-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VMPwz11xU3e558BwokxUnzavxGk5ATa9UjIxsyy2EqpavXI1URA5W9Y5UTvuWkTb 1VW5PMoctX5Y+urETy+oBQ== 0000950149-95-000724.txt : 19951118 0000950149-95-000724.hdr.sgml : 19951118 ACCESSION NUMBER: 0000950149-95-000724 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19950831 FILED AS OF DATE: 19951109 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SCHWAB INVESTMENTS CENTRAL INDEX KEY: 0000869365 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: MA FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-06200 FILM NUMBER: 95588482 BUSINESS ADDRESS: STREET 1: 101 MONTGOMERY ST CITY: SAN FRANCISCO STATE: CA ZIP: 94104 BUSINESS PHONE: 4156277000 MAIL ADDRESS: STREET 1: 101 MONTGOMERY ST STREET 2: 101 MONTGOMERY ST CITY: SAN FRANCISCO STATE: CA ZIP: 94104 N-30D 1 SCHWAB 1000 FUND ANNUAL REPORT DATED 8/31/95 1 SCHWABFUNDS(R) [LOGO] SCHWAB 1000 FUND(R) ANNUAL REPORT AUGUST 31, 1995 [Photo of the Schwab Building, San Francisco, California] 2 Dear Fellow Shareholder, This year, the SchwabFunds Family(R) celebrates its fifth [Photo anniversary as a mutual fund complex. This celebration follows an of exciting 1994 when the organization experienced tremendous Charles growth--the third largest asset growth of all mutual fund R. Schwab] companies. By placing your trust in SchwabFunds(R), you've helped total assets under management reach over $29 billion, ranking SchwabFunds in the top 6% of all mutual fund complexes. We believe much of this success can be traced to the Schwab commitment to serve the needs of the Fund shareholders, a commitment demonstrated by the entire SchwabFunds staff and, in particular, by our experienced team of portfolio managers. The 20 professionals that make up our growing portfolio management team are devoted to monitoring the financial markets for you. Through careful and disciplined selection of securities, they strive to construct optimal portfolios that provide shareholders with competitive returns that meet their investment goals. And shareholders continue to signal their trust in the 175 years of combined experience behind our SchwabFunds portfolio management by keeping their money invested in SchwabFunds. In fact, a large number of the 1.5 million shareholders have been investing in the SchwabFunds Family since its first year of operation. We believe an important part of serving your needs is keeping you informed about your investments. For example, last year we added the question and answer section of this report, developed by our portfolio managers to address what they feel were the most pressing questions we've heard from shareholders over the period. It is one way we hope to keep communication open between you and the people managing your investments. During its first five years, the SchwabFunds Family has grown to include a solid selection of funds that meet the "core" needs of investors. The 19 funds available to retail investors, including the new Schwab Asset Director(R) Funds*, offer effective diversification of the U.S. and international equity markets, both taxable and tax-free bonds, and a variety of different money market investments. With this added level of diversification, you may use the SchwabFunds to create an efficient, well-rounded portfolio. Or, they can serve as building blocks to an overall investment program that includes more specialized investments. I invite you to learn more about the SchwabFunds Family. To receive a brochure and prospectus for the SchwabFunds, please call our toll-free number, 1-800-2 NO-LOAD, or visit any one of our more than 200 Schwab offices. A Schwab representative will be happy to provide you with a prospectus that includes more complete information on the Funds, including charges and expenses. Please read it carefully before investing. If you normally invest in SchwabFunds with the help of an investment manager, he or she can give you more information on the other SchwabFunds. I'd like to extend my personal gratitude for your trust in the SchwabFunds Family as it continues to grow. You should feel confident that the outstanding efforts of all those who are part of the SchwabFunds organization will continue going forward. And, we expect these efforts to help us to meet even higher standards of excellence in the years ahead. /s/Charles R. Schwab Charles R. Schwab Chairman * In subscription until November 17, 1995 at an introductory price of $10 per share. After that date, the share price will fluctuate unless subscription period is extended. Cover: The Schwab Building, San Francisco, California 3 COMMENTS FROM THE INVESTMENT ADVISER We are pleased to report to you the performance of the Schwab 1000 Fund(R) for the fiscal year ended August 31, 1995. During this period, the Schwab 1000 Fund continued to provide you with a competitive, convenient and cost-effective way to participate in the long-term growth potential of the U.S. stock market. In addition, the Fund's performance during this period reflected the strong performance of the equity market. The latter half of the Fund's fiscal year saw nearly uninterrupted growth in the stock market, and the Fund's performance reflects this upward momentum. Fueled by strong corporate profits and low inflation, new market highs were set and surpassed during the latter half of the reporting period. On July 17, 1995, the Dow Jones Industrial Average peaked at 4736.29, a record high for this fiscal year. For fiscal year 1995, the Schwab 1000 Fund had a one year total return of 21.23% compared to the average for U.S. stock mutual funds of 19.67% 1. The Fund's indexing approach, which focuses on matching the performance of the U.S. public stock market, is gaining popularity with investors who seek returns that keep pace with today's fast-moving markets. At year end, net assets under management had risen to over $826 million, a 49% increase over the prior year, while the total number of shareholders grew 20% to more than 73,000. FUND PERFORMANCE The Schwab 1000 Fund outperformed the Standard & Poor's 500 Index(R) ("S&P 500") over the 12 months ending August 31, 1995. As the table below indicates, the Fund's cumulative total return has also outperformed the S&P 500 since the Fund's inception of April 2, 1991. The table below compares total returns for various periods for the Schwab 1000 Fund, Schwab 1000 Index(R) and S&P 500. ====================================================================================================== TOTAL RETURN
Cumulative Since Average Annual Six-Months Ended One Year Ended Fund Inception Since Inception August 31, 1995 August 31, 1995 (4/2/91-8/31/95) (4/2/91-8/31/95) - ------------------------------------------------------------------------------------------------------ Schwab 1000 Fund 17.02% 21.23% 69.36% 12.66% - ------------------------------------------------------------------------------------------------------ Schwab 1000 Index 17.31% 21.90% 72.45 - ------------------------------------------------------------------------------------------------------ S&P 500 Index 16.46% 21.07% 67.74% - ------------------------------------------------------------------------------------------------------ Past performance is no guarantee of future results. Principal investment returns and principal value will fluctuate. An investor's shares, when redeemed, may be worth more or less than their original cost. Indices are unmanaged and assume reinvestment of all dividends, but, unlike the Fund, do not reflect the payment of advisory fees and other expenses associated with an investment in the Fund. Fund total return assumes reinvestment of all dividends. ======================================================================================================
1 Source: Morningstar, Inc. Average return of 2123 domestic stock funds for 12 month period ending August 31, 1995. Past performance is no guarantee of future results. Principal investment returns will fluctuate. An investor's shares, when redeemed, may be worth more or less than their original cost. 4 In reviewing the Fund's performance over the 12 month reporting period, we are also proud to report that the Schwab 1000 Fund's(R) share price increased in value by $2.60 to $15.68. This increase in net asset value (NAV) is even more impressive considering that the Fund also paid cash dividends totalling 14 cents per share during the period, which reduced the Fund's NAV accordingly. BROAD EQUITY DIVERSIFICATION The Schwab 1000 Fund seeks to track the price and dividend performance of the U.S. stock market by investing substantially in all the stocks that comprise the Schwab 1000 Index(R). One of the broadest U.S. market indicators available, the Schwab 1000 Index includes a diversified group of stocks which represents about 85% of the total market value of the U.S. public stock market. The Index represents the stocks of the 1,000 largest public operating companies in the U.S., ranked by market capitalization (excluding investment companies). THE SCHWAB 1000 FUND'S BROADLY DIVERSIFIED STOCK PORTFOLIO COVERS A VARIETY OF INDUSTRIES [Pie chart indicating percentages of Schwab 1000 Fund's Stock Portfolio] Capital Goods 4% Consumer Durables 3% Consumer Non-Durables 30% Energy 7% Finance 15% Materials & Services 10% Technology 16% Transportation 2% Utilities 13%
Because the Schwab 1000 Index includes stocks of both large and medium-sized companies, it provides a broader measure of the stock market than the S&P 500, which covers about 70% of the market's value, or the Dow Jones Industrial Average, which covers less than 25%. A complete listing of the Fund's portfolio holdings at fiscal year end is provided in the "Statement of Net Assets" section of this report. TAX-EFFICIENT STRATEGY CAN PRODUCE HIGHER AFTER-TAX RETURNS Taxes can erode the returns you earn from your mutual fund investment. When you are considering a fund's performance, it's important to pay close attention to how fund returns compare on an after-tax basis. Over the past ten years, approximately 24% of the average annual returns for all equity funds has been lost to taxes 2. 2 Source: Morningstar, Inc. This example assumes investors are taxed at the 28% maximum federal capital gains tax rate and the 39.6% federal personal income tax rate. Average performance is measured by ten-year average annual total return on a pre-tax and after-tax basis for U.S. growth and income funds with ten-year performance ending 6/30/95. Past performance does not guarantee future results. 5 THE POWER OF TAX-SMART INVESTING [Chart indicating capital gains of Portfolio A and B] Portfolio A Capital Gains Realized Annually $75,281 Portfolio B Capital Gains Deferred and Shares Sold After 20 Years $88,640
This example is for illustrative purposes only and is not intended to predict or guarantee future performance of the Fund. The chart shows two hypothetical portfolios, each with a $20,000 initial investment and a 10% pre-tax average annual total return. The portfolio in which capital gains are realized annually (Portfolio A) earns 3% income and 7% realized capital gains taxed annually; the portfolio in which capital gains are deferred over 20 years (Portfolio B) earns 3% income taxed annually and 7% capital gains which accumulate unrealized and are taxed at the end of the 20-year period. Compared to Portfolio A, Portfolio B earns an extra $13,359 by deferring its capital gains. Both examples assume income dividends taxed annually at the maximum 39.6% federal personal income tax rate and capital gains taxed at the maximum 28% rate. Of course, tax rates may vary and can be higher or lower than the rates shown. As an index fund, the Schwab 1000 Fund(R) does not actively trade stocks, except to realign portfolio holdings with the Schwab 1000 Index(R) and to adequately handle customer purchases and redemptions. When the Fund's portfolio managers do trade, they attempt to offset capital gains with capital losses to minimize taxable distributions to shareholders. Any unrealized gains accumulate in the Fund, helping to build the value of your shares. This tax-smart strategy helps defer capital gains until you sell your shares. In fact, this strategy has proven to be so successful that the Fund has never paid a capital gain distribution since its inception. Trading less frequently allows the Schwab 1000 Fund to keep portfolio turnover low, which further helps minimize your capital gains tax liability. For fiscal year 1995, the Fund's portfolio turnover was 2%, compared to an average of 61% for U.S. growth and income funds 3. OPERATING EXPENSES LOWERED Generally speaking, the less you pay in fees, the greater the portion of a fund's return you can receive. Since stocks are not actively traded in the Fund, transaction costs are kept to a minimum. In addition, like all funds in the SchwabFunds Family(R), the Schwab 1000 Fund does not charge sales loads or 12b-1 fees, which can diminish your returns over time 4. 3 Source: Morningstar, Inc. Portfolio turnover for 323 U.S. growth and income funds as of 8/31/95. 4 A redemption fee of 0.50% of the proceeds will be charged by the Fund for redemption of shares held less than 6 months. 6 To further enhance your potential returns, effective July 1, 1995, the Schwab 1000 Fund(R) lowered its operating expense ratio from 0.55% to 0.49% -- well below the industry average of 1.25% for U.S. growth & income funds 5. LOOKING FORWARD By most standards, the Fund's 1995 fiscal year has been an excellent period for equity investors, but it's important to remember that stocks are best viewed as a long-term investment. When held over the long-term, stocks have outperformed most other U.S. investments--including corporate bonds, U.S. Treasury bills and certificates of deposit--and have helped investors keep pace with or ahead of inflation and realize capital appreciation 6. Looking forward, we believe the Schwab 1000 Fund will continue to offer you a convenient, cost-effective way to capitalize on the U.S. stock market's long-term growth potential. Thank you for placing your confidence in SchwabFunds(R). We recognize that we earn your trust day-by-day, and we look forward to continuing to help you meet your investment goals. CHARLES SCHWAB INVESTMENT MANAGEMENT, INC. - -------------------------------------------------------------------------------- NEW PORTFOLIO MANAGEMENT TEAM As of June 1, 1995, Charles Schwab Investment Management, Inc. has been responsible for providing all investment advisory services to the Schwab 1000 Fund. Prior to that date, Dimensional Fund Advisors, Inc. served as sub-adviser to the Fund. We believe shareholders will benefit from this change because we are better able to meet your service needs, respond to your inquiries and prepare shareholder communications. We have assembled an experienced and talented portfolio management team whose primary responsibility is managing the SchwabFunds equity portfolios. - -------------------------------------------------------------------------------- 5 Source: Morningstar, Inc. Average operating expenses of 394 U.S. growth and income funds as of 8/31/95. 6 Source: Ibbotson Associates. CORPORATE BONDS GENERALLY OFFER BOTH FIXED RATE OF RETURN AND PRINCIPAL VALUE IF HELD TO MATURITY. THE RETURN AND PRINCIPAL VALUE OF STOCKS FLUCTUATE DUE TO CHANGING INTEREST RATES OR OTHER MARKET CONDITIONS. STOCK PERFORMANCE IS GENERALLY CHARACTERIZED BY GREATER VOLATILITY OVER SHORT-TERM PERIODS. CERTIFICATES OF DEPOSIT OFFER FIXED RATES OF RETURN AND ARE FDIC INSURED. 7 QUESTIONS TO THE PORTFOLIO MANAGEMENT TEAM OF CHARLES SCHWAB INVESTMENT MANAGEMENT, INC. Stephen B. Ward - Senior Vice President and Chief Investment Officer Geri Hom - Portfolio Manager Q. TO WHAT DO YOU ATTRIBUTE THE SCHWAB 1000 FUND'S(R) STRONG PERFORMANCE DURING THE 12-MONTH REPORTING PERIOD? A. During the 12-month reporting period, the U.S. stock market experienced strong gains with all major domestic equity indices achieving new highs during the period. The Fund's performance was further enhanced by the fact that stocks with larger market capitalization, such as those in the Schwab 1000 Index(R), experienced greater returns than smaller capitalized stocks. Even though the Federal Reserve's series of increases in the federal funds rate (from 3.0% in January 1994 to 6.0% in February 1995) was successful at slowing the rate of economic growth during the first and second quarters of 1995, the domestic equities market continued its strong rally. The most significant factor contributing to the strong performance of the U.S. stock market appeared to be the strong growth in corporate earnings. Based on value measures such as the ratio of price to book value and dividend yield, most domestic equity indices experienced record or near record highs during the reporting period. Alternatively, because of the strong growth in corporate earnings, the price/earnings ratio of the S&P 500, at approximately 16 as of August 31, 1995, has experienced a steady decline from its 1992 high of approximately 26. Corporate earnings also benefited from the weak U.S. dollar during the first seven months of 1995. The falling dollar boosted U.S. exports significantly and also bolstered the earnings of U.S. companies with extensive overseas operations. Merger activity in large capitalization issues helped to support the strong stock market. Examples of such mega mergers during the period were Disney's $19 billion offer for Capital Cities/ABC, Westinghouse's $5.4 billion bid for CBS, IBM's $3.3 billion offer for Lotus Development, and Union Pacific's $5.4 billion bid for Southern Pacific. Q. WHAT ACCOUNTS FOR THE DIFFERENCE BETWEEN THE PERFORMANCE OF THE SCHWAB 1000 FUND AND THE SCHWAB 1000 INDEX? A. The Schwab 1000 Index is a theoretical return of a group of stocks representing the 1,000 largest U.S. corporations (excluding investment companies), ranked by market capitalization. Unlike the Fund, the Index does not incur management and other Fund costs which reduces returns to the shareholders. In addition, the Fund, unlike the Index, holds a small portion of its balances in cash to meet shareholder redemptions and pay expenses. The cash portion earns interest at money market rates, which may be more or less than the returns of the Index during a given period. The weighting of any particular security in the Fund can be greater or less than the actual weighting in the Index. Also accounting for the difference in the performance, is the Fund's goal to minimize capital gain distributions. In order to avoid the excessive realization of capital gains, the Fund may continue to hold certain stocks which are no 8 longer in the Index. Depending on the performance of these non-Index stocks, this practice can contribute positive or negative tracking error to the Fund. Combined, these factors cause the difference in the returns of the Fund compared to the Index, a difference referred to as the Fund's "tracking error." Q. HOW DID THE PERFORMANCE OF THE SCHWAB 1000 INDEX(R) COMPARE TO THE S&P 500 INDEX(R) DURING THE REPORTING PERIOD? A. During the period, the total return of the Schwab 1000 Index was 21.90%, outperforming the S&P 500 which returned 21.07% 7. (In addition, since the inception of the Schwab 1000 Fund on April 2, 1991, both the Fund and the Index have outperformed the S&P 500's cumulative total return, as the chart below illustrates.) The S&P 500 includes 500 large market capitalization stocks as determined by the Standard & Poor's Index Committee. Stocks in the S&P 500 are chosen for market size, liquidity, and industry group representation. The Schwab 1000 Index is much broader, including the common stocks of the 1,000 largest operating U.S. corporations (excluding investment companies) ranked by COMPARISON OF CHANGE IN VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN THE SCHWAB 1000 FUND(R), THE SCHWAB 1000 INDEX(R) AND THE STANDARD & POOR'S 500 INDEX(R) [Line graph comparing value of $10,000 investment for the period 4/2/91 to 8/31/95 between the Schwab 1000 Index(R) $17,245, the Schwab 1000 Fund(R) $16,936, and the S&P 500 Index(R) $16,774] Schwab 1000 Fund Average Annual Total Returns Through August 31, 1995 ------------------------------------- One Year Since Inception 21.23% 12.66%
DATE 1000 INDEX SCHWAB 1000 S&P 500 - ---- ---------- ----------- ---------- 04/02/91 $10,000.00 $10,000.00 $10,000.00 April $ 9,898.49 $ 9,910.00 $ 9,907.51 May $10,310.50 $10,320.00 $10,334.91 June $ 9,839.63 $ 9,850.00 $ 9,861.45 July $10,309.65 $10,320.00 $10,321.08 August $10,591.15 $10,600.00 $10,565.60 September $10,454.66 $10,460.00 $10,388.78 October $10,625.27 $10,630.00 $10,528.47 November $10,226.90 $10,240.00 $10,104.23 December $11,411.75 $11,425.00 $11,259.81 January 92 $11,271.86 $11,283.00 $11,049.98 February $11,415.17 $11,425.00 $11,193.09 March $11,162.67 $11,171.00 $10,975.40 April $11,392.14 $11,404.00 $11,297.56 May $11,425.96 $11,404.00 $11,352.94 June $11,256.50 $11,465.00 $11,184.12 July $11,728.23 $11,726.00 $11,641.03 August $11,485.97 $11,480.00 $11,402.78 September $11,646.34 $11,623.00 $11,536.78 October $11,763.20 $11,746.00 $11,576.64 November $12,233.22 $12,208.00 $11,970.82 December $12,427.71 $12,398.00 $12,117.74 January 93 $12,538.60 $12,502.00 $12,219.06 February $12,632.43 $12,595.00 $12,385.60 March $12,948.05 $12,896.00 $12,646.91 April $12,582.96 $12,533.00 $12,341.23 May $12,956.58 $12,896.00 $12,671.37 June $13,023.97 $12,958.00 $12,708.46 July $12,989.00 $12,905.00 $12,657.00 August $13,492.28 $13,397.00 $13,137.60 September $13,453.89 $13,355.00 $13,036.40 October $13,654.35 $13,544.00 $13,306.30 November $13,462.42 $13,355.00 $13,179.49 December $13,700.42 $13,592.00 $13,338.83 January 94 $14,136.31 $14,005.00 $13,800.32 February $13,780.60 $13,645.00 $13,417.88 March $13,168.98 $13,042.00 $12,835.38 April $13,325.94 $13,190.00 $12,999.67 May $13,488.02 $13,349.00 $13,211.57 June $13,127.19 $12,988.00 $12,887.88 July $13,557.96 $13,405.00 $13,310.61 August $14,146.55 $13,971.00 $13,855.00 September $13,824.96 $13,651.00 $13,516.95 October $14,094.52 $13,918.00 $13,819.73 November $13,589.52 $13,416.00 $13,316.69 December $13,766.95 $13,577.00 $13,513.78 January 95 $14,120.96 $13,923.00 $13,863.78 February $14,700.16 $14,474.00 $14,403.09 March $15,094.26 $14,852.00 $14,827.41 April $15,475.56 $15,219.00 $15,263.07 May $16,047.94 $15,770.00 $15,872.72 June $16,489.81 $16,191.00 $16,240.96 July $17,110.81 $16,981.00 $16,778.54 August $17,244.73 $16,936.00 $16,773.51
Past performance is no guarantee of future results. Principal value and investment returns will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. The performance graph compares a hypothetical $10,000 investment in the Schwab 1000 Fund since inception with hypothetical investments in the Schwab 1000 Index and the Standard & Poor's 500 Index. Indices are unmanaged and other expenses associated with an investment of all dividends, but, unlike the Fund, do not reflect the payment of advisory fees and other expenses associated with an investment on the Fund. Fund total return assumes the reinvestment of all dividends. 7 Past performance of the Schwab 1000 Index is not indicative of future performance of the Schwab 1000 Fund. Principal value and investment returns will fluctuate. An investor's shares, when redeemed, may be worth more or less than their original cost. 9 market capitalization. Based on market capitalization, the Schwab 1000 Index(R) represents approximately 85% of the U.S. stock market, while the S&P 500 represents approximately 70%, as of August 31, 1995. Q. WHICH INDUSTRY SECTORS WERE THE BEST PERFORMERS DURING THE PERIOD? A. The technology sector was clearly the strongest performing sector during the period. This sector, which comprised approximately 16% of Fund assets as of August 31, 1995 achieved an overall industry total return of 49.8% 8 during the reporting period. Other sectors with strong performance during the period were consumer non-durables, which represented 30% of Fund assets and achieved an overall industry total return of 19.5% 8, and transportation, which represented 2% of Fund assets and achieved an overall industry total return of 18.9% 8. Q. RECENTLY THERE HAS BEEN A SIGNIFICANT AMOUNT OF PRESS COVERAGE ON INDEX INVESTING. WHAT IS INDEX INVESTING, AND WHAT MAKES IT SUCH AN ATTRACTIVE INVESTMENT STRATEGY? A. Although index investing has broad appeal among institutional investors, it is actually a fairly simple concept. The investment manager's objective is to replicate the performance of an index by either investing in substantially all the securities in the index or by investing in a representative sample of the securities in the index. Index investing is frequently referred to as a "passive" strategy. As contrasted with "active" strategies, a passive strategy does not attempt to "make bets" on particular industry sectors or individual securities which the investment manager believes will out-perform the market. The primary advantages of index investing may include the opportunity to achieve a particular market return, the ability to purchase a diversified portfolio of securities and reduced costs to shareholders by offering lower management fees and lower total operating expenses. When compared to actively managed funds, passively managed funds generally have lower portfolio turnover, lower transaction costs, and they attempt to remain as fully invested as possible. Over time, these strategies may help to enhance shareholders' after-tax returns. In contrast, actively managed funds may periodically maintain varying levels of cash positions in an effort to enhance returns by "timing" market movements as well as to maintain liquidity for future redemptions. Over time, being fully invested with a low cash position level, will generally provide a potential for higher returns. For example, as of July 31, 1995 the Investment Company Institute reported that the average cash equivalent position for all growth and income funds was 6.7%. This is significantly greater than the Schwab 1000 Fund(R) which had a cash equivalent position of 0.6% as of August 31, 1995. 8 Source: Wilshire 5000 Index Total Return as calculated by Wilshire Associates, Inc. These total returns do not represent those of the Schwab 1000 Index or the Schwab 1000 Fund. 10 SchwabFunds(R) 1 - -------------------------------------------------------------------------------- SCHWAB 1000 FUND(R) STATEMENT OF NET ASSETS August 31, 1995 - --------------------------------------------------------------------------------
Number Value of Shares (000s) --------- -------- COMMON STOCK--99.3% 3COM Corp.* 24,800 $ 964 ADC Telecommunications, Inc.* 9,600 370 ADVANTA Corp. Class A 6,100 254 ADVANTA Corp. Class B 4,800 179 AES Corp.* 10,359 193 AFLAC Inc. 14,950 611 AGCO Corp. 3,300 160 ALLTEL Corp. 32,800 927 ALZA Corp.* 11,600 276 AMBAC Inc. 5,300 224 AMP Inc. 33,700 1,369 AMR Corp.* 13,400 945 ARCO Chemical Co. 16,600 801 AST Research, Inc.* 1,124 15 AT&T Capital Corp. 6,900 218 AT&T Corp. 258,117 14,584 Abbott Laboratories 130,300 5,049 Acclaim Entertainment, Inc.* 7,000 178 Adaptec, Inc.* 9,200 391 Adobe Systems Inc. 10,900 555 Adtran, Inc.* 5,600 174 Advanced Micro Devices, Inc. 18,000 608 Aetna Life & Casualty Co. 19,400 1,324 Ahmanson (H.F.) & Co. 17,800 423 Air Products & Chemicals, Inc. 17,200 922 Air Touch Communications* 117,500 3,819 Airgas, Inc.* 4,300 118 Albemarle Corp. 9,400 154 Alberto-Culver Co. Class A 1,500 38 Alberto-Culver Co. Class B (Convertible) 4,500 128 Albertson's, Inc. 42,900 1,367 Alco Standard Corp. 9,500 765 Alexander & Alexander Services Inc. 6,500 150 Alexander & Baldwin, Inc. 6,700 154 Alleghany Corp. 1,040 176 Allegheny Ludlum Corp. 10,000 210 Allegheny Power System, Inc. 21,100 514 Allen Group Inc.* 4,000 131 Allergan, Inc. 9,700 295 Alliance Semiconductor Corp.* 5,700 224 AlliedSignal Inc. 47,300 2,099 Allmerica Property & Casualty Companies, Inc. 8,700 210 Allstate Financial Corp. 119,124 4,035 Altera Corp.* 6,200 388 Alumax Inc.* 6,500 222 Aluminum Co. of America 29,700 1,697 AmSouth Bancorporation 8,200 306 Amdahl Corp.* 16,100 147 Amerada Hess Corp. 16,600 786 America Online, Inc.* 6,800 448 American Brands, Inc. 30,100 1,264 American Electric Power Co., Inc. 30,600 1,044 American Express Co. 81,100 3,274 American Financial Group, Inc. 6,900 213 American General Corp. 34,600 1,220 American Greetings Corp. Class A 11,700 361 American Home Products Corp. 50,600 3,896 American International Group, Inc. 77,325 6,234 American National Insurance Co. 3,900 224 American Power Conversion Corp.* 14,000 235 American Re Corp. 6,800 272 American Stores Co. 27,700 814 American Water Works Co., Inc. 4,800 143 Ameritech Corp. 89,800 4,602 Amgen Inc.* 42,600 2,042 Amoco Corp. 81,000 5,164 Amphenol Corp. Class A* 6,500 159 Anadarko Petroleum Corp. 8,500 406 Analog Devices, Inc.* 11,200 388 Andrew Corp.* 5,750 337 Anheuser-Busch Companies, Inc. 42,200 2,411 Anixter International, Inc.* 4,300 162 Aon Corp. 17,350 677 Apache Corp. 10,500 306 Apple Computer, Inc. 19,700 848 Applied Materials, Inc.* 14,500 1,512 Archer-Daniels-Midland Co. 85,361 1,419 Argonaut Group, Inc. 3,200 97 Armstrong World Industries, Inc. 5,600 321 Arrow Electronics, Inc. 9,000 488 Arrow International, Inc. 3,100 126 Arvin Industries, Inc. 1,300 28 Asarco Inc. 5,800 188 Ascend Communications, Inc.* 3,600 232 Ashland, Inc. 11,100 364 Associated Group Inc. Class B* 1,200 25 Atlanta Gas Light Co. 3,800 140 Atlantic Energy, Inc. 7,800 148 Atlantic Richfield Co. 26,100 2,848 Atlantic Southeast Airlines, Inc. 5,000 124 Atmel Corp.* 19,200 606 AutoZone, Inc.* 25,500 685 Autodesk, Inc. 7,200 333 Automatic Data Processing, Inc. 23,500 1,528 Avery Dennison Corp. 7,900 324 Avnet, Inc. 6,100 314 Avon Products, Inc. 10,400 735 BFGoodrich Co. 3,900 232 BHC Communications, Inc. Class A 3,700 336 BIC Corp. 3,700 147 BMC Software, Inc.* 7,600 323 Baby Superstore, Inc.* 2,900 136 Baker Hughes Inc. 21,200 477 Ball Corp. 4,400 150 Baltimore Gas & Electric Co. 25,650 673 Banc One Corp. 65,110 2,189 Bancorp Hawaii, Inc. 6,175 207 Bandag, Inc. 4,000 238 Bandag, Inc. Class A 1,800 99 Bank South Corp. 7,500 171 Bank of Boston Corp. 17,100 752 Bank of New York Co., Inc. 31,600 1,375 BankAmerica Corp. 61,395 3,469
See accompanying Notes to Financial Statements. 11 SchwabFunds(R) 2 - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Number Value of Shares (000s) --------- -------- Bankers Life Holdings Corporation 6,900 $ 131 Bankers Trust New York Corp. 13,400 923 Bard (C.R.), Inc. 7,600 236 Barnes & Noble, Inc.* 5,100 200 Barnett Banks, Inc. 16,088 919 Battle Mountain Gold Co. 17,700 175 Bausch & Lomb Incorporated 8,600 342 Baxter International Inc. 45,200 1,763 Bay Networks, Inc.* 19,882 943 BayBanks, Inc. 2,800 224 Bear Stearns Companies Inc. 17,548 362 Beckman Instruments, Inc. 4,300 123 Becton, Dickinson & Co. 11,900 671 Bed Bath & Beyond, Inc.* 4,900 134 Bell Atlantic Corp. 70,926 4,238 BellSouth Corp. 80,800 5,555 Belo (A.H.) Corp. Class A 6,000 211 Bemis Co., Inc. 7,400 215 Beneficial Corp. 7,900 388 Bergen Brunswig Corp. Class A 6,483 135 Berkley (W.R.) Corp. 100 4 Berkshire Hathaway Inc.* 210 5,355 Best Buy Co., Inc.* 5,800 158 Bethlehem Steel Corp.* 16,600 243 Betz Laboratories, Inc. 4,100 172 Beverly Enterprises, Inc.* 18,400 244 Biogen, Inc.* 4,700 258 Biomet, Inc.* 16,900 274 Black & Decker Corp. 12,500 405 Block (H&R), Inc. 18,700 729 Block Drug Co., Inc. Class A 1,901 74 Boatmen's Bancshares, Inc. 19,200 712 Bob Evans Farms, Inc. 6,400 115 Boeing Co. 56,200 3,583 Boise Cascade Corp. 6,500 279 Boston Chicken, Inc.* 6,300 152 Boston Edison Co. 6,900 177 Boston Scientific Corp.* 24,271 965 Bowater Inc. 5,300 253 Boyd Gaming Corp.* 8,700 126 Briggs & Stratton Corp. 4,300 163 Brinker International, Inc.* 10,725 180 Bristol-Myers Squibb Co. 82,700 5,675 Broderbund Software, Inc.* 3,900 287 Brooklyn Union Gas Co. 7,350 185 Brown-Forman Corp. Class B 10,500 389 Browning-Ferris Industries, Inc. 33,900 1,140 Brunswick Corp. 13,400 270 Burlington Northern Inc. 14,700 1,018 Burlington Resources Inc. 22,000 894 CBI Industries, Inc. 5,700 140 CBS Inc. 10,500 837 CIGNA Corp. 12,400 1,200 CIPSCO Inc. 5,000 164 CMS Energy Corp. 12,500 308 CNA Financial Corp.* 10,500 1,007 CPC International Inc. 23,100 1,452 CSX Corp. 17,000 1,403 CUC International Inc.* 30,525 1,042 Cabletron Systems, Inc.* 12,050 637 Cablevision Systems Corp. Class A* 3,500 229 Cabot Corp. 5,400 260 Cadence Design Systems, Inc.* 5,500 199 California Energy Co., Inc.* 14,600 305 Callaway Golf Co. 10,000 155 Campbell Soup Co. 41,600 1,903 Canandaigua Wine Co., Inc. Class A* 6,600 312 Capital Cities/ABC, Inc. 24,900 2,864 Capital One Financial Corp. 10,000 260 Cardinal Health, Inc. 6,362 340 Caremark International, Inc. 10,475 217 Carolina Power & Light Co. 28,500 873 Cascade Communication* 4,100 187 Case Corp. 12,000 453 Caterpillar Inc. 33,300 2,235 Centerior Energy Corp. 21,100 227 Centex Corp. 10,200 298 Centocor, Inc.* 10,600 129 Central & South West Services Corp. 34,800 853 Central Fidelity Banks, Inc. 5,850 190 Century Communications Corp. Class A* 13,137 131 Century Telephone Enterprises, Inc. 8,850 247 Ceridian Corp. 7,700 337 Cerner Corp.* 4,400 150 Champion International Corp. 16,000 906 Chase Manhattan Corp. 30,000 1,725 Chemical Banking Corp. 38,530 2,244 Chevron Corp. 107,900 5,220 Chiron Corp.* 7,403 664 Chris-Craft Industries, Inc.* 4,423 199 Chrysler Corp. 60,800 3,276 Chubb Corp. 14,300 1,305 Cincinnati Bell Inc. 9,400 256 Cincinnati Financial Corp. 9,560 498 Cincinnati Milacron Inc. 5,100 169 Cinergy Corp. 23,265 596 Cintas Corp. 6,600 249 Circuit City Stores, Inc. 14,200 490 Circus Circus Enterprises, Inc.* 15,400 504 Cirrus Logic, Inc.* 9,200 502 Cisco Systems, Inc.* 44,700 2,931 Citicorp 66,100 4,387 Citizens Utilities Co. Class A* 31,800 350 Citizens Utilities Co. Class B 7,737 85 Clayton Homes, Inc. 10,862 257 Clear Channel Communications, Inc.* 2,300 172 Clorox Co. 8,000 541 Coastal Corp. 15,400 504 Coca-Cola Co. 206,800 13,287 Coca-Cola Enterprises Inc. 21,200 490 Cognex Corp.* 2,900 144 Coleman Co., Inc.* 3,600 136 Colgate-Palmolive Co. 24,100 1,639 Coltec Industries Inc.* 10,300 155 Columbia Gas System, Inc.* 7,600 268 Columbia/HCA Healthcare Corp. 71,272 3,350 Comcast Corp. Class A 6,000 128 Comcast Corp. Special Class A 41,900 898
See accompanying Notes to Financial Statements. 12 SchwabFunds(R) 3 - -------------------------------------------------------------------------------- SCHWAB 1000 FUND(R) STATEMENT OF NET ASSETS August 31, 1995 - --------------------------------------------------------------------------------
Number Value of Shares (000s) --------- -------- Comdisco, Inc. 4,815 $ 147 Comerica Inc. 19,264 686 Commerce Bancshares, Inc. 6,720 240 Compaq Computer Corp.* 41,600 1,986 Compass Bancshares, Inc. 4,850 146 Computer Associates International, Inc. 25,700 1,786 Computer Sciences Corp.* 8,300 500 Compuware Corp.* 7,000 159 Comsat Corp. Series 1 7,000 163 ConAgra, Inc. 41,224 1,561 Conrail, Inc. 13,800 928 Conseco, Inc. 4,000 201 Consolidated Edison Co. of New York, Inc. 39,700 1,122 Consolidated Freightways, Inc. 7,900 204 Consolidated Natural Gas Co. 17,600 680 Consolidated Papers, Inc. 6,600 399 Consolidated Stores Corp.* 6,400 141 Cooper Industries, Inc. 20,700 787 Cooper Tire & Rubber Co. 12,500 325 Cordis Corp.* 3,100 240 Corestates Financial Corp. 25,000 925 Corning Inc. 36,800 1,201 Corporate Express, Inc.* 6,400 150 Countrywide Credit Industries, Inc. 20,885 459 Cox Communications, Inc. Class A* 41,306 816 Cracker Barrel Old Country Store, Inc. 8,700 178 Crane Co. 4,600 166 Credit Acceptance Corp.* 7,000 151 Crestar Financial Corp. 5,400 304 Crown Cork & Seal Co., Inc.* 15,200 684 Crown Vantage Inc.* 1,360 33 Cummins Engine Co., Inc. 5,900 232 Cypress Semiconductor Corp.* 7,800 356 Cyprus Amax Minerals Co. 13,300 372 Cytec Industries Inc.* 1,585 96 DPL Inc. 15,850 353 DQE, Inc. 11,550 276 DSC Communications Corp.* 20,100 1,054 Dana Corp. 16,300 487 Danaher Corp. 8,300 274 Darden Restaurants, Inc.* 23,600 242 Dayton Hudson Corp. 12,700 929 Dean Foods Co. 6,150 163 Dean Witter, Discover & Co. 27,995 1,428 Deere & Co. 15,000 1,283 Dell Computer Corp.* 8,500 654 Delmarva Power & Light Co. 8,700 189 Delta Air Lines, Inc. 9,400 699 Deluxe Corp. 12,200 381 Dentsply International Inc. 4,100 152 Department 56 Inc.* 4,400 195 Deposit Guaranty Corp. 3,000 117 Destec Energy, Inc.* 23,900 379 Detroit Edison Co. 26,600 815 Dial Corp. 14,100 338 Diebold, Inc. 5,275 246 Digital Equipment Corp.* 25,500 1,065 Dillard Department Stores, Inc. Class A 22,200 685 Dime Bancorp Inc. (New)* 24,926 302 Disney (Walt) Co. 85,300 4,787 Dole Food Company, Inc. 8,600 282 Dollar General Corp. 9,888 260 Dominion Resources, Inc. 28,650 1,035 Donnelley (R.R.) & Sons Co. 24,800 942 Dover Corp. 8,600 686 Dow Chemical Co. 45,400 3,360 Dow Jones & Co., Inc. 14,500 531 Dresser Industries, Inc. 32,060 769 Du Pont (E.I.) de Nemours & Co. 101,700 6,649 Duke Power Co. 34,200 1,389 Dun & Bradstreet Corp. 28,100 1,626 Duracell International, Inc. 20,500 915 EG&G, Inc. 7,200 137 EMC Corp.* 37,400 767 ENSERCH Corp. 9,500 156 Eastman Chemical Co. 14,725 952 Eastman Kodak Co. 56,100 3,233 Eaton Corp. 14,400 779 Echlin Inc. 8,800 304 Eckerd (Jack) Corp.* 4,500 165 Ecolab Inc. 9,400 257 Edwards (A.G.) & Sons, Inc. 8,562 209 El Paso Natural Gas Co. 4,941 139 Electronic Arts Inc.* 7,400 281 Emerson Electric Co. 38,700 2,762 Engelhard Corp. 24,687 697 Enron Corp. 40,100 1,348 Enron Oil & Gas Co. 26,400 614 Ensco International Inc.* 8,400 151 Entergy Corp. 35,721 857 Equifax Inc. 11,500 447 Equitable Companies, Inc. 30,100 775 Equitable Resources, Inc. 5,100 142 Equitable of Iowa Companies 4,700 175 Ethyl Corp. 17,300 188 Exide Corp. 2,700 141 Exxon Corp. 203,300 13,977 FHP International Corp.* 5,500 136 FINA, Inc. Class A 4,000 185 FMC Corp.* 5,500 424 FORE Systems, Inc.* 3,700 126 FPL Group, Inc. 30,200 1,174 Family Dollar Stores, Inc. 8,700 159 Fastenal Co. 5,200 172 Federal Express Corp.* 10,300 739 Federal Home Loan Mortgage Corp. 28,800 1,850 Federal National Mortgage Association 44,100 4,206 Federal Paper Board Co., Inc. 6,400 254 Federal Signal Corp. 5,866 127 Federated Department Stores, Inc.* 29,700 802 Fifth Third Bancorp 12,150 680 Finova Group, Inc. 4,000 163 First American Corp. 4,000 171 First Bank System, Inc. 23,800 1,086 First Brands Corp. 3,200 140 First Chicago Corp. 15,600 989 First Colony Corp. 7,550 185
See accompanying Notes to Financial Statements. 13 SchwabFunds(R) 4 - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Number Value of Shares (000s) --------- -------- First Commerce Corp. 4,562 $ 147 First Data Corp. 21,100 1,232 First Empire State Corp. 900 165 First Fidelity Bancorp 14,100 922 First Financial Management Corp. 9,950 897 First Hawaiian, Inc. 5,000 141 First Interstate Bancorp 13,100 1,251 First Security Corp. 7,175 225 First Tennessee National Corp. 5,050 267 First USA, Inc. 8,200 377 First Union Corp. 29,288 1,468 First Virginia Banks, Inc. 4,750 195 First of America Bank Corporation 9,200 407 Firstar Corp. 11,000 408 Firstmerit Corp. 5,400 142 Fiserv, Inc.* 5,675 163 Fleet Financial Group, Inc. 25,400 940 Fleetwood Enterprises, Inc. 6,700 131 Fleming Companies, Inc. 5,800 169 FlightSafety International, Inc. 4,800 213 Florida Progress Corp. 14,400 437 Flowers Industries, Inc. 6,100 126 Fluor Corp. 14,000 819 Food Lion, Inc. Class A 75,450 431 Food Lion, Inc. Class B 34,800 199 Ford Motor Co. 168,500 5,160 Forest Laboratories, Inc. 6,800 304 Foster Wheeler Corp. 4,800 177 Foundation Health Corp.* 8,200 284 Fourth Financial Corp. 3,800 136 Franklin Resources, Inc. 13,700 754 Freeport-McMoRan Copper & Gold Inc. Class A 29,531 690 Freeport-McMoRan Copper & Gold Inc. Class B* 17,894 418 Freeport-McMoRan Inc.* 25,500 143 Fritz Cos., Inc.* 2,500 179 Frontier Corp. 32,200 898 Fruit of the Loom, Inc. Class A* 11,300 266 GATX Corp. 2,600 134 GEICO Corp. 11,100 758 GTE Corp. 158,000 5,787 GTECH Holdings Corp.* 5,700 165 Gannett Co., Inc. 22,300 1,193 Gap, Inc. 25,000 803 Gartner Group Inc. Class A* 5,600 160 Gateway 2000 Inc.* 11,100 297 Gaylord Entertainment Co. Class A 14,390 399 Genentech, Inc.* 19,700 928 General Dynamics Corp. 11,400 600 General Electric Co. 276,200 16,261 General Instrument Corp.* 21,000 767 General Mills, Inc. 26,600 1,373 General Motors Corp. 123,900 5,823 General Motors Corp. Class E 70,600 3,292 General Motors Corp. Class H 13,000 518 General Nutrition Companies, Inc.* 5,700 238 General Public Utilities Corp. 17,100 489 General Re Corp. 13,800 2,051 General Signal Corp. 6,600 234 Genuine Parts Co. 19,950 786 Genzyme Corp. General Division* 6,000 335 Genzyme Corp. Tissue Repair* 378 5 Geon Co. 3,800 101 Georgia Gulf Corp. 5,600 186 Georgia-Pacific Corp. 15,300 1,377 Giant Food Inc. Class A 8,700 271 Gillette Co. 74,000 3,090 Glatfelter (P.H.) Co. 5,700 128 Glenayre Technologies, Inc.* 6,400 418 Global Marine, Inc. 51,500 348 Golden West Financial Corp. 8,800 420 Goodyear Tire & Rubber Co. 25,700 1,028 Grace (W.R.) & Co. 16,900 1,126 Grainger (W.W.), Inc. 7,500 446 Grand Casinos, Inc.* 3,400 125 Great Atlantic & Pacific Tea Co., Inc. 5,700 162 Great Lakes Chemical Corp. 10,000 661 Great Western Financial Corp. 24,300 568 Green Tree Financial Corporation 12,000 699 Greenpoint Financial Corp. 7,000 194 Guidant* 14,000 354 HBO & Co. 6,300 345 HFS, Inc.* 8,200 384 Halliburton Co. 19,600 831 Hanna (M.A.) Co. 7,150 200 Hannaford Bros. Co. Inc. 5,800 149 Harcourt General, Inc. 11,200 466 Harley-Davidson, Inc. 15,700 436 Harnischfeger Industries Corp. 6,300 232 Harrahs Entertainment Inc.* 15,400 491 Harris Corp. 5,500 317 Harsco Corp. 3,700 207 Hartford Steam Boiler Inspection & Ins. Co. 2,700 125 Hasbro, Inc. 13,150 426 Hawaiian Electric Industries, Inc. 3,900 141 Health Care and Retirement Corp.* 6,700 211 Health Management Associates, Inc. Class A* 6,075 204 Health Systems International, Inc.* 7,300 216 HealthCare Compare Corp.* 6,000 225 Healthsource, Inc.* 4,500 180 Healthsouth Corp.* 11,000 260 Heilig-Meyers Co. 7,350 162 Heinz (H.J.) Co. 39,900 1,691 Hercules Inc. 20,400 1,135 Hershey Foods Corp. 13,200 790 Hewlett-Packard Co. 83,500 6,680 Hibernia Corporation Class A 17,400 174 Hillenbrand Industries, Inc. 10,000 296 Hillhaven Corp.* 5,000 139 Hilton Hotels Corp. 9,000 599 Home Depot, Inc. 78,366 3,125 Home Shopping Network, Inc.* 11,600 122 Homestake Mining Co. 19,800 327
See accompanying Notes to Financial Statements. 14 SchwabFunds(R) 5 - -------------------------------------------------------------------------------- SCHWAB 1000 FUND(R) STATEMENT OF NET ASSETS August 31, 1995 - --------------------------------------------------------------------------------
Number Value of Shares (000s) --------- -------- Hon Industries Inc. 4,200 $ 125 Honeywell Inc. 22,900 1,002 Horizon/CMS Healthcare Corp.* 3,800 83 Hormel Foods Corp. 11,600 278 Host Marriott Corp.* 22,500 259 Houghton Mifflin Co. 5,200 254 Household International, Inc. 17,100 960 Houston Industries Inc. 20,900 886 Hubbell Inc. Class A 600 33 Hubbell Inc. Class B 4,969 291 Humana Inc.* 23,900 436 Huntington Bancshares Inc. 20,402 448 IBP, Inc. 6,700 330 IDEXX Laboratories, Inc.* 4,800 162 IMC Fertilizer, Inc. 4,200 266 IPALCO Enterprises, Inc. 5,500 190 ITT Corp. 17,400 2,081 IVAX Corp. 17,200 441 Idaho Power Co. 5,400 142 Illinois Central Corp. Class A 5,850 224 Illinois Tool Works Inc. 19,400 1,188 Illinova Corp. 10,800 271 Infinity Broadcasting Corp. Class A* 7,225 259 Informix Corp.* 23,600 656 Ingersoll-Rand Co. 17,200 651 Inland Steel Industries, Inc. 8,600 235 Integra Financial Corp. 4,900 275 Integrated Device Technology, Inc.* 5,700 328 Intel Corp. 135,400 8,319 International Business Machines Corp. 94,600 9,779 International Flavors & Fragrances Inc. 18,500 886 International Game Technology 18,600 265 International Paper Co. 21,300 1,744 International Rectifier Corp.* 3,800 154 International Speciality Products Inc. 15,400 137 Interpublic Group of Companies, Inc. 15,100 587 Intuit Inc.* 7,800 338 James River Corp. of Virginia 13,600 473 Jefferson Smurfit Corp.* 16,900 256 Jefferson-Pilot Corp. 7,100 446 John Nuveen Co. 5,200 123 Johnson & Johnson 105,200 7,259 Johnson Controls, Inc. 5,800 353 Jones Apparel Group, Inc.* 3,300 115 Jostens, Inc. 9,900 238 KLA Instruments Corp.* 3,500 298 KU Energy Corp. 5,500 150 Kaiser Aluminum Corp.* 8,800 153 Kansas City Power & Light Co. 8,900 199 Kansas City Southern Industries, Inc. 6,700 295 Kellogg Co. 35,200 2,376 Kelly Services, Inc. Class A 5,525 157 Kemet Corp.* 2,900 165 Kennametal Inc. 4,000 152 Kerr-McGee Corp. 7,800 429 KeyCorp, Inc. 41,423 1,284 Kimberly-Clark Corp. 26,000 1,661 King World Productions, Inc.* 5,500 209 Kmart Corp. 80,700 1,100 Knight-Ridder, Inc. 7,700 433 Kohl's Corp.* 5,100 240 Komag, Inc.* 3,500 218 Kroger Co.* 17,200 561 LCI International Inc.* 4,500 179 LG&E Energy Corp. 4,950 192 LIN Broadcasting Corp.* 10,200 1,309 LSI Logic Corp.* 21,100 1,039 LTV Corp.* 19,200 300 La Quinta Inns, Inc. 7,200 216 Laboratory Corp. of America Holdings, Inc.* 18,648 259 Lafarge Corp. 8,600 182 Lam Research Corp.* 3,700 222 Lancaster Colony Corp. 4,000 138 Lear Seating Corp.* 7,000 200 Lee Enterprises, Inc. 3,500 139 Leggett & Platt, Inc. 5,900 285 Lehman Brothers Holdings Inc. 15,880 377 Leucadia National Corp. 3,800 202 Lilly (Eli) and Co. 47,300 3,873 Limited, Inc. 58,100 1,075 Lin Television Corp.* 10,550 382 Lincoln National Corp. 17,100 735 Linear Technology Corp. 5,600 452 Litton Industries, Inc.* 6,500 252 Liz Claiborne, Inc. 11,500 262 Lockheed Martin Corp. 33,392 2,033 Loctite Corp. 5,300 254 Loews Corp. 10,300 1,353 Lone Star Steakhouse & Saloon, Inc.* 7,400 296 Long Island Lighting Co. 17,300 294 Longs Drug Stores Corp. 7,700 285 Longview Fibre Co. 8,000 129 Loral Corp. 15,100 827 Louisiana Land & Exploration Co. 4,700 180 Louisiana-Pacific Corp. 16,500 392 Lowe's Companies, Inc. 26,100 868 Lubrizol Corp. 9,600 298 Lyondell Petrochemical Co. 12,100 333 MAPCO Petroleum Inc. 4,400 235 MBIA Corp. 6,300 428 MBNA Corp. 24,200 859 MCI Communications Corp. 112,200 2,700 MCN Corp. 9,600 179 MFS Communications Company, Inc.* 9,700 429 MGIC Investment Corp. 8,700 487 MGM Grand, Inc.* 7,100 178 Mallinckrodt Group Inc. 11,300 425 Manor Care, Inc. 9,550 309 Manpower Inc. 10,700 308 Manville Corp.* 18,000 266 Mark IV Industries, Inc. 7,974 177 Marriott International, Inc. 21,300 756 Marsh & McLennan Companies, Inc. 12,600 1,038 Marshall & Ilsley Corp. 13,328 335
See accompanying Notes to Financial Statements. 15 SchwabFunds(R) 6 - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Number Value of Shares (000s) --------- -------- Martin Marietta Materials, Inc. 6,400 $ 122 Marvel Entertainment Group, Inc.* 14,500 208 Masco Corp. 27,400 767 Mattel, Inc. 38,076 1,104 Maxim Integrated Products, Inc.* 4,800 367 May Department Stores Co. 39,700 1,682 Maytag Corp. 15,300 237 McClatchy Newspapers, Inc. Class A 2,800 63 McCormick & Co., Inc. 11,400 252 McDonald's Corp. 113,500 4,143 McDonnell Douglas Corp. 19,200 1,541 McGraw-Hill, Inc. 9,000 709 McKesson Corp. New 6,700 291 Mead Corp. 8,500 522 Medaphis Corp.* 8,200 188 Media General, Inc. Class A 3,300 119 Medtronic, Inc. 18,700 1,765 Mellon Bank Corp. 25,772 1,221 Melville Corp. 15,800 527 Mentor Graphics Corp.* 8,000 154 Mercantile Bancorp Inc. 7,950 360 Mercantile Bankshares Corp. 6,750 178 Mercantile Stores Co., Inc. 5,300 243 Merck & Co., Inc. 202,054 10,077 Mercury Finance Co. 17,109 391 Mercury General Corp. 4,200 158 Meridian Bancorp, Inc. 8,300 331 Merrill Lynch & Co., Inc. 28,400 1,636 Merry-Go-Round Enterprises, Inc.* 200 1 Michigan National Corp. 2,000 215 Micro Warehouse, Inc.* 6,300 300 Microchip Technology, Inc.* 4,500 171 Micron Technology, Inc. 33,200 2,552 Microsoft Corp.* 95,200 8,800 Mid Atlantic Medical Services Inc.* 7,800 145 Midamerican Energy Company 15,200 217 Midlantic Corp. 7,600 392 Millipore Corp. 7,400 258 Minerals Technologies, Inc. 3,400 123 Minnesota Mining & Manufacturing Co. 68,500 3,742 Minnesota Power & Light Co. 4,800 129 Mirage Resorts, Inc.* 13,350 459 Mitchell Energy & Development Corp. Class A 8,000 144 Mitchell Energy & Development Corp. Class B 3,900 68 Mobil Corp. 64,900 6,182 Mobile Telecommunications Technologies Corp.* 10,900 334 Modine Manufacturing Co. 4,500 134 Molex Inc. 14,356 614 Molex Inc. Class A 5,893 235 Monsanto Co. 18,700 1,774 Montana Power Co. 7,900 174 Morgan (J.P.) & Co. Inc. 31,600 2,303 Morgan Stanley Group Inc. 12,600 1,095 Morrison Restaurants, Inc. 4,875 96 Morton International, Inc. 25,900 842 Motorola, Inc. 95,700 7,154 Multimedia, Inc.* 5,300 226 Murphy Oil Corp. 6,370 258 Mylan Laboratories Inc. 17,550 401 NBD Bancorp, Inc. 28,260 1,010 NGC Corp.* 11,000 105 NICOR Inc. 7,800 200 NIKE, Inc. Class B 12,600 1,167 NIPSCO Industries, Inc. 9,000 295 NYNEX Corp. 69,800 3,141 Nabisco Holdings Corp.* 7,000 200 Nalco Chemical Co. 9,800 343 National City Corp. 24,840 739 National Fuel Gas Co. 5,800 163 National Gypsum Co. (New)* 3,500 187 National Semiconductor Corp.* 21,800 616 National Service Industries, Inc. 7,200 209 NationsBank Corp. 44,184 2,712 Navistar International Corp.* 11,250 146 Nevada Power Co. 6,000 122 New England Electric Co. 9,800 343 New York State Electric & Gas Corp. 10,400 251 New York Times Co. Class A 15,313 381 Newell Co. 23,674 592 Newmont Gold Co. 14,500 602 Newmont Mining Corp. 15,132 658 Nextel Communications, Inc.* 36,100 650 Niagara Mohawk Power Corp. 25,200 302 Nine West Group Inc.* 4,700 200 Noble Affiliates, Inc. 7,400 204 NorAm Energy Co. 25,215 180 Nordson Corp. 2,700 153 Nordstrom, Inc. 12,400 510 Norfolk Southern Corp. 22,200 1,571 Northeast Utilities 18,900 432 Northern States Power Co. 11,200 477 Northern Trust Corp. 7,950 356 Northrop Grumman Corp. 7,300 444 Northwest Airlines Corporation Class A* 16,000 576 Norwest Corp. 53,488 1,611 Novell, Inc.* 61,000 1,102 Novellus Systems, Inc.* 2,200 162 Nucor Corp. 15,100 740 Occidental Petroleum Corp. 54,400 1,183 Office Depot, Inc.* 27,300 850 Officemax Inc.* 11,400 268 Ogden Corp. 10,388 242 Ohio Casualty Corp. 5,300 176 Ohio Edison Co. 27,000 584 Oklahoma Gas & Electric Co. 5,700 202 Old Kent Financial Corp. 6,405 243 Old National Bancorp 3,335 115 Old Republic International Corp. 8,400 232 Olin Corp. 5,000 323 Olsten Corp. 5,550 201 Omnicom Group Inc. 5,300 333 OrNda Healthcorp* 6,800 137 Oracle Systems Corp.* 70,950 2,842 Oryx Energy Co.* 14,200 192 Outback Steakhouse, Inc.* 6,250 202
See accompanying Notes to Financial Statements. 16 SchwabFunds(R) 7 - -------------------------------------------------------------------------------- SCHWAB 1000 FUND(R) STATEMENT OF NET ASSETS August 31, 1995 - --------------------------------------------------------------------------------
Number Value of Shares (000s) --------- -------- Owens-Corning Fiberglas Corp.* 7,600 $ 298 Owens-Illinois, Inc.* 16,900 230 Oxford Health Plans, Inc.* 4,900 241 PACCAR Inc. 5,660 278 PNC Bank Corp. 39,300 1,032 PPG Industries, Inc. 34,600 1,479 PPL Resources, Inc. 23,220 508 PacifiCare Health Systems, Inc. Class A* 1,700 93 PacifiCare Health Systems, Inc. Class B* 5,600 319 PacifiCorp 46,500 843 Pacific Enterprises 11,800 283 Pacific Gas & Electric Co. 71,500 2,056 Pacific Telecom, Inc. 5,800 173 Pacific Telesis Group 71,100 2,017 Paging Network, Inc.* 7,400 290 Paine Webber Group Inc. 17,625 339 Pall Corp. 17,033 373 Panhandle Eastern Corp. 25,300 633 Parametric Technology Corp.* 10,300 570 Parker Hannifin Corp. 10,950 434 Paul Revere Corp. 6,900 121 Paychex, Inc. 6,450 263 Peco Energy Co. 34,500 919 Penney (J.C.) Co., Inc. 40,200 1,819 Pennzoil Co. 7,000 308 Pentair, Inc. 3,100 140 PeopleSoft, Inc.* 3,700 256 Peoples Energy Corp. 4,500 123 Pep Boys - Manny, Moe & Jack 8,700 239 PepsiCo, Inc. 129,000 5,837 Perkin-Elmer Corp. 5,800 198 Perrigo Co.* 12,100 162 Petsmart Inc.* 7,400 224 Pfizer Inc. 103,500 5,110 Phelps Dodge Corp. 12,400 786 Philip Morris Companies Inc. 139,100 10,380 Phillips Petroleum Co. 41,600 1,368 Phycor, Inc.* 3,400 143 Picturetel Corp.* 2,400 135 Pinnacle West Capital Corp. 13,300 331 Pioneer Hi-Bred International, Inc. 12,700 545 Pitney Bowes Inc. 25,800 1,048 Pittston Service Group 5,500 140 Polaroid Corp. 6,600 288 Policy Management Systems Corp.* 3,000 149 Portland General Corp. 7,200 173 Potlatch Corp. 4,300 170 Potomac Electric Power Co. 17,500 374 Praxair, Inc. 20,900 543 Premark International, Inc. 9,300 487 Premier Industrial Corp. 12,850 308 Price (T. Rowe) Associates, Inc. 4,100 194 Price/Costco, Inc.* 31,304 532 Procter & Gamble Co. 112,400 7,798 Progressive Corp. 12,300 546 Promus Hotel Corp.* 7,700 159 Protective Life Corp. 3,800 108 Provident Life & Accident Ins. Co. of America Class B 5,600 146 Providian Corp. 15,400 591 Public Service Co. of Colorado 9,300 301 Public Service Enterprise Group Inc. 40,500 1,114 Puget Sound Power & Light Co. 9,200 199 Pyxis Corp.* 5,400 122 QUALCOMM Inc.* 9,600 469 Quaker Oats Co. 23,100 803 Quantum Corp.* 8,100 194 Questar Corp. 6,100 186 Quorum Health Group, Inc.* 7,100 151 RJR Nabisco Holdings Corp. 55,036 1,569 RPM, Inc. 8,700 173 Ralcorp Holdings, Inc.* 4,566 103 Ralston Purina Group 17,300 900 Raychem Corp. 6,700 294 Rayonier, Inc. 3,875 149 Raytheon Co. 20,500 1,658 Read-Rite Corp.* 7,000 286 Reader's Digest Association, Inc. Class A 18,300 846 Reader's Digest Association, Inc. Class B 3,200 134 Reebok International Ltd. 11,700 415 Regions Financial Corp. 6,650 268 Reliastar Financial Corp. 5,800 220 Republic New York Corp. 7,800 439 Revco D.S., Inc.* 10,000 198 Reynolds & Reynolds Co. Class A 5,600 180 Reynolds Metals Co. 11,300 675 Rhone-Poulenc Rorer Inc. 23,600 1,044 Rite Aid Corp. 11,900 333 Riverwood International Corp. 9,300 242 Roadway Services, Inc. 6,000 329 Rochester Gas & Electric Corp. 5,900 131 Rockwell International Corp. 34,900 1,562 Rohm & Haas Co. 11,900 711 Rollins, Inc. 5,600 134 Rouse Co. 6,700 140 Rubbermaid Inc. 29,000 863 Russell Corp. 5,900 162 Ryder System, Inc. 11,800 286 S3 Inc.* 3,300 129 SAFECO Corp. 11,300 732 SBC Communications, Inc. 98,428 4,983 SCANA Corp. 13,800 321 SCE Corp 74,600 1,240 SPS Transaction Services, Inc.* 4,000 108 SUPERVALU Inc. 10,200 302 SYSCO Corp. 30,700 883 Safety-Kleen Corp. 8,600 116 Safeway Inc.* 18,400 725 Salomon Inc 15,900 610 San Diego Gas & Electric Co. 17,300 376 Santa Fe Energy Resources, Inc.* 13,600 129 Santa Fe Pacific Corp. 27,832 790 Santa Fe Pacific Gold Corp. 25,720 312 Sara Lee Corp. 78,600 2,181 Scherer (R.P.) Corp.* 3,600 155 Schering-Plough Corp. 61,500 2,867 Scholastic Corp.* 2,800 173
See accompanying Notes to Financial Statements. 17 SchwabFunds(R) 8 - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Number Value of Shares (000s) --------- -------- Schulman (A.), Inc. 5,462 $ 146 Scientific-Atlanta, Inc. 11,700 234 Scott Paper Co. 25,000 1,159 Scripps (E.W.) Co. Class A 14,875 500 Seagate Technology, Inc.* 10,400 460 Sealed Air Corp.* 4,800 253 Sears, Roebuck & Co. 62,800 2,033 Sensormatic Electronics Corp. 11,150 234 Service Corp. International 16,900 592 Shared Medical Systems Corp. 3,400 126 Shaw Industries, Inc. 20,100 302 Shawmut National Corp. 19,300 625 Sherwin-Williams Co. 13,900 499 Sigma-Aldrich Corp. 7,100 339 Signet Banking Corp. 8,300 217 Silicon Graphics, Inc.* 27,900 1,179 Silicon Valley Group, Inc.* 4,000 172 Smith (A.O.) Corp. Class B 900 22 Snap-on Tools Inc. 6,100 250 Solectron Corp.* 5,600 199 Sonat Inc. 13,000 413 Sonat Offshore Drilling, Inc. 4,300 147 Sonoco Products Co. 14,810 398 Sotheby's Holdings, Inc. Class A 19,800 275 SouthTrust Corp. 11,425 294 Southern Co. 108,700 2,296 Southern National Corp. 15,450 413 Southern New England Telecommunications 9,800 330 Southern Pacific Rail Corp.* 23,700 581 Southland Corporation* 55,000 205 Southwest Airlines Co. 23,300 603 Southwestern Public Service Co. 6,000 180 Spelling Entertainment Group, Inc. 13,200 173 Spiegel, Inc. Class A 15,700 185 Sprint Corp. 58,434 2,074 St. Joe Paper Co. 4,300 263 St. Jude Medical, Inc.* 6,800 405 St. Paul Companies, Inc. 15,000 814 Standard Federal Bankcorp 4,700 183 Stanley Works 6,400 283 Staples, Inc.* 20,737 530 Star Banc Corp. 4,100 217 Starbucks Corp.* 6,000 240 State Street Boston Corp. 12,200 450 Sterling Software, Inc.* 3,700 165 Stewart & Stevenson Services, Inc. 5,000 160 Stewart Enterprises, Inc. Class A* 3,700 118 Stone Container Corp.* 16,000 348 Stop & Shop Companies, Inc.* 7,400 179 Storage Technology Corp.* 7,800 214 Stratacom Inc.* 6,800 332 Stryker Corp. 7,300 306 Student Loan Marketing Association 12,000 650 Sun Co., Inc. 15,900 423 Sun Microsystems, Inc.* 16,900 976 SunGard Data Systems Inc.* 4,800 131 Sunamerica, Inc. 6,100 364 Sunbeam-Oster Co., Inc. 14,100 229 Sundstrand Corp. 4,500 307 Sunglass Hut International, Inc.* 3,400 144 Suntrust Banks, Inc. 19,600 1,203 Superior Industries International, Inc. 4,200 124 Sybase, Inc.* 11,120 358 Sybron International Corp.* 4,900 201 Symantec Corp.* 5,600 162 Symbol Technologies, Inc.* 4,300 149 Synopsys, Inc.* 2,400 138 Synovus Financial Corp. 11,100 283 TCF Financial Corp. 6,400 356 TIG Holdings, Inc. 9,300 238 TJX Companies, Inc. 11,100 139 TRINOVA Corp. 4,500 165 TRW Inc. 11,400 888 Talbots, Inc. 7,500 259 Tambrands Inc. 5,400 242 Tandem Computers Inc.* 17,800 218 Tandy Corp. 12,058 749 Teco Energy Co. 16,700 361 Tecumseh Products Co. Class A 3,500 169 Tecumseh Products Co. Class B 800 37 Tektronix, Inc. 4,600 210 Tele-Communications Inc. Liberty Media Group Class A* 26,086 693 Tele-Communications, Inc. TCI International, Inc. Class A* 104,346 1,924 Teledyne, Inc. 8,282 197 Telephone & Data Systems, Inc. 8,600 353 Tellabs, Inc.* 15,800 741 Temple-Inland Inc. 8,400 435 Tencor Instruments* 5,000 216 Tenet Healthcare Corp.* 30,368 482 Tenneco Inc. 28,500 1,382 Teradyne, Inc.* 13,200 500 Terra Industries, Inc. 11,100 148 Texaco Inc. 41,700 2,700 Texas Instruments Inc. 30,600 2,291 Texas Utilities Co. 35,600 1,237 Textron Inc. 13,200 904 Thermo Cardiosystems Inc.* 5,000 197 Thermo Electron Corp.* 12,325 532 Thermo Instrument Systems Inc.* 10,050 258 Thermolase* 5,700 113 Thomas & Betts Corp. 2,700 182 Tidewater Inc. 7,800 193 Time Warner Inc. 63,680 2,683 Times Mirror Co. Series A 17,400 533 Timken Co. 4,600 208 Tootsie Roll Industries, Inc. 7,864 314 Torchmark Corp. 10,550 422 Tosco Corp. 5,300 170 Total System Services, Inc. 9,900 193 Toys 'R' Us, Inc.* 45,550 1,184 TransTexas Gas Corporation* 11,300 202 Transamerica Corp. 10,500 714
See accompanying Notes to Financial Statements. 18 SchwabFunds(R) 9 - -------------------------------------------------------------------------------- SCHWAB 1000 FUND(R) STATEMENT OF NET ASSETS August 31, 1995 - --------------------------------------------------------------------------------
Number Value of Shares (000s) --------- -------- Transatlantic Holdings, Inc. 3,300 $ 231 Travelers Inc. 53,217 2,554 TriMas Corp. 7,800 167 Tribune Co. 11,900 797 Trinity Industries, Inc. 5,950 193 Triton Energy Corp. 5,200 276 Turner Broadcasting System, Inc. Class A 10,200 315 Turner Broadcasting System, Inc. Class B 35,800 1,101 Tyco International Ltd. 11,807 698 Tyson Foods, Inc. Class A 22,200 567 U S WEST, Inc. 77,510 3,372 U.S. Bancorp 14,250 409 U.S. Healthcare, Inc. 25,225 804 U.S. Robotics, Inc. 3,000 420 UAL Corp.* 4,100 646 UJB Financial Corp. 8,400 291 UNUM Corp. 12,308 591 USF&G Corp. 15,300 277 USG Corp.* 6,200 168 USLIFE Corp. 3,600 155 UST Inc. 33,900 924 USX-Marathon Group 50,300 1,037 USX-US Steel Group 14,160 464 Ultramar Corp. 5,800 137 Unicom Corp. 35,400 996 Unifi, Inc. 9,925 251 Union Bank 7,400 376 Union Camp Corp. 12,300 700 Union Carbide Corp. 22,000 781 Union Electric Co. 15,300 545 Union Pacific Corp. 34,700 2,273 Union Planters Corp. 6,100 181 Union Texas Petroleum Holdings, Inc. 13,100 255 Unisys Corp.* 25,900 207 United Asset Management Corp. 3,900 152 United HealthCare Corp. 28,400 1,200 United States Cellular Corp.* 14,800 518 United States Surgical Corp. 8,300 211 United Technologies Corp. 20,400 1,701 Unitrin, Inc. 7,200 341 Universal Foods Corp. 4,100 130 Unocal Corp. 41,034 1,195 Upjohn Co. 28,300 1,199 UtiliCorp United Inc. 6,600 179 V.F. Corp. 9,800 537 VLSI Technology, Inc.* 6,100 201 Valero Energy Corp. 6,600 151 Valhi, Inc. 21,000 163 Valley National Bancorp 2,000 47 Valspar Corp. 2,800 112 Value Health, Inc.* 9,082 314 Value Jet* 4,000 117 Vanguard Cellular Systems, Inc. Class A* 5,750 157 Varian Associates, Inc. 4,800 259 Varity Corp.* 6,300 287 Vastar Resources 14,800 463 Vencor, Inc.* 4,300 127 Viacom Inc. Class A* 13,212 642 Viacom Inc. Class B* 59,174 2,877 Vicor Corp.* 3,200 150 Vigoro Corp. 3,000 132 Viking Office Products, Inc.* 5,600 200 Vishay Intertechnology, Inc.* 8,200 332 Vons Companies, Inc.* 5,700 128 Vulcan Materials Co. 5,300 279 WMX Technologies, Inc. 79,500 2,335 WPL Holdings, Inc. 4,400 125 Wachovia Corp. 29,220 1,161 Wal-Mart Stores, Inc. 377,800 9,303 Walgreen Co. 39,800 975 Wallace Computer Services, Inc. 3,400 196 Warnaco, Inc. Class A 5,600 122 Warner-Lambert Co. 21,600 1,952 Washington Federal, Inc. 6,095 141 Washington Gas Light Co. 6,200 119 Washington Mutual, Inc. 9,125 237 Washington Post Co. Class B 1,800 517 Washington Water Power Co. 7,700 119 Weis Markets, Inc. 6,300 178 WellPoint Health Networks Inc. Class A* 14,900 443 Wellman, Inc. 4,600 117 Wells Fargo & Co. 8,200 1,528 Wendy's International, Inc. 15,500 304 Wesco Financial Corp. 1,000 133 West One Bancorp 5,300 216 Western Atlas, Inc.* 8,600 390 Western Digital Corp.* 8,800 182 Western National Corp. 9,500 119 Western Resources, Inc. 9,231 279 Westinghouse Electric Corp. 57,600 785 Westvaco Corp. 12,200 538 Weyerhaeuser Co. 35,400 1,628 Wheelabrator Technologies Inc. 27,300 427 Whirlpool Corp. 11,100 605 Whitman Corp. 15,200 306 Willamette Industries, Inc. 8,500 587 Williams Companies, Inc. 18,560 680 Wilmington Trust Co. 4,900 148 Winn-Dixie Stores, Inc. 13,700 815 Wisconsin Central Transportation Corp.* 2,300 136 Wisconsin Energy Corp. 19,600 527 Witco Corp. 7,900 263 Woolworth Corp. 19,800 265 Worldcom Inc.* 34,917 1,176 Worthington Industries, Inc. 16,700 335 Wrigley (Wm.) Jr. Co. 19,100 862 XTRA Corp. 2,200 97 Xerox Corp. 17,400 2,101 Xilinx, Inc.* 12,900 552 York International Corp. 8,400 374 Zilog, Inc.* 3,800 154 -------- TOTAL COMMON STOCK (Cost $622,204) 821,297 --------
See accompanying Notes to Financial Statements. 19 SchwabFunds(R) 10 - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Number Value of Shares (000s) --------- -------- PREFERRED STOCK--0.0% Teledyne, Inc. Preferred Series E* 154 $ 2 -------- TOTAL PREFERRED STOCK (Cost $1) 2 -------- Maturity (000s) --------- REPURCHASE AGREEMENT--0.6% PNC Bank, N.A. 5.00% Dated 8/31/95 Due 09/01/95 Collateralized By: Federal National Mortgage Association: $10,970,000 Par; 6.25% Due 12/25/19 $4,997 4,996 -------- TOTAL REPURCHASE AGREEMENT (Cost $4,996) 4,996 -------- TOTAL INVESTMENTS -- 99.9% (Cost $627,201) 826,295 -------- OTHER ASSETS AND LIABILITIES -- 0.1% Other Assets 3,819 Liabilities (3,400) -------- 419 -------- NET ASSETS -- 100.0% Applicable to 52,732,983 outstanding $0.00001 par value shares (unlimited shares authorized) $826,714 ======== NET ASSET VALUE PER SHARE $15.68 ======
- ------------------ *Non-Income Producing Security See accompanying Notes to Financial Statements. 20 SchwabFunds(R) 11 - -------------------------------------------------------------------------------- SCHWAB 1000 FUND(R) STATEMENT OF OPERATIONS (in thousands) For the year ended August 31, 1995 - -------------------------------------------------------------------------------- Investment income: Dividends $ 15,821 Interest 246 -------- Total investment income 16,067 -------- Expenses: Investment advisory and administration fee 1,777 Transfer agency and shareholder service fees 1,564 Custodian fees 201 Registration fees 65 Professional fees 53 Shareholder reports 158 Trustees' fees 36 Amortization of deferred organization costs 50 Insurance and other expenses 44 -------- 3,948 Less expenses reduced (585) -------- Total expenses incurred by Fund 3,363 -------- Net investment income 12,704 -------- Net realized gain (loss) on investments: Proceeds from sales of investments 15,237 Cost of investments sold (14,807) -------- Net realized gain on investments sold 430 -------- Change in net unrealized appreciation (depreciation) on investments: Beginning of period 83,149 End of period 199,094 -------- Increase in net unrealized appreciation on investments 115,945 -------- Increase in net assets resulting from operations $129,079 ========
See accompanying Notes to Financial Statements. 21 SchwabFunds(R) 12 - -------------------------------------------------------------------------------- SCHWAB 1000 FUND(R) STATEMENT OF CHANGES IN NET ASSETS (in thousands) - --------------------------------------------------------------------------------
For the year ended August 31, 1995 1994 ------------ ------------ Operations: Net investment income $ 12,704 $ 10,821 Net realized gain (loss) on investments sold 430 (1,259) Increase in net unrealized appreciation on investments 115,945 13,264 ---------- ---------- Increase in net assets resulting from operations 129,079 22,826 ---------- ---------- Dividends to shareholders from net investment income (6,199) (10,613) ---------- ---------- Capital Share Transactions: Proceeds from shares sold 264,444 152,247 Net asset value of shares issued in reinvestment of dividends 5,550 9,565 Early withdrawal fees 93 84 Less payments for shares redeemed (120,314) (135,320) ---------- ---------- Increase in net assets from capital share transactions 149,773 26,576 ---------- ---------- Total increase in net assets 272,653 38,789 Net Assets: Beginning of period 554,061 515,272 ---------- ---------- End of period (including undistributed net investment income of $8,679 and $2,174, respectively) $ 826,714 $ 554,061 ========== ========== Number of Fund Shares: Sold 18,751 11,974 Reinvested 439 761 Redeemed (8,825) (10,627) ---------- ---------- Net increase in shares outstanding 10,365 2,108 Shares Outstanding: Beginning of period 42,368 40,260 ---------- ---------- End of period 52,733 42,368 ========== ==========
See accompanying Notes to Financial Statements. 22 SchwabFunds(R) 13 - -------------------------------------------------------------------------------- SCHWAB 1000 FUND(R) NOTES TO FINANCIAL STATEMENTS For the year ended August 31, 1995 - -------------------------------------------------------------------------------- 1. DESCRIPTION OF THE FUND The Schwab 1000 Fund (the "Fund") is a series of Schwab Investments (the "Trust"), an open-end, management investment company organized as a Massachusetts business trust on October 26, 1990 and registered under the Investment Company Act of 1940, as amended. In addition to the Fund, the Trust also offers -- the Schwab Short/Intermediate Government Bond Fund, the Schwab Long-Term Government Bond Fund, the Schwab California Short/Intermediate Tax-Free Bond Fund, the Schwab California Long-Term Tax-Free Bond Fund, the Schwab Short/Intermediate Tax-Free Bond Fund and the Schwab Long-Term Tax-Free Bond Fund. The assets of each series are segregated and accounted for separately. The investment objective of the Fund is to provide a total return which matches that of the Schwab 1000 Index(R), an index created to represent the performance of the 1000 largest publicly traded common stocks of 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. 23 SchwabFunds(R) 14 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 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 August 31, 1995, (for financial reporting and federal income tax purposes), net unrealized appreciation aggregated $199,094,000 of which $209,936,000 related to appreciated securities and $10,842,000 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 .30% of the first $500 million of average daily net assets and .22% of such assets over $500 million. Under this agreement, the Fund incurred investment advisory and administration fees of $1,777,000 during the year ended August 31, 1995, before the Investment Manager reduced its fee (see Note 5). Sub-advisory agreement -- Prior to June 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 $500 million of average daily net assets and .02% of such assets over $500 million. Effective June 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 average daily net assets for transfer agency services and .20% of such assets for shareholder services. For the year ended August 31, 1995, the Fund incurred transfer agency and shareholder service fees of $1,564,000, before Schwab reduced its fees (see Note 5). Officers and trustees -- During the period, certain officers and trustees of the Trust were also officers and/or directors of the Investment Manager and/or Schwab. During the year ended August 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 $36,000 related to the Trust's unaffiliated trustees. 24 SchwabFunds(R) 15 - -------------------------------------------------------------------------------- SCHWAB 1000 FUND(R) NOTES TO FINANCIAL STATEMENTS For the year ended August 31, 1995 - -------------------------------------------------------------------------------- 4. BORROWING AGREEMENT The Trust has an arrangement with PNC Bank, N.A., the Fund's custodian, whereby the Fund may borrow up to $20,000,000, 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 August 31, 1995, no borrowings were made under this arrangement. 5. EXPENSES REDUCED BY THE INVESTMENT MANAGER AND SCHWAB During the year ended August 31, 1995, 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; the total of such fee reductions were $137,000 and $448,000, respectively. 6. INVESTMENT TRANSACTIONS Purchases and sales of investment securities, other than short-term obligations, aggregated (in thousands) $170,774 and $15,237, respectively, during the year ended August 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 August 31, 1995, total early withdrawal fees retained by the Fund amounted to $93,000. 8. COMPOSITION OF NET ASSETS At August 31, 1995, net assets consisted of: Capital paid in $621,929,000 Accumulated undistributed net investment income 8,679,000 Accumulated net realized loss on investments sold (2,988,000) Net unrealized appreciation on investments 199,094,000 ------------ Total $826,714,000 ============
At August 31, 1995, the Fund's Statement of Net Assets included liabilities of $432,000 for Fund shares redeemed, $135,000 for investment advisory and administration fee payable, $90,000 for transfer agency and shareholder service fees payable and $2,582,000 for portfolio securities purchased. 25 SchwabFunds(R) 16 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 9. FINANCIAL HIGHLIGHTS Per share income and capital changes for a share outstanding throughout the period:
For the period April 2, 1991 (commencement For the eight For the of operations) For the year ended months ended year ended to August 31, August 31, December 31, December 31, 1995 1994 1993 1992 1991 ---------- ---------- ------------ ------------ ------------- Net asset value at beginning of period $ 13.08 $ 12.80 $ 11.96 $ 11.26 $ 10.00 Income from Investment - ---------------------- Operations ---------- Net investment income .26 .26 .17 .24 .15 Net realized and unrealized gain (loss) on investments 2.48 .28 .79 .71 1.26 -------- -------- -------- -------- -------- Total from investment operations 2.74 .54 .96 .95 1.41 Less Distributions - ------------------ Dividends from net investment income (.14) (.26) (.12) (.25) (.15) Distributions from realized gain on investments -- -- -- -- -- -------- -------- -------- -------- -------- Total distributions (.14) (.26) (.12) (.25) (.15) -------- -------- -------- -------- -------- Net asset value at end of period $ 15.68 $ 13.08 $ 12.80 $ 11.96 $ 11.26 ======== ======== ======== ======== ======== Total return (%) 21.23 4.28 8.06 8.52 14.25 - ---------------- Ratios/Supplemental Data - ------------------------ Net assets, end of period (000s) $826,714 $554,061 $515,272 $370,980 $ 192,206 Ratio of expenses to average net assets (%) .54 .51 .45* .35 --* Ratio of net investment income to average net assets (%) 2.03 2.06 2.21* 2.45 3.21* Portfolio turnover rate (%) 2 3 1 1 1
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 August 31, 1995, 1994, 1993, December 31, 1992 and 1991 would have been .63%, .56%, .49%*, .52% and 1.05%*, respectively, and the ratio of net investment income to average net assets would have been 1.94%, 2.01%, 2.17%*, 2.28% and 2.16%*, respectively. * Annualized 26 SchwabFunds(R) 17 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- To the Trustees and Shareholders of the Schwab 1000 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 1000 Fund (one of the series constituting Schwab Investments, hereafter referred to as the "Trust") at August 31, 1995, and the results of its operations and the changes in its net assets for 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 audit 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 August 31, 1995 by correspondence with the custodian and brokers, provide a reasonable basis for the opinion expressed above. PRICE WATERHOUSE LLP San Francisco, California September 29, 1995 1995 SPECIAL TAX INFORMATION (UNAUDITED) - -------------------------------------------------------------------------------- NOTICE TO CORPORATE SHAREHOLDERS -------------------------------- 100% of the Fund's distributions for the fiscal year ended August 31, 1995 qualify for the corporate dividends received deduction. - -------------------------------------------------------------------------------- 27 THE SCHWABFUNDS FAMILY(R) The SchwabFunds Family includes a variety of funds to meet your investment needs. You can diversify into several different equity markets with our three equity index funds, choose from different maturities with our bond fund selection, and take advantage of an array of money market fund choices. [Figure 1] SCHWAB 1000 FUND(R) is designed to allow investors to participate in the overall price and dividend performance of the U.S. stock market as represented by the Schwab 1000 Index.(R) This index reflects the performance of the 1,000 largest publicly traded U.S. companies based on market capitalization. 1 [Figure 2] SCHWAB SMALL-CAP INDEX FUND(R) is designed to replicate the Schwab Small-Cap Index(TM) which tracks the performance of smaller capitalization companies. The Schwab Small-Cap Index represents the second 1,000 largest publicly traded U.S. companies based on market capitalization. 1 [Figure 3] SCHWAB INTERNATIONAL INDEX FUND(TM) gives investors the opportunity to participate in the price and dividend performance of some of the world's largest companies. This Fund makes it simple to effectively invest in 350 of the largest publicly traded companies (based on market capitalization) from countries around the world, as represented by the Schwab International Index.(TM) 2 [Figure 4] SCHWAB GOVERNMENT BOND FUNDS include two different Funds designed to offer high current yields with the credit safety of high-quality U.S. Government securities. The level of income you're seeking and your tolerance for fluctuation in share price should determine your selection of either our Short/Intermediate Fund or the Long-Term Fund. 3 [Figure 5] SCHWAB TAX-FREE BOND FUNDS help investors take advantage of one of the last remaining tax breaks: tax-free municipal bonds. We offer a Short/Intermediate Fund and a Long-Term Fund, both of which pay monthly income free from federal personal income tax. 4, 5 [Figure 6] SCHWAB CALIFORNIA TAX-FREE BOND FUNDS give California residents two different opportunities to earn double tax-free income--free from both federal and California state personal income taxes. Choose from the Short/Intermediate Fund or the Long-Term Fund. 5 [Figure 7] SCHWAB MONEY FUNDS include seven different money market funds that seek high current income with safety and liquidity. Most can be linked to your Schwab account to "sweep" cash balances automatically when you're in between other investments. These Funds are managed to maintain a stable $1 share price. Keep in mind, however, that 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. Schwab will be happy to provide you with a free prospectus and brochure on any of the SchwabFunds.(R) The prospectus provides more complete information including charges and expenses. Please read it carefully before investing. Also keep in mind that the principal value and investment returns of your investment in the SchwabFunds (except Schwab Money Funds) will fluctuate with market conditions, and Fund shares, when redeemed, may be worth more or less than their original cost. 1-800-2 NO-LOAD 1-800-266-5623 1 The Schwab 1000 Fund and the Schwab Small-Cap Index Fund do not include privately held companies, investment companies and companies incorporated outside the United States. 2 Companies in the Schwab International Index Fund must be from countries with developed securities markets. The Fund is currently invested in 15 countries and excludes investment companies and companies from the United States. 3 Investors in the Schwab Government Bond Funds may experience a decline in share price due to pre-payment of obligations held by the Funds. 4 Income may be subject to state and local taxes. 5 Income may be subject to the Alternative Minimum Tax (AMT) and capital appreciation from discounted bonds may be subject to state and federal income tax. 28 -------------- BULK RATE U.S. POSTAGE PAID CHARLES SCHWAB -------------- [SCHWABFUNDS FAMILY(TM) LOGO] 101 Montgomery Street San Francisco, California 94104 INVESTMENT ADVISER 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. 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