-90 5.4%
Aug-90 5.6%
Sep-90 5.7%
Oct-90 5.8%
Nov-90 6.0%
Dec-90 6.2%
Jan-91 6.3%
Feb-91 6.5%
Mar-91 6.8%
Apr-91 6.6%
May-91 6.8%
Jun-91 6.8%
Jul-91 6.7%
Aug-91 6.8%
Sep-91 6.8%
Oct-91 6.9%
Nov-91 6.9%
Dec-91 7.1%
Jan-92 7.1%
Feb-92 7.3%
Mar-92 7.3%
Apr-92 7.3%
May-92 7.4%
Jun-92 7.7%
Jul-92 7.6%
Aug-92 7.6%
Sep-92 7.5%
Oct-92 7.4%
Nov-92 7.3%
Dec-92 7.3%
Jan-93 7.1%
Feb-93 7.0%
Mar-93 7.0%
Apr-93 7.0%
May-93 6.9%
Jun-93 6.9%
Jul-93 6.8%
Aug-93 6.7%
Sep-93 6.7%
Oct-93 6.7%
Nov-93 6.5%
Dec-93 6.4%
Jan-94 6.7%
Feb-94 6.6%
Mar-94 6.5%
Apr-94 6.4%
May-94 6.0%
Jun-94 6.0%
Jul-94 6.1%
Aug-94 6.1%
Sep-94 5.9%
Oct-94 5.6%
Nov-94 5.6%
Dec-94 5.4%
Jan-95 5.6%
Feb-95 5.4%
Mar-95 5.8%
Apr-95 5.7%
May-95 5.7%
Jun-95 5.6%
Jul-95 5.7%
Aug-95 5.3%
Sep-95 5.6%
Oct-95 5.5%
Nov-95 5.6%
Dec-95 5.6%
Jan-96 5.8%
Feb-96 5.5%
Mar-96 5.6%
Apr-96 5.4%
May-96 5.6%
Jun-96 5.3%
Jul-96 5.4%
Aug-96 5.1%
Sep-96 5.2%
Oct-96 5.2%
Nov-96 5.3%
Dec-96 5.3%
Jan-97 5.4%
Feb-97 5.3%
Mar-97 5.2%
Apr-97 4.9%
</TABLE>
* Source: Bloomberg
- - The unemployment rate during 1996 remained near its lows for the decade, and
declined further to 4.9% in April 1997, the lowest rate since December 1973.
Many economists have questioned how long such low levels of unemployment can
continue without generating inflationary pressures on wages and, ultimately,
prices.
8
<PAGE> 15
MEASURES OF INFLATION
[BAR GRAPH]
CPI&ECI
Consumer Price Index - All Items YOY % Change
Employment Cost Index SA (includes both wages and salaries and benefits
components) - YOY % Change
Source: Bloomberg L.P.
RED = DATA INPUTS
<TABLE>
<CAPTION>
Data for Graph
----------------------------------
Monthly Quarterly
Consumer Price Employment Cost
Index - YOY % Index - YOY %
Change Change
----------------------------------------
<S> <C> <C>
Jan-90 5.2% 5.3%
Feb-90 5.3% 5.3%
Mar-90 5.2% 5.3%
Apr-90 4.7% 5.4%
May-90 4.4% 5.4%
Jun-90 4.7% 5.4%
Jul-90 4.8% 5.1%
Aug-90 5.6% 5.1%
Sep-90 6.2% 5.1%
Oct-90 6.3% 4.8%
Nov-90 6.3% 4.8%
Dec-90 6.1% 4.8%
Jan-91 5.7% 4.6%
Feb-91 5.3% 4.6%
Mar-91 4.9% 4.6%
Apr-91 4.9% 4.5%
May-91 5.0% 4.5%
Jun-91 4.7% 4.5%
Jul-91 4.4% 4.3%
Aug-91 3.8% 4.3%
Sep-91 3.4% 4.3%
Oct-91 2.9% 4.2%
Nov-91 3.0% 4.2%
Dec-91 3.1% 4.2%
Jan-92 2.6% 4.1%
Feb-92 2.8% 4.1%
Mar-92 3.2% 4.1%
Apr-92 3.2% 3.5%
May-92 3.0% 3.5%
Jun-92 3.1% 3.5%
Jul-92 3.2% 3.4%
Aug-92 3.1% 3.4%
Sep-92 3.0% 3.4%
Oct-92 3.2% 3.5%
Nov-92 3.0% 3.5%
Dec-92 2.9% 3.5%
Jan-93 3.3% 3.4%
Feb-93 3.2% 3.4%
Mar-93 3.1% 3.4%
Apr-93 3.2% 3.6%
May-93 3.2% 3.6%
Jun-93 3.0% 3.6%
Jul-93 2.8% 3.6%
Aug-93 2.8% 3.6%
Sep-93 2.7% 3.6%
Oct-93 2.8% 3.4%
Nov-93 2.7% 3.4%
Dec-93 2.7% 3.4%
Jan-94 2.5% 3.2%
Feb-94 2.5% 3.2%
Mar-94 2.5% 3.2%
Apr-94 2.4% 3.1%
May-94 2.3% 3.1%
Jun-94 2.5% 3.1%
Jul-94 2.8% 3.1%
Aug-94 2.9% 3.1%
Sep-94 3.0% 3.1%
Oct-94 2.6% 3.0%
Nov-94 2.7% 3.0%
Dec-94 2.7% 3.0%
Jan-95 2.8% 3.0%
Feb-95 2.9% 3.0%
Mar-95 2.9% 3.0%
Apr-95 3.1% 3.0%
May-95 3.2% 3.0%
Jun-95 3.0% 3.0%
Jul-95 2.8% 2.8%
Aug-95 2.6% 2.8%
Sep-95 2.5% 2.8%
Oct-95 2.8% 2.8%
Nov-95 2.6% 2.8%
Dec-95 2.5% 2.8%
Jan-96 2.7% 2.9%
Feb-96 2.7% 2.9%
Mar-96 2.8% 2.9%
Apr-96 2.9% 2.9%
May-96 2.9% 2.9%
Jun-96 2.8% 2.9%
Jul-96 3.0% 2.9%
Aug-96 2.9% 2.9%
Sep-96 3.0% 2.9%
Oct-96 3.0% 3.0%
Nov-96 3.3% 3.0%
Dec-96 3.3% 3.0%
Jan-97 3.0% 2.8%
Feb-97 3.0% 2.8%
Mar-97 2.8% 2.8%
Apr-97 2.5%
</TABLE>
- - Both the Employment Cost Index and Consumer Price Index (CPI) remained in
check throughout 1996 as well as the first quarter of 1997, reflecting
continued low levels of inflation.
- - CPI rose 3.3% in 1996, the highest annual rate since 1990. However, the core
rate (which excludes the more volatile food and energy components) rose just
2.6%, the lowest rate since 1965.
- - The Federal Reserve has indicated its belief that the economy remains at risk
to inflation and that it is poised to act preemptively by raising interest
rates if necessary. The Federal Reserve did take action in March, increasing
the Fed Funds Rate by 0.25% to 5.50%.
9
<PAGE> 16
TOTAL RETURN OF A HYPOTHETICAL DOLLAR INVESTED
IN FOUR BROAD MARKET INDICES
[LINE GRAPH]
TOTAL RETURN PERFORMANCE
PLOT POINTS
<TABLE>
<CAPTION>
Growth of a $ Investment
Lehman
MF
Schwab Schwab General
Small Cap Internation US Govt.
S&P 500 Index al Index Index
------- --------- ----------- --------
<S> <C> <C> <C> <C>
$1.000 $1.000 $1.000 $1.000
Nov-96 $1.076 $1.040 $1.046 $1.017
Dec-96 $1.054 $1.059 $1.037 $1.007
Jan-97 $1.120 $1.084 $1.003 $1.008
Feb-97 $1.129 $1.058 $1.019 $1.010
Mar-97 $1.083 $1.006 $1.006 $0.999
Apr-97 $1.147 $1.009 $1.037 $1.013
</TABLE>
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. PRINCIPAL VALUE AND
INVESTMENT RETURNS WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED,
MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. Total return assumes
reinvestment of all dividend and capital gain distributions. Indices are
unmanaged, and unlike funds, do not reflect advisory and other fees associated
with an investment in funds. Investors cannot invest in an index directly.
- - Large-cap domestic stocks, as represented by the S&P 500 Index, were clearly
the strongest performing asset class -- achieving a 14.71% return during the
six-month reporting period.
- - Although positive, domestic small-cap stocks (as represented by the Schwab
Small-Cap Index) and international stocks (as represented by the Schwab
International Index) both lagged the S&P 500 Index significantly, with
six-month returns of 0.92% and 3.74%, respectively.
- - The six-month total return for U.S. Government bonds (as represented by the
Lehman Brothers General U.S. Government Index) was 1.32%.
10
<PAGE> 17
S&P 500(R) PRICE/EARNINGS RATIO
[LINE GRAPH]
S&P 500 P/E Ratio
Source Bloomberg
S&P 500 PRICE EARNINGS RATIO
Jan-90 14.37
Feb-90 14.21
Mar-90 14.77
Apr-90 14.82
May-90 15,84
Jun-90 16.66
Jul-90 16.65
Aug-90 15.57
Sep-90 14.9
Oct-90 14.36
Nov-90 14.59
Dec-90 15.19
Jan-91 14.95
Feb-91 16.82
Mar-91 17.48
Apr-91 17.85
May-91 17.92
Jun-91 17.96
Jul-91 18.07
Aug-91 19.72
Sep-91 19.88
Oct-91 19.92
Nov-91 21.02
Dec-91 21.85
Jan-92 23.35
Feb-92 23.83
Mar-92 25.45
Apr-92 25.51
May-92 25.71
Jun-92 25.08
Jul-92 25.61
Aug-92 25.5
Sep-92 24.37
Oct-92 23.94
Nov-92 24.08
Dec-92 24.01
Jan-93 24.2
Feb-93 24.25
Mar-93 24.22
Apr-93 23.2
May-93 23.21
Jun-93 22.68
Jul-93 22.52
Aug-93 23.02
Sep-93 23.74
Oct-93 23.97
Nov-93 22.55
Dec-93 23.55
Jan-94 22.98
Feb-94 21.17
Mar-94 20.34
Apr-94 20.1
May-94 20.16
Jun-94 19.76
Jul-94 18.64
Aug-94 18.9
Sep-94 18.26
Oct-94 17.55
Nov-94 16.58
Dec-94 16.98
Jan-95 16.23
Feb-95 16.2
Mar-95 16.5
Apr-95 16.02
May-95 16.43
Jun-95 16.82
Jul-95 16.55
Aug-95 16.18
Sep-95 16.86
Oct-95 16.18
Nov-95 17.14
Dec-95 17.41
Jan-96 18.11
Feb-96 18.56
Mar-96 18.94
Apr-96 19.16
May-96 19.48
Jun-96 19.3
Jul-96 18.31
Aug-96 18.62
Sep-96 19.75
Oct-96 19.6
Nov-96 21.05
Dec-96 20.7
Jan-97 20.55
Feb-97 20.98
Mar-97 19.87
Apr-97 20.24
The price/earnings ratio, also known as a multiple, is the price of a stock
divided by its earnings per share and generally indicates how much investors are
willing to pay for a company's earning potential.
- - The price/earnings ratio for the S&P 500 Index was 20 at the close of the
reporting period, well above its 30-year mean of 15, but below its 1991 and
1987 highs of 26 and 22, respectively.
- - Based on other traditional measures such as the price-to-book value ratio or
dividend yield, the U.S. stock market valuation reached historical highs
during the reporting period.
11
<PAGE> 18
QUESTIONS TO THE PORTFOLIO MANAGEMENT TEAM
Q. HOW DID THE PERFORMANCE OF THE SCHWAB ANALYTICS FUND(TM) (THE FUND) COMPARE
TO THAT OF THE S&P 500(R) INDEX?
A. During the six-month period ended April 30, 1997, the Schwab Analytics Fund
achieved a total return of 9.73% versus 14.71% for the S&P 500 Index and 4.63%
for the average growth fund. As shown on the graph at right, the Fund's
cumulative total return since inception on July 1, 1996, was 20.81% versus
21.53% for its benchmark, the S&P 500 Index. The cumulative growth fund average
for the same period was 8.44%. Although there may be deviations, the Fund's
objective is to outperform the Index over the long term.
The Fund's manager attempts to control risk by targeting industry weights and
market sensitivity, or beta, similar to those of its benchmark. The Fund
attempts to achieve returns in excess of its benchmark by finding the most
attractive stocks within each industry. Thus, performance is driven from
specific stock selection within each industry category. Although there were
several elements which contributed to the Fund's underperformance during the
reporting period, specific stock selection and a bias toward mid-cap securities,
with smaller market capitalizations than those found in the S&P 500 Index, were
two of the major contributors. During the six-month reporting period, the S&P
500 Index significantly outperformed the S&P 400 Mid-Cap Index (14.71% vs. 6.87%
return), which includes the next 400 largest capitalization stocks below the S&P
500 Index.
12
<PAGE> 19
COMPARISON OF CHANGE IN VALUE OF A
HYPOTHETICAL $10,000 INVESTMENT IN THE
SCHWAB ANALYTICS FUND(TM) AND THE S&P 500(R) INDEX
[LINE GRAPH]
Schwab Analytics Fund Cumulative
Total Return Through April 30, 1997
-----------------------------------
Since Inception
20.81%
<TABLE>
<CAPTION>
SCHWAB ANALYTICS FUND
HYPOTHETICAL GROWTH CHART
DATE ANALYTICS FUNDS S&P 500
---- --------------- -------
<S> <C> <C>
6/30/96 $10,000 $10,000
7/31/96 $ 9,690 $ 9,558
8/31/96 $ 9,880 $ 9,760
9/30/96 $10,620 $10,309
10/31/96 $11,010 $10,594
11/30/96 $11,640 $11,394
12/31/96 $11,368 $11,169
1/31/97 $11,959 $11,866
2/28/97 $11,908 $11,959
3/31/97 $11,287 $11,469
4/30/97 $12,081 $12,153
</TABLE>
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. PRINCIPAL VALUE AND
INVESTMENT RETURNS WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED,
MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. The performance graph
compares a hypothetical $10,000 investment in the Schwab Analytics Fund, since
inception, with a hypothetical investment in the S&P 500 Index. Total return
assumes reinvestment of all dividends and capital gain distributions, if any.
Indices are unmanaged, and unlike the Fund, do not reflect advisory and other
fees associated with an investment in the Fund. Investors cannot invest in an
index directly. The Investment Manager and Schwab waived a portion of their fees
during the period, and have guaranteed that maximum total operating expenses
will not exceed 0.75% through at least 2/28/98. Without fee waivers and
guarantees, the Fund's total return would have been lower.
13
<PAGE> 20
Q. HOW ARE THE HOLDINGS OF THE SCHWAB ANALYTICS FUND(TM) (THE FUND) DIFFERENT
FROM THE STOCKS IN THE S&P 500(R) INDEX?
A. The Fund's manager monitors approximately 1,300 companies with current market
capitalizations of $500 million or more. This universe of large and medium-sized
companies is then narrowed down to 50 to 100 identified by the model as having
the best return potential based on valuation factors, projections of analysts
whose earnings forecasts have correlated well with actual earnings
announcements, and insider selling activity.
Throughout the reporting period, the Fund held approximately 15-20% of its
holdings in companies outside the S&P 500 Index. As previously mentioned, these
non-index stocks, as a group, had mid-cap or smaller size bias relative to the
S&P 500 Index. With the exception of this differential, there were no
significant differences between the characteristics of the index stocks and the
stocks owned by the fund. By design, the fund is designed not to have
significant industry deviations from the S&P 500 Index.
Q. HOW HAVE RECENT MOVEMENTS IN THE STOCK MARKET AFFECTED THE SCHWAB ANALYTICS
FUND?
A. As can be seen on the previous chart, the Fund's price movements and
volatility characteristics were very similar to those of the S&P 500 Index
during the reporting period. Both the Fund and the S&P 500 Index, and large
capitalization equities in general, experienced significant corrections during
December and March, quickly followed by strong market recoveries that more than
offset the poor performance of the prior months. Since the Fund is managed to be
both industry and beta neutral versus the S&P 500 Index, we anticipate that the
Fund's performance should continue to exhibit volatility characteristics similar
to that of the S&P 500 Index and large capitalization equities in general.
14
<PAGE> 21
Q. OF THOSE STOCKS HELD BY THE FUND AT THE CLOSE OF THE PERIOD, WHICH
EXPERIENCED THE GREATEST APPRECIATION SINCE BEING ACQUIRED BY THE FUND?
A. The five stocks with the greatest appreciation and the percentage they
represented of the portfolio as of the close of the reporting period were: 3
<TABLE>
<CAPTION>
% OF INITIAL
INVESTMENTS ACQUISITION DATE % APPRECIATION
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
UAL Corp. 0.52 8/14/96 59.1
- --------------------------------------------------------------------------------
Student Loan Marketing Assoc. 2.20 6/28/96 57.4
- --------------------------------------------------------------------------------
NationsBank Corp. 0.92 7/8/96 49.7
- --------------------------------------------------------------------------------
Campbell Soup Co. 2.41 6/28/96 47.2
- --------------------------------------------------------------------------------
Bristol-Myers Squibb Co. 4.17 6/28/96 46.7
- --------------------------------------------------------------------------------
</TABLE>
3 This information is not indicative of the Fund's holdings after April 30,
1997. Past performance is no guarantee of future results.
15
<PAGE> 22
SCHWAB ANALYTICS FUND(TM)
- ------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
April 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
COMMON STOCK--98.9%
AEROSPACE/DEFENSE--1.9%
Boeing Co. 10,589 $1,044
General Dynamics Corp. 17,200 1,226
-----
2,270
-----
AIR TRANSPORTATION--0.5%
UAL Corp.+ 8,200 610
-----
ALCOHOLIC BEVERAGES--0.7%
Seagram Co. Ltd. 20,300 776
-----
APPAREL--0.7%
Liz Claiborne, Inc. 14,700 665
Nine West Group, Inc.+ 3,200 127
-----
792
-----
BANKS--7.4%
City National Corp. 29,700 679
J.P. Morgan & Co., Inc. 14,400 1,467
NationsBank Corp. 18,000 1,087
Regions Financial Corp. 7,200 409
Republic New York Corp. 19,800 1,815
Southtrust Corp. 16,600 620
Star Bank Corp. 23,600 1,003
SunTrust Banks, Inc. 33,700 1,710
-----
8,790
-----
BUSINESS MACHINES & SOFTWARE--7.6%
Compaq Computer Corp.+ 32,400 2,765
Compuware Corp.+ 21,400 808
Data General Corp.+ 2,400 45
Dell Computer Corp.+ 11,000 921
Microsoft Corp.+ 22,000 2,673
Quantum Corp.+ 25,000 1,042
Seagate Technology, Inc.+ 12,000 551
Stratus Computer, Inc.+ 4,000 156
-----
8,961
-----
BUSINESS SERVICES--2.2%
Browning-Ferris Industries, Inc. 8,000 227
Cadence Design Systems, Inc.+ 20,000 640
Dun & Bradstreet Corp. 13,200 325
Equifax, Inc. 35,900 1,033
Interpublic Group of Companies, Inc. 6,700 379
-----
2,604
-----
</TABLE>
16
<PAGE> 23
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
CHEMICAL--1.2%
E.I. du Pont de Nemours & Co. 13,600 $ 1,443
------
CONSTRUCTION--0.4%
Sherwin-Williams Co. 17,200 520
------
CONTAINERS--0.4%
Bemis Co., Inc. 11,900 454
------
ELECTRONICS--5.9%
Harris Corp. 20,400 1,744
Intel Corp. 31,200 4,778
Rockwell International Corp. (New) 6,900 459
------
6,981
------
ENERGY-DEVELOPMENT--3.0%
Burlington Resources, Inc. 13,100 555
Cooper Cameron Corp.+ 16,000 1,140
Occidental Petroleum Corp. 79,600 1,761
Union Texas Petroleum Holdings, Inc. 6,200 117
------
3,573
------
FOOD-AGRICULTURE--6.2%
Campbell Soup Co. 55,500 2,837
Coca-Cola Co. 53,500 3,405
Quaker Oats Co. 20,000 800
Universal Corp. 12,400 347
------
7,389
------
GOLD--0.3%
Newmont Mining Corp. 11,100 384
------
HEALTHCARE--10.6%
Becton, Dickinson & Co. 30,000 1,380
Bristol-Myers Squibb Co. 74,800 4,898
Eli Lilly & Co. 13,700 1,204
Johnson & Johnson 37,200 2,279
Merck & Co., Inc. 30,600 2,769
------
12,530
------
HOUSEHOLD PRODUCTS--2.2%
Gillette Co. 31,000 2,635
------
IMAGING & PHOTO--0.4%
Eastman Kodak Co. 5,000 418
------
</TABLE>
17
<PAGE> 24
SCHWAB ANALYTICS FUND(TM)
- ------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
April 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
INSURANCE--4.7%
CIGNA Corp. 15,400 $ 2,316
SunAmerica, Inc. 38,700 1,780
Torchmark Corp. 23,600 1,466
-------
5,562
-------
MEDIA--1.9%
McGraw Hill Companies, Inc. 13,000 661
Media General, Inc. Class A 5,700 168
New York Times Co. Class A 7,000 303
Washington Post Co. 3,200 1,150
-------
2,282
-------
MISCELLANEOUS FINANCE--4.8%
Charter One Financial, Inc. 8,800 392
Federal Home Loan Mortgage Corp. 39,000 1,243
Federal National Mortgage Assoc. 14,200 584
Student Loan Marketing Assoc. 21,900 2,589
T. Rowe Price Associates, Inc.+ 6,000 278
Travelers Group, Inc. 10,500 581
-------
5,667
-------
MOTOR VEHICLE--1.3%
Arvin Industries, Inc. 38,900 1,011
TRW, Inc. 11,100 579
-------
1,590
-------
NON-FERROUS--0.2%
Alcan Aluminum Ltd. 7,300 247
-------
OIL-DOMESTIC--1.5%
Unocal Corp. 46,900 1,788
-------
OIL-INTERNATIONAL--3.2%
Chevron Corp. 7,100 486
Royal Dutch Petroleum Company 4,000 721
Texaco, Inc. 24,200 2,553
-------
3,760
-------
PAPER--0.9%
Mead Corp. 15,300 859
Weyerhaeuser Co. 4,700 215
-------
1,074
-------
PRODUCER GOODS & MANUFACTURING--7.6%
Avery Dennison Corp. 21,400 786
Emerson Electric Co. 46,000 2,335
General Electric Co. 45,700 5,067
Herman Miller, Inc. 6,000 194
</TABLE>
18
<PAGE> 25
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
Johnson Controls, Inc. 6,400 $ 246
Precision Castparts Corp.+ 6,100 326
-------
8,954
-------
RAILROAD--0.7%
Norfolk Southern Corp. 8,700 782
-------
RETAIL--6.1%
American Stores Co. 26,000 1,183
Fred Meyer, Inc.+ 50,300 2,068
Gap, Inc. 55,200 1,760
Kroger Co.+ 23,700 652
Ross Stores, Inc. 30,000 844
Safeway, Inc. 15,600 696
-------
7,203
-------
STEEL--0.3%
USX--U.S. Steel Group 10,500 307
-------
TELEPHONE--6.0%
Bell Atlantic Corp. 40,500 2,744
Bellsouth Corp. 92,500 4,117
WorldCom, Inc. 10,600 254
-------
7,115
-------
TOBACCO--1.6%
American Brands, Inc. 8,500 457
Philip Morris Cos., Inc. 37,200 1,465
-------
1,922
-------
TRAVEL & RECREATION--3.7%
Promus Hotel Corp.+ 51,300 1,808
Walt Disney Co. 31,400 2,575
-------
4,383
-------
UTILITIES--2.8%
Columbia Gas System, Inc. 11,500 712
Edison International 75,000 1,574
Ipalco Enterprises, Inc. 23,700 723
National Fuel Gas Co. 6,100 254
-------
3,263
-------
TOTAL COMMON STOCK
(Cost $101,428) 117,029
-------
</TABLE>
19
<PAGE> 26
SCHWAB ANALYTICS FUND(TM)
- ------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
April 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
CASH EQUIVALENTS--0.5%
Temporary Investment Fund, Inc.--TempCash
Portfolio*
5.24%, 05/07/97 567 $ 567
-------
TOTAL CASH EQUIVALENTS
(Cost $567) 567
-------
TOTAL INVESTMENTS--99.4%
(Cost $101,995) 117,596
-------
OTHER ASSETS AND LIABILITIES--0.6%
Other Assets 1,002
Liabilities (329)
-------
673
-------
NET ASSETS--100.0% (see Note 7)
Applicable to 9,961,329 outstanding $0.00001 par value shares
(unlimited shares authorized) $118,269
=======
NET ASSET VALUE PER SHARE $11.87
=====
</TABLE>
- ---------------
+ Non-Income Producing Security.
* Interest rate represents the yield on report date.
See accompanying Notes to Financial Statements.
20
<PAGE> 27
SCHWAB ANALYTICS FUND(TM)
- ------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS (in thousands)
For the six months ended April 30, 1997 (Unaudited)
<TABLE>
<S> <C>
Investment income:
Dividends $1,048
------
Total investment income 1,048
------
Expenses:
Investment advisory and administration fee 395
Transfer agency and shareholder service fees 136
Custodian fees 32
Registration fees 25
Professional fees 11
Shareholder reports 23
Trustees' fees 3
Amortization of deferred organization costs 2
Insurance and other expenses 3
------
630
Less expenses reduced (see Note 4) (227)
------
Total expenses incurred by Fund 403
------
Net investment income 645
------
Net realized gain on investments sold 844
Net unrealized gain on investments 8,190
------
Net gain on investments 9,034
------
Increase in net assets resulting from operations $9,679
======
</TABLE>
See accompanying Notes to Financial Statements.
21
<PAGE> 28
SCHWAB ANALYTICS FUND(TM)
- ------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS (in thousands)
<TABLE>
<CAPTION>
Six months
ended Period
April 30, 1997 ended
(Unaudited) October 31, 1996+
-------------- -----------------
<S> <C> <C>
Operations:
Net investment income $ 645 $ 418
Net realized gain on investments sold 844 1,141
Net unrealized gain on investments 8,190 7,411
-------- --------
Increase in net assets resulting from operations 9,679 8,970
-------- --------
Dividends to shareholders from net investment income (682) --
Distributions to shareholders from net capital gains (1,141) --
-------- --------
Total dividends to shareholders (1,823) --
-------- --------
Capital share transactions:
Proceeds from shares sold 33,527 99,367
Net asset value of shares issued in reinvestment
of dividends 1,706 --
Less payments for shares redeemed (22,609) (10,548)
-------- --------
Increase in net assets from capital share
transactions 12,624 88,819
-------- --------
Total increase in net assets 20,480 97,789
Net assets:
Beginning of period 97,789 --
-------- --------
End of period (including undistributed net
investment income of $381 and $418,
respectively) $118,269 $ 97,789
======== ========
Number of Fund shares:
Sold 2,905 9,915
Reinvested 150 --
Redeemed (1,975) (1,034)
-------- --------
Net increase in shares outstanding 1,080 8,881
Shares outstanding:
Beginning of period 8,881 --
-------- --------
End of period 9,961 8,881
======== ========
</TABLE>
- ---------------
+ For the period from May 1, 1996 (commencement of operations) to October 31,
1996
See accompanying Notes to Financial Statements.
22
<PAGE> 29
SCHWAB ANALYTICS FUND(TM)
- ------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
Six months ended April 30, 1997 (Unaudited)
1. DESCRIPTION OF THE FUND
The Schwab Analytics Fund(TM) (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(R), Schwab Small-Cap Index Fund(R), Schwab Asset Director(R) -- High Growth
Fund, Schwab Asset Director -- Balanced Growth Fund, Schwab Asset
Director -- Conservative Growth Fund, Schwab S&P 500 Fund, Schwab OneSource
Portfolios -- International, Schwab OneSource Portfolios -- Growth Allocation
and Schwab OneSource Portfolios -- Balanced Allocation. The assets of each
series are segregated and accounted for separately.
2. SIGNIFICANT ACCOUNTING POLICIES
The following significant accounting policies are in conformity with generally
accepted accounting principles for investment companies. The preparation of
financial statements in accordance with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could differ
from those estimates.
Security valuation -- Investments in securities traded on an exchange and
unlisted securities are valued at the last 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. Securities for which no quotations are readily
available are valued at fair value as determined by the Fund's investment
manager pursuant to guidelines adopted in good faith by the Board of Trustees.
Short-term securities with 60 days or less to maturity are stated at amortized
cost, which approximates market value.
Security transactions and investment income -- Security transactions are
accounted for on a trade date basis (date the order to buy or sell is executed).
Realized gains and losses from security transactions are determined on an
identified cost basis. Dividend income and distributions to shareholders are
recorded on the ex-dividend date; interest income is accrued on a daily basis.
23
<PAGE> 30
SCHWAB ANALYTICS FUND(TM)
- ------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Continued)
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 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 generally allocated to
each series in proportion to their relative net assets.
Federal income taxes -- It is the Fund's policy to meet the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all net investment income and realized net capital gains, if any, to
shareholders. Therefore, no federal income tax provision is required. The Fund
is considered a separate entity for tax purposes.
At April 30, 1997 (for financial reporting and federal income tax purposes), net
unrealized gain aggregated $15,601,000 of which $16,507,000 related to
appreciated securities and $906,000 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 0.74% of the first $1 billion
of average daily net assets, 0.69% of the next $1 billion and 0.64% of such
assets over $2 billion. The Investment Manager has reduced a portion of its fee
for the six months ended April 30, 1997 (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
Fund. Symphony does not receive compensation directly from the Fund. However,
the Investment Manager pays Symphony an annual fee, payable monthly based on
0.20% of the Fund's average daily net assets on the first $300 million, 0.15% of
the next $500 million and 0.10% of such net assets over $800 million.
24
<PAGE> 31
- ------------------------------------------------------------------------------
Transfer agency and shareholder service agreements -- The Trust has transfer
agency and shareholder service agreements with Charles Schwab & Co., Inc.
("Schwab"). For services provided under these agreements, Schwab receives an
annual fee, payable monthly, of 0.05% of the average daily net assets for
transfer agency services and 0.20% of such assets for shareholder services.
Schwab has reduced a portion of its fee for the six months ended April 30, 1997
(see Note 4).
Officers and trustees -- Certain officers and trustees of the Trust are also
officers and/or directors of the Investment Manager and/or Schwab. During the
six months ended April 30, 1997, the Trust made no direct payments to its
officers or trustees who are "interested persons" within the meaning of the
Investment Company Act of 1940, as amended. The Fund incurred fees of $3,000
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, 1997, the total of such fees reduced by the Investment
Manager and Schwab were $208,000 and $19,000, respectively (see Note 8).
5. 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. As of April 30, 1997, there were no amounts outstanding under the line of
credit arrangement.
6. INVESTMENT TRANSACTIONS
Purchases and sales of investment securities, other than short-term obligations,
aggregated (in thousands) $72,435 and $60,848, respectively, during the six
months ended April 30, 1997.
25
<PAGE> 32
SCHWAB ANALYTICS FUND(TM)
- ------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
7. COMPOSITION OF NET ASSETS
At April 30, 1997, net assets consisted of (in thousands):
<TABLE>
<S> <C>
Paid-in-capital $101,443
Undistributed net investment income 381
Accumulated net realized gain on investments sold 844
Net unrealized gain on investments 15,601
--------
Total $118,269
========
</TABLE>
At April 30, 1997, the Fund's Statement of Net Assets included: $161,000 payable
for Fund shares redeemed, $12,000 payable for investment advisory and
administration fees, $8,000 payable for transfer agency and shareholder service
fees, $506,000 receivable for securities sold and $280,000 receivable for Fund
shares sold.
26
<PAGE> 33
- ------------------------------------------------------------------------------
8. FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period:
<TABLE>
<CAPTION>
Six months
ended Period
April 30, ended
1997 October 31,
(Unaudited) 1996++
----------- -----------
<S> <C> <C>
Net asset value at beginning of period $ 11.01 $ 10.00
Income from investment operations
- ----------------------------
Net investment income 0.07 0.05
Net realized and unrealized gain on investments 1.00 0.96
-------- -------
Total from investment operations 1.07 1.01
Less distributions
- --------------
Dividends from net investment income (0.08) --
Distributions from realized gain on investments (0.13) --
-------- -------
Total distributions (0.21) --
-------- -------
Net asset value at end of period $ 11.87 $ 11.01
======== =======
Total return (not annualized) 9.73% 10.10%
- ---------
Ratios/Supplemental data
- --------------------
Net assets, end of period (000s) $ 118,269 $97,789
Ratio of expenses to average net assets+ 0.74%* 0.75%*
Ratio of net investment income to average net assets+ 1.19%* 1.41%*
Portfolio turnover rate 56% 33%
Average commission rate $ 0.02 $ 0.03
</TABLE>
- ---------------
+ The information contained in the above table is based on actual expenses for
the period, after giving effect to the portion of expenses reduced and
absorbed by the Investment Manager and Schwab. Had these expenses not been
reduced and absorbed, the Fund's expense and net investment income ratios
would have been:
<TABLE>
<S> <C> <C>
Ratio of expenses to average net assets 1.16%* 1.51%*
Ratio of net investment income to average net assets 0.77%* 0.65%*
</TABLE>
* Annualized
++ For the period from May 1, 1996 (commencement of operations) to October 31,
1996.
27
<PAGE> 34
THIS SPACE RESERVED FOR YOUR COMMENTS AND QUESTIONS.
A SCHWAB REPRESENTATIVE WILL BE HAPPY TO ASSIST YOU.
<PAGE> 35
KEEP YOUR
MONEY WORKING
HARDER!
----------------------------
USE THIS ENVELOPE TO EASILY
ADD TO YOUR SCHWAB FUNDS.
CHARLES SCHWAB
<PAGE> 36
WE'VE MADE IT EASIER FOR YOU! TAKE ADVANTAGE OF THIS OPPORTUNITY TO ADD TO YOUR
SCHWABFUNDS(R) INVESTMENT.
Now, you can add to your account by using this convenient Schwab investment
envelope. It's a simple, easy way to increase your investment. You can also
have money transferred to your fund directly from your bank account or payroll
check using Schwab's free Automatic Investment Plan (AIP). If you'd like more
information on AIP, just check the appropriate box on the coupon. We'll send
you everything you need to get started.
DON'T DELAY. USE THIS CONVENIENT INVESTMENT ENVELOPE AND SEND YOUR CHECK TODAY!
THE AUTOMATIC INVESTMENT PLAN DOES NOT INSURE PROFIT OR PROTECT AGAINST LOSS IN
DECLINING MARKETS.
- --------------------------------------------------------------------------------
PLEASE DETACH HERE
SCHWABFUNDS(R)
INVESTMENT COUPON
- --------------------------------------------------------------------------------
Please enclose your check and this completed investment coupon in the attached
postage-paid envelope.
________________________________________________________________________________
NAME
$_______________________________________________________________________________
AMOUNT OF INVESTMENT
________________________________________________________________________________
SIGNATURE
[ ] Check here if you would like more investment coupons for future use.
[ ] Check here if you would like more information on Schwab's Automatic
Investment Plan (AIP).
__________-__________
SCHWAB ACCOUNT NUMBER
Please indicate to which SchwabFund your investment should go:
[ ] Schwab S&P 500 Fund
[ ] Schwab Small-Cap Index Fund(R)
[ ] Schwab International Index Fund(R)
[ ] Schwab Analytics Fund(TM)
[ ] 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
IF NO FUND IS INDICATED, YOUR INVESTMENT WILL GO INTO THE SWEEP ACCOUNT YOU'VE
DESIGNATED.
*This envelope may not be used for initial investments. Subsequent investment
minimum is $100.
(C) 1997 Charles Schwab & Co., Inc. All rights reserved. Member SIPC/NYSE
Printed on recycled paper. TF4794C(5/97) CRS 20061
(LIFT HERE FOR MORE INFORMATION)
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CHARLES SCHWAB
JUST FOLLOW THESE EASY STEPS TO INVEST IN YOUR SCHWABFUNDS(R) ACCOUNT:
1. Fill out the Schwab investment coupon completely, including your name,
account number, amount of your check and signature. Please use one coupon
for each account.
2. Make your check payable to CHARLES SCHWAB & CO., INC., and enclose your
check with the completed coupon in this postage-paid envelope.
3. Then just drop your SchwabFunds investment envelope in the mail today -
and start putting your money to work. If you have any questions, don't
hesitate to call 1-800-2 NO-LOAD.
This envelope is intended for shareholders who have already received a current
SchwabFunds prospectus.
<PAGE> 38
ATTN: Dept. AIP333-4 NO POSTAGE
NECESSARY IF
MAILED IN THE
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POSTAGE WILL BE PAID BY ADDRESSEE
CHARLES SCHWAB & CO INC
PO BOX 7778
SAN FRANCISCO CA 94120-9419
<PAGE> 39
SCHWABFUNDS FAMILY(R)
The SchwabFunds Family includes a variety of funds to help meet your investment
needs. You can diversify your portfolio in a single step with our asset
allocation funds. Or you can customize your portfolio with a combination of our
stock funds as well as our taxable and tax-advantaged bond and money funds.
SCHWAB ASSET ALLOCATION FUNDS
Schwab Asset Director(R)--High Growth Fund
Schwab Asset Director--Balanced Growth Fund
Schwab Asset Director--Conservative Growth Fund
Schwab OneSource Portfolios--Growth Allocation
Schwab OneSource Portfolios--Balanced Allocation
SCHWAB STOCK FUNDS
Schwab 1000 Fund(R)
Schwab S&P 500 Fund
Schwab Analytics Fund(TM)
Schwab Small-Cap Index Fund(R)
Schwab International Index Fund(R)
Schwab OneSource Portfolios--International
SCHWAB BOND FUNDS
Schwab Government Bond Funds--Long-Term and Short/Intermediate
Schwab Tax-Free Bond Funds--Long-Term and Short/Intermediate
Schwab California Tax-Free Bond Funds--Long-Term and Short/Intermediate
SCHWAB MONEY MARKET FUNDS
Schwab offers an array of money market funds* that seek high current income with
safety and liquidity. Choose from taxable or tax-advantaged alternatives. Many
can be linked to your Schwab account to "sweep" cash balances automatically when
you're between investments. Or, for your larger cash reserves, choose one of our
Value Advantage Investments(R).
Please call 1-800-2 NO-LOAD for a free prospectus and brochure for any of the
SchwabFunds(R).
Each prospectus provides more complete information, including charges and
expenses. Please read it carefully before investing.
This report must be preceded or accompanied by a current prospectus.
* Investments in money market funds are neither insured nor guaranteed by the
U.S. government, and there is no assurance that the funds will be able to
maintain a stable share price of $1.
<PAGE> 40
================
SCHWABFUNDS BULK RATE
FAMILY(R) U.S. POSTAGE
PAID
101 Montgomery Street CHARLES SCHWAB
San Francisco, California 94104 ================
INVESTMENT ADVISOR
Charles Schwab Investment Management, Inc.
101 Montgomery Street, San Francisco, CA 94104
DISTRIBUTOR
Charles Schwab & Co., Inc.
101 Montgomery Street, San Francisco, CA 94104
This report is not authorized for distribution to prospective investors
unless preceded or accompanied by a current prospectus.
(C)1997 Charles Schwab & Co., Inc. All rights reserved.
Member SIPC/NYSE.
TF4732R(5/97) CRS 20064 Printed on recycled paper.
