-----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, ScrZReRSHTpKIu+OZ+4ykImcO6753Fa8prhGLHeoHvNrtdVmp5gvJi0nAyIVF7pt 4NIqdYcK/zjksssR4Fq/BA== /in/edgar/work/20000707/0000912057-00-031149/0000912057-00-031149.txt : 20000920 0000912057-00-031149.hdr.sgml : 20000920 ACCESSION NUMBER: 0000912057-00-031149 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20000430 FILED AS OF DATE: 20000707 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SCHWAB CAPITAL TRUST CENTRAL INDEX KEY: 0000904333 STANDARD INDUSTRIAL CLASSIFICATION: [ ] STATE OF INCORPORATION: MA FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-07704 FILM NUMBER: 669444 BUSINESS ADDRESS: STREET 1: 101 MONTGOMERY ST CITY: SAN FRANCISCO STATE: CA ZIP: 94104 BUSINESS PHONE: 4159747620 MAIL ADDRESS: STREET 2: 101 MONTGOMERY ST CITY: SAN FRANCISCO STATE: CA ZIP: 94104 N-30D 1 n-30d.txt N-30D SCHWABFUNDS-Registered Trademark- SCHWAB EQUITY INDEX FUNDS SEMIANNUAL REPORT AND AN IMPORTANT NOTICE REGARDING DELIVERY OF SHAREHOLDER DOCUMENTS April 30, 2000 IMPORTANT NOTICE REGARDING DELIVERY OF SHAREHOLDER DOCUMENTS The Securities and Exchange Commission permits mutual funds to deliver only one copy of shareholder documents, including prospectuses and shareholder reports, to fund investors with multiple accounts at the same residential or post office box address. This practice is commonly called "householding" and is intended to eliminate duplicate mailings of shareholder documents. Mailings of your SchwabFunds shareholder documents may be householded indefinitely unless you instruct us otherwise. ADDITIONAL COPIES OF SHAREHOLDER DOCUMENTS ALL SCHWABFUNDS PROSPECTUSES AND SHAREHOLDER REPORTS ARE AVAILABLE FREE OF CHARGE AND MAY BE REQUESTED AT ANY TIME BY CALLING SCHWAB AS INDICATED BELOW. SCHWABFUNDS PROSPECTUSES ARE ALSO AVAILABLE ON OUR WEB SITE AT WWW.SCHWAB.COM. If you would prefer that your SchwabFunds mailings not be householded, please contact: - - SCHWAB SIGNATURE SERVICES-TM- CLIENTS: Schwab Signature Services. - - INVESTMENT MANAGER CLIENTS: Schwab at 1-800-515-2157, or your investment manager. - - ALL OTHER CLIENTS: Schwab at 1-800-435-4000. Your instructions that householding not apply to your accounts holding SchwabFunds will be effective within 30 days of receipt by Schwab. SCHWABFUNDS-Registered Trademark- SCHWAB EQUITY INDEX FUNDS - SCHWAB S&P 500 FUND - SCHWAB 1000 FUND-Registered Trademark- - SCHWAB TOTAL STOCK MARKET INDEX FUND-TM- - SCHWAB SMALL-CAP INDEX FUND-Registered Trademark- - SCHWAB INTERNATIONAL INDEX FUND-Registered Trademark- Semiannual Report April 30, 2000 SCHWAB EQUITY INDEX FUNDS We are pleased to bring you this semiannual report for the Schwab Equity Index Funds (the funds) for the six-month period ended April 30, 2000. This report includes the following five funds and all classes--Investor Shares, e.Shares-TM- and Select Shares-TM-: - Schwab S&P 500 Fund - Schwab 1000 Fund-Registered Trademark- - Schwab Total Stock Market Index Fund-TM- - Schwab Small-Cap Index Fund-Registered Trademark- - Schwab International Index Fund-Registered Trademark- As covered in their respective sections of this report, all the funds seek to achieve their primary objectives of tracking or matching the price and dividend performance of their benchmark indices during the reporting period. In addition, the funds also succeeded in maintaining the tax efficiencies and low costs designed to help maximize long-term performance results. FUND LISTINGS The funds are listed in THE WALL STREET JOURNAL, USA TODAY, INVESTOR'S BUSINESS DAILY and most local newspapers under the heading SCHWABFUNDS-Registered Trademark-:
NEWSPAPER LISTING SYMBOL S&P e SWPEX S&P Inv SWPIX S&P Sel SWPPX 1000 Inv SNXFX 1000 Sel SNXSX TSM Inv SWTIX TSM Sel SWTSX SmCp Inv SWSMX Sm Cp Sel SWSSX Intl Inv SWINX Intl Sel SWISX
CONTENTS - --------------------------------------------- A Message from the Chairman 1 - --------------------------------------------- What Every Investor Should Know 2 - --------------------------------------------- Market Overview 4 - --------------------------------------------- Schwab S&P 500 Fund FUND PERFORMANCE 8 PORTFOLIO SNAPSHOT 13 - --------------------------------------------- Schwab 1000 Fund FUND PERFORMANCE 15 PORTFOLIO SNAPSHOT 19 - --------------------------------------------- Schwab Total Stock Market Index Fund FUND PERFORMANCE 21 PORTFOLIO SNAPSHOT 24 - --------------------------------------------- Schwab Small-Cap Index Fund FUND PERFORMANCE 26 PORTFOLIO SNAPSHOT 30 - --------------------------------------------- Schwab International Index Fund FUND PERFORMANCE 32 PORTFOLIO SNAPSHOT 36 - --------------------------------------------- Portfolio Management 38 - --------------------------------------------- Fund Discussion 39 - --------------------------------------------- Glossary 46 - --------------------------------------------- Financial Statements and Notes 48 - ---------------------------------------------
S&P 500-REGISTERED TRADEMARK- IS A TRADEMARK OF THE MCGRAW-HILL COMPANIES, INC. AND HAS BEEN LICENSED FOR USE BY THE SCHWAB CAPITAL TRUST. THE SCHWAB S&P 500 FUND IS NOT SPONSORED, SOLD OR PROMOTED BY STANDARD & POOR'S-REGISTERED TRADEMARK-, AND THEY MAKE NO REPRESENTATION REGARDING THE ADVISABILITY OF INVESTING IN THE FUND. A MESSAGE FROM THE CHAIRMAN [PHOTO] Dear Shareholder, During the last few years, the benefits of investing have been readily apparent, while the risks have been somewhat less obvious. In recent months, however, investors have been subject to larger swings in the market, even within the span of a single day. Given this divergent environment, the message is clear: Expect volatility, maintain a long-term view and ensure your investment strategy is appropriate for your risk tolerance and time horizon. One way to lessen the impact of volatility on your portfolio is to adequately diversify your investments, both within and across asset sectors, namely cash equivalents, bonds and stocks. With its broad range of funds, SchwabFunds-Registered Trademark- can help form the foundation of a diversified investment plan. Our asset allocation funds can even provide diversification within a single fund. We recently added four new sector funds, the Schwab Focus Funds, to our SchwabFunds offering. Each invests in a group of industries within a specific sector--Communications, Financial Services, Healthcare and Technology--and can be an effective complement to individual stock investing. Each Focus Fund concentrates its investing in companies in a specific sector and may involve a greater degree of risk than an investment in mutual funds with greater diversification. For more information on the Schwab Focus Funds, please call 1-800-435-4000 and request a prospectus. The prospectus contains more information on fund fees and expenses as well as risks. Please read it carefully before investing. As a leader in online brokerage, we recognize the value of the web as a means of communicating timely, relevant information to investors. Regular updates on all the SchwabFunds, including performance data, are available on our Web site at WWW.SCHWAB.COM/SCHWABFUNDS. We encourage you to take advantage of this valuable resource. Thank you for your investment in SchwabFunds. For its part, SchwabFunds will do everything we can to warrant the trust you have placed in us. Sincerely, /s/ Charles R. Schwab Charles R. Schwab April 30, 2000 1 WHAT EVERY INVESTOR SHOULD KNOW WHY ASSET ALLOCATION MATTERS As most investors know, one of the most compelling reasons to invest in a mutual fund is diversification. By allocating your assets across many different securities, a fund can help reduce the risk that you might otherwise encounter by owning just a few stocks or bonds. But remember that diversification ACROSS asset classes can be just as important as diversification WITHIN one of the mutual funds you own. As you probably know, stocks historically have offered much higher returns over the long term than bonds, cash or other asset classes, but those returns have come at the price of higher volatility. To help mitigate some of that risk, many investors often include at least some bonds and cash in their portfolios. They also diversify their exposure across different stock market segments--such as large-cap and small-cap U.S. stocks and international stocks, which tend not to move in tandem. In short, allocating assets across market segments may help reduce your overall portfolio risk. REGULAR INVESTING STRATEGIES Another way to help dampen the effects of short-term market volatility is to invest the same amount of money on a regular basis. With this investment strategy, known as DOLLAR-COST AVERAGING, you automatically buy more shares when stock or bond prices are low and fewer when they're high.* A hypothetical example can help illustrate this concept. Let's say you invest $400 on a monthly basis in a single mutual fund, as shown below. Because of fluctuating prices, your per share purchase price varies monthly. A simple average of your five purchase prices would yield $8.20 per share; however, your AVERAGE COST BASIS (your total investment divided by the number of shares actually purchased) would be significantly lower--by more than $0.50 per share. The net result in this example is that your average cost per share is reduced and you'd have purchased more shares than you would have had you paid the average share price over the five-month period.
No. of Fixed Share Shares Investment Price Purchased - -------------------------------------------------------- Month 1 $400 $10 40 - -------------------------------------------------------- Month 2 $400 $8 50 - -------------------------------------------------------- Month 3 $400 $5 80 - -------------------------------------------------------- Month 4 $400 $8 50 - -------------------------------------------------------- Month 5 $400 $10 40 - -------------------------------------------------------- Totals $2,000 $41 260 - -------------------------------------------------------- AVERAGE SHARE PRICE ($41 DIVIDED BY 5 periods): $8.20 YOUR AVERAGE COST BASIS ($2,000 DIVIDED BY 260 shares) $7.69 PER-SHARE ADVANTAGE: $0.51
This example is for illustrative purposes only and is not intended to predict or guarantee the performance of any particular fund available through Schwab. (Of course, in this example, hindsight shows you that your best move would have been to invest your entire $2,000 in Month 3, when the share price was at a low of $5--but it's unlikely that you would have been able to predict that.) * Regular investing strategies such as dollar-cost averaging do not assure a profit or protect against a loss in declining markets. Since such a strategy involves continuous investment, investors should consider their ability to continue purchases through periods of low price levels. 2 SCHWAB'S 10 INVESTING PRINCIPLES 1. START WITH THE BASICS FOR LONG-TERM INVESTING. 2. GET STARTED NOW! 3. KNOW YOURSELF. 4. INVEST IN THE STOCK MARKET FOR GROWTH. 5. TAKE A LONG-TERM VIEW. 6. BUILD A DIVERSIFIED PORTFOLIO. 7. CONSIDER BONDS AND CASH FOR DIVERSIFICATION AND INCOME. 8. MINIMIZE YOUR EXPENSES. 9. STAY ON TRACK. 10. BECOME A LIFELONG INVESTOR. In addition to reducing your per-share costs over time, dollar-cost averaging provides another benefit: the discipline of investing regularly. You're more likely to maintain a regular investment plan if it's automatic: You don't have to think about it, and you minimize any propensity to skip an investment in favor of some other expenditure. To encourage this discipline, Schwab offers you two convenient, no cost ways to begin or maintain a program of regular investing: Schwab's AUTOMATIC INVESTMENT PLAN (AIP) allows you to automatically purchase--on a regular basis--additional shares in mutual funds that you already own. You can choose to invest as little as $100--twice a month, monthly or quarterly.(1) With Schwab MoneyLink-Registered Trademark- electronic funds transfer service, you can easily request fund transfers between your Schwab account and your accounts at other financial institutions. You can schedule automatically recurring transfers for easy long-term savings. Or request a transfer via the Web, by automated touch-tone phone, or through a Schwab representative anytime, day or night. Please be aware that these programs and dollar-cost averaging in general do not ensure a profit or protect against a loss, and investors should know that markets fall as well as rise. Because dollar-cost averaging involves continuous investment in securities regardless of fluctuating prices, you should consider your financial ability to purchase in both up and down markets. Over the long term, however, dollar-cost averaging may help to smooth out volatility caused by shortterm market trends. For more information on the Automatic Investment Plan or MoneyLink, please call us at 1-800-435-4000. WE MAKE IT EASY TO INVEST We try to make it easy and convenient for you to invest in SchwabFunds-Registered Trademark-. In addition to our automated methods that allow you to invest or transfer money to your Schwab account on a regular basis, you can also invest through our Web site at WWW.SCHWAB.COM/SCHWABFUNDS; through our automated touch-tone telephone service, TeleBroker-Registered Trademark-, by calling 1-800-272-4922; or in person at any of our nationwide branches. KEEPING YOU INFORMED You can find a wealth of information about our investment philosophy and funds, as well as updated fund performance data at our Web site: WWW.SCHWAB.COM/SCHWABFUNDS. (1) Includes uninvested cash and margin cash available. If sufficient cash is not available, your automatic purchases will not be made. 3 MARKET OVERVIEW U.S. ECONOMIC GROWTH April 2000 marked the beginning of the tenth year of the current expansion, making it the longest in U.S. history. Gross Domestic Product (GDP) grew at a real (inflation adjusted) rate of 4.6% during 1999--the fourth consecutive year at 4% or more and 5.4% during the first quarter of 2000. This rate is considered by most economists and the Federal Reserve (Fed) to be in excess of what the economy can absorb without experiencing inflationary pressures, perhaps 3.5% to 4.0%. High levels of consumer spending fueled by rising incomes, personal wealth and consumer confidence, as well as strong business capital investment and a healthy housing sector, have been the principal factors driving this lengthy expansion. EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC REAL GDP GROWTH RATE Quarterly Percentage Change (Annualized Rate) Q1 1990 5.0% Q2 1990 1.0% Q3 1990 -0.6% Q4 1990 -3.0% Q1 1991 -1.7% Q2 1991 2.6% Q3 1991 1.3% Q4 1991 2.5% Q1 1992 4.3% Q2 1992 4.0% Q3 1992 3.1% Q4 1992 5.2% Q1 1993 -0.7% Q2 1993 2.1% Q3 1993 1.5% Q4 1993 6.0% Q1 1994 3.6% Q2 1994 5.7% Q3 1994 2.2% Q4 1994 5.1% Q1 1995 1.5% Q2 1995 0.8% Q3 1995 3.2% Q4 1995 3.3% Q1 1996 2.9% Q2 1996 6.9% Q3 1996 2.2% Q4 1996 4.9% Q1 1997 4.9% Q2 1997 5.1% Q3 1997 4.0% Q4 1997 3.1% Q1 1998 6.7% Q2 1998 2.1% Q3 1998 3.8% Q4 1998 5.9% Q1 1999 3.7% Q2 1999 1.9% Q3 1999 5.7% Q4 1999 7.3% Q1 2000 5.4%
Source: BLOOMBERG L.P. Looking ahead, the availability of increasingly scarce labor resources and the domestic consumers' response to continued stock market volatility may be key determinants of whether the economy continues on its current course or softens throughout 2000. The Fed has raised the federal funds rate by 1.75% since June 1999 in an as yet unsuccessful effort to moderate the economy's rapid growth rate. The consensus of most economists is that the U.S. economy appears poised for continued strong growth and additional intervention by the Fed (increases in the federal funds rate) until the growth rate of the economy slows to a more sustainable level. UNEMPLOYMENT The unemployment rate dropped to 3.9% in April 2000, a three-decade low. Employment growth continues to outstrip population growth. Reflecting a shrinking pool of available workers, labor markets continue to be extremely tight in many areas of the country and there has been some regional evidence of labor shortages driving up wages. The labor force participation rate, which measures the employment population as a percent of the total population, is at a post-war high. Growth in the labor force has slowed, and the Fed has expressed its concern that strong demand and tight labor markets may continue to put pressure on manufacturers and service providers to raise prices. EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC U.S. UNEMPLOYMENT RATE Jan-90 5.4% Feb-90 5.3% Mar-90 5.2% Apr-90 5.4% May-90 5.4% Jun-90 5.2% Jul-90 5.5% Aug-90 5.7% Sep-90 5.9% Oct-90 5.9% Nov-90 6.2% Dec-90 6.3% Jan-91 6.4% Feb-91 6.6% Mar-91 6.8% Apr-91 6.7% May-91 6.9% Jun-91 6.9% Jul-91 6.8% Aug-91 6.9% Sep-91 6.9% Oct-91 7.0% Nov-91 7.0% Dec-91 7.3% Jan-92 7.3% Feb-92 7.4% Mar-92 7.4% Apr-92 7.4% May-92 7.6% Jun-92 7.8% Jul-92 7.7% Aug-92 7.6% Sep-92 7.6% Oct-92 7.3% Nov-92 7.4% Dec-92 7.4% Jan-93 7.3% Feb-93 7.1% Mar-93 7.0% Apr-93 7.1% May-93 7.1% Jun-93 7.0% Jul-93 6.9% Aug-93 6.8% Sep-93 6.7% Oct-93 6.8% Nov-93 6.6% Dec-93 6.5% Jan-94 6.8% Feb-94 6.6% Mar-94 6.5% Apr-94 6.4% May-94 6.1% Jun-94 6.1% Jul-94 6.3% Aug-94 6.0% Sep-94 5.8% Oct-94 5.8% Nov-94 5.6% Dec-94 5.5% Jan-95 5.6% Feb-95 5.4% Mar-95 5.3% Apr-95 5.8% May-95 5.8% Jun-95 5.6% Jul-95 5.6% Aug-95 5.7% Sep-95 5.6% Oct-95 5.5% Nov-95 5.7% Dec-95 5.6% Jan-96 5.6% Feb-96 5.5% Mar-96 5.6% Apr-96 5.5% May-96 5.6% Jun-96 5.3% Jul-96 5.5% Aug-96 5.1% Sep-96 5.2% Oct-96 5.2% Nov-96 5.3% Dec-96 5.4% Jan-97 5.3% Feb-97 5.3% Mar-97 5.1% Apr-97 5.0% May-97 4.7% Jun-97 5.0% Jul-97 4.7% Aug-97 4.9% Sep-97 4.7% Oct-97 4.7% Nov-97 4.6% Dec-97 4.7% Jan-98 4.5% Feb-98 4.6% Mar-98 4.6% Apr-98 4.3% May-98 4.3% Jun-98 4.5% Jul-98 4.5% Aug-98 4.5% Sep-98 4.5% Oct-98 4.5% Nov-98 4.4% Dec-98 4.3% Jan-99 4.3% Feb-99 4.4% Mar-99 4.2% Apr-99 4.3% May-99 4.2% Jun-99 4.3% Jul-99 4.3% Aug-99 4.2% Sep-99 4.2% Oct-99 4.1% Nov-99 4.1% Dec-99 4.1% Jan-00 4.0% Feb-00 4.1% Mar-00 4.1% Apr-00 3.9%
Source: BLOOMBERG L.P. 4 INFLATION Virtually all measures of price inflation exhibited upward trends during the reporting period. The Consumer Price Index (CPI) rose 3.0% for the year ended April 30, 2000. Its core rate (which excludes the more volatile food and energy components) was up 2.2%. The Personal Consumption Expenditures Index, a measure of inflation closely watched by the Fed, rose 2.3% for the same period. The GDP price deflator, the broadest measure of inflation, indicated prices rising at an annual rate of 3.2% during the first quarter of 2000. EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC MEASURES OF INFLATION
CONSUMER PRICE INDEX EMPLOYMENT COST-INDEX 12-MONTH CHANGE 12-MONTH CHANGE (MONTHLY) (QUARTERLY) Jan-90 5.2% 5.5% Feb-90 5.3% 5.5% Mar-90 5.2% 5.5% Apr-90 4.7% 5.4% May-90 4.4% 5.4% Jun-90 4.7% 5.4% Jul-90 4.8% 5.2% Aug-90 5.6% 5.2% Sep-90 6.2% 5.2% Oct-90 6.3% 4.9% Nov-90 6.3% 4.9% Dec-90 6.1% 4.9% Jan-91 5.7% 4.6% Feb-91 5.3% 4.6% Mar-91 4.9% 4.6% Apr-91 4.9% 4.6% May-91 5.0% 4.6% Jun-91 4.7% 4.6% Jul-91 4.4% 4.3% Aug-91 3.8% 4.3% Sep-91 3.4% 4.3% Oct-91 2.9% 4.3% Nov-91 3.0% 4.3% Dec-91 3.1% 4.3% Jan-92 2.6% 4.0% Feb-92 2.8% 4.0% Mar-92 3.2% 4.0% Apr-92 3.2% 3.6% May-92 3.0% 3.6% Jun-92 3.1% 3.6% Jul-92 3.2% 3.5% Aug-92 3.1% 3.5% Sep-92 3.0% 3.5% Oct-92 3.2% 3.5% Nov-92 3.0% 3.5% Dec-92 2.9% 3.5% Jan-93 3.3% 3.5% Feb-93 3.2% 3.5% Mar-93 3.1% 3.5% 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% 3.5% Nov-93 2.7% 3.5% Dec-93 2.7% 3.5% Jan-94 2.5% 3.2% Feb-94 2.5% 3.2% Mar-94 2.5% 3.2% Apr-94 2.4% 3.2% May-94 2.3% 3.2% Jun-94 2.5% 3.2% Jul-94 2.8% 3.2% Aug-94 2.9% 3.2% Sep-94 3.0% 3.2% Oct-94 2.6% 3.0% Nov-94 2.7% 3.0% Dec-94 2.7% 3.0% Jan-95 2.8% 2.9% Feb-95 2.9% 2.9% Mar-95 2.9% 2.9% Apr-95 3.1% 2.9% May-95 3.2% 2.9% Jun-95 3.0% 2.9% Jul-95 2.8% 2.7% Aug-95 2.6% 2.7% Sep-95 2.5% 2.7% Oct-95 2.8% 2.7% Nov-95 2.6% 2.7% Dec-95 2.5% 2.7% Jan-96 2.7% 2.8% Feb-96 2.7% 2.8% Mar-96 2.8% 2.8% Apr-96 2.9% 2.9% May-96 2.9% 2.9% Jun-96 2.8% 2.9% Jul-96 3.0% 2.8% Aug-96 2.9% 2.8% Sep-96 3.0% 2.8% Oct-96 3.0% 2.9% Nov-96 3.3% 2.9% Dec-96 3.3% 2.9% Jan-97 3.0% 2.9% Feb-97 3.0% 2.9% Mar-97 2.8% 2.9% Apr-97 2.5% 2.8% May-97 2.2% 2.8% Jun-97 2.3% 2.8% Jul-97 2.2% 3.0% Aug-97 2.2% 3.0% Sep-97 2.2% 3.0% Oct-97 2.1% 3.3% Nov-97 1.8% 3.3% Dec-97 1.7% 3.3% Jan-98 1.6% 3.3% Feb-98 1.4% 3.3% Mar-98 1.4% 3.3% Apr-98 1.4% 3.5% May-98 1.7% 3.5% Jun-98 1.7% 3.5% Jul-98 1.7% 3.7% Aug-98 1.6% 3.7% Sep-98 1.5% 3.7% Oct-98 1.5% 3.4% Nov-98 1.5% 3.4% Dec-98 1.6% 3.4% Jan-99 1.7% 3.0% Feb-99 1.6% 3.0% Mar-99 1.7% 3.0% Apr-99 2.3% 3.2% May-99 2.1% 3.2% Jun-99 2.0% 3.2% Jul-99 2.1% 3.1% Aug-99 2.3% 3.1% Sep-99 2.6% 3.1% Oct-99 2.6% 3.4% Nov-99 2.6% 3.4% Dec-99 2.7% 3.4% Jan-00 2.7% 4.3% Feb-00 3.2% 4.3% Apr-00 3.0% 4.3%
Source: BLOOMBERG L.P. Wage inflation also exhibited a marked upward trend during the reporting period. The Employment Cost Index, a measurement of the cost to employ workers, including both wages and benefits, rose 4.3% for the year ended March 31, 2000. Although these rates of price and employment cost inflation may not be alarmingly high by historical standards, the Fed has demonstrated its resolve to keep inflation at bay through its communications and its actions (six federal funds rate increases since June 1999). In particular, the Fed has expressed concern that if labor markets continue to tighten, increases in wages will outpace productivity growth and place additional upward pressure on prices. In such an environment, productivity growth becomes particularly critical, as it enables companies to pay higher wages without raising prices. Non-farm productivity grew 3.0% in 1999 and at a 2.4% annualized rate in the first quarter of 2000--strong gains to be sure, but likely not strong enough to offset recent increases in employment costs. ASSET CLASS PERFORMANCE EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC ASSET CLASS % RETURNS DURING REPORTING PERIOD
LEHMAN AGGREGATE MSCI-EAFE (ND) RUSSELL 2000 S&P 500 BOND INDEX INDEX SMALL-CAP INDEX INDEX 11/5/1999 0.61% 0.49% 3.23% 0.54% 11/12/1999 0.73% 2.02% 4.95% 2.44% 11/19/1999 0.32% 3.91% 7.62% 4.35% 11/26/1999 0.11% 5.22% 7.08% 3.95% 12/3/1999 0.15% 5.26% 8.43% 5.22% 12/10/1999 0.78% 6.67% 8.94% 4.10% 12/17/1999 -0.30% 6.78% 8.89% 4.39% 12/24/1999 -0.61% 10.69% 12.68% 7.13% 12/31/1999 -0.51% 12.55% 17.96% 8.04% 1/7/2000 -0.57% 7.42% 14.15% 6.00% 1/14/2000 -1.03% 10.06% 18.67% 7.74% 1/21/2000 -1.19% 7.61% 24.83% 5.99% 1/28/2000 -0.52% 7.11% 18.01% 0.02% 2/4/2000 -0.39% 9.34% 22.92% 4.81% 2/11/2000 -0.68% 9.96% 25.68% 2.07% 2/18/2000 -0.15% 8.31% 27.70% -0.95% 2/25/2000 0.50% 9.16% 30.29% -1.89% 3/3/2000 0.68% 11.46% 40.04% 3.81% 3/10/2000 0.48% 11.44% 41.37% 2.77% 3/17/2000 1.18% 10.11% 34.58% 7.88% 3/24/2000 1.05% 12.27% 34.49% 12.51% 3/31/2000 1.68% 12.10% 26.32% 10.49% 4/7/2000 2.49% 10.97% 27.26% 11.80% 4/14/2000 2.42% 7.09% 6.40% 0.02% 4/21/2000 2.33% 6.21% 12.97% 5.77% 4/28/2000 1.38% 6.10% 18.72% 7.17%
Compiled by CHARLES SCHWAB & CO., INC. As shown on the chart above, equity valuations, especially those of small-cap and technology stocks, exhibited extreme volatility during the reporting period. The price/earnings (P/E) ratio for the 5 MARKET OVERVIEW (continued) NASDAQ 100 Index fell by 33% in just 14 trading days during March and April. Remarkably, it remained at levels above 100 even after its precipitous decline. Reversing a five-year period of relative under performance, small-cap stocks outperformed both large-cap stocks and international stocks for the six-month reporting period ended 4/30/00. Small-cap stocks as represented by the Russell 2000-Registered Trademark- Index achieved a total return of 18.7%. Large-cap stocks, as represented by the S&P 500-Registered Trademark- Index, returned 7.2%. Dampened by relatively weak foreign currencies, International stocks, as represented by the Morgan Stanley Capital International Europe, Australia, Far East (MSCI-EAFE)-Registered Trademark- Index, achieved a return of 6.7% for the six-month reporting period ending 4/30/00. Reflecting the rise in intermediate-term interest rates, fixed income returns were generally weak for the period. Bond returns, as represented by the Lehman Brothers Aggregate Bond Index, were 1.4% for the six-month reporting period. U.S. EQUITY VALUATION The P/E ratio for the S&P 500-Registered Trademark- Index remained at very high levels during the reporting period and ended the period at a lofty 29.6 times earnings, slightly less than twice its long-term average. The P/E 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. Based on other traditional market valuation measures such as the price-to-book value ratio or dividend yield, the U.S. stock market continues to remain at record or near record high valuation levels. Reflecting the extraordinary valuations of the technology sector, the P/E ratio (12 months trailing) for the NASDAQ 100 Index ended the period at 120.2, as compared to an average of 67 over the last five years. EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC 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 14.90 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 25.50 Sep-92 24.37 Oct-92 23.94 Nov-92 24.08 Dec-92 24.01 Jan-93 24.20 Feb-93 24.25 Mar-93 24.22 Apr-93 23.20 May-93 23.21 Jun-93 22.58 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 20.10 May-94 20.16 Jun-94 19.76 Jul-94 18.64 Aug-94 18.90 Sep-94 18.26 Oct-94 17.55 Nov-94 16.58 Dec-94 16.98 Jan-95 16.23 Feb-95 16.20 Mar-95 16.50 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 19.30 Jul-96 18.31 Aug-96 18.62 Sep-96 19.75 Oct-96 19.60 Nov-96 21.05 Dec-96 20.70 Jan-97 20.55 Feb-97 20.98 Mar-97 19.87 Apr-97 20.24 May-97 21.43 Jun-97 22.45 Jul-97 23.92 Aug-97 22.64 Sep-97 24.00 Oct-97 22.84 Nov-97 24.02 Dec-97 24.51 Jan-98 24.99 Feb-98 26.44 Mar-98 27.76 Apr-98 26.51 May-98 26.12 Jun-98 27.09 Jul-98 26.78 Aug-98 22.77 Sep-98 24.23 Oct-98 27.58 Nov-98 30.14 Dec-98 31.97 Jan-99 33.29 Feb-99 32.65 Mar-99 33.78 Apr-99 33.90 May-99 32.74 Jun-99 34.70 Jul-99 31.62 Aug-99 31.21 Sep-99 29.90 Oct-99 29.92 Nov-99 30.65 Dec-99 32.53 Jan-00 29.78 Feb-00 28.59 Mar-00 31.50 Apr-00 29.58
30-Year Average 15.8
Source: BLOOMBERG L.P. TREASURY BOND YIELDS Continuing a trend which began in October 1998, both long-term and intermediate-term rates continued to climb upward during the first three months of the reporting period. The primary driver of this upward trend was the continued strong growth of the domestic economy. 6 EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC 10-YEAR AND 5-YEAR TREASURY BOND YIELDS
TEN-YEAR TREASURY FIVE-YEAR TREASURY BOND YIELD NOTE YIELD 10.01.1999 5.97% 5.86% 10.08.1999 6.03% 5.95% 10.15.1999 6.07% 5.97% 10.22.1999 6.19% 6.10% 10.29.1999 6.02% 5.95% 11.05.1999 5.93% 5.86% 11.12.1999 5.93% 5.86% 11.19.1999 6.06% 5.99% 11.26.1999 6.12% 6.05% 12.03.1999 6.16% 6.07% 12.10.1999 6.07% 5.98% 12.17.1999 6.28% 6.19% 12.24.1999 6.41% 6.31% 12.31.1999 6.44% 6.34% 1.07.2000 6.52% 6.41% 1.14.2000 6.68% 6.58% 1.21.2000 6.77% 6.63% 1.28.2000 6.66% 6.66% 2.04.2000 6.55% 6.65% 2.11.2000 6.60% 6.70% 2.18.2000 6.49% 6.68% 2.25.2000 6.33% 6.47% 3.03.2000 6.39% 6.59% 3.10.2000 6.38% 6.60% 3.17.2000 6.19% 6.45% 3.24.2000 6.19% 6.50% 3.31.2000 6.00% 6.31% 4.07.2000 5.58% 6.18% 4.14.2000 5.58% 6.11% 4.21.2000 5.99% 6.24% 4.28.2000 6.21% 6.54%
Source: BLOOMBERG L.P. Treasury bond yields exhibited an unusual pattern during the second half of the reporting period. Typically the yields on ten year treasury securities exceed those on five-year securities to compensate investors for the additional interest rate risk associated with longer duration securities. As shown in the graph above, late in January, this normal relationship reversed, resulting in what is referred to as a negative yield curve. This situation is a result of the accumulating budget surpluses, which are allowing the federal government to downsize its debt. The Treasury Department announced that it plans to buy back $30 billion in debt in 2000 starting with longer dated maturities because those payments carry the steepest interest payment. The anticipated reduction in supply resulting from this buyback program, as well as scaled back issuance, increased the price of the longer-term securities and resulted in a reduction in yields. INTERNATIONAL PERFORMANCE EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC MSCI-EAFE-Registered Trademark- COUNTRY US$ RETURNS For the Six-Month Period Ended 4/30/00 Belgium -21.4% Austria -14.3% Ireland -10.4% Switzerland -6.0% Norway -5.6% New Zealand -1.1% Australia -0.8% United Kingdom -0.3% Singapore 4.8% Netherlands 5.1% Portugal 6.0% Italy 6.2% Japan 7.8% Denmark 8.2% Spain 9.4% Hong Kong 17.9% France 21.0% Germany 21.8% Sweden 70.7% Finland 117.5%
Source: DATASTREAM The MSCI-EAFE Index gained 6.7% in U.S. dollar terms (excluding reinvested dividends) during the six-month reporting period. In local currency terms, it gained 15.6%, reflecting the relative weakness of most foreign currencies (compared to the dollar) during the period. The strongest performing countries for the period were Finland, Sweden and Germany. Those countries with the largest negative returns were Belgium, Austria and Ireland. 7 SCHWAB S&P 500 FUND-INVESTOR SHARES AND E.SHARES-TM- FUND PERFORMANCE AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED 4/30/00
SINCE INCEPTION SIX MONTHS(1) ONE YEAR (5/1/96) - ------------------------------------------------------------------------------------------------------------------- SCHWAB S&P 500 FUND-INVESTOR SHARES(2) 7.05% 9.75% 23.47% - ------------------------------------------------------------------------------------------------------------------- SCHWAB S&P 500 FUND-E.SHARES(2) 7.03% 9.83% 23.59% - ------------------------------------------------------------------------------------------------------------------- S&P 500-Registered Trademark- Index 7.19% 10.13% 24.05% - ------------------------------------------------------------------------------------------------------------------- Index Tracking Differential-Investor Shares (0.14)% (0.38)% (0.58)% - ------------------------------------------------------------------------------------------------------------------- Index Tracking Differential-e.Shares (0.16)% (0.30)% (0.46)% - -------------------------------------------------------------------------------------------------------------------
National Association of Securities Dealers (NASD) regulations require that we report performance data as of the most recent calendar quarter--in this case, the quarter ended 3/31/00. As of 3/31/00, the fund's six-month, one-year and since-inception average annual total returns were 17.32%, 17.50% and 25.00%, respectively, for the Investor Shares and 17.35%, 17.58% and 25.11%, respectively, for the e.Shares. Also shown is the difference between the total returns of the S&P 500 Index and the Schwab S&P 500 Fund, which is often referred to as the "tracking differential." The tracking differential arises due to several factors. For example, unlike the index, the fund has operating expenses and incurs trading costs when it buys or sells securities. The fund also may hold non-index securities that can produce either higher or lower returns than their index counterparts. Furthermore, unlike the index, the fund holds a portion of its assets in cash. 8 TAX-SMART INVESTMENT STRATEGY The Schwab S&P 500 Fund seeks to maximize its after-tax performance by using a strategy that helps reduce capital gains distributions. This strategy is designed to help investors keep more of what their money earns. The chart below illustrates the effects of this strategy on the three-year performance of the Schwab S&P 500 Fund-Investor Shares. AVERAGE ANNUAL RETURNS: PRE-TAX AND AFTER-TAX
PERIOD ENDED 4/30/00 THREE YEARS ----------------------------------------------- PRE TAX AFTER TAX(2) % LOST TO TAXES - ------------------------------------------------------------------------------------------------------------- Schwab S&P 500 Fund-Investor Shares(1) 23.20% 22.76% (1.90)% - ------------------------------------------------------------------------------------------------------------- Average Large-Cap Fund(3),(4) 22.04% 19.45% (11.75)% - -------------------------------------------------------------------------------------------------------------
(1) A portion of the fund's expenses was reduced during the reporting period. Without such reductions, the fund's average annual returns would have been lower. (2) After-tax returns assume the maximum federal income tax rate of 39.6% on dividends and 20% on capital gains distributions. Tax rates vary and may be higher or lower than those shown. State and local taxes have not been considered. After-tax return information is not applicable to shareholders in tax-deferred accounts such as IRAs or 401ks. Past after-tax information is not a prediction of future tax efficiency. These after-tax returns do not reflect any taxes you may have to pay as a result of selling your shares. (3) Indices are unmanaged and do not reflect advisory fees and other expenses associated with an investment in the fund. Investors cannot invest in an index fund. (4) Source: Morningstar, Inc. The large-cap fund category contains 832 funds with three-year track records as of 4/30/00. These funds may or may not follow a tax-efficient strategy similar to that followed by the Schwab S&P 500 Fund. 9 EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
SCHWAB S&P 500 S&P 500 INDEX SCHWAB S&P 500 FUND-INVESTOR SHARES FUND-E.SHARES 5/96 $10,000 $10,000 $10,000 5/96 $10,250 $10,257 $10,250 6/96 $10,290 $10,296 $10,290 7/96 $9,840 $9,841 $9,840 8/96 $10,040 $10,049 $10,050 9/96 $10,600 $10,613 $10,600 10/96 $10,880 $10,906 $10,890 11/96 $11,690 $11,731 $11,710 12/96 $11,462 $11,498 $11,473 1/97 $12,157 $12,216 $12,179 2/97 $12,248 $12,312 $12,270 3/97 $11,744 $11,808 $11,766 4/97 $12,430 $12,511 $12,452 5/97 $13,186 $13,272 $13,209 6/97 $13,760 $13,867 $13,794 7/97 $14,849 $14,969 $14,873 8/97 $14,012 $14,131 $14,036 9/97 $14,778 $14,904 $14,803 10/97 $14,284 $14,406 $14,318 11/97 $14,930 $15,073 $14,964 12/97 $15,184 $15,332 $15,227 1/98 $15,357 $15,502 $15,390 2/98 $16,455 $16,620 $16,490 3/98 $17,289 $17,471 $17,336 4/98 $17,452 $17,647 $17,499 5/98 $17,147 $17,344 $17,193 6/98 $17,838 $18,048 $17,886 7/98 $17,645 $17,857 $17,692 8/98 $15,092 $15,278 $15,136 9/98 $16,058 $16,257 $16,103 10/98 $17,340 $17,579 $17,397 11/98 $18,387 $18,645 $18,446 12/98 $19,443 $19,718 $19,504 1/99 $20,253 $20,543 $20,316 2/99 $19,617 $19,904 $19,679 3/99 $20,397 $20,700 $20,459 4/99 $21,176 $21,501 $21,240 5/99 $20,663 $20,994 $20,737 6/99 $21,812 $22,159 $21,878 7/99 $21,125 $21,467 $21,199 8/99 $21,012 $21,360 $21,086 9/99 $20,428 $20,775 $20,501 10/99 $21,709 $22,090 $21,795 11/99 $22,150 $22,539 $22,227 12/99 $23,448 $23,866 $23,536 1/00 $22,266 $22,668 $22,350 2/00 $21,841 $22,239 $21,924 3/00 $23,967 $24,415 $24,057 4/00 $23,241 $23,680 $23,328
The above graph compares the growth of a hypothetical $10,000 investment in the Schwab S&P 500 Fund-Investor Shares and e.Shares,-TM- made at their inception, with a similar investment in the S&P 500-Registered Trademark- Index. THE INFORMATION PRESENTED IS HISTORICAL AND DOES NOT REPRESENT FUTURE RESULTS. TOTAL RETURNS ASSUME REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS. PRINCIPAL VALUE AND INVESTMENT RETURNS WILL FLUCTUATE, SO AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. Indices are unmanaged and do not reflect advisory fees and other expenses associated with an investment in the fund. Investors cannot invest in an index directly. ASSETS - ------------------------------------------------------------------------ Total net assets as of 10/31/99 (000s) $3,617,323 - ------------------------------------------------------------------------ Total net assets as of 4/30/00 (000s) $3,962,602 - ------------------------------------------------------------------------ Percentage growth from 10/31/99 to 4/30/00 9.5% - ------------------------------------------------------------------------
10 SCHWAB S&P 500 FUND-SELECT SHARES-TM- FUND PERFORMANCE AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED 4/30/00
SINCE INCEPTION SIX MONTHS(1) ONE YEAR (5/19/97) - --------------------------------------------------------------------------------------------------------------- SCHWAB S&P 500 FUND-SELECT SHARES(2),(3) 7.13% 9.93% 22.17% - --------------------------------------------------------------------------------------------------------------- S&P 500-Registered Trademark- Index 7.19% 10.13% 22.46% - --------------------------------------------------------------------------------------------------------------- Index Tracking Differential-Select Shares (0.06)% (0.20)% (0.29)% - ---------------------------------------------------------------------------------------------------------------
National Association of Securities Dealers (NASD) regulations require that we report performance data as of the most recent calendar quarter--in this case, the quarter ended 3/31/00. As of 3/31/00, the fund's six-month, one-year and since-inception average annual total returns were 17.44%, 17.74% and 24.20%, respectively. Also shown is the difference between the total returns of the S&P 500 Index and the Schwab S&P 500 Fund, often referred to as the "tracking differential." (See page 8 for a more detailed discussion). (1) Actual, not annualized, because period is less than one year. (2) A portion of the fund's expenses was reduced during the reporting period. Without such reductions, the fund's average annual returns would have been lower. (3) The required minimum initial investment in the Select Shares is $50,000. 11 EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC GROWTH OF A HYPOTHETICAL $50,000 INVESTMENT
SCHWAB S&P 500 S&P 500 INDEX FUND-SELECT SHARES 5/97 $50,000 $50,000 5/97 $50,935 $50,930 6/97 $53,190 $53,212 7/97 $57,395 $57,442 8/97 $54,165 $54,225 9/97 $57,120 $57,191 10/97 $55,215 $55,281 11/97 $57,745 $57,841 12/97 $58,745 $58,836 1/98 $59,375 $59,489 2/98 $63,660 $63,778 3/98 $66,880 $67,043 4/98 $67,550 $67,720 5/98 $66,370 $66,556 6/98 $69,040 $69,258 7/98 $68,295 $68,524 8/98 $58,435 $58,629 9/98 $62,165 $62,387 10/98 $67,155 $67,459 11/98 $71,245 $71,547 12/98 $75,340 $75,668 1/99 $78,475 $78,831 2/99 $76,015 $76,379 3/99 $79,030 $79,434 4/99 $82,085 $82,509 5/99 $80,140 $80,561 6/99 $84,545 $85,033 7/99 $81,885 $82,380 8/99 $81,490 $81,968 9/99 $79,230 $79,721 10/99 $84,230 $84,767 11/99 $85,935 $86,491 12/99 $91,000 $91,585 1/00 $86,420 $86,987 2/00 $84,770 $85,341 3/00 $93,050 $93,687 4/00 $90,235 $90,867
The above graph compares the growth of a hypothetical $50,000 investment in the Schwab S&P 500 Fund-Select Shares, made at its inception, with a similar investment in the S&P 500-Registered Trademark- Index. THE INFORMATION PRESENTED IS HISTORICAL AND DOES NOT REPRESENT FUTURE RESULTS. TOTAL RETURNS ASSUME REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS. PRINCIPAL VALUE AND INVESTMENT RETURNS WILL FLUCTUATE, SO AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. Indices are unmanaged and do not reflect advisory fees and other expenses associated with an investment in the fund. Investors cannot invest in an index directly. ASSETS - ------------------------------------------------------------------------ Total net assets as of 10/31/99 (000s) $3,750,052 - ------------------------------------------------------------------------ Total net assets as of 4/30/00 (000s) $4,076,351 - ------------------------------------------------------------------------ Percentage growth from 10/31/99 to 4/30/00 8.7% - ------------------------------------------------------------------------
12 SCHWAB S&P 500 FUND PORTFOLIO SNAPSHOT The Schwab S&P 500 Fund (the fund) invests primarily in common stocks of the S&P 500-Registered Trademark- Index, a widely recognized, unmanaged index of 500 large-cap stocks selected by Standard & Poor's.-Registered Trademark- As of April 30, 2000, the aggregate market capitalization of the S&P 500 Index represented approximately 80% of the total value of the U.S. stock market.* Common stocks of the 50 largest companies in the S&P 500 Index accounted for approximately 57% of the index. The information below and on the following page provides a snapshot of the fund's characteristics as of 4/30/00, and is not indicative of its composition after that date. The terms used below are defined beginning on page 46. A complete list of the securities in the fund's portfolio as of 4/30/00 is provided in the Schedule of Investments later in this report. FUND FACTS
SCHWAB S&P 500 FUND- PEER GROUP INVESTOR SHARES AVERAGE+ - ---------------------------------------------------------------------------------------------------------------------- Number of Issues 505 138 - ---------------------------------------------------------------------------------------------------------------------- Median Market Cap ($ Mil) $95,991+ $58,904 - ---------------------------------------------------------------------------------------------------------------------- Price/Earnings (P/E) Ratio 37.0+ 35.4 - ---------------------------------------------------------------------------------------------------------------------- Price/Book (P/B) Ratio 10.4+ 9.5 - ---------------------------------------------------------------------------------------------------------------------- 12-Month Yield 0.81%+ 0.45% - ---------------------------------------------------------------------------------------------------------------------- Portfolio Turnover Rate 6% 75% - ---------------------------------------------------------------------------------------------------------------------- Three-Year Beta 1.00+ 0.94 - ---------------------------------------------------------------------------------------------------------------------- Expense Ratio 0.35%** 1.34% - ----------------------------------------------------------------------------------------------------------------------
* Source: Wilshire Associates. The U.S. stock market as represented by the Wilshire 5000 Index. ** Reflects a voluntary reduction by Charles Schwab Investment Management, Inc. (investment adviser), and Schwab, which is guaranteed through at least 2/28/01 (excluding interest, taxes and certain non-routine expenses). + Source: Morningstar. This information is as of 4/30/00, and is for illustrative purposes only. It is not intended to show, predict or guarantee future composition of the fund. The peer group average is based on 2,297 large-cap funds as tracked by Morningstar. 13 EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC PORTFOLIO COMPOSITION BY INDUSTRY AS OF 4/30/00 Other 25.2% Business Machines and Software 16.5% Electronics 12.2% Healthcare/Drugs and Medicine 9.6% Telephone 6.9% Retail 5.9% Producer Goods and Manufacturing 5.5% Miscellaneous Finance 5.2% Banks 4.7% Business Services 4.5% Media 3.8%
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC EQUITY INVESTMENT STYLE BOX(1) AS OF 4/30/00
- -STYLE- Value Blend Growth -Market Cap- X Large Medium Small
TOP 10 HOLDINGS AS A PERCENTAGE OF FUND INVESTMENTS(2) - --------------------------------------------- General Electric, Co. 4.1% - --------------------------------------------- Cisco Systems, Inc. 3.8% - --------------------------------------------- Intel Corp. 3.4% - --------------------------------------------- Microsoft Corp. 2.9% - --------------------------------------------- Exxon Mobil Corp. 2.1% - --------------------------------------------- - --------------------------------------------- Wal-Mart Stores, Inc. 2.0% - --------------------------------------------- Oracle Corp. 1.8% - --------------------------------------------- International Business Machines Corp. 1.6% - --------------------------------------------- Citigroup, Inc. 1.6% - --------------------------------------------- Lucent Technologies, Inc. 1.6% - ---------------------------------------------
(1) Source: Morningstar, Inc. The style box illustrates the composition of the fund's portfolio as of 4/30/00. It is not indicative of the fund's holdings after that date, nor does it represent an exact assessment of risk or future assessment or any type of future performance. Placement is based on the fund's P/E and P/B ratios relative to the S&P 500-Registered Trademark- Index, as well as the size of the companies in which it invests, or median market capitalization. (2) Nothing in this report represents a recommendation of a security by the investment adviser. 14 SCHWAB 1000 FUND-REGISTERED TRADEMARK--INVESTOR SHARES FUND PERFORMANCE AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED 4/30/00
SINCE INCEPTION SIX MONTHS(1) ONE YEAR FIVE YEARS (4/2/91) - --------------------------------------------------------------------------------------------------------------- SCHWAB 1000 FUND-INVESTOR SHARES(2) 8.88% 11.10% 24.55% 18.20% - --------------------------------------------------------------------------------------------------------------- Schwab 1000 Index-Registered Trademark- 9.05% 11.34% 25.05% 18.68% - --------------------------------------------------------------------------------------------------------------- Index Tracking Differential-Investor Shares (0.17)% (0.24)% (0.50)% (0.48)% - --------------------------------------------------------------------------------------------------------------- S&P 500-Registered Trademark- Index(3) 7.19% 10.13% 25.26% 18.60% - ---------------------------------------------------------------------------------------------------------------
National Association of Securities Dealers (NASD) regulations require that we report performance data as of the most recent calendar quarter--in this case, the quarter ended 3/31/00. As of 3/31/00, the fund's six-month, one-year, five-year and since inception average annual total returns were 20.61%, 20.13%, 26.13% and 18.88%, respectively. Also shown is the difference between the total returns of the Schwab 1000 Index and the Schwab 1000 Fund, which is often referred to as the "tracking differential." (See page 8 for a more detailed discussion). TAX-SMART INVESTMENT STRATEGY The Schwab 1000 Fund seeks to maximize its after-tax performance by using a strategy that helps reduce capital gains distributions. This strategy is designed to help investors keep more of what their money earns. The chart below illustrates the effects of this strategy on the five-year performance of the Schwab 1000 Fund-Investor Shares. AVERAGE ANNUAL RETURNS: PRE-TAX AND AFTER-TAX
PERIOD ENDED 4/30/00 FIVE YEARS -------------------------------------------- PRE TAX AFTER TAX(4) % LOST TO TAXES - ---------------------------------------------------------------------------------------------------------- Schwab 1000 Fund-Investor Shares(2) 24.55% 24.06% (2.00)% - ---------------------------------------------------------------------------------------------------------- Average Large-Cap Fund(5) 21.99% 19.22% (12.60)% - ----------------------------------------------------------------------------------------------------------
(1) Actual, not annualized, because period is less than one year. (2) A portion of the fund's expenses was reduced during the reporting period. Without such reductions, the fund's average annual returns would have been lower. (3) Indices are unmanaged and do not reflect advisory fees and other expenses associated with an investment in the fund. Investors cannot invest in an index directly. (4) After-tax returns assume the maximum federal income tax rate of 39.6% on dividends and 20% on capital gains distributions. Tax rates vary and may be higher or lower than those shown. State and local taxes have not been considered. After-tax return information is not applicable to shareholders in tax-deferred accounts such as IRAs or 401ks. Past after-tax information is not a prediction of future tax efficiency. These after tax returns do not reflect any taxes you may have to pay as a result of selling your shares. (5) Source: Morningstar, Inc. The large-cap fund category contains 647 funds with five-year track records as of 4/30/00. These funds may or may not follow a tax-efficient strategy similar to that followed by the Schwab 1000 Fund. 15 EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
SCHWAB 1000 S&P 500 INDEX SCHWAB 1000 INDEX FUND-INVESTOR SHARES 4/91 $10,000 $10,000 $10,000 4/91 $9,910 $9,908 $9,898 5/91 $10,320 $10,335 $10,311 6/91 $9,850 $9,861 $9,840 7/91 $10,320 $10,321 $10,310 8/91 $10,600 $10,566 $10,591 9/91 $10,460 $10,389 $10,455 10/91 $10,630 $10,528 $10,625 11/91 $10,240 $10,104 $10,225 12/91 $11,425 $11,260 $11,412 1/92 $11,283 $11,050 $11,272 2/92 $11,425 $11,193 $11,415 3/92 $11,171 $10,975 $11,163 4/92 $11,404 $11,298 $11,392 5/92 $11,404 $11,353 $11,457 6/92 $11,465 $11,184 $11,257 7/92 $11,726 $11,641 $11,728 8/92 $11,480 $11,403 $11,486 9/92 $11,623 $11,537 $11,646 10/92 $11,746 $11,577 $11,763 11/92 $12,208 $11,971 $12,233 12/92 $12,398 $12,119 $12,428 1/93 $12,502 $12,220 $12,539 2/93 $12,595 $12,387 $12,632 3/93 $12,896 $12,648 $12,948 4/93 $12,533 $12,342 $12,583 5/93 $12,896 $12,673 $12,957 6/93 $12,958 $12,710 $13,024 7/93 $12,905 $12,659 $12,989 8/93 $13,397 $13,139 $13,492 9/93 $13,355 $13,038 $13,454 10/93 $13,544 $13,308 $13,654 11/93 $13,355 $13,181 $13,462 12/93 $13,592 $13,341 $13,700 1/94 $14,005 $13,794 $14,136 2/94 $13,645 $13,420 $13,781 3/94 $13,042 $12,837 $13,169 4/94 $13,190 $13,001 $13,326 5/94 $13,349 $13,213 $13,488 6/94 $12,988 $12,889 $13,127 7/94 $13,405 $13,312 $13,558 8/94 $13,971 $13,856 $14,147 9/94 $13,651 $13,518 $13,825 10/94 $13,918 $13,821 $14,095 12/94 $13,416 $13,318 $13,590 12/94 $13,577 $13,514 $13,767 1/95 $13,923 $13,864 $14,121 2/95 $14,474 $14,404 $14,700 3/95 $14,852 $14,829 $15,094 4/95 $15,219 $15,264 $15,476 5/95 $15,770 $15,874 $16,048 6/95 $16,191 $16,242 $16,490 7/95 $16,807 $16,779 $17,111 8/95 $16,936 $16,821 $17,245 9/95 $17,606 $17,531 $17,949 10/95 $17,520 $17,468 $17,859 11/95 $18,276 $18,233 $18,646 12/95 $18,547 $18,585 $18,924 1/96 $19,095 $19,217 $19,499 2/96 $19,379 $19,396 $19,789 3/96 $19,554 $19,582 $19,980 4/96 $19,883 $19,870 $20,321 5/96 $20,354 $20,380 $20,812 6/96 $20,299 $20,458 $20,779 7/96 $19,335 $19,554 $19,794 8/96 $19,861 $19,966 $20,327 9/96 $20,967 $21,088 $21,465 10/96 $21,394 $21,670 $21,899 11/96 $22,938 $23,308 $23,485 12/96 $22,549 $22,847 $23,103 1/97 $23,846 $24,272 $24,442 2/97 $23,935 $24,464 $24,528 3/97 $22,870 $23,461 $23,457 4/97 $24,101 $24,859 $24,696 5/97 $25,631 $26,371 $26,291 6/97 $26,695 $27,552 $27,402 7/97 $28,857 $29,743 $29,615 8/97 $27,471 $28,077 $28,216 9/97 $28,946 $29,613 $29,732 10/97 $27,992 $28,624 $28,756 11/97 $29,167 $29,949 $29,983 12/97 $29,747 $30,464 $30,582 1/98 $29,960 $30,802 $30,818 2/98 $32,166 $33,023 $33,116 3/98 $33,801 $34,714 $34,830 4/98 $34,149 $35,065 $35,211 5/98 $33,398 $34,462 $34,441 6/98 $34,742 $35,861 $35,824 7/98 $34,260 $35,481 $35,324 8/98 $29,142 $30,357 $30,049 9/98 $31,023 $32,303 $32,014 10/98 $33,487 $34,929 $34,602 11/98 $35,570 $37,046 $36,762 12/98 $37,826 $39,180 $39,090 1/99 $39,259 $40,818 $40,575 2/99 $37,939 $39,548 $39,256 3/99 $39,462 $41,130 $40,820 4/99 $41,065 $42,722 $42,505 5/99 $40,117 $41,714 $41,535 6/99 $42,115 $44,029 $43,637 7/99 $40,772 $42,655 $42,247 9/99 $40,377 $42,442 $41,900 8/99 $39,304 $41,279 $40,655 10/99 $41,901 $43,891 $43,397 11/99 $42,917 $44,784 $44,410 12/99 $45,770 $47,422 $47,386 1/00 $43,622 $45,041 $45,179 2/00 $43,634 $44,188 $45,237 3/00 $47,406 $48,511 $49,172 4/00 $45,622 $47,052 $47,326
The above graph compares the growth of a hypothetical $10,000 investment in the Schwab 1000 Fund-Investor Shares, made at its inception, with similar investments in the Schwab 1000 Index-Registered Trademark- and the S&P 500-Registered Trademark- Index. THE INFORMATION PRESENTED IS HISTORICAL AND DOES NOT REPRESENT FUTURE RESULTS. TOTAL RETURNS ASSUME REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS. PRINCIPAL VALUE AND INVESTMENT RETURNS WILL FLUCTUATE, SO AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. Indices are unmanaged and do not reflect advisory fees and other expenses associated with an investment in the fund. Investors cannot invest in an index directly. ASSETS - ------------------------------------------------------------------------ Total net assets as of 10/31/99 (000s) $4,924,606 - ------------------------------------------------------------------------ Total net assets as of 4/30/00 (000s) $5,099,907 - ------------------------------------------------------------------------ Percentage growth from 10/31/99 to 4/30/00 3.6% - ------------------------------------------------------------------------
16 SCHWAB 1000 FUND-SELECT SHARES-TM- FUND PERFORMANCE AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED 4/30/00
SINCE INCEPTION SIX MONTHS(1) ONE YEAR (5/19/97) - --------------------------------------------------------------------------------------------------------------- SCHWAB 1000 FUND-SELECT SHARES(2),(3) 8.92% 11.20% 22.61% - --------------------------------------------------------------------------------------------------------------- Schwab 1000 Index-Registered Trademark- 9.05% 11.34% 22.94% - --------------------------------------------------------------------------------------------------------------- Index Tracking Differential-Select Shares (0.13)% (0.14)% (0.33)% - --------------------------------------------------------------------------------------------------------------- S&P 500-Registered Trademark- Index 7.19% 10.13% 22.46% - ---------------------------------------------------------------------------------------------------------------
National Association of Securities Dealers (NASD) regulations require that we report performance data as of the most recent calendar quarter--in this case, the quarter ended 3/31/00. As of 3/31/00, the fund's six-month, one-year and since-inception average annual total returns were 20.65%, 20.27% and 25.00%, respectively. Also shown is the difference between the total returns of the Schwab 1000 Index and the Schwab 1000 Fund, often referred to as the "tracking differential." (See page 8 for a more detailed discussion). (1) Actual, not annualized, because period is less than one year. (2) A portion of the fund's expenses was reduced during the reporting period. Without such reductions, the fund's average annual returns would have been lower. (3) The required minimum initial investment in the Select Shares is $50,000. 17 EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC GROWTH OF A HYPOTHETICAL $50,000 INVESTMENT
SCHWAB 1000 FUND-SELECT S&P 500 SCHWAB 1000 SHARES INDEX INDEX 5/97 $50,000 $50,000 $50,000 5/97 $51,040 $50,930 $51,064 6/97 $53,180 $53,212 $53,222 7/97 $57,490 $57,442 $57,518 8/97 $54,750 $54,225 $54,801 9/97 $57,685 $57,191 $57,746 10/97 $55,785 $55,281 $55,851 11/97 $58,150 $57,841 $58,233 12/97 $59,325 $58,836 $59,398 1/98 $59,725 $59,489 $59,855 2/98 $64,145 $63,778 $64,318 3/98 $67,405 $67,043 $67,648 4/98 $68,100 $67,720 $68,387 5/98 $66,625 $66,556 $66,893 6/98 $69,305 $69,258 $69,578 7/98 $68,345 $68,524 $68,606 8/98 $58,140 $58,629 $58,362 9/98 $61,915 $62,387 $62,179 10/98 $66,825 $67,459 $67,206 11/98 $71,000 $71,547 $71,400 12/98 $75,505 $75,668 $75,922 1/99 $78,385 $78,831 $78,805 2/99 $75,750 $76,379 $76,244 3/99 $78,795 $79,434 $79,282 4/99 $82,015 $82,509 $82,553 5/99 $80,120 $80,561 $80,671 6/99 $84,110 $85,033 $84,753 7/99 $81,450 $82,380 $82,052 8/99 $80,665 $81,968 $81,380 9/99 $78,545 $79,721 $78,960 10/99 $83,725 $84,767 $84,287 11/99 $85,755 $86,491 $86,255 12/99 $91,470 $91,585 $92,034 1/00 $87,180 $86,987 $87,747 2/00 $87,225 $85,341 $87,861 3/00 $94,765 $93,687 $95,504 4/00 $91,200 $90,867 $91,917
The above graph compares the growth of a hypothetical $50,000 investment in the Schwab 1000 Fund-Select Shares-TM-, made at its inception, with a similar investment in the Schwab 1000 Index-Registered Trademark- and the S&P 500-Registered Trademark- Index. THE INFORMATION PRESENTED IS HISTORICAL AND DOES NOT REPRESENT FUTURE RESULTS. TOTAL RETURNS ASSUME REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS. PRINCIPAL VALUE AND INVESTMENT RETURNS WILL FLUCTUATE, SO AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. Indices are unmanaged and do not reflect advisory fees and other expenses associated with an investment in the fund. Investors cannot invest in an index directly. ASSETS - ------------------------------------------------------------------------ Total net assets as of 10/31/99 (000s) $2,213,586 - ------------------------------------------------------------------------ Total net assets as of 4/30/00 (000s) $2,434,458 - ------------------------------------------------------------------------ Percentage growth from 10/31/99 to 4/30/00 10.0% - ------------------------------------------------------------------------
18 SCHWAB 1000 FUND-REGISTERED TRADEMARK- PORTFOLIO SNAPSHOT The Schwab 1000 Fund (the fund) invests primarily in common stocks of the Schwab 1000 Index-Registered Trademark-, an index created to represent the performance of publicly traded common stocks of the 1,000 largest U.S. companies (excluding investment companies). As of April 30, 2000, the aggregate market capitalization of the Schwab 1000 Index represented approximately 87.3% of the total value of the U.S. stock market, as represented by the Wilshire 5000 Index.* The information below and on the following page provides a snapshot of the fund's characteristics as of 4/30/00, and is not indicative of its composition after that date. The terms used below are defined beginning on page 46. A complete list of the securities in the fund's portfolio as of 4/30/00 is provided in the Schedule of Investments later in this report. FUND FACTS
SCHWAB 1000 FUND- PEER GROUP INVESTOR SHARES AVERAGE+ - ---------------------------------------------------------------------------------------------------------------------------- Number of Issues 987 138 - ---------------------------------------------------------------------------------------------------------------------------- Median Market Cap ($ Mil) $67,425+ $58,904 - ---------------------------------------------------------------------------------------------------------------------------- Price/Earnings (P/E) Ratio 37.3+ 35.4 - ---------------------------------------------------------------------------------------------------------------------------- Price/Book (P/B) Ratio 10.7+ 9.5 - ---------------------------------------------------------------------------------------------------------------------------- 12-Month Yield 0.64%+ 0.45% - ---------------------------------------------------------------------------------------------------------------------------- Portfolio Turnover Rate 5% 75% - ---------------------------------------------------------------------------------------------------------------------------- Three-Year Beta 1.00+ 0.94 - ---------------------------------------------------------------------------------------------------------------------------- Expense Ratio 0.46%** 1.34% - ----------------------------------------------------------------------------------------------------------------------------
* Source: Wilshire Associates. ** Reflects a voluntary reduction by the investment adviser and Schwab, which is guaranteed through at least 2/28/01 (excluding interest, taxes and certain non-routine expenses). + Source: Morningstar. This information is as of 4/30/00, and is for illustrative purposes only. It is not intended to show, predict or guarantee future composition of the fund. The peer group average is based on 2,297 large-cap funds as tracked by Morningstar. 19 EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC PORTFOLIO COMPOSITION BY INDUSTRY AS OF 4/30/00 Other 23.0% Business Machines and Software 15.3% Electronics 12.5% Healthcare/Drugs and Medicine 9.7% Telephone 7.2% Business Services 6.0% Miscellaneous Finance 5.9% Retail 5.8% Producer Goods and Manufacturing 5.4% Banks 4.8% Media 4.4%
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC EQUITY INVESTMENT STYLE BOX(++) AS OF 4/30/00
- -STYLE- Value Blend Growth -Market Cap- X Large Medium Small
TOP 10 HOLDINGS AS A PERCENTAGE OF FUND INVESTMENTS(1) - --------------------------------------------- General Electric Co. 3.7% - --------------------------------------------- Cisco Systems, Inc. 3.4% - --------------------------------------------- Intel Corp. 3.1% - --------------------------------------------- Microsoft Corp. 2.6% - --------------------------------------------- Exxon Mobil Corp. 1.9% - --------------------------------------------- - --------------------------------------------- Wal-Mart Stores, Inc. 1.8% - --------------------------------------------- Oracle Corp. 1.6% - --------------------------------------------- International Business Machines Corp. 1.5% - --------------------------------------------- Citigroup, Inc. 1.4% - --------------------------------------------- Lucent Technologies, Inc. 1.4% - ---------------------------------------------
++ Source: Morningstar, Inc. The style box illustrates the composition of the fund's portfolio as of 4/30/00. It is not indicative of the fund's holdings after that date, nor does it represent an exact assessment of risk or future assessment or any type of future performance. Placement is based on the fund's P/E and P/B ratios relative to the S&P 500-Registered Trademark- Index, as well as the size of the companies in which it invests, or median market capitalization. (1) Nothing in this report represents a recommendation of a security by the investment adviser. 20 SCHWAB TOTAL STOCK MARKET INDEX FUND-TM- FUND PERFORMANCE CUMULATIVE TOTAL RETURNS FOR THE PERIOD ENDED 4/30/00
SINCE INCEPTION(1) SIX MONTHS(1) (5/28/99) - --------------------------------------------------------------------------------------------- SCHWAB TOTAL STOCK MARKET INDEX FUND-INVESTOR SHARES(2) 9.24% 13.99% - --------------------------------------------------------------------------------------------- SCHWAB TOTAL STOCK MARKET INDEX FUND-SELECT SHARES(2,3) 9.26% 14.12% - --------------------------------------------------------------------------------------------- Wilshire 5000 Index(4) 9.45% 14.32% - --------------------------------------------------------------------------------------------- Index Tracking Differential-Investor Shares (0.21)% (0.33)% - --------------------------------------------------------------------------------------------- Index Tracking Differential-Select Shares (0.19)% (0.20)% - ---------------------------------------------------------------------------------------------
National Association of Securities Dealers (NASD) regulations require that we additionally report performance data as of the most recent calendar quarter--in this case, the quarter ended 3/31/00. As of 3/31/00, the fund's six-month and the cumulative total returns since inception were 22.42% and 20.22%, respectively, for the Investor Shares and 22.44% and 20.30%, respectively, for the Select Shares.(2) The index-tracking differential represents the difference between the total returns of the Wilshire 5000 Total Market Index(5) and the Schwab Total Stock Market Index Fund. The tracking differential arises due to several factors. (1) Actual, not annualized, because period is less than one year. (2) A portion of the fund's expenses was reduced during the reporting period. Without such reductions, the total returns since inception would have been lower. (3) The required minimum initial investment in the Select Shares is $50,000 (4) Indices are unmanaged and do not reflect advisory fees and other expenses associated with an investment in the fund. Investors cannot invest in an index directly. (5) Wilshire and Wilshire 5000 are registered service marks of Wilshire Associates, Inc. The fund is not sponsored, endorsed, sold or promoted by Wilshire Associates, and Wilshire Associates is not in any way affiliated with the fund. Wilshire Associates makes no representation about the advisability of investing in the fund or in any stock included in the Wilshire 5000. 21 TAX-SMART INVESTMENT STRATEGY One of the most attractive features of the Schwab Total Stock Market Index Fund-TM- is that it uses a strategy designed to maximize after-tax return potential. Like other index funds, the fund generally will have lower portfolio turnover than actively managed funds, because it won't have to actively trade stocks unless a company joins or exits the index. In addition, the fund's managers attempt to offset capital gains with losses whenever possible. The Schwab Total Stock Market Index Fund has the potential to be even more tax efficient than funds that track other indices. That's because the fund seeks to track the Wilshire 5000 Index. And because that index essentially represents all stocks in the U.S. market, the fund isn't forced to trade stocks that leave the index due to fluctuations in their market capitalizations. EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
SCHWAB TOTAL STOCK MARKET INDEX FUND-INVESTOR SHARES WILSHIRE 5000 INDEX 6/99 $10,000 $10,000 6/99 $10,515 $10,518 7/99 $10,165 $10,180 8/99 $10,070 $10,086 9/99 $9,820 $9,822 10/99 $10,435 $10,447 11/99 $10,790 $10,797 12/99 $11,605 $11,617 1/00 $11,108 $11,135 2/00 $11,374 $11,384 3/00 $12,022 $12,060 4/00 $11,399 $11,432
The above graph compares the growth of a hypothetical $10,000 investment in the Schwab Total Stock Market Index Fund-Investor Shares, made at its inception, with a similar investment in the Wilshire 5000 Index. 22 EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC GROWTH OF A HYPOTHETICAL $50,000 INVESTMENT
SCHWAB TOTAL STOCK MARKET INDEX FUND-SELECT SHARES WILSHIRE 5000 INDEX 06/99 $50,000 $50,000 06/99 $52,600 $52,590 07/99 $50,850 $50,902 08/99 $50,350 $50,428 09/99 $49,125 $49,112 10/99 $52,225 $52,236 11/99 $53,975 $53,986 12/99 $58,065 $58,083 01/00 $55,605 $55,673 02/00 $56,935 $56,920 03/00 $60,150 $60,301 04/00 $57,060 $57,159
The above graph compares the growth of a hypothetical $50,000 investment in the Schwab Total Stock Market Index Fund-Select Shares, made at its inception, with a similar investment in the Wilshire 5000 Index. THE INFORMATION PRESENTED IS HISTORICAL AND DOES NOT REPRESENT FUTURE RESULTS. TOTAL RETURNS ASSUME REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS. PRINCIPAL VALUE AND INVESTMENT RETURNS WILL FLUCTUATE, SO AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. Indices are unmanaged and do not reflect advisory fees and other expenses associated with an investment in the fund. Investors cannot invest in an index directly. ASSETS
INVESTOR SHARES SELECT SHARES-REGISTERED TRADEMARK- - ----------------------------------------------------------------------------------------------------------------------- Total net assets as of 10/31/99 (000s) $135,720 $149,131 - ----------------------------------------------------------------------------------------------------------------------- Total net assets as of 4/30/00 $196,433 $229,299 - ----------------------------------------------------------------------------------------------------------------------- Percentage growth from 10/31/99 to 4/30/00 44.7% 53.8% - -----------------------------------------------------------------------------------------------------------------------
23 SCHWAB TOTAL STOCK MARKET INDEX FUND-TM- PORTFOLIO SNAPSHOT Schwab Total Stock Market Index Fund (the fund) invests in stocks that are included in the Wilshire 5000 Index. The fund uses a "sampling" strategy, which means it purchases a representative sample of stocks in the index, instead of trying to add them all. The Wilshire 5000 Index, which was created in 1974, and was initially composed of 5,000 stocks, now measures the performance of more than 7,200 U.S.-headquartered companies that have readily available pricing data.* The information below and on the following page provides a snapshot of the fund's characteristics as of 4/30/00, and is not indicative of its composition after that date. The terms used below are defined beginning on page 46. A complete list of the securities in the fund's portfolio as of 4/30/00 is provided in the Schedule of Investments later in this report. FUND FACTS
SCHWAB TOTAL STOCK MARKET INDEX FUND PEER GROUP INVESTOR SHARES AVERAGE+ - --------------------------------------------------------------------------------------------------------------------------- Number of Issues 3,184 138 - --------------------------------------------------------------------------------------------------------------------------- Median Market Cap ($ Mil) $46,856+ $58,904 - --------------------------------------------------------------------------------------------------------------------------- Price/Earnings (P/E) Ratio 36.6+ 35.4 - --------------------------------------------------------------------------------------------------------------------------- Price/Book (P/B) Ratio 10.7+ 9.5 - --------------------------------------------------------------------------------------------------------------------------- 12-Month Yield N/A 0.45% - --------------------------------------------------------------------------------------------------------------------------- Portfolio Turnover Rate 1% 75% - --------------------------------------------------------------------------------------------------------------------------- Expense Ratio 0.40%** 1.34% - ---------------------------------------------------------------------------------------------------------------------------
* Source: Wilshire Associates. ** Reflects a voluntary reduction by the investment adviser and Schwab, which is guaranteed through at least 2/28/01 (excluding interest, taxes and certain non-routine expenses). + Source: Morningstar. This information is as of 4/30/00, and is for illustrative purposes only. It is not intended to show, predict or guarantee future composition of the fund. The peer group average is based on 2,297 large-cap funds as tracked by Morningstar. 24 EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC PORTFOLIO COMPOSITION BY INDUSTRY AS OF 4/30/00 Other 25.4% Business Machines & Software 13.7% Electronics 12.0% Healthcare/Drugs and Medicine 9.2% Business Services 7.9% Telephone 6.8% Miscellaneous Finance 6.2% Retail 5.2% Producer Goods & Manufacturing 5.0% Banks 4.5% Media 4.1%
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC EQUITY INVESTMENT STYLE BOX(++) AS OF 4/30/00 [LOGO] TOP 10 HOLDINGS AS A PERCENTAGE OF FUND INVESTMENTS(1) - --------------------------------------------- General Electric Co. 3.2% - --------------------------------------------- Cisco Systems, Inc. 3.0% - --------------------------------------------- Intel Corp. 2.7% - --------------------------------------------- Microsoft Corp. 2.3% - --------------------------------------------- Exxon Mobil Corp. 1.7% - --------------------------------------------- - --------------------------------------------- Wal-Mart Stores, Inc. 1.6% - --------------------------------------------- Oracle Corp. 1.4% - --------------------------------------------- Lucent Technologies, Inc. 1.3% - --------------------------------------------- Citigroup, Inc. 1.3% - --------------------------------------------- International Business Machines Corp. 1.3% - ---------------------------------------------
++ Source: Morningstar, Inc. The style box illustrates the composition of the fund's portfolio as of 4/30/00. It is not indicative of the fund's holdings after that date, nor does it represent an exact assessment of risk or future assessment or any type of future performance. Placement is based on the fund's P/E and P/B ratios relative to the S&P 500-Registered Trademark- Index, as well as the size of the companies in which it invests, or median market capitalization. (1) Nothing in this report represents a recommendation of a security by the investment adviser. 25 SCHWAB SMALL-CAP INDEX FUND-REGISTERED TRADEMARK--INVESTOR SHARES FUND PERFORMANCE AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED 4/30/00
SINCE INCEPTION SIX MONTHS(1) ONE YEAR FIVE YEARS (12/3/93) - ------------------------------------------------------------------------------------------------------------- SCHWAB SMALL-CAP INDEX FUND-INVESTOR SHARES(2) 16.44% 24.22% 15.73% 13.04% - ------------------------------------------------------------------------------------------------------------- Schwab Small-Cap Index-Registered Trademark- 17.39% 25.80% 17.70% 14.72% - ------------------------------------------------------------------------------------------------------------- Index Tracking Differential-Investor Shares (0.95)% (1.58)% (1.97)% (1.68)% - ------------------------------------------------------------------------------------------------------------- Russell 2000-Registered Trademark- Index 18.72% 18.42% N/A 12.91% - -------------------------------------------------------------------------------------------------------------
National Association of Securities Dealers (NASD) regulations require that we report performance data as of the most recent calendar quarter--in this case, the quarter ended 3/31/00. As of 3/31/00, the fund's six-month, one-year, five-year and since-inception average annual total returns were 24.78%, 40.94%, 17.43% and 14.13%, respectively. Also shown is the difference between the total returns of the Schwab Small-Cap Index and the Schwab Small-Cap Index Fund, which is often referred to as the "tracking differential." (See page 8 for a more detailed discussion). TAX-SMART INVESTMENT STRATEGY The Schwab Small-Cap Index Fund seeks to maximize its after-tax performance by using a strategy that helps reduce capital gains distributions. This strategy is designed to help investors keep more of what their money earns. The chart below illustrates the effects of this strategy on the five-year performance of the Schwab Small-Cap Index Fund-Investor Shares. AVERAGE ANNUAL RETURNS: PRE-TAX AND AFTER-TAX
PERIOD ENDED 4/30/00 FIVE YEARS -------------------------------------------- PRE TAX AFTER TAX(3) % LOST TO TAXES - ---------------------------------------------------------------------------------------------------------- Schwab Small-Cap Index Fund-Investor Shares(2) 15.73% 15.31% (2.67)% - ---------------------------------------------------------------------------------------------------------- Average Small-Cap Fund(4) 17.88% 15.33% (14.26)% - ----------------------------------------------------------------------------------------------------------
(1) Actual, not annualized, because period is less than one year. (2) A portion of the fund's expenses was reduced during the reporting period. Without such reductions, the fund's average annual returns would have been lower. (3) After-tax returns assume the maximum federal income tax rate of 39.60% on dividends and 20% on capital gains distributions. Tax rates vary and may be higher or lower than those shown. State and local taxes have not been considered. After-tax return information is not applicable to shareholders in tax-deferred accounts such as IRAs and 401ks. Past after-tax information is not prediction of future tax efficiency. These after-tax returns do not reflect any taxes you may have to pay as a result of selling your shares. (4) Source: Morningstar, Inc. The small-cap fund category contains 819 funds with one-year track records and 217 funds with five-year track records as of 4/30/00. These funds may or may not follow a tax-efficient strategy similar to that followed by the Schwab Small-Cap Index Fund. 26 EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
SCHWAB SMALL-CAP INDEX FUND-INVESTOR SHARES SCHWAB SMALL-CAP INDEX RUSSELL 2000 INDEX 12/93 $10,000 $10,000 $10,000 12/93 $10,154 $10,234 $10,186 1/94 $10,394 $10,469 $10,505 2/94 $10,334 $10,430 $10,467 3/94 $9,783 $9,871 $9,915 4/94 $9,753 $9,847 $9,974 5/94 $9,613 $9,692 $9,861 6/94 $9,333 $9,419 $9,529 7/94 $9,493 $9,614 $9,685 8/94 $10,134 $10,249 $10,225 9/94 $10,094 $10,191 $10,190 10/94 $10,064 $10,149 $10,149 11/94 $9,663 $9,767 $9,739 12/94 $9,841 $10,000 $10,000 1/95 $9,730 $9,838 $9,874 2/95 $10,082 $10,229 $10,285 3/95 $10,334 $10,442 $10,461 4/95 $10,566 $10,671 $10,693 5/95 $10,717 $10,809 $10,877 6/95 $11,211 $11,356 $11,441 7/95 $11,866 $12,021 $12,100 8/95 $12,077 $12,270 $12,351 9/95 $12,309 $12,510 $12,572 10/95 $11,785 $11,910 $12,010 11/95 $12,329 $12,492 $12,514 12/95 $12,562 $12,782 $12,845 1/96 $12,491 $12,749 $12,831 2/96 $12,967 $13,261 $13,231 3/96 $13,170 $13,492 $13,505 4/96 $13,899 $14,206 $14,227 5/96 $14,384 $14,692 $14,788 6/96 $13,848 $14,222 $14,180 7/96 $12,643 $13,075 $12,942 8/96 $13,413 $13,904 $13,694 9/96 $14,010 $14,416 $14,230 10/96 $13,757 $14,169 $14,010 11/96 $14,344 $14,733 $14,588 12/96 $14,508 $15,007 $14,970 1/97 $14,895 $15,361 $15,269 2/97 $14,376 $14,986 $14,900 3/97 $13,654 $14,257 $14,196 4/97 $13,756 $14,299 $14,236 5/97 $15,383 $16,050 $15,821 6/97 $16,125 $16,880 $16,499 7/97 $17,213 $17,842 $17,267 8/97 $17,538 $18,243 $17,662 9/97 $18,850 $19,675 $18,955 10/97 $18,026 $18,816 $18,123 11/97 $17,843 $18,645 $18,005 12/97 $18,236 $19,035 $18,320 1/98 $17,787 $18,736 $18,031 2/98 $19,195 $20,285 $19,361 3/98 $20,042 $21,199 $20,159 4/98 $20,144 $21,344 $20,270 5/98 $18,930 $20,090 $19,177 6/98 $18,960 $20,146 $19,218 7/98 $17,471 $18,597 $17,661 8/98 $14,062 $15,011 $14,231 9/98 $14,991 $15,953 $15,345 10/98 $15,705 $16,709 $15,972 11/98 $16,532 $17,576 $16,809 12/98 $17,584 $18,719 $17,849 1/99 $17,617 $18,800 $18,086 2/99 $16,145 $17,229 $16,621 3/99 $16,372 $17,559 $16,881 4/99 $17,660 $19,165 $18,393 5/99 $17,974 $19,500 $18,662 6/99 $18,969 $20,778 $19,505 7/99 $18,872 $20,615 $18,971 8/99 $18,309 $20,033 $18,269 9/99 $18,493 $20,204 $18,272 10/99 $18,839 $20,537 $18,347 12/99 $20,008 $21,820 $19,443 01/00 $21,839 $23,899 $21,644 02/00 $21,015 $23,005 $21,295 03/00 $23,801 $26,015 $24,811 04/00 $23,075 $25,333 $23,176 05/00 $21,936 $24,109 $21,781
The above graph compares the growth of a hypothetical $10,000 investment in the Schwab Small-Cap Index Fund-Investor Shares, made at its inception, with similar investments in the Schwab Small-Cap Index-Registered Trademark- and the Russell 2000-Registered Trademark- Index. THE INFORMATION PRESENTED IS HISTORICAL AND DOES NOT REPRESENT FUTURE RESULTS. TOTAL RETURNS ASSUME REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS. PRINCIPAL VALUE AND INVESTMENT RETURNS WILL FLUCTUATE, SO AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. Indices are unmanaged and do not reflect advisory fees and other expenses associated with an investment in the fund. Investors cannot invest in an index directly. ASSETS - ---------------------------------------------------------------------- Total net assets as of 10/31/99 (000s) $452,099 - ---------------------------------------------------------------------- Total net assets as of 4/30/00 (000s) $664,235 - ---------------------------------------------------------------------- Percentage change from 10/31/99 to 4/30/00 46.9% - ----------------------------------------------------------------------
27 SCHWAB SMALL-CAP INDEX FUND-REGISTERED TRADEMARK--SELECT SHARES-TM- FUND PERFORMANCE AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED 4/30/00
SINCE INCEPTION SIX MONTHS(1) ONE YEAR (5/19/97) - --------------------------------------------------------------------------------------------------------------- SCHWAB SMALL-CAP INDEX FUND-SELECT SHARES(2),(3) 16.60% 24.45% 14.62% - --------------------------------------------------------------------------------------------------------------- Schwab Small-Cap Index-Registered Trademark- 17.39% 25.80% 16.52% - --------------------------------------------------------------------------------------------------------------- Index Tracking Differential-Select Shares (0.79)% (1.35)% (1.90)% - --------------------------------------------------------------------------------------------------------------- Russell 2000-Registered Trademark- Index 18.72% 18.42% 12.92% - ---------------------------------------------------------------------------------------------------------------
National Association of Securities Dealers (NASD) regulations require that we report performance data as of the most recent calendar quarter--in this case, the quarter ended 3/31/00. As of 3/31/00, the fund's six-month, one-year and since-inception average annual total returns were 24.87%, 41.20% and 17.10%, respectively. Also shown is the difference between the total returns of the Schwab Small-Cap Index and the Schwab Small-Cap Index Fund, often referred to as the "tracking differential." (See page 8 for a more detailed discussion). (1) Actual, not annualized, because period is less than one year. (2) A portion of the fund's expenses was reduced during the reporting period. Without such reductions, the fund's average annual returns would have been lower. (3) The required minimum initial investment in the Select Shares is $50,000. 28 EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC GROWTH OF A HYPOTHETICAL $50,000 INVESTMENT
SCHWAB SMALL- SCHWAB CAP INDEX FUND- SMALL- RUSSELL SELECT SHARES CAP INDEX 2000 INDEX 5/97 $50,000 $50,000 $50,000 5/97 $52,170 $52,242 $51,960 6/97 $54,690 $54,942 $54,189 7/97 $58,415 $58,075 $56,709 8/97 $59,485 $59,380 $58,008 9/97 $63,965 $64,039 $62,254 10/97 $61,205 $61,244 $59,521 11/97 $60,550 $60,687 $59,134 12/97 $61,920 $61,958 $60,169 1/98 $60,400 $60,983 $59,218 2/98 $65,175 $66,026 $63,588 3/98 $68,050 $69,002 $66,208 4/98 $68,430 $69,473 $66,572 5/98 $64,310 $65,391 $62,984 6/98 $64,415 $65,575 $63,116 7/98 $59,360 $60,531 $58,004 8/98 $47,790 $48,861 $46,740 9/98 $50,945 $51,924 $50,399 10/98 $53,365 $54,386 $52,456 11/98 $56,170 $57,207 $55,204 12/98 $59,775 $60,929 $58,621 1/99 $59,925 $61,193 $59,401 2/99 $54,925 $56,079 $54,590 3/99 $55,660 $57,152 $55,441 4/99 $60,070 $62,380 $60,409 5/99 $61,140 $63,470 $61,291 6/99 $64,555 $67,629 $64,061 7/99 $64,225 $67,099 $62,306 8/99 $62,315 $65,206 $60,000 9/99 $62,940 $65,762 $60,012 10/99 $64,115 $66,846 $60,258 12/99 $68,125 $71,021 $63,856 1/00 $74,390 $77,788 $71,084 2/00 $71,585 $74,879 $69,940 3/00 $81,065 $84,677 $81,487 4/00 $78,595 $82,458 $76,117 5/00 $74,755 $78,471 $71,535
The above graph compares the growth of a hypothetical $50,000 investment in the Schwab Small-Cap Index Fund-Select Shares, made at its inception, with a similar investment in the Schwab Small-Cap Index-Registered Trademark- and the Russell 2000-Registered Trademark- Index. THE INFORMATION PRESENTED IS HISTORICAL AND DOES NOT REPRESENT FUTURE RESULTS. TOTAL RETURNS ASSUME REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS. PRINCIPAL VALUE AND INVESTMENT RETURNS WILL FLUCTUATE, SO AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. Indices are unmanaged and do not reflect advisory fees and other expenses associated with an investment in the fund. Investors cannot invest in an index directly. ASSETS - ---------------------------------------------------------------------- Total net assets as of 10/31/99 (000s) $446,918 - ---------------------------------------------------------------------- Total net assets as of 4/30/00 (000s) $658,258 - ---------------------------------------------------------------------- Percentage growth from 10/31/99 to 4/30/00 47.3% - ----------------------------------------------------------------------
29 SCHWAB SMALL-CAP INDEX FUND-REGISTERED TRADEMARK- PORTFOLIO SNAPSHOT The Schwab Small-Cap Index Fund (the fund) invests primarily in common stocks of the Schwab Small-Cap Index-Registered Trademark-, an index created to represent the performance of common stocks of the second 1,000 largest U.S. companies, ranked by market capitalization. As of April 30, 2000, the aggregate market capitalization of stocks included in the index represented approximately 4.6% of the total market value of all publicly traded U.S. companies, as represented by the Wilshire 5000 Index.* The information below and on the following page provides a snapshot of the fund's characteristics as of 4/30/00, and is not indicative of its composition after that date. The terms used below are defined beginning on page 46. A complete list of the securities in the fund's portfolio as of 4/30/00 is provided in the Schedule of Investments later in this report. FUND FACTS
SCHWAB SMALL-CAP INDEX FUND- PEER GROUP INVESTOR SHARES AVERAGE+ - ------------------------------------------------------------------------------------------------------------------------------ Number of Issues 960 180 - ------------------------------------------------------------------------------------------------------------------------------ Median Market Cap ($ Mil) $833+ $1,019 - ------------------------------------------------------------------------------------------------------------------------------ Price/Earnings (P/E) Ratio 26.4+ 30.3 - ------------------------------------------------------------------------------------------------------------------------------ Price/Book (P/B) Ratio 5.6+ 6.7 - ------------------------------------------------------------------------------------------------------------------------------ 12-Month Yield 0.19%+ 0.21% - ------------------------------------------------------------------------------------------------------------------------------ Portfolio Turnover Rate 50% 92% - ------------------------------------------------------------------------------------------------------------------------------ Three-Year Beta 0.85+ 0.87 - ------------------------------------------------------------------------------------------------------------------------------ Expense Ratio 0.49%** 1.59% - ------------------------------------------------------------------------------------------------------------------------------
* Source: Wilshire Associates. ** Reflects a voluntary reduction by the investment adviser and Schwab, which is guaranteed through at least 2/28/01 (excluding interest, taxes and certain non-routine expenses). + Source: Morningstar. This information is as of 4/30/00, and is for illustrative purposes only. It is not intended to show, predict or guarantee future composition of the fund. The peer group average is based on 845 small-cap funds as tracked by Morningstar. 30 EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC PORTFOLIO COMPOSITION BY INDUSTRY AS OF 4/30/00 Other 34.5% Business Services 13.2% Electronics 12.7% Healthcare/Drugs and Medicine 10.2% Producer Goods & Manufacturing 6.4% Miscellaneous Finance 5.4% Banks 4.2% Utilities-Energy & Gas 3.7% Construction 3.3% Insurance 3.3% Chemical 3.1%
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC EQUITY INVESTMENT STYLE BOX(++) AS OF 4/30/00 - -Style- Value Blend Growth -Market Cap- Large Medium X Small
TOP 10 HOLDINGS AS A PERCENTAGE OF FUND INVESTMENTS(1) - --------------------------------------------- Sabre Holdings Corp., Class A 0.7% - --------------------------------------------- Abgenix, Inc. 0.5% - --------------------------------------------- Celgene Corp. 0.5% - --------------------------------------------- International Rectifier Corp. 0.5% - --------------------------------------------- Imclone Systems 0.4% - --------------------------------------------- - --------------------------------------------- Digital Microwave Corp. 0.4% - --------------------------------------------- Quest Diagnostic, Inc. 0.4% - --------------------------------------------- Lucent Technologies, Inc. 0.4% - --------------------------------------------- Silicon Storage Technology 0.4% - --------------------------------------------- Quanta Services, Inc. 0.4% - ---------------------------------------------
++ Source: Morningstar, Inc. The style box illustrates the composition of the fund's portfolio as of 4/30/00. It is not indicative of the fund's holdings after that date, nor does it represent an exact assessment of risk or future assessment or any type of future performance. Placement is based on the fund's P/E and P/B ratios relative to the S&P 500-Registered Trademark- Index, as well as the size of the companies in which it invests, or median market capitalization. (1) Nothing in this report represents a recommendation of a security by the investment adviser. 31 SCHWAB INTERNATIONAL INDEX FUND-REGISTERED TRADEMARK--INVESTOR SHARES FUND PERFORMANCE AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED 4/30/00
SINCE INCEPTION SIX-MONTHS(1) ONE YEAR FIVE YEARS (9/9/93) - ------------------------------------------------------------------------------------------------------------------ SCHWAB INTERNATIONAL INDEX FUND-INVESTOR SHARES(2) 6.43% 17.94% 12.74% 11.25% - ------------------------------------------------------------------------------------------------------------------ Schwab International Index-Registered Trademark- 6.93% 18.51% 13.20% 11.89% - ------------------------------------------------------------------------------------------------------------------ Index Tracking Differential-Investor Shares (0.50)% (0.57)% (0.46)% (0.64)% - ------------------------------------------------------------------------------------------------------------------ MSCI-EAFE-Registered Trademark- Index 6.72% 13.89% 10.36% 9.56% - ------------------------------------------------------------------------------------------------------------------
National Association of Securities Dealers (NASD) regulations require that we report performance data as of the most recent calendar quarter--in this case, the quarter ended 3/31/00. As of 3/31/00, the fund's six-month, one-year, five-year and since-inception average annual total returns were 18.52%, 29.72%, 14.81% and 12.35%, respectively. Also shown is the difference between the total returns of the Schwab International Index and the Schwab International Index Fund, which is often referred to as the "tracking differential." (See page 8 for a more detailed discussion). TAX-SMART INVESTMENT STRATEGY The Schwab International Index Fund seeks to maximize its after-tax performance by using a strategy that helps reduce capital gains distributions. This strategy is designed to help investors keep more of what their money earns. The chart below illustrates the effects of this strategy on the five-year performance of the Schwab International Index Fund-Investor Shares. AVERAGE ANNUAL RETURNS: PRE TAX AND AFTER-TAX
PERIOD ENDED 4/30/00 FIVE YEARS ----------------------------------------------- PRE TAX AFTER TAX(3) % LOST TO TAXES - ------------------------------------------------------------------------------------------------------------- Schwab International Index Fund-Investor Shares(2) 12.74% 12.27% (3.69)% - ------------------------------------------------------------------------------------------------------------- Average Foreign Fund(4) 13.72% 12.09% (11.88)% - -------------------------------------------------------------------------------------------------------------
(1) Actual, not annualized, because period is less than one year. (2) A portion of the fund's expenses was reduced during the reporting period. Without such reductions, the fund's average annual returns would have been lower. (3) After-tax returns assume the maximum federal income tax rate of 39.6% on dividends and 20% on capital gains distributions. Tax rates vary and may be higher or lower than shown. State and local taxes have not been considered. After-tax return information is not applicable to shareholders in tax-deferred accounts such as IRAs or 401ks. Past after-tax information is not a prediction of future tax efficiency. These after tax returns do not reflect any taxes you may have to pay as a result of selling your shares. (4) Source: Morningstar, Inc. The foreign fund category contains 178 funds with five-year track records as of 4/30/00. These funds may or may not follow a tax-efficient strategy similar to that followed by the Schwab International Index Fund. 32 EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
SCHWAB INTERNATIONAL SCHWAB MSCI-EAFE INDEX FUND- INTERNATIONAL -REGISTERED TRADMARK- INVESTOR SHARES INDEX INDEX 9/93 $10,000 $10,000 $10,000 9/93 $9,770 $9,786 $9,749 10/93 $10,150 $10,167 $10,049 11/93 $9,420 $9,454 $9,171 12/93 $10,096 $10,137 $9,833 1/94 $10,769 $10,823 $10,664 2/94 $10,558 $10,623 $10,634 3/94 $10,156 $10,172 $10,176 4/94 $10,458 $10,544 $10,607 5/94 $10,407 $10,448 $10,547 6/94 $10,488 $10,508 $10,696 7/94 $10,649 $10,692 $10,798 8/94 $10,941 $10,999 $11,054 9/94 $10,559 $10,621 $10,706 10/94 $10,950 $11,026 $11,062 11/94 $10,428 $10,478 $10,530 12/94 $10,484 $10,564 $10,597 1/95 $10,108 $10,254 $10,190 2/95 $10,189 $10,282 $10,160 3/95 $10,759 $10,964 $10,794 4/95 $11,145 $11,346 $11,200 5/95 $11,176 $11,303 $11,067 6/95 $11,064 $11,168 $10,873 7/95 $11,623 $11,826 $11,550 8/95 $11,237 $11,384 $11,110 9/95 $11,470 $11,661 $11,327 10/95 $11,318 $11,461 $11,022 11/95 $11,562 $11,782 $11,329 12/95 $11,975 $12,238 $11,785 1/96 $12,006 $12,277 $11,834 2/96 $12,026 $12,300 $11,874 3/96 $12,232 $12,529 $12,126 4/96 $12,530 $12,826 $12,478 5/96 $12,396 $12,674 $12,249 6/96 $12,489 $12,761 $12,317 7/96 $12,139 $12,430 $11,958 8/96 $12,253 $12,538 $11,984 9/96 $12,592 $12,907 $12,303 10/96 $12,571 $12,863 $12,177 11/96 $13,136 $13,460 $12,662 12/96 $13,067 $13,341 $12,499 1/97 $12,640 $12,898 $12,061 2/97 $12,827 $13,114 $12,259 3/97 $12,932 $13,202 $12,303 4/97 $13,025 $13,344 $12,368 5/97 $13,984 $14,324 $13,174 6/97 $14,766 $15,160 $13,899 7/97 $15,214 $15,570 $14,125 8/97 $14,109 $14,447 $13,070 9/97 $15,078 $15,354 $13,801 10/97 $13,869 $14,110 $12,740 11/97 $13,859 $14,055 $12,610 12/97 $14,022 $14,254 $12,720 1/98 $14,538 $14,830 $13,301 2/98 $15,382 $15,727 $14,155 3/98 $15,782 $16,139 $14,591 4/98 $15,888 $16,248 $14,706 5/98 $15,888 $16,209 $14,634 6/98 $16,025 $16,315 $14,745 7/98 $16,067 $16,419 $14,894 8/98 $14,085 $14,350 $13,049 9/98 $13,632 $13,880 $12,648 10/98 $14,981 $15,335 $13,966 11/98 $15,751 $16,198 $14,681 12/98 $16,244 $16,729 $15,261 1/99 $16,190 $16,640 $15,216 2/99 $15,829 $16,311 $14,853 3/99 $16,541 $17,060 $15,473 4/99 $17,212 $17,794 $16,099 5/99 $16,371 $16,897 $15,270 6/99 $16,999 $17,586 $15,866 7/99 $17,616 $18,240 $16,337 8/99 $17,775 $18,410 $16,345 9/99 $18,105 $18,724 $16,510 10/99 $19,073 $19,722 $17,129 11/99 $19,945 $20,579 $17,724 12/99 $21,704 $22,386 $19,315 01/00 $19,999 $20,761 $18,089 02/00 $20,278 $21,097 $18,576 03/00 $21,457 $22,294 $19,296 04/00 $20,299 $21,089 $18,281
The above graph compares the growth of a hypothetical $10,000 investment in the Schwab International Index Fund-Investor Shares, made at its inception, with similar investments in the Schwab International Index-Registered Trademark- and the MSCI-EAFE-Registered Trademark- Index. THE INFORMATION PRESENTED IS HISTORICAL AND DOES NOT REPRESENT FUTURE RESULTS. TOTAL RETURNS ASSUME REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS. PRINCIPAL VALUE AND INVESTMENT RETURNS WILL FLUCTUATE, SO AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. Indices are unmanaged and do not reflect advisory fees and other expenses associated with an investment in the fund. Investors cannot invest in an index directly. ASSETS - ---------------------------------------------------------------------- Total net assets as of 10/31/99 (000s) $446,625 - ---------------------------------------------------------------------- Total net assets as of 4/30/00 (000s) $591,015 - ---------------------------------------------------------------------- Percentage change from 10/31/99 to 4/30/00 32.3% - ----------------------------------------------------------------------
33 SCHWAB INTERNATIONAL INDEX FUND-REGISTERED TRADEMARK--SELECT SHARES-TM- FUND PERFORMANCE AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED 4/30/00
SINCE INCEPTION SIX MONTHS(1) ONE YEAR (5/19/97) - ------------------------------------------------------------------------------------------------------------------- SCHWAB INTERNATIONAL INDEX FUND-SELECT SHARES(2),(3) 6.41% 17.97% 13.12% - ------------------------------------------------------------------------------------------------------------------- Schwab International Index-Registered Trademark- 6.93% 18.51% 13.47% - ------------------------------------------------------------------------------------------------------------------- Index Tracking Differential-Select Shares (0.52)% (0.54)% (0.35)% - ------------------------------------------------------------------------------------------------------------------- MSCI-EAFE-Registered Trademark- Index 6.72% 13.89% 11.31% - -------------------------------------------------------------------------------------------------------------------
National Association of Securities Dealers (NASD) regulations require that we report performance data as of the most recent calendar quarter--in this case, the quarter ended 3/31/00. As of 3/31/00, the fund's six-month, one-year and since-inception average annual total returns were 18.61%, 29.81% and 15.76%, respectively. Also shown is the difference between the total returns of the Schwab International Index and the Schwab International Index Fund, often referred to as the "tracking differential." (See page 8 for a more detailed discussion). (1) Actual, not annualized, because period is less than one year. (2) A portion of the fund's expenses was reduced during the reporting period. Without such reductions, the fund's average annual returns would have been lower. (3) The required minimum initial investment in the Select Shares is $50,000. 34 EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC GROWTH OF A HYPOTHETICAL $50,000 INVESTMENT
SCHWAB INTERNATIONAL INDEX FUND-SELECT SHARES SCHWAB INTERNATIONAL INDEX MSCI-EAFE-REGISTERED TRADEMARK- INDEX 5/97 $50,000 $50,000 $50,000 5/97 $49,375 $49,283 $49,248 6/97 $52,170 $52,161 $51,961 7/97 $53,755 $53,571 $52,803 8/97 $49,815 $49,706 $48,859 9/97 $53,240 $52,827 $51,595 10/97 $49,005 $48,550 $47,627 11/97 $48,970 $48,360 $47,141 12/97 $49,580 $49,042 $47,551 1/98 $51,405 $51,027 $49,725 2/98 $54,385 $54,111 $52,917 3/98 $55,800 $55,529 $54,547 4/98 $56,175 $55,905 $54,978 5/98 $56,175 $55,770 $54,708 6/98 $56,655 $56,133 $55,124 7/98 $56,845 $56,493 $55,681 8/98 $49,840 $49,376 $48,782 9/98 $48,240 $47,757 $47,284 10/98 $53,005 $52,763 $52,211 11/98 $55,725 $55,732 $54,885 12/98 $57,490 $57,561 $57,053 1/99 $57,305 $57,252 $56,881 2/99 $56,025 $56,122 $55,528 3/99 $58,585 $58,699 $57,843 4/99 $60,955 $61,225 $60,186 5/99 $57,980 $58,137 $57,086 6/99 $60,200 $60,507 $59,313 7/99 $62,385 $62,757 $61,074 8/99 $62,950 $63,342 $61,105 9/99 $64,115 $64,425 $61,722 10/99 $67,575 $67,857 $64,036 11/99 $70,660 $70,806 $66,258 12/99 $76,920 $77,025 $72,208 1/00 $70,880 $71,433 $67,623 2/00 $71,870 $72,588 $69,442 3/00 $76,050 $76,708 $72,137 4/00 $71,905 $72,561 $68,342
The above graph compares the growth of a hypothetical $50,000 investment in the Schwab International Index Fund-Select Shares, made at its inception, with a similar investment in the Schwab International Index-Registered Trademark- and the MSCI-EAFE-Registered Trademark- Index. THE INFORMATION PRESENTED IS HISTORICAL AND DOES NOT REPRESENT FUTURE RESULTS. TOTAL RETURNS ASSUME REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS. PRINCIPAL VALUE AND INVESTMENT RETURNS WILL FLUCTUATE, SO AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. Indices are unmanaged and do not reflect advisory fees and other expenses associated with an investment in the fund. Investors cannot invest in an index directly. ASSETS - ---------------------------------------------------------------------- Total net assets as of 10/31/99 (000s) $448,880 - ---------------------------------------------------------------------- Total net assets as of 4/30/00 (000s) $623,102 - ---------------------------------------------------------------------- Percentage growth from 10/31/99 to 4/30/00 38.8% - ----------------------------------------------------------------------
35 SCHWAB INTERNATIONAL INDEX FUND-REGISTERED TRADEMARK- PORTFOLIO SNAPSHOT The Schwab International Index Fund (the fund) invests primarily in common stocks of the Schwab International Index-Registered Trademark-, an index created to represent the performance of common stocks and other equity securities issued by large, publicly traded companies from countries around the world with major developed securities markets, excluding the United States. As of April 30, 2000, the aggregate market capitalization of stocks included in the index represented approximately 43.6% of the total market value of all publicly traded non-U.S. companies.* The information below and on the following page provides a snapshot of the fund's characteristics as of 4/30/00, and is not indicative of its composition after that date. The terms used below are defined beginning on page 46. A complete list of the securities in the fund's portfolio as of 4/30/00 is provided in the Schedule of Investments later in this report. FUND FACTS
SCHWAB INTERNATIONAL INDEX FUND- PEER GROUP INVESTOR SHARES AVERAGE++ - --------------------------------------------------------------------------------------------------------------------------------- Number of Issues 348 170 - --------------------------------------------------------------------------------------------------------------------------------- Median Market Cap ($ Mil) $47,109+ $23,383 - --------------------------------------------------------------------------------------------------------------------------------- Price/Earnings (P/E) Ratio) 37.7+ 37.6 - --------------------------------------------------------------------------------------------------------------------------------- Price/Book (P/B) Ratio 5.7+ 6.0 - --------------------------------------------------------------------------------------------------------------------------------- 12-Month Yield 0.82%+ 0.59% - --------------------------------------------------------------------------------------------------------------------------------- Portfolio Turnover Rate 2% 83% - --------------------------------------------------------------------------------------------------------------------------------- Three-Year Beta 0.80+ 0.74 - --------------------------------------------------------------------------------------------------------------------------------- Expense Ratio 0.58%** 1.71% - ---------------------------------------------------------------------------------------------------------------------------------
* Source: Wilshire Associates. + Reflects a voluntary reduction by the investment adviser and Schwab, which is guaranteed through at least 2/28/01 (excluding interest, taxes and certain non-routine expenses). ++ Source: Morningstar. This information is as of 4/30/00, and is for illustrative purposes only. It is not intended to show, predict or guarantee future composition of the fund. The peer group average is based on 700 foreign stock funds as tracked by Morningstar. 36 EQUITY HOLDINGS BY COUNTRY AS OF 4/30/00 - ------------------------------------------- Japan 31.3% - ------------------------------------------- United Kingdom 22.8% - ------------------------------------------- France 9.3% - ------------------------------------------- Germany 6.5% - ------------------------------------------- Netherlands 5.8% - ------------------------------------------- Switzerland 5.1% - ------------------------------------------- Canada 4.6% - ------------------------------------------- Italy 3.6% - ------------------------------------------- Sweden 3.3% - ------------------------------------------- Spain 2.7% - ------------------------------------------- Hong Kong 2.0% - ------------------------------------------- Australia 1.9% - ------------------------------------------- Belgium 0.6% - ------------------------------------------- Denmark 0.5% - -------------------------------------------
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC EQUITY INVESTMENT STYLE BOX(++) AS OF 4/30/00 - -Style- Value Blend Growth -Market Cap- X Large Medium Small
++ Source: Morningstar, Inc. The style box illustrates the composition of the fund's portfolio as of 4/30/00. It is not indicative of its holdings after that date, nor does it represent an exact assessment of risk or future assessment or any type of future performance. Placement is based on the fund's P/E and P/B ratios relative to the S&P 500-Registered Trademark- Index, as well as the size of the companies in which it invests, or median market capitalization. TOP 10 HOLDINGS AS A PERCENTAGE OF FUND INVESTMENTS(1) - --------------------------------------------- NTT DoCoMo, Inc. 3.7% - --------------------------------------------- Vodafone Airtouch PLC 2.7% - --------------------------------------------- BP Amoco PLC 2.3% - --------------------------------------------- Toyota Motor Corp. 2.2% - --------------------------------------------- Telefonaktiebolaqet LM Ericsson, Series B 2.0% - --------------------------------------------- - --------------------------------------------- Nippon Telegraph & Telephone Corp. 1.8% - --------------------------------------------- Nortel Networks Corp. 1.7% - --------------------------------------------- Royal Dutch Petroleum Co. 1.5% - --------------------------------------------- British Telecommunications PLC 1.4% - --------------------------------------------- Total Fina EIF SA, Series B 1.3% - ---------------------------------------------
(1) Nothing in this report represents a recommendation of a security by the investment adviser. 37 PORTFOLIO MANAGEMENT PORTFOLIO MANAGEMENT TEAM GERI HOM--vice president and senior portfolio manager, has overall responsibility for the management of the funds' portfolios. Geri joined CSIM in March 1995 as Portfolio Manager and was promoted to her current position in December 1996. She currently manages approximately $19 billion in indexed equity mutual fund 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. LARRY MANO--director and portfolio manager, has primary responsibility for the day-to-day management of the Total Stock Market Index Fund-TM-. Prior to joining CSIM in 1998, he spent 20 years at Wilshire Associates, where he directed the development of the equity index investment products. 38 FUND DISCUSSION QUESTIONS TO THE PORTFOLIO MANAGEMENT TEAM SCHWAB S&P 500 FUND Q. HOW DID THE FUND PERFORM DURING THE REPORTING PERIOD? A. As discussed in the MARKET OVERVIEW section of this report, large-cap domestic equities, such as the S&P 500 Index, relinquished a five-year hold as being the strongest performing major asset class to small-cap domestic equities. As the table below indicates, the fund achieved positive total returns for the six-month reporting period. All classes of shares closely tracked the fund's benchmark, the S&P 500 Index, which achieved a total return of 7.19% for the period. As the table below reveals, the fund as well as the index underperformed the average U.S. large-cap fund on a 6-month basis, but the fund outperformed the average U.S. large-cap fund on a three-year basis.(1) The fund's three year outperformance was even greater on an after-tax basis, a direct result of the fund's tax-efficient investment strategy.
BEFORE TAX AFTER TAX -------------------------------------- SIX MONTHS THREE YEARS THREE YEARS - ------------------------------------------------------------ Investor Shares 7.05% 23.20% 22.76% - ------------------------------------------------------------ e.Shares 7.03% 23.28% 22.80% - ------------------------------------------------------------ Select Shares 7.13% -- -- - ------------------------------------------------------------ Average Large-Cap Fund 11.41% 22.04% 19.45% - ------------------------------------------------------------
(1) Source: Morningstar, Inc. large-cap fund category contains 1,083 funds with six-month track records and 832 funds with three-year track records both as of 04/30/00. These funds may or may not follow a tax-efficiency strategy similar to that followed by the Schwab S&P 500 Fund. Q. WHAT TAX-SMART STRATEGIES DOES THE FUND USE TO ENHANCE AFTER-TAX RETURNS? A. Pre-tax total return is the most common measure used to compare mutual fund performance. Because of different tax management policies, however, two funds with identical pre-tax total returns may actually have significant differences in their after-tax returns. Over the long term, these after-tax return differences can have a major impact on investors' fund balances held outside retirement or other tax deferred accounts. As shown in the first question, the Schwab S&P 500 Fund has been more "tax efficient" than the average large-cap fund. Index funds can be tax efficient because they are designed to have lower portfolio turnover rates, and hence, lower realization of capital gains than most actively managed funds. Furthermore, when the fund's investment manager buys and sells stock, they can use a strategy of offsetting capital gains with losses whenever possible to minimize the potential for capital gain distributions to shareholders. Q. HOW HAVE THE INDUSTRY SECTORS IN THE S&P 500 INDEX CHANGED OVER THE LAST FIVE YEARS? A. The graph on the next page shows the top ten industry sectors of the S&P 500 Index as of 4/30/00 as well as the historical weightings of these sectors since 4/30/96. Since 1996, the Index has become more concentrated, with the top ten sectors currently representing approximately 76% of the total versus approximately 55% in 1996. The sectors with the largest gains during the period were Business Machines (from 5.9% to 16.5%) and Electronics (from 4.8% to 12.2%). The sectors with the largest declines 39 FUND DISCUSSION (continued) during the period were International Oil (from 6.6% to 3.8%) and Banks (from 7.1% to 4.7%). EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC S&P 500-Registered Trademark- INDEX SECTORS % OF TOTAL INDEX
BUSINESS DRUGS & PRODUCER MISCELLANEOUS BUSINESS MACHINES ELECTRONICS MEDICINE TELEPHONE RETAIL GOODS FINANCE BANKS SERVICES MEDIA 4/96 5.87 4.79 10.10 8.17 4.93 5.53 3.10 7.11 2.23 3.10 4/97 6.95 6.03 10.79 6.28 4.59 5.54 3.55 7.90 1.81 3.05 4/98 7.74 5.94 11.61 6.74 5.26 5.32 4.87 8.89 2.36 3.67 4/99 12.10 5.61 11.08 8.36 6.30 4.85 5.77 7.31 3.99 3.63 4/00 16.74 12.37 9.77 6.99 5.98 5.52 5.27 4.80 4.51 3.91
Source: Wilshire Associates SCHWAB 1000 FUND-TM- Q. HOW DID THE FUND PERFORM DURING THE REPORTING PERIOD? A. As discussed in the MARKET OVERVIEW section of this report, large-cap domestic equities, such as the Schwab 1000 Fund, relinquished a five-year hold as being the strongest performing major asset class to small-cap domestic equities. As the table below indicates, the fund still achieved positive total returns for the six-month reporting period. Both classes of shares closely tracked the fund's benchmark, the Schwab 1000 Index-Registered Trademark-, which achieved a total return of 9.05% for the period. As the table below reveals, the fund and the index underperformed the average U.S. large-cap fund on a 6-month basis, but the fund outperformed the average large-cap fund on a five-year basis.(2) The fund's 5-year outperformance was even greater on an after-tax basis, a direct result of the fund's tax-efficient investment strategy.
BEFORE TAX AFTER TAX ------------------------------------ SIX MONTHS FIVE YEARS FIVE YEARS - ---------------------------------------------------------- Investor Shares 8.88% 24.55% 24.06% - ---------------------------------------------------------- Select Shares 8.92% -- -- - ---------------------------------------------------------- Average Large-Cap Fund 11.41% 21.99% 19.22% - ----------------------------------------------------------
(2) Source: Morningstar, Inc. large-cap fund Category contains 1,083 funds with six-month track records and 647 funds with five-year track records, both as of 4/30/00. These funds may or may not follow a tax-efficiency strategy similar to that followed by the Schwab S&P 500 Fund. Q. HOW DID THE PERFORMANCE OF THE SCHWAB 1000 INDEX COMPARE TO THE S&P 500 INDEX? A. As shown in the table below, the Schwab 1000 Index outperformed the S&P 500 Index for the six month reporting period. On an inception-to-date basis, the performances of the two indices are almost identical. As we have discussed in previous reports, these two indices are constructed differently, and although the current period indicates otherwise, their performances will vary from time to time.
INCEPTION (4/2/91) TO DATE AVERAGE SIX MONTH ANNUAL RETURN - -------------------------------------------------------- Schwab 1000 Index 9.05% 18.68% - -------------------------------------------------------- S&P 500 Index 7.19% 18.60% - --------------------------------------------------------
Q. WHAT MANAGEMENT TECHNIQUES DOES THE FUND USE TO ENHANCE AFTER-TAX RETURNS? A. Pre-tax total return is the most common measure used to compare mutual fund performance. Because of different tax management policies, however, two funds with identical pre-tax total returns may actually have significant differences in their after-tax returns. Over the long term, these after-tax return differences 40 can have a major impact on investors' fund balances held outside retirement and other tax deferred accounts. As shown in the first question, the Schwab 1000 Fund has been more "tax efficient" than the average large-cap fund. Since its inception in 1991, the fund has not paid a capital gains distribution. Although no assurance can be provided that this record will be maintained in the future, it is indicative of the fund's tax-smart management strategy. Index funds can be tax efficient because they are designed to have lower portfolio turnover rates, and hence, lower realization of capital gains than most actively-managed funds. In addition, the fund may adjust its weightings of certain stocks, continue to hold a stock that is no longer included in the index or choose to realize certain capital losses and use them to offset capital gains. These strategies may help to minimize the potential for capital gain distributions to shareholders. Q. HOW HAVE THE INDUSTRY SECTORS IN THE SCHWAB 1000 INDEX CHANGED OVER THE LAST FIVE YEARS? A. The graph shows the top ten industry sectors of the Schwab 1000 Index as of 4/30/00 as well as the historical weightings of these sectors since 4/30/96. Since 1996, the Index has become more concentrated, with the top ten sectors currently representing approximately 77% of the total versus approximately 57% in 1996. The sectors with the largest gains during the period were Business Machines (from 5.9% to 15.3%) and Electronics (from 5.9% to 12.5%). The sectors with the largest declines during the period were Banks (from 7.4% to 4.8%) and Energy and Utilities (from 5.0% to 3.0%). EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC SCHWAB 1000 INDEX SECTORS % OF TOTAL INDEX
BUSINESS DRUGS & BUSINESS MISCELLANEOUS PRODUCER MACHINES ELECTRONICS MEDICINE TELEPHONE SERVICES FINANCE RETAIL GOODS BANKS MEDIA 4/96 5.92 5.92 10.07 7.47 3.11 4.23 5.00 5.08 7.36 3.22 4/97 6.69 6.52 10.38 5.71 2.83 4.84 4.79 5.27 8.45 3.04 4/98 7.35 6.12 11.05 6.30 3.26 5.95 5.60 4.99 9.24 3.80 4/99 11.30 6.00 10.57 8.51 4.73 6.89 6.44 4.53 7.38 3.95 4/00 15.35 12.49 9.67 7.28 6.05 5.95 5.82 5.39 4.83 4.44
Source: Wilshire Associates TOTAL STOCK MARKET INDEX FUND Q. HOW DID THE FUND PERFORM DURING THE REPORTING PERIOD? A. As discussed in the MARKET OVERVIEW section of this report, large-cap domestic equities, which make up a majority of the Wilshire 5000 Index, retreated from the strongest performing major asset class position. As the table below indicates, the fund achieved favorable total returns for the six-month period and closely tracked its benchmark, the Wilshire 5000 Index, which achieved a total return of 9.45% for the period.
SIX MONTHS - ----------------------------------------------- Investor Shares 9.24% - ----------------------------------------------- Select Shares 9.26% - ----------------------------------------------- Average Large-Cap Fund 11.41% - -----------------------------------------------
41 FUND DISCUSSION (continued) Q. WHAT TAX-SMART STRATEGIES DOES THE FUND USE TO ENHANCE AFTER-TAX RETURNS? A. Pre-tax total return is the most common measure used to compare mutual fund performance. Because of different tax management policies, however, two funds with identical pre-tax total returns may actually have significant differences in their after-tax returns. Over the long term, these after-tax return differences can have a major impact on investors' fund balances held outside retirement and other tax-deferred accounts. Index funds can be tax efficient because they are designed to have lower portfolio turnover rates, and hence, lower realization of capital gains than most actively managed funds. Furthermore, when the fund's investment manager buys and sells stock, they can use a strategy of offsetting capital gains with losses whenever possible to minimize the potential for capital gain distributions to shareholders. Q. WHAT MARKET CAPITALIZATION EXPOSURE DOES THE FUND PROVIDE? A. The U.S. stock market is commonly divided into three segments, based on market capitalization. Small-and mid-cap stocks are the most numerous, but make up only about one-third of the total value of the market. In contrast, large-cap stocks are relatively few in number but make up approximately two-thirds of the market's total value. The fund invests in all three tiers of the U.S. stock market: large-, mid- and small-cap. Q. HOW HAVE THE INDUSTRY SECTORS IN THE WILSHIRE 5000 INDEX CHANGED OVER THE LAST FIVE YEARS? A. The graph below illustrates the top ten industry sectors of the Wilshire 5000 Index as of 4/30/00 as well as the historical weightings of these sectors since 4/30/96. Since 1996, the Index has become more concentrated, with the top ten sectors currently representing approximately 76% of the total versus approximately 58% in 1996. The sectors with the largest gains during the period were Business Machines (from 5.5% to 13.7%) and Electronics (from 6.3% to 12.0%). The sectors with the largest declines during the period were Food and Agriculture (from 5.1% to 2.3%) and Banks (from 7.2% to 4.5%). EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC WILSHIRE 5000 INDEX INDUSTRY SECTORS % OF TOTAL INDEX
BUSINESS DRUGS & BUSINESS MISCELLANEOUS PRODUCER MACHINES ELECTRONICS MEDICINE SERVICES TELEPHONE FINANCE RETAIL GOODS BANKS MEDIA 4/96 5.52 6.29 9.95 4.58 6.62 5.15 4.71 5.22 7.17 3.06 4/97 6.13 6.66 10.14 3.93 5.13 5.99 4.52 5.26 8.26 2.90 4/98 6.65 6.34 10.50 4.71 5.81 6.92 5.16 4.98 8.73 3.59 4/99 10.26 6.08 10.06 6.17 7.76 7.56 6.03 4.55 7.24 3.87 4/00 13.97 12.21 9.38 8.10 6.92 6.24 5.30 5.13 4.62 4.15
Source: Wilshire Associates SCHWAB SMALL-CAP INDEX FUND Q. HOW DID THE FUND PERFORM DURING THE REPORTING PERIOD? A. As discussed in the MARKET OVERVIEW section of this report, small-cap domestic equities emerged as the strongest performing asset class for the six-month period ended 4/30/00. Both classes of shares tracked 42 the fund's benchmark, the Schwab Small-Cap Index, which realized a 17.39% total return for the period. As the table below reveals, the fund underperformed the average small-cap fund over both a six-month and a five-year period.(3) On an after tax basis, the fund's return was approximately equal to the average small- cap fund for the 5-year period.
BEFORE TAX AFTER TAX ------------------------------------ SIX MONTHS FIVE YEARS FIVE YEARS - ---------------------------------------------------------- Investor Shares 16.44% 15.73% 15.31% - ---------------------------------------------------------- Select Shares 16.60% -- -- - ---------------------------------------------------------- Average Small-Cap Fund 25.87% 17.88% 15.33% - ----------------------------------------------------------
Q. HOW DID THE PERFORMANCE OF THE SCHWAB SMALL-CAP-REGISTERED TRADEMARK- INDEX COMPARE TO THE RUSSELL 2000 INDEX? A. As shown in the table below, the Schwab Small-Cap Index return was marginally less than the Russell 2000 Index for the six-month reporting period. On an inception-to-date basis, the Schwab Small-Cap Index has outperformed the Russell 2000 Index. As we have discussed in previous reports, these two indices are constructed differently, and it is not unusual that their performance should vary somewhat over time.
INCEPTION (12/3/93) TO DATE AVERAGE SIX MONTH ANNUAL RETURN - -------------------------------------------------------- Schwab Small-Cap Index 17.39% 14.72% - -------------------------------------------------------- Russell 2000 Index 18.72% 12.91% - --------------------------------------------------------
(3) Source: Morningstar, Inc. small-cap fund category contains 459 funds with six-month track records and 217 funds with five-year track records, both as of 4/30/00. These funds may or may not follow a tax-efficiency strategy similar to that followed by the Schwab S&P 500 Fund. Q. WHY HAVE SMALL-CAP FUNDS HISTORICALLY BEEN RISKIER THAN LARGE- AND MID-CAP FUNDS? A. We believe the stock prices of smaller companies may be based substantially on future expectations rather than current achievements, and may move sharply, especially during market upturns or downturns. With its small-cap focus, this fund may make sense for long-term investors who are willing to accept greater risk in exchange for potentially higher long-term returns. Q. HOW HAVE THE INDUSTRY SECTORS IN THE SCHWAB SMALL-CAP INDEX CHANGED OVER THE LAST FOUR YEARS? A. The graph on the next page shows the top ten industry sectors of the Schwab Small-Cap Index as of 4/30/00 as well as the historical weightings of these sectors since 4/30/96. Since 1996, the concentration of the top ten sectors has increased moderately; however, there have been some significant shifts in the components. The sectors with the largest gains during the period were Business Services (from 11.6% to 13.2%) and Electronics (from 7.4% to 12.7%). The sectors with the largest declines during the period were Banks (from 6.3% to 4.2%) and Media (from 3.2% to 1.5%). Keep in mind that a sector decline in a small-cap index does not necessarily mean that the sector is declining in terms of its role in the entire economy--it could be (and in this case was) that the companies in 43 FUND DISCUSSION (continued) these sectors are actually growing to the point where they move to a large-cap index. EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC SCHWAB SMALL-CAP INDEX SECTORS % OF TOTAL INDEX
DRUGS ENERGY BUSINESS & PRODUCER MISCELLANEOUS & SERVICES ELECTRONICS MEDICINE GOODS FINANCE BANKS UTILITIES CONSTRUCTION INSURANCE CHEMICALS 4/96 11.62 7.54 9.51 7.05 5.66 6.31 3.84 1.51 5.11 2.26 4/97 10.05 7.40 9.58 6.84 5.79 7.11 4.48 1.94 5.33 2.48 4/98 13.91 8.39 7.95 6.75 4.56 4.80 3.47 2.99 4.57 2.52 4/99 14.51 8.57 6.70 7.58 7.08 6.03 4.31 2.65 3.95 2.93 4/00 13.29 12.57 10.68 6.56 4.66 4.26 3.77 3.34 3.24 3.10
Source: Wilshire Associates SCHWAB INTERNATIONAL INDEX FUND Q. HOW DID THE FUND PERFORM DURING THE REPORTING PERIOD? A. Although not as volatile as the domestic equity markets, the fund underperformed the U.S. large-cap and small-cap categories during the six-month reporting period. Both classes of shares closely tracked the fund's benchmark, the Schwab International Index, which realized a 6.93% total return for the period. As the table below reveals, the fund outperformed the average international stock fund over the five-year period ended April 30, 2000.(4) The fund as well as the index underperformed the average foreign stock fund on a 6-month and 5-year basis, but the fund outperformed the average foreign stock fund on a 5-year after tax basis, a direct result of the fund's tax-efficient investment strategy. (4) Source: Morningstar, Inc. foreign stock fund category contains 335 funds with six-month track records and 178 funds with five-year track records, both as of 4/30/00. These funds may or may not follow a tax-efficiency strategy similar to that followed by the Schwab International Index Fund. As shown in the Market Overview, the strong US Dollar had a moderately negative impact on Index returns during the six-month reporting period. Expressed in local currency terms, the six-month performance of the Schwab International Index-Registered Trademark- was 15.40%, approximately 8.47% greater than the dollar-denominated return, reflecting the relative weakness of foreign currencies during the reporting period.
BEFORE TAX AFTER TAX ------------------------------------ SIX MONTHS FIVE YEARS FIVE YEARS - ---------------------------------------------------------- Investor Shares 6.43% 12.74% 12.27% - ---------------------------------------------------------- Select Shares 6.41% -- -- - ---------------------------------------------------------- Average Foreign Stock Fund 15.45% 13.72% 12.09% - ----------------------------------------------------------
Q. HOW DID THE PERFORMANCE OF THE SCHWAB INTERNATIONAL INDEX COMPARE TO THE MSCI-EAFE-REGISTERED TRADEMARK- INDEX? A. As shown in the table below, the Schwab International Index outperformed the MSCI-EAFE Index for the six-month reporting period. The principal reason for the differential was related to market capitalization. The Schwab International Index has a higher average market capitalization than the MSCI-EAFE Index. On an inception-to-date basis, the Schwab International Index continues to outperform the MSCI-EAFE Index.
INCEPTION (9/3/93) TO DATE AVERAGE SIX MONTHS ANNUAL RETURN - -------------------------------------------------------- Schwab International Index 6.93% 11.89% - -------------------------------------------------------- MSCI-EAFE Index 6.72% 9.56% - --------------------------------------------------------
44 Q. WHAT TAX-SMART STRATEGIES DOES THE FUND USE TO ENHANCE AFTER-TAX RETURNS? A. Pre-tax total return is the most common measure used to compare mutual fund performance. However, because of different tax management policies, two funds with identical pre-tax total returns may actually have significant differences in their after-tax returns. Over the long term, these after-tax return differences can have a major impact on investors' fund balances held outside retirement and other tax-deferred accounts. As shown in the first question above, the Schwab International Index Fund has been more "tax efficient" than the average foreign fund. Index funds can be tax efficient because they are designed to have lower portfolio turnover rates, and hence, lower realization of capital gains than most actively managed funds. Furthermore, when the fund's investment manager buys and sells stock, they can use a strategy of offsetting capital gains with losses whenever possible to minimize the potential for capital gain distributions to shareholders. Q. HOW HAVE THE COUNTRY WEIGHTINGS IN THE SCHWAB INTERNATIONAL INDEX CHANGED OVER THE LAST FOUR YEARS? A. The graph below shows the top seven countries by their percent weighting in the Schwab International Index as of 4/30/00 as well as the historical weightings of these countries since 4/30/96. Compared to 1996, the changes have been fairly minor. However, there were significant shifts within the period, particularly in the Japan weighting, which dropped significantly only to rebound by the end of the period. The United Kingdom and France experienced moderate increases over the four-year period. EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC SCHWAB INTERNATIONAL INDEX % OF TOTAL INDEX
JAPAN UNITED KINGDOM FRANCE GERMANY NETHERLANDS SWITZERLAND CANA- OTHER DA 4/96 35.782 19.26 6.653 7.625 5.628 6.858 2.816 15.379 4/97 27.863 23.183 7.005 8.47 6.766 7.494 3.282 15.937 4/98 23.925 25.065 7.335 9.01 7.113 8.008 3.844 15.699 4/99 22.68 26.082 8.575 9.239 6.866 7.929 3.298 15.332 4/00 31.48 22.756 9.451 6.408 5.766 5.113 4.563 14.461
Source: Wilshire Associates 45 GLOSSARY ASSET ALLOCATION--The division of holdings among different types of assets, such as domestic stocks, international stocks, bonds and cashequivalent securities. BETA--A measure of a stock's volatility relative to the overall stock market. The beta of the S&P 500-Registered Trademark- Index is 1. Any investment that is more volatile than the market as a whole has a beta value higher than 1. If the beta is less than 1, the investment is considered to be less volatile than the market. CAPITAL GAIN (LOSS)--When a stock is sold for a profit, the difference between the net sales price and its net purchase price, or cost basis, is a capital gain. If a stock is sold below cost, the difference is a capital loss. EARNINGS GROWTH RATE--The average annual rate of growth in earnings over the past five years for the stocks in a fund's portfolio. EARNINGS PER SHARE (EPS)--The net income (or earnings) of a company for the past 12 months divided by the current number of shares outstanding. EXPENSE RATIO--Amount, expressed as a percentage of total investment, that shareholders pay annually for mutual fund operating expenses and management fees. MARKET CAPITALIZATION--The dollar value of a company or the amount someone would pay to buy the company today. It is calculated by multiplying the total number of outstanding shares by the current price per share. Median market cap is the midpoint of a fund's total market capitalization, weighted by the portion of assets invested in each holding. As a result, half of the fund's holdings will have market caps above the median, and the rest below it. NET ASSET VALUE (NAV)--The market value of a fund share. PRICE/BOOK (P/B) RATIO--Compares a stock's market value with the value of total assets minus intangible assets and total liabilities (the book value). It is determined by dividing the current price of the stock by common stockholder equity per share. In evaluating stocks, comparing P/B ratios often works well in situations where price/earnings ratios do not, because the P/B ratio is stable over time and is always a positive number. P/B ratios are best used for comparisons within an industry rather than between industries, as certain industries will usually contain stocks that have all high or all low P/B ratios. For mutual funds the P/B ratio is the weighted average of all the stocks' P/B ratios in the portfolio. PRICE/EARNINGS (P/E) RATIO--The ratio of a company's stock price to its earnings per share over the past year. For mutual funds the P/E ratio is the weighted average of all the stocks' P/E ratios in the mutual fund's portfolio. The P/E is an indicator of market expectations about a company's prospects. Typically, the higher the P/E, the greater the expectations for a company's future growth. Because earnings are volatile and sometimes "negative," however, the P/E has its limitations and may fail as a measure for a significant number of stocks at any given time. RETURN ON EQUITY--The average annual rate of return generated by the companies a fund holds during the past five years for each dollar of shareholders' equity (net income divided by shareholders' equity). STOCK--A share of ownership, or equity, in a corporation. 46 TOTAL RETURN--The sum of dividends, plus capital gains (or losses). TURNOVER RATE--An indication of a fund's trading activity. Funds with higher turnover rates typically incur higher transaction costs and are more likely to distribute capital gains, which are taxable to investors. YIELD--The income generated by an investment, expressed as a percentage of its price. 47 SCHWAB S&P 500 FUND SCHEDULE OF INVESTMENTS April 30, 2000 (Unaudited) Number Value of Shares (000s) --------- ----------- COMMON STOCK -- 99.7% AEROSPACE / DEFENSE -- 1.0% B.F. Goodrich Co. 71,913 $ 2,292 Boeing Co. 564,854 22,418 Crane Co. 42,569 1,144 General Dynamics Corp. 130,462 7,632 Lockheed Martin Corp. 256,210 6,373 Northrop Grumman Corp. 44,939 3,185 Raytheon Co., Class B 218,894 4,857 Rockwell International Corp. 123,536 4,864 Textron, Inc. 96,845 5,999 TRW, Inc. 79,457 4,648 United Technologies Corp. 308,184 19,165 -------- 82,577 -------- AIR TRANSPORTATION -- 0.3% AMR Corp.+ 96,484 3,287 Delta Air Lines, Inc. 84,306 4,447 FedEx Corp.+ 188,588 7,107 Southwest Airlines Co. 327,318 7,099 U.S. Airways Group, Inc.+ 45,990 1,279 -------- 23,219 -------- ALCOHOLIC BEVERAGES -- 0.3% Adolph Coors Co., Class B 24,077 1,228 Anheuser-Busch Cos., Inc. 303,927 21,446 Brown-Forman Corp., Class B 44,344 2,419 -------- 25,093 -------- APPAREL -- 0.2% Liz Claiborne, Inc. 38,146 1,767 Nike, Inc., Class B 179,503 7,797 Reebok International Ltd.+ 36,318 617 Russell Corp. 21,276 418 Springs Industries, Inc. 11,642 478 VF Corp. 76,762 2,168 -------- 13,245 -------- AUTOMOTIVE PRODUCTS / MOTOR VEHICLES -- 1.5% Cooper Tire & Rubber Co. 48,864 659 Cummins Engine Co., Inc. 26,880 956 Dana Corp. 106,996 3,250 Danaher Corp. 92,900 5,307 Delphi Automotive Systems Corp. 366,380 7,007 Eaton Corp. 48,461 4,071 Ford Motor Co. 784,195 42,886 General Motors Corp. 417,023 39,044 Number Value of Shares (000s) --------- ----------- Genuine Parts Co. 115,376 $ 3,028 Goodyear Tire & Rubber Co. 101,726 2,810 Harley-Davidson, Inc. 196,800 7,835 Navistar International Corp.+ 41,053 1,437 -------- 118,290 -------- BANKS -- 4.8% AmSouth Bancorp. 252,950 3,684 Bank of America Corp. 1,107,699 54,277 Bank of New York Co., Inc. 479,286 19,681 Bank One Corp. 744,824 22,717 BB&T Corp. 224,772 5,984 Chase Manhattan Corp. 535,870 38,616 Comerica, Inc. 101,130 4,285 Fifth Third Bancorp. 200,683 12,668 First Union Corp. 641,821 20,458 Firstar Corp. 635,891 15,818 Fleet Boston Financial Corp. 595,120 21,090 Huntington Bancshares, Inc. 148,410 2,708 J.P. Morgan & Co., Inc. 112,474 14,439 KeyCorp, Inc. 289,308 5,352 Mellon Financial Corp. 329,952 10,600 National City Corp. 400,000 6,800 Northern Trust Corp. 144,200 9,247 Old Kent Financial Corp. 86,000 2,591 PNC Financial Services Group 191,141 8,339 Providian Financial Corp. 92,194 8,119 Regions Financial Corp. 141,200 2,886 SouthTrust Corp. 109,100 2,605 State Street Corp. 104,135 10,088 Summit Bancorp. 112,900 2,865 SunTrust Banks, Inc. 207,947 10,553 Synovus Financial Corp. 181,247 3,364 U.S. Bancorp. 488,281 9,918 Union Planters Corp. 91,800 2,599 Wachovia Corp. 131,426 8,239 Wells Fargo & Co. 1,071,006 43,978 -------- 384,568 -------- BUSINESS MACHINES & SOFTWARE -- 16.7% 3Com Corp.+ 222,420 8,772 Adaptec, Inc.+ 67,700 1,828 Adobe Systems, Inc. 77,604 9,385 Apple Computer, Inc.+ 105,166 13,047 Autodesk, Inc. 40,500 1,554 BMC Software, Inc.+ 158,000 7,397 Cabletron Systems, Inc.+ 118,129 2,702 Ceridian Corp.+ 94,120 2,041 48 Number Value of Shares (000s) --------- ----------- Cisco Systems, Inc.+ 4,438,680 $ 307,725 Compaq Computer Corp. 1,099,194 32,151 Compuware Corp.+ 233,200 2,930 Comverse Technology, Inc.+ 99,100 8,839 Dell Computer Corp.+ 1,664,428 83,430 EMC Corp.+ 660,537 91,773 Gateway, Inc.+ 205,700 11,365 Hewlett-Packard Co. 652,973 88,151 IKON Office Solutions, Inc. 97,077 570 International Business Machines Corp. 1,169,404 130,535 Lexmark International Group, Inc., Class A+ 83,100 9,806 Microsoft Corp.+ 3,376,412 235,505 NCR Corp.+ 63,200 2,441 Network Appliance, Inc.+ 198,000 14,640 Novell, Inc.+ 211,229 4,145 Oracle Corp.+ 1,830,390 146,317 Pitney Bowes, Inc. 172,602 7,055 Seagate Technology, Inc.+ 139,811 7,104 Silicon Graphics, Inc.+ 119,070 856 Sun Microsystems, Inc.+ 1,024,384 94,179 Unisys Corp.+ 200,915 4,659 Xerox Corp. 430,574 11,383 ---------- 1,342,285 ---------- BUSINESS SERVICES -- 4.5% Allied Waste Industries, Inc.+ 122,100 748 America Online, Inc.+ 1,479,900 88,516 Automatic Data Processing, Inc. 410,624 22,097 Citrix Systems, Inc.+ 116,400 7,108 Computer Associates International, Inc. 383,590 21,409 Computer Sciences Corp.+ 108,922 8,884 Deluxe Corp. 47,672 1,201 Dun & Bradstreet Corp. 103,856 3,129 Ecolab, Inc. 83,670 3,268 Electronic Data Systems Corp. 307,500 21,141 Equifax, Inc. 92,115 2,251 First Data Corp. 272,027 13,244 H&R Block, Inc. 64,117 2,681 IMS Health, Inc. 199,386 3,402 Interpublic Group of Cos., Inc. 182,520 7,483 Laidlaw, Inc. 1 -- National Service Industries, Inc. 26,600 572 Omnicom Group, Inc. 115,300 10,499 Parametric Technology Corp.+ 177,232 1,446 Number Value of Shares (000s) --------- ----------- Paychex, Inc. 160,950 $ 8,470 PeopleSoft, Inc.+ 173,900 2,424 Shared Medical Systems Corp. 17,652 731 Tyco International Ltd. 1,097,160 50,401 VERITAS Software Corp.+ 252,500 27,085 Waste Management, Inc. 402,026 6,382 Yahoo!, Inc.+ 343,500 44,741 Young & Rubicam, Inc. 45,100 2,511 ---------- 361,824 ---------- CHEMICAL -- 1.8% Air Products & Chemicals, Inc. 148,758 4,621 Dow Chemical Co. 143,076 16,168 E. I. du Pont de Nemours & Co. 678,054 32,165 Eastman Chemical Co. 50,464 2,640 Great Lakes Chemical Corp. 37,325 1,006 Hercules, Inc. 68,457 1,065 Minnesota Mining & Manufacturing Co. 261,068 22,582 Pharmacia Corp. 811,880 40,543 PPG Industries, Inc. 112,975 6,143 Praxair, Inc. 103,630 4,605 Rohm & Haas Co. 141,850 5,053 Sigma-Aldrich Corp. 65,109 1,913 Union Carbide Corp. 87,460 5,160 W.R. Grace & Co.+ 46,200 601 ---------- 144,265 ---------- CONSTRUCTION -- 0.2% Armstrong Holdings, Inc.+ 25,700 503 Centex Corp. 39,122 944 Fluor Corp. 49,875 1,674 Kaufman & Broad Home Corp. 30,681 591 Masco Corp. 290,090 6,509 Owens Corning 35,311 642 Pulte Corp. 27,788 597 Sherwin-Williams Co. 107,161 2,666 The Stanley Works 58,586 1,728 Vulcan Materials Co. 64,600 2,830 ---------- 18,684 ---------- CONSUMER - DURABLE -- 0.1% Black & Decker Corp. 56,897 2,393 Leggett & Platt, Inc. 127,400 2,723 Maytag Corp. 54,456 1,875 Whirlpool Corp. 48,056 3,130 ---------- 10,121 ---------- 49 SCHWAB S&P 500 FUND SCHEDULE OF INVESTMENTS (continued) April 30, 2000 (Unaudited) Number Value of Shares (000s) --------- ----------- CONSUMER - NONDURABLE -- 0.7% American Greetings Corp., Class A 41,657 $ 755 Darden Restaurants, Inc. 84,620 1,560 Fortune Brands, Inc. 105,958 2,649 Harcourt General, Inc. 45,900 1,715 Hasbro, Inc. 113,697 1,812 Jostens, Inc. 21,400 528 Mattel, Inc. 272,207 3,335 McDonald's Corp. 878,974 33,511 Newell Rubbermaid, Inc. 182,433 4,595 Tricon Global Restaurants, Inc.+ 97,850 3,339 Tupperware Corp. 37,978 717 Wendy's International, Inc. 77,175 1,727 ---------- 56,243 ---------- CONTAINERS -- 0.1% Ball Corp. 19,763 623 Bemis Co., Inc. 34,011 1,252 Crown Cork & Seal Co., Inc. 83,968 1,364 Owens-Illinois, Inc.+ 96,693 1,305 Pactiv Corp.+ 110,356 904 Sealed Air Corp.+ 54,726 3,044 ---------- 8,492 ---------- ELECTRONICS -- 12.3% ADC Telecommunications, Inc.+ 195,300 11,864 Advanced Micro Devices, Inc.+ 95,794 8,406 Altera Corp.+ 106,000 10,838 Analog Devices, Inc.+ 227,200 17,452 Andrew Corp.+ 52,988 1,560 Applied Materials, Inc.+ 498,024 50,705 Conexant Systems, Inc.+ 139,100 8,328 Intel Corp. 2,167,524 274,869 ITT Industries, Inc. 56,747 1,791 KLA-Tencor Corp.+ 119,250 8,929 Linear Technology Corp. 202,200 11,551 LSI Logic Corp.+ 193,394 12,087 Lucent Technologies, Inc. 2,068,035 128,606 Micron Technology, Inc.+ 175,840 24,486 Molex, Inc. 127,200 6,988 Motorola, Inc. 461,666 54,967 National Semiconductor Corp.+ 111,437 6,770 Nextel Communications, Inc., Class A+ 236,750 25,909 Nortel Networks Corp. 937,040 106,120 PE Corp.-PE Biosystems Group 133,664 8,020 PerkinElmer, Inc. 31,696 1,735 Number Value of Shares (000s) --------- ----------- QUALCOMM, Inc.+ 480,300 $ 52,082 Scientific-Atlanta, Inc. 102,824 6,690 Solectron Corp.+ 384,300 17,990 Tektronix, Inc. 31,305 1,812 Tellabs, Inc.+ 261,156 14,315 Teradyne, Inc.+ 111,200 12,232 Texas Instruments, Inc. 528,802 86,129 Thermo Electron Corp.+ 102,914 1,994 Thomas & Betts Corp. 37,515 1,156 Xilinx, Inc.+ 208,800 15,295 ---------- 991,676 ---------- ENERGY - RAW MATERIALS -- 0.8% Anadarko Petroleum Corp. 82,350 3,577 Apache Corp. 73,689 3,570 Baker Hughes, Inc. 213,908 6,805 Burlington Resources, Inc. 141,055 5,545 Eastern Enterprises 17,843 1,086 Halliburton Co. 286,729 12,670 McDermott International, Inc. 38,300 311 Occidental Petroleum Corp. 237,792 5,098 Rowan Cos., Inc.+ 60,181 1,681 Schlumberger Ltd. 358,634 27,458 ---------- 67,801 ---------- FOOD & AGRICULTURE -- 2.7% Archer-Daniels Midland Co. 392,942 3,905 Bestfoods, Inc. 181,400 9,115 Campbell Soup Co. 276,827 7,197 Coca-Cola Co. 1,602,282 75,407 Coca-Cola Enterprises, Inc. 275,200 5,865 ConAgra, Inc. 319,500 6,031 General Mills, Inc. 195,768 7,121 H.J. Heinz Co. 230,438 7,835 Hershey Foods Corp. 90,398 4,102 Kellogg Co. 262,262 6,409 Nabisco Group Holdings Corp. 211,100 2,718 PepsiCo, Inc. 943,897 34,629 Quaker Oats Co. 87,187 5,683 Ralston-Ralston Purina Group 195,269 3,454 Sara Lee Corp. 588,738 8,831 SUPERVALU, Inc. 90,954 1,882 SYSCO Corp. 214,428 8,068 Unilever NV 370,632 16,887 Wm. Wrigley Jr. Co. 75,643 5,475 ---------- 220,614 ---------- 50 Number Value of Shares (000s) --------- ----------- GOLD -- 0.1% Barrick Gold Corp. 254,979 $ 4,287 Homestake Mining Co. 168,107 1,009 Newmont Mining Corp. 108,269 2,537 Placer Dome, Inc. 209,800 1,705 ---------- 9,538 ---------- HEALTHCARE / DRUGS & MEDICINE -- 9.7% Abbott Laboratories 997,314 38,334 Aetna, Inc. 93,158 5,392 Allergan, Inc. 85,070 5,009 ALZA Corp.+ 65,978 2,907 American Home Products Corp. 847,710 47,631 Amgen, Inc.+ 663,616 37,163 Bausch & Lomb, Inc. 37,416 2,259 Baxter International, Inc. 189,184 12,321 Becton, Dickinson & Co. 162,710 4,169 Biogen, Inc.+ 97,800 5,752 Biomet, Inc. 73,632 2,628 Boston Scientific Corp.+ 269,212 7,134 Bristol-Myers Squibb Co. 1,286,864 67,480 C.R. Bard, Inc. 33,020 1,438 Cardinal Health, Inc. 182,990 10,076 Columbia / HCA Healthcare Corp. 365,316 10,389 Eli Lilly & Co. 708,324 54,762 Guidant Corp.+ 199,820 11,465 HealthSouth Corp.+ 249,809 2,014 Humana, Inc.+ 107,942 830 Johnson & Johnson 903,180 74,512 Mallinckrodt, Inc. 44,800 1,204 Manor Care, Inc.+ 66,533 794 McKesson HBOC, Inc. 182,220 3,075 Medtronic, Inc. 775,554 40,280 Merck & Co., Inc. 1,516,346 105,386 Pfizer, Inc. 2,511,500 105,797 Quintiles Transnational Corp.+ 74,000 1,059 Schering-Plough Corp. 953,062 38,420 St. Jude Medical, Inc.+ 54,292 1,693 Tenet Healthcare Corp.+ 201,733 5,144 UnitedHealth Group, Inc. 110,392 7,362 Warner-Lambert Co. 558,301 63,542 Watson Pharmaceuticals, Inc.+ 62,800 2,822 Wellpoint Health Networks, Inc.+ 41,900 3,090 ---------- 783,333 ---------- Number Value of Shares (000s) --------- ----------- HOUSEHOLD PRODUCTS -- 1.4% Alberto-Culver Co., Class B 35,917 $ 849 Avon Products, Inc. 157,454 6,534 Clorox Co. 153,732 5,650 Colgate-Palmolive Co. 377,836 21,584 Gillette Co. 696,738 25,779 International Flavors & Fragrances, Inc. 67,828 2,336 Procter & Gamble Co. 854,222 50,933 ---------- 113,665 ---------- INSURANCE -- 2.8% AFLAC, Inc. 173,100 8,449 Allstate Corp. 521,918 12,330 American General Corp. 160,922 9,012 American International Group, Inc. 1,004,410 110,171 Aon Corp. 166,348 4,502 Chubb Corp. 113,960 7,251 CIGNA Corp. 109,565 8,738 Cincinnati Financial Corp. 106,945 4,311 Conseco, Inc. 210,702 1,146 Hartford Financial Services Group, Inc. 143,692 7,499 Jefferson-Pilot Corp. 68,422 4,554 Lincoln National Corp. 127,226 4,429 Loew's Corp. 69,040 3,806 Marsh & McLennan Cos., Inc. 173,578 17,108 MBIA, Inc. 65,086 3,218 MGIC Investment Corp. 69,038 3,301 Progressive Corp. 47,951 3,138 SAFECO Corp. 84,691 1,874 St. Paul Cos., Inc. 147,416 5,252 Torchmark Corp. 85,689 2,147 UnumProvident Corp. 155,328 2,640 ---------- 224,876 ---------- MEDIA -- 3.9% CBS Corp.+ 489,702 28,770 Clear Channel Communications, Inc.+ 219,910 15,834 Comcast Corp., Class A+ 602,258 24,128 Dow Jones & Co., Inc. 58,050 3,766 Gannett Co., Inc. 181,292 11,580 Knight-Ridder, Inc. 54,383 2,668 McGraw-Hill Cos., Inc. 127,264 6,681 MediaOne Group, Inc.+ 393,067 29,726 51 SCHWAB S&P 500 FUND SCHEDULE OF INVESTMENTS (continued) April 30, 2000 (Unaudited) Number Value of Shares (000s) --------- ----------- Meredith Corp. 33,612 $ 935 New York Times Co., Class A 111,300 4,584 R.R. Donnelley & Sons Co. 82,106 1,745 Seagram Co. Ltd. 281,375 15,194 Time Warner, Inc. 835,240 75,119 Tribune Co. 154,112 5,991 Viacom, Inc., Class B+ 453,774 24,674 Walt Disney Co. 1,342,830 58,161 ---------- 309,556 ---------- MISCELLANEOUS FINANCE -- 5.3% American Express Co. 291,579 43,755 Associates First Capital Corp. 472,002 10,473 Bear Stearns Cos., Inc. 74,201 3,181 Capital One Financial Corp. 128,050 5,602 Charles Schwab Corp. 533,358 23,735 Citigroup, Inc. 2,187,256 130,005 Countrywide Credit Industries, Inc. 73,124 2,020 Fannie Mae 664,917 40,103 Franklin Resources, Inc. 160,900 5,189 Freddie Mac 452,652 20,794 Golden West Financial Corp. 105,357 3,595 Household International, Inc. 305,108 12,738 Lehman Brothers Holdings, Inc. 78,400 6,434 MBNA Corp. 519,520 13,800 Merrill Lynch & Co., Inc. 240,792 24,546 Morgan Stanley Dean Witter Discover & Co. 739,372 56,747 Paine Webber Group, Inc. 92,900 4,076 Sabre Group Holdings, Inc.+ 84,101 2,938 SLM Holding Corp. 103,700 3,247 T. Rowe Price Associates, Inc. 77,300 2,947 Washington Mutual, Inc. 374,356 9,569 ---------- 425,494 ---------- NON-FERROUS METALS -- 0.4% Alcan Aluminum Ltd. 142,574 4,669 Alcoa, Inc. 239,026 15,507 Engelhard Corp. 81,301 1,428 Freeport-McMoRan Copper & Gold, Inc., Class B+ 105,615 1,017 Inco Ltd.+ 124,649 1,948 Phelps Dodge Corp. 53,154 2,458 Reynolds Metals Co. 41,054 2,730 ---------- 29,757 ---------- Number Value of Shares (000s) --------- ----------- OIL - DOMESTIC -- 0.6% Amerada Hess Corp. 58,792 $ 3,741 Ashland, Inc. 46,856 1,599 Conoco, Inc., Class B 406,000 10,099 Kerr-McGee Corp. 62,273 3,223 Phillips Petroleum Co. 164,850 7,820 Sunoco, Inc. 59,052 1,790 Tosco Corp. 92,900 2,978 Transocean Sedco Forex, Inc. 135,483 6,368 Union Pacific Resources Group, Inc. 162,762 3,123 Unocal Corp. 157,116 5,077 USX-Marathon Group, Inc. 201,002 4,686 ---------- 50,504 ---------- OIL - INTERNATIONAL -- 3.8% Chevron Corp. 427,468 36,388 Exxon Mobil Corp. 2,240,353 174,047 Royal Dutch Petroleum Co. - Sponsored ADR 1,390,980 79,808 Texaco, Inc. 358,754 17,758 ---------- 308,001 ---------- OPTICAL & PHOTO -- 0.6% Corning, Inc. 180,382 35,626 Eastman Kodak Co. 205,181 11,477 Polaroid Corp. 29,495 595 ---------- 47,698 ---------- PAPER & FOREST PRODUCTS -- 0.8% Boise Cascade Corp. 37,216 1,212 Champion International Corp. 63,000 4,142 Fort James Corp. 140,695 3,368 Georgia-Pacific Group 111,082 4,082 International Paper Co. 268,781 9,878 Kimberly-Clark Corp. 362,313 21,037 Louisiana-Pacific Corp. 69,228 926 Mead Corp. 66,219 2,305 Potlatch Corp. 19,560 771 Temple-Inland, Inc. 36,319 1,821 Westvaco Corp. 65,613 2,026 Weyerhaeuser Co. 152,017 8,123 Willamette Industries, Inc. 72,832 2,781 ---------- 62,472 ---------- 52 Number Value of Shares (000s) --------- ----------- PRODUCER GOODS & MANUFACTURING -- 5.6% Avery Dennison Corp. 72,815 $ 4,778 Briggs & Stratton Corp. 15,200 583 Caterpillar, Inc. 230,986 9,109 Cooper Industries, Inc. 61,055 2,095 Deere & Co. 151,527 6,118 Dover Corp. 132,165 6,716 Emerson Electric Co. 279,826 15,355 FMC Corp.+ 19,878 1,157 General Electric Co. (b) 2,128,640 334,729 Honeywell International, Inc. 514,443 28,809 Illinois Tool Works, Inc. 195,321 12,513 Ingersoll-Rand Co. 106,397 4,994 Johnson Controls, Inc. 56,075 3,550 Milacron, Inc. 23,783 434 Millipore Corp. 29,491 2,114 NACCO Industries, Inc., Class A 5,317 239 Pall Corp. 79,966 1,784 Parker-Hannifin Corp. 73,333 3,410 Snap-On, Inc. 37,650 995 The Timken Co. 39,832 737 W.W. Grainger, Inc. 60,508 2,625 ---------- 442,844 ---------- RAILROAD & SHIPPING -- 0.3% Burlington Northern Santa Fe Corp. 296,575 7,155 CSX Corp. 141,455 2,961 Kansas City Southern Industries, Inc. 72,400 5,204 Norfolk Southern Corp. 247,088 4,355 Union Pacific Corp. 161,116 6,787 ---------- 26,462 ---------- RETAIL -- 6.0% Albertson's, Inc. 275,037 8,956 AutoZone, Inc.+ 89,615 2,055 Bed, Bath & Beyond, Inc.+ 91,300 3,350 Best Buy Co., Inc.+ 132,500 10,699 Cendant Corp.+ 457,995 7,070 Circuit City Stores-Circuit City Group 132,012 7,764 Consolidated Stores Corp.+ 71,500 889 Costco Wholesale Corp.+ 288,588 15,602 CVS Corp. 254,518 11,071 Dillards, Inc., Class A 69,133 963 Dollar General Corp. 171,306 3,919 Federated Department Stores, Inc.+ 136,137 4,629 Gap, Inc. 553,302 20,334 Number Value of Shares (000s) --------- ----------- Great Atlantic & Pacific Tea Co., Inc. 24,700 $ 452 Home Depot, Inc. 1,493,525 83,731 J.C. Penney Co., Inc. 168,520 2,328 Kmart Corp.+ 317,117 2,576 Kohl's Corp.+ 211,200 10,138 Kroger Co.+ 540,562 10,034 Limited, Inc. 139,267 6,293 Longs Drug Stores, Inc. 25,282 588 Lowe's Cos., Inc. 248,326 12,292 May Department Stores Co. 215,079 5,915 Nordstrom, Inc. 87,322 2,429 Office Depot, Inc.+ 212,900 2,249 Rite Aid Corp. 167,014 835 Safeway, Inc.+ 330,100 14,566 Sears, Roebuck & Co. 245,418 8,988 Staples, Inc.+ 303,850 5,792 Tandy Corp. 125,442 7,150 Target Corp. 284,410 18,931 TJX Cos., Inc. 200,782 3,852 Toys "R" Us, Inc.+ 157,696 2,405 Wal-Mart Stores, Inc. 2,889,262 159,993 Walgreen Co. 652,756 18,359 Winn-Dixie Stores, Inc. 94,711 1,569 ---------- 478,766 ---------- STEEL -- 0.1% Allegheny Technologies, Inc. 60,251 1,457 Bethlehem Steel Corp.+ 84,135 452 Nucor Corp. 56,284 2,420 USX-U.S. Steel Group, Inc. 57,079 1,431 Worthington Industries, Inc. 57,402 711 ---------- 6,471 ---------- TELEPHONE -- 7.0% Alltel Corp. 204,090 13,598 AT&T Corp. 2,073,093 96,787 Bell Atlantic Corp. 1,007,696 59,706 BellSouth Corp. 1,221,092 59,452 CenturyTel, Inc. 90,950 2,228 Global Crossing Ltd.+ 505,255 15,916 GTE Corp. 624,148 42,286 MCI WorldCom, Inc.+ 1,841,204 83,660 SBC Communications, Inc. 2,212,930 96,954 Sprint Corp. (FON Group) 566,598 34,846 Sprint Corp. (PCS Group)+ 560,398 30,822 US West, Inc. 329,812 23,478 ---------- 559,733 ---------- 53 SCHWAB S&P 500 FUND SCHEDULE OF INVESTMENTS (continued) April 30, 2000 (Unaudited) Number Value of Shares (000s) --------- ----------- TOBACCO -- 0.4% Philip Morris Cos., Inc. 1,534,462 $ 33,566 UST, Inc. 110,500 1,658 ---------- 35,224 ---------- TRAVEL & RECREATION -- 0.3% Brunswick Corp. 59,107 1,134 Carnival Corp. 400,000 9,950 Harrah's Entertainment, Inc.+ 83,011 1,707 Hilton Hotels Corp. 238,572 2,028 Marriott International, Inc., Class A 161,232 5,159 Mirage Resorts, Inc.+ 125,474 2,557 ---------- 22,535 ---------- TRUCKING & FREIGHT -- 0.0% PACCAR, Inc. 50,663 2,410 Ryder Systems, Inc. 41,762 926 ---------- 3,336 ---------- UTILITIES - ELECTRIC & GAS -- 2.6% AES Corp.+ 133,800 12,034 Ameren Corp. 88,613 3,251 American Electric Power Co., Inc. 125,895 4,611 Carolina Power & Light Co. 104,016 3,803 Central & South West Corp. 137,943 2,992 Cinergy Corp. 102,600 2,745 CMS Energy Corp. 75,300 1,431 Coastal Corp. 138,542 6,953 Columbia Energy Group 53,274 3,343 Consolidated Edison, Inc. 143,191 5,039 Constellation Energy Group, Inc. 97,308 3,217 Dominion Resources, Inc. 154,055 6,932 DTE Energy Co. 93,703 3,057 Duke Energy Corp. 237,515 13,657 Edison International 224,629 4,282 El Paso Energy Corp. 148,079 6,293 Enron Corp. 465,278 32,424 Entergy Corp. 160,404 4,080 FirstEnergy Corp. 151,481 3,853 Florida Progress Corp. 63,400 3,107 FPL Group, Inc. 116,780 5,277 GPU, Inc. 80,452 2,258 New Century Energies, Inc. 75,400 2,460 Niagara Mohawk Holdings, Inc.+ 120,602 1,673 NICOR, Inc. 30,301 1,026 Northern States Power Co. 100,000 2,181 ONEOK, Inc. 20,200 510 Number Value of Shares (000s) --------- ----------- PECO Energy Co. 120,965 $ 5,043 Peoples Energy Corp. 22,873 710 PG&E Corp. 249,316 6,467 Pinnacle West Capital Corp. 54,700 1,921 PPL Corp. 92,745 2,214 Public Service Enterprise Group, Inc. 141,785 5,087 Reliant Energy, Inc. 191,486 5,098 Sempra Energy 132,630 2,462 Southern Co. 436,331 10,881 Texas Utilities Co. 178,787 6,023 Unicom Corp. 141,152 5,611 Williams Cos., Inc. 282,164 10,528 ---------- 204,534 ---------- TOTAL COMMON STOCK (Cost $5,850,241) 8,013,796 ---------- Par (000s) --------- U.S. TREASURY OBLIGATIONS -- 0.0% U.S. Treasury Bills (a) (b) 5.68%-5.79%, 06/15/00 $965 959 5.61%, 06/22/00 475 471 ---------- TOTAL U.S. TREASURY OBLIGATIONS (Cost $1,429) 1,430 ---------- Number of Shares --------- SHORT-TERM INVESTMENTS -- 1.2% Provident Institutional TempFund, 5.74%* 97,667,227 97,667 ---------- TOTAL SHORT-TERM INVESTMENTS (Cost $97,667) 97,667 ---------- TOTAL INVESTMENTS -- 100.9% (Cost $5,949,337) 8,112,893 ---------- OTHER ASSETS AND LIABILITIES, NET -- (0.9%) Other assets 679,064 Liabilities (753,004) ---------- (73,940) ---------- TOTAL NET ASSETS -- 100.0% $8,038,953 ========== SEE ACCOMPANYING NOTES TO SCHEDULES OF INVESTMENTS AND NOTES TO FINANCIAL STATEMENTS. 54 SCHWAB 1000 FUND(R) SCHEDULE OF INVESTMENTS April 30, 2000 (Unaudited) Number Value of Shares (000s) --------- ----------- COMMON STOCK -- 99.8% AEROSPACE / DEFENSE -- 1.0% B.F. Goodrich Co. 56,792 $ 1,810 Boeing Co. 486,282 19,299 Crane Co. 32,850 882 General Dynamics Corp. 113,600 6,646 Litton Industries, Inc.+ 30,500 1,325 Lockheed Martin Corp. 216,384 5,383 Northrop Grumman Corp. 39,900 2,828 Raytheon Co., Class A 52,000 1,193 Raytheon Co., Class B 185,100 4,107 Rockwell International Corp. 104,300 4,107 Textron, Inc. 85,400 5,289 TRW, Inc. 66,700 3,902 United Technologies Corp. 263,106 16,362 ---------- 73,133 ---------- AIR TRANSPORTATION -- 0.3% AMR Corp.+ 85,200 2,902 Continental Airlines, Inc.+ 39,400 1,576 Delta Air Lines, Inc. 74,400 3,925 FedEx Corp.+ 163,860 6,175 Galileo International, Inc. 30,500 705 Northwest Airlines Corp., Class A+ 42,000 1,037 Southwest Airlines Co. 277,350 6,015 U.S. Airways Group, Inc.+ 36,900 1,026 UAL Corp.+ 32,700 1,893 ---------- 25,254 ---------- ALCOHOLIC BEVERAGES -- 0.3% Adolph Coors Co., Class B 21,000 1,071 Anheuser-Busch Cos., Inc. 258,800 18,262 Brown-Forman Corp., Class B 36,700 2,002 ---------- 21,335 ---------- APPAREL -- 0.2% Abercrombie & Fitch Co.+ 65,000 715 Jones Apparel Group, Inc.+ 72,200 2,143 Liz Claiborne, Inc. 35,000 1,621 Nike, Inc., Class B 143,800 6,246 Talbots, Inc. 20,500 1,036 VF Corp. 68,100 1,924 WestPoint Stevens, Inc. 34,000 638 ---------- 14,323 ---------- Number Value of Shares (000s) --------- ----------- AUTOMOTIVE PRODUCTS / MOTOR VEHICLES -- 1.4% Cummins Engine Co., Inc. 24,800 $ 882 Dana Corp. 91,689 2,785 Danaher Corp. 80,800 4,615 Eaton Corp. 42,100 3,536 Federal-Mogul Corp. 9,600 130 Ford Motor Co. 655,500 35,848 General Motors Corp. 352,700 33,021 General Motors Corp., Class H+ 74,382 7,164 Genuine Parts Co. 95,575 2,509 Goodyear Tire & Rubber Co. 85,500 2,362 Harley-Davidson, Inc. 170,800 6,800 Lear Corp.+ 36,000 1,078 Meritor Automotive, Inc. 40,000 600 Navistar International Corp.+ 36,000 1,260 O'Reilly Automotive, Inc.+ 1,000 14 SPX Corp.+ 20,000 2,198 United Rentals, Inc.+ 45,000 610 ---------- 105,412 ---------- BANKS -- 4.8% AmSouth Bancorp. 223,475 3,254 Associated Bancorp. 39,625 1,013 BancWest Corp. 50,000 916 Bank of America Corp. 928,491 45,496 Bank of New York Co., Inc. 407,100 16,717 Bank One Corp. 616,693 18,809 BB&T Corp. 185,500 4,939 CCB Financial Corp. 21,000 831 Centura Banks, Inc. 22,000 909 Chase Manhattan Corp. 452,460 32,605 Citizens Banking Corp. 1,000 18 City National Corp. 25,000 920 Colonial BancGroup, Inc. 65,000 609 Comerica, Inc. 91,296 3,869 Commerce Bancorp, Inc. 21,000 834 Commerce Bancshares, Inc. 31,963 987 Compass Bancshares, Inc. 69,412 1,284 Cullen/Frost Bankers, Inc. 29,700 733 Fifth Third Bancorp. 170,793 10,781 First Midwest Bancorp, Inc. 2,000 50 First Security Corp. 112,627 1,591 First Tennessee National Corp. 72,600 1,379 First Union Corp. 523,622 16,690 First Virginia Banks, Inc. 24,625 899 55 SCHWAB 1000 FUND(R) SCHEDULE OF INVESTMENTS (continued) April 30, 2000 (Unaudited) Number Value of Shares (000s) --------- ----------- Firstar Corp. 538,535 $ 13,396 Firstmerit Corp. 46,800 766 Fleet Boston Financial Corp. 501,939 17,787 Fulton Financial Corp. 45,375 933 GreenPoint Financial Corp. 62,800 1,170 Hibernia Corp., Class A 80,000 850 Hudson United Bancorp. 22,660 511 Huntington Bancshares, Inc. 129,578 2,365 J.P. Morgan & Co., Inc. 97,000 12,452 KeyCorp, Inc. 248,946 4,606 Keystone Financial, Inc. 30,000 450 M&T Bank Corp. 4,600 2,021 Marshall & Ilsley Corp. 57,185 2,656 Mellon Financial Corp. 278,788 8,956 Mercantile Bankshares Corp. 40,675 1,159 National City Corp. 335,900 5,710 National Commerce Bancorp. 60,000 986 North Fork Bancorporation, Inc. 67,000 1,085 Northern Trust Corp. 123,800 7,939 Old Kent Financial Corp. 70,636 2,128 Old National Bancorp. 29,559 964 Pacific Century Financial Corp. 40,350 830 Peoples Bank-Bridgeport 38,000 774 Peoples Heritage Financial Group, Inc. 62,000 810 PNC Financial Services Group 165,130 7,204 Provident Bancorp, Inc. 19,200 563 Providian Financial Corp. 79,050 6,961 Regions Financial Corp. 126,765 2,591 S1 Corp.+ 18,900 1,027 Sky Financial Group, Inc. 44,300 728 SouthTrust Corp. 92,787 2,215 State Street Corp. 84,500 8,186 Summit Bancorp. 95,850 2,432 SunTrust Banks, Inc. 177,456 9,006 Synovus Financial Corp. 157,962 2,932 Trustmark Corp. 44,000 808 U.S. Bancorp. 412,098 8,371 Union Planters Corp. 83,900 2,375 UnionBanCal Corp. 90,600 2,509 Valley National Bancorp. 36,750 967 Wachovia Corp. 113,749 7,131 Wells Fargo & Co. 900,676 36,984 Westamerica Bancorp. 16,800 421 Number Value of Shares (000s) --------- ----------- Wilmington Trust Co. 18,200 $ 839 Zions Bancorp. 46,600 1,934 ---------- 363,621 ---------- BUSINESS MACHINES & SOFTWARE -- 15.3% 3Com Corp.+ 194,350 7,665 Adaptec, Inc.+ 60,400 1,631 Adobe Systems, Inc. 70,200 8,490 Apple Computer, Inc.+ 90,700 11,252 Autodesk, Inc. 27,200 1,044 BMC Software, Inc.+ 132,000 6,179 Cabletron Systems, Inc.+ 97,000 2,219 Ceridian Corp.+ 66,000 1,431 Cisco Systems, Inc.+ 3,738,600 259,190 Comdisco, Inc. 91,066 2,829 Compaq Computer Corp. 920,168 26,915 Compuware Corp.+ 209,600 2,633 Comverse Technology, Inc.+ 79,400 7,081 Dell Computer Corp.+ 1,394,000 69,874 Diebold, Inc. 35,818 1,034 EMC Corp.+ 557,600 77,472 Gateway, Inc.+ 182,000 10,056 Hewlett-Packard Co. 554,000 74,790 Informix Corp.+ 146,900 1,616 Integrated Device Technology, Inc.+ 50,400 2,422 International Business Machines Corp. 987,100 110,185 Lexmark International Group, Inc., Class A+ 75,000 8,850 Microchip Technology, Inc.+ 45,000 2,793 Micromuse, Inc.+ 18,200 1,786 Microsoft Corp.+ 2,839,000 198,020 National Computer Systems, Inc. 15,000 772 NCR Corp.+ 54,451 2,103 Network Appliance, Inc.+ 166,000 12,274 Novell, Inc.+ 195,800 3,843 Novellus Systems, Inc.+ 60,000 4,001 Oracle Corp.+ 1,540,657 123,156 Pitney Bowes, Inc. 149,100 6,094 Seagate Technology, Inc.+ 122,060 6,202 Silicon Graphics, Inc.+ 69,000 496 Storage Technology Corp.+ 30,500 397 Sun Microsystems, Inc.+ 864,000 79,434 Sybase+ 16,000 323 56 Number Value of Shares (000s) --------- ----------- Technology Data Corp.+ 28,000 $ 1,174 The Titan Corp.+ 27,700 1,189 Total System Services, Inc. 102,700 2,048 Unisys Corp.+ 176,150 4,085 Visual Networks, Inc.+ 2,000 78 Xerox Corp. 363,350 9,606 Xircom, Inc.+ 3,000 118 ---------- 1,154,850 ---------- BUSINESS SERVICES -- 6.0% ACNielsen Corp.+ 35,000 807 Affiliated Computer Services, Inc.+ 30,000 994 Affymetrix, Inc.+ 13,700 1,850 Allied Waste Industries, Inc.+ 91,365 560 America Online, Inc.+ 1,248,315 74,665 American Management Systems, Inc.+ 22,000 814 Apollo Group, Inc.+ 42,500 1,233 Aspect Development, Inc.+ 30,000 2,074 At Home Corp., Class A+ 176,696 3,291 Automatic Data Processing, Inc. 343,700 18,495 Autonation, Inc.+ 148,000 1,351 BEA Systems, Inc.+ 137,200 6,620 BroadVision, Inc.+ 134,400 5,905 CDW Computer Centers, Inc.+ 26,000 2,704 CheckFree Holdings Corp.+ 31,000 1,575 Ciber, Inc.+ 36,400 657 Cintas Corp. 100,800 3,994 Citrix Systems, Inc.+ 104,200 6,363 Computer Associates International, Inc. 323,479 18,054 Computer Sciences Corp.+ 94,196 7,683 Concord EFS, Inc.+ 108,412 2,426 Convergys Corp.+ 86,300 3,797 Credence Systems, Corp.+ 13,900 1,984 CSG Systems International, Inc.+ 24,900 1,149 Deluxe Corp. 46,000 1,159 DeVry, Inc.+ 35,000 833 DoubleClick, Inc.+ 64,700 4,909 DST Systems, Inc.+ 35,000 2,597 Dun & Bradstreet Corp. 89,600 2,699 Earthlink, Inc.+ 69,070 1,304 eBay, Inc.+ 72,800 11,589 Ecolab, Inc. 72,800 2,844 Number Value of Shares (000s) --------- ----------- Electronic Data Systems Corp. 257,200 $ 17,683 Entrust Technologies, Inc.+ 25,300 1,243 Equifax, Inc. 74,000 1,808 First Data Corp. 234,302 11,408 Fiserv, Inc.+ 70,693 3,247 Go2net, Inc.+ 15,700 934 H&R Block, Inc. 53,700 2,245 HNC Software, Inc.+ 13,700 678 I2 Technologies+ 82,800 10,702 Icos Corp.+ 15,000 604 IMS Health, Inc. 178,200 3,041 Interim Services, Inc.+ 5,000 86 Interpublic Group of Cos., Inc. 159,700 6,548 Intuit, Inc.+ 107,400 3,860 ISS Group, Inc.+ 23,000 2,080 J. D. Edwards & Co.+ 65,000 1,186 Keane, Inc.+ 45,000 1,299 Lamar Advertising Co.+ 25,000 1,102 Legato Systems, Inc.+ 46,100 596 LHS Group, Inc.+ 35,000 1,391 Lycos, Inc.+ 52,000 2,418 Macrovision Corp.+ 21,800 1,065 Manpower, Inc. 44,400 1,568 MarchFirst, Inc.+ 73,925 1,576 Medical Manager Corp.+ 19,800 634 Mercury Interactive Corp.+ 43,000 3,870 Metris Cos., Inc. 25,700 964 National Instruments+ 33,200 1,619 National Service Industries, Inc. 16,700 359 NCO Group, Inc.+ 1,000 34 Network Associates, Inc.+ 85,050 2,163 New Era of Networks, Inc.+ 20,000 628 NOVA Corp.+ 36,000 1,139 Omnicom Group, Inc. 97,200 8,851 Open Market, Inc.+ 20,900 216 Parametric Technology Corp.+ 142,400 1,161 Paychex, Inc. 139,695 7,351 PeopleSoft, Inc.+ 139,600 1,946 Peregrine Systems, Inc.+ 56,200 1,352 Pixar, Inc.+ 22,000 818 Polycom, Inc.+ 18,600 1,472 Profit Recovery Group International, Inc.+ 26,800 471 PSINet, Inc.+ 73,600 1,707 57 SCHWAB 1000 FUND(R) SCHEDULE OF INVESTMENTS (continued) April 30, 2000 (Unaudited) Number Value of Shares (000s) --------- ----------- Qlogic Corp.+ 41,000 $ 4,113 RealNetworks, Inc.+ 82,600 3,934 Reynolds & Reynolds Co., Class A 45,400 1,078 Robert Half International, Inc.+ 54,650 3,340 RSA Security, Inc.+ 18,600 1,092 Safety-Kleen, Corp.+ 44,000 44 Sandisk Corp.+ 36,200 3,317 Sapient Corp.+ 31,700 2,510 SDL, Inc.+ 40,000 7,800 SEI Investments Co. 9,000 1,074 The Service Master Co. 170,000 2,316 Shared Medical Systems Corp. 14,700 609 Siebel Systems, Inc.+ 103,600 12,730 Sungard Data Systems, Inc.+ 66,600 2,302 Sykes Enterprises, Inc.+ 30,000 600 Symantec Corp.+ 30,000 1,873 Synopsys, Inc.+ 38,800 1,629 Technology Solutions Co.+ 25,200 165 Teletech Holdings, Inc.+ 27,700 904 TMP Worldwide, Inc.+ 40,000 2,615 True North Communications, Inc. 23,000 947 Verio, Inc.+ 43,600 1,638 VeriSign, Inc.+ 57,300 7,986 VERITAS Software Corp.+ 218,250 23,411 Verity, Inc.+ 17,100 554 Viad Corp. 53,100 1,347 Vitesse Semiconductor Corp.+ 90,000 6,125 Waste Management, Inc. 305,275 4,846 Wind River Systems, Inc.+ 15,000 640 Yahoo!, Inc.+ 288,600 37,590 Young & Rubicam, Inc. 39,400 2,194 ---------- 453,425 ---------- CHEMICAL -- 1.7% Air Products & Chemicals, Inc. 127,200 3,951 Cabot Corp. 37,800 1,021 CK Witco Corp.+ 62,000 729 Dow Chemical Co. 122,200 13,809 E. I. du Pont de Nemours & Co. 574,589 27,257 Eastman Chemical Co. 45,725 2,392 Enzon, Inc.+ 10,000 373 Great Lakes Chemical Corp. 31,700 854 Hercules, Inc. 54,850 854 Lubrizol Corp. 31,700 812 Number Value of Shares (000s) --------- ----------- Lyondell Petrochemical Corp. 61,300 $ 1,126 Millennium Chemicals, Inc. 24,000 478 Minnesota Mining & Manufacturing Co. 219,400 18,978 Pharmacia Corp. 680,400 33,977 PPG Industries, Inc. 98,700 5,367 Praxair, Inc. 92,100 4,092 Rohm & Haas Co. 123,214 4,390 RPM, Inc. 44,843 454 Sigma-Aldrich Corp. 60,000 1,762 Solutia, Inc. 55,000 749 Union Carbide Corp. 73,000 4,307 Valspar Corp. 21,600 778 ---------- 128,510 ---------- CONSTRUCTION -- 0.3% Armstrong Holdings, Inc.+ 25,700 503 Centex Corp. 33,000 796 Clayton Homes, Inc. 64,182 610 Fluor Corp. 39,000 1,309 Johns Manville Corp. 84,300 880 Lafarge Corp. 46,100 1,164 Martin Marietta Materials, Inc. 21,400 1,134 Masco Corp. 231,300 5,190 Sawtek, Inc.+ 23,900 1,143 Sherwin-Williams Co. 97,000 2,413 Southdown, Inc. 24,200 1,407 The Stanley Works 56,800 1,675 USG Corp. 28,700 1,198 Vulcan Materials Co. 59,400 2,602 ---------- 22,024 ---------- CONSUMER - DURABLE -- 0.2% Black & Decker Corp. 49,900 2,099 Ethan Allen Interiors, Inc. 30,400 811 Hillenbrand Industries, Inc. 37,000 1,115 Leggett & Platt, Inc. 111,600 2,385 Linens 'N Things, Inc.+ 20,000 617 Maytag Corp. 45,850 1,579 Mohawk Industries, Inc.+ 25,000 620 Shaw Industries, Inc. 71,200 1,126 Whirlpool Corp. 40,900 2,664 ---------- 13,016 ---------- 58 Number Value of Shares (000s) --------- ----------- CONSUMER - NONDURABLE -- 0.8% American Greetings Corp., Class A 39,200 $ 711 Brinker International, Inc.+ 35,000 1,116 Catalina Marketing Corp.+ 10,000 1,012 Darden Restaurants, Inc. 78,600 1,449 Electronic Arts, Inc.+ 40,400 2,444 Fastenal Co. 20,700 1,210 Fortune Brands, Inc. 90,300 2,258 Harcourt General, Inc. 40,200 1,502 Hasbro, Inc. 117,087 1,866 International Game Technology+ 44,600 1,087 International Speedway Corp., Class A 30,100 1,294 Lancaster Colony Corp. 24,450 642 Mattel, Inc. 189,520 2,322 McDonald's Corp. 744,200 28,373 Newell Rubbermaid, Inc. 144,809 3,647 Outback Steakhouse, Inc.+ 46,875 1,535 Service Corp. International 16,200 83 Sotheby's Holdings, Inc., Class A 30,000 497 Starbucks Corp.+ 101,000 3,054 Tricon Global Restaurants, Inc.+ 84,760 2,892 Wendy's International, Inc. 63,500 1,421 ---------- 60,415 ---------- CONTAINERS -- 0.1% Bemis Co., Inc. 36,400 1,340 Crown Cork & Seal Co., Inc. 44,700 726 Owens-Illinois, Inc.+ 89,900 1,214 Sealed Air Corp.+ 44,199 2,459 Sonoco Products 62,141 1,297 ---------- 7,036 ---------- ELECTRONICS -- 12.5% Acxiom Corp.+ 40,000 1,080 ADC Telecommunications, Inc.+ 170,800 10,376 Adelphia Communications Corp., Class A+ 61,706 3,058 Advanced Fibre Communications, Inc.+ 44,000 2,010 Advanced Micro Devices, Inc.+ 80,100 7,029 Alpha Industries, Inc.+ 21,800 1,134 Altera Corp.+ 114,400 11,697 American Power Conversion Corp.+ 103,000 3,637 Number Value of Shares (000s) --------- ----------- Amphenol Corp.+ 22,800 $ 1,454 Analog Devices, Inc.+ 194,800 14,963 Andrew Corp.+ 48,612 1,431 ANTEC Corp.+ 23,000 1,236 Applied Materials, Inc.+ 414,800 42,232 Arrow Electronics, Inc.+ 53,800 2,357 Aspect Communications Corp.+ 26,900 955 Atmel Corp.+ 119,700 5,858 Avnet, Inc. 19,100 1,502 AVX Corp. 48,400 4,716 Broadcom Corp., Class A+ 63,800 10,998 Burr Brown Corp.+ 31,350 2,136 Cadence Design Systems, Inc.+ 139,350 2,343 CIENA Corp.+ 75,000 9,272 CMGI, Inc.+ 144,500 10,296 CommScope, Inc.+ 28,700 1,363 Concentric Network Corp.+ 19,000 827 Cree Research, Inc.+ 16,700 2,430 CTS Corp. 15,600 984 Cypress Semiconductor Corp.+ 59,400 3,085 Dallas Semiconductor Corp. 30,000 1,288 Electronics for Imaging, Inc.+ 35,000 1,829 Emulex Corp.+ 20,000 908 Gentex Corp.+ 45,000 1,451 Getty Images, Inc.+ 23,300 708 Harmonic, Inc.+ 17,100 1,262 Harris Corp. 36,600 1,183 Intel Corp. 1,827,400 231,737 ITT Industries, Inc. 50,600 1,597 JDS Uniphase Corp.+ 304,800 31,604 Kemet Corp.+ 24,300 1,810 KLA-Tencor Corp.+ 99,900 7,480 L-3 Communications Holdings, Inc.+ 6,900 367 Lam Research Corp.+ 66,900 3,069 Linear Technology Corp. 179,600 10,260 Loral Space & Communications Corp.+ 114,400 1,123 LSI Logic Corp.+ 160,200 10,013 Lucent Technologies, Inc. 1,736,469 107,987 Macromedia, Inc.+ 30,000 2,610 Maxim Integrated Products, Inc.+ 158,400 10,266 Metromedia Fiber Network, Inc., Class A+ 256,600 7,923 59 SCHWAB 1000 FUND(R) SCHEDULE OF INVESTMENTS (continued) April 30, 2000 (Unaudited) Number Value of Shares (000s) --------- ----------- Micron Technology, Inc.+ 145,600 $ 20,275 Molex Inc., Class A 66,900 2,676 Molex, Inc. 112,821 6,198 Motorola, Inc. 385,662 45,918 National Semiconductor Corp.+ 94,300 5,729 Network Solutions, Inc.+ 37,800 5,594 Nextel Communications, Inc., Class A+ 198,550 21,729 PE Corp.-PE Biosystems Group 122,000 7,320 PerkinElmer, Inc. 22,000 1,204 Powerwave Technologies, Inc.+ 11,000 2,289 QUALCOMM, Inc.+ 401,400 43,527 Rambus, Inc.+ 10,900 2,507 Rational Software Corp.+ 49,000 4,171 RF Micro Devices, Inc.+ 44,900 4,672 Sanmina Corp.+ 71,600 4,300 SCI Systems, Inc.+ 76,000 4,047 Scientific-Atlanta, Inc. 89,400 5,817 Semtech Corp.+ 20,200 1,377 Sensormatic Electronics Corp.+ 10,000 167 Solectron Corp.+ 321,100 15,031 Symbol Technologies, Inc. 83,980 4,682 Tektronix, Inc. 26,400 1,528 Tellabs, Inc.+ 222,000 12,168 Teradyne, Inc.+ 95,200 10,472 Terayon Communication Systems, Inc.+ 15,100 1,404 Texas Instruments, Inc. 444,600 72,414 Thermo Electron Corp.+ 77,137 1,494 Thomas & Betts Corp. 15,000 462 TranSwitch Corp.+ 21,300 1,876 Triquint Semiconductor, Inc.+ 19,800 2,036 Univision Communications, Inc.+ 57,000 6,227 Vicor Corp.+ 29,700 772 Vishay Intertechnology, Inc.+ 47,900 4,017 VISX, Inc.+ 16,900 267 Waters Corp.+ 39,200 3,714 Western Wireless Corp., Class A+ 28,100 1,396 Xilinx, Inc.+ 183,600 13,449 ---------- 939,860 ---------- ENERGY - RAW MATERIALS -- 0.9% Anadarko Petroleum Corp. 78,300 3,401 Apache Corp. 62,600 3,032 Baker Hughes, Inc. 180,020 5,727 Number Value of Shares (000s) --------- ----------- BJ Services Co.+ 40,100 $ 2,817 Burlington Resources, Inc. 125,967 4,952 Cooper Cameron Corp.+ 35,000 2,625 Devon Energy Corp. 45,200 2,178 Eastern Enterprises 5,000 304 ENSCO International, Inc. 77,800 2,582 EOG Resources, Inc. 64,800 1,612 Global Marine, Inc.+ 94,500 2,268 Halliburton Co. 242,760 10,727 Mitchell Energy & Development Corp., Class A 27,200 650 Nabors Industries, Inc.+ 78,300 3,088 Noble Affiliates, Inc. 27,400 988 Noble Drilling Corp.+ 75,000 2,995 Occidental Petroleum Corp. 194,900 4,178 R&B Falcon Corp.+ 105,000 2,179 Rowan Cos., Inc.+ 52,600 1,470 Smith International+ 25,000 1,900 Tidewater, Inc. 27,000 803 Valero Energy Corp. 24,600 713 Vastar Resources, Inc. 52,500 4,233 Weatherford International, Inc.+ 62,930 2,557 ---------- 67,979 ---------- FOOD & AGRICULTURE -- 2.4% Archer-Daniels Midland Co. 333,970 3,319 Bestfoods, Inc. 157,400 7,909 Campbell Soup Co. 234,400 6,094 Coca-Cola Co. 1,345,400 63,318 Coca-Cola Enterprises, Inc. 212,600 4,531 ConAgra, Inc. 247,348 4,669 Dean Foods Co. 21,150 518 Flowers Industries, Inc. 47,500 724 General Mills, Inc. 172,200 6,264 H.J. Heinz Co. 197,700 6,722 Hershey Foods Corp. 76,100 3,453 Hormel Foods Corp. 82,800 1,263 IBP, Inc. 45,100 744 IMC Global, Inc. 62,360 963 International Home Foods, Inc.+ 45,000 655 Interstate Bakeries Corp. 37,200 474 Kellogg Co. 213,300 5,213 McCormick & Co., Inc. 38,400 1,198 Nabisco Group Holdings Corp. 177,936 2,291 60 Number Value of Shares (000s) --------- ----------- Nabisco Holdings Corp., Class A 26,000 $ 977 PepsiCo, Inc. 797,600 29,262 Quaker Oats Co. 73,100 4,765 Ralston-Ralston Purina Group 168,300 2,977 Sara Lee Corp. 480,400 7,206 Suiza Foods Corp.+ 21,300 829 SUPERVALU, Inc. 71,600 1,481 SYSCO Corp. 186,800 7,028 Tyson Foods, Inc. 129,300 1,350 Whitman Corp. 72,800 832 Wm. Wrigley Jr. Co. 63,400 4,589 ---------- 181,618 ---------- GOLD -- 0.0% Homestake Mining Co. 142,800 857 Newmont Mining Corp. 99,037 2,321 ---------- 3,178 ---------- HEALTHCARE / DRUGS & MEDICINE -- 9.7% Abbott Laboratories 840,100 32,291 Aetna, Inc. 72,165 4,177 Allergan, Inc. 72,100 4,245 ALZA Corp.+ 56,100 2,472 American Home Products Corp. 716,100 40,236 Amgen, Inc.+ 571,400 31,998 Andrx Corp.+ 25,400 1,300 Bausch & Lomb, Inc. 35,800 2,161 Baxter International, Inc. 159,900 10,413 Beckman Coulter, Inc. 17,500 1,134 Becton, Dickinson & Co. 137,200 3,516 Biogen, Inc.+ 84,600 4,975 Biomet, Inc. 58,900 2,102 Boston Scientific Corp.+ 231,942 6,146 Bristol-Myers Squibb Co. 1,080,500 56,659 C.R. Bard, Inc. 33,600 1,464 Cardinal Health, Inc. 156,920 8,640 Chiron Corp.+ 104,612 4,734 Columbia / HCA Healthcare Corp. 308,672 8,778 Dentsply International, Inc. 33,000 959 Eli Lilly & Co. 597,768 46,215 First Health Group Corp.+ 26,900 819 Forest Laboratories, Inc.+ 47,200 3,968 Genzyme Corp.+ 43,800 2,138 Number Value of Shares (000s) --------- ----------- Gilead Sciences, Inc.+ 26,000 $ 1,409 Guidant Corp.+ 168,972 9,695 Health Management Associates, Inc., Class A+ 118,128 1,883 HealthSouth Corp.+ 210,200 1,695 Human Genome Sciences, Inc.+ 26,200 2,006 Humana, Inc.+ 88,500 680 ICN Pharmaceuticals, Inc. 45,174 1,138 IDEC Pharmaceuticals Corp.+ 23,400 1,498 Immunex Corp.+ 275,400 10,844 IVAX Corp.+ 97,500 2,669 Johnson & Johnson 760,738 62,761 Jones Medical Industries, Inc. 19,500 562 King Pharmaceuticals, Inc.+ 27,300 1,348 Lincare Holdings, Inc.+ 37,000 1,128 Mallinckrodt, Inc. 43,000 1,156 Manor Care, Inc.+ 68,600 819 McKesson HBOC, Inc. 154,028 2,599 Medimmune, Inc.+ 35,000 5,598 Medtronic, Inc. 656,300 34,086 Merck & Co., Inc. 1,278,508 88,856 Millennium Pharmaceuticals+ 41,000 3,254 Minimed, Inc.+ 20,000 2,459 Mylan Laboratories, Inc. 64,950 1,843 Omnicare, Inc. 37,900 576 Oxford Health Plans, Inc.+ 49,900 948 PacifiCare Health Systems, Inc.+ 21,164 1,089 Patterson Dental Co.+ 18,500 890 Pfizer, Inc. 2,110,400 88,901 Quintiles Transnational Corp.+ 53,660 768 Schering-Plough Corp. 809,100 32,617 Sepracor, Inc.+ 37,200 3,422 St. Jude Medical, Inc.+ 46,450 1,449 Stryker Corp. 53,600 3,853 Sybron International Corp.+ 59,600 1,855 Tenet Healthcare Corp.+ 177,373 4,523 Trigon Healthcare, Inc.+ 20,000 719 UnitedHealth Group, Inc. 96,400 6,429 Warner-Lambert Co. 471,401 53,651 Watson Pharmaceuticals, Inc.+ 57,000 2,561 Wellpoint Health Networks, Inc.+ 35,925 2,649 ---------- 728,426 ---------- 61 SCHWAB 1000 FUND(R) SCHEDULE OF INVESTMENTS (continued) April 30, 2000 (Unaudited) Number Value of Shares (000s) --------- ----------- HOUSEHOLD PRODUCTS -- 1.3% Alberto-Culver Co., Class B 33,700 $ 796 Avon Products, Inc. 139,400 5,785 Clorox Co. 121,400 4,462 Colgate-Palmolive Co. 322,200 18,406 Dial Corp. 65,100 907 Estee Lauder Cos., Inc., Class A 72,000 3,177 Gillette Co. 586,710 21,708 International Flavors & Fragrances, Inc. 58,500 2,015 Procter & Gamble Co. 714,300 42,590 ---------- 99,846 ---------- INSURANCE -- 2.9% 21st Century Insurance Group 55,000 1,203 AFLAC, Inc. 153,850 7,510 Alleghany Corp.+ 3,072 518 Allmerica Financial Corp. 30,000 1,624 Allstate Corp. 421,948 9,969 AMBAC Financial Group, Inc. 44,800 2,150 American Financial Group, Inc. 44,100 1,122 American General Corp. 139,493 7,812 American International Group, Inc. 843,475 92,519 American National Insurance Co. 14,500 748 Aon Corp. 131,312 3,554 AXA Financial, Inc. 246,900 8,055 Chubb Corp. 91,100 5,796 CIGNA Corp. 95,200 7,592 Cincinnati Financial Corp. 88,614 3,572 CNA Financial Corp.+ 105,700 3,250 Conseco, Inc. 136,096 740 Erie Indemnity Co., Class A 40,000 1,190 Everest Re Group Ltd. 31,000 907 Hartford Financial Services Group, Inc. 124,200 6,482 Hartford Life, Inc., Class A 17,000 837 Jefferson-Pilot Corp. 58,725 3,909 Lincoln National Corp. 113,800 3,962 Loew's Corp. 58,000 3,197 Marsh & McLennan Cos., Inc. 146,700 14,459 MBIA, Inc. 56,000 2,769 Mercury General Corp. 31,400 859 MGIC Investment Corp. 60,400 2,888 Mony Group, Inc. 25,900 801 Number Value of Shares (000s) --------- ----------- Old Republic International Corp. 61,275 $ 873 PMI Group, Inc. 25,100 1,216 Progressive Corp. 43,900 2,873 Protective Life Corp. 32,600 776 Reinsurance Group of America, Inc. 15,000 373 Reliastar Financial Corp. 52,000 2,239 SAFECO Corp. 59,700 1,321 St. Paul Cos., Inc. 124,554 4,437 Torchmark Corp. 79,700 1,997 Transatlantic Holdings, Inc. 20,000 1,659 Unitrin, Inc. 32,000 1,080 UnumProvident Corp. 98,471 1,674 ---------- 220,512 ---------- MEDIA -- 4.4% A.H. Belo Corp., Class A 72,000 1,201 American Tower Corp., Class A+ 75,000 3,487 AMFM, Inc.+ 116,000 7,699 BHC Communications, Inc., Class A 11,700 1,812 Cablevision Systems Corp., Class A+ 61,600 4,169 CBS Corp.+ 419,587 24,651 Central Newspapers, Inc., Class A 17,000 522 Chris-Craft Industries, Inc.+ 19,499 1,198 Clear Channel Communications, Inc.+ 185,754 13,374 CNET Networks, Inc.+ 41,300 1,427 Comcast Corp., Class A+ 503,176 20,158 Comcast Corp., Class H+ 17,000 663 Cox Communications, Inc.+ 312,386 13,374 Crown Castle International Group+ 82,000 3,147 Dow Jones & Co., Inc. 50,450 3,273 The E.W. Scripps Co., Class A 43,975 2,053 EchoStar Communications Corp., Class A+ 123,000 7,833 Emmis Communications Corp., Class A+ 22,400 952 Express Scripts, Inc., Class A+ 22,000 787 Fox Entertainment Group, Inc.+ 99,900 2,572 Gannett Co., Inc. 154,500 9,869 Harte-Hanks Communications, Inc. 38,200 945 Hispanic Broadcasting Corp.+ 29,000 2,931 Hollinger International, Inc. 60,000 758 Houghton Mifflin Co. 20,000 831 62 Number Value of Shares (000s) --------- ----------- Knight-Ridder, Inc. 51,500 $ 2,527 Lee Enterprises, Inc. 22,000 499 Liberty Digital, Inc., Class A+ 5,000 160 McClatchy Newspapers, Inc., Class A 22,000 697 McGraw-Hill Cos., Inc. 111,350 5,846 Media General, Inc., Class A 19,500 959 MediaOne Group, Inc.+ 336,700 25,463 Meredith Corp. 36,000 1,001 Metro Goldwyn Mayer, Inc.+ 119,520 3,586 New York Times Co., Class A 96,526 3,976 Price Communications Corp.+ 5,000 101 Primedia, Inc.+ 83,000 1,733 R.R. Donnelley & Sons Co. 66,500 1,413 Reader's Digest Association, Inc., Class A 57,800 1,850 Time Warner, Inc. 705,910 63,488 Tribune Co. 130,800 5,085 TV Guide, Inc.+ 87,400 2,606 United Television, Inc. 1,000 135 USA Networks, Inc.+ 146,400 3,367 Valassis Communications, Inc.+ 37,500 1,277 Valuevision International, Inc.+ 4,000 80 Viacom, Inc., Class B+ 383,552 20,856 Walt Disney Co. 1,132,021 49,031 Washington Post Co. 5,200 2,538 Westwood One, Inc.+ 60,600 2,144 Ziff-Davis, Inc.+ 9,000 88 ---------- 330,192 ---------- MISCELLANEOUS FINANCE -- 5.9% Allied Capital Corp. 3,000 56 American Express Co. 246,200 36,945 AmeriCredit Corp.+ 41,000 766 Ameritrade Holding Corp., Class A+ 89,500 1,499 Associates First Capital Corp. 373,702 8,292 Astoria Financial Corp. 29,750 820 Bear Stearns Cos., Inc. 70,186 3,009 Berkshire Hathaway, Inc., Class A+ 819 48,567 Berkshire Hathaway, Inc., Class B+ 2,921 5,597 BISYS Group, Inc.+ 17,000 1,064 Capital One Financial Corp. 108,250 4,736 Charles Schwab Corp. 469,750 20,904 Number Value of Shares (000s) --------- ----------- Charter One Financial, Inc. 115,376 $ 2,344 CIT Group, Inc. 132,000 2,236 Citigroup, Inc. 1,835,624 109,105 Countrywide Credit Industries, Inc. 60,985 1,685 Dime Bancorp., Inc. 69,926 1,311 Donaldson, Lufkin, & Jenrette, Inc. 71,600 2,985 Eaton Vance Corp. 19,300 817 Edwards, Inc. 52,843 1,988 ETrade Group, Inc.+ 136,000 2,924 Fannie Mae 563,800 34,004 Federated Investors 45,100 1,274 Financial Security Assurance Holdings Ltd. 18,000 1,329 Finova Group, Inc. 36,700 470 Franklin Resources, Inc. 143,200 4,618 Freddie Mac 383,800 17,631 Golden State Bancorp, Inc.+ 74,000 1,138 Golden West Financial Corp. 89,700 3,061 Household International, Inc. 257,598 10,755 John Nuveen Co., Class A 15,000 598 Knight/Trimark Group, Inc.+ 63,100 2,378 Legg Mason, Inc. 32,000 1,210 Lehman Brothers Holdings, Inc. 67,880 5,570 Leucadia National Corp. 30,000 699 MBNA Corp. 435,787 11,575 Merrill Lynch & Co., Inc. 204,400 20,836 Morgan Stanley Dean Witter Discover & Co. 622,110 47,747 Paine Webber Group, Inc. 83,687 3,672 Radian Group, Inc. 20,900 1,064 Roslyn Bancorp., Inc. 8,000 136 SLM Holding Corp. 90,350 2,829 Sovereign Bancorp, Inc. 88,000 605 T. Rowe Price Associates, Inc. 65,900 2,512 TCF Financial Corp. 50,600 1,183 U.S. Trust Corp. 10,500 1,616 UnitedGlobalCom, Inc., Class A+ 35,800 1,902 Washington Federal, Inc. 38,940 679 Washington Mutual, Inc. 293,747 7,509 Wesco Financial Corp. 3,800 893 ---------- 447,143 ---------- 63 SCHWAB 1000 FUND(R) SCHEDULE OF INVESTMENTS (continued) April 30, 2000 (Unaudited) Number Value of Shares (000s) --------- ----------- NON-FERROUS METALS -- 0.3% Alcoa, Inc. 204,070 $ 13,239 Engelhard Corp. 69,687 1,224 Freeport-McMoRan Copper & Gold, Inc., Class B+ 88,894 856 Howmet International, Inc.+ 60,000 1,271 Mueller Industries, Inc.+ 19,900 656 Phelps Dodge Corp. 44,700 2,067 Reynolds Metals Co. 32,800 2,181 ---------- 21,494 ---------- OIL - DOMESTIC -- 0.6% Amerada Hess Corp. 52,100 3,315 Ashland, Inc. 41,000 1,399 Diamond Offshore Drilling, Inc. 76,800 3,096 Kerr-McGee Corp. 48,002 2,484 Murphy Oil Corp. 27,670 1,633 Ocean Energy, Inc.+ 100,200 1,296 Phillips Petroleum Co. 143,700 6,817 Santa Fe Snyder Corp.+ 101,500 933 Sunoco, Inc. 51,900 1,573 Tosco Corp. 85,600 2,744 Transocean Sedco Forex, Inc. 114,000 5,358 Ultramar Diamond Shamrock Corp. 50,700 1,255 Union Pacific Resources Group, Inc. 141,688 2,719 Unocal Corp. 135,534 4,379 USX-Marathon Group, Inc. 176,000 4,103 ---------- 43,104 ---------- OIL - INTERNATIONAL -- 2.6% Chevron Corp. 355,300 30,245 Exxon Mobil Corp. 1,882,865 146,275 Santa Fe International Corp. 65,000 2,234 Texaco, Inc. 291,409 14,425 ---------- 193,179 ---------- OPTICAL & PHOTO -- 0.5% C-Cube Microsystems, Inc.+ 22,600 1,452 Corning, Inc. 150,647 29,753 Eastman Kodak Co. 172,700 9,660 Imation Corp.+ 3,000 84 ---------- 40,949 ---------- Number Value of Shares (000s) --------- ----------- PAPER & FOREST PRODUCTS -- 0.8% Boise Cascade Corp. 33,000 $ 1,075 Bowater, Inc. 31,300 1,722 Champion International Corp. 52,900 3,478 Consolidated Papers, Inc. 54,800 2,076 Fort James Corp. 100,200 2,399 Georgia Pacific Corp. 50,000 1,159 Georgia-Pacific Group 93,500 3,436 International Paper Co. 214,129 7,869 Kimberly-Clark Corp. 299,360 17,382 Louisiana-Pacific Corp. 66,500 889 Mead Corp. 61,800 2,151 Pentair, Inc. 31,200 1,193 Potlatch Corp. 1,000 39 Rayonier, Inc. 13,875 651 Smurfit-Stone Container Corp.+ 126,900 1,935 St. Joe Co. 43,300 1,248 Temple-Inland, Inc. 31,900 1,599 Westvaco Corp. 63,300 1,954 Weyerhaeuser Co. 132,000 7,054 Willamette Industries, Inc. 67,000 2,559 ---------- 61,868 ---------- PRODUCER GOODS & MANUFACTURING -- 5.4% American Standard Corp.+ 35,500 1,456 Applied Micro Circuits Corp.+ 60,800 7,836 Applied Power, Inc., Class A 30,000 859 Avery Dennison Corp. 61,800 4,056 Blyth Industries, Inc.+ 30,000 891 Briggs & Stratton Corp. 16,300 626 Caterpillar, Inc. 190,400 7,509 Cognex Corp.+ 22,700 1,291 Cooper Industries, Inc. 53,700 1,843 Deere & Co. 128,200 5,176 Dover Corp. 114,200 5,803 Emerson Electric Co. 225,100 12,352 FMC Corp.+ 14,200 826 General Electric Co. (b) 1,792,700 281,902 Harsco Corp. 14,800 439 Herman Miller, Inc. 35,600 975 Hon Industries, Inc. 38,800 967 Honeywell International, Inc. 425,663 23,837 Hubbell, Inc., Class B 36,938 963 64 Number Value of Shares (000s) --------- ----------- Illinois Tool Works, Inc. 164,842 $ 10,560 Ingersoll-Rand Co. 95,550 4,485 Jabil Circuit, Inc.+ 92,000 3,766 Johnson Controls, Inc. 50,600 3,204 Lattice Semiconductor Corp.+ 26,900 1,812 Mastec, Inc.+ 16,800 1,451 Micrel, Inc.+ 23,200 2,007 Millipore Corp. 24,900 1,785 Pall Corp. 70,233 1,567 Parker-Hannifin Corp. 64,375 2,993 Rare Medium Group, Inc.+ 25,400 522 Safeguard Scientifics, Inc.+ 59,100 2,467 Snap-On, Inc. 37,150 982 Teleflex, Inc. 25,000 864 Thermo Instrument Systems, Inc.+ 52,171 932 The Timken Co. 38,600 714 Trinity Industries, Inc. 27,950 622 U.S. Industries, Inc. 47,500 579 Valhi, Inc. 60,000 667 W.W. Grainger, Inc. 53,600 2,325 Zebra Technologies Corp., Class A+ 17,700 1,009 ---------- 404,920 ---------- RAILROAD & SHIPPING -- 0.3% Burlington Northern Santa Fe Corp. 254,253 6,134 CSX Corp. 103,100 2,159 Florida East Coast Industry, Inc. 20,300 998 GATX Corp. 24,000 858 Kansas City Southern Industries, Inc. 64,100 4,607 Newport News Shipbuilding, Inc. 15,000 501 Norfolk Southern Corp. 188,100 3,315 Union Pacific Corp. 136,261 5,740 ---------- 24,312 ---------- REAL PROPERTY -- 0.0% Catellus Development Corp.+ 61,600 801 ---------- RETAIL -- 5.8% Albertson's, Inc. 231,742 7,546 Amazon.com, Inc.+ 192,400 10,618 American Eagle Outfitters, Inc.+ 26,000 442 AnnTaylor Stores Corp.+ 1,000 21 AutoZone, Inc.+ 87,000 1,996 Number Value of Shares (000s) --------- ----------- Barnes & Noble, Inc.+ 40,000 $ 740 Bed, Bath & Beyond, Inc.+ 79,600 2,920 Best Buy Co., Inc.+ 113,600 9,173 BJ's Wholesale Club, Inc.+ 35,000 1,240 Borders Group, Inc.+ 52,000 825 Cendant Corp.+ 389,640 6,015 Circuit City Stores-Circuit City Group 117,600 6,916 Consolidated Stores Corp.+ 65,312 812 Costco Wholesale Corp.+ 243,408 13,159 CVS Corp. 222,914 9,697 Dillards, Inc., Class A 62,200 867 Dollar General Corp. 129,016 2,951 Dollar Tree Stores, Inc.+ 35,000 2,026 Family Dollar Stores, Inc. 96,200 1,834 Federated Department Stores, Inc.+ 115,200 3,917 Gap, Inc. 474,100 17,423 Hannaford Bros. Co., Inc. 23,300 1,686 Home Depot, Inc. 1,253,797 70,291 Intimate Brands, Inc. 136,500 5,255 J.C. Penney Co., Inc. 100,400 1,387 Kmart Corp.+ 265,600 2,158 Kohl's Corp.+ 182,600 8,765 Kroger Co.+ 468,080 8,689 Lands' End, Inc.+ 16,500 698 Limited, Inc. 117,319 5,301 Lowe's Cos., Inc. 212,200 10,504 May Department Stores Co. 184,350 5,070 The Neiman Marcus Group, Inc., Class A+ 30,000 772 Nordstrom, Inc. 73,800 2,052 Office Depot, Inc.+ 180,550 1,907 Payless Shoesource, Inc.+ 14,814 817 Rite Aid Corp. 46,600 233 Ross Stores, Inc. 62,000 1,286 Safeway, Inc.+ 277,580 12,248 Saks, Inc.+ 83,340 953 Sears, Roebuck & Co. 193,300 7,080 Staples, Inc.+ 259,360 4,944 Tandy Corp. 109,332 6,232 Target Corp. 241,000 16,042 Tiffany & Co., Inc. 40,000 2,907 TJX Cos., Inc. 169,900 3,260 Toys "R" Us, Inc.+ 130,880 1,996 65 SCHWAB 1000 FUND(R) SCHEDULE OF INVESTMENTS (continued) April 30, 2000 (Unaudited) Number Value of Shares (000s) --------- ----------- Wal-Mart Stores, Inc. 2,436,000 $ 134,894 Walgreen Co. 558,100 15,697 Weis Markets, Inc. 23,900 795 Williams-Sonoma, Inc.+ 28,000 970 Winn-Dixie Stores, Inc. 82,300 1,363 Zale Corp.+ 15,000 619 ---------- 438,009 ---------- STEEL -- 0.1% AK Steel Holding Corp. 56,700 627 Allegheny Technologies, Inc. 54,140 1,310 Nucor Corp. 49,100 2,111 USX-U.S. Steel Group, Inc. 55,760 1,398 Worthington Industries, Inc. 60,200 745 ---------- 6,191 ---------- TELEPHONE -- 7.2% Adtran, Inc.+ 22,300 1,507 Aerial Communications, Inc.+ 10,000 442 Allegiance Telecom, Inc.+ 55,050 3,895 Alltel Corp. 170,767 11,377 AT&T Corp. 1,739,496 81,213 Bell Atlantic Corp. 851,886 50,474 BellSouth Corp. 1,033,800 50,333 Broadwing Inc.+ 118,752 3,362 Carrier Access Corp.+ 3,000 131 Centennial Cellular Corp.+ 52,800 1,043 CenturyTel, Inc. 68,987 1,690 Commonwealth Telephone Enterprises, Inc.+ 1,000 49 Exodus Communications, Inc.+ 96,400 8,525 Global Telesystems Group, Inc.+ 101,900 1,484 GTE Corp. 529,350 35,863 Intermedia Communications, Inc.+ 32,700 1,333 ITC DeltaCom, Inc.+ 35,800 1,177 Level 3 Communications, Inc.+ 191,500 17,044 MCI WorldCom, Inc.+ 1,553,028 70,565 McLeodUSA, Inc., Class A+ 246,900 6,173 NEXTLINK Communications, Inc., Class A+ 42,100 3,549 NTL, Inc.+ 70,313 5,379 Powertel, Inc.+ 16,900 1,136 Number Value of Shares (000s) --------- ----------- Qwest Communications International, Inc.+ 420,954 $ 18,259 RCN Corp.+ 42,900 1,228 SBC Communications, Inc. 1,861,428 81,554 Sprint Corp. (FON Group) 482,668 29,684 Sprint Corp. (PCS Group)+ 473,321 26,033 Telephone & Data Systems, Inc. 35,100 3,580 U.S. Cellular Corp.+ 53,800 3,231 US West, Inc. 277,215 19,734 Viatel, Inc.+ 18,500 708 Winstar Communications, Inc.+ 48,000 1,914 ---------- 543,669 ---------- TOBACCO -- 0.4% Philip Morris Cos., Inc. 1,280,700 28,015 UST, Inc. 100,200 1,503 ---------- 29,518 ---------- TRAVEL & RECREATION -- 0.3% Brunswick Corp. 48,900 938 Harrah's Entertainment, Inc.+ 72,100 1,483 Hertz Corp. 27,000 842 Hilton Hotels Corp. 179,167 1,523 Mandalay Resort Group+ 51,400 970 Marriott International, Inc., Class A 138,600 4,435 MGM Grand, Inc. 74,000 2,183 Mirage Resorts, Inc.+ 114,100 2,325 Premier Parks, Inc.+ 43,700 942 Royal Caribbean Cruises Ltd. 87,900 1,830 SFX Entertainment, Inc., Class A+ 36,100 1,503 Speedway Motorsports, Inc.+ 23,700 567 ---------- 19,541 ---------- TRUCKING & FREIGHT -- 0.1% C.H. Robinson Worldwide, Inc. 27,500 1,375 CNF Transportation, Inc. 26,400 738 Expeditores International of Washington, Inc. 28,400 1,214 PACCAR, Inc. 42,120 2,003 Ryder Systems, Inc. 33,800 750 ---------- 6,080 ---------- 66 Number Value of Shares (000s) --------- ----------- UTILITIES - ELECTRIC & GAS -- 3.0% AES Corp.+ 120,318 $ 10,821 Allegheny Energy, Inc. 62,100 1,886 Alliant Energy Corp. 45,000 1,350 Ameren Corp. 77,130 2,830 American Electric Power Co., Inc. 94,000 3,443 American Water Works Co., Inc. 54,600 1,239 Calpine Corp.+ 34,800 3,184 Carolina Power & Light Co. 90,500 3,309 Central & South West Corp. 93,700 2,032 Cinergy Corp. 87,565 2,342 Citizens Utilities Co., Class B+ 150,818 2,423 CMS Energy Corp. 62,900 1,195 Coastal Corp. 116,600 5,852 Columbia Energy Group 44,100 2,767 Conectiv, Inc. 60,700 1,077 Consolidated Edison, Inc. 115,600 4,068 Constellation Energy Group, Inc. 79,650 2,633 Dominion Resources, Inc. 129,842 5,843 DPL, Inc. 70,492 1,639 DQE, Inc. 44,050 1,685 DTE Energy Co. 87,100 2,842 Duke Energy Corp. 203,331 11,692 Dynegy, Inc., Class A 76,207 4,987 Edison International 195,100 3,719 El Paso Energy Corp. 129,768 5,515 Energy East Corp. 66,800 1,394 Enron Corp. 394,138 27,466 Entergy Corp. 116,821 2,972 Equitable Resources, Inc. 18,000 835 FirstEnergy Corp. 129,515 3,295 Florida Progress Corp. 54,000 2,646 FPL Group, Inc. 102,100 4,614 GPU, Inc. 73,600 2,065 Ipalco Enterprises, Inc. 49,000 1,001 Kansas City Power & Light Co. 35,900 922 KeySpan Corp. 77,934 2,289 Kinder Morgan, Inc. 65,800 1,995 LG&E Energy Corp. 70,155 1,635 MCN Corp. 50,600 1,262 Number Value of Shares (000s) --------- ----------- MDU Resources Group, Inc. 26,000 $ 567 Minnesota Power & Light Co. 44,000 811 Montana Power Co. 65,800 2,899 National Fuel Gas Co. 26,600 1,262 New Century Energies, Inc. 67,700 2,209 Niagara Mohawk Holdings, Inc.+ 100,200 1,390 NICOR, Inc. 25,300 857 Nisource, Inc. 61,800 1,143 Northeast Utilities 66,000 1,419 Northern States Power Co. 87,600 1,911 OGE Energy Corp. 51,200 1,014 PECO Energy Co. 104,300 4,348 Peoples Energy Corp. 19,500 606 PG&E Corp. 198,058 5,137 Pinnacle West Capital Corp. 47,300 1,661 Potomac Electric Power Co. 69,400 1,627 PPL Corp. 84,720 2,023 Public Service Enterprise Group, Inc. 122,300 4,387 Puget Sound Power & Light Co. 48,200 1,145 Questar Corp. 35,800 673 Reliant Energy, Inc. 169,117 4,503 Republic Services, Inc.+ 99,300 1,359 Scana Corp. 65,800 1,703 Sempra Energy 114,338 2,122 Sierra Pacific Resources 46,600 705 Southern Co. 379,700 9,469 TECO Energy, Inc. 72,200 1,579 Texas Utilities Co. 141,912 4,781 Unicom Corp. 118,500 4,710 United Water Resources, Inc. 18,100 629 UtiliCorp United, Inc. 48,350 931 Washington Gas Light Co. 30,000 769 Western Resources, Inc. 47,231 744 Williams Cos., Inc. 238,461 8,898 Wisconsin Energy Corp. 59,600 1,274 ---------- 226,029 ---------- TOTAL COMMON STOCK (Cost $4,042,493) 7,520,772 ---------- 67 SCHWAB 1000 FUND(R) SCHEDULE OF INVESTMENTS (continued) April 30, 2000 (Unaudited) Number Value of Shares (000s) --------- ----------- WARRANTS -- 0.0% Per-Se Technologies+ 488 -- ---------- Total Warrants (Cost $0) -- ---------- Par (000s) --------- U.S. TREASURY OBLIGATIONS -- 0.0% U.S. Treasury Bills (a) (b) 5.56%-5.76%, 06/15/00 $285 $ 283 5.61%, 06/22/00 280 278 ---------- TOTAL U.S. TREASURY OBLIGATIONS (Cost $561) 561 ---------- REPURCHASE AGREEMENT -- 0.1% PNC FINANCIAL SERVICES GROUP 5.00%, Dated 04/28/00; matures 05/1/00, repurchase price $3,376,406 (collateralized by: Federal Home Loan Mortgage Corp.,total market value $3,476,250) 3,375 3,375 ---------- TOTAL REPURCHASE AGREEMENT (Cost $3,375) 3,375 ---------- Number Value of Shares (000s) --------- ----------- SHORT-TERM INVESTMENTS -- 0.1% Provident Institutional TempFund, 5.74%* 8,998,755 $ 8,999 ---------- TOTAL SHORT-TERM INVESTMENTS (Cost $8,999) 8,999 ---------- Total Investments -- 100.0% (Cost $4,055,428) 7,533,707 ---------- OTHER ASSETS AND LIABILITIES, NET -- 0.0% Other assets 660,855 Liabilities (660,197) ---------- 658 ---------- TOTAL NET ASSETS -- 100.0% $7,534,365 ========== SEE ACCOMPANYING NOTES TO SCHEDULES OF INVESTMENTS AND NOTES TO FINANCIAL STATEMENTS. 68 SCHWAB TOTAL STOCK MARKET INDEX FUND(TM) SCHEDULE OF INVESTMENTS April 30, 2000 (Unaudited) Number Value of Shares (000s) --------- ----------- COMMON STOCK -- 99.1% AEROSPACE / DEFENSE -- 0.9% Aviation Sales Co.+ 800 $ 3 B.F. Goodrich Co. 2,704 86 Boeing Co. 24,300 964 Cordant Technologies, Inc. 900 51 Crane Co. 1,600 43 GenCorp., Inc. 1,700 17 General Dynamics Corp. 5,700 334 Kaman Corp., Class A 1,000 11 Litton Industries, Inc.+ 1,100 48 Lockheed Martin Corp. 9,900 246 Northrop Grumman Corp. 2,000 142 Raytheon Co., Class B 8,600 191 Rockwell International Corp. 4,900 193 Satcon Technology Corp.+ 1,000 18 Textron, Inc. 4,300 266 Trimble Navigation Ltd.+ 1,000 28 TRW, Inc. 3,200 187 United Technologies Corp. 12,434 773 Veeco Instruments, Inc.+ 400 25 ---------- 3,626 ---------- AIR TRANSPORTATION -- 0.3% AAR Corp. 700 11 Airborne Freight Corp. 1,100 24 AirTran Holdings, Inc.+ 1,000 4 Alaska Airgroup, Inc.+ 600 17 America West Holdings Corp., Class B+ 1,100 16 AMR Corp.+ 4,000 136 Amtran, Inc.+ 600 10 Atlantic Coast Airlines Holdings, Inc.+ 800 24 Atlas Air, Inc.+ 900 32 Aviall, Inc.+ 1,200 7 Continental Airlines, Inc.+ 1,800 72 Delta Air Lines, Inc. 3,400 179 EGL, Inc.+ 650 15 FedEx Corp.+ 8,300 313 Frontier Airlines, Inc.+ 600 9 Galileo International, Inc. 2,300 53 Hawk Corp.+ 1,200 8 Kellstrom Industries, Inc.+ 600 2 Kitty Hawk, Inc.+ 600 0 Mesa Air Group, Inc.+ 1,300 8 Mesaba Holdings, Inc.+ 1,100 14 Midwest Express Holdings, Inc.+ 500 13 Number Value of Shares (000s) --------- ----------- Northwest Airlines Corp., Class A+ 2,100 $ 52 SkyWest, Inc. 500 21 Southwest Airlines Co. 13,350 290 U.S. Airways Group, Inc.+ 1,700 47 UAL Corp.+ 1,400 81 ---------- 1,458 ---------- ALCOHOLIC BEVERAGES -- 0.3% Adolph Coors Co., Class B 900 46 Anheuser-Busch Cos., Inc. 12,500 882 Beringer Wine Estates Holdings, Inc.+ 500 18 Boston Beer Co., Inc.+ 300 2 Brown-Forman Corp., Class B 2,200 120 Canandaigua Brands, Inc., Class A+ 500 25 Central European Distribution Corp.+ 400 2 The Chalone Wine Group Ltd.+ 200 2 Geerlings & Wade, Inc.+ 400 2 Genesee Corp., Class B 200 3 Golden State Vintners, Inc.+ 400 2 National Beverage Corp.+ 1,200 10 The Robert Mondavi Corp., Class A+ 400 13 ---------- 1,127 ---------- APPAREL -- 0.3% Abercrombie & Fitch Co.+ 2,400 26 Bebe Stores, Inc.+ 900 8 Brown Shoe Co., Inc. 800 8 Buckle, Inc.+ 1,000 13 The Children's Place Retail Stores, Inc.+ 1,100 24 Columbia Sportswear Co.+ 900 26 Cyrk International, Inc.+ 1,100 10 The Dixie Group, Inc.+ 1,500 6 The Dress Barn, Inc.+ 800 16 Footstar, Inc.+ 600 22 Genesco, Inc.+ 1,300 17 Global Sports, Inc.+ 800 6 Goody's Family Clothing, Inc.+ 1,500 10 Guess, Inc.+ 1,200 33 Haggar Corp. 900 12 Hartmarx Corp.+ 1,300 3 J. Baker, Inc. 1,100 7 Jo-Ann Stores, Inc., Class A+ 700 7 Jones Apparel Group, Inc.+ 3,200 95 K-Swiss, Inc., Class A 600 9 Kellwood Co. 900 15 Kenneth Cole Productions, Inc.+ 600 25 69 SCHWAB TOTAL STOCK MARKET INDEX FUND(TM) SCHEDULE OF INVESTMENTS (continued) April 30, 2000 (Unaudited) Number Value of Shares (000s) --------- ----------- Liz Claiborne, Inc. 1,600 $ 74 MediaBay, Inc.+ 900 4 Men's Wearhouse, Inc.+ 1,000 21 Nautica Enterprises, Inc.+ 1,300 15 Nike, Inc., Class B 7,300 317 OshKosh B'Gosh, Inc., Class A 700 11 Pacific Sunwear of California+ 800 27 Polo Ralph Lauren Corp.+ 1,000 16 Polymer Group, Inc. 1,300 15 Quiksilver, Inc.+ 1,000 19 Reebok International Ltd.+ 1,700 29 Russell Corp. 1,100 22 Saucony, Inc.+ 700 9 Springs Industries, Inc. 400 16 Stride Rite Corp. 2,100 18 Superior Uniform Group, Inc. 900 8 Talbots, Inc. 800 41 Tarrant Apparel Group+ 800 7 Timberland Co., Class A+ 600 42 Tropical Sportswear Int'l Corp.+ 500 9 Unifi, Inc.+ 1,700 17 Urban Outfitters, Inc.+ 1,100 12 VF Corp. 3,300 93 Warnaco Group, Inc., Class A 1,300 14 WestPoint Stevens, Inc. 1,200 23 Wolverine World Wide, Inc. 1,200 14 ---------- 1,291 ---------- Number Value of Shares (000s) --------- ----------- AUTOMOTIVE PRODUCTS / MOTOR VEHICLES -- 1.4% A.O. Smith Corp., Class B 800 16 A.S.V., Inc.+ 700 9 American Axle & Manufacturing Holdings, Inc.+ 1,100 17 Arvin Industries, Inc. 600 13 Autoweb.com, Inc.+ 1,100 4 Bandag, Inc. 700 17 Borg-Warner Automotive, Inc. 600 25 Carey International, Inc.+ 500 5 Carlisle Cos., Inc. 700 29 Collins & Aikman Corp. 1,300 9 Cooper Tire & Rubber Co. 2,000 27 CSK Auto Corp.+ 1,100 12 Cummins Engine Co., Inc. 1,000 36 Dana Corp. 4,300 131 Danaher Corp. 3,800 217 Delco Remy International, Inc.+ 1,200 10 Delphi Automotive Systems Corp. 15,200 291 Number Value of Shares (000s) --------- ----------- Detroit Diesel Corp. 800 $ 12 Donaldson Co., Inc. 1,100 26 Dura Automotive Systems, Inc.+ 600 10 Eaton Corp. 2,100 176 Federal-Mogul Corp. 1,700 23 Fleetwood Enterprises, Inc. 1,000 15 Ford Motor Co. 32,400 1,772 General Motors Corp. 17,400 1,629 General Motors Corp., Class H+ 3,700 356 Genuine Parts Co. 4,600 121 Goodyear Tire & Rubber Co. 4,100 113 Group 1 Automotive, Inc.+ 1,100 13 Harley-Davidson, Inc. 8,200 326 Hayes Lemmerz International, Inc.+ 700 11 Jason, Inc.+ 1,200 12 Lear Corp.+ 1,600 48 Meritor Automotive, Inc. 1,600 24 Modine Manufacturing Co. 600 13 Monaco Coach Corp.+ 500 8 Myers Industries, Inc. 700 10 Navistar International Corp.+ 1,600 56 O'Reilly Automotive, Inc.+ 1,200 16 Oshkosh Truck Corp. 450 14 Polaris Industries, Inc. 600 18 Rush Enterprises, Inc.+ 500 4 Simpson Industries, Inc. 1,000 10 SPX Corp.+ 800 88 Standard Motor Products, Inc. 700 8 Sterile Recoveries, Inc.+ 300 2 Stoneridge, Inc.+ 1,200 16 Superior Industries International, Inc. 1,300 42 TBC Corp.+ 1,500 8 Thor Industries, Inc. 500 13 Titan International, Inc. 800 5 Tower Automotive, Inc.+ 2,300 36 United Rentals, Inc.+ 1,600 22 Winnebago Industries, Inc. 700 12 Wynns International, Inc. 800 11 ---------- 5,967 ---------- BANKS -- 4.6% ABC Bancorp. 1,200 12 Albama National Bancorp. 400 8 AmSouth Bancorp. 11,003 160 Anchor Bancorp Wisconsin, Inc. 800 13 Associated Bancorp. 1,600 41 Bancfirst Corp. 500 13 70 Number Value of Shares (000s) --------- ----------- BancFirst Ohio Corp. 700 $ 14 Bancorpsouth, Inc. 1,300 20 BancWest Corp. 1,600 29 Bank of America Corp. 45,800 2,244 Bank of Granite Corp. 400 8 Bank of New York Co., Inc. 19,600 805 Bank One Corp. 30,600 933 Bank United Corp., Class A 800 27 BankFirst Corp.+ 1,500 13 Banknorth Group, Inc. 500 12 BB&T Corp. 9,613 256 Brenton Banks, Inc. 200 2 Brookline Bancorp., Inc. 1,400 13 BSB Bancorp., Inc. 200 4 Capital City Bank Group, Inc. 500 10 Capitol Bancorp. Ltd. 700 9 Cascade Bancorp. 880 9 CCB Financial Corp. 1,000 40 CENIT Bancorp., Inc. 500 6 Centennial Bancorp.+ 907 9 Central Coast Bancorp.+ 880 13 Centura Banks, Inc. 1,070 44 Century South Banks, Inc. 400 9 Chase Manhattan Corp. 22,000 1,585 Chemical Financial Corp. 420 12 Chittenden Corp. 600 16 Citizens Banking Corp. 990 18 City Holding Co. 800 11 City National Corp. 1,100 40 Coast Bancorp. 500 13 Colonial BancGroup, Inc. 2,500 23 Columbia Banking System, Inc.+ 1,100 14 Comerica, Inc. 4,700 199 Commerce Bancorp., Inc. 830 33 Commerce Bancshares, Inc. 1,565 48 Community Bank System, Inc. 500 11 Community First Bankshares, Inc. 1,200 20 Community Trust Bancorp. 660 12 Compass Bancshares, Inc. 2,700 50 CORUS Bankshares, Inc. 500 12 Cullen/Frost Bankers, Inc. 1,200 30 Dime Community Bancshares 500 9 Doral Financial Corp. 1,100 13 Drovers Bancshares Corp. 600 9 Eagle Bancshares, Inc. 700 10 F&M Bancorp./Frederick MD 200 4 F&M National Corp. 612 15 Number Value of Shares (000s) --------- ----------- F.N.B. Corp. 525 $ 10 Farmers Capital Bank Corp. 400 13 Fifth Third Bancorp. 8,144 514 First Bancorp./Puerto Rico 700 12 First Banking Co. of Southeast Georgia 500 10 First Busey Corp., Class A 600 12 First Charter Corp. 1,000 14 First Citizens Bancshares 300 19 First Commerce Bancshares, Inc. 500 17 First Commonwealth Financial Corp. 1,300 15 First Fed Capital Corp. 700 8 First Federal Financial Corp. of Kentucky 600 12 First Financial Bancorp. 990 18 First Financial Bancshares, Inc. 400 11 First Merchants Corp. 400 8 First Midwest Bancorp., Inc. 900 22 First Republic Bank+ 400 8 First Security Corp. 4,900 69 First Tennessee National Corp. 3,300 63 First Union Corp. 26,362 840 First United Bancshares, Inc. 900 15 First Virginia Banks, Inc. 1,200 44 Firstar Corp. 25,954 646 Firstfed America Bancorp., Inc. 1,000 11 Firstfed Financial Corp.+ 900 11 Firstmerit Corp. 2,100 34 Fleet Boston Financial Corp. 24,314 862 Franchise Finance Corp. 1,400 33 Frontier Financial Corp. 700 13 Fulton Financial Corp. 1,600 33 GA Financial, Inc. 800 10 GBC Bancorp. 400 11 Great Southern Bancorp. 500 9 GreenPoint Financial Corp. 2,700 50 Hancosk Holding Co. 300 10 Harbor Florida Bancshares, Inc. 1,100 12 Harleysville National Corp. 400 12 Hibernia Corp., Class A 3,700 39 Horizon Financial Corp. 1,100 10 Hudson City Bancorp., Inc. 2,700 40 Hudson United Bancorp. 1,219 28 Huntington Bancshares, Inc. 6,500 119 Imperial Bancorp.+ 1,080 21 Imperial Credit Industries+ 1,900 7 Independence Community Bank 1,700 20 Industrial Bancorp., Inc. 500 6 Irwin Financial Corp. 700 12 71 SCHWAB TOTAL STOCK MARKET INDEX FUND(TM) SCHEDULE OF INVESTMENTS (continued) April 30, 2000 (Unaudited) Number Value of Shares (000s) --------- ----------- J.P. Morgan & Co., Inc. 4,900 $ 629 KeyCorp, Inc. 12,200 226 Keystone Financial, Inc. 1,000 15 Lakeland Financial Corp. 800 10 LSB Bancshares, Inc. 500 8 M&T Bank Corp. 200 88 MAF Bancorp., Inc. 700 13 Marshall & Ilsley Corp. 2,800 130 Mellon Financial Corp. 13,600 437 Mercantile Bankshares Corp. 1,700 48 Merchants Bancorp., Inc. New York 800 13 Merchants Bancshares, Inc. 500 9 Mid-America Bancorp. 406 10 Mid-State Bancshares 500 13 National Bancorp. of Alaska, Inc. 700 26 National City Bancorp.+ 700 10 National City Bancshares, Inc. 525 12 National City Corp. 16,400 279 National Commerce Bancorp. 2,700 44 National Penn Bancshares, Inc. 620 13 Net.B@nk, Inc.+ 900 9 Niagara Bancorp., Inc. 1,200 12 North Fork Bancorp., Inc. 5,400 87 Northern Trust Corp. 5,900 378 OceanFirst Financial Corp. 400 6 Old Kent Financial Corp. 6,388 192 Old National Bancorp. 1,548 51 Omega Financial Corp. 500 13 One Valley Bancorp., Inc. 700 24 Oriental Financial Group 500 9 Pacific Century Financial Corp. 2,100 43 Park National Corp. 305 28 Peoples Bank-Bridgeport 1,500 31 Peoples Heritage Financial Group, Inc. 2,600 34 PFF Bancorp., Inc. 600 8 PNC Financial Services Group 7,800 340 Popular, Inc. 3,500 70 Premier National Bancorp., Inc. 620 8 Provident Bancorp, Inc. 1,200 35 Provident Bankshares Corp. 840 13 Providian Financial Corp. 4,200 370 Quaker City Bancorp., Inc.+ 500 7 Queens County Bancorp., Inc. 600 12 Regions Financial Corp. 6,200 127 Republic Bancorp. 1,390 14 Republic Bancorp., Inc., Class A 1,600 13 Republic Security Financial Corp. 1,500 8 Number Value of Shares (000s) --------- ----------- Richmond County Financial Corp. 600 $ 10 Riggs National Corp. 1,000 14 S & T Bancorp., Inc. 500 9 S1 Corp.+ 1,230 67 Sandy Spring Bancorp., Inc. 200 5 Seacoast Banking Corp. 600 15 Second Bancorp., Inc. 400 7 Silicon Valley Bancshares+ 600 37 Sky Financial Group, Inc. 1,810 30 The South Financial Group, Inc. 800 11 Southside Bancshares Corp. 500 4 SouthTrust Corp. 4,200 100 Southwest Bancorp. of Texas, Inc.+ 700 14 Southwest Bancorp., Inc. 400 7 State Street Corp. 4,700 455 Sterling Bancorp. 840 13 Sterling Bancshares 1,400 15 Summit Bancorp. 4,937 125 SunTrust Banks, Inc. 8,600 436 Susquehanna Bancshares, Inc. 1,000 14 Synovus Financial Corp. 7,900 147 Texas Regional Bancshares, Inc. 400 11 The Trust Co. of New Jersey 500 10 TrustCo Bank Corp. 1,000 12 Trustmark Corp. 1,800 33 U.S. Bancorp. 20,265 412 UMB Financial Corp. 550 20 Union Planters Corp. 3,600 102 UnionBanCal Corp. 4,300 119 United Bankshares, Inc. 1,000 22 United Community Financial Corp. 1,500 8 United National Bancorp. 730 14 USB Holding Co., Inc. 630 9 Valley National Bancorp. 1,478 39 VIB Corp.+ 1,545 9 Vista Bancorp., Inc. 800 12 Wachovia Corp. 5,400 339 Washington Trust Bancorp. 700 11 Wells Fargo & Co. 44,115 1,811 Wesbanco, Inc. 500 11 Westamerica Bancorp. 800 20 Westcorp, Inc. 900 12 Whitney Holding Corp. 500 17 Wilmington Trust Co. 900 42 WSFS Financial Corp. 1,000 12 Zions Bancorp. 2,300 95 ---------- 19,508 ---------- 72 Number Value of Shares (000s) --------- ----------- BUSINESS MACHINES & SOFTWARE -- 13.9% 3Com Corp.+ 9,200 $ 363 Activision, Inc.+ 1,000 6 Adaptec, Inc.+ 3,300 89 Adobe Systems, Inc. 3,400 411 Advanced Digital Information+ 1,400 34 Analogic Corp. 500 20 Analytical Surveys, Inc.+ 1,000 4 Andersen Group, Inc.+ 400 5 Apple Computer, Inc.+ 4,800 596 Artesyn Technologies+ 800 19 Aspeon, Inc.+ 1,000 9 Auspex Systems, Inc.+ 1,000 8 Autodesk, Inc. 1,600 61 Black Box Corp.+ 500 38 BMC Software, Inc.+ 6,800 318 C3, Inc.+ 1,500 10 Cabletron Systems, Inc.+ 5,400 124 Caci International, Inc.+ 600 14 CAM Commerce Solutions, Inc.+ 500 4 Ceridian Corp.+ 3,700 80 Cisco Systems, Inc.+ 183,598 12,729 Cognitronics Corp.+ 600 6 Comdisco, Inc. 3,900 121 Communication Intelligence+ 1,900 6 Compaq Computer Corp. 45,300 1,325 Comptek Research, Inc.+ 1,000 16 Computer Horizons Corp.+ 1,000 14 Compuware Corp.+ 9,600 121 Comverse Technology, Inc.+ 4,200 375 Concurrent Computer Corp.+ 1,200 12 Crossroads Systems, Inc.+ 700 49 Cybex Computer Products Corp.+ 600 16 Datum, Inc.+ 1,100 22 Davox Corp.+ 300 8 Dell Computer Corp.+ 68,500 3,434 Diebold, Inc. 1,800 52 Digital Lightwave, Inc.+ 1,300 89 eFax.com, Inc.+ 1,400 3 EMC Corp.+ 27,512 3,822 Equitex, Inc.+ 1,300 10 Excalibur Technologies Corp.+ 1,200 43 Extended Systems, Inc.+ 200 8 Fair, Isaac & Co., Inc. 300 13 Foundry Networks, Inc.+ 3,000 273 Gateway, Inc.+ 8,400 464 Hanger Orthopedic Group, Inc.+ 1,100 6 Number Value of Shares (000s) --------- ----------- Hewlett-Packard Co. 27,000 $ 3,645 Hypercom Corp.+ 1,300 19 IKON Office Solutions, Inc. 3,200 19 Immersion Corp.+ 500 18 InaCom Corp.+ 1,100 2 Informix Corp.+ 8,850 97 Inprise Corp.+ 1,200 6 Input/Output, Inc.+ 3,400 25 Integrated Device Technology, Inc.+ 2,400 115 Intergraph Corp.+ 1,000 7 International Business Machines Corp. 48,100 5,369 InterVoice, Inc.+ 1,678 27 Iomega Corp.+ 6,000 21 Juniper Networks, Inc.+ 4,200 893 Latitude Communications, Inc.+ 400 6 Lexmark International Group, Inc., Class A+ 3,600 425 LTX Corp.+ 1,400 64 Maxtor Corp.+ 2,700 32 Microchip Technology, Inc.+ 2,000 124 Micromuse, Inc.+ 800 79 Micron Electronics, Inc.+ 2,200 24 MICROS Systems, Inc.+ 500 20 Microsoft Corp.+ 139,270 9,714 Minntech Corp. 1,300 11 MIPS Technology, Inc.+ 800 23 MTI Technology Corp.+ 700 11 National Computer Systems, Inc. 800 41 NCR Corp.+ 3,100 120 Netegrity+ 400 18 Network Appliance, Inc.+ 8,200 606 Novell, Inc.+ 9,000 177 Novellus Systems, Inc.+ 2,900 193 Oracle Corp.+ 75,800 6,059 Osicom Technologies, Inc.+ 300 16 Pitney Bowes, Inc. 7,200 294 Printronix, Inc.+ 600 11 Procom Technology, Inc.+ 300 11 PTEK Holdings, Inc.+ 2,000 10 Quantum Corp. - DLT & Storage Systems+ 4,200 49 Quantum Corp. - Hard Disk Drive+ 1,900 22 Read-Rite+ 1,900 6 SCM Microsystems, Inc.+ 400 32 Seagate Technology, Inc.+ 6,300 320 Sigma Designs, Inc.+ 1,500 6 Silicon Graphics, Inc.+ 4,800 34 73 SCHWAB TOTAL STOCK MARKET INDEX FUND(TM) SCHEDULE OF INVESTMENTS (continued) April 30, 2000 (Unaudited) Number Value of Shares (000s) --------- ----------- Smartdisk Corp.+ 300 $ 8 Storage Technology Corp.+ 2,600 34 Sun Microsystems, Inc.+ 42,340 3,893 SVI Holdings, Inc.+ 1,400 13 Sybase+ 2,100 42 Systems & Computer Technolog Corp.+ 1,100 26 Technology Data Corp.+ 1,400 59 Telxon Corp.+ 300 4 The Titan Corp.+ 1,681 72 Total System Services, Inc. 5,100 102 Unisys Corp.+ 8,600 199 Visual Networks, Inc.+ 700 27 Xerox Corp. 17,600 465 Xircom, Inc.+ 700 28 ---------- 59,043 ---------- BUSINESS SERVICES -- 8.0% 24/7 Media, Inc.+ 700 14 4 Kids Entertainment, Inc.+ 400 9 ABM Industries, Inc. 700 18 About.com, Inc.+ 500 17 Accrue Software, Inc.+ 600 14 ACNielsen Corp.+ 1,400 32 ACT Networks, Inc.+ 1,300 16 Actel Corp.+ 1,100 40 Active Software, Inc.+ 600 24 Actuate Corp.+ 800 24 adam.com, Inc.+ 1,000 10 Adecco SA - ADR 127 13 Advantage Learning Systems, Inc.+ 1,100 16 Advent Software, Inc.+ 900 47 Advo, Inc.+ 700 21 Aether Systems, Inc.+ 1,000 166 Affiliated Computer Services, Inc.+ 1,300 43 Affymetrix, Inc.+ 800 108 Agency.com, Inc. Ltd.+ 800 17 Agile Software Corp.+ 1,200 44 AHL Services, Inc.+ 1,100 11 Akamai Technologies, Inc.+ 438 43 Allaire Corp.+ 800 44 Alliance Semiconductor Corp.+ 1,000 20 Allied Waste Industries, Inc.+ 5,000 31 America Online, Inc.+ 61,200 3,661 American Management Systems, Inc.+ 1,000 37 American Superconductor Corp.+ 700 27 Analysts International Corp. 1,500 17 Andover.Net, Inc.+ 300 4 Ansoft Corp.+ 1,800 23 Number Value of Shares (000s) --------- ----------- AnswerThink Consulting Group, Inc.+ 1,000 $ 19 Apex, Inc.+ 700 21 Apollo Group, Inc.+ 1,900 55 Applied Theory Corp.+ 800 9 Appnet, Inc.+ 800 19 Apropos Technology, Inc.+ 300 3 Ariba, Inc.+ 5,100 378 ARIS Corp.+ 1,400 10 Art Technology Group, Inc.+ 1,600 97 Ask Jeeves, Inc.+ 900 27 Aspect Development, Inc.+ 2,000 138 Aspen Technology, Inc.+ 700 25 At Home Corp., Class A+ 9,200 171 Automatic Data Processing, Inc. 16,700 899 Autonation, Inc.+ 10,700 98 Avant Corp.+ 1,500 27 AXENT Technologies, Inc.+ 1,000 20 Banyan Systems, Inc.+ 900 12 Barra, Inc.+ 500 21 BEA Systems, Inc.+ 6,400 309 Bell & Howell Co.+ 500 13 Beyond.com Corp.+ 1,300 3 Billing Concepts Corp.+ 1,600 9 BindView Development Corp.+ 1,700 14 Bottomline Technologies, Inc.+ 500 18 Bowne & Co., Inc. 1,200 14 Brio Technology, Inc.+ 900 22 Broadbase Software, Inc.+ 2,400 38 BroadVision, Inc.+ 6,411 282 Brocade Communications Systems, Inc.+ 2,800 347 BSQUARE Corp.+ 1,100 19 Cacheflow, Inc.+ 1,700 126 CAIS Internet, Inc.+ 700 9 Calico Commerce, Inc.+ 900 15 Cambridge Technology Partners, Inc.+ 1,400 15 CareInsite, Inc.+ 1,900 48 Catalytica, Inc.+ 1,100 12 CDI Corp.+ 700 16 CDW Computer Centers, Inc.+ 1,100 114 Cell Genesys, Inc.+ 800 15 Centra Software, Inc.+ 900 8 Century Business Services, Inc.+ 2,100 7 Cerner Corp.+ 800 18 Cheap Tickets, Inc.+ 1,000 11 CheckFree Holdings Corp.+ 1,400 71 Chemed Corp. 500 15 Choicepoint, Inc.+ 800 30 Chordiant Software, Inc.+ 1,100 7 74 Number Value of Shares (000s) --------- ----------- Ciber, Inc.+ 1,400 $ 25 Cintas Corp. 4,450 176 Circle.com+ 1,275 6 Citrix Systems, Inc.+ 5,000 305 Clarent Corp.+ 800 54 Clarus Corp.+ 500 20 CLOSURE Medical Corp.+ 900 17 Coinstar, Inc.+ 1,100 12 Com21, Inc.+ 800 22 Complete Business Solutions, Inc.+ 800 18 Computer Associates International, Inc. 16,626 928 Computer Sciences Corp.+ 5,038 411 Computer Task Group, Inc. 1,000 8 Concord EFS, Inc.+ 5,300 119 Concur Technologies, Inc.+ 700 5 Convergys Corp.+ 4,000 176 Cordiant Communications Group - Sponsored ADR 693 16 Cornell Corrections, Inc.+ 1,100 10 Corporate Executives Board Co.+ 400 23 Correctional Services Corp.+ 1,200 6 CoStar Group, Inc.+ 600 14 Creative Biomolecules+ 1,300 10 Creative Computers, Inc.+ 1,400 11 Credence Systems, Corp.+ 600 86 Critical Path, Inc.+ 1,500 87 CSG Systems International, Inc.+ 1,300 60 CuraGen Corp.+ 1,600 43 CyberSource Corp.+ 900 14 Cysive, Inc.+ 500 27 Cytec Industries, Inc.+ 1,000 30 Daleen Technologies, Inc.+ 800 10 Datastream Systems, Inc.+ 500 7 DBT Online, Inc.+ 700 14 Deltek Systems, Inc.+ 1,200 15 Deluxe Corp. 1,800 45 Dendrite International, Inc.+ 900 21 DeVry, Inc.+ 1,700 40 Digex, Inc.+ 600 47 Digital Courier Technologies, Inc.+ 1,700 11 Digital Impact, Inc.+ 700 9 Digital Insight Corp.+ 600 23 Digital River, Inc.+ 700 10 Digitalthink, Inc.+ 800 16 Digitas, Inc.+ 1,500 23 Diversa Corp.+ 400 11 Documentum, Inc.+ 500 29 Number Value of Shares (000s) --------- ----------- DoubleClick, Inc.+ 3,068 $ 233 DST Systems, Inc.+ 1,600 119 Dun & Bradstreet Corp. 4,800 145 Earthlink, Inc.+ 2,930 55 Earthweb, Inc.+ 700 13 eBay, Inc.+ 3,500 557 Ebenx, Inc.+ 500 8 Echelon Corp.+ 900 29 Eclipsys Corp.+ 1,300 10 Ecolab, Inc. 4,400 172 Edison Schools, Inc.+ 1,000 23 Educational Management Corp.+ 1,000 16 Egain Communications Corp.+ 1,000 17 Elcom International, Inc.+ 1,100 8 Electronic Data Systems Corp. 12,500 859 eMerge Interactive, Inc.+ 600 11 Engage Technologies, Inc.+ 2,800 70 Entrust Technologies, Inc.+ 1,400 69 Equifax, Inc. 3,700 90 eXcelon Corp.+ 1,000 12 Exchange Applications, Inc.+ 1,000 12 Extensity, Inc.+ 500 6 Ezenia!, Inc.+ 1,200 8 F.Y.I., Inc.+ 600 16 F5 Networks, Inc.+ 500 23 FactSet Research Systems, Inc. 800 23 Falcon Products, Inc. 1,500 18 FileNet Corp.+ 1,300 38 Firepond, Inc.+ 800 13 First Data Corp. 11,200 545 Fiserv, Inc.+ 7,200 331 Flextronics International Ltd.+ 1,449 102 Forrester Research, Inc.+ 600 27 Freemarkets, Inc.+ 900 65 FreeShop.com, Inc.+ 500 5 G & K Services, Inc., Class A 700 17 Gartner Group, Inc., Class B+ 2,251 24 Gentiva Health Services+ 450 4 Geoworks Corp.+ 500 8 Gerald Stevens, Inc.+ 1,700 9 GetThere.com, Inc.+ 1,300 13 Global Imaging Systems, Inc.+ 800 6 Global Sources Limited+ 66 2 Go2net, Inc.+ 1,000 59 GoTo.com, Inc.+ 1,300 44 GP Strategies Corp.+ 1,500 6 Great Plains Software, Inc.+ 400 17 75 SCHWAB TOTAL STOCK MARKET INDEX FUND(TM) SCHEDULE OF INVESTMENTS (continued) April 30, 2000 (Unaudited) Number Value of Shares (000s) --------- ----------- Grey Advertising, Inc. 200 $ 92 Gric Communications, Inc.+ 500 8 GTECH Holdings, Corp.+ 900 19 H&R Block, Inc. 2,900 121 HA-LO Industries, Inc.+ 1,500 11 Harbinger Corp.+ 1,200 23 Healthcentral.com+ 800 3 Healtheon Corp.+ 1,949 41 HearMe+ 700 5 Heidrick & Struggles, Inc.+ 400 14 High Speed Access Corp.+ 1,700 14 HNC Software, Inc.+ 600 30 HotJobs.com Ltd.+ 1,000 12 Hyperion Solutions Corp.+ 800 24 I2 Technologies+ 4,000 517 Ibasis, Inc.+ 800 18 Icos Corp.+ 1,100 44 Identix Inc.+ 1,100 16 IDT Corp.+ 700 22 IDX Systems Corp.+ 700 12 iGate Capital Corp.+ 1,300 39 Imanage, Inc.+ 700 7 IMS Health, Inc. 8,500 145 In Focus Systems, Inc.+ 500 15 Infocure Corp.+ 800 7 Infonet Services Corp.+ 8,000 135 Information Resource Engineering, Inc.+ 500 13 infoUSA, Inc.+ 1,600 9 Inktomi Corp.+ 2,900 446 Inso Corp.+ 800 4 InsWeb Corp.+ 800 2 Intelligroup, Inc.+ 400 6 Interact Commerce Corp.+ 700 10 Interim Services, Inc.+ 1,530 26 Interliant, Inc.+ 1,100 23 Internap Network Services Corp.+ 3,400 131 Internet Pictures Corp.+ 821 13 internet.com Corp.+ 800 15 Interpublic Group of Cos., Inc. 7,950 326 Intertrust Technologies Corp.+ 2,000 46 Interwoven, Inc.+ 600 42 Intuit, Inc.+ 5,215 187 Invitrogen Corp.+ 700 44 Iron Mountain, Inc.+ 1,450 51 ISS Group, Inc.+ 1,100 99 IT Group, Inc.+ 1,300 9 iVillage, Inc.+ 900 9 Number Value of Shares (000s) --------- ----------- J. D. Edwards & Co.+ 2,700 $ 49 Jacobs Engineering Group, Inc.+ 600 19 JDA Software Group, Inc.+ 1,000 19 John H. Harland Co. 1,000 15 Juno Online Services, Inc.+ 900 9 Jupiter Communications, Inc.+ 500 13 Kana Communications, Inc.+ 2,164 92 Keane, Inc.+ 1,900 55 Kelly Services, Inc. Class A 900 21 Korn/Ferry International+ 900 24 Kroll-O'Gara Co.+ 1,300 10 Kronos, Inc.+ 500 16 Labor Ready, Inc.+ 2,000 18 Lamar Advertising Co.+ 1,800 79 LandAmerica Financial Group, Inc. 800 14 Landmark Systems Corp.+ 1,500 9 Lante Corp.+ 900 19 Lason, Inc.+ 1,100 5 Learning Tree International, Inc.+ 500 24 Legato Systems, Inc.+ 2,200 28 LHS Group, Inc.+ 1,500 60 Liberate Technologies+ 2,400 94 Lifeminders.com, Inc.+ 600 27 Lightspan, Inc.+ 1,500 12 Loislaw.com, Inc.+ 800 5 Looksmart Ltd.+ 2,200 53 Luminant Worldwide Corp.+ 800 7 Lycos, Inc.+ 3,000 140 Macrovision Corp.+ 1,200 59 Manhattan Associates, Inc.+ 600 14 Manpower, Inc. 2,000 71 Manugistics Group, Inc.+ 700 30 Mapinfo Corp.+ 750 22 MapQuest.com, Inc.+ 800 15 MarchFirst, Inc.+ 3,816 81 Marimba, Inc.+ 500 10 Marketwatch.com, Inc.+ 400 6 MAXIMUS, Inc.+ 500 12 Maxygen, Inc.+ 800 33 Mechanical Technology, Inc.+ 1,800 32 Media Arts Group, Inc.+ 900 4 Mediaplex, Inc.+ 800 41 Medical Manager Corp.+ 887 28 MedicaLogic, Inc.+ 1,200 14 Medscape, Inc.+ 2,000 7 MemberWorks, Inc.+ 500 16 Mentor Corp. 1,000 18 76 Number Value of Shares (000s) --------- ----------- Mentor Graphics Corp.+ 1,600 $ 21 Mercator Software, Inc.+ 700 26 Mercury Computer Systems, Inc.+ 600 23 Mercury Interactive Corp.+ 2,000 180 META Group, Inc.+ 1,100 25 Metacreations Corp.+ 900 10 Metamor Worldwide, Inc.+ 800 16 Metasolv Software, Inc.+ 800 27 Metricom, Inc.+ 700 20 Metris Cos., Inc. 1,000 38 Miami Computer Supply Corp.+ 500 10 MicroStrategy, Inc.+ 700 18 Microvision, Inc.+ 400 13 Mission Critical Software, Inc.+ 400 14 Modis Professional Services, Inc.+ 2,400 18 Multex.com, Inc.+ 700 14 Mypoints.com, Inc.+ 1,300 23 National Data Corp. 900 25 National Instruments+ 1,350 66 National Processing, Inc.+ 1,500 16 National Service Industries, Inc. 1,000 22 NationsRent, Inc.+ 1,800 9 Natural MicroSystems Corp.+ 500 33 Navigant Consulting Co.+ 2,000 20 NBC Internet, Inc.+ 400 9 NCO Group, Inc.+ 761 26 Neff Corp.+ 1,200 5 Neoforma.com, Inc.+ 1,900 13 Neon Systems, Inc.+ 700 15 Net Perceptions, Inc.+ 900 17 Netcentives, Inc.+ 1,100 11 NETIQ Corp.+ 500 18 Netobjects, Inc.+ 800 11 Netratings, Inc.+ 900 24 Netscout Systems, Inc.+ 1,000 15 Netsolve, Inc.+ 600 18 Network Associates, Inc.+ 3,700 94 Network Peripherals, Inc.+ 600 17 Neurocrine Biosciences, Inc.+ 1,400 30 New England Business Service, Inc. 800 13 New Era of Networks, Inc.+ 800 25 NOVA Corp.+ 2,000 63 NYFIX, Inc.+ 750 20 Oak Technology, Inc.+ 1,300 18 Official Payments Corp.+ 800 4 Ogden Corp. 1,600 16 Omnicom Group, Inc. 4,800 437 Number Value of Shares (000s) --------- ----------- On Assignment, Inc.+ 1,000 $ 31 Ondisplay, Inc.+ 500 28 OneMain.com, Inc.+ 900 6 Onyx Software Corp.+ 1,400 30 Open Market, Inc.+ 1,000 10 Orbital Sciences Corp.+ 1,000 13 Organic, Inc.+ 1,900 29 Packeteer, Inc.+ 700 16 Parametric Technology Corp.+ 7,300 60 PAXAR Corp.+ 1,800 18 Paychex, Inc. 6,600 347 Pc-Tel, Inc.+ 500 17 Peapod, Inc.+ 1,400 4 Pegasus Systems, Inc.+ 900 16 Pegasystems, Inc.+ 1,000 9 PeopleSoft, Inc.+ 7,100 99 Peregrine Systems, Inc.+ 2,700 65 Performance Food Group Co.+ 700 18 Perot Systems Corp.+ 2,400 39 Persistence Software, Inc.+ 700 11 Pervasive Software, Inc.+ 1,000 7 Pfsweb, Inc.+ 600 7 Phoenix Technologies Ltd.+ 800 16 Pilot Network Services, Inc.+ 400 7 Pittston Brink's Group 1,200 20 Pivotal Corp.+ 600 19 Pixar, Inc.+ 1,200 45 Policy Management Systems Corp.+ 1,600 21 Polycom, Inc.+ 900 71 Pomeroy Computer Resources, Inc.+ 1,100 18 Portal Software, Inc.+ 4,200 193 Pre-Paid Legal Services, Inc.+ 500 16 Predictive Systems, Inc.+ 500 24 Preview Systems, Inc.+ 400 6 Priceline.com, Inc.+ 3,900 247 Primark Corp.+ 700 19 Primus Knowledge Solution, Inc.+ 400 15 Priority Healthcare Corp., Class B+ 600 33 ProBusiness Services, Inc.+ 700 18 Prodigy Communications Corp.+ 1,500 17 Profit Recovery Group International, Inc.+ 1,200 21 Progress Software Corp.+ 1,000 20 Project Software & Development, Inc.+ 600 18 Protein Design Labs, Inc.+ 800 81 Proxicom, Inc.+ 1,400 48 Proxim, Inc.+ 400 31 PSINet, Inc.+ 4,062 94 77 SCHWAB TOTAL STOCK MARKET INDEX FUND(TM) SCHEDULE OF INVESTMENTS (continued) April 30, 2000 (Unaudited) Number Value of Shares (000s) --------- ----------- Puma Technology, Inc.+ 1,000 $ 31 PurchasePro.com, Inc.+ 750 23 Qlogic Corp.+ 1,900 191 QRS Corp.+ 350 12 Quest Education Corp.+ 1,400 13 Quest Software, Inc.+ 2,100 79 Quintus Corp.+ 900 9 Quixote Corp. 800 11 R. H. Donnelley Corp.+ 1,000 20 Radiant Systems, Inc.+ 600 11 RadiSys Corp.+ 500 21 Rainmaker Systems, Inc.+ 1,600 7 Ramp Networks, Inc.+ 800 16 RAVISENT Technologies, Inc.+ 900 6 Razorfish, Inc.+ 2,224 42 RealNetworks, Inc.+ 4,100 195 Red Hat, Inc.+ 3,900 98 Redback Networks, Inc.+ 2,300 183 Remedy Corp.+ 700 37 RemedyTemp, Inc.+ 900 18 Retek, Inc.+ 1,200 26 Reynolds & Reynolds Co., Class A 1,800 43 Ritchie Bros. Auctioneers, Inc.+ 300 7 Robert Half International, Inc.+ 2,300 141 Romac International, Inc.+ 1,600 17 RSA Security, Inc.+ 1,000 59 Rural Cellular Corp., Class A.+ 300 22 Rural/Metro Corp.+ 1,100 2 S3, Inc.+ 1,900 27 Safety-Kleen, Corp.+ 2,100 2 SAGA Systems, Inc.+ 800 15 Sanchez Computer Associates, Inc.+ 600 12 Sandisk Corp.+ 1,800 165 The Santa Cruz Operation, Inc.+ 1,400 8 Sapient Corp.+ 1,500 119 Savvis Communications Corp.+ 2,500 35 Scient Corp.+ 1,800 97 Sciquest.com, Inc.+ 800 10 SDL, Inc.+ 2,000 390 Seachange International, Inc.+ 550 17 SEACOR SMIT, Inc.+ 500 31 SEI Investments Co. 500 60 Sequenom, Inc.+ 600 15 Serena Software, Inc.+ 900 20 The Service Master Co. 8,200 112 Shared Medical Systems Corp. 700 29 ShopNow.com, Inc.+ 1,300 8 Siebel Systems, Inc.+ 5,200 639 Number Value of Shares (000s) --------- ----------- Silverstream Software, Inc.+ 500 $ 20 Simione Central Holdings, Inc.+ 119 0 Sirius Satellite Radio, Inc.+ 700 28 SITEL Corp.+ 2,800 19 SoftNet Systems, Inc.+ 900 14 Software.com, Inc.+ 1,100 89 Sonic Foundry, Inc.+ 200 9 SonicWall, Inc.+ 600 36 Spartech Corp. 700 24 SportsLine USA, Inc.+ 600 12 Spyglass, Inc.+ 800 42 StaffMark, Inc.+ 1,600 11 Standard Register Co. 1,100 14 StarMedia Network, Inc.+ 1,500 33 StarTek, Inc.+ 400 21 Stericycle, Inc.+ 1,100 23 Strayer Education, Inc. 700 14 Structural Dynamics Research Corp.+ 1,400 19 Sungard Data Systems, Inc.+ 3,300 114 Sycamore Networks, Inc.+ 6,500 510 Sykes Enterprises, Inc.+ 1,100 22 Sylvan Learning Systems, Inc.+ 1,100 17 Symantec Corp.+ 1,500 94 Symyx Technologies, Inc.+ 800 27 Synopsys, Inc.+ 1,900 80 Syntel, Inc.+ 1,500 17 Talk City, Inc.+ 500 2 Tanning Technology Corp.+ 600 11 Technology Solutions Co.+ 1,500 10 Teledyne Technologies, Inc.+ 857 15 TeleSpectrum Worldwide, Inc.+ 2,100 10 Teletech Holdings, Inc.+ 1,600 52 TenFold Corp.+ 900 23 Tetra Technology, Inc.+ 1,125 27 Texas Biotech Corp.+ 1,100 13 Thermo Cardiosystems, Inc.+ 1,600 18 TheStreet.com, Inc.+ 800 5 TIBCO Software, Inc.+ 5,000 445 Ticketmaster Online-CitySearch, Inc.+ 900 18 TMP Worldwide, Inc.+ 2,200 144 Track Data Corp.+ 1,900 4 Transaction Systems Architects, Inc.+ 900 15 True North Communications, Inc. 1,200 49 Tularik, Inc.+ 1,300 37 Tyco International Ltd. 500 23 Ubid, Inc.+ 640 12 Unify Corp.+ 800 10 Universal Electronics, Inc.+ 1,000 21 78 Number Value of Shares (000s) --------- ----------- UNOVA, Inc.+ 1,300 $ 18 URS Corp.+ 900 11 Usinternetworking, Inc.+ 2,400 60 Va Linux Systems, Inc.+ 1,100 46 Ventiv Health, Inc.+ 1,633 17 Verio, Inc.+ 2,000 75 VeriSign, Inc.+ 2,800 390 VERITAS Software Corp.+ 10,575 1,134 Verity, Inc.+ 800 26 Vertel Corp.+ 600 10 VerticalNet, Inc.+ 1,800 97 Via Net.Works, Inc.+ 2,700 54 Viad Corp. 2,400 61 The viaLink Co.+ 400 8 Viant Corp.+ 1,000 23 Vignette Corp.+ 4,800 231 Vitesse Semiconductor Corp.+ 4,200 286 Vixel Corp.+ 600 4 The Wackenhut Corp.+ 1,000 13 Wackenhut Corrections Corp. 1,500 12 Wallace Computer Services, Inc. 1,100 12 Waste Management, Inc. 16,700 265 WatchGuard Technologies, Inc.+ 600 29 Wave Systems Corp.+ 900 17 Web Trends Corp.+ 600 20 Webmethods, Inc.+ 1,000 90 Westaff, Inc.+ 1,400 10 Wind River Systems, Inc.+ 1,460 62 Wireless Facilities, Inc.+ 1,000 58 Witness Systems, Inc.+ 500 7 WorldGate Communications, Inc.+ 500 12 Xpedior, Inc.+ 1,100 18 Xybernaut Corp.+ 1,000 10 Yahoo!, Inc.+ 14,432 1,880 York Research Corp.+ 1,100 2 Young & Rubicam, Inc. 1,900 106 Zamba Corp.+ 2,000 13 ZAP.com, Corp.+ 32 0 ZapMe! Corp.+ 1,800 7 Zixit Corp.+ 400 15 ---------- 33,903 ---------- CHEMICAL -- 1.7% A. Schulman 700 9 Aceto Corp. 500 5 Advanced Technical Products, Inc.+ 400 2 Number Value of Shares (000s) --------- ----------- AEP Industries, Inc.+ 400 $ 8 Air Products & Chemicals, Inc. 6,000 186 Airgas, Inc.+ 1,900 11 Albemarle Corp. 1,100 23 Amcol International Corp. 600 10 Arch Chemicals, Inc. 700 14 Bio-Rad Laboratories, Inc., Class A+ 500 13 Brady Corp., Class A 500 15 Cabot Corp. 1,700 46 Calgon Carbon Corp. 500 3 Cambrex Corp. 700 29 Celgene Corp.+ 3,000 141 Chemfab Corp.+ 700 10 Chemfirst, Inc. 500 10 Chromatics Color Sciences+ 1,300 7 CK Witco Corp.+ 2,624 31 Dexter Corp. 700 38 Dow Chemical Co. 5,800 655 E. I. du Pont de Nemours & Co. 27,795 1,319 Eastman Chemical Co. 2,200 115 Enzon, Inc.+ 1,000 37 Ferro Corp. 700 16 Foamex International, Inc. 400 2 Fuller 400 15 Geon Co. 400 9 Georgia Gulf Corp. 800 19 Great Lakes Chemical Corp. 1,700 46 Gum Tech International, Inc.+ 400 4 Hawkins Chemical, Inc. 1,300 10 Hercules, Inc. 2,800 44 International Specialty Products, Inc.+ 1,400 8 Lilly Industries, Inc., Class A 800 9 Liqui-Box Corp. 200 9 Lubrizol Corp. 1,400 36 Lyondell Petrochemical Corp. 2,900 53 M. A. Hanna Co. 900 10 Macdermid, Inc. 800 19 Mace Security International, Inc.+ 400 1 McWhorter Technologies, Inc.+ 400 6 Millennium Chemicals, Inc. 1,500 30 Minnesota Mining & Manufacturing Co. 10,400 900 NCH Corp. 300 13 Oil-Dri Corp. of America 400 3 Olin Corp. 900 16 79 SCHWAB TOTAL STOCK MARKET INDEX FUND(TM) SCHEDULE OF INVESTMENTS (continued) April 30, 2000 (Unaudited) Number Value of Shares (000s) --------- ----------- OM Group, Inc. 700 $ 32 Omnova Solutions, Inc. 1,000 6 Oxigene, Inc.+ 900 13 Pharmacia Corp. 33,616 1,679 PPG Industries, Inc. 5,300 288 Praxair, Inc. 4,200 187 Quaker Chemical Corp. 400 7 Rogers Corp. 400 27 Rohm & Haas Co. 6,253 223 Rollins, Inc. 800 11 RPM, Inc. 2,400 24 Sequa Corp., Class A+ 300 15 Sigma-Aldrich Corp. 2,700 79 Solutia, Inc. 2,800 38 Stepan Co. 200 4 SurModics, Inc.+ 400 10 Techne Corp.+ 500 35 Tredegar Industries, Inc. 800 21 Trex Co., Inc.+ 500 20 Tuscarora Plastics, Inc. 400 5 Twinlab Corp.+ 900 7 Union Carbide Corp. 3,400 201 Valspar Corp. 1,100 40 Ventro Corp.+ 1,200 33 W.R. Grace & Co.+ 1,800 23 WD-40 Co. 400 8 Wellman, Inc. 900 19 Xceed, Inc.+ 500 7 Zoltek Cos., Inc.+ 600 5 ---------- 7,082 ---------- CONSTRUCTION -- 0.5% 4Front Technologies, Inc.+ 1,400 25 Apogee Enterprises, Inc. 1,000 4 Armstrong Holdings, Inc.+ 1,000 20 Cameron Ashley Building Products+ 1,000 18 Carbo Ceramics, Inc. 500 17 Centex Construction Products, Inc. 500 16 Centex Corp. 1,500 36 Clayton Homes, Inc. 3,500 33 CoorsTek, Inc.+ 250 11 Craftmade International, Inc. 1,200 6 Crossmann Communities, Inc.+ 700 11 D.R. Horton, Inc. 1,600 21 DAL-Tile International, Inc.+ 1,300 13 Dayton Superior Corp., Class A+ 800 20 Dycom Industries, Inc.+ 1,100 57 Number Value of Shares (000s) --------- ----------- Elcor Corp. 450 $ 14 Florida Rock Industries, Inc. 500 16 Fluor Corp. 2,000 67 Granite Construction, Inc. 700 17 Huttig Building Products, Inc.+ 311 1 Insituform Technologies, Inc., Class A+ 800 27 Integrated Electrical Services, Inc.+ 1,100 5 Interface, Inc. 1,200 4 Johns Manville Corp. 3,800 40 Justin Industries, Inc. 900 16 Kaufman & Broad Home Corp. 1,100 21 Lafarge Corp. 1,700 43 Lennar Corp. 1,500 28 Martin Marietta Materials, Inc. 1,300 69 Masco Corp. 12,200 274 Morrison Knudsen Corp.+ 1,500 14 NCI Building Systems, Inc.+ 400 8 NVR, Inc.+ 500 31 Owens Corning 1,500 27 Palm Harbor Homes, Inc.+ 700 12 Performance Technologies, Inc.+ 600 21 Photon Dynamics, Inc.+ 200 15 Puerto Rican Cement Co., Inc. 400 12 Pulte Corp. 1,000 22 Quanta Services, Inc.+ 1,400 65 The Ryland Group, Inc. 200 4 Sawtek, Inc.+ 1,200 57 SBA Communications Corp.+ 700 28 Sherwin-Williams Co. 4,400 109 Simpson Manufacturing, Inc.+ 300 14 Socket Communications, Inc.+ 300 5 Southdown, Inc. 1,000 58 Specialty Equipment Cos., Inc.+ 700 14 The Stanley Works 2,300 68 Stone & Webster, Inc. 700 9 Texas Industries, Inc. 500 16 Toll Brothers, Inc.+ 1,800 39 U.S. Home Corp.+ 500 18 U.S. Plastic Lumber Corp.+ 1,700 7 United Dominion Industries Ltd. 1,000 17 USG Corp. 1,400 58 Vulcan Materials Co. 2,800 123 Walter Industries, Inc. 1,300 14 Webb Del Corp.+ 600 9 Wesco International, Inc.+ 1,700 16 West Teleservices Corp.+ 1,700 36 Westell Technologies, Inc.+ 1,760 50 80 Number Value of Shares (000s) --------- ----------- Yankee Candle Co., Inc.+ 1,500 $ 27 ---------- 1,973 ---------- CONSUMER - DURABLE -- 0.2% Black & Decker Corp. 2,400 101 Champion Enterprises, Inc.+ 2,200 15 Chromcraft Revington, Inc.+ 800 10 Coachmen Industries, Inc. 700 11 Compx International, Inc. 800 16 Ethan Allen Interiors, Inc. 1,000 27 Flexsteel Industries, Inc. 600 8 Furniture Brands International, Inc.+ 1,100 21 Genlyte Group, Inc.+ 600 12 Haverty Furniture Cos., Inc. 800 9 Helen of Troy Ltd.+ 1,100 7 Hillenbrand Industries, Inc. 1,700 51 Kimball International, Inc., Class B 2,100 29 La-Z-Boy, Inc. 1,400 22 Leggett & Platt, Inc. 5,200 111 Linens 'N Things, Inc.+ 900 28 Maytag Corp. 2,200 76 Mikasa, Inc. 700 7 Mohawk Industries, Inc.+ 1,500 37 National Presto Industries, Inc. 400 14 Rent-A-Center, Inc.+ 1,000 20 Restoration Hardware, Inc.+ 1,700 7 Salton, Inc.+ 400 17 Select Comfort Corp.+ 1,100 5 Shaw Industries, Inc. 3,625 57 SLI, Inc. 1,100 16 Sturm, Ruger & Co., Inc. 1,100 11 Sunbeam Corp.+ 681 2 Thomas Industries, Inc. 700 14 Toro Co. 400 12 Virco Mfg. Corp. 880 9 Water Pik Technologies, Inc.+ 195 1 Whirlpool Corp. 1,900 124 Windmere Durable Holdings, Inc.+ 1,100 18 ---------- 925 ---------- CONSUMER - NONDURABLE -- 0.9% The 3DO Co.+ 1,400 9 A.T. Cross Co., Class A+ 1,000 5 Acclaim Entertainment, Inc.+ 2,100 6 Action Performance Cos., Inc.+ 900 8 American Greetings Corp., Class A 1,700 31 Applebee's International, Inc. 700 25 Number Value of Shares (000s) --------- ----------- barnesandnoble.com, Inc.+ 1,600 $ 17 Boyd Gaming Corp.+ 2,800 14 Boyds Collection Ltd.+ 2,200 14 Brinker International, Inc.+ 1,800 57 Buca, Inc.+ 1,100 17 Buffets, Inc.+ 1,700 17 Catalina Marketing Corp.+ 500 51 Cbrl Group, Inc. 1,600 22 Cdnow, Inc.+ 1,000 4 CEC Entertainment, Inc.+ 650 19 Cedar Fair LP 1,400 27 Championship Auto Racing Teams, Inc.+ 700 14 Cheesecake Factory+ 500 20 CKE Restaurants, Inc. 2,100 8 Consolidated Products, Inc.+ 1,580 14 Cytyc Corp.+ 1,600 72 Darden Restaurants, Inc. 3,300 61 Dave and Buster's, Inc.+ 1,700 13 Department 56, Inc.+ 1,100 10 Dover Downs Entertainment, Inc. 1,400 17 Electronic Arts, Inc.+ 1,700 103 Factory 2-U Stores, Inc.+ 600 20 Fastenal Co. 1,100 64 The First Years, Inc. 1,500 13 Fortune Brands, Inc. 4,300 108 Fossil, Inc.+ 1,650 34 Garden Fresh Restaurant Corp.+ 900 10 Handleman Co.+ 1,400 17 Harcourt General, Inc. 1,900 71 Hasbro, Inc. 4,800 77 Hollywood.com, Inc.+ 800 11 IHOP Corp.+ 1,000 16 International Game Technology+ 2,100 51 International Speedway Corp., Class A 1,345 58 Isle of Capris Casinos, Inc.+ 1,100 15 Jack in the Box, Inc.+ 900 22 JAKKS Pacific, Inc.+ 800 15 Jostens, Inc. 800 20 Lancaster Colony Corp. 1,000 26 Landry's Seafood Restaurants, Inc.+ 1,300 11 Lone Star Steakhouse & Saloon, Inc.+ 1,400 17 Luby's Cafeterias, Inc. 900 8 The Marcus Corp. 1,500 16 Marvel Enterprises, Inc.+ 1,500 7 Mattel, Inc. 11,000 135 McDonald's Corp. 36,400 1,388 Mck Communications, Inc.+ 600 19 81 SCHWAB TOTAL STOCK MARKET INDEX FUND(TM) SCHEDULE OF INVESTMENTS (continued) April 30, 2000 (Unaudited) Number Value of Shares (000s) --------- ----------- Midway Games, Inc.+ 1,500 $ 10 Movado Group, Inc. 700 6 MP3.com, Inc.+ 1,700 12 Musicland Stores Corp.+ 1,600 12 Newell Rubbermaid, Inc. 7,700 194 NPC International, Inc.+ 1,100 11 On Command Corp.+ 900 19 Oneida Ltd. 700 13 Outback Steakhouse, Inc.+ 1,900 62 Papa John's International, Inc.+ 700 19 RARE Hospitality International Inc.+ 700 22 Regis Corp. 1,000 12 Riviana Foods, Inc. 900 14 Ruby Tuesday, Inc. 1,800 38 Russ Berrie & Co., Inc. 1,000 19 Ryan's Family Steak Houses, Inc.+ 1,500 15 SCP Pool Corp.+ 600 22 Sonic Corp.+ 500 14 Sotheby's Holdings, Inc., Class A 1,600 27 Starbucks Corp.+ 4,900 148 Stewart Enterprises, Inc., Class A 500 2 Student Advantage, Inc.+ 1,100 6 Taco Cabana, Inc., Class A+ 1,500 9 The Topps Co., Inc.+ 1,700 15 Trans World Entertainment Corp.+ 1,500 16 Triarc Cos., Inc.+ 700 14 Tricon Global Restaurants, Inc.+ 4,000 137 Tupperware Corp. 1,400 26 Wendy's International, Inc. 3,000 67 ---------- 3,905 ---------- CONTAINERS -- 0.1% ACX Technologies, Inc.+ 1,000 4 Ball Corp. 700 22 Bemis Co., Inc. 1,300 48 Crown Cork & Seal Co., Inc. 3,400 55 Gaylord Container Corp.+ 2,500 13 Greif Brothers Corp., Class A 500 16 Mobile Mini, Inc.+ 600 13 Owens-Illinois, Inc.+ 4,000 54 Packaging Corp. of America+ 2,700 32 Pactiv Corp.+ 4,300 35 Sealed Air Corp.+ 2,300 128 Silgan Holdings, Inc.+ 900 12 Sonoco Products 2,600 54 U.S. Can Corp.+ 600 11 ---------- 497 ---------- Number Value of Shares (000s) --------- ----------- ELECTRONICS -- 12.1% 3Dfx Interactive, Inc.+ 1,300 $ 13 Acxiom Corp.+ 2,200 59 Adaptive Broadband Corp.+ 1,000 33 ADC Telecommunications, Inc.+ 8,000 486 Adelphia Business Solutions, Inc.+ 900 32 Adelphia Communications Corp., Class A+ 3,001 149 Advanced Fibre Communications, Inc.+ 2,000 91 Advanced Micro Devices, Inc.+ 4,100 360 Advanced Radio Telecom Corp.+ 1,000 17 Airnet Communications Corp.+ 500 9 Alamosa PCS Holdings, Inc.+ 1,400 40 Allen Telecom, Inc.+ 1,500 27 Alliant Techsystems, Inc.+ 500 35 Alpha Industries, Inc.+ 1,000 52 Altera Corp.+ 5,500 562 American Power Conversion Corp.+ 4,900 173 American Xtal Technology, Inc.+ 400 10 Amkor Technology, Inc.+ 3,100 190 Amphenol Corp.+ 800 51 Anadigics, Inc.+ 750 56 Analog Devices, Inc.+ 9,200 707 Ancor Communications, Inc.+ 800 24 Andrew Corp.+ 2,000 59 Anixter International, Inc.+ 900 30 ANTEC Corp.+ 900 48 Applied Materials, Inc.+ 20,949 2,133 Arguss Holdings, Inc.+ 1,100 24 Arrow Electronics, Inc.+ 2,400 105 Artisan Components, Inc.+ 1,100 11 Aspect Communications Corp.+ 1,700 60 Asyst Technologies, Inc.+ 600 32 Atmel Corp.+ 5,700 279 Atmi, Inc.+ 700 27 Audiovox Corp., Class A+ 600 21 Avanex Corp.+ 200 24 Avid Technology, Inc.+ 800 11 Avnet, Inc. 1,546 122 AVT Corp.+ 1,400 15 AVX Corp. 2,200 214 Aware, Inc.+ 500 20 Bel Fuse, Inc., Class A+ 700 12 Bel Fuse, Inc., Class B 500 9 Belden, Inc. 800 24 Bell Industries, Inc. 600 2 Benchmark Electronics, Inc.+ 700 28 Boston Acoustics, Inc. 800 8 Broadcom Corp., Class A+ 3,100 534 82 Number Value of Shares (000s) --------- ----------- Brooks Automation, Inc.+ 300 $ 27 Burr Brown Corp.+ 1,450 99 C&D Technologies, Inc. 500 32 C-Cor Electronics, Inc.+ 800 31 Cable Design Technologies Corp.+ 600 21 Cadence Design Systems, Inc.+ 6,200 104 Caliper Technologies Corp.+ 500 19 Caprock Communications Corp.+ 900 30 CCC Information Services Group, Inc.+ 1,100 15 CIENA Corp.+ 3,800 470 Cirrus Logic, Inc.+ 1,500 25 CMGI, Inc.+ 7,118 507 Cobalt Networks, Inc.+ 700 22 Coherent, Inc.+ 800 46 Cohu, Inc. 600 23 CommScope, Inc.+ 1,400 67 Computer Network Technology Corp.+ 700 11 Concentric Network Corp.+ 1,100 48 Concord Communications, Inc.+ 500 14 Conexant Systems, Inc.+ 5,696 341 Cox Radio, Inc., Class A+ 300 22 Cree Research, Inc.+ 800 116 CTS Corp. 800 50 Cyberonics, Inc.+ 1,200 24 Cypress Semiconductor Corp.+ 2,800 145 Dallas Semiconductor Corp. 1,400 60 Data Broadcasting Corp.+ 1,500 7 Digital Microwave Corp.+ 1,700 63 Dionex+ 500 18 DSP Group, Inc.+ 600 43 Dupont Photomasks, Inc.+ 500 28 E-tek Dynamics, Inc.+ 1,800 369 e.spire Communications, Inc.+ 1,600 8 Electro Rent Corp.+ 1,100 12 Electro Scientific Industries, Inc.+ 600 38 Electroglas, Inc.+ 500 19 Electronics Boutique Holdings Corp.+ 800 13 Electronics for Imaging, Inc.+ 1,500 78 Emcore Corp.+ 300 26 Emulex Corp.+ 1,000 45 ESS Technology, Inc.+ 1,000 13 Exar Corp.+ 450 36 Exide Corp. 1,700 16 FEI Co.+ 700 16 FSI International, Inc.+ 1,300 19 FVC.COM, Inc.+ 1,200 7 Gadzoox Networks, Inc.+ 600 22 Number Value of Shares (000s) --------- ----------- Gasonics International Corp.+ 1,100 $ 36 General Cable Corp. 1,700 13 General Semiconductor, Inc.+ 800 16 Genrad, Inc.+ 1,000 7 Gentex Corp.+ 1,900 61 Gerber Scientific, Inc. 800 11 Getty Images, Inc.+ 1,000 30 Glenayre Technologies, Inc.+ 1,500 20 Globespan, Inc.+ 1,500 143 Hadco Corp.+ 400 33 Harman International Industries, Inc. 400 26 Harmonic, Inc.+ 800 59 Harris Corp. 1,800 58 Hearst-Argyle Television, Inc.+ 1,300 28 HI/Fn, Inc.+ 300 10 Hollywood Entertainment Corp.+ 2,000 14 Hutchinson Technology, Inc.+ 800 10 IMRglobal Corp.+ 1,100 14 Intel Corp. 89,516 11,352 Intermagnetics General Corp.+ 1,800 22 International Rectifier Corp.+ 1,500 74 ITT Industries, Inc. 2,600 82 JDS Uniphase Corp.+ 16,084 1,668 JNI Corp.+ 600 24 Kemet Corp.+ 1,100 82 Kent Electronics Corp.+ 600 18 KLA-Tencor Corp.+ 4,900 367 Kopin Corp.+ 800 62 Kulicke & Soffa Industries, Inc.+ 700 55 L-3 Communications Holdings, Inc.+ 900 48 Lam Research Corp.+ 3,200 147 Linear Technology Corp. 8,300 474 Littelfuse, Inc.+ 500 18 Loral Space & Communications Corp.+ 6,100 60 LSI Logic Corp.+ 8,000 500 Lucent Technologies, Inc. 87,023 5,412 Macromedia, Inc.+ 1,300 113 Mattson Technology, Inc.+ 1,100 54 Maxim Integrated Products, Inc.+ 7,400 480 MEMC Electronic Materials, Inc.+ 1,600 28 Mestek, Inc.+ 700 13 Methode Electronics, Inc., Class A 900 38 Metro Information Services, Inc.+ 700 10 Metromedia Fiber Network, Inc., Class A+ 11,310 349 MGC Communications, Inc.+ 700 34 Micron Technology, Inc.+ 7,500 1,044 83 SCHWAB TOTAL STOCK MARKET INDEX FUND(TM) SCHEDULE OF INVESTMENTS (continued) April 30, 2000 (Unaudited) Number Value of Shares (000s) --------- ----------- Microsemi Corp.+ 1,500 $ 44 MKS Instruments, Inc.+ 600 28 MMC Networks, Inc.+ 800 21 Molex, Inc. 5,625 309 Motorola, Inc. 19,385 2,308 MRV Communications, Inc.+ 1,100 76 Nanogen, Inc.+ 500 12 National Semiconductor Corp.+ 5,200 316 NeoMagic Corp.+ 1,300 4 Netopia, Inc.+ 600 25 NetOptix Corp.+ 300 53 Netro Corp.+ 1,200 52 Network Solutions, Inc.+ 2,400 355 Newport Corp. 200 24 Nextel Communications, Inc., Class A+ 9,900 1,083 Nortel Networks Corp. 1,428 162 Novoste Corp.+ 900 37 Nvidia Corp.+ 800 71 Objective Systems Integrators, Inc.+ 900 13 P-Com, Inc.+ 1,700 18 Parkervision, Inc.+ 400 9 Paxson Communications Corp.+ 1,900 16 PE Corp.-Celera Genomics Group+ 1,300 107 PE Corp.-PE Biosystems Group 5,900 354 Peerless Systems Corp.+ 1,600 5 PerkinElmer, Inc. 3,100 170 Pinnacle Systems, Inc.+ 1,200 29 Pioneer - Standard Electronics, Inc. 1,100 17 Plantronics, Inc.+ 500 44 Plexus Corp.+ 500 38 PLX Technology, Inc.+ 800 26 Powell Industries, Inc.+ 2,000 18 Power Intergrations, Inc.+ 600 14 Power-One, Inc.+ 600 41 Powerwave Technologies, Inc.+ 500 104 PRI Automation, Inc.+ 500 40 QUALCOMM, Inc.+ 20,000 2,169 Quantum Effect Devices, Inc.+ 600 35 QuickLogic Corp.+ 400 12 Rambus, Inc.+ 600 138 Rational Software Corp.+ 2,300 196 Rayovac Corp.+ 800 17 Remec, Inc.+ 1,000 38 RF Micro Devices, Inc.+ 2,100 219 Rofin-Sinar Technologies, Inc.+ 1,400 16 Sanmina Corp.+ 3,400 204 SCI Systems, Inc.+ 3,800 202 Number Value of Shares (000s) --------- ----------- Scientific-Atlanta, Inc. 4,600 $ 299 Semitool, Inc.+ 600 12 Semtech Corp.+ 800 55 Sensormatic Electronics Corp.+ 2,000 33 Silicon Storage Technology, Inc.+ 600 59 Silicon Valley Group, Inc.+ 1,000 29 Siliconix, Inc.+ 800 66 Snyder Communications, Inc.+ 1,700 40 Solectron Corp.+ 15,820 741 SpeedFam-IPEC, Inc.+ 900 14 STAR Telecommunications, Inc.+ 2,100 10 Superconductor Technologies+ 300 7 Superior Telecommunications, Inc. 1,124 14 Symbol Technologies, Inc. 3,375 188 SymmetriCom, Inc.+ 1,400 17 Technitrol, Inc. 500 34 Tekelec, Inc.+ 1,400 49 Tektronix, Inc. 1,400 81 Telaxis Communications Corp.+ 400 10 TeleCorp PCS, Inc.+ 2,200 98 Tellabs, Inc.+ 10,700 586 Teradyne, Inc.+ 5,000 550 Terayon Communication Systems, Inc.+ 800 74 Tessco Technologies, Inc.+ 700 15 Texas Instruments, Inc. 21,551 3,510 Therma-Wave, Inc.+ 500 14 Thermo Electron Corp.+ 4,700 91 Thermoquest Corp.+ 1,300 22 Thomas & Betts Corp. 1,400 43 THQ, Inc.+ 800 12 Three-Five Systems, Inc.+ 1,466 128 Tollgrade Communications, Inc.+ 400 26 TranSwitch Corp.+ 1,000 88 Triquint Semiconductor, Inc.+ 1,000 103 Truetime, Inc.+ 400 2 Tweeter Home Entertainment Group, Inc.+ 600 22 Unitil Corp. 600 17 Univision Communications, Inc.+ 2,600 284 Valence Technology, Inc.+ 900 14 Varian, Inc.+ 1,300 47 Varian Medical Systems, Inc.+ 700 28 Varian Semiconductor Equipment+ 800 54 Viasat, Inc.+ 200 9 Vicor Corp.+ 900 23 Virata Corp.+ 500 63 Vishay Intertechnology, Inc.+ 2,200 185 84 Number Value of Shares (000s) --------- ----------- VISX, Inc.+ 1,500 $ 24 Waters Corp.+ 1,600 152 Western Digital Corp.+ 3,300 23 Western Wireless Corp., Class A+ 1,800 89 Wink Communications, Inc.+ 800 16 Xilinx, Inc.+ 8,600 630 Youthstream Media Networks, Inc.+ 800 5 Zoran Corp.+ 300 15 ---------- 51,619 ---------- ENERGY - RAW MATERIALS -- 1.2% Anadarko Petroleum Corp. 3,600 156 Apache Corp. 3,100 150 Arch Coal, Inc. 900 5 Atwood Oceanics, Inc.+ 500 30 Baker Hughes, Inc. 9,400 299 Barrett Resources Corp.+ 700 22 Basin Exploration, Inc.+ 1,200 17 Berry Petroleum, Class A 1,000 16 BJ Services Co.+ 2,000 141 Buckeye Partners 700 19 Burlington Resources, Inc. 6,000 236 Cabot Oil & Gas Corp., Class A 900 17 Cooper Cameron Corp.+ 1,400 105 Devon Energy Corp. 2,202 106 Dril-Quip, Inc.+ 500 20 Eastern Enterprises 500 30 ENSCO International, Inc. 3,700 123 Enterprise Products Partners L.P. 1,100 23 EOG Resources, Inc. 3,200 80 Evergreen Resources, Inc.+ 800 19 Forest Oil Corp.+ 1,500 17 Friede Goldman Halter, Inc.+ 1,855 11 Global Marine, Inc.+ 4,500 108 Halliburton Co. 11,900 526 Helmerich & Payne, Inc. 1,300 41 IRI International Corp.+ 500 4 Key Energy Group, Inc.+ 2,000 19 KEY Production Co., Inc.+ 1,200 16 Kirby Corp.+ 800 17 Louis Dreyfus Natural Gas Corp.+ 900 25 Lynx Therapeutics, Inc.+ 300 7 MAXXAM, Inc.+ 400 11 McDermott International, Inc. 1,500 12 Mitchell Energy & Development Corp., Class A 1,300 31 Number Value of Shares (000s) --------- ----------- Nabors Industries, Inc.+ 3,717 $ 147 Newpark Resources, Inc.+ 2,200 18 NL Industries, Inc. 1,500 24 Noble Affiliates, Inc. 1,400 50 Noble Drilling Corp.+ 3,400 136 Occidental Petroleum Corp. 9,800 210 Offshore Logistics, Inc.+ 600 7 Parker Drilling Co.+ 500 2 Penn Virginia Corp. 400 7 Plains All American Pipeline L.P. 1,000 17 Plains Resources, Inc.+ 1,000 14 Prima Energy Corp.+ 1,050 30 R&B Falcon Corp.+ 5,100 106 Rowan Cos., Inc.+ 2,400 67 Schlumberger Ltd. 14,700 1,125 Sitel Corp.+ 800 5 Smith International+ 1,300 99 Southwestern Energy Co. 300 3 Swift Energy Co.+ 1,100 22 Tidewater, Inc. 1,400 42 Titan Exploration, Inc.+ 400 2 Tom Brown, Inc.+ 900 17 Trico Marine Services, Inc.+ 1,300 10 Unit Corp.+ 1,600 18 USEC, Inc. 1,900 9 UTI Energy Corp.+ 600 21 Valero Energy Corp. 1,400 41 Varco International, Inc.+ 1,600 20 Vastar Resources, Inc. 2,700 218 Weatherford International, Inc.+ 2,900 118 Western Gas Resources, Inc. 2,000 33 ---------- 5,097 ---------- FOOD & AGRICULTURE -- 2.3% Ag-Chem Equipment, Inc.+ 1,400 12 Agribrands International, Inc.+ 400 15 American Italian Pasta Co., Class A+ 500 12 Andersons, Inc. 1,500 11 Archer-Daniels Midland Co. 15,815 157 Aurora Foods, Inc.+ 1,300 6 Ben & Jerry's Homemade, Class A+ 400 17 Bestfoods, Inc. 7,500 377 Bob Evans Farms, Inc. 2,200 29 Campbell Soup Co. 11,400 296 Celestial Seasonings, Inc.+ 400 13 Coca-Cola Bottling Co. 400 20 Coca-Cola Co. 66,300 3,120 85 SCHWAB TOTAL STOCK MARKET INDEX FUND(TM) SCHEDULE OF INVESTMENTS (continued) April 30, 2000 (Unaudited) Number Value of Shares (000s) --------- ----------- Coca-Cola Enterprises, Inc. 11,700 $ 249 ConAgra, Inc. 13,200 249 Consolidated-Tomoka Land Co. 1,100 13 Corn Products International, Inc. 900 22 CTB International Corp.+ 1,600 13 Dean Foods Co. 900 22 Del Monte Foods Co.+ 1,500 13 Delta & Pine Land Co. 900 19 Dole Food Co., Inc. 1,200 21 Dreyer's Grand Ice Cream, Inc. 800 19 Earthgrains Co. 2,100 30 Embrex, Inc.+ 300 5 Fleming Cos., Inc. 1,300 21 Flowers Industries, Inc. 2,500 38 Fresh Del Monte Produce, Inc.+ 1,700 14 General Mills, Inc. 8,100 295 H.J. Heinz Co. 9,400 320 The Hain Food Group, Inc.+ 400 11 Hershey Foods Corp. 3,600 163 Hormel Foods Corp. 3,400 52 IBP, Inc. 2,500 41 IMC Global, Inc. 2,900 45 International Home Foods, Inc.+ 1,800 26 International Multifoods Corp. 600 8 Interstate Bakeries Corp. 1,700 22 J & J Snack Foods Corp.+ 700 11 J.M. Smucker Co., Class A 700 11 Keebler Foods Co. 2,200 69 Kellogg Co. 11,000 269 Lance, Inc. 1,200 13 Lindsay Manufacturing Co. 800 14 Marsh Supermarkets, Inc. 1,000 10 Maui Land & Pineapple Co. 800 16 McCormick & Co., Inc. 1,700 53 Michael Foods, Inc. 500 11 Midwest Grain Products, Inc.+ 1,500 11 Nabisco Group Holdings Corp. 8,300 107 Nabisco Holdings Corp., Class A 1,400 53 Nash - Finch Co. 1,800 13 Northland Cranberries 2,300 8 Osteotech, Inc.+ 700 5 The Pepsi Bottling Group, Inc. 4,000 86 PepsiCo, Inc. 39,100 1,434 Pilgrim's Pride Corp., Class A 300 2 Pilgrim's Pride Corp., Class B 1,400 10 Quaker Oats Co. 3,500 228 Ralcorp Holdings, Inc.+ 700 10 Ralston-Ralston Purina Group 7,600 135 Number Value of Shares (000s) --------- ----------- Rexall Sundown, Inc.+ 1,600 $ 31 Sanderson Farms, Inc. 1,400 10 Sara Lee Corp. 24,200 363 Schultz SAV O Stores, Inc. 1,100 13 Scotts Co., Class A+ 700 25 Smithfield Foods, Inc.+ 1,300 28 Suiza Foods Corp.+ 700 27 SUPERVALU, Inc. 3,687 76 SYSCO Corp. 8,900 335 Tasty Baking Co. 1,300 14 Tejon Ranch Co.+ 600 13 Tootsie Roll Industries, Inc. 721 22 Tyson Foods, Inc. 5,700 60 Ultrak, Inc.+ 1,500 14 United Natural Foods, Inc.+ 1,300 20 Universal Foods Corp. 1,200 20 Veterinary Centers of America, Inc.+ 1,100 15 Vlasic Foods International, Inc.+ 2,000 4 Whitman Corp. 3,700 42 Whole Foods Market, Inc.+ 600 26 Wild Oats Markets, Inc.+ 650 9 Wm. Wrigley Jr. Co. 3,800 275 Zapata Corp.+ 1,600 6 ---------- 9,843 ---------- GOLD -- 0.0% Battle Mountain Gold Co.+ 4,300 9 Bull RUN Corp.+ 1,100 4 Golden Cycle Gold Corp.+ 600 3 Homestake Mining Co. 7,000 42 Meridian Gold, Inc.+ 2,100 12 Newmont Mining Corp. 4,600 108 ---------- 178 ---------- HEALTHCARE / DRUGS & MEDICINE -- 9.3% Abbott Laboratories 41,205 1,584 Abgenix, Inc.+ 1,000 90 Abiomed, Inc.+ 400 15 Acuson Corp.+ 1,100 14 Advance Paradigm, Inc.+ 1,100 14 Aetna, Inc. 4,200 243 Albany Molecular Research, Inc.+ 400 18 Alexion Pharmaceuticals, Inc.+ 400 18 Alkermes, Inc.+ 700 37 Allergan, Inc. 3,600 212 Alliance Pharmaceutical Corp.+ 1,100 9 Allscripts, Inc.+ 600 19 86 Number Value of Shares (000s) --------- ----------- Alpharma, Inc., Class A 800 $ 31 Alterra Healthcare Corp.+ 3,200 10 ALZA Corp.+ 2,700 119 American Home Products Corp. 35,100 1,972 Ameripath, Inc.+ 1,900 15 Amerisource Health Corp.+ 1,400 28 Amgen, Inc.+ 27,400 1,534 Amylin Pharmaceuticals, Inc.+ 1,200 13 Andrx Corp.+ 1,600 82 Antigenics, Inc.+ 600 10 Apria Healthcare Group, Inc.+ 1,200 17 Arrow International, Inc. 500 17 Arthrocare Corp.+ 300 31 Aspect Medical Systems, Inc.+ 400 18 Atrix Labs, Inc.+ 1,400 14 Aurora Biosciences Corp.+ 1,200 43 Avant Immunotherapeutics, Inc.+ 1,500 10 Avigen, Inc.+ 300 10 Aviron+ 800 19 Bacou USA, Inc.+ 1,000 20 Barr Laboratories, Inc.+ 700 30 Bausch & Lomb, Inc. 1,500 91 Baxter International, Inc. 7,900 514 Beckman Coulter, Inc. 800 52 Becton, Dickinson & Co. 6,700 172 Bergen Brunswig Corp. 3,000 15 Berkshire Bancorp, Inc. 500 16 Bindley Western Industries, Inc. 1,033 18 Bio-Technology General Corp.+ 1,200 17 Biocryst Pharmaceuticals, Inc.+ 700 17 Biogen, Inc.+ 4,200 247 Biomatrix, Inc.+ 800 15 Biomet, Inc. 3,100 111 Biopure Corp.+ 500 11 Block Drug Co. 515 15 Bone Care International, Inc.+ 1,400 27 Boston Scientific Corp.+ 11,300 299 Bristol-Myers Squibb Co. 53,300 2,795 Brookdale Living Communities+ 1,300 17 C.R. Bard, Inc. 1,400 61 Cardinal Health, Inc. 7,600 418 Caremark Rx, Inc.+ 5,300 34 Carter-Wallace, Inc. 1,100 24 Cell Pathways, Inc.+ 600 16 Cephalon, Inc.+ 900 51 Cerus Corp.+ 300 11 Chattem, Inc.+ 1,100 14 ChiRex, Inc.+ 800 14 Number Value of Shares (000s) --------- ----------- Chiron Corp.+ 4,800 $ 217 ChromaVision Medical Systems, Inc.+ 800 11 Columbia / HCA Healthcare Corp. 15,000 427 Conmed Corp.+ 500 13 Cooper Cos., Inc. 600 20 COR Therapeutics, Inc.+ 1,100 84 Corixa Corp.+ 1,100 34 CorVel Corp.+ 600 16 Coulter Pharmaceutical, Inc.+ 700 13 Covance, Inc.+ 1,300 12 Coventry Health Care, Inc.+ 1,700 18 Cubist Pharmaceuticals, Inc.+ 500 16 CV Therapeutics, Inc.+ 400 16 Cyotgen Corp.+ 1,700 11 D&K Healthcare Resources, Inc.+ 1,000 9 Datascope Corp. 500 17 Dentsply International, Inc. 1,300 38 Diagnostic Products Corp. 600 18 Digene Corp.+ 600 26 drkoop.com, Inc.+ 1,200 3 Dura Pharmaceuticals, Inc.+ 1,200 16 Duramed Pharmaceuticals, Inc.+ 1,900 9 Eclipse Surgical Technologies, Inc.+ 1,700 7 Edwards Lifesciences Corp.+ 1,500 22 Eli Lilly & Co. 29,400 2,273 Emisphere Technologies, Inc.+ 500 20 Entremed, Inc.+ 500 26 Enzo Biochem, Inc.+ 600 24 First Health Group Corp.+ 1,300 40 Forest Laboratories, Inc.+ 2,200 185 Foundation Health Systems, Inc.+ 3,300 33 GelTex Pharmaceuticals, Inc.+ 700 11 Gene Logic, Inc.+ 1,300 35 Genentech, Inc.+ 3,200 374 Genome Therapeutics Corp.+ 500 9 Genzyme Corp.+ 2,300 112 Genzyme Surgical Products+ 996 9 Geron Corp.+ 400 10 Gilead Sciences, Inc.+ 1,265 69 Guidant Corp.+ 8,216 471 Guilford Pharmaceuticals, Inc.+ 500 9 Haemonetics Corp.+ 700 16 Health Management Associates, Inc., Class A+ 6,300 100 Health Management Systems, Inc.+ 1,400 5 Healthcare Services Group+ 2,500 12 HealthSouth Corp.+ 10,300 83 HEICO Corp., Class A 1,000 14 87 SCHWAB TOTAL STOCK MARKET INDEX FUND(TM) SCHEDULE OF INVESTMENTS (continued) April 30, 2000 (Unaudited) Number Value of Shares (000s) --------- ----------- Henry Schein, Inc.+ 1,100 $ 15 Hologic, Inc.+ 1,400 11 Human Genome Sciences, Inc.+ 1,400 107 Humana, Inc.+ 4,400 34 Hyseq, Inc.+ 400 11 ICN Pharmaceuticals, Inc. 2,100 53 IDEC Pharmaceuticals Corp.+ 1,100 70 Idexx Laboratories, Inc.+ 1,000 26 IGEN International, Inc.+ 600 10 Ilex Oncology, Inc.+ 500 12 ImClone Systems+ 700 64 Immucore, Inc.+ 1,100 10 Immunex Corp.+ 13,400 528 Immunomedics, Inc.+ 1,200 17 Inamed Corp.+ 500 21 Incyte Pharmaceuticals, Inc.+ 700 54 Inhale Therapeutic Systems+ 500 31 Invacare Corp. 800 21 Isis Pharmaceuticals, Inc.+ 1,000 11 IVAX Corp.+ 4,200 115 Johnson & Johnson 37,430 3,088 Jones Medical Industries, Inc. 1,700 49 King Pharmaceuticals, Inc.+ 1,450 72 Laboratory Corp. of America Holdings+ 2,300 14 Laser Vision Centers, Inc.+ 1,700 7 LCA-vision, Inc.+ 1,400 5 LifePoint Hospitals, Inc.+ 1,100 19 Ligand Pharmaceuticals, Inc.+ 1,300 17 Lincare Holdings, Inc.+ 1,400 43 The Liposome Co., Inc.+ 1,300 23 Mallinckrodt, Inc. 1,800 48 Manor Care, Inc.+ 2,400 29 Maxicare Health Plans, Inc.+ 1,400 2 Maxim Pharmaceuticals, Inc.+ 900 35 McKesson HBOC, Inc. 7,400 125 Medarex, Inc.+ 900 48 Medicis Pharmaceutical Corp., Class A+ 700 31 Medimmune, Inc.+ 1,800 288 MedQuist, Inc.+ 900 32 Medtronic, Inc. 32,024 1,663 Merck & Co., Inc. 62,700 4,358 MGI Pharma, Inc.+ 400 9 Mid Atlantic Medical Services, Inc.+ 1,600 15 Millennium Pharmaceuticals+ 2,342 186 Mine Safety Appliances Co. 300 19 Minimed, Inc.+ 800 98 Molecular Devices Corp.+ 200 9 Mylan Laboratories, Inc. 3,400 96 Number Value of Shares (000s) --------- ----------- Myriad Genetics, Inc.+ 700 $ 45 NBTY, Inc.+ 1,500 27 Neurogen Corp.+ 800 23 Nexell Therapeutics, Inc.+ 1,800 5 North American Vaccine, Inc.+ 2,600 10 Northfield Laboratories, Inc.+ 1,100 16 NPS Pharmacuticals, Inc.+ 1,000 13 Oakley, Inc.+ 2,200 25 Ocular Sciences, Inc.+ 1,000 17 Omnicare, Inc. 2,400 36 Onyx Pharmaceuticals, Inc.+ 1,200 12 Organogenesis, Inc.+ 1,500 17 OrthAlliance, Inc.+ 2,100 13 Orthodontic Centers of America, Inc.+ 1,200 25 Owens & Minor, Inc. 1,500 18 Oxford Health Plans, Inc.+ 2,000 38 PacifiCare Health Systems, Inc.+ 1,100 57 Parexel International Corp.+ 1,900 17 Patterson Dental Co.+ 900 43 Pediatrix Medical Group, Inc.+ 2,200 18 Penwest Pharmaceuticals Co.+ 1,200 15 Perrigo Co.+ 2,000 11 Pfizer, Inc. 104,000 4,381 Pharmaceutical Product Development, Inc.+ 1,000 17 Pharmacopeia, Inc.+ 800 33 Pharmacyclics, Inc.+ 400 18 PolyMedica Corp.+ 300 16 Progenics Pharmaceuticals, Inc.+ 300 14 Province Healthcare Co.+ 700 20 PSS World Medical, Inc.+ 1,900 16 Quest Diagnostic, Inc.+ 1,200 70 Quintiles Transnational Corp.+ 3,100 44 Quorum Health Group, Inc.+ 1,500 16 Regeneron Pharmaceuticals, Inc.+ 900 26 Renal Care Group, Inc.+ 1,100 24 ResMed, Inc.+ 1,000 34 Respironics, Inc.+ 1,400 23 SafeScience, Inc.+ 1,200 11 Sangstat Medical Corp.+ 600 17 Schein Pharmaceutical, Inc.+ 1,500 21 Schering-Plough Corp. 39,500 1,592 Sepracor, Inc.+ 1,700 156 Serologicals Corp.+ 2,200 8 SICOR, Inc.+ 2,000 23 Sierra Health Services, Inc.+ 3,100 11 Sola International, Inc.+ 1,900 8 SonoSite, Inc.+ 600 20 88 Number Value of Shares (000s) --------- ----------- Spectra-Physics Lasers, Inc.+ 400 $ 20 St. Jude Medical, Inc.+ 2,300 72 Stancorp Financial Group 800 23 Steris Corp.+ 1,400 13 Stryker Corp. 2,700 194 Summit Technology, Inc.+ 1,600 14 Sunrise Assisted Living, Inc.+ 1,200 19 Sunrise Medical, Inc.+ 1,900 10 Sunrise Technologies International+ 1,700 11 SuperGen, Inc.+ 700 23 Sybron International Corp.+ 2,700 84 Syncor International Corp.+ 600 25 Techniclone Corp.+ 2,600 11 Tenet Healthcare Corp.+ 8,700 222 Thermedics, Inc.+ 2,400 20 Thoratec Labs Corp.+ 1,300 14 Titan Pharmaceuticals, Inc.+ 600 19 Total Renal Care Holdings, Inc.+ 1,800 5 Transkaryotic Therapies, Inc.+ 600 18 Triad Hospitals, Inc.+ 1,100 19 Triangle Pharmaceuticals, Inc.+ 1,000 6 Trigon Healthcare, Inc.+ 1,000 36 Trimeris, Inc.+ 300 10 TriPath Imaging, Inc.+ 1,800 11 UnitedHealth Group, Inc. 5,100 340 Universal Health Services, Class B+ 800 44 Ventana Medical Systems+ 300 8 Vertex Pharmaceuticals, Inc.+ 600 31 Vical, Inc.+ 700 13 Viropharma, Inc.+ 1,000 15 Warner-Lambert Co. 23,200 2,640 Watson Pharmaceuticals, Inc.+ 2,600 117 Wellpoint Health Networks, Inc.+ 1,900 140 West Pharmaceutical Services, Inc. 600 15 Xoma Ltd.+ 1,700 7 Young Innovations, Inc.+ 800 13 ---------- 39,472 ---------- HOUSEHOLD PRODUCTS -- 1.2% Alberto-Culver Co., Class B 1,600 38 Avon Products, Inc. 6,300 262 Bush Boake Allen, Inc.+ 500 15 Church & Dwight Co., Inc. 800 14 Clorox Co. 6,400 235 Colgate-Palmolive Co. 15,600 891 Dial Corp. 2,700 38 Number Value of Shares (000s) --------- ----------- Estee Lauder Cos., Inc., Class A 3,100 $ 137 French Fragrances, Inc.+ 1,200 10 Gillette Co. 28,800 1,066 Guest Supply, Inc.+ 600 10 Inter Parfums, Inc.+ 300 3 International Flavors & Fragrances, Inc. 2,900 100 Nu Skin Asia Pacific, Inc.+ 3,300 25 Playtex Products, Inc.+ 1,200 13 Procter & Gamble Co. 35,400 2,111 Revlon, Inc.+ 1,800 13 ---------- 4,981 ---------- INSURANCE -- 2.7% 21st Century Insurance Group 2,300 50 ACE Ltd. 520 12 AFLAC, Inc. 6,800 332 Alfa Farmers Federation Corp. 800 14 Alleghany Corp.+ 202 34 Allmerica Financial Corp. 1,400 76 Allstate Corp. 21,574 510 AMBAC Financial Group, Inc. 1,900 91 American Annuity Group, Inc. 1,000 17 American Financial Group, Inc. 1,500 38 American General Corp. 6,400 358 American International Group, Inc. 41,325 4,533 American National Insurance Co. 600 31 AmerUs Life Holdings, Inc., Class A 700 14 Aon Corp. 7,200 195 Argonaut Group, Inc. 800 14 Arthur J. Gallegher & Co. 1,000 37 AXA Financial, Inc. 11,500 375 Baldwin & Lyons, Inc., Class B 600 12 Chubb Corp. 5,347 340 CIGNA Corp. 5,300 423 Cincinnati Financial Corp. 4,300 173 CNA Financial Corp.+ 4,800 148 CNA Surety Corp. 1,200 18 Commerce Group, Inc. 700 21 Conseco, Inc. 8,200 45 Copart, Inc.+ 1,400 24 Crawford & Co., Class B 1,100 15 Delphi Financial Group, Inc., Class A+ 510 15 E.W. Blanch Holdings 400 9 Enhance Financial Services Group, Inc. 1,100 11 Erie Indemnity Co., Class A 1,600 48 Everest Re Group Ltd. 1,100 32 FBL Financial Group, Inc., Class A 1,000 16 89 SCHWAB TOTAL STOCK MARKET INDEX FUND(TM) SCHEDULE OF INVESTMENTS (continued) April 30, 2000 (Unaudited) Number Value of Shares (000s) --------- ----------- First American Financial Corp. 1,500 $ 23 First United Corp. 900 9 FPIC Insurance Group, Inc.+ 700 10 Fremont General Corp. 2,100 12 Harleysville Group, Inc. 800 13 Hartford Financial Services Group, Inc. 6,100 318 Hartford Life, Inc., Class A 600 30 HCC Insurance Holdings, Inc. 1,200 14 HealthAxis, Inc.+ 400 2 Hilb, Rogal & Hamilton Co. 400 11 Hooper Holmes, Inc. 1,400 24 Horace Mann Educators Corp. 800 12 HSB Group, Inc. 600 17 Jefferson-Pilot Corp. 2,900 193 Kansas City Life Insurance Co. 400 11 Liberty Corp. 500 16 Lincoln National Corp. 5,000 174 Loew's Corp. 2,700 149 Markel Corp.+ 100 15 Marsh & McLennan Cos., Inc. 7,000 690 MBIA, Inc. 2,600 129 Medical Assurance, Inc.+ 725 10 Mercury General Corp. 1,400 38 MGIC Investment Corp. 2,700 129 MIIX Group, Inc. 1,000 12 Mony Group, Inc. 1,100 34 Nationwide Financial Services, Inc., Class A 500 14 Ohio Casualty Corp. 1,600 27 Old Republic International Corp. 2,900 41 Penn-America Group, Inc. 900 8 Penn Treaty American Corp.+ 1,000 15 Pico Holdings, Inc.+ 1,000 11 PMI Group, Inc. 1,150 56 Presidential Life Corp. 700 11 Proffessionals Group, Inc.+ 520 9 Progressive Corp. 2,300 151 Protective Life Corp. 1,400 33 Reinsurance Group of America, Inc. 1,100 27 Reliastar Financial Corp. 2,050 88 Risk Capital Holdings, Inc.+ 800 12 RLI Corp. 500 16 SAFECO Corp. 3,400 75 SCPIE Holdings, Inc. 500 15 Selective Insurance Group, Inc. 700 13 St. Paul Cos., Inc. 6,600 235 State Auto Financial Corp. 1,300 13 Sterling Financial Corp. 500 10 Number Value of Shares (000s) --------- ----------- Superior National Insurance Group+ 1,300 $ 0 Torchmark Corp. 3,400 85 Transatlantic Holdings, Inc. 900 75 Trenwick Group, Inc. 800 11 Triad Guaranty, Inc.+ 500 10 UICI+ 1,300 6 Unitrin, Inc. 1,900 64 UnumProvident Corp. 14,014 238 Vesta Insurance Group, Inc. 2,300 12 W.R. Berkley Corp. 700 15 Xl Capital Ltd., Class A 183 9 Zenith National Insurance Corp. 600 15 ---------- 11,596 ---------- MEDIA -- 4.1% A.H. Belo Corp., Class A 3,000 50 Ackerly Group, Inc. 800 10 Actv, Inc.+ 1,100 20 Amc Entertainment, Inc.+ 1,400 6 American Tower Corp., Class A+ 3,900 181 AMFM, Inc.+ 5,798 385 Applied Graphics Technologies+ 1,500 8 Banta Corp. 700 14 BHC Communications, Inc., Class A 600 93 Cablevision Systems Corp., Class A+ 3,500 237 Cadmus Communications Corp. 1,400 12 California Amplifier, Inc.+ 600 16 CBS Corp.+ 19,472 1,144 Central Newspapers, Inc., Class A 900 28 Charter Communications, Inc., Class A+ 4,300 63 Chris-Craft Industries, Inc.+ 927 57 Citadel Communications Corp.+ 1,000 39 Clear Channel Communications, Inc.+ 9,100 655 CNET Networks, Inc.+ 2,000 69 Comcast Corp., Class A+ 24,900 998 Consolidated Graphics, Inc.+ 600 7 Cox Communications, Inc.+ 15,435 661 Crown Castle International Group+ 3,800 146 CTC Communications Group, Inc.+ 550 19 Cumulus Media, Inc.+ 700 9 Cymer, Inc.+ 700 27 Dick Clark Productions, Inc.+ 900 12 Dow Jones & Co., Inc. 2,800 182 The E.W. Scripps Co., Class A 2,000 93 EchoStar Communications Corp., Class A+ 6,100 388 Efficient Networks, Inc.+ 1,300 85 Emmis Communications Corp., Class A+ 1,000 43 90 Number Value of Shares (000s) --------- ----------- Emusic.com, Inc.+ 1,400 $ 3 Entercom Communications Corp.+ 800 34 Express Scripts, Inc., Class A+ 1,000 36 Fox Entertainment Group, Inc.+ 4,700 121 Gannett Co., Inc. 7,500 479 Gaylord Entertainment Co. 800 19 GC Cos., Inc.+ 500 16 go.com+ 1,495 20 Gray Communication Systems, Inc. 700 8 Gray Communication Systems, Inc., Class B 500 5 Harte-Hanks Communications, Inc. 1,800 45 Hispanic Broadcasting Corp.+ 1,400 141 Hollinger International, Inc. 2,600 33 Houghton Mifflin Co. 900 37 IDG Books Worldwide, Inc.+ 800 8 ImageX.com, Inc.+ 400 3 Infinity Broadcasting Corp.+ 9,975 339 Information Holdings, Inc.+ 700 18 Insight Communications+ 1,300 26 Intraware, Inc.+ 800 13 John Wiley & Sons, Inc., Class A 1,500 26 Journal Register Co.+ 1,200 18 Knight-Ridder, Inc. 2,400 118 Lee Enterprises, Inc. 1,000 23 Liberty Digital, Inc., Class A+ 700 22 Loews Cineplex Entertainment Corp.+ 1,900 6 Maxwell Technologies, Inc.+ 1,000 15 McClatchy Newspapers, Inc., Class A 1,200 38 McGraw-Hill Cos., Inc. 6,000 315 Media General, Inc., Class A 800 39 Mediacom Communications Corp.+ 1,400 17 MediaOne Group, Inc.+ 15,700 1,187 Meredith Corp. 1,300 36 Metro Goldwyn Mayer, Inc.+ 5,417 163 Metromedia International Group, Inc.+ 1,600 8 New York Times Co., Class A 5,000 206 OnHealth Network Co.+ 1,600 6 PanAmSat Corp.+ 400 17 Penton Media, Inc. 700 18 Playboy Enterprises, Inc.+ 500 8 Price Communications Corp.+ 1,355 27 Primedia, Inc.+ 8,300 173 R.R. Donnelley & Sons Co. 3,400 72 Radio Unica Corp.+ 800 8 Reader's Digest Association, Inc., Class A 2,900 93 Number Value of Shares (000s) --------- ----------- Salem Communications Corp.+ 600 $ 5 Scholastic Corp.+ 400 19 Sinclair Broadcast Group, Inc.+ 1,200 9 Skymall, Inc.+ 1,300 5 The Source Information Management Co.+ 1,000 15 Spanish Broadcasting System, Class A+ 700 13 Time Warner, Inc. 34,600 3,112 TiVo, Inc.+ 900 16 Tribune Co. 6,900 268 TV Guide, Inc.+ 4,000 119 United Television, Inc. 300 41 USA Networks, Inc.+ 7,856 181 Valassis Communications, Inc.+ 1,400 48 Valuevision International, Inc.+ 900 18 Viacom, Inc., Class B+ 18,700 1,017 Walt Disney Co. 55,600 2,408 Washington Post Co. 300 147 Westwood One, Inc.+ 3,200 113 XM Satellite Radio Holdings, Inc.+ 800 23 Young Broadcasting, Inc.+ 500 11 Ziff-Davis, Inc.+ 2,600 26 ---------- 17,434 ---------- MISCELLANEOUS -- 0.8% 1-800-FLOWERS.com, Inc.+ 1,200 7 Aclara BioSciences, Inc.+ 800 31 Acme Communications, Inc.+ 700 16 Agilent Technologies, Inc.+ 1,900 168 Alaska Communications Systems Group, Inc.+ 1,100 13 Alteon Websystems, Inc.+ 2,200 150 Amdocs Ltd.+ 111 8 Amercan National Can Group, Inc. 1,400 24 Be Free, Inc.+ 1,400 18 Be, Inc.+ 1,900 15 BioMarin Pharmaceuticals, Inc.+ 1,100 20 Bluestone Software, Inc.+ 500 11 Braun Consulting+ 600 15 Breakaway Solutions, Inc.+ 1,000 26 C-Bridge Internet Solutions, Inc.+ 600 16 Capitol Federal Financial 2,300 22 Choice One Communications, Inc.+ 700 22 CIRCOR International, Inc.+ 950 11 Cobalt Group, Inc.+ 700 8 Commerce One, Inc.+ 3,800 232 Corinthian Colleges, Inc.+ 800 17 91 SCHWAB TOTAL STOCK MARKET INDEX FUND(TM) SCHEDULE OF INVESTMENTS (continued) April 30, 2000 (Unaudited) Number Value of Shares (000s) --------- ----------- Cypress Communications, Inc.+ 1,200 $ 16 Data Return Corp.+ 900 22 Digital Island+ 1,700 59 Ditech Communications Corp.+ 800 69 DSL.net, Inc.+ 1,400 14 E-loan, Inc.+ 1,600 11 E-Stamp Corp.+ 700 3 Eloyalty Corp.+ 1,000 17 Epiphany, Inc.+ 700 46 Extreme Networks, Inc.+ 1,400 81 Fairchild Semiconductor International, Inc., Class A+ 1,800 86 Finisar Corp.+ 4,100 153 Frontline Capital Group+ 600 10 Gabelli Asset Management, Inc.+ 700 14 Globalnet Financial.com, Inc.+ 700 16 Grant Prideco, Inc.+ 2,900 56 Informatica Corp.+ 800 34 InfoSpace.com, Inc.+ 5,200 373 Interactive Intelligence, Inc.+ 700 17 Intercept Group, Inc.+ 1,000 17 Interdent, Inc.+ 1,400 7 Internet Capital Group, Inc.+ 800 34 Interspeed, Inc.+ 500 6 InterWorld Corp.+ 700 13 IXL Enterprises, Inc.+ 1,800 40 John Hancock Financial Services+ 8,900 162 Keynote Systems, Inc.+ 700 31 Liquid Audio+ 700 11 Mail.com, Inc.+ 1,600 13 Management Network Group, Inc.+ 1,000 18 Media Metrix+ 600 19 MicroFinancial, Inc. 1,400 14 Mortgage.com, Inc.+ 2,300 4 National Information Consortium, Inc.+ 1,300 16 NaviSite, Inc.+ 1,400 65 NetCreations, Inc.+ 500 17 Network Access Solutions Corp.+ 1,100 17 Netzero, Inc.+ 2,400 29 Nucentrix Broadband Networks, Inc.+ 200 5 Nueberger Berman, Inc. 1,200 39 ON2.COM, Inc.+ 2,000 22 Pac-West Telecomm, Inc.+ 800 17 Palm, Inc.+ 200 5 Paradyne Networks Corp.+ 700 20 Pennaco Energy, Inc.+ 300 5 Phone.com, Inc.+ 1,800 151 Number Value of Shares (000s) --------- ----------- PlanetRx.com, Inc.+ 1,400 $ 4 Radio One, Inc.+ 600 35 Regent Communications, Inc.+ 400 3 Rudolph Technologies, Inc.+ 500 15 Sage, Inc.+ 700 12 Sagent Technology, Inc.+ 1,100 9 Silicon Image, Inc.+ 700 28 Smith-Gardner & Associates, Inc.+ 900 9 Somera Communications, Inc.+ 1,900 18 Spectrasite Holdings, Inc.+ 3,200 67 T/R Systems, Inc.+ 200 3 TD Waterhouse Group, Inc.+ 900 18 Too, Inc.+ 742 22 Travelocity.com, Inc.+ 300 5 Trizetto Group, Inc.+ 900 19 Troy Group, Inc.+ 200 3 Tumbleweed Communications Corp.+ 700 21 U.S. Interactive, Inc.+ 900 15 United Parcel Service, Inc. 3,000 200 United Therapeutics Corp.+ 500 28 Viador, Inc.+ 800 16 Vicinity Corp.+ 900 11 Virginia Capital Bancshares, Inc. 1,100 16 Vitria Technology, Inc.+ 3,400 126 Web Street, Inc.+ 800 3 Webvan Group Inc.+ 700 5 Williams Communications Group, Inc.+ 1,700 63 Wit Capital Group, Inc.+ 1,300 14 Women.com Networks, Inc.+ 900 5 ---------- 3,537 ---------- MISCELLANEOUS FINANCE -- 6.2% Acacia Research Corp.+ 300 7 Advanta Corp., Class A 700 12 Advest Group, Inc. 700 14 Affiliated Managers Group, Inc.+ 500 20 Alexandria Real Estate Equities, Inc. 500 16 Alliance Capital Management Holding L.P. 4,500 202 Allied Capital Corp. 1,700 32 AMB Property Corp. 2,300 51 AMCORE Financial, Inc. 700 14 American Bank of Connecticut 600 12 American Capital Strategies Ltd. 500 12 American Express Co. 12,100 1,816 AmeriCredit Corp.+ 2,000 37 Ameritrade Holding Corp., Class A+ 4,400 74 92 Number Value of Shares (000s) --------- ----------- Amli Residential Properties 500 $ 11 Amresco Capital Trust, Inc. 1,300 14 Apartment Investment & Management Co. 1,800 72 Archstone Communities Trust 3,700 80 Arden Realty, Inc. 1,700 38 Area Bancshares Corp. 500 10 Associates First Capital Corp. 19,400 430 Astoria Financial Corp. 1,500 41 AvalonBay Communities, Inc. 1,700 67 Banco Santander Puerto Rico 1,100 13 Bay View Capital Corp. 1,000 7 Bear Stearns Cos., Inc. 3,120 134 Bedford Property Investors 900 16 Berkshire Hathaway, Inc., Class A.+ 40 2,372 BISYS Group, Inc.+ 700 44 Boca Resorts, Inc., Class A+ 1,300 12 BOK Financial Corp.+ 1,127 18 Bradley Real Estate, Inc. 700 13 Brandywine Realty Trust 700 12 BRE Properties, Class A 1,200 34 Brown & Brown 300 12 BT Financial Corp. 725 12 Cabot Industrial Trust 900 17 Cadiz, Inc.+ 1,600 12 Camden Property Trust 1,000 28 Capital One Financial Corp. 5,700 249 Capstead Mortgage Corp. 1,700 6 Carey Diversified LLC 700 13 Carramerica Realty Corp. 1,600 38 Cash America International, Inc. 1,300 12 Cathay Bancorp, Inc. 400 18 CBL & Associates Properties 500 12 Centerpoint Properties Corp. 500 18 Charles Schwab Corp. 21,900 975 Charter One Financial, Inc. 5,549 113 Chateau Communities, Inc. 600 16 Chelsea GCA Realty, Inc. 500 16 CIT Group, Inc. 6,300 107 Citigroup, Inc. 90,700 5,391 Coastal Bancorp, Inc. 800 12 Coastal Financial Corp. 924 10 Cohoes Bancorp. 1,200 14 Colonial Properties Trust 500 12 Commercial Federal Corp. 1,300 20 Commercial NET Lease Realty 1,000 11 CompuCredit Corp.+ 1,200 39 Number Value of Shares (000s) --------- ----------- Cornerstone Realty Income Trust 1,200 $ 12 Correctional Properties Trust 1,100 13 Countrywide Credit Industries, Inc. 2,900 80 Cousins Properties, Inc. 800 31 Crescent Real Estate Equity Co. 3,200 55 CV Real Estate Investment Trust, Inc. 1,400 13 CVB Financial Corp. 625 10 Dain Rauscher Corp. 400 25 Developers Diversified Realty 1,600 24 Dime Bancorp., Inc. 2,800 52 Donaldson, Lufkin, & Jenrette, Inc. 3,400 142 Downey Financial Corp. 800 24 Dynex Capital, Inc.+ 1,700 3 Eastgroup Properties 700 15 Eaton Vance Corp. 900 38 Edwards, Inc. 2,400 90 Energizer Holdings, Inc.+ 2,533 43 Equity Office Properties Trust 6,600 179 Equity One, Inc. 1,100 10 Equity Residential Properties Trust 3,400 155 Espeed, Inc., Class A+ 200 9 Essex Property Trust, Inc. 400 15 ETrade Group, Inc.+ 7,635 164 Excel Legacy Corp.+ 363 1 Fannie Mae 27,500 1,659 Farm Family Holdings, Inc.+ 400 11 Federal Realty Investment Trust 900 19 Federated Investors 2,100 59 Fidelity Bancshares, Inc. 800 13 Fidelity Holdings, Inc.+ 1,200 7 Fidelity National Financial, Inc. 1,700 25 Financial Federal Corp.+ 800 15 Financial Security Assurance Holdings Ltd. 800 59 Finova Group, Inc. 1,500 19 First Financial Corp. 300 10 First Industrial Realty Trust 900 27 First Northern Capital Corp. 1,300 16 First Sentinel Bancorp, Inc. 1,500 11 First Source Corp. 600 12 First Washington Realty Trust 600 12 Flagstar Bancorp., Inc. 700 9 Franklin Resources, Inc. 7,000 226 Freddie Mac 18,600 854 Gables Residential Trust 500 12 Glenborough Realty Trust, Inc. 900 13 Glimcher Realty Trust 800 11 93 SCHWAB TOTAL STOCK MARKET INDEX FUND(TM) SCHEDULE OF INVESTMENTS (continued) April 30, 2000 (Unaudited) Number Value of Shares (000s) --------- ----------- Golden State Bancorp, Inc.+ 3,300 $ 51 Golden West Financial Corp. 4,200 143 Goldman Sachs Group, Inc. 1,800 168 Golf Trust of America L.P. 900 16 Greater Bay Bancorp. 500 21 Grove Property Trust 1,000 14 Harris Financial, Inc. 1,400 9 Health Care Property Investors, Inc. 1,224 34 Health Care Real Estate Investment Trust, Inc. 700 11 Healthcare Realty Trust, Inc. 900 16 Heller Financial, Inc. 1,059 21 Henry Jack & Associates, Inc. 1,000 39 Highwoods Properties, Inc. 1,500 34 Home Properties of NY, Inc. 500 14 Hospitality Properties Trust 1,500 33 Household International, Inc. 12,600 526 HRPT Properties Trust 3,400 26 Hudson River Bancorp. 1,200 12 Hugoton Royalty Trust 1,300 13 IndyMac Mortgage Holdings, Inc. 2,000 26 Innkeepers USA Trust 1,500 13 International Bancshares Corp. 450 19 InterWest Bancorp., Inc. 700 11 Investment Technology Group, Inc.+ 800 30 Investors Financial Services Corp. 400 33 IRT Property Co. 1,600 13 ITT Educational Services, Inc.+ 1,000 18 Jefferies Group, Inc. 800 18 John Nuveen Co., Class A 900 36 JP Realty, Inc. 700 13 JW Genesis Financial Corp.+ 1,041 11 Keystone Property Trust 900 11 Kimco Realty Corp. 1,700 68 Knight/Trimark Group, Inc.+ 6,700 252 Koger Equity, Inc. 700 12 LabOne, Inc. 1,300 9 LaBranche & Co., Inc.+ 1,200 14 Legg Mason, Inc. 1,600 61 Lehman Brothers Holdings, Inc. 3,900 320 Leucadia National Corp. 1,400 33 Liberty Financial Cos., Inc. 1,100 21 Liberty Property Trust 1,700 42 LNR Property Corp. 700 15 LTC Propertys, Inc. 1,800 11 M.D.C. Holdings, Inc. 1,000 19 Macerich Co. 700 16 Mack-Cali Realty Corp. 1,400 36 Number Value of Shares (000s) --------- ----------- Mail Well Holdings, Inc.+ 1,300 $ 12 Manufactured Home Communities 500 13 MBNA Corp. 21,500 571 MECH Financial, Inc. 600 19 Meditrust Corp. 2,900 6 Merrill Lynch & Co., Inc. 10,100 1,030 MessageMedia, Inc.+ 1,900 10 Mid-America Apartment Communities 500 12 Midas, Inc. 500 13 Mills Corp. 700 13 Mississippi Valley Bancshares 500 11 Morgan Keegan, Inc. 700 11 Morgan Stanley Dean Witter Discover & Co. 30,600 2,349 National Discount Broker Group, Inc.+ 600 18 National Golf Properties, Inc. 800 15 National Health Investors 700 8 National Western Life Insurance Co., Class A+ 300 22 Nationwide Health Properties, Inc. 1,100 15 New Century Financial Corp.+ 1,100 8 New Plan Excel Realty Trust 2,300 33 NextCard, Inc.+ 1,200 13 Northwest Bancorp., Inc. 1,500 11 NVEST L.P. 1,000 18 Ocwen Financial Corp.+ 2,920 21 Pacific Capital Bancorp. 500 14 Pacific Gulf Properties, Inc. 800 17 Paine Webber Group, Inc. 4,200 184 PAN Pacific Retail Properties, Inc. 900 17 Parkway Properties, Inc. 500 15 PBOC Holdings, Inc.+ 1,500 13 Penford Corp. 1,200 20 The Peoples Holding Co. 500 12 Phoenix Investment Partners Ltd. 1,600 14 Pimco Advisors Holdings L.P. 1,300 50 Pioneer Group, Inc.+ 800 22 PMC Commercial Trust 1,000 11 Prentiss Properties Trust 800 19 Prison Realty Trust, Inc. 2,300 7 Prologis Trust 4,300 85 PS Business Parks, Inc. 500 11 Public Storage, Inc. 3,400 76 Radian Group, Inc. 959 49 Raymond James Financial, Inc. 1,100 22 Realty Income Corp. 500 11 Reckson Associates Realty 900 18 Regency Realty Corp. 1,400 31 94 Number Value of Shares (000s) --------- ----------- Resource America, Inc. 1,400 $ 10 RFS Hotel Investors, Inc. 1,100 13 Roslyn Bancorp., Inc. 1,800 31 Sabre Group Holdings, Inc.+ 3,501 122 Security Capital Group, Inc.+ 1,300 20 Senior Housing Properties Trust 950 8 Siebert Financial Corp. 1,100 10 SierraCities.com, Inc.+ 700 4 SL Green Realty Corp. 500 13 SLM Holding Corp. 4,400 138 Smith Residential 600 23 Southwest Securities Group 530 22 Sovereign Bancorp, Inc. 5,460 38 Sovran Self Storage, Inc. 800 16 Spieker Properties, Inc. 1,800 80 Starwood Financial, Inc.+ 2,290 40 Staten Island Bancorp., Inc. 800 14 Storage USA, Inc. 600 18 Student Loan Corp. 500 20 Summit Properties, Inc. 600 12 Sun Communities, Inc. 500 17 T. Rowe Price Associates, Inc. 3,200 122 Tanger Factory Outlet Centers 800 17 Taragon Realty Investors, Inc. 1,300 13 Taubman Centers, Inc. 1,100 13 TCF Financial Corp. 2,100 49 Tucker Anthony Sutro 1,200 20 U.S. Trust Corp. 500 77 United Asset Management Co. 1,300 23 United Dominion Realty Trust 2,600 26 UnitedGlobalCom, Inc., Class A+ 2,200 117 Universal Health Realty Income 900 14 Value Line, Inc. 300 11 W Holding Co., Inc. 1,400 13 Waddell & Reed Financial, Inc., Class A 1,950 52 Washington Federal, Inc. 1,200 21 Washington Mutual, Inc. 15,577 398 Washington Real Estate Investment Trust 700 11 Webster Financial Corp. 1,100 24 Weingarten Realty Investment 800 32 Wesco Financial Corp. 200 47 Wesley Jessen VisionCare, Inc.+ 500 20 Westfield America, Inc. 1,700 23 WFS Financial, Inc.+ 900 18 White Mountains Insurance Group, Inc. 200 28 World Acceptance Corp.+ 1,400 7 ---------- 26,459 ---------- Number Value of Shares (000s) --------- ----------- NON-FERROUS METALS -- 0.3% Alcoa, Inc. 9,900 $ 642 Commercial Metals Co. 500 15 Commonwealth Industries, Inc. 1,300 10 Engelhard Corp. 3,000 53 Freeport-McMoRan Copper & Gold, Inc., Class B+ 4,200 40 Howmet International, Inc.+ 2,400 51 IMCO Recycling, Inc. 1,400 14 Kaiser Aluminum Corp.+ 2,000 8 Minerals Technologies, Inc. 500 23 Mueller Industries, Inc.+ 900 30 Phelps Dodge Corp. 2,830 131 Reliance Steel & Aluminum Co. 650 15 Reynolds Metals Co. 2,200 146 Southern Peru Copper Corp. 1,000 13 Stillwater Mining Co.+ 900 25 United Park City Mines+ 200 5 Wolverine Tube, Inc.+ 700 11 ---------- 1,232 ---------- OIL - DOMESTIC -- 0.8% Amerada Hess Corp. 2,500 159 Ashland, Inc. 1,900 65 Belco Oil & Gas Corp.+ 2,000 18 Benton Oil & Gas Co.+ 400 1 CAL Dive International, Inc.+ 500 25 Callon Petroleum Co.+ 1,100 15 Conoco, Class A 3,200 76 Conoco, Inc., Class B 15,900 395 Consol Energy, Inc. 1,800 19 Cross Timbers Oil Co. 1,600 23 Diamond Offshore Drilling, Inc. 3,600 145 Frontier Oil Corp.+ 2,000 13 Getty Realty Corp. 1,000 12 Global Industries Ltd.+ 2,200 31 Gulf Island Fabrication, Inc.+ 1,300 20 Gulfmark Offshore, Inc.+ 300 5 Houston Exploration Co.+ 700 13 Howell Corp. 600 4 HS Resources, Inc.+ 800 19 Kerr-McGee Corp. 2,600 134 Meridian Resource Corp.+ 1,600 6 Midcoast Energy Resources 700 11 Murphy Oil Corp. 1,100 65 National-Oilwell, Inc.+ 1,700 41 Newfield Exploration Co.+ 1,000 41 Nuevo Energy Co.+ 800 14 95 SCHWAB TOTAL STOCK MARKET INDEX FUND(TM) SCHEDULE OF INVESTMENTS (continued) April 30, 2000 (Unaudited) Number Value of Shares (000s) --------- ----------- Ocean Energy, Inc.+ 4,300 $ 56 OYO Geospace Corp.+ 300 5 Patina Oil & Gas Corp. 1,500 21 Patterson Energy, Inc.+ 900 25 Pennzoil-Quaker State Co. 1,800 20 Phillips Petroleum Co. 6,700 318 Pioneer Natural Resources Co.+ 2,600 27 Pogo Producing Co. 1,000 26 Pride International, Inc.+ 1,500 34 Remington Oil & Gas Corp.+ 400 2 Santa Fe Snyder Corp.+ 4,700 43 St. Mary Land & Exploration Co. 600 20 Stone Energy Corp.+ 500 24 Sunoco, Inc. 2,300 70 Superior Energy Services+ 1,900 17 Syntroleum Corp.+ 1,500 29 Teppco Partners L.P. 700 15 Tesoro Petroleum Corp.+ 1,300 15 Tosco Corp. 3,900 125 Trans Montaigne Oil, Inc.+ 1,600 12 Transocean Sedco Forex, Inc. 6,081 286 Tuboscope Vetco International Corp.+ 1,200 21 Ultramar Diamond Shamrock Corp. 2,200 54 UniCapital Corp.+ 1,300 2 Union Pacific Resources Group, Inc. 6,500 125 Unocal Corp. 6,500 210 USX-Marathon Group, Inc. 8,500 198 Vintage Petroleum, Inc. 1,600 32 ---------- 3,202 ---------- OIL - INTERNATIONAL -- 2.2% Chevron Corp. 17,900 1,524 Exxon Mobil Corp. 92,658 7,198 Santa Fe International Corp. 2,900 100 Texaco, Inc. 14,700 727 ---------- 9,549 ---------- OPTICAL & PHOTO -- 0.5% Anacomp, Inc.+ 600 7 Ballantyne of Omaha, Inc.+ 1,500 4 BMC Industries, Inc. 1,300 7 C-Cube Microsystems, Inc.+ 1,000 64 Corning, Inc. 7,449 1,471 CPI Corp. 400 10 Drexler Technology Corp.+ 1,000 13 Eastman Kodak Co. 8,200 459 Imation Corp.+ 800 22 Number Value of Shares (000s) --------- ----------- Ingram Micro, Inc., Class A+ 1,800 $ 35 Meade Instruments Corp.+ 400 29 Photronics, Inc.+ 600 20 Polaroid Corp. 2,400 48 Zomax, Inc.+ 1,000 47 Zygo Corp.+ 300 8 ---------- 2,244 ---------- PAPER & FOREST PRODUCTS -- 0.8% Boise Cascade Corp. 1,500 49 Bowater, Inc. 1,400 77 Buckeye Technology, Inc.+ 800 15 Caraustar Industries, Inc. 700 11 Champion International Corp. 3,000 197 Chesapeake Corp. 500 16 Consolidated Papers, Inc. 2,300 87 CSS Industries, Inc.+ 600 12 Fibermark, Inc.+ 300 4 Fort James Corp. 5,800 139 Georgia-Pacific Corp. 2,100 49 Georgia-Pacific Group 5,200 191 International Paper Co. 11,000 404 Kimberly-Clark Corp. 14,839 862 Longview Fibre Co. 1,200 15 Louisiana-Pacific Corp. 2,400 32 Lydall, Inc.+ 1,400 12 Mead Corp. 2,700 94 Pentair, Inc. 1,200 46 PH Glatfelter Co. 2,800 30 Pope & Talbot 500 11 Potlatch Corp. 800 32 Rayonier, Inc. 600 28 Rock Tennessee Co., Class A 1,000 9 Smurfit-Stone Container Corp.+ 5,400 82 St. Joe Co. 2,100 60 Temple-Inland, Inc. 1,500 75 Thermo Fibertek, Inc.+ 1,500 10 Universal Forest Products, Inc. 800 11 Wausau Mosinee Paper Corp. 1,100 13 Westvaco Corp. 2,500 77 Weyerhaeuser Co. 6,200 331 Willamette Industries, Inc. 2,900 111 ---------- 3,192 ---------- PRODUCER GOODS & MANUFACTURING -- 5.1% Actrade International Ltd.+ 1,000 14 Advanced Energy Industries, Inc.+ 700 48 96 Number Value of Shares (000s) --------- ----------- Aeroflex, Inc.+ 400 $ 15 AGCO Corp. 1,200 14 Albany International Corp., Class A+ 918 14 Alltrista Corp.+ 200 4 American Standard Corp.+ 1,700 70 AMETEK, Inc. 600 12 Applied Industrial Technologies, Inc. 900 16 Applied Micro Circuits Corp.+ 3,200 412 Applied Power, Inc., Class A 900 26 AptarGroup, Inc. 900 26 Astec Industries, Inc.+ 500 13 Avery Dennison Corp. 3,100 203 Baldor Electric, Co. 800 15 Barnes Group, Inc. 700 12 BE Aerospace, Inc.+ 1,100 8 Blount International, Inc.+ 1,200 16 Blyth Industries, Inc.+ 1,100 33 Briggs & Stratton Corp. 500 19 Carbide/Graphite Group, Inc.+ 1,100 4 Caterpillar, Inc. 9,600 379 CLARCOR, Inc. 700 13 CMI Corp. 1,600 6 Cognex Corp.+ 1,000 57 Columbus Mckinnon Corp. 500 7 Comfort Systems USA, Inc.+ 1,600 11 Cooper Industries, Inc. 6,000 206 Cuno, Inc.+ 600 16 Curtiss-Wright Corp. 400 14 Cyber-Care, Inc.+ 900 14 Deere & Co. 6,600 266 Diamond Technology Partners, Inc.+ 400 32 Dover Corp. 6,000 305 DT Industries, Inc. 1,200 15 Elantec Semiconductor, Inc.+ 400 16 eLOT, Inc.+ 1,500 4 Emerson Electric Co. 11,500 631 Encompass Services Corp.+ 2,525 17 Entrade, Inc.+ 400 4 The Fairchild Corp., Class A+ 1,400 9 Farr Co.+ 900 16 Federal Signal Corp. 1,000 20 Fisher Scientific International+ 1,000 40 Flowserve Corp. 800 11 FMC Corp.+ 700 41 Foster Wheeler Corp. 1,200 11 Franklin Electric Corp. 200 14 General Electric Co. (b) 88,052 13,846 Number Value of Shares (000s) --------- ----------- Graco, Inc. 500 $ 17 Hanover Compressor Co.+ 800 47 Hardinge, Inc. 800 9 Harsco Corp. 1,000 30 Helix Technology Corp. 600 31 Herman Miller, Inc. 2,000 55 Hexcel Corp.+ 1,500 13 Hon Industries, Inc. 1,600 40 Honeywell International, Inc. 21,362 1,196 Hubbell, Inc., Class B 1,600 42 Hughes Supply, Inc. 500 8 Husmann International, Inc. 1,100 15 Ibis Technology Corp.+ 200 8 IDEX Corp. 600 19 Illinois Tool Works, Inc. 8,150 522 Ingersoll-Rand Co. 4,300 202 Ionics, Inc.+ 400 9 Jabil Circuit, Inc.+ 4,600 188 JLG Industries, Inc. 900 9 Johnson Controls, Inc. 2,200 139 Juno Lighting, Inc.+ 29 0 Kaydon Corp. 800 19 Kennametal, Inc. 800 23 Lattice Semiconductor Corp.+ 1,200 81 Lennox International, Inc. 1,971 17 Libbey, Inc. 500 15 Lincoln Electric Co., Class A 1,000 19 Lone Star Technologies, Inc.+ 1,000 46 Magnatek, Inc.+ 1,500 12 Manitowoc Co., Inc. 600 20 Marine Drilling Co., Inc.+ 1,400 36 Mark IV Industries, Inc. 1,100 23 MascoTech, Inc. 1,100 13 Mastec, Inc.+ 700 60 Material Sciences Corp.+ 800 8 Matthews International Corp., Class A 700 16 Maverick Tube Corp.+ 1,000 28 Metals USA, Inc. 1,500 11 Micrel, Inc.+ 1,000 86 Milacron, Inc. 800 15 Millipore Corp. 1,200 86 MSC Industrial Direct, Inc.+ 1,000 14 NACCO Industries, Inc., Class A 300 13 Nordson Corp. 500 22 Nortek, Inc.+ 500 10 Oceaneering International, Inc.+ 800 14 Pall Corp. 3,100 69 97 SCHWAB TOTAL STOCK MARKET INDEX FUND(TM) SCHEDULE OF INVESTMENTS (continued) April 30, 2000 (Unaudited) Number Value of Shares (000s) --------- ----------- Park Ohio Holdings Corp.+ 1,100 $ 10 Parker-Hannifin Corp. 3,200 149 Penn Engineering & Manufacturing Corp. 500 14 Pitt-Des Moines, Inc. 500 12 Plug Power, Inc.+ 1,100 88 Precision Castparts Corp. 600 25 Presstek, Inc.+ 700 15 Primex Technologies, Inc. 500 11 Rare Medium Group, Inc.+ 1,100 23 Regal Beloit 500 9 Research Frontiers, Inc.+ 800 15 Robertson-Ceco Corp.+ 1,400 16 Roper Industries, Inc. 800 25 Safeguard Scientifics, Inc.+ 2,800 117 Sauer, Inc. 1,100 10 Scott Technologies, Inc.+ 700 14 Shaw Group, Inc.+ 500 18 Snap-On, Inc. 1,400 37 SPS Technologies, Inc.+ 500 16 Standex International Corp. 500 8 Steelcase, Inc. 1,000 12 Stewart & Stevenson Services 1,000 12 Strattec Security Corp.+ 300 10 Tecumseh Products Co., Class A 500 23 Teleflex, Inc. 900 31 Tennant Co. 600 21 Tenneco Automotive, Inc. 1,980 18 Terex Corp.+ 700 11 Thermo Ecotek Corp.+ 300 2 Thermo Instrument Systems, Inc.+ 3,000 54 Thermo Optek Corp.+ 1,600 24 Thermo TerraTech, Inc.+ 1,500 11 The Timken Co. 1,400 26 Trinity Industries, Inc. 800 18 U.S. Industries, Inc. 2,000 24 UCAR International, Inc.+ 900 12 Ultratech Stepper, Inc.+ 800 12 Uniroyal Technology Corp.+ 600 13 Valhi, Inc. 2,800 31 Valmont Industries, Inc. 900 18 W.W. Grainger, Inc. 2,500 108 Watsco, Inc. 900 12 Watts Industries, Inc., Class A 1,000 13 WMS Industries, Inc.+ 1,000 9 Woodward Governor Co. 500 11 X-Rite, Inc. 2,000 23 York International Corp. 800 19 Number Value of Shares (000s) --------- ----------- Zebra Technologies Corp., Class A+ 800 $ 46 ---------- 21,646 ---------- RAILROAD & SHIPPING -- 0.3% Alexander & Baldwin, Inc. 1,000 21 Burlington Northern Santa Fe Corp. 12,500 302 CSX Corp. 5,700 119 Florida East Coast Industry, Inc. 900 44 GATX Corp. 1,300 46 Greenbrier Co., Inc. 1,600 12 Kansas City Southern Industries, Inc. 2,900 208 Newport News Shipbuilding, Inc. 900 30 Norfolk Southern Corp. 10,000 176 Overseas Shipholding Group, Inc. 1,000 26 Railamerica, Inc.+ 866 5 Transport Corp. of America+ 1,100 7 Union Pacific Corp. 6,900 291 Westinghouse Air Brake Co. 1,528 17 Wisconsin Central Transportation Corp.+ 1,200 18 ---------- 1,322 ---------- REAL PROPERTY -- 0.2% American Real Estate Partners L.P.+ 1,300 11 American Realty Trust, Inc.+ 700 12 American Retirement Corp.+ 700 5 Avatar Holdings, Inc.+ 700 14 Boston Properties, Inc. 1,700 59 Burnham Pacific Property, Inc. 1,500 11 Buy.com, Inc.+ 3,100 21 Catellus Development Corp.+ 2,800 36 CB Richard Ellis Services+ 1,100 11 Center Trust, Inc. 1,400 10 Cornerstone Properties 3,400 62 Duke-Weeks Realty Corp. 3,190 69 Equity Inns, Inc. 1,900 13 Fairfield Communities, Inc.+ 1,000 9 FelCor Lodging Trust, Inc. 1,700 33 Forest City Enterprises, Inc. 800 23 General Growth Properties 1,300 43 Homestore.com, Inc.+ 2,000 37 JDN Realty Corp. 1,300 13 Jones Lang LaSalle, Inc.+ 1,100 18 Kilroy Realty Corp. 800 19 Konover Property Trust, Inc. 1,600 9 Newhall Land & Farming Co. 800 22 Omega Healthcare Investors 1,000 6 Post Properties, Inc. 1,000 42 98 Number Value of Shares (000s) --------- ----------- Rouse Co. 1,800 $ 42 Saul Centers, Inc. 600 9 Simon Property Group, Inc. 4,600 117 Starwood Hotels & Resorts Worldwide, Inc. 5,280 150 Trammell Crow Co.+ 1,300 17 Urban Shopping Centers, Inc. 1,100 36 Vornado Realty Trust 2,300 79 ---------- 1,058 ---------- RETAIL -- 5.2% 99 Cents Only Stores+ 800 30 Albertson's, Inc. 11,068 360 Alloy Online, Inc.+ 200 2 Amazon.com, Inc.+ 9,100 502 American Eagle Outfitters, Inc.+ 1,100 19 Ames Department Stores, Inc.+ 600 11 AnnTaylor Stores Corp.+ 800 17 Ashford.com, Inc.+ 1,100 4 AutoZone, Inc.+ 8,900 204 Barnes & Noble, Inc.+ 1,600 30 Bed, Bath & Beyond, Inc.+ 3,700 136 Best Buy Co., Inc.+ 5,300 428 BJ's Wholesale Club, Inc.+ 1,900 67 The Bombay Co., Inc.+ 1,700 6 Borders Group, Inc.+ 1,800 29 Burlington Coat Factory Warehouse Corp. 1,200 18 Casey's General Stores, Inc. 1,100 13 The Cato Corp., Class A 1,200 13 Cendant Corp.+ 19,000 293 Central Garden & Pet Co.+ 1,700 18 Charming Shoppes, Inc.+ 2,000 14 Circuit City Stores-Circuit City Group 5,500 323 Claire's Stores, Inc. 1,200 22 Coldwater Creek, Inc.+ 700 18 Consolidated Stores Corp.+ 2,700 34 Cost Plus, Inc.+ 700 21 Costco Wholesale Corp.+ 11,900 643 CVS Corp. 10,100 439 DEB Shops, Inc. 700 10 Delhaize America, Inc. 3,466 61 Dillards, Inc., Class A 2,600 36 Dollar General Corp. 6,900 158 Dollar Tree Stores, Inc.+ 1,600 93 Drugstore.Com+ 1,200 9 Duane Reade, Inc.+ 500 15 Number Value of Shares (000s) --------- ----------- Egghead.com, Inc.+ 1,604 $ 7 Enesco Group 1,100 5 Envision Development Corp.+ 400 28 Etoys, Inc.+ 2,700 22 Family Dollar Stores, Inc. 4,400 84 Fatbrain.com Inc.+ 800 4 Federated Department Stores, Inc.+ 6,000 204 Fogdog, Inc.+ 300 1 Gadzooks, Inc.+ 600 13 Gap, Inc. 22,800 838 Gottschalks, Inc.+ 1,800 11 Great Atlantic & Pacific Tea Co., Inc. 800 15 Greg Manning Auctions, Inc.+ 800 11 Guitar Center, Inc.+ 1,100 15 Hannaford Bros. Co., Inc. 1,100 80 Home Depot, Inc. 61,700 3,459 HOT Topic, Inc.+ 400 12 Insight Enterprises, Inc.+ 700 29 Intertan, Inc.+ 1,050 15 Intimate Brands, Inc. 6,470 249 J.C. Penney Co., Inc. 6,800 94 Kmart Corp.+ 12,800 104 Kohl's Corp.+ 8,600 413 Kroger Co.+ 22,100 410 Lands' End, Inc.+ 800 34 Lillian Vernon Corp. 500 5 Limited, Inc. 6,200 280 Longs Drug Stores, Inc. 1,000 23 Lowe's Cos., Inc. 10,300 510 May Department Stores Co. 9,300 256 Michaels Stores, Inc.+ 600 24 Multiple Zones International, Inc.+ 1,600 8 Musicmaker.com, Inc.+ 500 1 The Neiman Marcus Group, Inc., Class A+ 1,100 28 The Neiman Marcus Group, Inc., Class B+ 451 11 Nordstrom, Inc. 4,000 111 Office Depot, Inc.+ 9,000 95 OfficeMax, Inc.+ 2,700 15 Payless Shoesource, Inc.+ 602 33 PC Connection, Inc.+ 400 19 Pep Boys-Manny, Moe, & Jack 1,600 10 Petco Animal Supplies, Inc.+ 1,100 13 Pier 1 Imports, Inc. 2,000 23 Pricesmart, Inc.+ 200 8 99 SCHWAB TOTAL STOCK MARKET INDEX FUND(TM) SCHEDULE OF INVESTMENTS (continued) April 30, 2000 (Unaudited) Number Value of Shares (000s) --------- ----------- Rite Aid Corp. 6,100 $ 30 Ross Stores, Inc. 2,100 44 RoweCom Inc.+ 500 6 Ruddick Corp. 900 10 Safeway, Inc.+ 13,700 605 Saks, Inc.+ 3,200 37 School Specialty, Inc.+ 1,100 20 Sears, Roebuck & Co. 9,800 359 Sharper Image Corp.+ 1,200 16 Shop At Home, Inc.+ 1,100 7 ShopKo Stores, Inc.+ 600 11 Spiegel, Inc., Class A 2,700 22 Stamps.com, Inc.+ 1,000 16 Staples, Inc.+ 12,500 238 Stein Mart, Inc.+ 2,300 21 Sunglass HUT International, Inc.+ 1,500 11 Systemax, Inc.+ 1,300 10 Tandy Corp. 5,600 319 Target Corp. 11,800 785 Tiffany & Co., Inc 1,800 131 TJX Cos., Inc. 8,300 159 Toys 'R' Us, Inc.+ 6,500 99 Tractor Supply Co.+ 700 12 Tuesday Morning Corp.+ 1,100 14 U.S. Office Products Co.+ 1,400 3 Unifirst Corp. 900 9 United Stationers, Inc.+ 900 30 Value America, Inc.+ 2,000 4 Value City Department Stores, Inc.+ 700 7 Venator Group, Inc.+ 2,800 33 Wal-Mart Stores, Inc. 119,500 6,617 Walgreen Co. 27,000 759 Weis Markets, Inc. 1,000 33 West Marine, Inc.+ 1,200 10 Whitehall Jewellers, Inc.+ 600 10 Williams-Sonoma, Inc.+ 1,200 42 Winn-Dixie Stores, Inc. 3,600 60 Zale Corp.+ 900 37 ---------- 22,362 ---------- STEEL -- 0.1% AK Steel Holding Corp. 2,627 29 Allegheny Technologies, Inc. 2,550 62 Atchison Casting Corp.+ 900 6 Bethlehem Steel Corp.+ 2,884 16 Carpenter Technology Corp. 900 18 Cleveland-Cliffs, Inc. 700 17 Gibraltar Steel Corp.+ 600 10 Number Value of Shares (000s) --------- ----------- Intermet Corp. 1,100 $ 8 National Steel Corp., Class B 2,400 15 NS Group, Inc.+ 1,200 19 Nucor Corp. 2,300 99 Quanex Corp. 800 13 Roanoke Electric Steel Corp. 800 14 Ryerson Tull, Inc. 1,000 12 Steel Dynamics, Inc.+ 1,200 14 Steel Technologies, Inc. 700 6 USX-U.S. Steel Group, Inc. 2,200 55 Worthington Industries, Inc. 2,200 27 ---------- 440 ---------- TELEPHONE -- 6.8% Adtran, Inc.+ 1,000 67 Aerial Communications, Inc.+ 1,200 53 Airgate Pcs, Inc.+ 300 26 Alcatel - Sponsored ADR 638 29 Allegiance Telecom, Inc.+ 2,850 202 Allied Riser Communications+ 1,400 27 Alltel Corp. 8,335 555 Applied Digital Solutions, Inc.+ 400 2 Arch Communications Group+ 500 4 AT&T Corp. 85,748 4,003 AT&T Corp.-Liberty Media Group, Class A+ 603 30 autobytel.com, Inc.+ 1,100 7 Bell Atlantic Corp. 41,600 2,465 BellSouth Corp. 50,500 2,459 Boston Communications Group+ 1,300 12 Brightpoint, Inc.+ 1,100 13 Broadwing, Inc.+ 5,868 166 Carrier Access Corp.+ 600 26 CellStar Corp.+ 1,200 7 Centennial Cellular Corp.+ 2,400 48 CenturyTel, Inc. 4,400 108 CFW Communication Co. 500 19 Cidco, Inc.+ 200 1 Commonwealth Telephone Enterprises, Inc.+ 500 24 COMSAT Corp. 1,252 31 Conestoga Enterprise, Inc. 700 14 Convergent Communications, Inc.+ 1,300 10 Copper Mountain Networks+ 1,200 100 Covad Communications Group, Inc.+ 3,750 104 CT Communications, Inc. 1,000 30 D & E Communications, Inc. 700 15 Dobson Communications Corp.+ 700 18 100 Number Value of Shares (000s) --------- ----------- eShare Technologies, Inc.+ 200 $ 2 Exodus Communications, Inc.+ 4,600 407 FirstCom Corp.+ 600 12 Focal Communications Corp.+ 1,600 53 General Communication, Inc.+ 500 2 Global Crossing Ltd.+ 6,560 207 Global Telesystems Group, Inc.+ 4,800 70 Globix Corp.+ 800 18 GST Telecommunications, Inc.+ 1,700 6 GTE Corp. 24,600 1,667 Hickory Tech Corp. 800 10 ICG Communications, Inc.+ 1,200 36 Illuminet Holdings, Inc.+ 800 36 Inet Technologies, Inc.+ 1,200 52 Inter Tel, Inc. 600 12 Interdigital Communications Corp.+ 1,100 23 Intermedia Communications, Inc.+ 3,000 122 IPC Communications, Inc.+ 300 50 ITC DeltaCom, Inc.+ 1,500 49 ITXC Corp.+ 900 24 IXNET, Inc.+ 1,300 48 JFAX.COM, Inc.+ 400 1 Leap Wireless International, Inc.+ 800 41 Level 3 Communications, Inc.+ 9,700 863 MCI WorldCom, Inc.+ 76,249 3,465 McLeodUSA, Inc., Class A+ 13,944 349 Metrocall, Inc.+ 400 3 Motient Corp.+ 1,200 15 Net2Phone, Inc.+ 400 18 Network Plus Corp.+ 1,400 27 Next Level Communications, Inc.+ 2,200 175 NEXTLINK Communications, Inc., Class A+ 2,000 169 North Pittsburgh Systems, Inc. 700 9 Northeast Optic Network, Inc.+ 500 28 Northpoint Communications+ 3,300 53 NTL, Inc.+ 3,794 290 Optical Cable Corp.+ 1,200 30 Pacific Gateway Exchange, Inc.+ 800 5 PairGain Technologies, Inc.+ 1,800 45 Pegasus Communications Corp.+ 400 44 Pinnacle Holdings, Inc.+ 1,300 73 Powertel, Inc.+ 800 54 Primus Telecommunications Group, Inc.+ 900 29 Qwest Communications International, Inc.+ 20,100 872 RCN Corp.+ 2,100 60 Number Value of Shares (000s) --------- ----------- Rhythms Netconnections, Inc.+ 1,900 $ 39 SBC Communications, Inc. 91,462 4,007 Sprint Corp. (FON Group) 23,400 1,439 Sprint Corp. (PCS Group)+ 23,100 1,270 TALK.com, Inc.+ 1,400 14 TCI Satellite Entertainment, Inc., Class A+ 1,400 15 Telephone & Data Systems, Inc. 1,700 173 Teligent, Inc.+ 200 7 Time Warner Telecom, Inc., Class A+ 700 38 Tritel, Inc.+ 2,500 81 Triton PCS Holdings, Inc., Class A+ 1,500 63 Turnstone Systems, Inc.+ 200 22 Tut Systems, Inc.+ 300 14 U.S. Cellular Corp.+ 2,300 138 U.S. Wireless Corp.+ 200 4 US LEC Corp.+ 500 13 US West, Inc. 13,500 961 Viatel, Inc.+ 1,011 39 Voicestream Wireless Corp.+ 3,715 368 WebLink Wireless, Inc.+ 700 8 Winstar Communications, Inc.+ 2,350 94 World Access, Inc.+ 1,200 19 Worldpages.com, Inc.+ 900 6 WorldPort Communications, Inc.+ 600 2 Z-Tel Technologies, Inc.+ 500 20 ---------- 29,153 ---------- TOBACCO -- 0.4% 800-Jr Cigar, Inc.+ 600 6 Brooke Ltd. 725 10 General Cigar Holdings, Inc.+ 500 8 Philip Morris Cos., Inc. 63,500 1,389 R.J. Reynolds Tobacco Holdings, Inc. 2,766 57 Schweitzer-Mauduit International, Inc. 900 13 Universal Corp. 600 11 UST, Inc. 4,500 68 ---------- 1,562 ---------- TRAVEL & RECREATION -- 0.5% AMERCO+ 900 15 American Classic Voyager+ 600 12 Anchor Gaming, Inc.+ 500 20 Argosy Gaming Co.+ 1,100 18 Autotote Corp., Class A+ 700 2 Avis Rent A Car, Inc.+ 800 16 Aztar Corp.+ 1,400 17 Bally Total Fitness Holding Corp.+ 1,300 29 101 SCHWAB TOTAL STOCK MARKET INDEX FUND(TM) SCHEDULE OF INVESTMENTS (continued) April 30, 2000 (Unaudited) Number Value of Shares (000s) --------- ----------- Brunswick Corp. 2,500 $ 48 Budget Group, Inc.+ 1,600 7 Callaway Golf Co. 2,000 33 Carnival Corp. 16,600 413 Central Parking Corp. 900 23 Choice Hotels International, Inc.+ 1,300 17 Crestline Capital Corp.+ 800 14 Dollar Thrifty Automotive Group, Inc.+ 1,000 21 Expedia, Inc.+ 1,000 15 Extended Stay Amererica, Inc.+ 2,200 20 Harrah's Entertainment, Inc.+ 3,300 68 Hertz Corp. 1,000 31 Hilton Hotels Corp. 9,526 81 Host Marriott Corp. 5,700 61 Interstate Hotels Corp.+ 90 0 Intranet Solutions, Inc.+ 600 13 Mandalay Resort Group+ 2,400 45 Marketing Services Group, Inc.+ 1,100 8 Marriott International, Inc., Class A 7,000 224 Meristar Hospitality Corp. 1,200 24 MGM Grand, Inc. 3,000 89 Mirage Resorts, Inc.+ 4,300 88 Navigant International, Inc.+ 1,300 12 Park Place Entertainment Corp.+ 8,100 104 Pinnacle Entertainment, Inc.+ 700 14 Premier Parks, Inc.+ 2,100 45 Prime Hospitality Corp.+ 1,800 17 Quokka Sports, Inc.+ 1,600 9 Rent-Way, Inc.+ 700 18 ResourtQuest International, Inc.+ 1,200 7 Royal Caribbean Cruises Ltd. 4,800 100 SFX Entertainment, Inc., Class A+ 1,750 73 Sodexho Marriott Services, Inc. 1,700 25 Speedway Motorsports, Inc.+ 1,000 24 Station Casinos, Inc.+ 1,100 31 Suburban Lodges of America+ 2,200 13 Sunburst Hospitality Corp.+ 1,600 8 Sunterra+ 1,100 2 Tickets.com, Inc.+ 1,900 8 Trendwest Resorts, Inc.+ 700 16 Vail Resorts, Inc.+ 800 13 ---------- 2,011 ---------- TRUCKING & FREIGHT -- 0.1% American Freightways Corp.+ 1,000 19 Arkansas Best Corp.+ 1,100 14 C.H. Robinson Worldwide, Inc. 1,000 50 Number Value of Shares (000s) --------- ----------- Circle International Group, Inc. 800 $ 21 CNF Transportation, Inc. 1,300 36 Consolidated Freightways Corp.+ 2,200 14 Expeditores International of Washington, Inc. 1,300 56 Forward Air Corp.+ 600 21 Fritz Cos., Inc.+ 1,300 13 Heartland Express, Inc.+ 1,000 17 HUB Group, Inc.+ 700 8 J.B. Hunt Transport Services, Inc. 1,000 16 Knight Transportation, Inc.+ 800 15 Landstar Systems, Inc.+ 400 23 M.S. Carriers, Inc.+ 600 14 OLD Dominion Freight Line+ 1,200 13 PACCAR, Inc. 2,000 95 Roadway Express, Inc. 600 14 Rollins Truck Leasing Corp. 1,500 15 Ryder Systems, Inc. 1,600 35 Shurgard Storage Centers, Inc. 600 16 South Alabama Bancorp. 400 4 Swift Transportation Co., Inc.+ 1,600 32 US Freightways Corp. 600 28 Wabash National Corp. 1,100 16 Werner Enterprises, Inc. 1,200 23 XTRA Corp.+ 300 14 Yellow Corp.+ 700 13 ---------- 655 ---------- UTILITIES - ELECTRIC & GAS-- 2.8% AES Corp.+ 5,600 504 AGL Resources, Inc. 1,200 21 Allegheny Energy, Inc. 2,800 85 Alliant Energy Corp. 1,900 57 Ameren Corp. 3,500 128 American Electric Power Co., Inc. 5,200 190 American States Water Co. 500 15 American Water Works Co., Inc. 2,500 57 ATG, Inc.+ 1,100 4 Atmos Energy Corp. 700 11 Atrion Corp.+ 300 4 Avista Corp. 1,200 35 Azurix Corp.+ 2,700 19 Bangor Hydro-Electric Co. 900 15 Baycorp Holdings Ltd.+ 200 3 Birmingham Utilities, Inc. 300 4 Black Hills Corp. 500 11 California Water Service Group 500 12 102 Number Value of Shares (000s) --------- ----------- Calpine Corp.+ 1,600 $ 146 Carolina Power & Light Co. 4,161 152 Cascade Natural Gas Corp. 500 8 Central & South West Corp. 5,300 115 Central Vermont Public Service Corp. 300 3 CH Energy Group, Inc. 400 13 Cinergy Corp. 4,100 110 Citizens Utilities Co., Class B+ 6,500 104 Cleco Corp. 600 21 CMP Group, Inc. 800 23 CMS Energy Corp. 2,800 53 Coastal Corp. 6,300 316 Columbia Energy Group 2,500 157 Conectiv, Inc. 2,400 43 Connecticut Water SVC, Inc. 500 14 Consolidated Edison, Inc. 5,900 208 Constellation Energy Group, Inc. 3,800 126 CTG Resources, Inc. 500 19 Delta Natural Gas Co., Inc. 200 3 Dominion Resources, Inc. 7,098 319 DPL, Inc. 3,152 73 DQE, Inc. 1,900 73 DTE Energy Co. 3,800 124 Duke Energy Corp. 9,900 569 Dynegy, Inc., Class A 3,781 247 E'Town Corp. 300 20 Edison International 9,200 175 El Paso Electric Co.+ 1,600 18 El Paso Energy Corp. 6,400 272 Empire District Electric Co. 700 15 Energen Corp. 700 13 Energy East Corp. 3,628 76 EnergyNorth, Inc. 200 12 EnergySouth, Inc. 800 15 Enron Corp. 19,400 1,352 Entergy Corp. 6,600 168 Equitable Resources, Inc. 900 42 FirstEnergy Corp. 6,000 153 Florida Progress Corp. 2,500 122 Florida Public Utilites Co. 200 3 FPL Group, Inc. 4,800 217 GPU, Inc. 3,100 87 Green Mountain Power Corp. 400 3 Hawaiian Electric Industries, Inc. 700 26 IDACORP, Inc. 1,000 37 Ipalco Enterprises, Inc. 2,000 41 Kansas City Power & Light Co. 1,600 41 Number Value of Shares (000s) --------- ----------- KeySpan Corp. 3,400 $ 100 Kinder Morgan, Inc. 2,900 88 Laclede Gas Co. 600 12 LG&E Energy Corp. 3,300 77 Madison Gas & Electric Co. 800 14 Maine Public Service Co. 200 4 MCN Corp. 2,200 55 MDU Resources Group, Inc. 1,300 28 Minnesota Power & Light Co. 1,700 31 Montana Power Co. 2,800 123 National Fuel Gas Co. 1,000 47 National Wireless Holdings, Inc.+ 200 4 New Century Energies, Inc. 2,900 95 New Jersey Resources Corp. 400 16 Niagara Mohawk Holdings, Inc.+ 4,700 65 NICOR, Inc. 1,200 41 Nisource, Inc. 3,100 57 Northeast Utilities 4,424 95 Northern States Power Co. 3,900 85 Northwest Natural Gas Co. 700 15 Northwestern Public Services Co. 1,400 32 NSTAR 1,467 65 NUI Corp. 500 13 OGE Energy Corp. 2,000 40 ONEOK, Inc. 800 20 Otter Tail Power Co. 600 16 PECO Energy Co. 4,900 204 Peoples Energy Corp. 900 28 PG&E Corp. 10,600 275 Philadelphia Suburban Corp. 1,000 24 Piedmont Natural Gas Co., Inc. 800 23 Pinnacle West Capital Corp. 2,100 74 Potomac Electric Power Co. 3,000 70 PPL Corp. 3,500 84 Providence Energy Corp. 300 12 Public Service Co. of New Mexico 2,000 36 Public Service Enterprise Group, Inc. 5,700 204 Puget Sound Power & Light Co. 2,200 52 Questar Corp. 2,100 40 Reliant Energy, Inc. 7,900 210 Republic Services, Inc.+ 4,500 62 RGS Energy Group, Inc. 700 16 Scana Corp. 3,005 78 Sempra Energy 5,175 96 Sierra Pacific Resources 1,776 27 SJW Corp. 100 12 South Jersey Industries 500 13 103 SCHWAB TOTAL STOCK MARKET INDEX FUND(TM) SCHEDULE OF INVESTMENTS (continued) April 30, 2000 (Unaudited) Number Value of Shares (000s) --------- ----------- Southern Co. 18,300 $ 456 Southern Union Co.+ 1,025 18 Southwest Gas Corp. 700 13 ST Joseph Light & Power 200 4 Streicher Mobile Fueling, Inc.+ 600 3 TECO Energy, Inc. 3,300 72 Texas Utilities Co. 7,700 259 U.S. Energy Systems, Inc.+ 600 2 UGI Corp. 700 14 Unicom Corp. 5,800 231 Unisource Energy Corp. 900 15 United Illuminating Co. 500 23 United Water Resources, Inc. 900 31 UtiliCorp United, Inc. 2,300 44 Vectren Corp.+ 1,466 30 Veritas DGC, Inc.+ 800 19 Washington Gas Light Co. 1,100 28 Waste Connections, Inc.+ 1,000 13 Western Resources, Inc. 1,600 25 Williams Cos., Inc. 11,700 437 Wisconsin Energy Corp. 3,000 64 WPS Resources Corp. 700 21 ---------- 11,822 ---------- TOTAL COMMON STOCK (Cost $388,435) 421,971 ---------- Par Value (000s) (000s) --------- ----------- U.S. TREASURY OBLIGATIONS -- 0.1% U.S. Treasury Bills (a) (b) 5.73%-5.75%, 06/15/00 $200 $ 199 5.61%, 06/22/00 10 10 -------- TOTAL U.S. TREASURY OBLIGATIONS (Cost $209) 209 -------- Number of Shares --------- SHORT-TERM INVESTMENTS -- 1.1% Provident Institutional TempFund, 5.74%* 4,624,331 4,624 -------- TOTAL SHORT-TERM INVESTMENTS (Cost $4,624) 4,624 -------- TOTAL INVESTMENTS -- 100.3% (Cost $393,268) 426,804 -------- OTHER ASSETS AND LIABILITIES, NET -- (0.3%) Other assets 69,808 Liabilities (70,880) -------- (1,072) -------- TOTAL NET ASSETS -- 100.0% $425,732 ======== SEE ACCOMPANYING NOTES TO SCHEDULES OF INVESTMENTS AND NOTES TO FINANCIAL STATEMENTS. 104 SCHWAB SMALL-CAP INDEX FUND(R) SCHEDULE OF INVESTMENTS April 30, 2000 (Unaudited) Number Value of Shares (000s) --------- ----------- - -------------------------------------------------------------------------------- COMMON STOCK -- 99.6% - -------------------------------------------------------------------------------- AEROSPACE / DEFENSE -- 0.6% Cordant Technologies, Inc. 72,800 $ 4,122 GenCorp., Inc. 80,400 809 Trimble Navigation Ltd.+ 45,300 1,252 Veeco Instruments, Inc.+ 36,070 2,241 ---------- 8,424 ---------- - -------------------------------------------------------------------------------- AIR TRANSPORTATION -- 1.0% AAR Corp. 53,300 803 Airborne Freight Corp. 97,000 2,079 Alaska Airgroup, Inc.+ 53,800 1,547 America West Holdings Corp., Class B+ 68,500 1,002 Atlantic Coast Airlines Holdings, Inc.+ 37,300 1,114 Atlas Air, Inc.+ 68,150 2,381 EGL, Inc.+ 61,300 1,406 Midwest Express Holdings, Inc.+ 27,800 704 SkyWest, Inc. 49,100 2,068 ---------- 13,104 ---------- ALCOHOLIC BEVERAGES -- 0.3% Beringer Wine Estates Holdings, Inc.+ 38,900 1,405 Canandaigua Brands, Inc., Class A+ 36,000 1,813 The Robert Mondavi Corp., Class A+ 16,200 538 ---------- 3,756 ---------- APPAREL -- 2.0% Buckle, Inc.+ 42,650 546 Chico's FAS, Inc.+ 39,200 703 The Children's Place Retail Stores, Inc.+ 53,200 1,184 The Dress Barn, Inc.+ 35,000 687 Footstar, Inc.+ 41,900 1,558 Genesco, Inc.+ 52,500 679 Global Sports, Inc.+ 36,100 282 Kellwood Co. 55,500 950 Kenneth Cole Productions, Inc.+ 41,950 1,715 Men's Wearhouse, Inc.+ 83,350 1,787 Nautica Enterprises, Inc.+ 66,400 747 Pacific Sunwear of California+ 62,125 2,116 Polo Ralph Lauren Corp.+ 65,000 1,056 Quiksilver, Inc.+ 44,850 847 Reebok International Ltd.+ 112,200 1,907 Russell Corp. 66,300 1,301 Springs Industries, Inc. 35,200 1,445 Timberland Co., Class A+ 41,900 2,907 Unifi, Inc.+ 116,000 1,182 Number Value of Shares (000s) --------- ----------- Urban Outfitters, Inc.+ 32,800 $ 353 Warnaco Group, Inc., Class A 111,700 1,187 Wolverine World Wide, Inc. 82,700 992 ---------- 26,131 ---------- AUTOMOTIVE PRODUCTS / MOTOR VEHICLES -- 1.9% A.O. Smith Corp., Class B 47,000 966 Arvin Industries, Inc. 49,700 1,081 Bandag, Inc. 44,000 1,051 Borg-Warner Automotive, Inc. 54,517 2,280 Carlisle Cos., Inc. 60,200 2,479 Cooper Tire & Rubber Co. 150,200 2,028 CSK Auto Corp.+ 55,700 585 Detroit Diesel Corp. 46,000 713 Donaldson Co., Inc. 91,700 2,132 Fleetwood Enterprises, Inc. 65,500 958 Group 1 Automotive, Inc.+ 41,000 487 Hayes Lemmerz International, Inc.+ 60,800 958 Modine Manufacturing Co. 58,900 1,299 Monaco Coach Corp.+ 36,400 596 Myers Industries, Inc. 39,670 555 Oshkosh Truck Corp. 32,200 1,014 Polaris Industries, Inc. 55,600 1,703 Stoneridge, Inc.+ 43,400 572 Superior Industries International, Inc. 52,800 1,700 Tower Automotive, Inc.+ 93,200 1,456 Winnebago Industries, Inc. 42,000 714 ---------- 25,327 ---------- BANKS -- 4.2% Anchor Bancorp Wisconsin, Inc. 47,900 754 Bancorpsouth, Inc. 113,300 1,749 Bank United Corp., Class A 66,600 2,210 Banknorth Group, Inc. 54,300 1,296 Chemical Financial Corp. 27,126 746 Chittenden Corp. 56,900 1,511 Community First Bankshares, Inc. 102,800 1,735 CORUS Bankshares, Inc. 27,700 690 F&M National Corp. 45,121 1,080 F.N.B. Corp. 42,523 840 First Bancorp./Puerto Rico 57,100 1,010 First Busey Corp., Class A 26,300 506 First Citizens Bancshares 22,400 1,414 First Commonwealth Financial Corp. 116,100 1,350 First Financial Bancorp. 92,753 1,652 First Financial Bancshares, Inc. 19,600 529 First United Bancshares, Inc. 49,700 817 105 SCHWAB SMALL-CAP INDEX FUND(R) SCHEDULE OF INVESTMENTS (continued) April 30, 2000 (Unaudited) Number Value of Shares (000s) --------- ----------- Frontier Financial Corp. 34,500 $ 651 Hancosk Holding Co. 20,945 725 Harbor Florida Bancshares, Inc. 54,000 567 Imperial Bancorp.+ 93,863 1,842 Independence Community Bank 143,200 1,683 Irwin Financial Corp. 41,200 698 MAF Bancorp., Inc. 48,725 914 Merchants Bancorp., Inc. New York 36,900 616 Mid-State Bancshares 22,200 583 National Bancorp. of Alaska, Inc. 59,900 2,216 National City Bancshares, Inc. 33,487 737 National Penn Bancshares, Inc. 34,160 704 Net.B@nk, Inc.+ 71,300 740 One Valley Bancorp., Inc. 56,200 1,907 Park National Corp. 19,120 1,745 PFF Bancorp., Inc. 34,500 485 Provident Bankshares Corp. 63,647 951 Queens County Bancorp., Inc. 41,530 844 Republic Bancorp. 89,900 888 Republic Security Financial Corp. 108,200 602 Richmond County Financial Corp. 58,000 993 Riggs National Corp. 55,500 753 S & T Bancorp., Inc. 53,900 947 The South Financial Group, Inc. 49,700 690 Southwest Bancorp. of Texas, Inc.+ 56,100 1,097 Sterling Bancshares 55,200 607 Susquehanna Bancshares, Inc. 74,075 1,023 Texas Regional Bancshares, Inc. 27,900 797 The Trust Co. of New Jersey 37,600 724 TrustCo Bank Corp. 105,124 1,255 UMB Financial Corp. 43,518 1,577 United Bankshares, Inc. 84,700 1,847 United Community Financial Corp. 69,100 389 United National Bancorp. 34,900 683 Wesbanco, Inc. 37,900 862 Whitney Holding Corp. 44,400 1,548 ---------- 55,779 ---------- BUSINESS MACHINES & SOFTWARE -- 2.8% Activision, Inc.+ 46,600 291 Advanced Digital Information+ 101,800 2,500 Analogic Corp. 25,600 1,042 Artesyn Technologies+ 74,700 1,811 Auspex Systems, Inc.+ 74,100 565 Black Box Corp.+ 39,700 3,054 Computer Horizons Corp.+ 62,500 859 Concurrent Computer Corp.+ 106,300 1,063 Number Value of Shares (000s) --------- ----------- Cybex Computer Products Corp.+ 38,550 $ 1,055 Fair, Isaac & Co., Inc. 27,500 1,164 Hypercom Corp.+ 65,200 954 IKON Office Solutions, Inc. 300,800 1,767 Inprise Corp.+ 112,200 589 InterVoice, Inc.+ 64,900 1,034 Iomega Corp.+ 539,100 1,921 LTX Corp.+ 87,900 4,021 Maxtor Corp.+ 226,900 2,709 Micron Electronics, Inc.+ 190,700 2,038 MICROS Systems, Inc.+ 32,600 1,312 MTI Technology Corp.+ 62,100 963 Netegrity+ 38,300 1,700 Procom Technology, Inc.+ 22,600 814 PTEK Holdings, Inc.+ 102,100 517 SCM Microsystems, Inc.+ 28,000 2,216 Systems & Computer Technology Corp.+ 66,800 1,574 ---------- 37,533 ---------- BUSINESS SERVICES -- 13.2% 24/7 Media, Inc.+ 44,200 867 4 Kids Entertainment, Inc.+ 23,300 537 Aaron Rents, Inc., Class A 38,800 599 ABM Industries, Inc. 44,200 1,116 Actel Corp.+ 44,100 1,623 Actuate Corp.+ 55,000 1,647 Advantage Learning Systems, Inc.+ 68,600 999 Advent Software, Inc.+ 59,300 3,113 Advo, Inc.+ 40,700 1,221 AHL Services, Inc.+ 37,300 361 Akamai Technologies, Inc.+ 17,930 1,773 Alliance Semiconductor Corp.+ 85,100 1,734 Apex, Inc.+ 41,250 1,219 Aspen Technology, Inc.+ 49,800 1,762 Avant Corp.+ 75,500 1,359 AXENT Technologies, Inc.+ 56,100 1,129 Banyan Systems, Inc.+ 47,300 656 Bell & Howell Co.+ 46,400 1,233 Beyond.com Corp.+ 84,300 184 BindView Development Corp.+ 95,200 768 Bowne & Co., Inc. 74,100 852 Cambridge Technology Partners, Inc.+ 119,700 1,317 Catalytica, Inc.+ 70,300 782 CDI Corp.+ 36,700 826 Century Business Services, Inc.+ 172,700 561 Cerner Corp.+ 67,500 1,489 Choicepoint, Inc.+ 59,200 2,250 106 Number Value of Shares (000s) --------- ----------- Com21, Inc.+ 46,400 $ 1,299 Complete Business Solutions, Inc.+ 73,200 1,674 Computer Task Group, Inc. 41,900 356 Cytec Industries, Inc.+ 83,800 2,524 DBT Online, Inc.+ 38,100 750 Dendrite International, Inc.+ 76,850 1,758 Digital River, Inc.+ 50,900 763 Documentum, Inc.+ 33,100 1,953 Earthweb, Inc.+ 29,600 533 Echelon Corp.+ 67,200 2,188 Eclipsys Corp.+ 69,900 559 F.Y.I., Inc.+ 27,900 748 FactSet Research Systems, Inc. 62,700 1,803 FileNet Corp.+ 65,000 1,909 Forrester Research, Inc.+ 40,800 1,849 G & K Services, Inc., Class A 45,950 1,126 Global Imaging Systems, Inc.+ 45,300 331 Great Plains Software, Inc.+ 32,300 1,367 Grey Advertising, Inc. 2,900 1,329 GTECH Holdings, Corp.+ 69,800 1,448 HA-LO Industries, Inc.+ 93,775 686 Harbinger Corp.+ 72,900 1,376 Hyperion Solutions Corp.+ 63,845 1,936 IDT Corp.+ 50,400 1,594 IDX Systems Corp.+ 55,100 933 iGate Capital Corp.+ 101,300 3,039 In Focus Systems, Inc.+ 45,100 1,350 Infocure Corp.+ 56,100 512 Inso Corp.+ 27,300 126 Iron Mountain, Inc.+ 108,020 3,781 Jacobs Engineering Group, Inc.+ 52,200 1,635 JDA Software Group, Inc.+ 46,600 868 John H. Harland Co. 62,900 967 Kroll-O'Gara Co.+ 44,300 341 Kronos, Inc.+ 24,650 792 Labor Ready, Inc.+ 93,350 846 Lason, Inc.+ 43,900 198 Learning Tree International, Inc.+ 43,500 2,085 Lightbridge, Inc.+ 36,300 762 Manugistics Group, Inc.+ 55,200 2,363 MAXIMUS, Inc.+ 42,200 994 MemberWorks, Inc.+ 31,700 1,024 Mentor Corp. 49,000 867 Mentor Graphics Corp.+ 127,200 1,670 Mercator Software, Inc.+ 57,000 2,098 Mercury Computer Systems, Inc.+ 42,300 1,626 Metamor Worldwide, Inc.+ 68,100 1,319 Number Value of Shares (000s) --------- ----------- Miami Computer Supply Corp.+ 22,600 $ 473 MicroStrategy, Inc.+ (b) 47,300 1,224 Modis Professional Services, Inc.+ 192,200 1,454 National Data Corp. 65,900 1,829 NationsRent, Inc.+ 111,800 538 Natural MicroSystems Corp.+ 31,300 2,038 Navigant Consulting Co.+ 79,900 794 Netmanage, Inc.+ 141,100 450 Network Peripherals, Inc.+ 31,800 890 New England Business Service, Inc. 27,100 447 Novadigm, Inc.+ 36,700 502 NYFIX, Inc.+ 42,250 1,138 Ogden Corp. 98,000 962 On Assignment, Inc.+ 43,400 1,362 Orbital Sciences Corp.+ 80,400 1,015 PAXAR Corp.+ 93,735 955 Pegasus Systems, Inc.+ 40,050 711 Performance Food Group Co.+ 27,100 715 Phoenix Technologies Ltd.+ 49,600 973 Pittston Brink's Group 99,200 1,624 Policy Management Systems Corp.+ 71,400 946 Pre-Paid Legal Services, Inc.+ 44,300 1,418 Primark Corp.+ 40,100 1,083 Priority Healthcare Corp., Class B+ 43,527 2,410 ProBusiness Services, Inc.+ 49,000 1,292 Progress Software Corp.+ 68,500 1,370 Project Software & Development, Inc.+ 42,300 1,290 Protein Design Labs, Inc.+ 37,600 3,816 Provant, Inc.+ 79,600 440 Proxim, Inc.+ 23,100 1,777 Puma Technology, Inc.+ 80,100 2,453 QRS Corp.+ 26,950 889 R. H. Donnelley Corp.+ 67,200 1,344 Radiant Systems, Inc.+ 50,400 939 RadiSys Corp.+ 33,600 1,390 Remedy Corp.+ 57,500 3,055 Romac International, Inc.+ 92,100 950 Rural Cellular Corp., Class A.+ 21,100 1,560 S3, Inc.+ 157,700 2,218 SAGA Systems, Inc.+ 56,500 1,052 Sanchez Computer Associates, Inc.+ 48,900 947 The Santa Cruz Operation, Inc.+ 70,900 430 Seachange International, Inc.+ 41,550 1,247 SEACOR SMIT, Inc.+ 22,200 1,360 Sirius Satellite Radio, Inc.+ 53,500 2,123 SITEL Corp.+ 130,300 896 SoftNet Systems, Inc.+ 51,300 770 107 SCHWAB SMALL-CAP INDEX FUND(R) SCHEDULE OF INVESTMENTS (continued) April 30, 2000 (Unaudited) Number Value of Shares (000s) --------- ----------- Spartech Corp. 54,200 $ 1,883 SportsLine USA, Inc.+ 46,900 900 Spyglass, Inc.+ 33,700 1,786 Standard Register Co. 53,400 698 StarTek, Inc.+ 27,300 1,403 Strayer Education, Inc. 29,800 613 Structural Dynamics Research Corp.+ 77,400 1,035 Sylvan Learning Systems, Inc.+ 100,000 1,506 Syntel, Inc.+ 75,700 842 Tetra Technology, Inc.+ 79,375 1,870 Transaction Systems Architects, Inc.+ 64,300 1,049 Unify Corp.+ 44,800 538 UNOVA, Inc.+ 110,200 1,543 URS Corp.+ 29,900 381 Volt Information Sciences, Inc.+ 30,200 1,044 The Wackenhut Corp.+ 43,600 575 Wallace Computer Services, Inc. 80,600 882 Wave Systems Corp.+ 80,300 1,541 Zixit Corp.+ 30,800 1,138 ---------- 174,818 ---------- CHEMICAL -- 3.1% A. Schulman 59,200 762 Airgas, Inc.+ 137,800 810 Albemarle Corp. 92,200 1,930 Amcol International Corp. 51,700 847 Brady Corp., Class A 45,100 1,325 Cambrex Corp. 53,800 2,206 Celgene Corp.+ 128,500 6,048 Chemfirst, Inc. 40,900 792 Dexter Corp. 46,300 2,541 Ethyl Corp. 174,400 545 Ferro Corp. 70,400 1,610 Fuller 27,600 1,061 Geon Co. 46,800 1,024 International Specialty Products, Inc.+ 134,900 793 Lilly Industries, Inc., Class A 46,050 501 M. A. Hanna Co. 97,500 1,121 Macdermid, Inc. 61,200 1,434 Olin Corp. 89,300 1,585 OM Group, Inc. 47,400 2,180 Rollins, Inc. 57,700 829 Sequa Corp., Class A+ 20,800 1,024 Techne Corp.+ 40,300 2,866 Tredegar Industries, Inc. 75,800 1,957 Twinlab Corp.+ 74,300 557 W.R. Grace & Co.+ 142,200 1,849 Number Value of Shares (000s) --------- ----------- WD-40 Co. 31,100 $ 620 Wellman, Inc. 67,200 1,436 Xceed, Inc.+ 38,300 527 ---------- 40,780 ---------- CONSTRUCTION -- 3.3% Centex Construction Products, Inc. 37,400 1,155 D.R. Horton, Inc. 132,700 1,717 DAL-Tile International, Inc.+ 109,300 1,066 Dycom Industries, Inc.+ 77,600 4,035 Elcor Corp. 38,150 1,214 Florida Rock Industries, Inc. 36,900 1,195 Granite Construction, Inc. 59,950 1,424 Insituform Technologies, Inc., Class A+ 50,300 1,688 Integrated Electrical Services, Inc.+ 74,800 360 Justin Industries, Inc. 49,600 905 Kaufman & Broad Home Corp. 95,400 1,836 Lennar Corp. 119,200 2,220 Morrison Knudsen Corp.+ 105,100 966 NCI Building Systems, Inc.+ 36,000 688 NVR, Inc.+ 19,200 1,195 Owens Corning 110,000 2,001 Palm Harbor Homes, Inc.+ 43,987 726 Pulte Corp. 90,600 1,948 Quanta Services, Inc.+ 101,250 4,702 The Ryland Group, Inc. 28,400 571 Simpson Manufacturing, Inc.+ 24,000 1,086 Specialty Equipment Cos., Inc.+ 36,800 759 Standard Pacific Corp. 59,200 596 Texas Industries, Inc. 41,400 1,351 Toll Brothers, Inc.+ 73,000 1,583 U.S. Home Corp.+ 26,900 963 U.S. Plastic Lumber Corp.+ 62,700 274 United Dominion Industries Ltd. 77,800 1,357 Walter Industries, Inc. 95,100 1,016 Webb Del Corp.+ 36,000 538 West Teleservices Corp.+ 126,400 2,670 ---------- 43,805 ---------- CONSUMER - DURABLE -- 0.9% Champion Enterprises, Inc.+ 95,400 674 Furniture Brands International, Inc.+ 97,700 1,826 Genlyte Group, Inc.+ 27,100 532 Haverty Furniture Cos., Inc. 43,400 488 Helen of Troy Ltd.+ 68,600 455 Kimball International, Inc., Class B 80,000 1,120 La-Z-Boy, Inc. 122,400 1,920 108 Number Value of Shares (000s) --------- ----------- Rent-A-Center, Inc.+ 49,100 $ 1,000 SLI, Inc. 75,750 1,080 Sunbeam Corp.+ 262,633 919 Toro Co. 25,300 778 Windmere Durable Holdings, Inc.+ 44,600 716 ---------- 11,508 ---------- CONSUMER - NONDURABLE -- 2.7% The 3DO Co.+ 88,600 543 Acclaim Entertainment, Inc.+ 154,400 422 Applebee's International, Inc. 53,900 1,964 Buffets, Inc.+ 84,200 826 Cbrl Group, Inc. 121,700 1,688 Cdnow, Inc.+ 49,300 213 CEC Entertainment, Inc.+ 53,300 1,599 Cheesecake Factory+ 44,600 1,826 CKE Restaurants, Inc. 100,300 370 Cytyc Corp.+ 71,300 3,191 Department 56, Inc.+ 34,700 317 Dover Downs Entertainment, Inc. 70,500 864 Fossil, Inc.+ 64,200 1,332 Handleman Co.+ 55,800 670 Hanover Direct, Inc.+ 418,400 732 IHOP Corp.+ 39,200 637 Jack in the Box, Inc.+ 75,800 1,857 JAKKS Pacific, Inc.+ 37,500 689 Jostens, Inc. 61,500 1,518 The Marcus Corp. 56,725 606 Midway Games, Inc.+ 71,266 472 Movado Group, Inc. 27,100 234 NPC International, Inc.+ 45,000 467 Oneida Ltd. 32,000 612 Papa John's International, Inc.+ 60,700 1,669 Regis Corp. 80,650 943 Ruby Tuesday, Inc. 60,874 1,275 Russ Berrie & Co., Inc. 40,700 758 Ryan's Family Steak Houses, Inc.+ 71,000 694 Sonic Corp.+ 36,500 1,015 Stewart Enterprises, Inc., Class A 216,300 1,041 The Topps Co., Inc.+ 106,800 934 Trans World Entertainment Corp.+ 112,450 1,181 Triarc Cos., Inc.+ 46,900 967 Tupperware Corp. 114,900 2,169 ---------- 36,295 ---------- CONTAINERS -- 0.3% Ball Corp. 59,700 1,881 Number Value of Shares (000s) --------- ----------- Gaylord Container Corp.+ 106,000 $ 543 Greif Brothers Corp., Class A 45,700 1,508 ---------- 3,932 ---------- ELECTRONICS -- 12.8% Adaptive Broadband Corp.+ 67,100 2,181 Advanced Radio Telecom Corp.+ 56,000 935 Alliant Techsystems, Inc.+ 18,900 1,316 Anadigics, Inc.+ 55,200 4,154 Anixter International, Inc.+ 71,900 2,422 Asyst Technologies, Inc.+ 62,100 3,322 Atmi, Inc.+ 55,500 2,137 AVT Corp.+ 59,500 658 Aware, Inc.+ 43,300 1,689 Belden, Inc. 47,800 1,419 Benchmark Electronics, Inc.+ 32,400 1,302 Brooks Automation, Inc.+ 32,300 2,897 C&D Technologies, Inc. 25,500 1,643 C-Cor Electronics, Inc.+ 63,500 2,484 Cable Design Technologies Corp.+ 56,750 1,944 Cirrus Logic, Inc.+ 131,500 2,153 Coherent, Inc.+ 49,300 2,850 Cohu, Inc. 39,800 1,515 Computer Network Technology Corp.+ 46,000 742 Concord Communications, Inc.+ 27,600 773 Cox Radio, Inc., Class A+ 18,400 1,334 Cyberonics, Inc.+ 34,900 711 Data Broadcasting Corp.+ 68,500 336 Digital Microwave Corp.+ 139,900 5,168 Dionex+ 43,400 1,579 DSP Group, Inc.+ 49,900 3,549 Dupont Photomasks, Inc.+ 30,700 1,721 Electro Scientific Industries, Inc.+ 53,000 3,342 Electroglas, Inc.+ 41,000 1,589 ESS Technology, Inc.+ 83,700 1,088 Exar Corp.+ 34,750 2,786 General Semiconductor, Inc.+ 81,900 1,638 Genrad, Inc.+ 57,100 425 Gerber Scientific, Inc. 42,600 591 Hadco Corp.+ 27,300 2,247 Harman International Industries, Inc. 34,100 2,229 Hearst-Argyle Television, Inc.+ 103,300 2,202 Hollywood Entertainment Corp.+ 87,700 614 Hutchinson Technology, Inc.+ 48,000 612 IMRglobal Corp.+ 76,450 984 International Rectifier Corp.+ 121,800 5,983 Kent Electronics Corp.+ 60,600 1,769 109 SCHWAB SMALL-CAP INDEX FUND(R) SCHEDULE OF INVESTMENTS (continued) April 30, 2000 (Unaudited) Number Value of Shares (000s) --------- ----------- Kopin Corp.+ 59,700 $ 4,623 Kulicke & Soffa Industries, Inc.+ 47,500 3,720 Littelfuse, Inc.+ 40,600 1,441 Lucent Technologies, Inc. 79,942 4,971 MEMC Electronic Materials, Inc.+ 137,804 2,394 Methode Electronics, Inc., Class A 71,350 2,973 MGC Communications, Inc.+ 54,000 2,646 MMC Networks, Inc.+ 63,100 1,672 MRV Communications, Inc.+ 53,900 3,716 Netopia, Inc.+ 32,900 1,374 NetOptix Corp.+ 23,000 4,057 P-Com, Inc.+ 144,100 1,558 Park Electrochemical Corp. 20,900 536 Paxson Communications Corp.+ 107,000 876 Pinnacle Systems, Inc.+ 100,300 2,407 Pioneer - Standard Electronics, Inc. 52,700 807 Plantronics, Inc.+ 32,400 2,867 Plexus Corp.+ 35,700 2,736 Power Intergrations, Inc.+ 52,400 1,192 Power-One, Inc.+ 44,600 3,044 PRI Automation, Inc.+ 45,900 3,666 Rayovac Corp.+ 55,100 1,150 Remec, Inc.+ 57,300 2,174 REX Stores Corp.+ 25,876 650 Silicon Storage Technology, Inc.+ 50,300 4,904 Silicon Valley Group, Inc.+ 66,500 1,895 Snyder Communications, Inc.+ 143,600 3,411 Spectrian Corp.+ 22,600 400 SpeedFam-IPEC, Inc.+ 58,400 923 STAR Telecommunications, Inc.+ 113,100 537 Superior Telecommunications, Inc. 40,101 486 Technitrol, Inc. 32,500 2,210 Tekelec, Inc.+ 112,800 3,948 Thermoquest Corp.+ 99,800 1,678 THQ, Inc.+ 35,600 552 Three-Five Systems, Inc.+ 26,666 2,320 Tweeter Home Entertainment Group, Inc.+ 37,200 1,372 Varian Medical Systems, Inc.+ 61,200 2,448 Western Digital Corp.+ 266,900 1,852 Youthstream Media Networks, Inc.+ 40,000 255 Zoran Corp.+ 26,600 1,328 ---------- 168,802 ---------- ENERGY - RAW MATERIALS -- 2.3% Arch Coal, Inc. 74,900 403 Atwood Oceanics, Inc.+ 26,900 1,631 Number Value of Shares (000s) --------- ----------- Barrett Resources Corp.+ 64,300 $ 2,042 Basin Exploration, Inc.+ 41,400 580 Cabot Oil & Gas Corp., Class A 50,400 936 Dril-Quip, Inc.+ 33,800 1,373 Evergreen Resources, Inc.+ 37,400 865 Forest Oil Corp.+ 104,800 1,172 Friede Goldman Halter, Inc.+ 81,800 506 Grey Wolf, Inc.+ 327,500 1,330 Helmerich & Payne, Inc. 102,600 3,213 Key Energy Group, Inc.+ 165,500 1,614 Kirby Corp.+ 49,300 1,020 Louis Dreyfus Natural Gas Corp.+ 79,800 2,234 MAXXAM, Inc.+ 13,900 375 McDermott International, Inc. 118,400 962 Newpark Resources, Inc.+ 144,100 1,189 NL Industries, Inc. 104,300 1,695 Parker Drilling Co.+ 154,300 665 Tom Brown, Inc.+ 69,000 1,311 USEC, Inc. 179,300 840 UTI Energy Corp.+ 38,500 1,338 Varco International, Inc.+ 131,800 1,647 Western Gas Resources, Inc. 64,600 1,078 ---------- 30,019 ---------- FOOD & AGRICULTURE -- 2.6% 7-Eleven, Inc.+ 820,700 3,078 Agribrands International, Inc.+ 19,700 738 American Italian Pasta Co., Class A+ 36,300 898 Aurora Foods, Inc.+ 188,600 908 Bob Evans Farms, Inc. 75,500 986 Coca-Cola Bottling Co. 17,500 893 Delta & Pine Land Co. 80,100 1,682 Dole Food Co., Inc. 110,600 1,942 Dreyer's Grand Ice Cream, Inc. 54,400 1,306 Earthgrains Co. 83,300 1,171 Fleming Cos., Inc. 76,600 1,259 Fresh Del Monte Produce, Inc.+ 103,400 872 Grand Union Co.+ 86,100 145 The Hain Food Group, Inc.+ 35,600 955 J.M. Smucker Co., Class A 58,000 928 Lance, Inc. 64,500 685 Michael Foods, Inc. 42,100 903 Ralcorp Holdings, Inc.+ 59,166 817 Rexall Sundown, Inc.+ 128,500 2,474 Scotts Co., Class A+ 55,400 2,001 Seaboard Corp. 3,200 576 Smithfield Foods, Inc.+ 113,300 2,415 110 Number Value of Shares (000s) --------- ----------- Tootsie Roll Industries, Inc. 67,359 $ 2,076 Universal Foods Corp. 98,500 1,619 Vlasic Foods International, Inc.+ 119,100 208 Whole Foods Market, Inc.+ 53,200 2,264 Wild Oats Markets, Inc.+ 44,000 583 ---------- 34,382 ---------- GOLD -- 0.0% Battle Mountain Gold Co.+ 275,000 567 ---------- HEALTHCARE / DRUGS & MEDICINE -- 10.3% Abgenix, Inc.+ 76,100 6,816 Acuson Corp.+ 51,300 632 Advance Paradigm, Inc.+ 41,500 519 Alkermes, Inc.+ 52,900 2,817 Alpharma, Inc., Class A 59,767 2,308 Amerisource Health Corp.+ 102,500 2,050 Apria Healthcare Group, Inc.+ 102,200 1,424 Arrow International, Inc. 47,300 1,614 Avigen, Inc.+ 32,400 1,061 Barr Laboratories, Inc.+ 46,000 1,987 Bergen Brunswig Corp. 269,800 1,349 Beverly Enterprises, Inc.+ 196,500 663 Bindley Western Industries, Inc. 67,298 1,174 Bio-Technology General Corp.+ 104,800 1,474 Biomatrix, Inc.+ 45,600 869 Caremark Rx, Inc.+ 396,600 2,528 Carter-Wallace, Inc. 89,200 1,985 Cephalon, Inc.+ 64,900 3,651 Cerus Corp.+ 25,400 940 ChiRex, Inc.+ 29,700 505 Conmed Corp.+ 29,400 768 Cooper Cos., Inc. 28,100 945 COR Therapeutics, Inc.+ 50,400 3,840 Covance, Inc.+ 113,000 1,038 Coventry Health Care, Inc.+ 118,700 1,261 CV Therapeutics, Inc.+ 35,600 1,420 Datascope Corp. 31,900 1,057 Diagnostic Products Corp. 26,300 807 Dura Pharmaceuticals, Inc.+ 87,600 1,139 Entremed, Inc.+ 29,300 1,536 Enzo Biochem, Inc.+ 49,800 2,017 Foundation Health Systems, Inc.+ 243,100 2,446 Haemonetics Corp.+ 51,300 1,180 Henry Schein, Inc.+ 79,800 1,116 Idexx Laboratories, Inc.+ 72,900 1,914 IGEN International, Inc.+ 29,800 475 Number Value of Shares (000s) --------- ----------- ImClone Systems+ 56,900 $ 5,178 Incyte Pharmaceuticals, Inc.+ 57,300 4,412 Inhale Therapeutic Systems+ 40,800 2,524 Invacare Corp. 60,100 1,608 Isis Pharmaceuticals, Inc.+ 66,900 744 KV Pharmaceutical Co., Class A+ 37,700 952 Laboratory Corp. of America Holdings+ 259,900 1,543 Laser Vision Centers, Inc.+ 63,100 256 Ligand Pharmaceuticals, Inc.+ 57,800 762 The Liposome Co., Inc.+ 82,300 1,440 Medarex, Inc.+ 67,800 3,593 Medicis Pharmaceutical Corp., Class A+ 58,100 2,542 MedQuist, Inc.+ 71,200 2,523 Mid Atlantic Medical Services, Inc.+ 100,100 932 Mine Safety Appliances Co. 9,500 617 Myriad Genetics, Inc.+ 20,700 1,333 NBTY, Inc.+ 133,100 2,363 Oakley, Inc.+ 141,500 1,627 Ocular Sciences, Inc.+ 62,600 1,037 Orthodontic Centers of America, Inc.+ 94,900 2,011 Owens & Minor, Inc. 65,600 787 Pathogenesis Corp.+ 36,100 767 Perrigo Co.+ 153,000 870 Pharmaceutical Product Development, Inc.+ 47,300 795 Pharmacopeia, Inc.+ 40,400 1,661 Pharmacyclics, Inc.+ 30,100 1,366 Province Healthcare Co.+ 38,200 1,103 PSS World Medical, Inc.+ 142,500 1,225 Quest Diagnostic, Inc.+ 86,700 5,045 Quorum Health Group, Inc.+ 141,600 1,504 Renal Care Group, Inc.+ 90,800 2,026 ResMed, Inc.+ 59,300 2,016 Sangstat Medical Corp.+ 34,000 977 SICOR, Inc.+ 176,500 1,997 Sola International, Inc.+ 91,600 412 Steris Corp.+ 140,700 1,266 Summit Technology, Inc.+ 100,500 892 Sunrise Technologies International+ 89,000 573 SuperGen, Inc.+ 58,000 1,921 Syncor International Corp.+ 23,800 982 Total Renal Care Holdings, Inc.+ 154,300 444 Transkaryotic Therapies, Inc.+ 46,000 1,377 Triangle Pharmaceuticals, Inc.+ 72,400 468 Universal Health Services, Class B+ 61,100 3,345 111 SCHWAB SMALL-CAP INDEX FUND(R) SCHEDULE OF INVESTMENTS (continued) April 30, 2000 (Unaudited) Number Value of Shares (000s) --------- ----------- US Oncology, Inc.+ 166,172 $ 571 Vertex Pharmaceuticals, Inc.+ 51,400 2,686 Vical, Inc.+ 31,200 562 Viropharma, Inc.+ 28,600 433 West Pharmaceutical Services, Inc. 28,600 699 ---------- 136,092 ---------- HOUSEHOLD PRODUCTS -- 0.3% Bush Boake Allen, Inc.+ 37,900 1,132 Church & Dwight Co., Inc. 82,600 1,476 Nu Skin Asia Pacific, Inc.+ 64,200 494 Playtex Products, Inc.+ 121,500 1,314 ---------- 4,416 ---------- INSURANCE -- 3.3% Alfa Farmers Federation Corp. 77,800 1,400 American Annuity Group, Inc. 84,450 1,409 AmerUs Life Holdings, Inc., Class A 49,700 991 Argonaut Group, Inc. 44,500 762 Arthur J. Gallegher & Co. 73,600 2,742 CNA Surety Corp. 92,100 1,358 Commerce Group, Inc. 68,500 2,021 Copart, Inc.+ 109,600 1,891 Delphi Financial Group, Inc., Class A+ 40,971 1,180 E.W. Blanch Holdings 42,400 943 Enhance Financial Services Group, Inc. 75,900 768 FBL Financial Group, Inc., Class A 58,400 905 First American Financial Corp. 130,900 2,021 Fremont General Corp. 138,100 803 Harleysville Group, Inc. 58,400 938 HCC Insurance Holdings, Inc. 94,650 1,112 HealthAxis, Inc.+ 26,900 141 Hilb, Rogal & Hamilton Co. 25,400 719 Hooper Holmes, Inc. 129,000 2,241 Horace Mann Educators Corp. 80,500 1,172 HSB Group, Inc. 58,300 1,691 Kansas City Life Insurance Co. 24,100 654 Liberty Corp. 38,500 1,263 Markel Corp.+ 11,800 1,711 Medical Assurance, Inc.+ 46,231 613 Nationwide Financial Services, Inc., Class A 53,587 1,494 Ohio Casualty Corp. 125,700 2,090 Presidential Life Corp. 61,400 978 Reliance Group Holdings, Inc. 241,100 663 RLI Corp. 21,075 677 Number Value of Shares (000s) --------- ----------- SCPIE Holdings, Inc. 23,900 $ 707 Selective Insurance Group, Inc. 57,600 1,091 State Auto Financial Corp. 77,800 778 Trenwick Group, Inc. 36,950 522 Triad Guaranty, Inc.+ 27,600 580 UICI+ 91,100 399 W.R. Berkley Corp. 51,000 1,077 Zenith National Insurance Corp. 33,200 813 ---------- 43,318 ---------- MEDIA -- 1.6% Ackerly Group, Inc. 45,900 597 Actv, Inc.+ 92,600 1,678 Banta Corp. 53,400 1,045 Consolidated Graphics, Inc.+ 32,500 384 CTC Communications Group, Inc.+ 45,150 1,524 Cumulus Media, Inc.+ 55,300 726 Cymer, Inc.+ 56,700 2,215 Emusic.com, Inc.+ 64,500 139 Gaylord Entertainment Co. 66,100 1,582 John Wiley & Sons, Inc., Class A 122,700 2,116 Journal Register Co.+ 93,100 1,362 Loews Cineplex Entertainment Corp.+ 115,100 367 Metromedia International Group, Inc.+ 185,200 926 PanAmSat Corp.+ 38,100 1,643 Penton Media, Inc. 62,800 1,652 Scholastic Corp.+ 32,700 1,527 Sinclair Broadcast Group, Inc.+ 98,500 769 Young Broadcasting, Inc.+ 21,500 462 ---------- 20,714 ---------- MISCELLANEOUS FINANCE -- 5.4% Advanta Corp., Class A 56,509 961 Affiliated Managers Group, Inc.+ 46,200 1,854 AMCORE Financial, Inc. 55,650 1,110 American Capital Strategies Ltd. 36,100 875 Area Bancshares Corp. 32,300 630 Bay View Capital Corp. 68,000 489 BOK Financial Corp.+ 98,267 1,612 Brown & Brown 27,100 1,087 BT Financial Corp. 33,090 569 Cathay Bancorp., Inc. 17,800 810 Commercial Federal Corp. 113,700 1,769 CVB Financial Corp. 48,975 790 Dain Rauscher Corp. 25,100 1,555 Downey Financial Corp. 56,171 1,678 Fidelity National Financial, Inc. 138,082 2,037 112 Number Value of Shares (000s) --------- ----------- Financial Federal Corp.+ 28,300 $ 527 First Sentinel Bancorp., Inc. 78,062 585 First Source Corp. 37,742 778 Greater Bay Bancorp. 28,200 1,199 Heller Financial, Inc. 90,600 1,761 Henry Jack & Associates, Inc. 81,200 3,207 International Bancshares Corp. 33,850 1,401 InterWest Bancorp., Inc. 31,100 498 Investment Technology Group, Inc.+ 61,500 2,306 Investors Financial Services Corp. 30,200 2,465 ITT Educational Services, Inc.+ 50,750 907 Liberty Financial Cos., Inc. 94,300 1,768 LNR Property Corp. 45,900 990 M.D.C. Holdings, Inc. 43,500 829 Mail Well Holdings, Inc.+ 97,500 871 MessageMedia, Inc.+ 94,200 518 Midas, Inc. 42,700 1,081 Morgan Keegan, Inc. 57,950 924 National Discount Broker Group, Inc.+ 36,800 1,074 Northwest Bancorp., Inc. 94,900 688 Ocwen Financial Corp.+ 141,500 1,026 Pacific Capital Bancorp. 49,000 1,354 Phoenix Investment Partners Ltd. 87,500 760 Pioneer Group, Inc.+ 52,100 1,459 Raymond James Financial, Inc. 91,400 1,839 Sabre Group Holdings, Inc.+ 259,500 9,066 Siebert Financial Corp. 45,500 429 SierraCities.com, Inc.+ 35,100 211 Southwest Securities Group 23,700 975 Staten Island Bancorp., Inc. 79,000 1,358 Student Loan Corp. 40,100 1,604 United Asset Management Co. 116,900 2,104 Value Line, Inc. 19,500 683 Waddell & Reed Financial, Inc., Class A 90,150 2,400 Webster Financial Corp. 99,700 2,131 Wesley Jessen VisionCare, Inc.+ 41,700 1,642 ---------- 71,244 ---------- NON-FERROUS METALS -- 0.5% Commercial Metals Co. 27,633 812 Kaiser Aluminum Corp.+ 152,200 647 Minerals Technologies, Inc. 43,700 2,021 Reliance Steel & Aluminum Co. 55,675 1,281 Stillwater Mining Co.+ 75,900 2,125 ---------- 6,886 ---------- Number Value of Shares (000s) --------- ----------- OIL - DOMESTIC -- 2.4% CAL Dive International, Inc.+ 33,800 $ 1,682 Cross Timbers Oil Co. 95,725 1,382 Global Industries Ltd.+ 181,100 2,581 Houston Exploration Co.+ 47,200 853 National-Oilwell, Inc.+ 132,700 3,176 Newfield Exploration Co.+ 83,300 3,384 Nuevo Energy Co.+ 51,300 898 Patterson Energy, Inc.+ 65,000 1,836 Pennzoil-Quaker State Co. 156,300 1,710 Pioneer Natural Resources Co.+ 200,000 2,062 Pogo Producing Co. 80,800 2,071 Pride International, Inc.+ 121,200 2,742 Stone Energy Corp.+ 36,600 1,729 Superior Energy Services+ 119,900 1,109 Tesoro Petroleum Corp.+ 62,200 731 Tuboscope Vetco International Corp.+ 88,800 1,543 Vintage Petroleum, Inc. 126,500 2,514 ---------- 32,003 ---------- OPTICAL & PHOTO -- 0.6% Ingram Micro, Inc., Class A+ 141,000 2,776 Photronics, Inc.+ 47,000 1,566 Polaroid Corp. 88,200 1,780 Zomax, Inc.+ 29,800 1,410 ---------- 7,532 ---------- PAPER & FOREST PRODUCTS -- 0.7% Buckeye Technology, Inc.+ 69,800 1,335 Caraustar Industries, Inc. 49,600 753 Chesapeake Corp. 37,000 1,156 Longview Fibre Co. 102,400 1,306 PH Glatfelter Co. 84,000 903 Rock Tennessee Co., Class A 60,830 559 Thermo Fibertek, Inc.+ 122,600 827 Universal Forest Products, Inc. 38,900 525 Wausau Mosinee Paper Corp. 101,825 1,235 ---------- 8,599 ---------- PRODUCER GOODS & MANUFACTURING -- 6.5% Advanced Energy Industries, Inc.+ 57,000 3,933 AGCO Corp. 128,800 1,529 Albany International Corp., Class A+ 60,483 919 AMETEK, Inc. 64,000 1,316 Applied Industrial Technologies, Inc. 40,800 709 113 SCHWAB SMALL-CAP INDEX FUND(R) SCHEDULE OF INVESTMENTS (continued) April 30, 2000 (Unaudited) Number Value of Shares (000s) --------- ----------- AptarGroup, Inc. 73,200 $ 2,086 Astec Industries, Inc.+ 44,800 1,126 Baldor Electric, Co. 82,020 1,523 Barnes Group, Inc. 36,400 617 CLARCOR, Inc. 47,850 861 Comfort Systems USA, Inc.+ 75,000 516 Cuno, Inc.+ 33,200 901 Curtiss-Wright Corp. 19,300 688 Daisytek International Corp.+ 33,400 409 Diamond Technology Partners, Inc.+ 37,700 2,983 Encompass Services Corp.+ 44,289 307 Federal Signal Corp. 92,300 1,875 Fisher Scientific International+ 79,900 3,191 Flowserve Corp. 73,934 1,044 Foster Wheeler Corp. 89,500 822 Franklin Electric Corp. 10,500 747 Graco, Inc. 40,637 1,377 Hanover Compressor Co.+ 57,200 3,332 Helix Technology Corp. 44,300 2,262 Hughes Supply, Inc. 45,150 689 Husmann International, Inc. 100,900 1,400 Ibis Technology Corp.+ 18,000 765 IDEX Corp. 59,325 1,854 Ionics, Inc.+ 31,000 728 JLG Industries, Inc. 89,100 846 Kaydon Corp. 60,500 1,414 Kennametal, Inc. 60,000 1,725 Libbey, Inc. 32,200 982 Lincoln Electric Co., Class A 90,400 1,722 Lone Star Technologies, Inc.+ 45,200 2,085 Manitowoc Co., Inc. 51,862 1,721 Marine Drilling Co., Inc.+ 115,600 3,006 Mark IV Industries, Inc. 87,800 1,860 MascoTech, Inc. 87,500 1,012 Matthews International Corp., Class A 26,100 600 Maverick Tube Corp.+ 35,300 1,006 Metals USA, Inc. 72,300 515 Milacron, Inc. 73,800 1,347 MSC Industrial Direct, Inc.+ 67,900 951 NACCO Industries, Inc., Class A 15,650 702 Nordson Corp. 33,000 1,475 Precision Castparts Corp. 48,800 2,037 Presstek, Inc.+ 63,400 1,331 Regal Beloit 40,200 726 Roper Industries, Inc. 60,600 1,909 Sauer, Inc. 53,400 464 Scott Technologies, Inc.+ 35,700 696 Number Value of Shares (000s) --------- ----------- Shaw Group, Inc.+ 30,200 $ 1,074 SPS Technologies, Inc.+ 24,700 775 Steelcase, Inc. 50,500 593 Stewart & Stevenson Services 55,800 673 Tecumseh Products Co., Class A 39,800 1,848 Tennant Co. 17,800 620 Terex Corp.+ 56,200 878 Thermo Optek Corp.+ 100,200 1,472 UCAR International, Inc.+ 89,500 1,180 Ultratech Stepper, Inc.+ 42,900 641 Valmont Industries, Inc. 45,200 898 Watsco, Inc. 57,500 740 Watts Industries, Inc., Class A 52,300 699 WMS Industries, Inc.+ 59,300 519 York International Corp. 88,000 2,123 ---------- 85,374 ---------- RAILROAD & SHIPPING -- 0.5% Alexander & Baldwin, Inc. 86,600 1,818 Overseas Shipholding Group, Inc. 67,000 1,755 Westinghouse Air Brake Co. 101,479 1,148 Wisconsin Central Transportation Corp.+ 105,600 1,538 ---------- 6,259 ---------- REAL PROPERTY -- 0.2% Fairfield Communities, Inc.+ 74,400 674 Forest City Enterprises, Inc. 59,500 1,733 Trammell Crow Co.+ 71,400 928 ---------- 3,335 ---------- RETAIL -- 3.1% 99 Cents Only Stores+ 66,200 2,491 Ames Department Stores, Inc.+ 56,400 1,012 Burlington Coat Factory Warehouse Corp. 92,440 1,387 Casey's General Stores, Inc. 118,900 1,390 Charming Shoppes, Inc.+ 192,000 1,296 Claire's Stores, Inc. 102,075 1,882 Cost Plus, Inc.+ 48,500 1,482 Duane Reade, Inc.+ 34,400 1,032 Egghead.com, Inc.+ 68,748 320 Great Atlantic & Pacific Tea Co., Inc. 76,900 1,408 Insight Enterprises, Inc.+ 51,900 2,170 Intertan, Inc.+ 74,700 1,032 Longs Drug Stores, Inc. 78,300 1,820 114 Number Value of Shares (000s) --------- ----------- Michaels Stores, Inc.+ 61,300 $ 2,418 OfficeMax, Inc.+ 227,600 1,280 PC Connection, Inc.+ 35,700 1,709 Pep Boys-Manny, Moe, & Jack 103,000 650 PetSmart, Inc.+ 224,700 730 Pier 1 Imports, Inc. 197,500 2,247 Ruddick Corp. 91,000 1,041 Shop At Home, Inc.+ 61,200 385 ShopKo Stores, Inc.+ 59,200 1,058 Spiegel, Inc., Class A 261,100 2,154 Sunglass HUT International, Inc.+ 91,000 682 Systemax, Inc.+ 69,700 536 United Stationers, Inc.+ 71,300 2,380 Value City Department Stores, Inc.+ 63,100 643 Venator Group, Inc.+ 275,900 3,276 Whitehall Jewellers, Inc.+ 32,450 558 ---------- 40,469 ---------- STEEL -- 0.4% Bethlehem Steel Corp.+ 259,100 1,393 Carpenter Technology Corp. 43,500 873 Cleveland-Cliffs, Inc. 21,300 523 LTV Corp. 202,000 719 Ryerson Tull, Inc. 48,300 598 Steel Dynamics, Inc.+ 99,900 1,136 ---------- 5,242 ---------- TELEPHONE -- 2.5% Brightpoint, Inc.+ 106,150 1,254 CellStar Corp.+ 119,800 689 CFW Communication Co. 25,200 970 COMSAT Corp. 105,500 2,578 FirstCom Corp.+ 57,600 1,195 GST Telecommunications, Inc.+ 108,500 366 ICG Communications, Inc.+ 94,200 2,802 Inter Tel, Inc. 52,000 1,053 Interdigital Communications Corp.+ 97,000 2,007 Leap Wireless International, Inc.+ 46,600 2,394 Northeast Optic Network, Inc.+ 32,300 1,809 Optical Cable Corp.+ 74,900 1,863 Pacific Gateway Exchange, Inc.+ 39,700 251 PairGain Technologies, Inc.+ 144,900 3,604 Pegasus Communications Corp.+ 31,700 3,459 Primus Telecommunications Group, Inc.+ 73,700 2,418 TALK.com, Inc.+ 128,100 1,249 TCI Satellite Entertainment, Inc., Class A+ 126,100 1,324 Number Value of Shares (000s) --------- ----------- Teligent, Inc.+ 19,300 $ 724 World Access, Inc.+ 90,700 1,429 ---------- 33,438 ---------- TOBACCO -- 0.1% Brooke Ltd. 42,810 594 Universal Corp. 60,100 1,134 ---------- 1,728 ---------- TRAVEL & RECREATION -- 1.8% AMERCO+ 44,400 744 American Classic Voyager+ 37,700 756 Anchor Gaming, Inc.+ 23,200 934 Argosy Gaming Co.+ 56,800 909 Avis Rent A Car, Inc.+ 62,500 1,266 Aztar Corp.+ 85,800 1,024 Bally Total Fitness Holding Corp.+ 46,700 1,045 Callaway Golf Co. 152,500 2,535 Central Parking Corp. 73,000 1,871 Choice Hotels International, Inc.+ 107,700 1,420 Dollar Thrifty Automotive Group, Inc.+ 51,000 1,071 Extended Stay Amererica, Inc.+ 191,200 1,709 Intranet Solutions, Inc.+ 40,000 890 Marketing Services Group, Inc.+ 56,600 393 Prime Hospitality Corp.+ 94,700 876 Rent-Way, Inc.+ 44,200 1,147 Sodexho Marriott Services, Inc. 124,600 1,822 Station Casinos, Inc.+ 84,500 2,408 Sunterra+ 144,100 297 Vail Resorts, Inc.+ 54,400 877 ---------- 23,994 ---------- TRUCKING & FREIGHT -- 1.6% American Freightways Corp.+ 79,200 1,475 Arnold Industries, Inc. 53,500 625 Circle International Group, Inc. 38,400 1,020 Forward Air Corp.+ 41,500 1,427 Fritz Cos., Inc.+ 72,600 699 Heartland Express, Inc.+ 57,947 978 J.B. Hunt Transport Services, Inc. 70,650 1,166 Landstar Systems, Inc.+ 21,000 1,202 M.S. Carriers, Inc.+ 23,100 549 Roadway Express, Inc. 38,900 914 Rollins Truck Leasing Corp. 113,550 1,128 Swift Transportation Co., Inc.+ 129,800 2,604 US Freightways Corp. 54,600 2,546 Wabash National Corp. 45,800 667 115 SCHWAB SMALL-CAP INDEX FUND(R) SCHEDULE OF INVESTMENTS (continued) April 30, 2000 (Unaudited) Number Value of Shares (000s) --------- ----------- Werner Enterprises, Inc. 95,362 $ 1,788 XTRA Corp.+ 23,700 1,114 Yellow Corp.+ 49,900 951 ---------- 20,853 ---------- UTILITIES - ELECTRIC & GAS -- 3.8% AGL Resources, Inc. 112,800 1,974 American States Water Co. 18,000 542 Atmos Energy Corp. 63,300 1,005 Avista Corp. 93,500 2,764 Black Hills Corp. 42,900 984 California Water Service Group 25,700 599 CH Energy Group, Inc. 33,400 1,100 Cleco Corp. 44,200 1,522 CMP Group, Inc. 65,100 1,884 CTG Resources, Inc. 16,400 632 E'Town Corp. 16,800 1,095 El Paso Electric Co.+ 115,000 1,272 Empire District Electric Co. 34,700 748 Energen Corp. 59,700 1,093 Hawaiian Electric Industries, Inc. 64,100 2,372 IDACORP, Inc. 77,400 2,854 Laclede Gas Co. 38,500 756 Madison Gas & Electric Co. 31,900 578 New Jersey Resources Corp. 34,900 1,405 Northwest Natural Gas Co. 50,300 1,107 Northwestern Public Services Co. 46,400 1,067 NUI Corp. 25,500 682 ONEOK, Inc. 61,800 1,561 Otter Tail Power Co. 47,800 1,243 Philadelphia Suburban Corp. 81,700 1,961 Piedmont Natural Gas Co., Inc. 67,100 1,896 Public Service Co. of New Mexico 81,300 1,463 RGS Energy Group, Inc. 71,800 1,687 Southern Union Co.+ 94,950 1,632 Southwest Gas Corp. 60,600 1,155 UGI Corp. 54,000 1,104 Unisource Energy Corp. 64,880 1,054 United Illuminating Co. 28,200 1,297 Vectren Corp.+ 123,052 2,477 Veritas DGC, Inc.+ 60,400 1,450 WPS Resources Corp. 53,200 1,589 ---------- 49,604 ---------- TOTAL COMMON STOCK (Cost $1,274,158) 1,316,062 ---------- Par Value (000s) (000s) --------- ---------- U.S. TREASURY OBLIGATIONS -- 0.0% U.S. Treasury Bills (a) (b) 5.71%-5.76%, 06/15/00 $540 $ 536 ---------- TOTAL U.S. TREASURY OBLIGATIONS (Cost $536) 536 ---------- Number of Shares --------- SHORT-TERM INVESTMENTS -- 0.8% HSBC Holdings Grand Cayman Time Deposit 5.44%*, 05/01/00 9,164,383 9,164 Bank One Grand Cayman Time Deposit 5.44%*, 05/01/00 1,698,628 1,699 ---------- TOTAL SHORT-TERM INVESTMENTS (Cost $10,863) 10,863 ---------- TOTAL INVESTMENTS -- 100.4% (Cost $1,285,557) 1,327,461 ---------- OTHER ASSETS AND LIABILITIES, NET -- (0.4%) Other assets 1,234 Liabilities (6,202) ---------- (4,968) ---------- TOTAL NET ASSETS -- 100.0% $1,322,493 ========== SEE ACCOMPANYING NOTES TO SCHEDULES OF INVESTMENTS AND NOTES TO FINANCIAL STATEMENTS. 116 SCHWAB INTERNATIONAL INDEX FUND(R) SCHEDULE OF INVESTMENTS April 30, 2000 (Unaudited) Number Value of Shares (000s) --------- ----------- - -------------------------------------------------------------------------------- COMMON STOCKS -- 98.4% - -------------------------------------------------------------------------------- AUSTRALIA -- 1.6% AMP Ltd. 173,175 $ 1,516 Australia & New Zealand Banking Group Ltd. 224,109 1,548 Brambles Industries Ltd. 38,235 1,075 Broken Hill Proprietary Co. Ltd.+ 246,491 2,652 Cable and Wireless Optus Ltd. 510,400 1,647 Coles Myer Ltd. 192,593 721 Commonwealth Bank of Australia 124,915 1,901 National Australia Bank 227,567 3,115 News Corporation Ltd. 305,939 3,882 Westpac Banking Corp. 260,376 1,661 ---------- 19,718 ---------- BELGIUM -- 0.5% Almanij NV 27,381 1,011 Electrabel 8,291 2,009 Fortis (B) 102,444 2,592 UCB SA 24,836 837 ---------- 6,449 ---------- CANADA -- 4.6% Alcan Aluminum Ltd. 37,466 1,219 Bank of Montreal 37,377 1,356 Bank of Nova Scotia 77,594 1,767 Barrick Gold Corp. 52,091 875 BCE, Inc. 89,564 10,367 BCT. Telus Communications, Inc. 26,400 677 Bombardier, Inc., Class B 95,100 2,554 Canadian Imperial Bank of Commerce 54,445 1,426 Canadian Pacific Ltd. 50,624 1,177 Imperial Oil Ltd. 63,322 1,483 Loblaw Co. Ltd. 38,800 1,040 Nortel Networks Corp. 188,092 21,250 Royal Bank of Canada 43,886 2,070 Seagram Co. Ltd. 55,690 2,926 Thomson Corp. 89,432 2,952 Toronto-Dominion Bank 67,156 1,552 TransCanada PipeLines Ltd. 74,100 525 ---------- 55,216 ---------- Number Value of Shares (000s) --------- ----------- DENMARK -- 0.6% D/S 1912, Series B 152 $ 1,533 Dampskibsselkabet Svendborg, Series B 116 1,609 Den Danske Bank 7,622 759 Novo-Nordisk A/S, Series B 10,672 1,435 Tele Danmark A/S, Series B 30,861 2,263 ---------- 7,599 ---------- FRANCE -- 9.2% Accor SA 25,663 955 Air Liquide SA 12,742 1,663 Alcatel SA 29,135 6,770 Alstom 30,523 762 Aventis SA 53,056 2,925 Axa 50,112 7,448 Banque Nationale de Paris 44,334 3,592 Bouygues SA+ 269 172 Bouygues SA 4,596 2,940 Canal Plus 19,208 3,711 Cap Gemini SA 12,030 2,368 Carrefour Supermarche SA 76,376 4,984 Castorama Dubois Investissements SA 5,864 1,283 Compagnie de Saint-Gobain SA 13,719 1,877 Credit Commerical de France 10,393 1,484 Establissements Economiques du Casino Guichard Perrachon SA 10,894 997 Groupe Danone 10,962 2,403 Lafarge SA 18,397 1,527 L'Oreal SA 9,646 6,558 LVMH 14,362 6,042 Michelin, Series B 21,163 704 Pinault-Printemps-Redoute SA 16,706 3,378 PSA Peugeot Citroen 6,683 1,386 Sanofi-Synthelabo SA+ 110,872 4,148 Schneider Electric SA 25,234 1,656 Societe Generale 15,231 3,162 STMicroelectronics NV 41,855 8,006 Suez Lyonnaise des Eaux SA 27,554 4,331 Total Fina Elf SA 106,093 16,136 Valeo SA 13,407 745 Vivendi 78,467 7,780 ---------- 111,893 ---------- 117 SCHWAB INTERNATIONAL INDEX FUND(R) SCHEDULE OF INVESTMENTS (continued) April 30, 2000 (Unaudited) Number Value of Shares (000s) --------- ----------- GERMANY -- 6.1% BASF AG 90,279 $ 3,956 Bayer AG 106,563 4,451 Bayerische Motoren Werke (BMW) AG 91,414 2,466 Bayerische Vereinsbank AG 56,611 3,457 Commerzbank AG 68,589 2,601 DaimlerChrysler AG 139,733 8,169 Degussa-Huels AG+ 20,500 596 Deutsche Bank AG 112,865 7,601 Deutsche Lufthansa AG 51,768 1,083 Dresdner Bank AG 73,948 3,053 Ergo Versicherungs Gruppe AG 10,500 1,076 Metro AG 40,148 1,566 Muenchener Rueckversicher AG 28,456 8,363 Preussag AG 22,900 943 RWE AG 66,701 2,168 Schering AG 9,382 1,330 Siemens AG 85,595 12,714 ThyssenKrupp AG+ 78,370 1,650 Veba AG 71,701 3,607 Viag AG 66,482 1,300 Volkswagen AG 40,720 1,540 ---------- 73,690 ---------- HONG KONG / CHINA -- 2.0% Cheung Kong Holdings 331,000 3,952 CLP Holdings Ltd. 293,900 1,317 Hang Seng Bank Ltd. 298,700 2,751 Henderson Land Development Co. 282,000 1,231 Hong Kong & China Gas Co. Ltd. 723,349 794 Hong Kong Electric Holdings Ltd. 328,500 1,025 Hutchison Whampoa Ltd. 548,000 7,985 Sun Hung Kai Properties Ltd. 337,694 2,677 Swire Pacific Ltd., Class A 246,500 1,392 The Wharf Holdings Ltd. + 376,000 780 ---------- 23,904 ---------- ITALY -- 3.5% Assicurazioni Generali+ 161,472 4,606 Autostrade Concessionie Costruzioni Autostrade SPA 160,539 1,084 Banca Commerciale Italiana SPA 35,210 167 Number Value of Shares (000s) --------- ----------- Banca Di Roma SPA+ 707,950 $ 750 Banca Intesa SPA+ 457,372 1,688 Banca Intesa SPA - RNC+ 314,509 636 Edison SPA 86,055 802 ENI SPA 1,085,662 5,412 Fiat SPA 44,930 1,104 Fiat SPA - RNC 15,452 193 Istituto Nazionale Assicuraz SPA 554,495 1,193 Mediaset SPA 155,944 2,537 Olivetti SPA 589,966 1,957 Telecom Italia SPA 500,565 7,016 Telecom Italia SPA - RNC+ 179,792 1,135 TIM SPA 919,850 8,802 TIM SPA - RNC 223,802 883 Unicredito Italiano SPA 674,008 2,739 ---------- 42,704 ---------- JAPAN -- 31.1% Advantest Corp. 14,700 3,361 Ajinomoto Co., Inc. 83,000 949 The Asahi Bank Ltd. 408,000 1,963 Asahi Breweries Ltd. 86,000 875 Asahi Chemical Industry Co. Ltd. 206,000 1,186 Asahi Glass Co. Ltd. 154,000 1,351 The Bank of Tokyo-Mitsubishi Ltd. 652,500 8,416 Bridgestone Corp. 124,000 2,691 Canon, Inc. 123,000 5,622 Central Japan Railway 287 1,540 Chubu Electric Power Co. 98,100 1,616 The Chugoku Electric Power Co., Inc. 82,000 1,018 The Dai-Ichi Kangyo Bank Ltd. 445,000 3,689 DAI Nippon Printing Co. Ltd. 100,000 1,696 Daiwa House Industry Co. Ltd. 120,000 799 Daiwa Securities Group, Inc. 189,000 2,886 DDI Corp. 334 3,832 Denso Corp. 129,000 3,157 East Japan Railway Co. 375 2,221 Fanuc 33,100 3,467 The Fuji Bank Ltd. 486,000 4,047 Fuji Photo Film Co. Ltd. 72,000 2,885 Fujitsu Ltd. 262,000 7,418 Hitachi Ltd. 460,000 5,491 Honda Motor Co. Ltd. 142,000 6,346 118 Number Value of Shares (000s) --------- ----------- Hoya Corp. 15,000 $ 1,527 Industrial Bank of Japan Ltd. 368,000 3,031 Ito-Yokado Co. Ltd. 59,000 4,307 Japan Telecom Co. Ltd. 64 3,257 Japan Tobacco, Inc. 301 2,214 Jusco Co. Ltd. 54,000 999 Kansai Electric Power Co. 144,300 2,270 KAO Corp. 90,000 2,740 Kawasaki Steel Corp. 592,000 920 Keyence Corp. 5,390 1,788 Kinki Nippon Railway Co. 215,830 815 Kirin Brewery Co. Ltd. 159,000 2,070 Komatsu Ltd. 212,000 1,020 Kyocera Corp. 26,000 4,347 Kyushu Electric Power Co. 63,800 741 Matsushita Communications Industrial Co. Ltd. 26,000 4,075 Matsushita Electric Industrial Co. Ltd. 289,000 7,648 Matsushita Electric Works 94,000 1,043 Mazda Motor Corp. 212,000 651 Mitsubishi Corp. 219,000 1,905 Mitsubishi Chemical Corp. 265,000 1,062 Mitsubishi Electric Corp. 310,000 2,648 Mitsubishi Estate Co. Ltd. 189,000 2,125 Mitsubishi Heavy Industries Ltd. 510,000 1,586 Mitsubishi Trust & Banking Corp. 190,000 1,595 Mitsui & Co. 246,000 1,823 Murata Manufacturing Co. Ltd. 35,000 6,801 NEC Corp. 237,000 6,447 Nintendo Co. Ltd. 20,600 3,431 The Nikko Securities Co. Ltd. 231,000 2,725 Nippon Express Co. Ltd. 184,000 1,161 Nippon Mitsubishi Oil Corp. 222,000 768 Nippon Steel Corp. 995,000 2,237 Nippon Telegraph & Telephone Corp. 1,813 22,479 Nissan Motor Co. Ltd. 362,000 1,645 Nomura Securities Co. Ltd. 277,000 6,971 NTT DoCoMo, Inc. 1,364 45,561 Osaka Gas Co. Ltd. 392,000 1,070 Ricoh Co. Ltd. 97,000 2,046 Rohm Co. 17,000 5,694 Sakura Bank Ltd. 567,000 3,977 Sankyo Co. Ltd. 62,000 1,365 Number Value of Shares (000s) --------- ----------- The Sanwa Bank Ltd. 413,000 $ 3,990 Sanyo Electric Co. Ltd. 296,000 1,975 Secom Co. 39,000 3,269 Seibu Railway Co. 65,000 831 Sekisui House Ltd. 120,000 1,099 Seven-Eleven Japan Co. 118,000 14,521 Sharp Corp. 168,000 3,241 Shin-Etsu Chemical Co. 56,700 2,996 Shiseido Co. Ltd. 92,000 1,163 The Shizuoka Bank Ltd. 103,000 953 SMC Corp. 10,000 1,989 Sony Corp. 116,400 13,366 The Sumitomo Bank Ltd. 458,000 5,725 Sumitomo Chemical Co. Ltd. 207,000 1,030 Sumitomo Corp. 141,000 1,579 Sumitomo Electric Industries 92,000 1,225 Sumitomo Trust & Banking Co. Ltd. 220,000 1,608 Suzuki Motor Corp. Ltd. 63,000 938 Taisho Pharmaceutical Co. 51,000 1,708 Takeda Chemical Industries 127,000 8,355 TDK Corp. 19,000 2,544 Tohoku Electric Power Co. 66,600 785 The Tokai Bank Ltd. 297,000 1,544 Tokio Marine & Fire Insurance Co. 229,000 2,233 Tokyo Electric Power Co., Inc. 198,700 4,688 Tokyo Electronics Ltd. 24,000 3,911 Tokyo Gas Co. Ltd. 471,000 1,037 Toppan Printing Co. Ltd. 93,000 972 Toray Industries, Inc. 240,000 871 Toshiba Corp. 446,000 4,325 Toyota Motor Corp. 536,000 26,633 West Japan Railway Co. 175 602 Yamanouchi Pharmaceutical Co. 52,000 2,747 Yamato Transport Co. Ltd. 58,000 1,449 ---------- 377,009 ---------- NETHERLANDS -- 5.7% ABN-AMRO Holdings NV 205,161 4,235 Aegon NV 93,906 6,765 Akzo Nobel NV 43,972 1,804 ASM Lithography Holding NV+ 66,314 2,599 Elsevier NV 85,374 832 Fortis NV 63,632 1,604 119 SCHWAB INTERNATIONAL INDEX FUND(R) SCHEDULE OF INVESTMENTS (continued) April 30, 2000 (Unaudited) Number Value of Shares (000s) --------- ----------- ING Groep NV 134,674 $ 7,366 Koninklijke Ahold NV 91,034 2,128 Koninklijke Philips Electronics NV 192,924 8,627 Royal Dutch Petroleum Co. 323,703 18,702 Royal KPN NV 70,233 7,095 TNT Post Group NV 74,422 1,628 Unilever NV 84,693 3,856 VNU NV 30,444 1,633 Wolters Kluwer NV 35,554 841 ---------- 69,715 ---------- SPAIN -- 2.6% Banco Bilbao Vizcaya Argentaria SA 373,872 5,111 Banco Popular Espanol 34,068 922 Banco Santander Central Hispano SA 526,515 5,503 Endesa SA 155,665 3,385 Gas Natural SDG SA 81,460 1,364 Iberdrola SA 148,616 1,911 Repsol SA 172,541 3,538 Telefonica SA 462,897 10,327 ---------- 32,061 ---------- SWEDEN -- 3.2% Electrolux AB, Series B 48,454 820 Foreningssparbaken, Series A 76,221 1,124 Hennes & Mauritz AB, Series B 111,247 2,957 Nordic Baltic Holding AB 201,536 1,272 Skandia Forsakrings AB 69,450 3,328 Skandinaviska Enskilda Banken, Series A 106,864 1,170 Svenska Handlesbanken AB, Series A 101,022 1,337 Svenska Handelsbanken AB, Series B 53,561 688 Telefonaktiebolaget LM Ericsson, Series B 279,621 24,892 Volvo AB, Series A 26,050 609 Volvo AB, Series B 38,526 936 ---------- 39,133 ---------- SWITZERLAND -- 5.1% Adecco SA 2,605 2,142 Alusuisse Lonza Group AG 1,108 703 Cie Financiere Richemont, Series A 764 1,861 Number Value of Shares (000s) --------- ----------- Clariant AG 2,020 $ 739 Credit Suisse Group, Registered 38,884 7,040 Holderbank Financiere Glarus AG, Bearer 760 861 Holderbank Financiere Glarus AG, Registered 2,943 941 Nestle SA, Registered 5,636 9,958 Novartis AG, Registered 9,753 13,656 Roche Holding AG, Bearer 219 2,629 Roche Holding AG, Genus 987 10,332 Schweizerische Lebensversicherungs-und Rentenanstalt 1,600 849 UBS AG, Registered 29,051 7,134 Zurich Allied AG 7,042 3,000 ---------- 61,845 ---------- UNITED KINGDOM -- 22.6% Abbey National PLC 206,737 2,366 Alliance & Leicester PLC 93,610 932 Amvescap PLC 85,231 1,238 Associated British Foods PLC 135,084 803 AstraZeneca PLC 252,493 10,624 BAA PLC 143,314 930 Bank of Scotland PLC + 165,104 1,471 Barclays PLC 210,444 5,407 BASS PLC 114,181 1,342 BG Group PLC 479,109 2,871 Billiton PLC 280,553 1,047 BOC Group PLC 47,105 779 Boots Co. PLC 157,816 1,228 BP Amoco PLC 3,230,270 28,029 British Aerospace PLC 358,909 2,213 British Airways PLC 142,475 742 British American Tobacco PLC 290,455 1,765 British Energy PLC 219,483 587 British Sky Broadcasting PLC 248,190 6,117 British Telecommunications PLC 920,209 16,574 Cable & Wireless PLC 347,809 5,785 Cable & Wireless Communications PLC 169,765 2,550 Cadbury Schweppes PLC 288,970 1,985 Centrica PLC 596,018 2,126 CGU PLC 181,292 2,606 Compass Group PLC 93,368 1,331 120 Number Value of Shares (000s) --------- ----------- Diageo PLC 505,514 $ 4,109 GKN PLC 91,748 1,275 Glaxo Wellcome PLC 512,430 15,885 Granada Group PLC 253,258 2,481 Great Universal Stores PLC 171,714 1,041 Halifax Group PLC 310,803 2,913 Hanson PLC 114,055 842 Hays PLC 273,040 1,885 Hilton Group PLC 248,465 1,048 HSBC Holdings PLC 1,197,189 13,320 Imperial Chemical Industries PLC 108,538 934 Imperial Tobacco Group PLC 84,439 634 Invensys PLC 536,368 2,581 J Sainsbury PLC 256,515 1,349 Kingfisher PLC 215,397 1,772 Legal & General Group PLC 786,557 2,062 Lloyds TSB Group PLC 766,836 7,536 Marconi PLC 370,236 4,644 Marks & Spencer PLC 430,439 1,581 National Grid Group PLC 221,283 1,827 National Power PLC 159,236 725 New Dixons Group PLC 211,372 867 Norwich Union PLC 253,690 1,741 Pearson, Inc. PLC 82,993 2,871 Peninsular & Oriental Steam Navigation 87,594 869 Powergen PLC 106,860 677 Prudential Corp. PLC 269,320 4,155 Railtrack Group PLC 94,195 1,198 Reed International PLC 144,366 1,004 Rentokil Initial PLC 362,995 998 Reuters Group PLC 202,594 3,643 Rio Tinto PLC 158,600 2,469 Rolls-Royce PLC 251,663 936 Royal & Sun Alliance Insurance Group PLC 183,015 1,027 Royal Bank of Scotland Group PLC 291,815 4,550 Schroders PLC 48,763 746 Scottish & Newcastle PLC 104,466 778 Scottish & Southern Energy PLC 115,521 979 Number Value of Shares (000s) --------- ----------- Scottish Power PLC 148,235 $ 1,193 Shell Transport & Trading Co. PLC 1,430,326 11,695 SmithKline Beecham PLC 793,540 10,909 Standard Chartered PLC 144,432 1,946 Telewest Communications PLC 300,559 1,835 Tesco PLC 965,955 3,310 Unilever PLC 399,712 2,410 United Utilities PLC 91,258 878 Vodafone AirTouch PLC 7,146,254 32,932 Whitbread PLC 84,727 764 Woolwich PLC 235,114 1,147 WPP Group PLC 102,317 1,656 ---------- 274,075 ---------- TOTAL COMMON STOCKS (Cost $903,536) 1,195,011 ---------- - -------------------------------------------------------------------------------- PREFERRED STOCKS -- 0.7% - -------------------------------------------------------------------------------- AUSTRALIA -- 0.3% News Corporation Ltd. 298,837 3,212 ---------- - -------------------------------------------------------------------------------- GERMANY -- 0.4% Metro AG 5,860 123 RWE AG 18,788 495 SAP AG 5,837 3,450 Volkswagen AG 22,670 500 ---------- 4,568 ---------- ITALY -- 0.0% Fiat SPA 29,606 434 ---------- TOTAL PREFERRED STOCKS (Cost $6,005) 8,214 ---------- 121 SCHWAB INTERNATIONAL INDEX FUND(R) SCHEDULE OF INVESTMENTS (continued) April 30, 2000 (Unaudited) Number Value of Shares (000s) --------- ----------- SHORT-TERM INVESTMENTS -- 1.5% Bank One Grand Cayman Time Deposit 5.44%*, 05/01/00 17,928,079 $ 17,928 ---------- TOTAL SHORT-TERM INVESTMENTS (Cost $17,928) 17,928 ---------- TOTAL INVESTMENTS -- 100.6% (Cost $927,469) 1,221,153 ---------- OTHER ASSET AND LIABILITIES, NET -- (0.6%) Other assets 92,037 Liabilities (99,073) ---------- (7,036) ---------- TOTAL NET ASSETS -- 100.0% $1,214,117 ========== NOTES TO SCHEDULES OF INVESTMENTS April 30, 2000 (Unaudited) + Non-income producing security. * Interest rate represents the yield on report date. ADR -- American Depository Receipt. LLC -- Limited Liability Company. LP -- Limited Partnership. Ltd. -- Limited. PLC -- Public Limited Company. RNC -- Risparmio Non-Convertible. (a) Yields shown are effective yields at time of purchase. (b) These securities, or portion thereof, are being used to collaterize open futures contracts. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 122 STATEMENTS OF ASSETS AND LIABILITIES (in thousands) April 30, 2000 (Unaudited)
Schwab Schwab Schwab Total Schwab Schwab S&P 500 1000 Stock Market Small-Cap International Fund Fund(R) Index Fund(TM) Index Fund(R) Index Fund(R) ------------ ----------- -------------- ------------- ------------- ASSETS Investments, at value (Cost: $5,949,337, $4,055,428, $393,268, $1,285,557 and $927,469, respectively) $8,112,893 $7,533,707 $426,804 $1,327,461 $1,221,153 Cash -- 1 -- -- -- Foreign currency -- -- -- -- 981 Cash held as collateral for securities on loan (see Note 6) 667,248 654,761 68,685 -- 82,659 Receivables: Investments sold -- -- 23 -- 239 Fund shares sold 4,951 385 693 654 3,636 Dividends 6,202 5,503 287 414 3,816 Interest 176 30 26 4 8 Securities lending income 35 59 12 -- 57 Variation margin -- -- -- 58 -- Dividend tax reclaim -- -- -- -- 626 Deferred offering costs -- -- 26 -- -- Prepaid expenses 452 116 56 104 15 ---------- ---------- -------- ---------- ---------- Total assets 8,791,957 8,194,562 496,612 1,328,695 1,313,190 ---------- ---------- -------- ---------- ---------- LIABILITIES Collateral held for securities on loan (see Note 6) 667,248 654,761 68,685 -- 82,659 Payables: Investments purchased 80,260 4,110 1,704 5,996 15,231 Fund shares redeemed 4,650 491 148 32 416 Variation margin 109 49 8 -- -- Investment advisory and administration fees 130 167 -- 32 42 Transfer agency and shareholder service fees 75 143 5 22 21 Withholding taxes -- -- -- -- 116 Accrued expenses 532 476 330 120 376 Unrealized loss on forward foreign currency contracts (see Note 2) -- -- -- -- 212 ---------- ---------- -------- ---------- ---------- Total liabilities 753,004 660,197 70,880 6,202 99,073 ---------- ---------- -------- ---------- ---------- Net assets applicable to outstanding shares $8,038,953 $7,534,365 $425,732 $1,322,493 $1,214,117 ========== ========== ======== ========== ========== NET ASSETS CONSIST OF: Paid-in capital $5,943,770 $4,070,449 $391,066 $1,070,278 $927,792 Undistributed net investment income 22,072 15,429 1,030 1,933 3,847 Accumulated net realized gain (loss) on investments sold, futures contracts and foreign currency transactions (90,453) (30,020) (29) 209,024 (11,065) Net unrealized appreciation on investments and futures contracts 2,163,564 3,478,507 33,665 41,258 293,684 Net unrealized depreciation on translating assets and liabilities into reporting currency -- -- -- -- (141) ---------- ---------- -------- ---------- ---------- $8,038,953 $7,534,365 $425,732 $1,322,493 $1,214,117 ========== ========== ======== ========== ========== PRICING OF SHARES: Net asset value, offering and redemption price per share, applicable to outstanding shares, $0.00001 par value (unlimited shares authorized) Investor Shares ($3,499,959/156,193, $5,099,907/127,036, $196,433/8,654, $664,235/32,828, $591,015/31,229, respectively) $22.41 $40.15 $22.70 $20.23 $18.93 Select Shares ($4,076,351/181,518, $2,434,458/60,629, $229,299/10,093, $658,258/32,496, $623,102/32,908, respectively) $22.46 $40.15 $22.72 $20.26 $18.93 e. Shares ($462,643/20,631) $22.42 NA NA NA NA
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 123 STATEMENTS OF OPERATIONS (in thousands) For the six months ended April 30, 2000 (Unaudited)
Schwab Schwab Schwab Total Schwab Schwab S&P 500 1000 Stock Market Small-Cap International Fund Fund(R) Index Fund(TM) Index Fund(R) Index Fund(R) ---------- ------------ -------------- ------------- ------------- Investment income: Dividends (net of foreign tax withheld of $61, $7, $0, $3 and $952, respectively) $ 45,397 $ 41,417 $ 1,945 $ 4,840 $ 6,709 Interest 533 150 137 327 440 Securities lending 588 732 98 -- 70 -------- -------- ------- -------- ------- Total investment income 46,518 42,299 2,180 5,167 7,219 -------- -------- ------- -------- ------- Expenses: Investment advisory and administration fees 13,548 8,377 544 2,411 2,963 Transfer agency and shareholder service fees Investor Shares 4,163 6,339 212 722 668 Select Shares 1,991 1,182 96 285 278 e.Shares 228 -- -- -- -- Custodian fees 107 111 155 79 392 Portfolio accounting fees 574 549 32 103 92 Registration fees 67 86 2 38 106 Professional fees 34 93 64 11 50 Shareholder reports 100 18 89 15 106 Trustees' fees 55 65 6 8 7 Interest expense 60 106 -- -- -- Proxy fees 201 198 11 36 31 Amortization of deferred offering costs -- -- 15 -- -- Other expenses 301 94 3 18 7 -------- -------- ------- -------- ------- 21,429 17,218 1,229 3,726 4,700 Less:expenses reduced (see Note 4) (10,918) (1,113) (619) (1,194) (1,814) -------- -------- ------- -------- ------- Net expenses incurred by fund 10,511 16,105 610 2,532 2,886 -------- -------- ------- -------- ------- Net investment income 36,007 26,194 1,570 2,635 4,333 -------- -------- ------- -------- ------- Net realized gain (loss) on investments, futures contracts and foreign currency transactions: Net realized gain (loss) on investments sold (78,526) (10,138) 219 214,047 5,394 Net realized gain (loss) on futures contracts (499) 436 (119) 1,031 -- Net realized loss on foreign currency transactions -- -- -- -- (349) -------- -------- ------- -------- ------- Net realized gain (loss) on investments, futures contracts and foreign currency transactions (79,025) (9,702) 100 215,078 5,045 -------- -------- ------- -------- ------- Change in net unrealized appreciation (depreciation) on investments, futures contracts and foreign currency translation: Net unrealized appreciation (depreciation) on investments 561,637 610,283 25,050 (67,844) 45,494 Net unrealized appreciation (depreciation) on futures contracts (171) (447) 31 (646) -- Net unrealized depreciation on foreign currency translation -- -- -- -- (141) -------- -------- ------- -------- ------- Net unrealized appreciation (depreciation) on investments, futures contracts and foreign currency translation 561,466 609,836 25,081 (68,490) 45,353 -------- -------- ------- -------- ------- Net gain on investments 482,441 600,134 25,181 146,588 50,398 -------- -------- ------- -------- ------- Increase in net assets resulting from operations $518,448 $626,328 $26,751 $149,223 $54,731 ======== ======== ======= ======== =======
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 124 STATEMENTS OF CHANGES IN NET ASSETS (in thousands)
Schwab Total Schwab S&P 500 Schwab 1000 Stock Market Fund Fund(R) Index Fund(TM) ------------------------ -------------------------- ------------------------ Six months Six months Six months ended Year ended Year ended Period 04/30/00 ended 04/30/00 ended 04/30/00 ended (Unaudited) 10/31/99 (Unaudited) 10/31/99 (Unaudited) 10/31/99+ ------------ --------- ------------ --------- ------------- --------- Operations: Net investment income $ 36,007 $ 65,370 $ 26,194 $ 51,388 $ 1,570 $ 940 Net realized gain (loss) on investments and futures contracts (79,025) 22,632 (9,702) (13,695) 100 (129) Net unrealized appreciation on investments and futures contracts 561,466 1,063,273 609,836 1,244,248 25,081 8,584 ---------- ---------- ---------- ---------- -------- -------- Increase in net assets resulting from operations 518,448 1,151,275 626,328 1,281,941 26,751 9,395 ---------- ---------- ---------- ---------- -------- -------- Dividends to shareholders from net investment income: Investor Shares (27,441) (18,212) (33,936) (31,297) (667) -- Select Shares (38,359) (19,016) (19,079) (11,925) (813) -- e. Shares (4,350) (2,807) -- -- -- -- ---------- ---------- ---------- ---------- -------- -------- Distributions to shareholders from net capital gains: Investor Shares (9,855) -- -- -- -- -- Select Shares (11,814) -- -- -- -- -- e. Shares (1,354) -- -- -- -- -- ---------- ---------- ---------- ---------- -------- -------- Total dividends and distributions to shareholders (93,173) (40,035) (53,015) (43,222) (1,480) -- ---------- ---------- ---------- ---------- -------- -------- Capital share transactions: Proceeds from shares sold 2,217,545 5,031,249 1,043,492 2,713,020 191,478 295,297 Net asset value of shares issued in reinvestment of dividends 87,351 37,624 47,866 39,869 1,369 -- Early withdrawal fees (see Note 8) -- -- 611 1,032 124 79 Payments for shares redeemed (2,058,593) (2,577,012) (1,269,108) (1,552,122) (77,360) (19,921) ---------- ---------- ---------- ---------- -------- -------- Increase (decrease) in net assets from capital share transactions 246,303 2,491,861 (177,139) 1,201,799 115,611 275,455 ---------- ---------- ---------- ---------- -------- -------- Total increase in net assets 671,578 3,603,101 396,174 2,440,518 140,882 284,850 Net Assets: Beginning of period 7,367,375 3,764,274 7,138,191 4,697,673 284,850 -- ---------- ---------- ---------- ---------- -------- -------- End of period (including undistributed net investment income of $22,072, $56,216, $15,429, $42,250, $1,030, and $940, respectively) $8,038,953 $7,367,375 $7,534,365 $7,138,191 $425,732 $284,850 ========== ========== ========== ========== ======== ======== Number of fund shares: Sold 100,895 253,908 26,630 78,398 8,462 14,629 Reinvested 3,991 2,052 1,234 1,241 62 -- Redeemed (93,978) (129,013) (32,417) (44,491) (3,419) (987) ---------- ---------- ---------- ---------- -------- -------- Net increase (decrease) in shares outstanding 10,908 126,947 (4,553) 35,148 5,105 13,642 Shares outstanding: Beginning of period 347,434 220,487 192,218 157,070 13,642 -- ---------- ---------- ---------- ---------- -------- -------- End of period 358,342 347,434 187,665 192,218 18,747 13,642 ========== ========== ========== ========== ======== ======== + For the period from June 1, 1999 (commencement of operations) to October 31, 1999.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 125 STATEMENTS OF CHANGES IN NET ASSETS (in thousands)
Schwab Schwab Small-Cap International Index Fund(R) Index Fund(R) --------------------- ---------------------- Six months Six months ended Year ended Year 04/30/00 ended 04/30/00 ended (Unaudited) 10/31/99 (Unaudited) 10/31/99 ----------- -------- ----------- -------- Operations: Net investment income $ 2,635 $ 2,830 $ 4,333 $ 9,282 Net realized gain (loss) on investments, futures contracts and foreign currency transactions 215,078 (5,689) 5,045 (436) Net unrealized appreciation (depreciation) on investments, futures contracts and foreign currency translation (68,490) 135,451 45,353 159,588 ---------- -------- ---------- -------- Increase in net assets resulting from operations 149,223 132,592 54,731 168,434 ---------- -------- ---------- -------- Dividends to shareholders from net investment income: Investor Shares (1,061) (1,755) (4,063) (4,066) Select Shares (1,847) (752) (4,878) (1,055) Distributions to shareholders from net capital gains: Investor Shares -- (27,699) -- -- Select Shares -- (8,884) -- -- ---------- -------- ---------- -------- Total dividends and distributions to shareholders (2,908) (39,090) (8,941) (5,121) ---------- -------- ---------- -------- Capital share transactions: Proceeds from shares sold 432,674 608,419 396,865 520,176 Net asset value of shares issued in reinvestment of dividends 2,705 36,340 8,181 4,702 Early withdrawal fees (see Note 8) 130 408 248 115 Payments for shares redeemed (158,348) (468,908) (132,472) (314,823) ---------- -------- ---------- -------- Increase in net assets from capital share transactions 277,161 176,259 272,822 210,170 ---------- -------- ---------- -------- Total increase in net assets 423,476 269,761 318,612 373,483 Net Assets: Beginning of period 899,017 629,256 895,505 522,022 ---------- -------- ---------- -------- End of period (including undistributed net investment income of $1,933, $2,205, $3,847, and $8,898, respectively) $1,322,493 $899,017 $1,214,117 $895,505 ========== ======== ========== ======== Number of fund shares: Sold 21,419 37,207 20,690 32,399 Reinvested 144 2,378 427 316 Redeemed (7,832) (28,855) (6,881) (19,551) ---------- -------- ---------- -------- Net increase in shares outstanding 13,731 10,730 14,236 13,164 Shares outstanding: Beginning of period 51,593 40,863 49,901 36,737 ---------- -------- ---------- -------- End of period 65,324 51,593 64,137 49,901 ========== ======== ========== ========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 126 FINANCIAL HIGHLIGHTS
11/1/99- 11/1/98- 11/1/97- 11/1/96- 5/1/96- SCHWAB S&P 500 FUND 4/30/00 10/31/99 10/31/98 10/31/97 10/31/96 INVESTOR SHARES (Unaudited) - -------------------------------------------------------------------------------------------------------------------- PER-SHARE DATA ($) - -------------------------------------------------------------------------------------------------------------------- Net asset value at beginning of period 21.17 17.05 14.17 10.88 10.00 - -------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income 0.09 0.17 0.16 0.14 0.08 Net realized and unrealized gain on investments 1.40 4.10 2.85 3.24 0.80 - -------------------------------------------------------------------------------------------------------------------- Total income from investment operations 1.49 4.27 3.01 3.38 0.88 - -------------------------------------------------------------------------------------------------------------------- Less distributions: Dividends from net investment income (0.18) (0.15) (0.13) (0.09) -- Distributions from capital gains (0.07) -- -- -- -- - -------------------------------------------------------------------------------------------------------------------- Total distributions (0.25) (0.15) (0.13) (0.09) -- - -------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE AT END OF PERIOD 22.41 21.17 17.05 14.17 10.88 - -------------------------------------------------------------------------------------------------------------------- Total return (%) 7.05(1) 25.20 21.39 31.29 8.80(1) RATIOS/SUPPLEMENTAL DATA (%) - -------------------------------------------------------------------------------------------------------------------- Ratio of net operating expenses to average net assets 0.35(2,3) 0.35 0.35 0.38 0.49(2) Expense reductions reflected in above ratio 0.21(2) 0.27 0.28 0.32 0.40(2) Ratio of net investment income to average net assets 0.84(2) 1.01 1.25 1.49 1.89(2) Portfolio turnover rate 6 3 1 3 1 Net assets, end of period ($ x 1,000) 3,499,959 3,182,724 1,935,398 923,148 243,772
11/1/99- 11/1/98- 11/1/97- 5/19/97- 4/30/00 10/31/99 10/31/98 10/31/97 SELECT SHARES(R) (Unaudited) - -------------------------------------------------------------------------------------------------------- PER-SHARE DATA ($) - -------------------------------------------------------------------------------------------------------- Net asset value at beginning of period 21.23 17.09 14.19 12.85 - -------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income 0.11 0.20 0.26 0.05 Net realized and unrealized gain on investments 1.40 4.12 2.78 1.29 - -------------------------------------------------------------------------------------------------------- Total income from investment operations 1.51 4.32 3.04 1.34 - -------------------------------------------------------------------------------------------------------- Less distributions: Dividends from net investment income (0.21) (0.18) (0.14) -- Distributions from capital gains (0.07) -- -- -- - -------------------------------------------------------------------------------------------------------- Total distributions (0.28) (0.18) (0.14) -- - -------------------------------------------------------------------------------------------------------- NET ASSET VALUE AT END OF PERIOD 22.46 21.23 17.09 14.19 - -------------------------------------------------------------------------------------------------------- Total return (%) 7.13(1) 25.42 21.63 10.43(1) RATIOS/SUPPLEMENTAL DATA (%) - -------------------------------------------------------------------------------------------------------- Ratio of net operating expenses to average net assets 0.19(2) 0.19 0.19 0.19(2) Expense reductions reflected in above ratio 0.21(2) 0.28 0.28 0.34(2) Ratio of net investment income to average net assets 1.01(2) 1.17 1.40 1.46(2) Portfolio turnover rate 6 3 1 3 Net assets, end of period ($ x 1,000) 4,076,351 3,750,052 1,548,052 485,604 (1) Not annualized. (2) Annualized. (3) Would have been 0.36% if certain non-routine expenses had been included.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 127 FINANCIAL HIGHLIGHTS
11/1/99- 11/1/98- 11/1/97- 11/1/96- 5/1/96- 4/30/00 10/31/99 10/31/98 10/31/97 10/31/96 E. SHARES(R) (Unaudited) - --------------------------------------------------------------------------------------------------------------------- PER-SHARE DATA ($) - --------------------------------------------------------------------------------------------------------------------- Net asset value at beginning of period 21.21 17.08 14.19 10.89 10.00 - --------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income 0.10 0.20 0.15 0.21 0.04 Net realized and unrealized gain on investments 1.39 4.09 2.88 3.19 0.85 - --------------------------------------------------------------------------------------------------------------------- Total income from investment operations 1.49 4.29 3.03 3.40 0.89 - --------------------------------------------------------------------------------------------------------------------- Less distributions: Dividends from net investment income (0.21) (0.16) (0.14) (0.10) -- Distributions from capital gains (0.07) -- -- -- -- - --------------------------------------------------------------------------------------------------------------------- Total distributions (0.28) (0.16) (0.14) (0.10) - --------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE AT END OF PERIOD 22.42 21.21 17.08 14.19 10.89 - --------------------------------------------------------------------------------------------------------------------- Total return (%) 7.03(1) 25.28 21.50 31.48 8.90(1) RATIOS/SUPPLEMENTAL DATA (%) - --------------------------------------------------------------------------------------------------------------------- Ratio of net operating expenses to average net assets 0.28(2) 0.28 0.28 0.28 0.28(2) Expense reductions reflected in above ratio 0.12(2) 0.20 0.24 0.33 0.91(2) Ratio of net investment income to average net assets 0.91(2) 1.08 1.32 1.61 1.82(2) Portfolio turnover rate 6 3 1 3 1 Net assets, end of period ($ x 1,000) 462,643 434,599 280,824 131,691 36,331 (1) Not annualized. (2) Annualized.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 128
11/1/99- 11/1/98- 11/1/97- 9/1/97- 9/1/96- 9/1/95- 9/1/94- SCHWAB 1000 FUND(R) 4/30/00 10/31/99 10/31/98 10/31/97 8/31/97 8/31/96 8/31/95 INVESTOR SHARES (Unaudited) - ------------------------------------------------------------------------------------------------------------------------- PER-SHARE DATA ($) - ------------------------------------------------------------------------------------------------------------------------- Net asset value at beginning of period 37.12 29.90 25.25 24.78 18.14 15.68 13.08 - ------------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income 0.14 0.26 0.27 0.04 0.28 0.24 0.26 Net realized and unrealized gain on investments 3.15 7.21 4.64 0.43 6.62 2.45 2.48 - ------------------------------------------------------------------------------------------------------------------------- Total income from investment operations 3.29 7.47 4.91 0.47 6.90 2.69 2.74 - ------------------------------------------------------------------------------------------------------------------------- Less distributions: Dividends from net investment income (0.26) (0.25) (0.26) -- (0.26) (0.23) (0.14) - ------------------------------------------------------------------------------------------------------------------------- Total distributions (0.26) (0.25) (0.26) -- (0.26) (0.23) (0.14) - ------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE AT END OF PERIOD 40.15 37.12 29.90 25.25 24.78 18.14 15.68 - ------------------------------------------------------------------------------------------------------------------------- Total return (%) 8.88(1) 25.12 19.63 1.90(1) 38.32 17.27 21.23 RATIOS/SUPPLEMENTAL DATA (%) - ------------------------------------------------------------------------------------------------------------------------- Ratio of net operating expenses to average net assets 0.46(2,3) 0.46 0.46 0.46(2) 0.47 0.49 0.54 Expense reductions reflected in above ratio 0.04(2) 0.05 0.05 0.04(2) 0.06 0.08 0.09 Ratio of net investment income to average net assets 0.67(2) 0.78 1.02 1.00(2) 1.33 1.66 2.03 Portfolio turnover rate 5 3 2 -- 2 2 2 Net assets, end of period ($ x 1,000) 5,099,907 4,924,606 3,657,122 2,610,607 2,498,891 1,560,059 826,714
11/1/99- 11/1/98- 11/1/97- 9/1/97- 5/19/97- 4/30/00 10/31/99 10/31/98 10/31/97 8/31/97 SELECT SHARES(R) (Unaudited) - ----------------------------------------------------------------------------------------------------- PER-SHARE DATA ($) - ----------------------------------------------------------------------------------------------------- Net asset value at beginning of period 37.16 29.93 25.26 24.79 22.64 - ----------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income 0.15 0.30 0.32 0.04 0.05 Net realized and unrealized gain on investments 3.16 7.22 4.63 0.43 2.10 - ----------------------------------------------------------------------------------------------------- Total income from investment operations 3.31 7.52 4.95 0.47 2.15 Less distributions: Dividends from net investment income (0.32) (0.29) (0.28) -- -- - ----------------------------------------------------------------------------------------------------- Total distributions (0.32) (0.29) (0.28) -- -- - ----------------------------------------------------------------------------------------------------- NET ASSET VALUE AT END OF PERIOD 40.15 37.16 29.93 25.26 24.79 - ----------------------------------------------------------------------------------------------------- Total return (%) 8.92(1) 25.29 19.79 1.90(1) 9.50(1) RATIOS/SUPPLEMENTAL DATA (%) - ----------------------------------------------------------------------------------------------------- Ratio of net operating expenses to average net assets 0.35(2,4) 0.35 0.35 0.35(2) 0.35(2) Expense reductions reflected in above ratio 0.00(2) 0.02 0.04 0.06(2) 0.33(2) Ratio of net investment income to average net assets 0.78(2) 0.89 1.11 1.11(2) 1.26(2) Portfolio turnover rate 5 3 2 -- 2 Net assets, end of period ($ x 1,000) 2,434,458 2,213,585 1,040,551 426,392 347,244 (1) Not annualized. (2) Annualized. (3) Would have been 0.47% if certain non-routine expenses had been included. (4) Would have been 0.36% if certain non-routine expenses had been included.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 129 FINANCIAL HIGHLIGHTS (continued) 11/1/99- 6/1/99- SCHWAB TOTAL STOCK MARKET INDEX FUND(TM) 4/30/00 10/31/99 INVESTOR SHARES (Unaudited) - -------------------------------------------------------------------------------- PER-SHARE DATA ($) - -------------------------------------------------------------------------------- Net asset value at beginning of period 20.87 20.00 - -------------------------------------------------------------------------------- Income from investment operations: Net investment income 0.08 0.07 Net realized and unrealized gain on investments 1.85 0.80 - -------------------------------------------------------------------------------- Total income from investment operations 1.93 0.87 - -------------------------------------------------------------------------------- Less distributions: Dividends from net investment income (0.10) -- - -------------------------------------------------------------------------------- Total distributions (0.10) -- NET ASSET VALUE AT END OF PERIOD 22.70 20.87 - -------------------------------------------------------------------------------- Total return (%) 9.24(1) 4.35(1) RATIOS/SUPPLEMENTAL DATA (%) - -------------------------------------------------------------------------------- Ratio of net operating expenses to average net assets 0.40(2,3) 0.40(2) Expense reductions reflected in above ratio 0.35(2) 0.51(2) Ratio of net investment income to average net assets 0.80(2) 0.92(2) Portfolio turnover rate 1 1 Net assets, end of period ($ x 1,000) 196,433 135,71 11/1/99- 6/1/99- 4/30/00 10/31/99 SELECT SHARES(R) (Unaudited) - -------------------------------------------------------------------------------- PER-SHARE DATA ($) - -------------------------------------------------------------------------------- Net asset value at beginning of period 20.89 20.00 - -------------------------------------------------------------------------------- Income from investment operations: Net investment income 0.09 0.07 Net realized and unrealized gain on investments 1.84 0.82 - -------------------------------------------------------------------------------- Total income from investment operations 1.93 0.89 - -------------------------------------------------------------------------------- Less distributions: Dividends from net investment income (0.10) -- - -------------------------------------------------------------------------------- Total distributions (0.10) -- - -------------------------------------------------------------------------------- NET ASSET VALUE AT END OF PERIOD 22.72 20.89 - -------------------------------------------------------------------------------- Total return (%) 9.26(1) 4.45(1) RATIOS/SUPPLEMENTAL DATA (%) - -------------------------------------------------------------------------------- Ratio of net operating expenses to average net assets 0.27(2,4) 0.27(2) Expense reductions reflected in above ratio 0.33(2) 0.47(2) Ratio of net investment income to average net assets 0.93(2) 1.05(2) Portfolio turnover rate 1 1 Net assets, end of period ($ x 1,000) 229,299 149,131 (1) Not annualized. (2) Annualized. (3) Would have been 0.41% if certain non-routine expenses had been included. (4) Would have been 0.28% if certain non-routine expenses had been included. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 130
11/1/99- 11/1/98- 11/1/97- 11/1/96- 11/1/95- 11/1/94- SCHWAB SMALL-CAP INDEX FUND(R) 4/30/00 10/31/99 10/31/98 10/31/97 10/31/96 10/31/95 INVESTOR SHARES (Unaudited) - ------------------------------------------------------------------------------------------------------------------------ PER-SHARE DATA ($) - ------------------------------------------------------------------------------------------------------------------------ Net asset value at beginning of period 17.41 15.39 17.73 13.59 11.70 10.05 - ------------------------------------------------------------------------------------------------------------------------ Income from investment operations: Net investment income 0.03 0.06 0.05 0.06 0.07 0.10 Net realized and unrealized gain (loss) on investments 2.83 2.89 (2.33) 4.14 1.88 1.61 - ------------------------------------------------------------------------------------------------------------------------ Total income (loss) from investment operations 2.86 2.95 (2.28) 4.20 1.95 1.71 - ------------------------------------------------------------------------------------------------------------------------ Less distributions: Dividends from net investment income (0.04) (0.06) (0.06) (0.06) (0.06) (0.06) Distributions from capital gains -- (0.87) -- -- -- -- - ------------------------------------------------------------------------------------------------------------------------ Total distributions (0.04) (0.93) (0.06) (0.06) (0.06) (0.06) - ------------------------------------------------------------------------------------------------------------------------ NET ASSET VALUE AT END OF PERIOD 20.23 17.41 15.39 17.73 13.59 11.70 - ------------------------------------------------------------------------------------------------------------------------ Total return (%) 16.44(1) 19.96 (12.88) 31.03 16.73 17.11 RATIOS/SUPPLEMENTAL DATA (%) - ------------------------------------------------------------------------------------------------------------------------ Ratio of net operating expenses to average net assets 0.49(2,3) 0.49 0.49 0.52 0.59 0.68 Expense reductions reflected in above ratio 0.25(2) 0.30 0.32 0.37 0.35 0.34 Ratio of net investment income to average net assets 0.40(2) 0.33 0.35 0.53 0.56 0.68 Portfolio turnover rate 50 41 40 23 23 24 Net assets, end of period ($ x 1,000) 664,235 452,099 479,500 410,470 209,125 122,074
11/1/99- 11/1/98- 11/1/97- 5/19/97- 4/30/00 10/31/99 10/31/98 10/31/97 SELECT SHARES(R) (Unaudited) - ------------------------------------------------------------------------------------------------------------------------ PER-SHARE DATA ($) - ------------------------------------------------------------------------------------------------------------------------ Net asset value at beginning of period 17.44 15.41 17.75 14.50 - ------------------------------------------------------------------------------------------------------------------------ Income from investment operations: Net investment income 0.05 0.07 0.08 0.02 Net realized and unrealized gain (loss) on investments 2.84 2.90 (2.35) 3.23 - ------------------------------------------------------------------------------------------------------------------------ Total income (loss) from investment operations 2.89 2.97 (2.27) 3.25 - ------------------------------------------------------------------------------------------------------------------------ Less distributions: Dividends from net investment income (0.07) (0.07) (0.07) -- - ------------------------------------------------------------------------------------------------------------------------ Distributions from capital gains -- (0.87) -- -- - ------------------------------------------------------------------------------------------------------------------------ Total distributions (0.07) (0.94) (0.07) -- - ------------------------------------------------------------------------------------------------------------------------ NET ASSET VALUE AT END OF PERIOD 20.26 17.44 15.41 17.75 - ------------------------------------------------------------------------------------------------------------------------ Total return (%) 16.60(1) 20.14 (12.81) 22.41(1) RATIOS/SUPPLEMENTAL DATA (%) - ------------------------------------------------------------------------------------------------------------------------ Ratio of net operating expenses to average net assets 0.38(2,4) 0.38 0.38 0.38(2) Expense reductions reflected in above ratio 0.16(2) 0.27 0.33 0.52(2) Ratio of net investment income to average net assets 0.52(2) 0.44 0.46 0.56(2) Portfolio turnover rate 50 41 40 23 Net assets, end of period ($ x 1,000) 658,258 446,918 149,756 81,174 (1) Not annualized. (2) Annualized. (3) Would have been 0.50% if certain non-routine expenses had been included. (4) Would have been 0.39% if certain non-routine expenses had been included.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 131 FINANCIAL HIGHLIGHTS (continued)
11/1/99- 11/1/98- 11/1/97- 11/1/96- 11/1/95- 11/1/94- SCHWAB INTERNATIONAL INDEX FUND(R) 4/30/00 10/31/99 10/31/98 10/31/97 10/31/96 10/31/95 INVESTOR SHARES (Unaudited) - ------------------------------------------------------------------------------------------------------------------------ PER-SHARE DATA ($) - ------------------------------------------------------------------------------------------------------------------------ Net asset value at beginning of period 17.93 14.21 13.31 12.23 11.13 10.89 - ------------------------------------------------------------------------------------------------------------------------ Income from investment operations: Net investment income 0.02 0.19 0.17 0.17 0.16 0.14 Net realized and unrealized gain on investments 1.13 3.66 0.88 1.08 1.07 0.22 - ------------------------------------------------------------------------------------------------------------------------ Total income from investment operations 1.15 3.85 1.05 1.25 1.23 0.36 - ------------------------------------------------------------------------------------------------------------------------ Less distributions: Dividends from net investment income (0.15) (0.13) (0.15) (0.17) (0.13) (0.12) - ------------------------------------------------------------------------------------------------------------------------ Total distributions: (0.15) (0.13) (0.15) (0.17) (0.13) (0.12) - ------------------------------------------------------------------------------------------------------------------------ NET ASSET VALUE AT END OF PERIOD 18.93 17.93 14.21 13.31 12.23 11.13 - ------------------------------------------------------------------------------------------------------------------------ Total return (%) 6.43(1) 27.31 8.02 10.33 11.07 3.35 RATIOS/SUPPLEMENTAL DATA (%) - ------------------------------------------------------------------------------------------------------------------------ Ratio of net operating expenses to average net assets 0.58(2,3) 0.58 0.58 0.61 0.69 0.85 Expense reductions reflected in above ratio 0.35(2) 0.41 0.46 0.52 0.48 0.37 Ratio of net investment income to average net assets 0.74(2) 1.24 1.35 1.36 1.50 1.45 Portfolio turnover rate 2 5 6 13 6 -- Net assets, end of period ($ x 1,000) 591,015 446,625 428,462 317,833 246,778 179,612
11/1/99- 11/1/98- 11/1/97- 5/19/97- 4/30/00 10/31/99 10/31/98 10/31/97 SELECT SHARES(R) (Unaudited) - ------------------------------------------------------------------------------------------------------------------------ PER-SHARE DATA ($) - ------------------------------------------------------------------------------------------------------------------------ Net asset value at beginning of period 17.96 14.23 13.32 13.59 - ------------------------------------------------------------------------------------------------------------------------ Income from investment operations: Net investment income 0.08 0.18 0.22 0.04 Net realized and unrealized gain (loss) on investments 1.07 3.70 0.85 (0.31) - ------------------------------------------------------------------------------------------------------------------------ Total income (loss) from investment operations 1.15 3.88 1.07 (0.27) - ------------------------------------------------------------------------------------------------------------------------ Less distributions: Dividends from net investment income (0.18) (0.15) (0.16) -- - ------------------------------------------------------------------------------------------------------------------------ Total distributions: (0.18) (0.15) (0.16) -- - ------------------------------------------------------------------------------------------------------------------------ NET ASSET VALUE AT END OF PERIOD 18.93 17.96 14.23 13.32 - ------------------------------------------------------------------------------------------------------------------------ Total return (%) 6.41(1) 27.49 8.16 (1.99)(1) RATIOS/SUPPLEMENTAL DATA (%) - ------------------------------------------------------------------------------------------------------------------------ Ratio of net operating expenses to average net assets 0.47(2,4) 0.47 0.47 0.47(2) Expense reductions reflected in above ratio 0.31(2) 0.39 0.48 0.80(2) Ratio of net investment income to average net assets 0.85(2) 1.57 1.49 0.17(2) Portfolio turnover rate 2 5 6 13 Net assets, end of period ($ x 1,000) 623,102 448,880 93,560 49,529 (1) Not annualized. (2) Annualized. (3) Would have been 0.59% if certain non-routine expenses had been included. (4) Would have been 0.48% if certain non-routine expenses had been included.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 132 NOTES TO FINANCIAL STATEMENTS For the six months ended April 30, 2000 (Unaudited) (All currency amounts are in thousands unless otherwise noted.) 1. DESCRIPTION OF THE FUNDS The Schwab S&P 500 Fund, Schwab Total Stock Market Index Fund(TM), Schwab Small-Cap Index Fund(R) and Schwab International Index Fund(R) are series of the Schwab Capital Trust (the "Capital trust") and the Schwab 1000 Fund(R) is a series of Schwab Investments (the "Investment trust"), each a no-load, open-end investment management company organized as Massachusetts business trusts on May 7, 1993 and October 26, 1990, respectively, and registered under the Investment Company Act of 1940, as amended (the "1940 Act"). Each series in this report is hereafter referred to as a "fund". The Schwab S&P 500 Fund, Schwab 1000 Fund, Schwab Total Stock Market Index Fund, Schwab Small-Cap Index Fund and Schwab International Index Fund each offer two classes of shares -- the Investor Shares and the Select Shares(R). Both classes represent interests in the same portfolio of investments of each fund and are substantially the same in all respects except that the classes are subject to different shareholder service fees (see Note 3), investment minimums and certain other expenses. In addition, the Schwab S&P 500 Fund offers a third class of shares --the e.Shares(R). This class is similar to the Select Shares with respect to transfer agency and shareholder service fees, but the e.Shares are available only to clients of Schwab Institutional, Charles Schwab Trust Company and to certain tax-advantaged retirement plans that can execute their trading and information requests through SchwabLink(TM). In addition to the Schwab S&P 500 Fund, Schwab Total Stock Market Index Fund, Schwab Small-Cap Index Fund and Schwab International Index Fund, the Capital trust also offers the Schwab MarketTrack Growth Portfolio, Schwab MarketTrack Balanced Portfolio, Schwab MarketTrack Conservative Portfolio, Schwab MarketTrack All Equity Portfolio, Schwab Analytics Fund(R), Schwab MarketManager Growth Portfolio, Schwab MarketManager Balanced Portfolio, Schwab MarketManager Small Cap Portfolio, Schwab MarketManager International Portfolio, Institutional Select(TM) S&P 500 Fund, Institutional Select(TM) Large-Cap Value Index Fund and Institutional Select(TM) Small-Cap Value Index Fund. The assets of each series are segregated and accounted for separately. In addition to the Schwab 1000 Fund, the Investment trust also offers the Schwab Short-Term Bond Market Index Fund, Schwab Total Bond Market Index Fund, Schwab California Short/Intermediate Tax-Free Bond Fund, Schwab California Long-Term Tax-Free Bond Fund, Schwab Short/Intermediate Tax-Free Bond Fund, Schwab Long-Term Tax-Free Bond Fund and Schwab YieldPlus Fund(TM). 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. 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. 133 NOTES TO FINANCIAL STATEMENTS (continued) SECURITY VALUATION -- Investments in securities traded on an exchange or in the over-the-counter market 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 funds' investment adviser pursuant to guidelines adopted in good faith by the Board of Trustees. Futures contracts, which are traded on exchanges, are valued at their settlement prices as of the close of such exchanges. Short-term securities with 60 days or less to maturity are stated at amortized cost, which approximates market value. SECURITY TRANSACTIONS, INVESTMENT INCOME AND REALIZED GAINS (LOSSES) -- Security transactions are accounted for on a trade-date basis (date the order to buy or sell is executed). Dividend income and distributions to shareholders are recorded on the ex-dividend date, except that certain dividends from foreign securities are recorded as soon as the funds are informed of the ex-dividend date. Interest income (including accretion of discounts) is recorded on the accrual basis. Realized gains and losses from security transactions are determined on an identified cost basis. FUTURES CONTRACTS -- The Schwab S&P 500 Fund, Schwab 1000 Fund(R), Schwab Total Stock Market Index Fund(TM) and Schwab Small-Cap Index Fund(R) may invest in futures contracts. The funds are required to deposit with the broker an amount of cash equivalents equal to a certain percentage of the contract amount. This is known as the "initial margin." The "variation margin" represents the daily fluctuation in the value of the contract. When the contract is closed, the funds record a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the time it was closed. The funds will invest in these instruments to participate in the return of an index. The use of futures contracts involves certain risks, which include (1) imperfect correlation between the price movement of the contracts and the underlying securities, or (2) inability to close out positions due to different trading hours, or the temporary absence of a liquid market, for either the contract or underlying securities. These risks may involve amounts exceeding the amount recognized in each fund's statement of operations at any given time. As of April 30, 2000, the Schwab S&P 500 Fund, the Schwab 1000 Fund, the Schwab Total Stock Market Index Fund and the Schwab Small-Cap Index Fund had the following open Index futures contracts:
Unrealized Type of Number of Contract Appreciation Fund Contract Contracts Value Expiration (Depreciation) - ----- ---------- ---------- ---------- ---------- ------------- Schwab S&P 500 Fund S&P 500 Index 53 $19,345 6/16/00 $ 8 Schwab 1000 Fund S&P 500 Index 27 9,855 6/16/00 228 Schwab Total Stock Market Index Fund S&P 500 Index 9 3,285 6/16/00 152 Russell 2000 Index 2 509 6/16/00 (23) Schwab Small-Cap Index Fund Russell 2000 Index 14 3,564 6/16/00 (646)
The eligible securities on deposit with brokers available to cover margin requirements for open futures positions at April 30, 2000 were $1,430 for the Schwab S&P 500 Fund, $561 for the Schwab 1000 Fund, $209 for the Total Stock Market Index Fund and $536 for the Schwab Small-Cap Index Fund, respectively. The funds have segregated short-term investments and other securities for the remaining portion of the contract value. 134 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 funds' custodian and is monitored daily to ensure that its market value at least equals the repurchase price under the agreement. FOREIGN CURRENCY TRANSLATION -- The accounting records of the Schwab International Index Fund(R) are maintained in U.S. dollars. Investment securities and all other assets and liabilities of the fund denominated in foreign currencies are translated into U.S. dollars at the exchange rates on April 30, 2000. Purchases and sales of securities, income receipts and expense payments are translated into U.S. dollars at the exchange rate in effect on the dates of the respective transactions. The Schwab International Index Fund separates within its statement of operations the portion of realized and unrealized gains and losses resulting from changes in foreign currency exchange rates from the fluctuations in market prices of investments held. FORWARD CURRENCY CONTRACTS -- A forward currency contract ("Forward") is an agreement between two parties to buy and sell a currency at a set price on a future date. The value of the Forward fluctuates with changes in currency exchange rates. The Forward is marked-to-market daily and the change in value is recorded by the Schwab International Index Fund as an unrealized gain or loss. When the Forward is closed, the Schwab International Index Fund records a realized gain or loss equal to the difference between the value at the time the contract was entered into and the value at the time the contract was closed. The Schwab International Index Fund engages in Forwards in connection with the purchase and sale of portfolio securities to minimize the uncertainty of changes in future exchange rates. The Schwab International Index Fund could be exposed to risk if counterparties to the contracts are unable to meet the terms of the contracts or if the value of the foreign currency changes unfavorably. The following forward foreign currency contracts were outstanding as of April 30, 2000:
Settlement Foreign Currency In Exchange Net Unrealized Dates to Receive for (U.S. $) Depreciation ------------ ---------------- ------------- ------------- Foreign Currency Purchases: Australian Dollar 5/1/00 145 $ 852 $ (8) British Pound 5/4/00 237 375 (3) Canadian Dollar 5/1/00 945 641 (3) European Currency 5/2/00 3,020 2,792 (40) European Currency 5/31/00 3,785 3,507 (51) Japanese Yen 5/1/00 463,182 4,360 (88) Swedish Krona 5/2/00 8,611 970 (8) Swiss Franc 5/2/00 1,655 973 (11) ------- ----- $14,470 $(212) ======= =====
135 NOTES TO FINANCIAL STATEMENTS (continued) EXPENSES -- Expenses arising in connection with a fund are charged directly to that 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 each fund's policy to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all net investment income and realized net capital gains, if any, to shareholders. Therefore, no federal income tax provision is required. Each fund is considered a separate entity for tax purposes. The aggregate unrealized appreciation and depreciation for securities held by the funds at April 30, 2000, which was substantially the same for financial reporting and federal income tax purposes, was as follows:
Net Unrealized Appreciated Depreciated Fund Appreciation Securities Securities ---- -------------- ----------- ----------- Schwab S&P 500 Fund $2,163,564 $2,639,355 $ (475,791) Schwab 1000 Fund(R) 3,478,507 3,675,886 (197,379) Schwab Total Stock Market Index Fund(TM) 33,665 73,704 (40,039) Schwab Small-Cap Index Fund(R) 41,258 214,509 (173,251) Schwab International Index Fund(R) 293,684 345,151 (51,467)
At October 31, 1999, the unused capital loss carryforwards, for federal income tax purposes with expiration dates, were as follows:
Schwab Total Schwab Small Schwab Schwab 1000 Stock Market Cap Index International Capital Loss Expirations: Fund Index Fund Fund Index Fund ------------------------- ----------- ------------ ------------ ------------- 10/31/00 $ 354 $-- $ -- $ -- 10/31/02 935 -- -- 140 10/31/03 -- -- -- -- 10/31/04 844 -- -- 1,743 10/31/05 2,606 -- -- 1,837 10/31/06 650 -- -- 11,905 10/31/07 11,853 18 4,126 7 ------- --- ------ ------- $17,242 $18 $4,126 $15,632 ======= === ====== =======
RECLASSIFICATIONS -- Generally accepted accounting principles require that certain components of net assets be reclassified between financial and tax reporting. These reclassifications have no effect on net assets or net asset values per share. On the statements of assets and liabilities, the following reclassifications were made:
Accumulated Undistributed Net Realized Net Investment Fund Gain (Loss) Income Paid-In Capital ---- ------------ -------------- --------------- Schwab S&P 500 Fund $ (1) $ (1) $ 2 Schwab Small-Cap Index Fund (1) 1 -- Schwab International Index Fund 443 (443) --
136 NOTES TO FINANCIAL STATEMENTS (continued) 3. TRANSACTIONS WITH AFFILIATES INVESTMENT ADVISORY AND ADMINISTRATION AGREEMENT -- The Capital trust and the Investment trust have investment advisory and administration agreements with Charles Schwab Investment Management, Inc. (the "investment adviser"). For advisory services and facilities furnished, the Schwab S&P 500 Fund pays an annual fee, payable monthly, of 0.20% of the first $500 million of average daily net assets, and 0.17% of such net assets over $500 million. the Schwab 1000 Fund(R) and Total Stock Market Index Fund(TM) pay an annual fee, payable monthly, of 0.30% of the first $500 million of average daily net assets and 0.22% of such net assets over $500 million. The Schwab Small-Cap Index Fund(R) pays an annual fee, payable monthly, of 0.33% of the first $500 million of average daily net assets and 0.28% of such net assets over $500 million. The Schwab International Index Fund(R) pays an annual fee, payable monthly, of 0.43% of the first $500 million of average daily net assets and 0.38% of such net assets over $500 million. The investment adviser has reduced a portion of its fee for the six months ended April 30, 2000 (See Note 4). Prior to February 29, 2000, for advisory services and facilities furnished, the Schwab S&P 500 Fund paid an annual fee, payable monthly, of 0.36% of the first $1 billion of average daily net assets, 0.33% of the next $1 billion of such net assets, and 0.31% of such net assets over $2 billion. The Schwab Small-Cap Index Fund paid an annual fee, payable monthly, of 0.50% of the first $300 million of average daily net assets and 0.45% of such net assets over $300 million. The Schwab International Index Fund paid an annual fee, payable monthly, of 0.70% of the first $300 million of average daily net assets and 0.60% of such net assets over $300 million. TRANSFER AGENCY AND SHAREHOLDER SERVICE AGREEMENTS -- The Capital trust and Investment trust have 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 each fund's average daily net assets for transfer agency services. for shareholder services provided, Schwab will receive from the Investor Shares, Select Shares(R) and e.Shares(R) an annual fee of 0.20%, 0.05% and 0.05%, respectively, of the average daily net assets of that class of shares. Schwab has reduced a portion of its fees for the six months ended April 30, 2000 (See Note 4). OFFICERS AND TRUSTEES -- Certain officers and trustees of the Capital trust and the Investment trust are also officers and/or directors of the investment adviser and/or Schwab. During the six months ended April 30, 2000, the Capital trust and the Investment trust made no direct payments to its officers or trustees who are "interested persons" within the meaning of the 1940 Act. The funds incurred fees aggregating $141 related to the trusts' unaffiliated trustees. OTHER AFFILIATED PARTIES AND TRANSACTIONS -- As of April 30, 2000, Schwab S&P 500 Fund, Schwab Small-Cap Index Fund and Schwab International Index Fund, had outstanding shares of 1.1%, 0.7%, 0.2% and 1.8%; 8.3%, 5.4%, 1.4%, and 6.4%; and 8.5%, 5.5%, 1.4% and 8.1%, respectively, owned by Schwab MarketTrack Growth Portfolio, Schwab MarketTrack Balanced Portfolio, Schwab MarketTrack Conservative Portfolio and Schwab MarketTrack All Equity Portfolio, respectively. 137 NOTES TO FINANCIAL STATEMENTS (continued) As of April 30, 2000, the Schwab S&P 500 Fund, Schwab 1000 Fund(R) and Schwab Total Stock Market Index Fund(TM) held common stock of the Charles Schwab Corp., an affiliated issuer, with a current value of $23,735, $20,904, and $975, respectively. INTERFUND TRANSACTIONS -- For the six months ended April 30, 2000, the Schwab S&P 500 Fund, Schwab 1000 Fund, Schwab Total Stock Market Index Fund, Schwab Small-Cap Index Fund(R) and Schwab International Index Fund(R) engaged in purchase and sale transactions with funds that have a common investment adviser, common trustees and common officers. These purchases and sale transactions, made at current market value pursuant to Rule 17a-7 under the 1940 Act, were $1,941, $174,145, $187, $174,610, and $272, respectively. 4. EXPENSES REDUCED AND ABSORBED BY THE INVESTMENT ADVISER AND SCHWAB The investment adviser and Schwab guarantee that, through at least February 28, 2001, total operating expenses of each class of shares will not exceed the percentages of the average daily net assets of that class of shares, after waivers and reimbursements, as shown below. For the purpose of this guarantee, operating expenses do not include interest, taxes and certain non-routine expenses. The operating expense ratio for the six months ended April 30, 2000, did include non-routine expenses.
Fund Investor Shares Select Shares e.Shares ---- --------------- ------------- -------- Schwab S&P 500 Fund 0.35% 0.19% 0.28% Schwab 1000 Fund 0.46% 0.35% N/A Schwab Total Stock Market Index Fund 0.40% 0.27% N/A Schwab Small-Cap Index Fund 0.49% 0.38% N/A Schwab International Index Fund 0.58% 0.47% N/A
For the six months ended April 30, 2000, the total of such fees and expenses reduced by the investment adviser were $7,794, $99, $541, $1,078, and $1,707 for the Schwab S&P 500 Fund, Schwab 1000 Fund, Schwab Total Stock Market Index Fund, Schwab Small-Cap Index Fund and Schwab International Index Fund, respectively. The total of such fees reduced by Schwab were $3,124, $1,014, $78, $116, and $107 for the Schwab S&P 500 Fund, Schwab 1000 Fund, Schwab Total Stock Market Index Fund, Schwab Small-Cap Index Fund and Schwab International Index Fund, respectively. 5. BORROWING AGREEMENTS The trusts have both committed and uncommitted lines of credit arrangements with PNC Bank N.A., Bank of America NT & SA and The Bank of New York, whereby the trusts may borrow on behalf of the funds, as a temporary measure to satisfy redemption requests or for extraordinary or emergency purposes. The trusts may borrow in an aggregate amount of up to $150 million from PNC Bank N.A., $133 million from Bank of America NT & SA and $183 million from The Bank of New York. Amounts borrowed under these arrangements bear interest at periodically negotiated rates. The funds also pay annual fees for the unused balance of the committed line of credit. During the reporting period, the funds only borrowed against the uncommitted lines of credit. As of April 30, 2000, there were no borrowings outstanding. 138 NOTES TO FINANCIAL STATEMENTS (continued) 6. SECURITIES LENDING The Schwab S&P 500 Fund, Schwab 1000 Fund(R), Schwab Total Stock Market Index Fund(TM) and Schwab International Index Fund(R) loaned securities to certain brokers, dealers and other financial institutions who paid the funds negotiated lenders' fees. The funds received cash collateral, letters of credit or U.S. Government securities against the loaned securities in an amount equal to 102% of the market value of the loaned securities at the inception of each loan. The loans were and at all times will be collateralized in an amount equal to at least 100% of the market value of the securities loaned.
Market Value of Market Value of Fund Securities Loaned Collateral ---- ----------------- --------------- Schwab S&P 500 Fund $646,336 $667,248 Schwab 1000 Fund 644,452 654,761 Schwab Total Stock Market Index Fund 67,729 68,685 Schwab International Index Fund 77,938 82,659
7. INVESTMENT TRANSACTIONS Purchases, sales and maturities of investment securities, other than short-term obligations and U.S. Government securities, for the six months ended April 30, 2000, were as follows:
Proceeds of Sales Fund Purchases and Maturities ---- --------- ----------------- Schwab S&P 500 Fund $642,546 $480,818 Schwab 1000 Fund 398,640 605,367 Schwab Total Stock Market Index Fund 118,051 3,708 Schwab Small-Cap Index Fund 849,275 574,642 Schwab International Index Fund 292,300 20,251
8. EARLY WITHDRAWAL FEES The early withdrawal fees are retained by the funds and are treated as a contribution to capital.
Early withdrawal fees on Early withdrawal fees Fund redemption proceeds* as of 4/30/00 ---- ------------------------ --------------------- Schwab 1000 Fund 0.50% $611 Schwab Total Stock Market Index Fund 0.50% 124 Schwab Small-Cap Index Fund 0.50% 130 Schwab International Index Fund 0.75% 248
*Attributable to shares purchased and held less than 180 days. Effective 05/01/00, the early withdrawal fees have been changed to 0.75%, with the exception of Schwab International Index Fund which has been changed to 1.50%. 139 NOTES TO FINANCIAL STATEMENTS (continued) 9. CAPITAL SHARE TRANSACTIONS The funds offer two classes of shares: Investor Shares and Select Shares(R), with the exception of Schwab S&P 500 Fund which offers a third class of shares: e.Shares(R). Shares of each class represent interests in the same portfolio of investments of the funds. Transactions in capital shares for the six months ended April 30, 2000 were as follows:
Schwab S&P 500 Fund ------------------------------------------------ Six months ended Year ended April 30, 2000 October 31, 1999 --------------------- ----------------------- Shares Dollars Shares Dollars ------- ---------- -------- ---------- Investor Shares: Sold 42,914 $ 943,604 94,157 $1,863,484 Reinvested 1,645 35,985 962 17,632 Redeemed (38,682) (846,527) (58,283) (1,163,104) ------- ---------- ------- ---------- Net increase 5,877 $ 133,062 36,836 $ 718,012 ------- ---------- ------- ---------- Select Shares: Sold 52,251 $1,147,886 141,228 $2,801,786 Reinvested 2,108 46,155 950 17,420 Redeemed (49,467) (1,084,304) (56,115) (1,125,070) ------- ---------- ------- ---------- Net increase 4,892 $ 109,737 86,063 $1,694,136 ------- ---------- ------- ---------- e.Shares: Sold 5,730 $ 126,055 18,523 $ 365,979 Reinvested 238 5,211 140 2,572 Redeemed (5,829) (127,762) (14,615) (288,838) ------- ---------- ------- ---------- Net increase 139 $ 3,504 4,048 $ 79,713 ------- ---------- ------- ---------- Total increase from capital share transactions 10,908 $ 246,303 126,947 $2,491,861 ======= ========== ======= ========== Schwab 1000 Fund(R) ------------------------------------------------ Six months ended Year ended April 30, 2000 October 31, 1999 --------------------- ---------------------- Shares Dollars Shares Dollars ------- --------- ------- ---------- Investor Shares: Sold 15,474 $ 606,527 43,791 $1,518,286 Reinvested 803 31,141 913 29,333 Redeemed (21,896) (857,222) (34,357) (1,194,295) ------- --------- ------- ---------- Net increase (decrease) (5,619) $(219,554) 10,347 $ 353,324 ------- --------- ------- ---------- Select Shares: Sold 11,156 $ 436,965 34,607 $1,194,734 Reinvested 431 16,725 328 10,536 Redeemed (10,521) (411,275) (10,134) (356,795) ------- --------- ------- ---------- Net increase 1,066 $ 42,415 24,801 $ 848,475 ------- --------- ------- ---------- Total increase (decrease) from capital share transactions (4,553) $(177,139) 35,148 $1,201,799 ======= ========= ======= ==========
140 NOTES TO FINANCIAL STATEMENTS (continued)
Schwab Total Stock Market Index Fund(TM) ------------------------------------------------ Six months ended Period ended April 30, 2000 October 31, 1999 --------------------- ---------------------- Shares Dollars Shares Dollars ------- -------- ------- --------- Investor Shares: Sold 3,721 $ 84,041 7,071 $142,518 Reinvested 29 634 -- -- Redeemed (1,597) (36,023) (569) (11,468) ------- -------- ------ -------- Net increase 2,153 $ 48,652 6,502 $131,050 ------- -------- ------ -------- Select Shares: Sold 4,741 $107,437 7,558 $152,779 Reinvested 33 735 -- -- Redeemed (1,822) (41,213) (418) (8,374) ------- -------- ------ -------- Net increase 2,952 $ 66,959 7,140 $144,405 ------- -------- ------ -------- Total increase from capital share transactions 5,105 $115,611 13,642 $275,455 ======= ======== ====== ======== Schwab Small-Cap Index Fund(R) ------------------------------------------------ Six months ended Year ended April 30, 2000 October 31, 1999 ------------------ ---------------------- Shares Dollars Shares Dollars ------- -------- ------- -------- Investor Shares: Sold 11,228 $226,664 15,020 $244,144 Reinvested 52 983 1,826 27,893 Redeemed (4,421) (88,588) (22,026) (358,017) ------- -------- ------- -------- Net increase (decrease) 6,859 $139,059 (5,180) $(85,980) ------- -------- ------- -------- Select Shares: Sold 10,191 $206,009 22,187 $364,275 Reinvested 92 1,722 552 8,447 Redeemed (3,411) (69,629) (6,829) (110,483) ------- -------- ------- -------- Net increase 6,872 $138,102 15,910 $262,239 ------- -------- ------- -------- Total increase from capital share transactions 13,731 $277,161 10,730 $176,259 ======= ======== ======= ========
141 NOTES TO FINANCIAL STATEMENTS (continued)
Schwab International Index Fund(R) ------------------------------------------------ Six months ended Year ended April 30, 2000 October 31, 1999 ------------------ ---------------------- Shares Dollars Shares Dollars ------- -------- ------- -------- Investor Shares: Sold 10,305 $197,515 11,715 $186,131 Reinvested 193 3,704 255 3,798 Redeemed (4,176) (80,066) (17,223) (277,601) ------- -------- ------- -------- Net increase (decrease) 6,322 $121,153 (5,253) $(87,672) ------- -------- ------- -------- Select Shares: Sold 10,385 $199,350 20,684 $334,045 Reinvested 234 4,477 61 904 Redeemed (2,705) (52,158) (2,328) (37,107) ------- -------- ------- -------- Net increase 7,914 $151,669 18,417 $297,842 ------- -------- ------- -------- Total increase from capital share transactions 14,236 $272,822 13,164 $210,170 ======= ======== ======= ========
142 THE SCHWABFUNDS FAMILY-REGISTERED TRADEMARK- 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 market funds. Please call 800-435-4000 for a free prospectus and brochure for any of these SchwabFunds.-Registered Trademark- This report must be preceded or accompanied by a current prospectus. METHODS FOR PLACING ORDERS The information below outlines how Schwab brokerage account investors can place orders. If you are investing through a third-party investment provider, methods for placing orders may be different. PHONE Call 800-435-4000, day or night (for TDD service, call 800-345-2550). INTERNET www.schwab.com/schwabfunds MAIL Write to SchwabFunds at: P. O. Box 7575, San Francisco, CA 94120-7575 When selling or exchanging shares, be sure to include the signatures of at least one of the persons whose name is on the account. IN PERSON Visit the nearest Charles Schwab office. SCHWAB ASSET ALLOCATION FUNDS Schwab MarketTrack All Equity Portfolio Schwab MarketTrack Growth Portfolio Schwab MarketTrack Balanced Portfolio Schwab MarketTrack Conservative Portfolio Schwab MarketManager Growth Portfolio Schwab MarketManager Balanced Portfolio SCHWAB STOCK FUNDS Schwab S&P 500-Registered Trademark- Fund Schwab 1000 Fund-Registered Trademark- Schwab Total Stock Market Index Fund-TM- Schwab Analytics Fund-Registered Trademark- Schwab Small-Cap Index Fund-Registered Trademark- Schwab MarketManager Small Cap Portfolio Schwab International Index Fund-Registered Trademark- Schwab MarketManager International Portfolio SCHWAB BOND FUNDS Schwab YieldPlus Fund-TM- Schwab Total Bond Market Index Fund Schwab Short-Term Bond Market Index Fund Schwab Long-Term Tax-Free Bond Fund Schwab Short/Intermediate Tax-Free Bond Fund Schwab California Long-Term Tax-Free Bond Fund Schwab California Short/Intermediate Tax-Free Bond Fund SCHWAB MONEY MARKET FUNDS Schwab offers an array of money market funds that seek high current income consistent with safety and liquidity.(1) 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.-Registered Trademark- (1) Investments in money market funds are neither insured nor guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency and, although they seek to preserve the value of your investment at $1 per share, it is possible to lose money. [LOGO] INVESTMENT ADVISER Charles Schwab Investment Management, Inc. 101 Montgomery Street, San Francisco, CA 94104 DISTRIBUTOR Charles Schwab & Co., Inc. P.O. Box 7575, San Francisco, CA 94120-7575 This report is not authorized for distribution to prospective investors unless preceded or accompanied by a current prospectus. - -C- 2000 Charles Schwab & Co., Inc. All rights reserved. Member SIPC/NYSE. Printed on recycled paper. MKT 3562-2(6/00) SCHWABFUNDS-Registered Trademark- SCHWAB MARKETMANAGER PORTFOLIOS-TM- SEMIANNUAL REPORT AND AN IMPORTANT NOTICE REGARDING DELIVERY OF SHAREHOLDER DOCUMENTS April 30, 2000 IMPORTANT NOTICE REGARDING DELIVERY OF SHAREHOLDER DOCUMENTS The Securities and Exchange Commission permits mutual funds to deliver only one copy of shareholder documents, including prospectuses and shareholder reports, to fund investors with multiple accounts at the same residential or post office box address. This practice is commonly called "householding" and is intended to eliminate duplicate mailings of shareholder documents. Mailing of your SchwabFunds shareholder documents may be householded indefinitely unless you instruct us otherwise. ADDITIONAL COPIES OF SHAREHOLDER DOCUMENTS ALL SCHWABFUNDS PROSPECTUSES AND SHAREHOLDER REPORTS ARE AVAILABLE FREE OF CHARGE AND MAY BE REQUESTED AT ANY TIME BY CALLING SCHWAB AS INDICATED BELOW. SCHWABFUNDS PROSPECTUSES ARE ALSO AVAILABLE ON OUR WEB SITE AT WWW.SCHWAB.COM. If you would prefer that your SchwabFunds mailings not be householded, please contact: - - SCHWAB SIGNATURE SERVICES-TM- CLIENTS: Schwab Signature Services. - - INVESTMENT MANAGER CLIENTS: Schwab at 1-800-515-2157, or your investment manager. - - ALL OTHER CLIENTS: Schwab at 1-800-435-4000. Your instructions that householding not apply to your accounts holding SchwabFunds will be effective within 30 days of receipt by Schwab. SCHWABFUNDS-Registered Trademark- SCHWAB MARKETMANAGER PORTFOLIOS-TM- - GROWTH - BALANCED - SMALL CAP - INTERNATIONAL Semiannual Report April 30, 2000 SCHWAB MARKETMANAGER PORTFOLIOS-TM- We are pleased to bring you this semiannual report for the Schwab MarketManager Portfolios (the portfolios) for the six-month period ended April 30, 2000. In this report you will find performance statistics and other useful information for the following four portfolios: - Schwab MarketManager Growth Portfolio - Schwab MarketManager Balanced Portfolio - Schwab MarketManager Small Cap Portfolio - Schwab MarketManager International Portfolio We appreciate that our investors recognize that the MarketManager Portfolios can be a smart and efficient way to participate in a professionally managed portfolio of actively managed mutual funds. Portfolio Manager Jeff Mortimer and his team, supported by the Schwab Center for Investment Research, use sophisticated quantitative tools and techniques to provide a level of day-to-day portfolio analysis and management that few investors could replicate. FUND LISTINGS The MarketManager Portfolios are listed in THE WALL STREET JOURNAL, USA TODAY, INVESTOR'S BUSINESS DAILY and most local newspapers as follows under the heading SCHWABFUNDS-Registered Trademark-:
NEWSPAPER LISTING* SYMBOL MM Gro SWOGX MM Bal SWOBX MM Intl SWOIX MM SCp SWOSX
* Note that newspaper listings will indicate the previous day's quotation. CONTENTS - --------------------------------------------- A Message from the Chairman 1 - --------------------------------------------- What Every Investor Should Know 2 - --------------------------------------------- Market Overview 4 - --------------------------------------------- Schwab MarketManager Growth Portfolio PORTFOLIO PERFORMANCE 8 PORTFOLIO SNAPSHOT 10 - --------------------------------------------- Schwab MarketManager Balanced Portfolio PORTFOLIO PERFORMANCE 12 PORTFOLIO SNAPSHOT 14 - --------------------------------------------- Schwab MarketManager Small Cap Portfolio PORTFOLIO PERFORMANCE 16 PORTFOLIO SNAPSHOT 18 - --------------------------------------------- Schwab MarketManager International Portfolio PORTFOLIO PERFORMANCE 20 PORTFOLIO SNAPSHOT 22 - --------------------------------------------- Portfolio Management 24 - --------------------------------------------- Portfolio Discussion 25 - --------------------------------------------- Glossary 29 - --------------------------------------------- Financial Statements and Notes 31 - ---------------------------------------------
A MESSAGE FROM THE CHAIRMAN [PHOTO] Dear Shareholder, During the last few years, the benefits of investing have been readily apparent, while the risks have been somewhat less obvious. In recent months, however, investors have been subject to larger swings in the market, even within the span of a single day. Given this divergent environment, the message is clear: Expect volatility, maintain a long-term view and ensure your investment strategy is appropriate for your risk tolerance and time horizon. One way to lessen the impact of volatility on your portfolio is to adequately diversify your investments, both within and across asset sectors, namely cash equivalents, bonds and stocks. With its broad range of funds, SchwabFunds-Registered Trademark- can help form the foundation of a diversified investment plan. Our asset allocation funds can even provide diversification within a single fund. We recently added four new sector funds, the Schwab Focus Funds, to our SchwabFunds offering. Each invests in a group of industries within a specific sector--Communications, Financial Services, Healthcare and Technology--and can be an effective complement to individual stock investing. Each Focus Fund concentrates its investing in companies in a specific sector and may involve a greater degree of risk than an investment in mutual funds with greater diversification. For more information on the Schwab Focus Funds, please call 1-800-435-4000 and request a prospectus. The prospectus contains more information on fund fees and expenses as well as risks. Please read it carefully before investing. As a leader in online brokerage, we recognize the value of the web as a means of communicating timely, relevant information to investors. Regular updates on all the SchwabFunds, including performance data, are available on our Web site at WWW.SCHWAB.COM/SCHWABFUNDS. We encourage you to take advantage of this valuable resource. Thank you for your investment in SchwabFunds. For its part, SchwabFunds will do everything we can to warrant the trust you have placed in us. Sincerely, /s/ Charles R. Schwab Charles R. Schwab April 30, 2000 1 WHAT EVERY INVESTOR SHOULD KNOW WHY ASSET ALLOCATION MATTERS As most investors know, one of the most compelling reasons to invest in a mutual fund is diversification. By allocating your assets across many different securities, a fund can help reduce the risk that you might otherwise encounter by owning just a few stocks or bonds. But remember that diversification ACROSS asset classes can be just as important as diversification WITHIN one of the mutual funds you own. As you probably know, stocks historically have offered much higher returns over the long term than bonds, cash or other asset classes, but those returns have come at the price of higher volatility. To help mitigate some of that risk, many investors often include at least some bonds and cash in their portfolios. They also diversify their exposure across different stock market segments--such as large-cap and small-cap U.S. stocks and international stocks, which tend not to move in tandem. In short, allocating assets across market segments may help reduce your overall portfolio risk. REGULAR INVESTING STRATEGIES Another way to help dampen the effects of short-term market volatility is to invest the same amount of money on a regular basis. With this investment strategy, known as DOLLAR-COST AVERAGING, you automatically buy more shares when stock or bond prices are low and fewer when they're high.* A hypothetical example can help illustrate this concept. Let's say you invest $400 on a monthly basis in a single mutual fund, as shown below. Because of fluctuating prices, your per share purchase price varies monthly. A simple average of your five purchase prices would yield $8.20 per share; however, your AVERAGE COST BASIS (your total investment divided by the number of shares actually purchased) would be significantly lower--by more than $0.50 per share. The net result in this example is that your average cost per share is reduced and you'd have purchased more shares than you would have had you paid the average share price over the five-month period.
No. of Fixed Share Shares Investment Price Purchased - -------------------------------------------------------- Month 1 $400 $10 40 - -------------------------------------------------------- Month 2 $400 $8 50 - -------------------------------------------------------- Month 3 $400 $5 80 - -------------------------------------------------------- Month 4 $400 $8 50 - -------------------------------------------------------- Month 5 $400 $10 40 - -------------------------------------------------------- Totals $2,000 $41 260 - -------------------------------------------------------- AVERAGE SHARE PRICE ($41 DIVIDED BY 5 periods): $8.20 YOUR AVERAGE COST BASIS ($2,000 DIVIDED BY 260 shares) $7.69 PER-SHARE ADVANTAGE: $0.51
This example is for illustrative purposes only and is not intended to predict or guarantee the performance of any particular fund available through Schwab. (Of course, in this example, hindsight shows you that your best move would have been to invest your entire $2,000 in Month 3, when the share price was at a low of $5--but it's unlikely that you would have been able to predict that.) * Regular investing strategies such as dollar-cost averaging do not assure a profit or protect against a loss in declining markets. Since such a strategy involves continuous investment, investors should consider their ability to continue purchases through periods of low price levels. 2 SCHWAB'S 10 INVESTING PRINCIPLES 1. START WITH THE BASICS FOR LONG-TERM INVESTING. 2. GET STARTED NOW! 3. KNOW YOURSELF. 4. INVEST IN THE STOCK MARKET FOR GROWTH. 5. TAKE A LONG-TERM VIEW. 6. BUILD A DIVERSIFIED PORTFOLIO. 7. CONSIDER BONDS AND CASH FOR DIVERSIFICATION AND INCOME. 8. MINIMIZE YOUR EXPENSES. 9. STAY ON TRACK. 10. BECOME A LIFELONG INVESTOR. In addition to reducing your per-share costs over time, dollar-cost averaging provides another benefit: the discipline of investing regularly. You're more likely to maintain a regular investment plan if it's automatic: You don't have to think about it, and you minimize any propensity to skip an investment in favor of some other expenditure. To encourage this discipline, Schwab offers you two convenient, no cost ways to begin or maintain a program of regular investing: Schwab's AUTOMATIC INVESTMENT PLAN (AIP) allows you to automatically purchase--on a regular basis--additional shares in mutual funds that you already own. You can choose to invest as little as $100--twice a month, monthly or quarterly.(1) With Schwab MoneyLink-Registered Trademark- electronic funds transfer service, you can easily request fund transfers between your Schwab account and your accounts at other financial institutions. You can schedule automatically recurring transfers for easy long-term savings. Or request a transfer via the Web, by automated touch-tone phone, or through a Schwab representative anytime, day or night. Please be aware that these programs and dollar-cost averaging in general do not ensure a profit or protect against a loss, and investors should know that markets fall as well as rise. Because dollar-cost averaging involves continuous investment in securities regardless of fluctuating prices, you should consider your financial ability to purchase in both up and down markets. Over the long term, however, dollar-cost averaging may help to smooth out volatility caused by shortterm market trends. For more information on the Automatic Investment Plan or MoneyLink, please call us at 1-800-435-4000. WE MAKE IT EASY TO INVEST We try to make it easy and convenient for you to invest in SchwabFunds-Registered Trademark-. In addition to our automated methods that allow you to invest or transfer money to your Schwab account on a regular basis, you can also invest through our Web site at WWW.SCHWAB.COM/SCHWABFUNDS; through our automated touch-tone telephone service, TeleBroker-Registered Trademark-, by calling 1-800-272-4922; or in person at any of our nationwide branches. KEEPING YOU INFORMED You can find a wealth of information about our investment philosophy and funds, as well as updated fund performance data at our Web site: WWW.SCHWAB.COM/SCHWABFUNDS. (1) Includes uninvested cash and margin cash available. If sufficient cash is not available, your automatic purchases will not be made. 3 MARKET OVERVIEW U.S. ECONOMIC GROWTH April 2000 marked the beginning of the tenth year of the current expansion, making it the longest in U.S. history. Gross Domestic Product (GDP) grew at a real (inflation adjusted) rate of 4.6% during 1999--the fourth consecutive year at 4% or more and 5.4% during the first quarter of 2000. This rate is considered by most economists and the Federal Reserve (Fed) to be in excess of what the economy can absorb without experiencing inflationary pressures, perhaps 3.5% to 4.0%. High levels of consumer spending fueled by rising incomes, personal wealth and consumer confidence, as well as strong business capital investment and a healthy housing sector, have been the principal factors driving this lengthy expansion. EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC REAL GDP GROWTH RATE Quarterly Percentage Change (Annualized Rate) Q1 1990 5.0% Q2 1990 1.0% Q3 1990 -0.6% Q4 1990 -3.0% Q1 1991 -1.7% Q2 1991 2.6% Q3 1991 1.3% Q4 1991 2.5% Q1 1992 4.3% Q2 1992 4.0% Q3 1992 3.1% Q4 1992 5.2% Q1 1993 -0.7% Q2 1993 2.1% Q3 1993 1.5% Q4 1993 6.0% Q1 1994 3.6% Q2 1994 5.7% Q3 1994 2.2% Q4 1994 5.1% Q1 1995 1.5% Q2 1995 0.8% Q3 1995 3.2% Q4 1995 3.3% Q1 1996 2.9% Q2 1996 6.9% Q3 1996 2.2% Q4 1996 4.9% Q1 1997 4.9% Q2 1997 5.1% Q3 1997 4.0% Q4 1997 3.1% Q1 1998 6.7% Q2 1998 2.1% Q3 1998 3.8% Q4 1998 5.9% Q1 1999 3.7% Q2 1999 1.9% Q3 1999 5.7% Q4 1999 7.3% Q1 2000 5.4%
Source: BLOOMBERG L.P. Looking ahead, the availability of increasingly scarce labor resources and the domestic consumers' response to continued stock market volatility may be key determinants of whether the economy continues on its current course or softens throughout 2000. The Fed has raised the federal funds rate by 1.75% since June 1999 in an as yet unsuccessful effort to moderate the economy's rapid growth rate. The consensus of most economists is that the U.S. economy appears poised for continued strong growth and additional intervention by the Fed (increases in the federal funds rate) until the growth rate of the economy slows to a more sustainable level. UNEMPLOYMENT The unemployment rate dropped to 3.9% in April 2000, a three-decade low. Employment growth continues to outstrip population growth. Reflecting a shrinking pool of available workers, labor markets continue to be extremely tight in many areas of the country and there has been some regional evidence of labor shortages driving up wages. The labor force participation rate, which measures the employment population as a percent of the total population, is at a post-war high. Growth in the labor force has slowed, and the Fed has expressed its concern that strong demand and tight labor markets may continue to put pressure on manufacturers and service providers to raise prices. EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC U.S. UNEMPLOYMENT RATE Jan.90 5.4% Feb.90 5.3% Mar.90 5.2% Apr.90 5.4% May.90 5.4% Jun.90 5.2% Jul.90 5.5% Aug.90 5.7% Sep.90 5.9% Oct.90 5.9% Nov.90 6.2% Dec.90 6.3% Jan.91 6.4% Feb.91 6.6% Mar.91 6.8% Apr.91 6.7% May.91 6.9% Jun.91 6.9% Jul.91 6.8% Aug.91 6.9% Sep.91 6.9% Oct.91 7.0% Nov.91 7.0% Dec.91 7.3% Jan.92 7.3% Feb.92 7.4% Mar.92 7.4% Apr.92 7.4% May.92 7.6% Jun.92 7.8% Jul.92 7.7% Aug.92 7.6% Sep.92 7.6% Oct.92 7.3% Nov.92 7.4% Dec.92 7.4% Jan.93 7.3% Feb.93 7.1% Mar.93 7.0% Apr.93 7.1% May.93 7.1% Jun.93 7.0% Jul.93 6.9% Aug.93 6.8% Sep.93 6.7% Oct.93 6.8% Nov.93 6.6% Dec.93 6.5% Jan.94 6.8% Feb.94 6.6% Mar.94 6.5% Apr.94 6.4% May.94 6.1% Jun.94 6.1% Jul.94 6.3% Aug.94 6.0% Sep.94 5.8% Oct.94 5.8% Nov.94 5.6% Dec.94 5.5% Jan.95 5.6% Feb.95 5.4% Mar.95 5.3% Apr.95 5.8% May.95 5.8% Jun.95 5.6% Jul.95 5.6% Aug.95 5.7% Sep.95 5.6% Oct.95 5.5% Nov.95 5.7% Dec.95 5.6% Jan.96 5.6% Feb.96 5.5% Mar.96 5.6% Apr.96 5.5% May.96 5.6% Jun.96 5.3% Jul.96 5.5% Aug.96 5.1% Sep.96 5.2% Oct.96 5.2% Nov.96 5.3% Dec.96 5.4% Jan.97 5.3% Feb.97 5.3% Mar.97 5.1% Apr.97 5.0% May.97 4.7% Jun.97 5.0% Jul.97 4.7% Aug.97 4.9% Sep.97 4.7% Oct.97 4.7% Nov.97 4.6% Dec.97 4.7% Jan.98 4.5% Feb.98 4.6% Mar.98 4.6% Apr.98 4.3% May.98 4.3% Jun.98 4.5% Jul.98 4.5% Aug.98 4.5% Sep.98 4.5% Oct.98 4.5% Nov.98 4.4% Dec.98 4.3% Jan.99 4.3% Feb.99 4.4% Mar.99 4.2% Apr.99 4.3% May.99 4.2% Jun.99 4.3% Jul.99 4.3% Aug.99 4.2% Sep.99 4.2% Oct.99 4.1% Nov.99 4.1% Dec.99 4.1% Jan.00 4.0% Feb.00 4.1% Mar.00 4.1% Apr.00 3.9%
Source: BLOOMBERG L.P. 4 INFLATION Virtually all measures of price inflation exhibited upward trends during the reporting period. The Consumer Price Index (CPI) rose 3.0% for the year ended April 30, 2000. Its core rate (which excludes the more volatile food and energy components) was up 2.2%. The Personal Consumption Expenditures Index, a measure of inflation closely watched by the Fed, rose 2.3% for the same period. The GDP price deflator, the broadest measure of inflation, indicated prices rising at an annual rate of 3.2% during the first quarter of 2000. EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC MEASURES OF INFLATION
CONSUMER PRICE INDEX EMPLOYMENT COST-INDEX 12-MONTH CHANGE 12-MONTH CHANGE (MONTHLY) (QUARTERLY) Jan-90 5.2% 5.5% Feb-90 5.3% 5.5% Mar-90 5.2% 5.5% Apr-90 4.7% 5.4% May-90 4.4% 5.4% Jun-90 4.7% 5.4% Jul-90 4.8% 5.2% Aug-90 5.6% 5.2% Sep-90 6.2% 5.2% Oct-90 6.3% 4.9% Nov-90 6.3% 4.9% Dec-90 6.1% 4.9% Jan-91 5.7% 4.6% Feb-91 5.3% 4.6% Mar-91 4.9% 4.6% Apr-91 4.9% 4.6% May-91 5.0% 4.6% Jun-91 4.7% 4.6% Jul-91 4.4% 4.3% Aug-91 3.8% 4.3% Sep-91 3.4% 4.3% Oct-91 2.9% 4.3% Nov-91 3.0% 4.3% Dec-91 3.1% 4.3% Jan-92 2.6% 4.0% Feb-92 2.8% 4.0% Mar-92 3.2% 4.0% Apr-92 3.2% 3.6% May-92 3.0% 3.6% Jun-92 3.1% 3.6% Jul-92 3.2% 3.5% Aug-92 3.1% 3.5% Sep-92 3.0% 3.5% Oct-92 3.2% 3.5% Nov-92 3.0% 3.5% Dec-92 2.9% 3.5% Jan-93 3.3% 3.5% Feb-93 3.2% 3.5% Mar-93 3.1% 3.5% 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% 3.5% Nov-93 2.7% 3.5% Dec-93 2.7% 3.5% Jan-94 2.5% 3.2% Feb-94 2.5% 3.2% Mar-94 2.5% 3.2% Apr-94 2.4% 3.2% May-94 2.3% 3.2% Jun-94 2.5% 3.2% Jul-94 2.8% 3.2% Aug-94 2.9% 3.2% Sep-94 3.0% 3.2% Oct-94 2.6% 3.0% Nov-94 2.7% 3.0% Dec-94 2.7% 3.0% Jan-95 2.8% 2.9% Feb-95 2.9% 2.9% Mar-95 2.9% 2.9% Apr-95 3.1% 2.9% May-95 3.2% 2.9% Jun-95 3.0% 2.9% Jul-95 2.8% 2.7% Aug-95 2.6% 2.7% Sep-95 2.5% 2.7% Oct-95 2.8% 2.7% Nov-95 2.6% 2.7% Dec-95 2.5% 2.7% Jan-96 2.7% 2.8% Feb-96 2.7% 2.8% Mar-96 2.8% 2.8% Apr-96 2.9% 2.9% May-96 2.9% 2.9% Jun-96 2.8% 2.9% Jul-96 3.0% 2.8% Aug-96 2.9% 2.8% Sep-96 3.0% 2.8% Oct-96 3.0% 2.9% Nov-96 3.3% 2.9% Dec-96 3.3% 2.9% Jan-97 3.0% 2.9% Feb-97 3.0% 2.9% Mar-97 2.8% 2.9% Apr-97 2.5% 2.8% May-97 2.2% 2.8% Jun-97 2.3% 2.8% Jul-97 2.2% 3.0% Aug-97 2.2% 3.0% Sep-97 2.2% 3.0% Oct-97 2.1% 3.3% Nov-97 1.8% 3.3% Dec-97 1.7% 3.3% Jan-98 1.6% 3.3% Feb-98 1.4% 3.3% Mar-98 1.4% 3.3% Apr-98 1.4% 3.5% May-98 1.7% 3.5% Jun-98 1.7% 3.5% Jul-98 1.7% 3.7% Aug-98 1.6% 3.7% Sep-98 1.5% 3.7% Oct-98 1.5% 3.4% Nov-98 1.5% 3.4% Dec-98 1.6% 3.4% Jan-99 1.7% 3.0% Feb-99 1.6% 3.0% Mar-99 1.7% 3.0% Apr-99 2.3% 3.2% May-99 2.1% 3.2% Jun-99 2.0% 3.2% Jul-99 2.1% 3.1% Aug-99 2.3% 3.1% Sep-99 2.6% 3.1% Oct-99 2.6% 3.4% Nov-99 2.6% 3.4% Dec-99 2.7% 3.4% Jan-00 2.7% 4.3% Feb-00 3.2% 4.3% Mar-00 3.7% 4.3% Apr-00 3.0%
Source: BLOOMBERG L.P. Wage inflation also exhibited a marked upward trend during the reporting period. The Employment Cost Index, a measurement of the cost to employ workers, including both wages and benefits, rose 4.3% for the year ended March 31, 2000. Although these rates of price and employment cost inflation may not be alarmingly high by historical standards, the Fed has demonstrated its resolve to keep inflation at bay through its communications and its actions (six federal funds rate increases since June 1999). In particular, the Fed has expressed concern that if labor markets continue to tighten, increases in wages will outpace productivity growth and place additional upward pressure on prices. In such an environment, productivity growth becomes particularly critical, as it enables companies to pay higher wages without raising prices. Non-farm productivity grew 3.0% in 1999 and at a 2.4% annualized rate in the first quarter of 2000--strong gains to be sure, but likely not strong enough to offset recent increases in employment costs. ASSET CLASS PERFORMANCE EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC ASSET CLASS % RETURNS DURING REPORTING PERIOD
LEHMAN AGGREGATE MSCI-EAFE (ND) RUSSELL 2000 S&P 500 BOND INDEX INDEX SMALL-CAP INDEX INDEX 11/5/1999 0.61% 0.49% 3.23% 0.54% 11/12/1999 0.73% 2.02% 4.95% 2.44% 11/19/1999 0.32% 3.91% 7.62% 4.35% 11/26/1999 0.11% 5.22% 7.08% 3.95% 12/3/1999 0.15% 5.26% 8.43% 5.22% 12/10/1999 0.78% 6.67% 8.94% 4.10% 12/17/1999 -0.30% 6.78% 8.89% 4.39% 12/24/1999 -0.61% 10.69% 12.68% 7.13% 12/31/1999 -0.51% 12.55% 17.96% 8.04% 1/7/2000 -0.57% 7.42% 14.15% 6.00% 1/14/2000 -1.03% 10.06% 18.67% 7.74% 1/21/2000 -1.19% 7.61% 24.83% 5.99% 1/28/2000 -0.52% 7.11% 18.01% 0.02% 2/4/2000 -0.39% 9.34% 22.92% 4.81% 2/11/2000 -0.68% 9.96% 25.68% 2.07% 2/18/2000 -0.15% 8.31% 27.70% -0.95% 2/25/2000 0.50% 9.16% 30.29% -1.89% 3/3/2000 0.68% 11.46% 40.04% 3.81% 3/10/2000 0.48% 11.44% 41.37% 2.77% 3/17/2000 1.18% 10.11% 34.58% 7.88% 3/24/2000 1.05% 12.27% 34.49% 12.51% 3/31/2000 1.68% 12.10% 26.32% 10.49% 4/7/2000 2.49% 10.97% 27.26% 11.80% 4/14/2000 2.42% 7.09% 6.40% 0.02% 4/21/2000 2.33% 6.21% 12.97% 5.77% 4/28/2000 1.38% 6.10% 18.72% 7.17%
Compiled by CHARLES SCHWAB & CO., INC. As shown on the chart above, equity valuations, especially of the small-cap and technology stocks, exhibited extreme volatility during the reporting period. The price/earnings (P/E) ratio for the 5 MARKET OVERVIEW (continued) NASDAQ 100 Index fell by 33% in just 14 trading days during March and April. Remarkably, it remained at levels above 100 even after its precipitous decline. Reversing a five-year period of relative under performance, small-cap stocks outperformed both large-cap stocks and international stocks for the six-month reporting period ended 4/30/00. Small-cap stocks as represented by the Russell 2000-Registered Trademark- Index achieved a total return of 18.7%. Large-cap stocks, as represented by the S&P 500-Registered Trademark- Index, returned 7.2%. Dampened by relatively weak foreign currencies, International stocks, as represented by the Morgan Stanley Capital International Europe, Australia, Far East (MSCI-EAFE)-Registered Trademark- Index, achieved a return of 6.7% for the six-month reporting period ending 4/30/00. Reflecting the rise in intermediate-term interest rates, fixed income returns were generally weak for the period. Bond returns, as represented by the Lehman Brothers Aggregate Bond Index, were 1.4% for the six-month reporting period. U.S. EQUITY VALUATION The P/E ratio for the S&P 500-Registered Trademark- Index remained at very high levels during the reporting period and ended the period at a lofty 29.6 times earnings, slightly less than twice its long-term average. The P/E 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. Based on other traditional market valuation measures such as the price-to-book value ratio or dividend yield, the U.S. stock market continues to remain at record or near record high valuation levels. Reflecting the extraordinary valuations of the technology sector, the P/E ratio (12 months trailing) for the NASDAQ 100 Index ended the period at 120.2, as compared to an average of 67 over the last five years. EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC 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 14.90 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 25.50 Sep.92 24.37 Oct.92 23.94 Nov.92 24.08 Dec.92 24.01 Jan.93 24.20 Feb.93 24.25 Mar.93 24.22 Apr.93 23.20 May.93 23.21 Jun.93 22.58 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 20.10 May.94 20.16 Jun.94 19.76 Jul.94 18.64 Aug.94 18.90 Sep.94 18.26 Oct.94 17.55 Nov.94 16.58 Dec.94 16.98 Jan.95 16.23 Feb.95 16.20 Mar.95 16.50 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 19.30 Jul.96 18.31 Aug.96 18.62 Sep.96 19.75 Oct.96 19.60 Nov.96 21.05 Dec.96 20.70 Jan.97 20.55 Feb.97 20.98 Mar.97 19.87 Apr.97 20.24 May.97 21.43 Jun.97 22.45 Jul.97 23.92 Aug.97 22.64 Sep.97 24.00 Oct.97 22.84 Nov.97 24.02 Dec.97 24.51 Jan.98 24.99 Feb.98 26.44 Mar.98 27.76 Apr.98 26.51 May.98 26.12 Jun.98 27.09 Jul.98 26.78 Aug.98 22.77 Sep.98 24.23 Oct.98 27.58 Nov.98 30.14 Dec.98 31.97 Jan.99 33.29 Feb.99 32.65 Mar.99 33.78 Apr.99 33.90 May.99 32.74 Jun.99 34.70 Jul.99 31.62 Aug.99 31.21 Sep.99 29.90 Oct.99 29.92 Nov.99 30.65 Dec.99 32.53 Jan.00 29.78 Feb.00 28.59 Mar.00 31.50 Apr.00 29.58
30-Year Average 15.8
Source: BLOOMBERG L.P. TREASURY BOND YIELDS Continuing a trend which began in October 1998, both long-term and intermediate-term rates continued to climb upward during the first three months of the reporting period. The primary driver of this upward trend was the continued strong growth of the domestic economy. 6 EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC 10-YEAR AND 5-YEAR TREASURY BOND YIELDS
TEN-YEAR TREASURY FIVE-YEAR TREASURY BOND YIELD NOTE YIELD 10.01.1999 5.97% 5.86% 10.08.1999 6.03% 5.95% 10.15.1999 6.07% 5.97% 10.22.1999 6.19% 6.10% 10.29.1999 6.02% 5.95% 11.05.1999 5.93% 5.86% 11.12.1999 5.93% 5.86% 11.19.1999 6.06% 5.99% 11.26.1999 6.12% 6.05% 12.03.1999 6.16% 6.07% 12.10.1999 6.07% 5.98% 12.17.1999 6.28% 6.19% 12.24.1999 6.41% 6.31% 12.31.1999 6.44% 6.34% 1.07.2000 6.52% 6.41% 1.14.2000 6.68% 6.58% 1.21.2000 6.77% 6.63% 1.28.2000 6.66% 6.66% 2.04.2000 6.55% 6.65% 2.11.2000 6.60% 6.70% 2.18.2000 6.49% 6.68% 2.25.2000 6.33% 6.47% 3.03.2000 6.39% 6.59% 3.10.2000 6.38% 6.60% 3.17.2000 6.19% 6.45% 3.24.2000 6.19% 6.50% 3.31.2000 6.00% 6.31% 4.07.2000 5.58% 6.18% 4.14.2000 5.58% 6.11% 4.21.2000 5.99% 6.24% 4.28.2000 6.21% 6.54%
Source: BLOOMBERG L.P. Treasury bond yields exhibited an unusual pattern during the second half of the reporting period. Typically the yield on ten-year treasury securities exceeds those on five-year securities to compensate investors for the additional interest rate risk associated with longer duration securities. As shown in the graph above, late in January, this normal relationship reversed, resulting in what is referred to as a negative yield curve. This situation is a result of the accumulating budget surpluses, which are allowing the federal government to downsize its debt. The Treasury Department announced that it plans to buy back $30 billion in debt in 2000 starting with longer dated maturities because those payments carry the steepest interest payment. The anticipated reduction in supply resulting from this buyback program, as well as scaled back issuance, increased the price of the longer-term securities and resulted in a reduction in yields. INTERNATIONAL PERFORMANCE EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC MSCI-EAFE-Registered Trademark- COUNTRY US$ RETURNS For the Six-Month Period Ended 4/30/00 Belgium -21.4% Austria -14.3% Ireland -10.4% Switzerland -6.0% Norway -5.6% New Zealand -1.1% Australia -0.8% United Kingdom -0.3% Singapore 4.8% Netherlands 5.1% Portugal 6.0% Italy 6.2% Japan 7.8% Denmark 8.2% Spain 9.4% Hong Kong 17.9% France 21.0% Germany 21.8% Sweden 70.7% Finland 117.5%
Source: DATASTREAM The MSCI-EAFE Index gained 6.7% in U.S. dollar terms (excluding reinvested dividends) during the six-month reporting period. In local currency terms, it gained 15.6%, reflecting the relative weakness of most foreign currencies (compared to the dollar) during the period. The strongest performing countries for the period were Finland, Sweden and Germany. Those countries with the largest negative returns were Belgium, Austria and Ireland. 7 SCHWAB MARKETMANAGER GROWTH PORTFOLIO PORTFOLIO PERFORMANCE TOTAL RETURNS FOR THE PERIODS ENDED 4/30/00
AVERAGE ANNUAL RETURNS ----------------------------- SINCE INCEPTION SIX MONTHS(1) ONE YEAR (11/18/96) - ------------------------------------------------------------------------------------------------------------- SCHWAB MARKETMANAGER GROWTH PORTFOLIO(2) 16.23% 21.96% 18.74% - ------------------------------------------------------------------------------------------------------------- Growth Composite Index(3,4) 13.35% 18.74% 15.78% - ------------------------------------------------------------------------------------------------------------- S&P 500-Registered Trademark- Index 7.19% 10.13% 23.54% - ------------------------------------------------------------------------------------------------------------- Lehman Brothers Aggregate Bond Index 1.42% 1.26% 5.48% - -------------------------------------------------------------------------------------------------------------
National Association of Securities Dealers (NASD) regulations require that we report performance data as of the most recent calendar quarter--in this case, the quarter ended 3/31/00. As of 3/31/00, the portfolio's six-month, one-year and since-inception average annual total returns were 31.70%, 36.81% and 21.97%, respectively. (1) Actual, not annualized, because period is less than one year. (2) A portion of the fund's expenses was reduced during the reporting period. Without such reductions, the fund's average annual returns would have been lower. (3) The Growth Composite Index is composed of Morningstar category averages and cash equivalents as represented by the 90-day T-bill and is calculated using the portfolio allocations: 35% large-cap, 20% small-cap, 25% foreign, 15% bonds and 5% cash. (4) As of 4/30/00 there were 2,297 large-cap funds, 845 small-cap funds, 700 foreign funds and 561 intermediate-term bond funds tracked by Morningstar. Performance includes changes in price and reinvestment of dividends and capital gains. 8 EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
SCHWAB MARKETMANAGER LEHMAN BROTHERS GROWTH GROWTH PORTFOLIO S&P 500 INDEX AGGREGATE BOND INDEX COMPOSITE INDEX 11/18/96 $10,000 $10,000 $10,000 $10,000 11/30/96 $10,120 $10,271 $10,071 $10,144 12/31/96 $10,077 $10,068 $9,977 $10,122 01/31/97 $10,371 $10,696 $10,008 $10,365 02/28/97 $10,310 $10,780 $10,033 $10,328 03/31/97 $10,016 $10,338 $9,922 $10,068 04/30/97 $10,229 $10,955 $10,071 $10,225 05/31/97 $10,848 $11,621 $10,166 $10,857 06/30/97 $11,274 $12,141 $10,287 $11,271 07/31/97 $11,841 $13,106 $10,565 $11,849 08/31/97 $11,547 $12,372 $10,475 $11,521 09/30/97 $12,145 $13,049 $10,630 $12,106 10/31/97 $11,760 $12,613 $10,784 $11,660 11/30/97 $11,750 $13,197 $10,834 $11,712 12/31/97 $11,927 $13,424 $10,943 $11,825 01/31/98 $11,959 $13,573 $11,084 $11,911 02/28/98 $12,622 $14,552 $11,075 $12,587 03/31/98 $13,146 $15,297 $11,112 $13,080 04/30/98 $13,242 $15,452 $11,170 $13,209 05/31/98 $13,135 $15,186 $11,276 $12,996 06/30/98 $13,306 $15,802 $11,372 $13,138 07/31/98 $13,135 $15,635 $11,396 $12,922 08/31/98 $11,639 $13,377 $11,582 $11,305 09/30/98 $11,745 $14,235 $11,853 $11,598 10/31/98 $12,216 $15,392 $11,790 $12,182 11/30/98 $12,814 $16,325 $11,857 $12,752 12/31/98 $13,734 $17,265 $11,893 $13,331 01/31/99 $14,255 $17,987 $11,977 $13,542 02/28/99 $13,712 $17,427 $11,768 $13,061 03/31/99 $14,266 $18,124 $11,832 $13,421 04/30/99 $14,830 $18,826 $11,870 $13,963 05/31/99 $14,487 $18,381 $11,766 $13,764 06/30/99 $15,118 $19,402 $11,728 $14,388 07/31/99 $14,919 $18,796 $11,679 $14,323 08/31/99 $14,896 $18,702 $11,673 $14,221 09/30/99 $14,819 $18,190 $11,808 $14,161 10/31/99 $15,560 $19,341 $11,852 $14,627 11/30/99 $16,557 $19,734 $11,851 $15,316 12/31/99 $18,630 $20,897 $11,794 $16,513 01/31/00 $17,808 $19,848 $11,755 $16,004 02/29/00 $19,681 $19,472 $11,897 $16,847 03/31/00 $19,516 $21,377 $12,054 $17,299 04/30/00 $18,086 $20,734 $12,019 $16,579
The above graph compares the growth of a hypothetical $10,000 investment in the Schwab MarketManager Growth Portfolio, made at its inception, with similar investments in the Growth Composite Index, the S&P 500-Registered Trademark- Index and the Lehman Brothers Aggregate Bond Index. The hypothetical $10,000 investment assumes investment on the first day of the month following inception and includes changes in share price and reinvestment of dividends and capital gains. A detailed analysis of the respective performances of the portfolios and the indices is provided in the PORTFOLIO DISCUSSION section later in this report. THE INFORMATION PRESENTED IS HISTORICAL AND DOES NOT REPRESENT FUTURE RESULTS. TOTAL RETURNS ASSUME REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS. PRINCIPAL VALUE AND INVESTMENT RETURNS WILL FLUCTUATE, SO AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. Indices are unmanaged and do not reflect advisory fees and other expenses associated with an investment in the Portfolios. Investors cannot invest in an index directly. ASSETS - ---------------------------------------------------------------------- Total net assets as of 10/31/99 (000s) $180,602 - ---------------------------------------------------------------------- Total net assets as of 4/30/00 (000s) $240,911 - ---------------------------------------------------------------------- Percentage growth from 10/31/99 to 4/30/00 33.4% - ----------------------------------------------------------------------
9 SCHWAB MARKETMANAGER GROWTH PORTFOLIO PORTFOLIO SNAPSHOT The Schwab MarketManager Growth Portfolio seeks capital growth with less volatility than a portfolio composed entirely of stock funds. The portfolio allocations will vary as the portfolio managers adjust the respective asset mixes based on changing market conditions. The information below and on the following page provides a snapshot of the portfolio's characteristics as of 4/30/00, and is not indicative of its composition after that date. The terms used below are defined on page 29. A complete list of the securities in the portfolio as of 4/30/00 is provided in the Schedule of Investments later in this report. PORTFOLIO FACTS
SCHWAB MARKETMANAGER PEER GROUP GROWTH PORTFOLIO AVERAGE++ - --------------------------------------------------------------------------------------------------------------------- Number of Holdings 45** 138 - --------------------------------------------------------------------------------------------------------------------- Median Market Cap ($ Mil) $14,833++ $58,904 - --------------------------------------------------------------------------------------------------------------------- Price/Earnings (P/E) Ratio 41.6++ 35.4 - --------------------------------------------------------------------------------------------------------------------- Price/Book (P/B) Ratio 11.0++ 9.5 - --------------------------------------------------------------------------------------------------------------------- 12-Month Yield 2.05%++ 0.45% - --------------------------------------------------------------------------------------------------------------------- Portfolio Turnover Rate 112%* 75% - --------------------------------------------------------------------------------------------------------------------- Three-Year Beta 0.68++ 0.94 - --------------------------------------------------------------------------------------------------------------------- Expense Ratio 0.50%+ 1.34% - ---------------------------------------------------------------------------------------------------------------------
* Compiled by Charles Schwab & Co., Inc. This information is for illustrative purposes only and is not intended to show, predict or guarantee future composition of the Portfolio. ** The Portfolio invests primarily in other funds, whereas most large-cap funds invest primarily in individual securities. + Reflects a reduction by the Investment Adviser and Schwab, which is guaranteed through at least 2/28/01 (excluding interest, taxes and certain non-routine expenses). Underlying funds also charge fees and incur expenses. ++ Source: Morningstar. The peer group average is based on 2,297 large-cap funds as tracked by Morningstar. 10 EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC ASSET MIX AS A PERCENTAGE OF PORTFOLIO INVESTMENTS Large-Cap 35.8% Small-Cap/Mid-Cap 22.9% International 18.3% Short-Term Investments 15.3% Bonds 5.5% Sector 2.2%
MIX AS OF TARGET MIX IN 4/30/00 NEUTRAL MARKETS - ---------------------------------------------------- Stock Funds 79.2% 80.0% - ---------------------------------------------------- Bond Funds 5.5% 15.0% - ---------------------------------------------------- Short-Term Investments 15.3% 5.0% - ---------------------------------------------------- Total 100.0% 100.0% - ----------------------------------------------------
TOP 10 HOLDINGS AS A PERCENTAGE OF PORTFOLIO INVESTMENTS(1) - ------------------------------------------- White Oak Growth Stock Fund 8.1% - ------------------------------------------- Thornburg Value Fund 6.8% - ------------------------------------------- American Century International Growth Fund, Institutional Class 5.8% - ------------------------------------------- Artisan International Fund 5.7% - ------------------------------------------- Marsico Focus Fund 4.3% - ------------------------------------------- - ------------------------------------------- Oakmark Select Fund 4.0% - ------------------------------------------- T. Rowe Price Value Fund 3.9% - ------------------------------------------- Rydex Series Trust Nova Fund 3.6% - ------------------------------------------- Robertson Stephens Emerging Growth Fund, Class A 3.1% - ------------------------------------------- Neuberger Berman Millennium Fund 2.5% - -------------------------------------------
(1) Nothing in this report represents a recommendation of a security by the investment adviser. 11 SCHWAB MARKETMANAGER BALANCED PORTFOLIO PORTFOLIO PERFORMANCE TOTAL RETURNS FOR THE PERIODS ENDED 4/30/00
AVERAGE ANNUAL RETURNS ----------------------------- SINCE INCEPTION SIX MONTHS(1) ONE YEAR (11/18/96) - ------------------------------------------------------------------------------------------------------------- SCHWAB MARKETMANAGER BALANCED PORTFOLIO(2) 12.75% 17.02% 15.69% - ------------------------------------------------------------------------------------------------------------- Balanced Composite Index(3,4) 10.04% 13.74% 13.24% - ------------------------------------------------------------------------------------------------------------- S&P 500-Registered Trademark- Index 7.19% 10.13% 23.54% - ------------------------------------------------------------------------------------------------------------- Lehman Brothers Aggregate Bond Index 1.42% 1.26% 5.48% - -------------------------------------------------------------------------------------------------------------
National Association of Securities Dealers (NASD) regulations require that we report performance data as of the most recent calendar quarter--in this case, the quarter ended 3/31/00. As of 3/31/00, the portfolio's six-month, one-year and since-inception average annual total returns were 23.17%, 27.40% and 17.86%, respectively. (1) Actual, not annualized, because period is less than one year. (2) A portion of the fund's expenses was reduced during the reporting period. Without such reductions, the fund's average annual returns would have been lower. (3) The Balanced Composite Index is composed of Morningstar category averages and cash equivalents as represented by the 90-day T-bill and is calculated using the portfolio allocations: 30% large-cap, 15% small-cap, 15% foreign, 35% bonds and 5% cash. (4) As of 4/30/00 there were 2,297 large-cap funds, 845 small-cap funds, 700 foreign funds and 561 intermediate-term bond funds tracked by Morningstar. Performance includes changes in price and reinvestment of dividends and capital gains. 12 EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
SCHWAB MARKETMANAGER S&P 500 LEHMAN BROTHERS BALANCED BALANCED PORTFOLIO INDEX AGGREGATE BOND INDEX COMPOSITE INDEX 11/18/96 $10,000 $10,000 $10,000 $10,000 11/30/96 $10,100 $10,271 $10,071 $10,134 12/31/96 $10,059 $10,068 $9,977 $10,090 01/31/97 $10,322 $10,696 $10,008 $10,297 02/28/97 $10,271 $10,780 $10,033 $10,270 03/31/97 $10,018 $10,338 $9,922 $10,034 04/30/97 $10,200 $10,955 $10,071 $10,198 05/31/97 $10,676 $11,621 $10,166 $10,696 06/30/97 $11,041 $12,141 $10,287 $11,029 07/31/97 $11,517 $13,106 $10,565 $11,547 08/31/97 $11,284 $12,372 $10,475 $11,294 09/30/97 $11,770 $13,049 $10,630 $11,760 10/31/97 $11,527 $12,613 $10,784 $11,485 11/30/97 $11,558 $13,197 $10,834 $11,549 12/31/97 $11,719 $13,424 $10,943 $11,662 01/31/98 $11,762 $13,573 $11,084 $11,753 02/28/98 $12,251 $14,552 $11,075 $12,253 03/31/98 $12,634 $15,297 $11,112 $12,621 04/30/98 $12,688 $15,452 $11,170 $12,725 05/31/98 $12,613 $15,186 $11,276 $12,587 06/30/98 $12,783 $15,802 $11,372 $12,733 07/31/98 $12,677 $15,635 $11,396 $12,567 08/31/98 $11,581 $13,377 $11,582 $11,416 09/30/98 $11,740 $14,235 $11,853 $11,739 10/31/98 $12,092 $15,392 $11,790 $12,161 11/30/98 $12,560 $16,325 $11,857 $12,608 12/31/98 $13,311 $17,265 $11,893 $13,067 01/31/99 $13,693 $17,987 $11,977 $13,255 02/28/99 $13,224 $17,427 $11,768 $12,839 03/31/99 $13,650 $18,124 $11,832 $13,131 04/30/99 $14,130 $18,826 $11,870 $13,534 05/31/99 $13,868 $18,381 $11,766 $13,364 06/30/99 $14,226 $19,402 $11,728 $13,807 07/31/99 $14,141 $18,796 $11,679 $13,719 08/31/99 $14,119 $18,702 $11,673 $13,629 09/30/99 $14,119 $18,190 $11,808 $13,604 10/31/99 $14,664 $19,341 $11,852 $13,956 11/30/99 $15,341 $19,734 $11,851 $14,422 12/31/99 $16,742 $20,897 $11,794 $15,228 01/31/00 $16,155 $19,848 $11,755 $14,866 02/29/00 $17,353 $19,472 $11,897 $15,456 03/31/00 $17,390 $21,377 $12,054 $15,853 04/30/00 $16,534 $20,734 $12,019 $15,357
The above graph compares the growth of a hypothetical $10,000 investment in the Schwab MarketManager Balanced Portfolio, made at its inception, with similar investments in the Balanced Composite Index, the S&P 500-Registered Trademark- Index and the Lehman Brothers Aggregate Bond Index. The hypothetical $10,000 investment assumes investment on the first day of the month following inception and includes changes in share price and reinvestment of dividends and capital gains. A detailed analysis of the respective performances of the portfolios and the indices is provided in the PORTFOLIO DISCUSSION section later in this report. THE INFORMATION PRESENTED IS HISTORICAL AND DOES NOT REPRESENT FUTURE RESULTS. TOTAL RETURNS ASSUME REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS. PRINCIPAL VALUE AND INVESTMENT RETURNS WILL FLUCTUATE, SO AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. Indices are unmanaged and do not reflect advisory fees and other expenses associated with an investment in the Portfolios. Investors cannot invest in an index directly. ASSETS - ---------------------------------------------------------------------- Total net assets as of 10/31/99 (000s) $121,781 - ---------------------------------------------------------------------- Total net assets as of 4/30/00 (000s) $150,708 - ---------------------------------------------------------------------- Percentage growth from 10/31/99 to 4/30/00 23.8% - ----------------------------------------------------------------------
13 SCHWAB MARKETMANAGER BALANCED PORTFOLIO PORTFOLIO SNAPSHOT The Schwab MarketManager Balanced Portfolio seeks capital growth and income with less volatility than the Growth Portfolio. The portfolio's allocation will vary as the portfolio managers adjust the respective asset mixes based on changing market conditions. The information below and on the following page provides a snapshot of the portfolio's characteristics as of 4/30/00, and is not indicative of its composition after that date. The terms used below are defined on page 29. A complete list of the securities in the portfolio as of 4/30/00 is provided in the Schedule of Investments later in this report. PORTFOLIO FACTS
SCHWAB MARKETMANAGER PEER GROUP BALANCED PORTFOLIO AVERAGE++ - --------------------------------------------------------------------------------------------------------------------- Number of Holdings 42** 228 - --------------------------------------------------------------------------------------------------------------------- Median Market Cap ($ Mil) $12,538++ $43,966 - --------------------------------------------------------------------------------------------------------------------- Price/Earnings (P/E) Ratio 35.8++ 32.1 - --------------------------------------------------------------------------------------------------------------------- Price/Book (P/B) Ratio 8.7++ 7.9 - --------------------------------------------------------------------------------------------------------------------- 12-Month Yield 2.39%++ 2.49% - --------------------------------------------------------------------------------------------------------------------- Portfolio Turnover Rate 76%* 95% - --------------------------------------------------------------------------------------------------------------------- Three-Year Beta 0.54++ 0.54 - --------------------------------------------------------------------------------------------------------------------- Expense Ratio 0.50%+ 1.29% - ---------------------------------------------------------------------------------------------------------------------
* Compiled by Charles Schwab & Co., Inc. This information is for illustrative purposes only and is not intended to show, predict or guarantee future composition of the Portfolio. ** The Portfolio invests primarily in other funds, whereas most domestic hybrid funds invest primarily in individual securities. + Reflects a reduction by the Investment Adviser and Schwab, which is guaranteed through at least 2/28/01 (excluding interest, taxes and certain non-routine expenses). Underlying funds also charge fees and incur expenses. ++ Source: Morningstar. This information is as of 4/30/00. The peer group average is based on 726 domestic hybrid funds as tracked by Morningstar. 14 EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC ASSET MIX AS A PERCENTAGE OF PORTFOLIO INVESTMENTS Large-Cap 33.9% Bond 28.1% Small-Cap/Mid-Cap 17.3% International 10.9% Short-Term Investments 8.1% Sector 1.7%
MIX AS OF TARGET MIX IN 4/30/00 NEUTRAL MARKETS - ---------------------------------------------------- Stock Funds 63.8% 60.0% - ---------------------------------------------------- Bond Funds 28.1% 35.0% - ---------------------------------------------------- Short-Term Investments 8.1% 5.0% - ---------------------------------------------------- Total 100.0% 100.0% - ----------------------------------------------------
TOP 10 HOLDINGS AS A PERCENTAGE OF PORTFOLIO INVESTMENTS(1) - ------------------------------------------- PIMCO Total Return Fund, Institutional Class 13.4% - ------------------------------------------- Artisan International Fund 6.9% - ------------------------------------------- Oakmark Select Fund 6.5% - ------------------------------------------- White Oak Growth Stock Fund 6.4% - ------------------------------------------- T. Rowe Price Value Fund 5.7% - ------------------------------------------- Mainstay High Yield Corporate Bond Fund, Class A 4.7% - ------------------------------------------- - ------------------------------------------- Thornburg Value Fund, Institutional Class 4.6% - ------------------------------------------- Federated U.S. Government Securities Fund, 2-5 Years, Institutional Shares 4.3% - ------------------------------------------- American Century Intermediate Term Treasury Fund 4.1% - ------------------------------------------- Marsico Focus Fund 3.8% - -------------------------------------------
(1) Nothing in this report represents a recommendation of a security by the investment adviser. 15 SCHWAB MARKETMANAGER SMALL CAP PORTFOLIO PORTFOLIO PERFORMANCE TOTAL RETURNS FOR THE PERIODS ENDED 4/30/00
AVERAGE ANNUAL RETURNS ----------------------------- SINCE INCEPTION SIX MONTHS(1) ONE YEAR (9/16/97) - ---------------------------------------------------------------------------------------------------------------- SCHWAB MARKETMANAGER SMALL CAP PORTFOLIO(2) 15.46% 22.33% 11.10% - ---------------------------------------------------------------------------------------------------------------- Russell 2000-Registered Trademark- Index 18.72% 18.42% 6.25% - ---------------------------------------------------------------------------------------------------------------- Average Small-Cap Fund(3) 26.34% 36.56% 12.26% - ----------------------------------------------------------------------------------------------------------------
National Association of Securities Dealers (NASD) regulations require that we report performance data as of the most recent calendar quarter--in this case, the quarter ended 3/31/00. As of 3/31/00, the portfolio's six-month, one-year and since-inception average annual total returns were 31.90%, 44.55% and 15.74%, respectively. (1) Actual, not annualized, because period is less than one year. (2) A portion of the fund's expenses was reduced during the reporting period. Without such reductions, the fund's average annual returns would have been lower. (3) Source: Morningstar, Inc. The small-cap fund category contains 845 funds as of 4/30/00. 16 EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
SCHWAB MARKETMANAGER RUSSELL 2000 SMALL CAP PORTFOLIO INDEX 09/16/97 $10,000 $10,000 09/30/97 $10,260 $10,201 10/31/97 $9,930 $9,753 11/30/97 $9,770 $9,690 12/31/97 $9,886 $9,859 01/31/98 $9,701 $9,704 02/28/98 $10,277 $10,420 03/31/98 $10,781 $10,849 04/30/98 $10,832 $10,909 05/31/98 $10,359 $10,321 06/30/98 $10,411 $10,342 07/31/98 $9,896 $9,505 08/31/98 $8,271 $7,659 09/30/98 $8,435 $8,259 10/31/98 $8,754 $8,595 11/30/98 $9,238 $9,046 12/31/98 $9,946 $9,606 01/31/99 $10,101 $9,734 02/28/99 $9,563 $8,945 03/31/99 $10,029 $9,085 04/30/99 $10,773 $9,899 05/31/99 $10,752 $10,043 06/30/99 $11,311 $10,497 07/31/99 $11,228 $10,210 08/31/99 $10,938 $9,832 09/30/99 $10,990 $9,834 10/31/99 $11,414 $9,874 11/30/99 $12,272 $10,464 12/31/99 $13,714 $11,648 01/31/00 $13,339 $11,460 02/29/00 $15,171 $13,353 03/31/00 $14,496 $12,473 04/30/00 $13,178 $11,722
The above graph compares the growth of a hypothetical $10,000 investment in the MarketManager Small Cap Portfolio, made at its inception, with a similar investment in the Russell 2000-Registered Trademark- Index. The hypothetical $10,000 investment assumes investment on the first day of the month following inception and includes changes in share price and reinvestment of dividends and capital gains. A detailed analysis of the performances of the portfolio and its index is provided in the PORTFOLIO DISCUSSION section later in this report. THE INFORMATION PRESENTED IS HISTORICAL AND DOES NOT REPRESENT FUTURE RESULTS. TOTAL RETURNS ASSUME REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS. PRINCIPAL VALUE AND INVESTMENT RETURNS WILL FLUCTUATE, SO AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. Indices are unmanaged and do not reflect advisory fees and other expenses associated with an investment in the Portfolio. Investors cannot invest in an index directly. ASSETS - ---------------------------------------------------------------------- Total net assets as of 10/31/99 (000s) $122,998 - ---------------------------------------------------------------------- Total net assets as of 4/30/00 (000s) $161,564 - ---------------------------------------------------------------------- Percentage change from 10/31/99 to 4/30/00 31.4% - ----------------------------------------------------------------------
17 SCHWAB MARKETMANAGER SMALL CAP PORTFOLIO PORTFOLIO SNAPSHOT The Schwab MarketManager Small Cap Portfolio seeks long-term capital appreciation. It invests primarily in small-company stock funds. The information below and on the following page provides a snapshot of the portfolio's characteristics as of 4/30/00, and is not indicative of its composition after that date. The terms used below are defined on page 29. A complete list of the securities in the portfolio as of 4/30/00 is provided in the Schedule of Investments later in this report. PORTFOLIO FACTS
SCHWAB MARKETMANAGER PEER GROUP SMALL CAP PORTFOLIO AVERAGE++ - ------------------------------------------------------------------------------------------------------------------ Number of Holdings 22** 180 - ------------------------------------------------------------------------------------------------------------------ Median Market Cap ($ Mil) $1,009++ $1,019 - ------------------------------------------------------------------------------------------------------------------ Price/Earnings (P/E) Ratio 34.1++ 30.3 - ------------------------------------------------------------------------------------------------------------------ Price/Book (P/B) Ratio 9.3++ 6.7 - ------------------------------------------------------------------------------------------------------------------ 12-Month Yield 3.72%++ 0.21% - ------------------------------------------------------------------------------------------------------------------ Portfolio Turnover Rate 59%* 92% - ------------------------------------------------------------------------------------------------------------------ Three-Year Beta N/A++ 0.87 - ------------------------------------------------------------------------------------------------------------------ Expense Ratio 0.50%+ 1.59% - ------------------------------------------------------------------------------------------------------------------
* Compiled by Charles Schwab & Co., Inc. This information is for illustrative purposes only and is not intended to show, predict or guarantee future composition of the Portfolio. ** The Portfolio invests primarily in other funds, whereas most small-cap funds invest primarily in individual securities. + Reflects a reduction by the Investment Adviser and Schwab, which is guaranteed through at least 2/28/01 (excluding interest, taxes and certain non-routine expenses). Underlying funds also charge fees and incur expenses. ++ Source: Morningstar. The peer group average is based on 845 small-cap funds as tracked by Morningstar. 18 EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC ASSET MIX AS A PERCENTAGE OF PORTFOLIO INVESTMENTS Growth 48.4% Value 19.2% Blend 18.7% Sector 7.2% Short-Term Investments 6.5%
TOP 10 HOLDINGS AS A PERCENTAGE OF PORTFOLIO INVESTMENTS(1) - ------------------------------------------- Fremont U.S. Micro Cap Fund 13.7% - ------------------------------------------- Melody 4500 Fund, L.P.(2) 12.3% - ------------------------------------------- State Street Research Aurora Fund, Class A 6.3% - ------------------------------------------- Longleaf Partners Realty Fund 6.1% - ------------------------------------------- Managers Special Equity Fund 6.0% - ------------------------------------------- Turner Small Cap Growth Fund 5.6% - ------------------------------------------- - ------------------------------------------- MAS Small Cap Value Fund, Institutional Class 4.9% - ------------------------------------------- Robertson Stephens Diversified Growth Fund, Class A 4.8% - ------------------------------------------- Longleaf Partners Small Cap Fund 4.4% - ------------------------------------------- Value Line Special Situations Fund 4.2% - -------------------------------------------
(1) Nothing in this report represents a recommendation of a security by the investment adviser. (2) See Note 3 in the Notes to Financial Statements. 19 SCHWAB MARKETMANAGER INTERNATIONAL PORTFOLIO PORTFOLIO PERFORMANCE TOTAL RETURNS FOR THE PERIODS ENDED 4/30/00
AVERAGE ANNUAL RETURN ----------------------------- SINCE INCEPTION SIX MONTHS(1) ONE YEAR (10/16/96) - ---------------------------------------------------------------------------------------------------------------- SCHWAB MARKETMANAGER INTERNATIONAL PORTFOLIO(1) 30.29% 53.09% 23.57 - ---------------------------------------------------------------------------------------------------------------- MSCI-EAFE-Registered Trademark- Index 6.72% 13.89% 11.64% - ---------------------------------------------------------------------------------------------------------------- Average Foreign Fund(3) 15.60% 26.90% 15.50% - ----------------------------------------------------------------------------------------------------------------
National Association of Securities Dealers (NASD) regulations require that we report performance data as of the most recent calendar quarter--in this case, the quarter ended 3/31/00. As of 3/31/00, the portfolio's six-month, one-year and since-inception average annual total returns were 51.65%, 81.72% and 27.81%, respectively. (1) Actual, not annualized, because period is less than one year. (2) A portion of the fund's expenses was reduced during the reporting period. Without such reductions, the fund's average annual returns would have been lower. (3) Source: Morningstar, Inc. The foreign fund category contains 700 funds as of 4/30/00. 20 EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
SCHWAB MARKETMANAGER MSCI-EAFE INTERNATIONAL PORTFOLIO INDEX 10/16/96 $10,000 $10,000 10/31/96 $9,910 $9,836 11/30/96 $10,220 $10,228 12/31/96 $10,313 $10,096 01/31/97 $10,426 $9,742 02/28/97 $10,599 $9,902 03/31/97 $10,558 $9,938 04/30/97 $10,609 $9,991 05/31/97 $11,209 $10,641 06/30/97 $11,697 $11,227 07/31/97 $11,962 $11,409 08/31/97 $11,199 $10,557 09/30/97 $11,830 $11,148 10/31/97 $11,046 $10,291 11/30/97 $10,894 $10,186 12/31/97 $11,016 $10,274 01/31/98 $11,146 $10,744 02/28/98 $11,925 $11,434 03/31/98 $12,670 $11,786 04/30/98 $12,952 $11,879 05/31/98 $13,265 $11,821 06/30/98 $13,157 $11,911 07/31/98 $13,525 $12,031 08/31/98 $11,654 $10,540 09/30/98 $11,006 $10,217 10/31/98 $11,438 $11,281 11/30/98 $12,011 $11,859 12/31/98 $12,481 $12,327 01/31/99 $12,820 $12,290 02/28/99 $12,415 $11,998 03/31/99 $12,853 $12,498 04/30/99 $13,815 $13,004 05/31/99 $13,170 $12,335 06/30/99 $14,428 $12,816 07/31/99 $14,985 $13,196 08/31/99 $15,248 $13,203 09/30/99 $15,401 $13,336 10/31/99 $16,232 $13,836 11/30/99 $18,683 $14,316 12/31/99 $21,819 $15,602 01/31/00 $21,236 $14,611 02/29/00 $24,410 $15,004 03/31/00 $23,356 $15,587 04/30/00 $21,149 $14,767
The above graph compares the growth of a hypothetical $10,000 investment in the MarketManager International Portfolio, made at its inception, with a similar investment in the Morgan Stanley Capital International Europe Australasia, Far East (MSCI-EAFE)-Registered Trademark- Index. A detailed analysis of the performances of the portfolio and its index is provided in the PORTFOLIO DISCUSSION section later in this report. THE INFORMATION PRESENTED IS HISTORICAL AND DOES NOT REPRESENT FUTURE RESULTS. TOTAL RETURNS ASSUME REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS. PRINCIPAL VALUE AND INVESTMENT RETURNS WILL FLUCTUATE, SO AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. Indices are unmanaged and do not reflect advisory fees and other expenses associated with an investment in the Portfolio. Investors cannot invest in an index directly. ASSETS - ---------------------------------------------------------------------- Total net assets as of 10/31/99 (000s) $103,804 - ---------------------------------------------------------------------- Total net assets as of 4/30/00 (000s) $236,580 - ---------------------------------------------------------------------- Percentage change over reporting period 127.9% - ----------------------------------------------------------------------
21 SCHWAB MARKETMANAGER INTERNATIONAL PORTFOLIO PORTFOLIO SNAPSHOT The Schwab MarketManager International Portfolio offers broad diversification with the convenience of a single investment. The portfolio can be used to fulfill all or part of the international equity component of your asset allocation plan. The information below and on the following page provides a snapshot of the portfolio's characteristics as of 4/30/00, and is not indicative of its composition after that date. The terms used below are defined on page 29. A complete list of the securities in the portfolio as of 4/30/00 is provided in the Schedule of Investments later in this report. PORTFOLIO FACTS
SCHWAB MARKETMANAGER PEER GROUP INTERNATIONAL PORTFOLIO AVERAGE++ - ----------------------------------------------------------------------------------------------------------- Number of Holdings 22** 170 - ----------------------------------------------------------------------------------------------------------- Median Market Cap ($ Mil) $8,471++ $23,383 - ----------------------------------------------------------------------------------------------------------- Price/Earnings (P/E) Ratio 45.0++ 37.6 - ----------------------------------------------------------------------------------------------------------- Price/Book (P/B) Ratio 8.4++ 6.0 - ----------------------------------------------------------------------------------------------------------- 12-Month Yield 2.61%++ 0.59% - ----------------------------------------------------------------------------------------------------------- Portfolio Turnover Rate 54%* 83% - ----------------------------------------------------------------------------------------------------------- Three-Year Beta 0.65++ 0.74 - ----------------------------------------------------------------------------------------------------------- Expense Ratio 0.50%+ 1.71% - -----------------------------------------------------------------------------------------------------------
* Compiled by Charles Schwab & Co., Inc. This information is not intended to show, predict or guarantee future composition of the Portfolio. WEBS Germany Index Series was not included when compiling Portfolio Facts because information was not available. ** The Portfolio invests primarily in other funds, whereas most foreign funds invest primarily in individual securities. + Reflects a reduction by the Investment Adviser and Schwab, which is guaranteed through at least 2/28/01 (excluding interest, taxes and certain non-routine expenses). Underlying funds also charge fees and incur expenses. ++ Source: Morningstar. The peer group average is based on 700 foreign funds as tracked by Morningstar. 22 EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC ASSET MIX AS A PERCENTAGE OF PORTFOLIO INVESTMENTS International Diversified Mutual Funds 85.1% Small-Cap/Mid-Cap Funds 1.0% Asian Regional Mutual Funds 3.0% Short-Term Investments 5.5% European Regional Mutual Funds 5.4%
TOP FIVE COUNTRIES AS A PERCENTAGE OF PORTFOLIO INVESTMENTS - ------------------------------------------- United Kingdom 14.3% - ------------------------------------------- Japan 13.0% - ------------------------------------------- France 7.7% - ------------------------------------------- Germany 6.6% - ------------------------------------------- Switzerland 4.6% - -------------------------------------------
REGIONAL DIVERSIFICATION AS A PERCENTAGE OF PORTFOLIO INVESTMENTS - ------------------------------------------- Developed Europe(1) 50.8% - ------------------------------------------- Developed Pacific(2) 20.3% - ------------------------------------------- Short-Term Investments 11.5% - ------------------------------------------- Emerging Markets 7.8% - ------------------------------------------- - ------------------------------------------- Canada 4.4% - ------------------------------------------- United States 4.3% - ------------------------------------------- Other Countries 0.9% - ------------------------------------------- Total 100.0% - -------------------------------------------
TOP 10 HOLDINGS AS A PERCENTAGE OF PORTFOLIO INVESTMENTS(3) - ------------------------------------------- Artisan International Fund 15.7% - ------------------------------------------- Janus Overseas Fund 15.2% - ------------------------------------------- American Century International Discovery Fund, Institutional Class 12.9% - ------------------------------------------- American Century International Growth Fund, Institutional Class 8.2% - ------------------------------------------- Oppenheimer International Growth Fund, Class A 6.7% - ------------------------------------------- - ------------------------------------------- AIM European Development Fund, Class A 5.0% - ------------------------------------------- Pilgrim International Small Cap Growth Fund, Class Q 4.8% - ------------------------------------------- Oakmark International Fund 3.1% - ------------------------------------------- Dreyfus Founders Passport Fund, Class F 2.9% - ------------------------------------------- Montgomery Global Long Short Fund, Class R 2.8% - -------------------------------------------
(1) Developed Europe includes the following countries: Austria, Belgium, Denmark, Finland, Germany, Ireland, Italy, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and the United Kingdom. (2) Developed Pacific includes the following countries: Australia, China/Hong Kong, Indonesia, Japan, Malaysia, New Zealand, Singapore and Thailand. (3) Nothing in this report represents a recommendation of a security by the investment adviser. 23 PORTFOLIO MANAGEMENT PORTFOLIO MANAGEMENT TEAM: JEFF MORTIMER, vice president and senior portfolio manager, is responsible for the overall management of the MarketManager portfolios. Until February 29, 2000, Cynthia Liu was the manager for the International and Small-Cap portfolios. Cynthia co-managed the Growth and Balanced portfolios with Jeff. Jeff joined CSIM in November 1997. Prior to joining CSIM Jeff was employed by Higgins Associates, where he was Chief Investment Officer, managing and advising close to $1 billion in assets. Prior to joining Higgins, Jeff was employed by Gannett Welsh & Kotler, a money management firm. He holds an M.B.A. from the University of Chicago and a B.S. Finance from Babson College, and is a Chartered Financial Analyst (CFA). 24 PORTFOLIO DISCUSSION QUESTIONS TO THE PORTFOLIO MANAGEMENT TEAM GROWTH AND BALANCED PORTFOLIOS Q. HOW DID THE FUNDS PERFORM DURING THE SIX-MONTH REPORTING PERIOD? A. The Growth and Balanced Portfolios produced total returns of 16.23% and 12.75%, respectively for the six-month reporting period ended April 30, 2000. As shown on the preceding pages, both portfolios achieved returns that were significantly greater than their respective composite indices. Additionally, both portfolios have achieved inception-to-date total returns (from 11/18/96) in excess of their respective composite indices. Q. WHICH ASSET CLASSES PERFORMED WELL FOR THE PORTFOLIOS? A. During the reporting period large-capitalization growth stocks and small-capitalization growth stocks were the top performing asset classes. International stocks also did well, as the growth bias was evident around the world. The primary reason for the difference in performance among these asset classes continued to be the strong performance in the technology sector during the reporting period. The table below summarizes the one-year returns of several major asset classes.
SIX MONTH RETURN AS OF ASSET CLASS INDEX(1) 4/30/00 - ------------------------------------------------------------------------------------------------ Large-Cap Stocks S&P 500 Index 7.19% - ------------------------------------------------------------------------------------------------ Small-Cap Stocks Russell 2000 Index 18.72% - ------------------------------------------------------------------------------------------------ International Stocks MSCI-EAFE Index 6.72% - ------------------------------------------------------------------------------------------------ Bonds Lehman Aggregate Bond Index 1.42% - ------------------------------------------------------------------------------------------------ Cash Three-Month Treasury Bill 2.86% - ------------------------------------------------------------------------------------------------
Q. WHAT ARE SOME OF THE UNDERLYING FUNDS THAT PERFORMED PARTICULARLY WELL FOR THE PORTFOLIOS? A. As you might expect, those mutual funds which focused their investments in the strongest areas of the market performed best during the reporting period. These strongest funds include Janus Twenty, Marsico Focus, and White Oak. In the small/mid capitalization area, Van Wagoner Emerging Growth performed particularly well. Internationally, Artisan International and American Century International Growth led the way.(2),(3) Q. HOW DID THE FUNDS' STRATEGIES CHANGE DURING THE REPORTING PERIOD? RELATIVE TO THEIR NEUTRAL TARGETS, HOW WERE THE FUNDS POSITIONED AT THE CLOSE OF THE REPORTING PERIOD? A. For the majority of the reporting period the funds remained overweight in the small-cap area compared to their neutral benchmarks, large-cap and international holdings remained near neutrality. One overriding theme that existed for most of the reporting (1) The S&P Index is composed of 500 large-company common stocks representing key industries, including many from the most recognizable companies in the United States. The Russell 2000 consists of the smallest 2000 companies in the Russell 3000 Index (largest 3000 companies), representing approximately 7% of the total market capitalization. MSCI-EAFE (refers to Europe, Australasia, and Far East) is widely accepted as a benchmark for international stock performance. The EAFE Index is an aggregate of 21 individual country indexes that collectively represent many of the major markets of the world. The Lehman Brother Aggregate Bond Index includes fixed-rate debt issues rated investment grade or higher. (2) These 6 funds represent 27.0% of the growth portfolio and 19.0% of balanced portfolio. Please see the Schedule of Investments for more information. (3) Past performance is no guarantee of future results. The Portfolios may sell or have already sold these funds. This is not a recommendation of a specific fund. 25 PORTFOLIO DISCUSSION (continued) period was the overweighting of the growth style versus the value style. This was true throughout the portfolio, in large-capitalization mutual funds, in small-capitalization and in international mutual funds. At the close of the reporting period, the portfolios were near neutral weight in equity mutual fund exposure relative to their benchmarks, underweight fixed income, and overweight cash. Within the equity component of the asset allocation, the portfolios were slightly overweight large-capitalization stock mutual funds and small cap mutual funds, and underweight international funds. The charts below show the two portfolios' actual asset mixes during the reporting period. The cash holdings shown include both the actual cash holdings of the portfolios as well as the cash holdings of the underlying funds. EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC SCHWAB MARKETMANAGER GROWTH PORTFOLIO
CASH BONDS INTERNATIONAL EQUITY SMALL-CAP EQUITY LARGE-CAP EQUITY 11/30/99 5.27% 6.76% 23.72% 23.74% 40.51% 12/31/99 4.02% 5.89% 23.95% 26.04% 40.10% 01/31/00 9.66% 6.13% 20.97% 26.66% 36.58% 02/29/00 7.49% 5.36% 19.61% 32.30% 35.24% 03/31/00 12.21% 5.24% 19.22% 27.87% 35.46% 04/30/00 15.27% 5.53% 18.25% 22.90% 38.05%
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC SCHWAB MARKETMANAGER BALANCED PORTFOLIO
CASH BONDS INTERNATIONAL EQUITY SMALL-CAP EQUITY LARGE-CAP EQUITY 11/30/99 6.01% 26.96% 16.09% 20.53% 30.41% 12/31/99 4.83% 25.77% 16.81% 21.66% 30.93% 01/31/00 6.29% 29.02% 16.08% 18.34% 30.27% 02/29/00 5.33% 26.99% 15.02% 24.26% 28.40% 03/31/00 9.58% 27.01% 12.42% 19.71% 31.28% 04/30/00 8.09% 28.05% 10.94% 17.35% 35.57%
Q. CAN YOU SHARE A COUPLE EXAMPLES OF ANY NEW FUNDS THE PORTFOLIOS PURCHASED DURING THE PERIOD, AND WHY? A. Two funds purchased during the period were Neuberger Berman Millennium Fund and Oakmark Select Fund. These funds were purchased for two very different reasons, and highlight the slight change of strategy as we moved through the reporting period. Neuberger Berman Millennium Fund is an aggressive small-cap mutual fund which purchases stocks its manager believes offer great promise going forward. It was added to both portfolios early in the reporting period. The Oakmark Select Fund is at the opposite side of spectrum, and is a large-cap value fund that holds about 25 names. The manager of this fund looks for stocks that are trading below what he believes to be fair value. This fund was added toward the end of the reporting period, and is used to offset some of our exposure to the underlying growth funds we continue to hold.(1),(2) (1) These 2 funds represent 6.5% of the growth portfolio and 7.4% of the balanced portfolio. Please see the Schedule of Investments for more information. 26 SMALL-CAP PORTFOLIO Q. HOW DID THE PORTFOLIO PERFORM DURING THE REPORTING PERIOD? A. The portfolio achieved a total return of 15.46% for the six-month reporting period ended April 30, 2000, comparing favorably to the average small capitalization mutual fund, which returned 26.34% and the Russell 2000 Index which was 18.72%. Q. WHICH UNDERLYING FUNDS PERFORMED PARTICULARLY WELL FOR THE PORTFOLIOS? A. Funds that focused on the growth style of investing performed particularly well during the period, mainly due to their large technology exposure. These funds include Turner Small Cap Fund, Value Line Special Situations Fund, and Robertson Stephens Diversified Growth Fund.(2),(3) Q. HOW DID THE PORTFOLIO'S STRATEGY CHANGE DURING THE REPORTING PERIOD, AND HOW WAS THE FUND POSITIONED AT THE CLOSE OF THE PERIOD? A. The portfolios did not change significantly during the reporting period, although some movement was made from growth to value as the period wore on. Profits were taken from some of the mutual funds which performed extremely well and re-allocated to funds which have a more value-driven discipline to their investment strategy. At the close of the period, the fund had about equal weightings in the mid-cap, small-cap growth, small-cap value, and micro-cap sectors, each about 20% of assets. The remaining 20% of assets were split among cash, small-cap blend, and sector funds. Q. CAN YOU SHARE A COUPLE OF EXAMPLES OF NEW FUNDS PURCHASED DURING THE PERIOD, AND WHY? A. To increase our small-cap blend exposure (a combination of growth and value), MAS Small Cap Value Fund was added during the period. To increase exposure to the technology sector, the Firsthand Technology Value Fund was added to the portfolio where manager Kevin Landis has demonstrated an ability to be a strong performer in a very volatile asset class.(2),(4) INTERNATIONAL PORTFOLIO Q. HOW DID THE PORTFOLIO PERFORM DURING THE REPORTING PERIOD? A. The portfolio achieved a total return of 30.29% for the six month reporting period ended April 30, 2000, comparing very favorably to the average international mutual fund, which returned 15.60% and the MSCI-EAFE Index which was up 6.72%. Q. WHICH SECTORS OR REGIONS PERFORMED WELL FOR THE FUND? A. Many sectors in the international markets performed well over the past six months, as the world generally followed the US market higher. The strongest regions were those in northern Europe, which benefited from the strong performance of the telecommunications sector. These were followed by Germany and France. Japan and the Pacific region (2) Past performance is no guarantee of future results. The Portfolios may sell or have already sold these funds. This is not a recommendation of a specific fund. (3) These 3 funds represent 14.5% of the small-cap portfolio. Please see the Schedule of Investments for more information. (4) These 2 funds represent 7.7% of the small-cap portfolio. Please see the Schedule of Investments for more information. 27 PORTFOLIO DISCUSSION (continued) posted positive returns, but couldn't compete with Europe. Q. WHAT IMPACT DID CURRENCY EXCHANGE RATES HAVE ON THE PERFORMANCE OF INTERNATIONAL EQUITIES AND THE FUND? A. Over the period, the general trend of foreign currencies was to weaken versus the dollar, although the Yen/ Dollar relationship continued to be volatile over the period. The Euro has weakened against the dollar since its inception on January 1, 1999. A strengthening dollar generally hurts portfolio returns; however, strong foreign markets were more than able to offset this slight negative influence. Q. HOW DID THE FUND'S STRATEGY CHANGE DURING THE REPORTING PERIOD, AND HOW WAS THE FUND POSITIONED VERSUS ITS BENCHMARK AT THE CLOSE OF THE PERIOD? A. During the reporting period, the portfolio's European weighting was increased slightly, as profits were taken from some Asian holdings and re-invested Euroland. Small company exposure was also increased over the reporting period, as the portfolio continued to take advantage of the relative values offered by this category. During most of the reporting period, the portfolio was overweighed in Europe and small company stocks relative to the MSCI-EAFE Index, with the Pacific region carrying about an index weight. EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC SCHWAB MARKETMANAGER INTERNATIONAL PORTFOLIO Actual Asset Mix: 10/31/98-10/31/99
CANADA USA DEVELOPED EUROPE DEVELOPED PACIFIC EMERGING MARKETS OTHER COUNTRIES CASH 10/99 4.21% 2.31% 40.41% 34.57% 5.55% 1.42% 11.53% 11/99 4.40% 3.12% 41.14% 35.28% 6.61% 1.25% 8.20% 12/99 4.78% 4.40% 42.83% 30.35% 7.96% 1.00% 8.68% 1/00 4.40% 4.23% 44.72% 26.15% 8.60% 1.34% 10.56% 2/00 4.25% 5.19% 48.91% 22.16% 8.55% 0.79% 10.15% 3/00 4.72% 5.03% 49.00% 22.84% 8.41% 0.84% 9.16% 4/00 4.41% 4.27% 50.83% 20.31% 7.76% 0.90% 11.52%
28 GLOSSARY ASSET ALLOCATION--The division of holdings among different types of assets, such as domestic stocks, international stocks, bonds and cashequivalent securities. BETA--A measure of a stock's volatility relative to the overall stock market. The beta of the S&P 500-Registered Trademark- Index is 1. Any investment that is more volatile than the market as a whole has a beta value higher than 1. If the beta is less than 1, the investment is considered to be less volatile than the market. CAPITAL GAIN (LOSS)--When a stock is sold for a profit, the difference between the net sales price and its net purchase price, or cost basis, is a capital gain. If a stock is sold below cost, the difference is a capital loss. EARNINGS GROWTH RATE--The average annual rate of growth in earnings over the past five years for the stocks in a fund's portfolio. EARNINGS PER SHARE (EPS)--The net income (or earnings) of a company for the past 12 months divided by the current number of shares outstanding. EXPENSE RATIO--Amount, expressed as a percentage of total investment, that shareholders pay annually for mutual fund operating expenses and management fees. MARKET CAPITALIZATION--The dollar value of a company or the amount someone would pay to buy the company today. It is calculated by multiplying the total number of outstanding shares by the current price per share. Median market cap is the midpoint of a fund's total market capitalization, weighted by the portion of assets invested in each holding. As a result, half of the fund's holdings will have market caps above the median, and the rest below it. NET ASSET VALUE (NAV)--The market value of a fund share. PRICE/BOOK (P/B) RATIO--Compares a stock's market value with the value of total assets minus intangible assets and total liabilities (the book value). It is determined by dividing the current price of the stock by common stockholder equity per share. In evaluating stocks, comparing P/B ratios often works well in situations where price/earnings ratios do not, because the P/B ratio is stable over time and is always a positive number. P/B ratios are best used for comparisons within an industry rather than between industries, as certain industries will usually contain stocks that have all high or all low P/B ratios. For mutual funds the P/B ratio is the weighted average of all the stocks' P/B ratios in the portfolio. PRICE/EARNINGS (P/E) RATIO--The ratio of a company's stock price to its earnings per share over the past year. For mutual funds the P/E ratio is the weighted average of all the stocks' P/E ratios in the mutual fund's portfolio. The P/E is an indicator of market expectations about a company's prospects. Typically, the higher the P/E, the greater the expectations for a company's future growth. Because earnings are volatile and sometimes "negative," however, the P/E has its limitations and may fail as a measure for a significant number of stocks at any given time. RETURN ON EQUITY--The average annual rate of return generated by the companies a fund holds during the past five years for each dollar of shareholders' equity (net income divided by shareholders' equity). STOCK--A share of ownership, or equity, in a corporation. 29 GLOSSARY (continued) TOTAL RETURN--The sum of dividends, plus capital gains (or losses). TURNOVER RATE--An indication of a fund's trading activity. Funds with higher turnover rates typically incur higher transaction costs and are more likely to distribute capital gains, which are taxable to investors. YIELD--The income generated by an investment, expressed as a percentage of its price. 30 SCHWAB MARKETMANAGER GROWTH PORTFOLIO SCHEDULE OF INVESTMENTS April 30, 2000 (Unaudited)
Number Value of Shares (000s) --------- -------- INVESTMENT FUNDS -- 84.7% ASIAN FUNDS -- 0.5% Scudder Japan Fund 82,201 $ 1,175 --------- -------- 1,175 -------- BOND FUNDS -- 5.5% American Century Intermediate Term Treasury Fund 499,369 4,979 American Century Long Term Treasury Fund 121,150 1,180 American Century Target 2020 Fund 32,669 1,088 Federated U.S. Government Securities Fund, 1-3 Years, Institutional Shares 85,880 881 PIMCO Total Return Fund, Institutional Class 526,387 5,200 -------- 13,328 -------- INTERNATIONAL STOCK FUNDS -- 17.8% Acorn International Fund 160,137 5,603 American Century International Discovery Fund, Institutional Class+ 273,184 4,895 American Century International Growth Fund, Institutional Class 981,418 14,054 Artisan International Fund 458,905 13,749 Dreyfus Founders Passport Fund+ 94,161 2,030 Oakmark International Fund 169,668 2,443 -------- 42,774 -------- LARGE-CAP FUNDS -- 35.8% Accessor Value & Income Portfolio 104,200 2,132 Excelsior Large Cap Growth Fund+ 326,276 5,798 Heritage Capital Appreciation Fund, Class A 140,822 4,413 Janus Twenty Fund 60,662 4,858 Longleaf Partners Fund 20,840 425 Managers Capital Appreciation Fund+ 53,997 3,159 Marsico Focus Fund+ 475,420 10,288 Marsico Growth & Income Fund+ 224,455 4,626 Oakmark Select Fund 481,133 9,618 Number Value of Shares (000s) --------- -------- Rydex Series Trust Arktos Fund, Investor Class 102,249 $ 1,958 Rydex Series Trust Nova Fund+ 217,424 8,636 Rydex Series Trust Ursa Fund, Investor Class 190,355 1,510 T. Rowe Price Value Fund 524,717 9,335 White Oak Growth Stock Fund+ 272,000 19,451 -------- 86,207 -------- SECTOR FUNDS -- 2.2% Heritage Technology Fund, Class A+ 93,953 1,639 T. Rowe Price New Era Fund 165,906 3,745 -------- 5,384 -------- SMALL-CAP / MID-CAP FUNDS -- 22.9% Baron Small Cap Fund+ 139,183 2,278 Berger Small Cap Value Fund+ 94,544 2,123 Firsthand Technology Value Fund 18,032 2,046 Hambrecht & Quist IPO & Emerging Company Fund+ 55,813 668 Loomis Sayles Small Cap Growth Fund+ 57,705 1,587 MAS Small Cap Value Fund, Institutional Class 122,554 2,615 Melody 4500 Fund, L.P.+** 419,711 5,200 Neuberger Berman Millennium Fund 190,311 6,122 Riggs Small Company Stock Fund+ 174,620 2,298 Robertson Stephens Emerging Growth Fund, Class A 126,337 7,421 Robertson Stephens Mid Cap Opportunities Fund 215,614 3,543 Thornburg Value Fund, Class A 219,973 7,400 Thornburg Value Fund, Institutional Class+ 262,109 8,846 VAN Wagoner Emerging Growth Fund+ 63,006 2,540 Weitz Series Hickory Fund 14,365 477 -------- 55,164 -------- TOTAL INVESTMENT FUNDS (Cost $182,267) 204,032 --------
31 SCHWAB MARKETMANAGER GROWTH PORTFOLIO SCHEDULE OF INVESTMENTS (continued) April 30, 2000 (Unaudited)
Number Value of Shares (000s) --------- -------- SHORT-TERM INVESTMENTS -- 15.3% Bank One Grand Cayman Time Deposit, 5.44%*, 05/01/00 5,000,000 $ 5,000 Cayman Time Deposit 5.44%*, 05/01/00 8,589,119 8,589 Chase Manhattan Bank NY Time Deposit, 5.44%*, 05/01/00 5,000,000 5,000 Citibank Nassau TCA Time Deposit, 5.44%*, 05/01/00 5,000,000 5,000 Morgan Guaranty London Time Deposit 5.44%*, 05/01/00 5,000,000 5,000 Rydex U.S. Government Money Market Fund, 5.04%* 3,207,838 3,208 Wachovia Bank NA Time Deposit 5.44%*, 05/01/00 5,000,000 5,000 -------- TOTAL SHORT-TERM INVESTMENTS (Cost $36,797) 36,797 -------- TOTAL INVESTMENT -- 100.0% (Cost $219,064) 240,829 -------- OTHER ASSETS AND LIABILITIES, NET -- 0.0% Other assets 146 Liabilities (64) -------- 82 -------- TOTAL NET ASSETS -- 100.0% $240,911 ========
SEE ACCOMPANYING NOTES TO SCHEDULES OF INVESTMENTS AND NOTES TO FINANCIAL STATEMENTS. 32 SCHWAB MARKETMANAGER BALANCED PORTFOLIO SCHEDULE OF INVESTMENTS April 30, 2000 (Unaudited)
Number Value of Shares (000s) --------- -------- INVESTMENT FUNDS -- 91.6% ASIAN FUNDS -- 0.5% Scudder Japan Fund 51,939 $ 742 -------- 742 -------- BOND FUNDS -- 28.0% American Century Intermediate Term Treasury Fund 616,814 6,150 American Century Long Term Treasury Fund 228,451 2,225 Federated U.S. Government Securities Fund, 2-5 Years, Institutional Shares 634,196 6,526 Mainstay High Yield Corporate Bond Fund, Class A 984,831 7,091 PIMCO Total Return Fund, Institutional Class 2,043,611 20,190 -------- 42,182 -------- INTERNATIONAL STOCK FUNDS -- 10.4% Acorn International Fund 37,793 1,322 American Century International Discovery Fund, Institutional Class+ 100,143 1,795 Artisan International Fund 343,333 10,286 Dreyfus Founders Passport Fund+ 70,621 1,523 Oakmark International Fund 52,443 755 -------- 15,681 -------- LARGE-CAP FUNDS -- 33.7% Accessor Value & Income Portfolio 44,240 905 Excelsior Large Cap Growth Fund+ 157,777 2,804 Heritage Capital Appreciation Fund, Class A 46,453 1,456 Janus Twenty Fund 27,134 2,173 Longleaf Partners Fund 26,813 547 Managers Capital Appreciation Fund+ 20,037 1,172 Marsico Focus Fund+ 262,940 5,690 Marsico Growth & Income Fund+ 108,795 2,242 Number Value of Shares (000s) --------- -------- Oakmark Select Fund 489,546 $ 9,786 Rydex Series Trust Arktos Fund, Investor Class 51,124 979 Rydex Series Trust Nova Fund+ 82,930 3,294 Rydex Series Trust OTC Fund 18,272 508 Rydex Series Trust Ursa Fund, Investor Class 126,903 1,006 T. Rowe Price Value Fund 483,170 8,596 White Oak Growth Stock Fund+ 134,931 9,649 -------- 50,807 -------- SECTOR FUNDS -- 1.7% T. Rowe Price New Era Fund 110,683 2,498 -------- 2,498 -------- SMALL-CAP/MID-CAP FUNDS -- 17.3% Baron Small Cap Fund+ 83,780 1,372 Firsthand Technology Value Fund 5,288 600 Hambrecht & Quist IPO & Emerging Company Fund+ 35,728 427 Loomis Sayles Small Cap Growth Fund+ 37,338 1,027 MAS Small Cap Value Fund, Institutional Class 63,025 1,345 Melody 4500 Fund, L.P.+** 400,000 4,956 Neuberger Berman Millennium Fund 42,948 1,382 Robertson Stephens Emerging Growth Fund, Class A 29,960 1,760 Robertson Stephens Mid Cap Opportunities Fund 137,939 2,266 Thornburg Value Fund, Class A 78,693 2,647 Thornburg Value Fund, Institutional Class+ 206,176 6,959 VAN Wagoner Emerging Growth Fund+ 19,512 787 Weitz Series Hickory Fund 17,378 577 -------- 26,105 -------- TOTAL INVESTMENT FUNDS (Cost $128,109) 138,015 --------
33 SCHWAB MARKETMANAGER BALANCED PORTFOLIO SCHEDULE OF INVESTMENTS (continued) April 30, 2000 (Unaudited)
Number Value of Shares (000s) --------- -------- SHORT-TERM INVESTMENTS -- 8.0% Cayman Time Deposit 5.44%*, 05/01/00 3,665,300 $ 3,665 Chase Manhattan Bank NY Time Deposit 5.44%*, 05/01/00 2,000,000 2,000 Citibank Nassau TCA Time Deposit 5.44%*, 05/01/00 2,000,000 2,000 Morgan Guaranty London Time Deposit 5.44%*, 05/01/00 2,000,000 2,000 Rydex U.S. Government Money Market Fund, 5.04%* 476,179 476 Wachovia Bank NA Time Deposit 5.44%*, 05/01/00 2,000,000 2,000 -------- TOTAL SHORT-TERM INVESTMENTS (Cost $12,141) 12,141 -------- TOTAL INVESTMENTS -- 99.6% (Cost $140,250) 150,156 -------- OTHER ASSETS AND LIABILITIES, NET -- 0.4% Other assets 585 Liabilities (33) -------- 552 -------- TOTAL NET ASSETS -- 100.0% $150,708 ========
SEE ACCOMPANYING NOTES TO SCHEDULES OF INVESTMENTS AND NOTES TO FINANCIAL STATEMENTS. 34 SCHWAB MARKETMANAGER SMALL CAP PORTFOLIO SCHEDULE OF INVESTMENTS April 30, 2000 (Unaudited)
Number Value of Shares (000s) --------- -------- INVESTMENT FUNDS -- 93.4% Sector Funds -- 1.1% Excelsior Energy & Natural Resources Fund 121,558 $ 1,816 -------- 1,816 -------- SMALL-CAP / MID-CAP FUNDS -- 92.3% BlackRock Small Cap Value Equity Fund, Institutional Class 230,562 3,495 Firsthand Technology Value Fund 39,845 4,520 Fremont U.S. Micro Cap Fund+ 531,716 22,125 Liberty-Stein Roe Capital Opportunities Fund+ 155,716 6,028 Longleaf Partners Realty Fund 792,892 9,871 Longleaf Partners Small Cap Fund 363,203 7,173 Managers Special Equity Fund 99,836 9,716 MAS Small Cap Value Fund, Institutional Class 372,628 7,952 Melody 4500 Fund, L.P.+** 1,605,081 19,887 Neuberger Berman Genesis Fund 234,710 3,854 PBHG Small Cap Value Fund 119,568 2,137 Robertson Stephens Diversified Growth Fund, Class A+ 231,316 7,742 Scudder Micro Cap Fund 113,131 1,672 State Street Research Aurora Fund, Class A 419,703 10,249 Turner Micro Cap Growth Fund+ 126,707 4,478 Turner Small Cap Growth Fund+ 206,299 8,962 Value Line Special Situations Fund 239,514 6,714 VAN Wagoner Emerging Growth Fund+ 115,224 4,646 VAN Wagoner Micro Cap Fund 90,955 3,283 Weitz Series Hickory Fund 141,634 4,705 -------- 149,209 -------- TOTAL INVESTMENT FUNDS (Cost $134,624) 151,025 -------- Number Value of Shares (000s) --------- -------- SHORT-TERM INVESTMENTS -- 6.5% Bank One Grand Cayman Time Deposit 5.44%*, 05/01/00 2,000,000 $ 2,000 Cayman Time Deposit 5.44%*, 05/01/00 441,638 442 Chase Manhattan Bank NY Time Deposit 5.44%*, 05/01/00 2,000,000 2,000 Citibank Nassau TCA Time Deposit 5.44%*, 05/01/00 2,000,000 2,000 Morgan Guaranty London Time Deposit 5.44%*, 05/01/00 2,000,000 2,000 Wachovia Bank NA Time Deposit 5.44%*, 05/01/00 2,000,000 2,000 -------- TOTAL SHORT-TERM INVESTMENTS (Cost $10,442) 10,442 -------- TOTAL INVESTMENTS -- 99.9% (Cost $145,066) 161,467 -------- OTHER ASSETS AND Liabilities, NET -- 0.1% Other assets 113 Liabilities (16) -------- 97 -------- TOTAL NET ASSETS -- 100.0% $161,564 ========
SEE ACCOMPANYING NOTES TO SCHEDULES OF INVESTMENTS AND NOTES TO FINANCIAL STATEMENTS. 35 SCHWAB MARKETMANAGER INTERNATIONAL PORTFOLIO SCHEDULE OF INVESTMENTS April 30, 2000 (Unaudited)
Number Value of Shares (000s) --------- -------- INVESTMENT FUNDS -- 94.3% ASIAN FUNDS -- 3.0% Colonial Newport Japan Fund* 51,186 $ 1,065 Colonial Newport Tiger Fund, Class A 197,407 2,527 Scudder Japan Fund 242,588 3,466 -------- 7,058 -------- EUROPEAN FUNDS -- 5.4% AIM European Development Fund, Class A 466,870 11,910 Vontobel Eastern European Equity Fund 94,329 933 -------- 12,843 -------- INTERNATIONAL STOCK FUNDS -- 84.9% American Century International Discovery Fund, Institutional Class+ 1,704,789 30,550 American Century International Growth Fund, Institutional Class 1,347,900 19,302 Artisan International Fund 1,237,178 37,066 Dreyfus Founders Passport Fund+ 312,468 6,737 Driehaus International Growth Fund 308,657 5,892 First Eagle SoGen Overseas Fund 382,933 5,300 Hotchkis & Wiley International Fund 228,325 5,914 Ivy International Fund, Class A 77,679 3,381 Janus Overseas Fund 934,582 35,869 Montgomery Global Long Short Fund 213,870 6,525 Oakmark International Fund 500,606 7,209 Oppenheimer International Growth Fund, Class A+ 665,320 15,914 Pilgrim International Small Cap Growth Fund, Class Q 260,577 11,288 Tweedy Browne Global Value Fund 219,265 4,648 William Blair International Growth Fund 214,589 5,236 -------- 200,831 -------- SMALL-CAP / MID-CAP FUNDS -- 1.0% American Century Emerging Markets Fund 352,967 $ 2,344 -------- 2,344 -------- TOTAL INVESTMENT FUNDS (Cost $203,281) 223,076 -------- SHORT-TERM INVESTMENTS -- 5.5% Bank One Grand Cayman Time Deposit 5.44%*, 05/01/00 2,000,000 2,000 Cayman Time Deposit 5.44%*, 05/01/00 3,051,130 3,051 Chase Manhattan Bank NY Time Deposit 5.44%*, 05/01/00 2,000,000 2,000 Citibank Nassau TCA Time Deposit 5.44%*, 05/01/00 2,000,000 2,000 Morgan Guaranty London Time Deposit 5.44%*, 05/01/00 2,000,000 2,000 Wachovia Bank NA Time Deposit 5.44%*, 05/01/00 2,000,000 2,000 -------- TOTAL SHORT-TERM INVESTMENTS (Cost $13,051) 13,051 -------- TOTAL INVESTMENTS -- 99.8% (Cost $216,332) 236,127 -------- OTHER ASSETS AND LIABILITIES, NET -- 0.2% Other assets 570 Liabilities (117) -------- 453 -------- TOTAL NET ASSETS -- 100.0% $236,580 -------- NOTES TO SCHEDULES OF INVESTMENTS April 30, 2000 + Non-income producing security. * Interest rate represents the yield on report date. ** See Note 3 of Notes to Financial Statements. L.P. -- Limited Partnership
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 36 STATEMENTS OF ASSETS AND LIABILITIES (in thousands) April 30, 2000
Schwab MarketManager Portfolios(TM) -------------------------------------------- Growth Balanced Small Cap International -------- -------- --------- ------------- ASSETS Investments, at value (Cost: $219,064, $140,250, $145,066, and $216,332, respectively) $240,829 $150,156 $161,467 $236,127 Receivables: Fund shares sold 107 556 93 520 Dividends 7 19 -- -- Interest 16 5 5 6 Prepaid expenses 16 5 15 44 -------- -------- --------- -------- Total assets 240,975 150,741 161,580 236,697 -------- -------- --------- -------- Liabilities Payables: Fund shares redeemed -- 2 -- -- Investment advisory and administration fees 10 6 5 11 Accrued expenses 54 25 11 106 -------- -------- --------- -------- Total liabilities 64 33 16 117 ======== ======== ========= ======== Net assets applicable to outstanding shares $240,911 $150,708 $161,564 $236,580 ======== ======== ========= ======== Net assets consist of: Paid-in capital $194,268 $127,691 $140,557 $198,563 Undistributed net investment income 565 1,088 145 611 Accumulated net realized gain on investments sold 24,313 12,023 4,461 17,611 Net unrealized appreciation on investments 21,765 9,906 16,401 19,795 -------- -------- --------- -------- $240,911 $150,708 $161,564 $236,580 ======== ======== ========= ======== Pricing of shares: Outstanding shares, $0.00001 par value (unlimited shares authorized) 16,864 11,140 13,139 13,871 Net asset value, offering and redemption price per share $14.29 $13.53 $12.30 $17.06
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 37 STATEMENTS OF OPERATIONS (in thousands) For the six months ended April 30, 2000 (Unaudited)
Schwab MarketManager Portfolios(TM) -------------------------------------------- Growth Balanced Small Cap International -------- -------- --------- ------------- Investment income: Dividends $ 4,345 $ 3,181 $ 3,371 $ 4,878 Interest 256 118 167 192 -------- -------- --------- -------- Total investment income 4,601 3,299 3,538 5,070 -------- -------- --------- -------- Expenses: Investment advisory and administration fees 597 380 412 483 Transfer agency and shareholder service fees 276 176 191 224 Custodian fees 27 8 1 13 Portfolio accounting fees 18 13 35 16 Registration fees 17 14 5 9 Professional fees 11 9 2 13 Shareholder reports 19 5 8 60 Trustees' fees 4 6 6 6 Proxy fees 8 4 6 7 Other expenses 8 7 2 7 -------- -------- --------- -------- 985 622 668 838 Less:expenses reduced (see Note 5) (425) (267) (280) (384) -------- -------- --------- -------- Net expenses incurred by fund 560 355 388 454 -------- -------- --------- -------- Net investment income 4,041 2,944 3,150 4,616 -------- -------- --------- -------- Net realized gain on investments: Net realized gain on investments sold 20,745 10,353 7,563 13,472 Net realized gain received from underlying funds 3,847 1,811 2,654 4,238 -------- -------- --------- -------- Net realized gain on investments 24,592 12,164 10,217 17,710 -------- -------- --------- -------- Net unrealized appreciation (depreciation) on investments (378) 316 3,678 2,073 -------- -------- --------- -------- Net gain on investments 24,214 12,480 13,895 19,783 -------- -------- --------- -------- Increase in net assets resulting from operations $ 28,255 $ 15,424 $ 17,045 $ 24,399 ======== ======== ========= ========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 38 STATEMENTS OF CHANGES IN NET ASSETS (in thousands)
Schwab MarketManager Portfolios(TM) --------------------------------------------------------------------------------------------- Growth Balanced Small Cap International ---------------------- ---------------------- ---------------------- --------------------- Six months Six months Six months Six months ended Year ended Year ended Year ended Year 04/30/00 ended 04/30/00 ended 04/30/00 ended 04/30/00 ended (Unaudited) 10/31/99 (Unaudited) 10/31/99 (Unaudited) 10/31/99 (Unaudited) 10/31/99 ----------- ---------- ----------- ---------- ----------- ---------- ----------- --------- Operations: Net investment income $ 4,041 $ 2,077 $ 2,944 $ 2,373 $ 3,150 $ 2,795 $ 4,616 $ 775 Net realized gain on investments 20,745 19,916 10,353 10,077 7,563 5,707 13,472 13,982 Net realized gain received from underlying funds 3,847 2,831 1,811 1,397 2,654 4,813 4,238 1,240 Net unrealized appreciation (depreciation) on investments (378) 15,237 316 6,255 3,678 20,277 2,073 13,138 ---------- ---------- ---------- ---------- ---------- ---------- ---------- --------- Increase in net assets resulting from operations 28,255 40,061 15,424 20,102 17,045 33,592 24,399 29,135 ---------- ---------- ---------- ---------- ---------- ---------- ---------- --------- Dividends and distributions: Dividends to shareholders from net investment income (4,282) (2,077) (3,256) (2,373) (5,150) (673) (3,862) (775) Dividends in excess of net investment income -- (625) -- (118) -- -- -- (143) Distributions to shareholders from net capital gains (23,031) (3,029) (11,787) -- -- -- (14,371) -- ---------- ---------- ---------- ---------- ---------- ---------- ---------- --------- Total dividends and distributions to shareholders (27,313) (5,731) (15,043) (2,491) (5,150) (673) (18,233) (918) ---------- ---------- ---------- ---------- ---------- ---------- ---------- --------- Capital share transactions: Proceeds from shares sold 68,360 40,223 31,808 38,953 42,475 20,774 163,035 47,140 Net asset value of shares issued in reinvestment of dividends 26,775 5,639 14,451 2,389 4,883 642 17,401 879 Payments for shares redeemed (35,768) (51,444) (17,713) (29,966) (20,687) (59,884) (53,826) (46,236) ---------- ---------- ---------- ---------- ---------- ---------- ---------- --------- Increase (decrease) in net assets from capital share transactions 59,367 (5,582) 28,546 11,376 26,671 (38,468) 126,610 1,783 ---------- ---------- ---------- ---------- ---------- ---------- ---------- --------- Total increase (decrease) in net assets 60,309 28,748 28,927 28,987 38,566 (5,549) 132,776 30,000 Net assets: Beginning of period 180,602 151,854 121,781 92,794 122,998 128,547 103,804 73,804 ---------- ---------- ---------- ---------- ---------- ---------- ---------- --------- End of period (including undistributed net investment income (loss) of $565, $806, $1,088, $1,400, $145, $2,145, $611, $(143), respectively) $ 240,911 $ 180,602 $ 150,708 $ 121,781 $ 161,564 $ 122,998 $ 236,580 $ 103,804 ========== ========== ========== ========== ========== ========== ========== ========= Number of fund shares: Sold 4,574 3,089 2,290 3,085 3,232 2,046 8,866 3,661 Reinvested 1,830 457 1,060 196 387 68 995 78 Redeemed (2,389) (3,980) (1,273) (2,386) (1,624) (6,075) (2,987) (3,716) ---------- ---------- ---------- ---------- ---------- ---------- ---------- --------- Net increase (decrease) in shares outstanding 4,015 (434) 2,077 895 1,995 (3,961) 6,874 23 Shares outstanding: Beginning of period 12,849 13,283 9,063 8,168 11,144 15,105 6,997 6,974 ---------- ---------- ---------- ---------- ---------- ---------- ---------- --------- End of period 16,864 12,849 11,140 9,063 13,139 11,144 13,871 6,997 ========== ========== ========== ========== ========== ========== ========== =========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 39 FINANCIAL HIGHLIGHTS
11/1/99- 11/1/98- 11/1/97- 11/18/96- 4/30/00 10/31/99 10/31/98 10/31/97 SCHWAB MARKETMANAGER GROWTH (Unaudited) PORTFOLIO - --------------------------------------------------------------------------------------- PER-SHARE DATA ($) - --------------------------------------------------------------------------------------- Net asset value at beginning of period 14.06 11.43 11.60 10.00 ---------------------------------------------- Income from investment operations: Net investment income 0.30 0.16 0.32 0.08 Net realized and unrealized gain on investments 2.03 2.91 0.11 1.66 ---------------------------------------------- Total income from investment operations 2.33 3.07 0.43 1.74 ---------------------------------------------- Less distributions: Dividends from net investment income (0.33) (0.16) (0.29) (0.14) Dividends in excess of net investment income -- (0.05) -- -- Distributions from capital gains (1.77) (0.23) (0.31) -- ---------------------------------------------- Total distributions (2.10) (0.44) (0.60) (0.14) ---------------------------------------------- NET ASSET VALUE AT END OF PERIOD 14.29 14.06 11.43 11.60 ---------------------------------------------- Total return (%) 16.23(1) 27.38 3.87 17.60(1)
RATIOS/SUPPLEMENTAL DATA (%) - --------------------------------------------------------------------------------------- Ratio of net operating expenses to average net assets 0.50(2,3) 0.50 0.50 0.50(2) Expense reductions reflected in above ratio 0.38(2) 0.43 0.67 0.77(2) Ratio of net investment income to average net assets 3.66(2) 1.23 2.66 2.07(2) Portfolio turnover rate 112 284 384 192 Net assets, end of period ($ x 1,000) 240,911 180,602 151,854 123,877 (1) Not annualized. (2) Annualized. (3) Would have been 0.51% if certain non-routine expenses had been included.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 40
11/1/99- 11/1/98- 11/1/97- 11/18/96- 4/30/00 10/31/99 10/31/98 10/31/97 SCHWAB MARKETMANAGER BALANCED (Unaudited) PORTFOLIO - ------------------------------------------------------------------------------------- PER-SHARE DATA ($) - ------------------------------------------------------------------------------------- Net asset value at beginning of period 13.44 11.36 11.38 10.00 ---------------------------------------------- Income from investment operations: Net investment income 0.29 0.27 0.36 0.17 Net realized and unrealized gain on investments 1.43 2.11 0.18 1.34 ---------------------------------------------- Total income from investment operations 1.72 2.38 0.54 1.51 ---------------------------------------------- Less distributions: Dividends from net investment income (0.35) (0.28) (0.34) (0.13) Dividends in excess of net investment income -- (0.02) -- -- Distributions from capital gains (1.28) -- (0.22) -- ---------------------------------------------- Total distributions (1.63) (0.30) (0.56) (0.13) ---------------------------------------------- NET ASSET VALUE AT END OF PERIOD 13.53 13.44 11.36 11.38 ---------------------------------------------- Total return (%) 12.75(1) 21.28 4.89 15.27(1) RATIOS/SUPPLEMENTAL DATA (%) - ------------------------------------------------------------------------------------- Ratio of net operating expenses to average net assets 0.50(2,3) 0.50 0.50 0.50(2) Expense reductions reflected in above ratio 0.38(2) 0.45 0.69 0.95(2) Ratio of net investment income to average net assets 4.19(2) 2.20 3.21 3.03(2) Portfolio turnover rate 76 244 353 171 Net assets, end of period ($ x 1,000) 150,708 121,781 92,794 61,133 (1) Not annualized. (2) Annualized. (3) Would have been 0.51% if certain non-routine expenses had been included.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 41 FINANCIAL HIGHLIGHTS
11/1/99- 11/1/98- 11/1/97- 9/16/97- 4/30/00 10/31/99 10/31/98 10/31/97 SCHWAB MARKETMANAGER SMALL CAP (Unaudited) PORTFOLIO - ------------------------------------------------------------------------------------- PER-SHARE DATA ($) - ------------------------------------------------------------------------------------- Net asset value at beginning of period 11.04 8.51 9.93 10.00 ------------------------------------------------ Income from investment operations: Net investment income 0.28 0.24 0.21 0.02 Net realized and unrealized gain (loss) on investments 1.44 2.34 (1.36) (0.09) ------------------------------------------------ Total income (loss) from investment operations 1.72 2.58 (1.15) (0.07) ------------------------------------------------ Less distributions: Dividends from net investment income (0.46) (0.05) (0.21) -- Dividends in excess of net investment income -- -- (0.03) -- Distributions from capital gains -- -- (0.03) -- ------------------------------------------------ Total distributions (0.46) (0.05) (0.27) -- ------------------------------------------------ NET ASSET VALUE AT END OF PERIOD 12.30 11.04 8.51 9.93 ------------------------------------------------ Total return (%) 15.46(1) 30.38 (11.84) (0.70)(1) RATIOS/SUPPLEMENTAL DATA (%) - ------------------------------------------------------------------------------------- Ratio of net operating expenses to average net assets 0.50(2,3) 0.50 0.50 0.50(2) Expense reductions reflected in above ratio 0.37(2) 0.51 0.69 0.75(2) Ratio of net investment income to average net assets 4.13(2) 2.23 2.65 1.29(2) Portfolio turnover rate 59 145 166 10 Net assets, end of period ($ x 1,000) 161,564 122,998 128,547 207,050 (1) Not annualized. (2) Annualized. (3) Would have been 0.51% if certain non-routine expenses had been included.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 42
11/1/99- 11/1/98- 11/1/97- 11/18/96- 10/16/96- 4/30/00 10/31/99 10/31/98 10/31/97 10/31/96 SCHWAB MARKETMANAGER INTERNATIONAL (Unaudited) PORTFOLIO - ------------------------------------------------------------------------------------------------ PER-SHARE DATA ($) - ------------------------------------------------------------------------------------------------ Net asset valueat beginning of period 14.84 10.58 10.86 9.91 10.00 ---------------------------------------------------------- Income from investment operations: Net investment income 0.55 0.11 0.34 0.17 -- Net realized and unrealized gain (loss) on investments 4.00 4.28 0.02 0.95 (0.09) ---------------------------------------------------------- Total income (loss) from investment operations 4.55 4.39 0.36 1.12 (0.09) ---------------------------------------------------------- Less distributions: Dividends from net investment income (0.49) (0.11) (0.33) (0.17) -- Dividends in excess of net investment income -- (0.02) (0.01) -- -- Distributions from capital gains (1.84) -- (0.30) -- -- ---------------------------------------------------------- Total distributions (2.33) (0.13) (0.64) (0.17) -- ---------------------------------------------------------- NET ASSET VALUE AT END OF PERIOD 17.06 14.84 10.58 10.86 9.91 ---------------------------------------------------------- Total return (%) 30.29(1) 41.92 3.55 11.47 (0.90)(1) RATIOS/SUPPLEMENTAL DATA (%) - ------------------------------------------------------------------------------------------------ Ratio of net operating expenses to average net assets 0.50(2,3) 0.50 0.50 0.50 0.50(2) Expense reductions reflected in above ratio 0.43(2) 0.47 0.70 0.80 2.91(2) Ratio of net investment income to average net assets 5.16(2) 0.94 2.96 1.40 0.52(2) Portfolio turnover rate 54 249 236 179 -- Net assets, end of period ($ x 1,000) 236,580 103,804 73,804 81,086 59,180 (1) Not annualized. (2) Annualized. (3) Would have been 0.51% if certain non-routine expenses had been included.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 43 NOTES TO FINANCIAL STATEMENTS For the six months ended April 30, 2000 (Unaudited) (All currency amounts are in thousands unless otherwise noted.) 1. DESCRIPTION OF THE FUNDS The SCHWAB MARKETMANAGER GROWTH PORTFOLIO, Schwab MarketManager Balanced Portfolio, SCHWAB MARKETMANAGER SMALL CAP PORTFOLIO and Schwab MarketManager International Portfolio, (the "funds") are series of Schwab Capital Trust (the "trust"), a no-load, open-end, investment management company organized as a Massachusetts business trust on May 7, 1993 and registered under the Investment Company Act of 1940, as amended (the "1940 Act"). In addition to the funds, the trust also offers the Schwab Total Stock Market Index Fund(TM), Schwab S&P 500 Fund, Schwab Small-Cap Index Fund(R), Schwab International Index Fund(R), Schwab MarketTrack Growth Portfolio, Schwab MarketTrack Balanced Portfolio, Schwab MarketTrack Conservative Portfolio, Schwab MarketTrack All Equity Portfolio, Schwab Analytics Fund(R), Institutional Select(TM) S&P 500 Fund, Institutional Select(TM) Large-Cap Value Index Fund and Institutional Select(TM) Small-Cap Value Index Fund. 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. 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 underlying funds are valued at their respective net asset values as determined by those funds, in accordance with the 1940 Act, for a given day. Investments in securities traded on an exchange or in the over-the-counter market value 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. Other investments, including limited partnerships, for which no quotations are readily available, are valued at fair value as determined by the funds' investment adviser pursuant to guidelines adopted in good faith by the Board of Trustees. SECURITY TRANSACTIONS, INVESTMENT INCOME AND REALIZED GAINS (LOSSES) -- Security transactions are accounted for on a trade-date basis (date the order to buy or sell is executed). Dividend income and distributions to shareholders are recorded on the ex-dividend date. Interest income, (including accretion of discounts) is recorded on the accrual basis. Realized gains and losses from security transactions are determined on an identified cost basis. EXPENSES -- Expenses arising in connection with a fund are charged directly to that 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 each fund's policy to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all net investment income and realized net capital gains, if any, to shareholders. Therefore, no federal income tax provision is required. Each fund is considered a separate entity for tax purposes. 44 NOTES TO FINANCIAL STATEMENTS (continued) The aggregate unrealized appreciation and depreciation for securities held by the funds at April 30, 2000, which was substantially the same for financial reporting and federal income tax purposes, was as follows:
Net Unrealized Appreciated Depreciated Portfolio Appreciation Securities Securities ---------- -------------- ----------- ----------- Schwab MarketManager Growth Portfolio $ 21,765 $ 28,602 $ (6,837) Schwab MarketManager Balanced Portfolio 9,906 14,008 (4,102) Schwab MarketManager Small cap Portfolio 16,401 23,974 (7,573) Schwab MarketManager International Portfolio 19,795 30,870 (11,075)
At October 31, 1999, the unused capital loss carryforwards, for federal income tax purposes with expiration dates, were as follows: Schwab MarketManager Portfolios(TM) ----------------------------------- Capital Loss Expirations Small Cap ------------------------ ------------- 12/31/05 $14,553 RECLASSIFICATIONS -- Generally accepted accounting principles require that certain components of net assets be reclassified between financial and tax reporting. These reclassifications have no effect on net assets or net asset values per share. As of April 30, 2000, there were no reclassifications. 3. TRANSACTIONS WITH LIMITED PARTNERSHIPS As of April 30, 2000, the MarketManager Growth Portfolio, the MarketManager Balanced Portfolio and the MarketManager Small Cap Portfolio owned 17.3%, 16.5%, and 66.1% limited partnership ownership interests, respectively, in the Melody 4500 Fund, L.P. ("Melody"). Melody invests in publicly traded securities of small-to-medium capitalization issuers located in the United States and will attempt to equal or exceed the total return performance of the Wilshire 4500 Index over a market cycle of five years. As stated in the partnership agreement, under normal market conditions, each fund can generally redeem up to 50% of its interest upon three business days notice to the general partner, and the remainder of the capital account as of the last business day of any calendar month on at least 30 days prior notice to the general partner. 4. 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 adviser"). For advisory services and facilities furnished, each fund pays an annual fee, payable monthly, of 0.54% of the first $500 million of average daily net assets, and 0.49% of such net assets over $500 million. The investment adviser has reduced a portion of its fee for the six months ended April 30, 2000 (see Note 5). Prior to February 28, 1999, each fund paid an annual fee, payable monthly, of 0.74% of the first $1 billion of average daily net assets, and 0.69% of the next $1 billion and 0.64% of such net assets over $2 billion. 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 each fund's average daily net assets for transfer agency services and 0.20% of such net assets for shareholder services. Schwab has waived all of its transfer agency and shareholder service fees for the six months ended April 30, 2000 (see Note 5). 45 NOTES TO FINANCIAL STATEMENTS (continued) OFFICERS AND TRUSTEES -- Certain officers and trustees of the trust are also officers and/or directors of the investment adviser and/or Schwab. During the six months ended April 30, 2000, the trust made no direct payments to its officers or trustees who are "interested persons" within the meaning of the 1940 Act. The funds incurred fees aggregating $22 related to the trust's unaffiliated trustees. 5. EXPENSES REDUCED AND ABSORBED BY THE INVESTMENT ADVISER AND SCHWAB The investment adviser and Schwab guarantee that through at least February 28, 2001, each fund's total operating expenses will not exceed 0.50% of the fund's average daily net assets, after waivers and reimbursements. Schwab has agreed to waive its transfer agency and shareholder service fees through at least December 31, 2001. For the purpose of this guarantee, operating expenses do not include interest, taxes, and certain non-routine expenses. The operating expense ratio for the six months ended April 30, 2000 did include non-routine expenses. For the six months ended April 30, 2000, the total of such fees and expenses reduced by the investment adviser was $149, $91, $89, and $160 for the Schwab MarketManager Growth, Schwab MarketManager Balanced, Schwab MarketManager Small Cap and Schwab MarketManager International Portfolios, respectively, and the total of such fees reduced by Schwab was $276, $176, $191, and $224, respectively for the Schwab MarketManager Growth, Schwab MarketManager Balanced, Schwab MarketManager Small Cap, and Schwab MarketManager International Portfolios. 6. BORROWING AGREEMENTS The trusts have both committed and uncommitted lines of credit arrangements with PNC Bank N.A., Bank of America NT &SA and The Bank of New York, whereby the trusts may borrow on behalf of the funds, as a temporary measure to satisfy redemption requests or for extraordinary or emergency purposes. The trusts may borrow in an aggregate amount of up to $150 million from PNC Bank N.A., $133 million from Bank of America NT &SA and $183 million from The Bank of New York. Amounts borrowed under these arrangements bear interest at periodically negotiated rates. The funds also pay annual fees for the unused balance of the committed line of credit. During the reporting period, the funds only borrowed against the uncommitted lines of credit. As of April 30, 2000, there were no borrowings outstanding. 7. INVESTMENT TRANSACTIONS Purchases, sales and maturities of investment securities, other than short-term obligations and U.S. Government securities, for the six months ended April 30, 2000, were as follows:
Proceeds of Sales and Portfolio Purchases Maturities --------- --------- ----------- Schwab MarketManager Growth Portfolio $236,774 $223,912 Schwab MarketManager Balanced Portfolio 111,628 99,089 Schwab MarketManager Small Cap Portfolio 107,770 84,511 Schwab MarketManager International Portfolio 199,902 92,300
46 THE SCHWABFUNDS FAMILY-REGISTERED TRADEMARK- 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 market funds. Please call 800-435-4000 for a free prospectus and brochure for any of these SchwabFunds-Registered Trademark-. This report must be preceded or accompanied by a current prospectus. METHODS FOR PLACING ORDERS The information below outlines how Schwab brokerage account investors can place orders. If you are investing through a third-party investment provider, methods for placing orders may be different. PHONE Call 800-435-4000, day or night (for TDD service, call 800-345-2550). INTERNET www.schwab.com/schwabfunds MAIL Write to SchwabFunds at: P. O. Box 7575, San Francisco, CA 94120-7575 When selling or exchanging shares, be sure to include the signatures of at least one of the persons whose name is on the account. IN PERSON Visit the nearest Charles Schwab office. SCHWAB ASSET ALLOCATION FUNDS Schwab MarketTrack All Equity Portfolio Schwab MarketTrack Growth Portfolio Schwab MarketTrack Balanced Portfolio Schwab MarketTrack Conservative Portfolio Schwab MarketManager Growth Portfolio Schwab MarketManager Balanced Portfolio SCHWAB STOCK FUNDS Schwab S&P 500-Registered Trademark- Fund Schwab 1000 Fund-Registered Trademark- Schwab Total Stock Market Index Fund-TM- Schwab Analytics Fund-Registered Trademark- Schwab Small-Cap Index Fund-Registered Trademark- Schwab MarketManager Small Cap Portfolio Schwab International Index Fund-Registered Trademark- Schwab MarketManager International Portfolio SCHWAB BOND FUNDS Schwab YieldPlus Fund-TM- Schwab Total Bond Market Index Fund Schwab Short-Term Bond Market Index Fund Schwab Long-Term Tax-Free Bond Fund Schwab Short/Intermediate Tax-Free Bond Fund Schwab California Long-Term Tax-Free Bond Fund Schwab California Short/Intermediate Tax-Free Bond Fund SCHWAB MONEY MARKET FUNDS Schwab offers an array of money market funds that seek high current income consistent with safety and liquidity.(1) 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-Registered Trademark-. (1) Investments in money market funds are neither insured nor guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency and, although they seek to preserve the value of your investment at $1 per share, it is possible to lose money. [LOGO] INVESTMENT ADVISER Charles Schwab Investment Management, Inc. 101 Montgomery Street, San Francisco, CA 94104 DISTRIBUTOR Charles Schwab & Co., Inc. P.O. Box 7575, San Francisco, CA 94120-7575 This report is not authorized for distribution to prospective investors unless preceded or accompanied by a current prospectus. -C- 2000 Charles Schwab & Co., Inc. All rights reserved. Member SIPC/NYSE. Printed on recycled paper. MKT3563-2 (6/00) SCHWABFUNDS -Registered Trademark- SCHWAB MARKETTRACK PORTFOLIOS -TM- SEMIANNUAL REPORT AND AN IMPORTANT NOTICE REGARDING DELIVERY OF SHAREHOLDER DOCUMENTS April 30, 2000 IMPORTANT NOTICE REGARDING DELIVERY OF SHAREHOLDER DOCUMENTS The Securities and Exchange Commission permits mutual funds to deliver only one copy of shareholder documents, including prospectuses and shareholder reports, to fund investors with multiple accounts at the same residential or post office box address. This practice is commonly called "householding" and is intended to eliminate duplicate mailings of shareholder documents. Mailing of your SchwabFunds shareholder documents may be householded indefinitely unless you instruct us otherwise. ADDITIONAL COPIES OF SHAREHOLDER DOCUMENTS ALL SCHWABFUNDS PROSPECTUSES AND SHAREHOLDER REPORTS ARE AVAILABLE FREE OF CHARGE AND MAY BE REQUESTED AT ANY TIME BY CALLING SCHWAB AS INDICATED BELOW. SCHWABFUNDS PROSPECTUSES ARE ALSO AVAILABLE ON OUR WEB SITE AT WWW.SCHWAB.COM. If you would prefer that your SchwabFunds mailings not be householded, please contact: - - SCHWAB SIGNATURE SERVICES-TM- CLIENTS: Schwab Signature Services. - - INVESTMENT MANAGER CLIENTS: Schwab at 1-800-515-2157, or your investment manager. - - ALL OTHER CLIENTS: Schwab at 1-800-435-4000. Your instructions that householding not apply to your accounts holding SchwabFunds will be effective within 30 days of receipt by Schwab. SCHWABFUNDS -Registered Trademark- SCHWAB MARKETTRACK PORTFOLIOS -TM- - ALL EQUITY - GROWTH - BALANCED - CONSERVATIVE Semiannual Report April 30, 2000 SCHWAB MARKETTRACK PORTFOLIOS-TM- We are pleased to bring you this semiannual report for the Schwab MarketTrack Portfolios (the portfolios) for the six-month period ended April 30, 2000. In this report you will find performance statistics and other useful information for the following portfolios: - Schwab MarketTrack All Equity Portfolio - Schwab MarketTrack Growth Portfolio - Schwab MarketTrack Balanced Portfolio - Schwab MarketTrack Conservative Portfolio Each of the portfolios provides an easy, convenient way to diversify your investment among major asset categories--stocks, bonds and cash equivalents*. Through a single investment, you may benefit from asset allocation, an investment strategy designed to achieve an optimal balance between risk and return. In fact, research has shown that one of the greatest impacts on investment returns may be the asset allocation decision (the mix of stocks, bonds and cash equivalents) rather than market timing or individual stock selection. The primary difference among the four Schwab MarketTrack Portfolios is the proportion of each that is invested in stocks. Each portfolio targets a different mix of investments, as described more fully in the following pages, and employs an index-based approach to capturing the returns inherent in the asset categories by investing primarily in Schwab Index Funds. * The Schwab MarketTrack All Equity Portfolio does not target investing in bonds or cash. FUND LISTINGS The MarketTrack Portfolios are listed in THE WALL STREET JOURNAL, USA TODAY, INVESTOR'S BUSINESS DAILY and most local newspapers as follows under the heading SCHWABFUNDS-Registered Trademark-:
NEWSPAPER LISTING + SYMBOL MT AllEq SWEGX MT Gro SWHGX MT Bal SWBGX MT Cons SWCGX
+ Note that newspaper listings will indicate the previous day's quotation. CONTENTS - --------------------------------------------- A Message from the Chairman 1 - --------------------------------------------- What Every Investor Should Know 2 - --------------------------------------------- Market Overview 4 - --------------------------------------------- Schwab MarketTrack All Equity Portfolio PORTFOLIO PERFORMANCE 8 PORTFOLIO SNAPSHOT 10 - --------------------------------------------- Schwab MarketTrack Growth Portfolio PORTFOLIO PERFORMANCE 12 PORTFOLIO SNAPSHOT 14 - --------------------------------------------- Schwab MarketTrack Balanced Portfolio PORTFOLIO PERFORMANCE 16 PORTFOLIO SNAPSHOT 18 - --------------------------------------------- Schwab MarketTrack Conservative Portfolio PORTFOLIO PERFORMANCE 20 PORTFOLIO SNAPSHOT 22 - --------------------------------------------- Portfolio Management 24 - --------------------------------------------- Portfolio Discussion 25 - --------------------------------------------- Glossary 28 - --------------------------------------------- Financial Statements and Notes 30 - ---------------------------------------------
A MESSAGE FROM THE CHAIRMAN [PHOTO] Dear Shareholder, During the last few years, the benefits of investing have been readily apparent, while the risks have been somewhat less obvious. In recent months, however, investors have been subject to larger swings in the market, even within the span of a single day. Given this divergent environment, the message is clear: Expect volatility, maintain a long-term view and ensure your investment strategy is appropriate for your risk tolerance and time horizon. One way to lessen the impact of volatility on your portfolio is to adequately diversify your investments, both within and across asset sectors, namely cash equivalents, bonds and stocks. With its broad range of funds, SchwabFunds-Registered Trademark- can help form the foundation of a diversified investment plan. Our asset allocation funds can even provide diversification within a single fund. We recently added four new sector funds, the Schwab Focus Funds, to our SchwabFunds offering. Each invests in a group of industries within a specific sector--Communications, Financial Services, Healthcare and Technology--and can be an effective complement to individual stock investing. Each Focus Fund concentrates its investing in companies in a specific sector and may involve a greater degree of risk than an investment in mutual funds with greater diversification. For more information on the Schwab Focus Funds, please call 1-800-435-4000 and request a prospectus. The prospectus contains more information on fund fees and expenses as well as risks. Please read it carefully before investing. As a leader in online brokerage, we recognize the value of the web as a means of communicating timely, relevant information to investors. Regular updates on all the SchwabFunds, including performance data, are available on our Web site at WWW.SCHWAB.COM/SCHWABFUNDS. We encourage you to take advantage of this valuable resource. Thank you for your investment in SchwabFunds. For its part, SchwabFunds will do everything we can to warrant the trust you have placed in us. Sincerely, /s/ Charles R. Schwab Charles R. Schwab April 30, 2000 1 WHAT EVERY INVESTOR SHOULD KNOW WHY ASSET ALLOCATION MATTERS As most investors know, one of the most compelling reasons to invest in a mutual fund is diversification. By allocating your assets across many different securities, a fund can help reduce the risk that you might otherwise encounter by owning just a few stocks or bonds. But remember that diversification ACROSS asset classes can be just as important as diversification WITHIN one of the mutual funds you own. As you probably know, stocks historically have offered much higher returns over the long term than bonds, cash or other asset classes, but those returns have come at the price of higher volatility. To help mitigate some of that risk, many investors often include at least some bonds and cash in their portfolios. They also diversify their exposure across different stock market segments--such as large-cap and small-cap U.S. stocks and international stocks, which tend not to move in tandem. In short, allocating assets across market segments may help reduce your overall portfolio risk. REGULAR INVESTING STRATEGIES Another way to help dampen the effects of short-term market volatility is to invest the same amount of money on a regular basis. With this investment strategy, known as DOLLAR-COST AVERAGING, you automatically buy more shares when stock or bond prices are low and fewer when they're high.* A hypothetical example can help illustrate this concept. Let's say you invest $400 on a monthly basis in a single mutual fund, as shown below. Because of fluctuating prices, your per share purchase price varies monthly. A simple average of your five purchase prices would yield $8.20 per share; however, your AVERAGE COST BASIS (your total investment divided by the number of shares actually purchased) would be significantly lower--by more than $0.50 per share. The net result in this example is that your average cost per share is reduced and you'd have purchased more shares than you would have had you paid the average share price over the five-month period.
No. of Fixed Share Shares Investment Price Purchased - -------------------------------------------------------- Month 1 $400 $10 40 - -------------------------------------------------------- Month 2 $400 $8 50 - -------------------------------------------------------- Month 3 $400 $5 80 - -------------------------------------------------------- Month 4 $400 $8 50 - -------------------------------------------------------- Month 5 $400 $10 40 - -------------------------------------------------------- Totals $2,000 $41 260 - -------------------------------------------------------- AVERAGE SHARE PRICE ($41 DIVIDED BY 5 periods): $8.20 YOUR AVERAGE COST BASIS ($2,000 DIVIDED BY 260 shares) $7.69 PER-SHARE ADVANTAGE: $0.51
This example is for illustrative purposes only and is not intended to predict or guarantee the performance of any particular fund available through Schwab. (Of course, in this example, hindsight shows you that your best move would have been to invest your entire $2,000 in Month 3, when the share price was at a low of $5--but it's unlikely that you would have been able to predict that.) * Regular investing strategies such as dollar-cost averaging do not assure a profit or protect against a loss in declining markets. Since such a strategy involves continuous investment, investors should consider their ability to continue purchases through periods of low price levels. 2 SCHWAB'S 10 INVESTING PRINCIPLES 1. START WITH THE BASICS FOR LONG-TERM INVESTING. 2. GET STARTED NOW! 3. KNOW YOURSELF. 4. INVEST IN THE STOCK MARKET FOR GROWTH. 5. TAKE A LONG-TERM VIEW. 6. BUILD A DIVERSIFIED PORTFOLIO. 7. CONSIDER BONDS AND CASH FOR DIVERSIFICATION AND INCOME. 8. MINIMIZE YOUR EXPENSES. 9. STAY ON TRACK. 10. BECOME A LIFELONG INVESTOR. In addition to reducing your per-share costs over time, dollar-cost averaging provides another benefit: the discipline of investing regularly. You're more likely to maintain a regular investment plan if it's automatic: You don't have to think about it, and you minimize any propensity to skip an investment in favor of some other expenditure. To encourage this discipline, Schwab offers you two convenient, no cost ways to begin or maintain a program of regular investing: Schwab's AUTOMATIC INVESTMENT PLAN (AIP) allows you to automatically purchase--on a regular basis--additional shares in mutual funds that you already own. You can choose to invest as little as $100--twice a month, monthly or quarterly.(1) With Schwab MoneyLink-Registered Trademark- electronic funds transfer service, you can easily request fund transfers between your Schwab account and your accounts at other financial institutions. You can schedule automatically recurring transfers for easy long-term savings. Or request a transfer via the Web, by automated touch-tone phone, or through a Schwab representative anytime, day or night. Please be aware that these programs and dollar-cost averaging in general do not ensure a profit or protect against a loss, and investors should know that markets fall as well as rise. Because dollar-cost averaging involves continuous investment in securities regardless of fluctuating prices, you should consider your financial ability to purchase in both up and down markets. Over the long term, however, dollar-cost averaging may help to smooth out volatility caused by shortterm market trends. For more information on the Automatic Investment Plan or MoneyLink, please call us at 1-800-435-4000. WE MAKE IT EASY TO INVEST We try to make it easy and convenient for you to invest in SchwabFunds-Registered Trademark-. In addition to our automated methods that allow you to invest or transfer money to your Schwab account on a regular basis, you can also invest through our Web site at WWW.SCHWAB.COM/SCHWABFUNDS; through our automated touch-tone telephone service, TeleBroker-Registered Trademark-, by calling 1-800-272-4922; or in person at any of our nationwide branches. KEEPING YOU INFORMED You can find a wealth of information about our investment philosophy and funds, as well as updated fund performance data at our Web site: WWW.SCHWAB.COM/SCHWABFUNDS. (1) Includes uninvested cash and margin cash available. If sufficient cash is not available, your automatic purchases will not be made. 3 MARKET OVERVIEW U.S. ECONOMIC GROWTH April 2000 marked the beginning of the tenth year of the current expansion, making it the longest in U.S. history. Gross Domestic Product (GDP) grew at a real (inflation adjusted) rate of 4.6% during 1999--the fourth consecutive year at 4% or more and 5.4% during the first quarter of 2000. This rate is considered by most economists and the Federal Reserve (Fed) to be in excess of what the economy can absorb without experiencing inflationary pressures, perhaps 3.5% to 4.0%. High levels of consumer spending fueled by rising incomes, personal wealth and consumer confidence, as well as strong business capital investment and a healthy housing sector, have been the principal factors driving this lengthy expansion. EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC REAL GDP GROWTH RATE Quarterly Percentage Change (Annualized Rate) Q1/90 5.0% Q2/90 1.0% Q3/90 -0.6% Q4/90 -3.0% Q1/91 -1.7% Q2/91 2.6% Q3/91 1.3% Q4/91 2.5% Q1/92 4.3% Q2/92 4.0% Q3/92 3.1% Q4/92 5.2% Q1/93 -0.7% Q2/93 2.1% Q3/93 1.5% Q4/93 6.0% Q1/94 3.6% Q2/94 5.7% Q3/94 2.2% Q4/94 5.1% Q1/95 1.5% Q2/95 0.8% Q3/95 3.2% Q4/95 3.3% Q1/96 2.9% Q2/96 6.9% Q3/96 2.2% Q4/96 4.9% Q1/97 4.9% Q2/97 5.1% Q3/97 4.0% Q4/97 3.1% Q1/98 6.7% Q2/98 2.1% Q3/98 3.8% Q4/98 5.9% Q1/99 3.7% Q2/99 1.9% Q3/99 5.7% Q4/99 7.3% Q1/00 5.4%
Source: BLOOMBERG L.P. Looking ahead, the availability of increasingly scarce labor resources and the domestic consumers' response to continued stock market volatility may be key determinants of whether the economy continues on its current course or softens throughout 2000. The Fed has raised the federal funds rate by 1.75% since June 1999 in an as yet unsuccessful effort to moderate the economy's rapid growth rate. The consensus of most economists is that the U.S. economy appears poised for continued strong growth and additional intervention by the Fed (increases in the federal funds rate) until the growth rate of the economy slows to a more sustainable level. UNEMPLOYMENT The unemployment rate dropped to 3.9% in April 2000, a three-decade low. Employment growth continues to outstrip population growth. Reflecting a shrinking pool of available workers, labor markets continue to be extremely tight in many areas of the country and there has been some regional evidence of labor shortages driving up wages. The labor force participation rate, which measures the employment population as a percent of the total population, is at a post-war high. Growth in the labor force has slowed, and the Fed has expressed its concern that strong demand and tight labor markets may continue to put pressure on manufacturers and service providers to raise prices. EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC U.S. UNEMPLOYMENT RATE 1/90 5.4% 2/90 5.3% 3/90 5.2% 4/90 5.4% 5/90 5.4% 6/90 5.2% 7/90 5.5% 8/90 5.7% 9/90 5.9% 10/90 5.9% 11/90 6.2% 12/90 6.3% 1/91 6.4% 2/91 6.6% 3/91 6.8% 4/91 6.7% 5/91 6.9% 6/91 6.9% 7/91 6.8% 8/91 6.9% 9/91 6.9% 10/91 7.0% 11/91 7.0% 12/91 7.3% 1/92 7.3% 2/92 7.4% 3/92 7.4% 4/92 7.4% 5/92 7.6% 6/92 7.8% 7/92 7.7% 8/92 7.6% 9/92 7.6% 10/92 7.3% 11/92 7.4% 12/92 7.4% 1/93 7.3% 2/93 7.1% 3/93 7.0% 4/93 7.1% 5/93 7.1% 6/93 7.0% 7/93 6.9% 8/93 6.8% 9/93 6.7% 10/93 6.8% 11/93 6.6% 12/93 6.5% 1/94 6.8% 2/94 6.6% 3/94 6.5% 4/94 6.4% 5/94 6.1% 6/94 6.1% 7/94 6.3% 8/94 6.0% 9/94 5.8% 10/94 5.8% 11/94 5.6% 12/94 5.5% 1/95 5.6% 2/95 5.4% 3/95 5.3% 4/95 5.8% 5/95 5.8% 6/95 5.6% 7/95 5.6% 8/95 5.7% 9/95 5.6% 10/95 5.5% 11/95 5.7% 12/95 5.6% 1/96 5.6% 2/96 5.5% 3/96 5.6% 4/96 5.5% 5/96 5.6% 6/96 5.3% 7/96 5.5% 8/96 5.1% 9/96 5.2% 10/96 5.2% 11/96 5.3% 12/96 5.4% 1/97 5.3% 2/97 5.3% 3/97 5.1% 4/97 5.0% 5/97 4.7% 6/97 5.0% 7/97 4.7% 8/97 4.9% 9/97 4.7% 10/97 4.7% 11/97 4.6% 12/97 4.7% 1/98 4.5% 2/98 4.6% 3/98 4.6% 4/98 4.3% 5/98 4.3% 6/98 4.5% 7/98 4.5% 8/98 4.5% 9/98 4.5% 10/98 4.5% 11/98 4.4% 12/98 4.3% 1/99 4.3% 2/99 4.4% 3/99 4.2% 4/99 4.3% 5/99 4.2% 6/99 4.3% 7/99 4.3% 8/99 4.2% 9/99 4.2% 10/99 4.1% 11/99 4.1% 12/99 4.1% 1/00 4.0% 2/00 4.1% 3/00 4.1% 4/00 3.9%
Source: BLOOMBERG L.P. 4 INFLATION Virtually all measures of price inflation exhibited upward trends during the reporting period. The Consumer Price Index (CPI) rose 3.0% for the year ended April 30, 2000. Its core rate (which excludes the more volatile food and energy components) was up 2.2%. The Personal Consumption Expenditures Index, a measure of inflation closely watched by the Fed, rose 2.3% for the same period. The GDP price deflator, the broadest measure of inflation, indicated prices rising at an annual rate of 3.2% during the first quarter of 2000. EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC MEASURES OF INFLATION
CONSUMER PRICE INDEX EMPLOYMENT COST-INDEX 12-MONTH CHANGE 12-MONTH CHANGE (MONTHLY) (QUARTERLY) 1/90 5.2% 5.5% 2/90 5.3% 5.5% 3/90 5.2% 5.5% 4/90 4.7% 5.4% 5/90 4.4% 5.4% 6/90 4.7% 5.4% 7/90 4.8% 5.2% 8/90 5.6% 5.2% 9/90 6.2% 5.2% 10/90 6.3% 4.9% 11/90 6.3% 4.9% 12/90 6.1% 4.9% 1/91 5.7% 4.6% 2/91 5.3% 4.6% 3/91 4.9% 4.6% 4/91 4.9% 4.6% 5/91 5.0% 4.6% 6/91 4.7% 4.6% 7/91 4.4% 4.3% 8/91 3.8% 4.3% 9/91 3.4% 4.3% 10/91 2.9% 4.3% 11/91 3.0% 4.3% 12/91 3.1% 4.3% 1/92 2.6% 4.0% 2/92 2.8% 4.0% 3/92 3.2% 4.0% 4/92 3.2% 3.6% 5/92 3.0% 3.6% 6/92 3.1% 3.6% 7/92 3.2% 3.5% 8/92 3.1% 3.5% 9/92 3.0% 3.5% 10/92 3.2% 3.5% 11/92 3.0% 3.5% 12/92 2.9% 3.5% 1/93 3.3% 3.5% 2/93 3.2% 3.5% 3/93 3.1% 3.5% 4/93 3.2% 3.6% 5/93 3.2% 3.6% 6/93 3.0% 3.6% 7/93 2.8% 3.6% 8/93 2.8% 3.6% 9/93 2.7% 3.6% 10/93 2.8% 3.5% 11/93 2.7% 3.5% 12/93 2.7% 3.5% 1/94 2.5% 3.2% 2/94 2.5% 3.2% 3/94 2.5% 3.2% 4/94 2.4% 3.2% 5/94 2.3% 3.2% 6/94 2.5% 3.2% 7/94 2.8% 3.2% 8/94 2.9% 3.2% 9/94 3.0% 3.2% 10/94 2.6% 3.0% 11/94 2.7% 3.0% 12/94 2.7% 3.0% 1/95 2.8% 2.9% 2/95 2.9% 2.9% 3/95 2.9% 2.9% 4/95 3.1% 2.9% 5/95 3.2% 2.9% 6/95 3.0% 2.9% 7/95 2.8% 2.7% 8/95 2.6% 2.7% 9/95 2.5% 2.7% 10/95 2.8% 2.7% 11/95 2.6% 2.7% 12/95 2.5% 2.7% 1/96 2.7% 2.8% 2/96 2.7% 2.8% 3/96 2.8% 2.8% 4/96 2.9% 2.9% 5/96 2.9% 2.9% 6/96 2.8% 2.9% 7/96 3.0% 2.8% 8/96 2.9% 2.8% 9/96 3.0% 2.8% 10/96 3.0% 2.9% 11/96 3.3% 2.9% 12/96 3.3% 2.9% 1/97 3.0% 2.9% 2/97 3.0% 2.9% 3/97 2.8% 2.9% 4/97 2.5% 2.8% 5/97 2.2% 2.8% 6/97 2.3% 2.8% 7/97 2.2% 3.0% 8/97 2.2% 3.0% 9/97 2.2% 3.0% 10/97 2.1% 3.3% 11/97 1.8% 3.3% 12/97 1.7% 3.3% 1/98 1.6% 3.3% 2/98 1.4% 3.3% 3/98 1.4% 3.3% 4/98 1.4% 3.5% 5/98 1.7% 3.5% 6/98 1.7% 3.5% 7/98 1.7% 3.7% 8/98 1.6% 3.7% 9/98 1.5% 3.7% 10/98 1.5% 3.4% 11/98 1.5% 3.4% 12/98 1.6% 3.4% 1/99 1.7% 3.0% 2/99 1.6% 3.0% 3/99 1.7% 3.0% 4/99 2.3% 3.2% 5/99 2.1% 3.2% 6/99 2.0% 3.2% 7/99 2.1% 3.1% 8/99 2.3% 3.1% 9/99 2.6% 3.1% 10/99 2.6% 3.4% 11/99 2.6% 3.4% 12/99 2.7% 3.4% 1/00 2.7% 4.3% 2/00 3.2% 4.3% 3/00 3.7% 4.3% 4/00 3.0%
Source: BLOOMBERG L.P. Wage inflation also exhibited a marked upward trend during the reporting period. The Employment Cost Index, a measurement of the cost to employ workers, including both wages and benefits, rose 4.3% for the year ended March 31, 2000. Although these rates of price and employment cost inflation may not be alarmingly high by historical standards, the Fed has demonstrated its resolve to keep inflation at bay through its communications and its actions (six federal funds rate increases since June 1999). In particular, the Fed has expressed concern that if labor markets continue to tighten, increases in wages will outpace productivity growth and place additional upward pressure on prices. In such an environment, productivity growth becomes particularly critical, as it enables companies to pay higher wages without raising prices. Non-farm productivity grew 3.0% in 1999 and at a 2.4% annualized rate in the first quarter of 2000--strong gains to be sure, but likely not strong enough to offset recent increases in employment costs. ASSET CLASS PERFORMANCE EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC ASSET CLASS % RETURNS DURING REPORTING PERIOD
LEHMAN AGGREGATE MSCI-EAFE RUSSELL 2000 S&P 500 BOND INDEX (ND) INDEX SMALL-CAP INDEX INDEX 11/5/99 0.61% 0.49% 3.23% 0.54% 11/12/99 0.73% 2.02% 4.95% 2.44% 11/19/99 0.32% 3.91% 7.62% 4.35% 11/26/99 0.11% 5.22% 7.08% 3.95% 12/3/99 0.15% 5.26% 8.43% 5.22% 12/10/99 0.78% 6.67% 8.94% 4.10% 12/17/99 -0.30% 6.78% 8.89% 4.39% 12/24/99 -0.61% 10.69% 12.68% 7.13% 12/31/99 -0.51% 12.55% 17.96% 8.04% 1/7/00 -0.57% 7.42% 14.15% 6.00% 1/14/00 -1.03% 10.06% 18.67% 7.74% 1/21/00 -1.19% 7.61% 24.83% 5.99% 1/28/00 -0.52% 7.11% 18.01% 0.02% 2/4/00 -0.39% 9.34% 22.92% 4.81% 2/11/00 -0.68% 9.96% 25.68% 2.07% 2/18/00 -0.15% 8.31% 27.70% -0.95% 2/25/00 0.50% 9.16% 30.29% -1.89% 3/3/00 0.68% 11.46% 40.04% 3.81% 3/10/00 0.48% 11.44% 41.37% 2.77% 3/17/00 1.18% 10.11% 34.58% 7.88% 3/24/00 1.05% 12.27% 34.49% 12.51% 3/31/00 1.68% 12.10% 26.32% 10.49% 4/7/00 2.49% 10.97% 27.26% 11.80% 4/14/00 2.42% 7.09% 6.40% 0.02% 4/21/00 2.33% 6.21% 12.97% 5.77% 4/28/00 1.38% 6.10% 18.72% 7.17%
Compiled by CHARLES SCHWAB & CO., INC. As shown on the chart above, equity valuations, especially of the small-cap and technology stocks, exhibited extreme volatility during the reporting period. The price/earnings (P/E) ratio for the 5 MARKET OVERVIEW (continued) NASDAQ 100 Index fell by 33% in just 14 trading days during March and April. Remarkably, it remained at levels above 100 even after its precipitous decline. Reversing a five-year period of relative under performance, small-cap stocks outperformed both large-cap stocks and international stocks for the six-month reporting period ended 4/30/00. Small-cap stocks as represented by the Russell 2000-Registered Trademark- Index achieved a total return of 18.7%. Large-cap stocks, as represented by the S&P 500-Registered Trademark- Index, returned 7.2%. Dampened by relatively weak foreign currencies, International stocks, as represented by the Morgan Stanley Capital International Europe, Australia, Far East (MSCI-EAFE)-Registered Trademark- Index, achieved a return of 6.7% for the six-month reporting period ending 4/30/00. Reflecting the rise in intermediate-term interest rates, fixed income returns were generally weak for the period. Bond returns, as represented by the Lehman Brothers Aggregate Bond Index, were 1.4% for the six-month reporting period. U.S. EQUITY VALUATION The P/E ratio for the S&P 500-Registered Trademark- Index remained at very high levels during the reporting period and ended the period at a lofty 29.6 times earnings, slightly less than twice its long-term average. The P/E 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. Based on other traditional market valuation measures such as the price-to-book value ratio or dividend yield, the U.S. stock market continues to remain at record or near record high valuation levels. Reflecting the extraordinary valuations of the technology sector, the P/E ratio (12 months trailing) for the NASDAQ 100 Index ended the period at 120.2, as compared to an average of 67 over the last five years. EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC 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 14.90 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 25.50 Sep/92 24.37 Oct/92 23.94 Nov/92 24.08 Dec/92 24.01 Jan/93 24.20 Feb/93 24.25 Mar/93 24.22 Apr/93 23.20 May/93 23.21 Jun/93 22.58 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 20.10 May/94 20.16 Jun/94 19.76 Jul/94 18.64 Aug/94 18.90 Sep/94 18.26 Oct/94 17.55 Nov/94 16.58 Dec/94 16.98 Jan/95 16.23 Feb/95 16.20 Mar/95 16.50 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 19.30 Jul/96 18.31 Aug/96 18.62 Sep/96 19.75 Oct/96 19.60 Nov/96 21.05 Dec/96 20.70 Jan/97 20.55 Feb/97 20.98 Mar/97 19.87 Apr/97 20.24 May/97 21.43 Jun/97 22.45 Jul/97 23.92 Aug/97 22.64 Sep/97 24.00 Oct/97 22.84 Nov/97 24.02 Dec/97 24.51 Jan/98 24.99 Feb/98 26.44 Mar/98 27.76 Apr/98 26.51 May/98 26.12 Jun/98 27.09 Jul/98 26.78 Aug/98 22.77 Sep/98 24.23 Oct/98 27.58 Nov/98 30.14 Dec/98 31.97 Jan/99 33.29 Feb/99 32.65 Mar/99 33.78 Apr/99 33.90 May/99 32.74 Jun/99 34.70 Jul/99 31.62 Aug/99 31.21 Sep/99 29.90 Oct/99 29.92 Nov/99 30.65 Dec/99 32.53 Jan/00 29.78 Feb/00 28.59 Mar/00 31.50 Apr/00 29.58
30-Year Average 15.8
Source: BLOOMBERG L.P. TREASURY BOND YIELDS Continuing a trend which began in October 1998, both long-term and intermediate-term rates continued to climb upward during the first three months of the reporting period. The primary driver of this upward trend was the continued strong growth of the domestic economy. 6 EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC 10-YEAR AND 5-YEAR TREASURY BOND YIELDS
TEN-YEAR TREASURY FIVE-YEAR TREASURY BOND YIELD NOTE YIELD 10/1/99 5.97% 5.86% 10/8/99 6.03% 5.95% 10/15/99 6.07% 5.97% 10/22/99 6.19% 6.10% 10/29/99 6.02% 5.95% 11/5/99 5.93% 5.86% 11/12/99 5.93% 5.86% 11/19/99 6.06% 5.99% 11/26/99 6.12% 6.05% 12/3/99 6.16% 6.07% 12/10/99 6.07% 5.98% 12/17/99 6.28% 6.19% 12/24/99 6.41% 6.31% 12/31/99 6.44% 6.34% 1/7/00 6.52% 6.41% 1/14/00 6.68% 6.58% 1/21/00 6.77% 6.63% 1/28/00 6.66% 6.66% 2/4/00 6.55% 6.65% 2/11/00 6.60% 6.70% 2/18/00 6.49% 6.68% 2/25/00 6.33% 6.47% 3/3/00 6.39% 6.59% 3/10/00 6.38% 6.60% 3/17/00 6.19% 6.45% 3/24/00 6.19% 6.50% 3/31/00 6.00% 6.31% 4/7/00 5.58% 6.18% 4/14/00 5.58% 6.11% 4/21/00 5.99% 6.24% 4/28/00 6.21% 6.54%
Source: BLOOMBERG L.P. Treasury bond yields exhibited an unusual pattern during the second half of the reporting period. Typically the yield on ten-year treasury securities exceeds those on five-year securities to compensate investors for the additional interest rate risk associated with longer duration securities. As shown in the graph above, late in January, this normal relationship reversed, resulting in what is referred to as a negative yield curve. This situation is a result of the accumulating budget surpluses, which are allowing the federal government to downsize its debt. The Treasury Department announced that it plans to buy back $30 billion in debt in 2000 starting with longer dated maturities because those payments carry the steepest interest payment. The anticipated reduction in supply resulting from this buyback program, as well as scaled back issuance, increased the price of the longer-term securities and resulted in a reduction in yields. INTERNATIONAL PERFORMANCE EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC MSCI-EAFE-Registered Trademark- COUNTRY US$ RETURNS For the Six-Month Period Ended 4/30/00 Belgium -21.4% Austria -14.3% Ireland -10.4% Switzerland -6.0% Norway -5.6% New Zealand -1.1% Australia -0.8% United Kingdom -0.3% Singapore 4.8% Netherlands 5.1% Portugal 6.0% Italy 6.2% Japan 7.8% Denmark 8.2% Spain 9.4% Hong Kong 17.9% France 21.0% Germany 21.8% Sweden 70.7% Finland 117.5%
Source: DATASTREAM The MSCI-EAFE Index gained 6.7% in U.S. dollar terms (excluding reinvested dividends) during the six-month reporting period. In local currency terms, it gained 15.6%, reflecting the relative weakness of most foreign currencies (compared to the dollar) during the period. The strongest performing countries for the period were Finland, Sweden and Germany. Those countries with the largest negative returns were Belgium, Austria and Ireland. 7 SCHWAB MARKETTRACK ALL EQUITY PORTFOLIO PORTFOLIO PERFORMANCE AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED 4/30/00
SINCE INCEPTION SIX MONTHS(1) ONE YEAR (5/19/98) - ------------------------------------------------------------------------------------------------------------------- SCHWAB MARKETTRACK ALL EQUITY PORTFOLIO(2) 9.28% 15.73% 12.64% - ------------------------------------------------------------------------------------------------------------------- All Equity Composite Index(3,4) 16.29% 23.07% -- - ------------------------------------------------------------------------------------------------------------------- S&P 500-Registered Trademark- Index 7.19% 10.13% 15.82% - -------------------------------------------------------------------------------------------------------------------
National Association of Securities Dealers (NASD) regulations require that we report fund performance data as of the most recent calendar quarter--in this case, the quarter ended 3/31/00. As of 3/31/00, the portfolio's six-month, one year, and since-inception average annual total returns were 19.56% , 26.74% and 15.85%, respectively. (1) Actual, not annualized, because period is less than one year. (2) A portion of the fund's expenses was reduced during the reporting period. Without such reductions, the fund's average annual returns would have been lower. (3) The All Equity Composite Index is composed of Morningstar category averages and is calculated using the following portfolio allocations: 45% large-cap stocks, 25% small-cap stocks and 30% foreign stocks. (4) As of 4/30/00, there were 2,297 large-cap funds, 845 small-cap funds and 700 foreign funds tracked by Morningstar. Performance includes changes in price and reinvestment of dividends and capital gains. 8 EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
SCHWAB MARKETTRACK S&P 500 ALL EQUITY ALL EQUITY PORTFOLIO INDEX COMPOSITE INDEX 05/20/98 $10,000 $10,000 05/31/98 $9,850 $9,751 06/30/98 $10,050 $10,147 $9,973 07/31/98 $9,810 $10,039 $9,759 08/31/98 $8,330 $8,590 $8,210 09/30/98 $8,610 $9,140 $8,450 10/31/98 $9,280 $9,883 $8,992 11/30/98 $9,800 $10,482 $9,506 12/31/98 $10,303 $11,086 $10,040 01/31/99 $10,483 $11,549 $10,227 02/28/99 $10,041 $11,190 $9,805 03/31/99 $10,383 $11,638 $10,128 04/30/99 $10,896 $12,088 $10,629 05/31/99 $10,664 $11,803 $10,461 06/30/99 $11,197 $12,458 $11,058 07/31/99 $11,137 $12,069 $10,992 08/31/99 $11,056 $12,009 $10,892 09/30/99 $11,006 $11,680 $10,808 10/31/99 $11,539 $12,419 $11,248 11/30/99 $11,971 $12,672 $11,898 12/31/99 $12,885 $13,418 $13,058 01/31/00 $12,162 $12,744 $12,562 02/29/00 $12,498 $12,503 $13,353 03/31/00 $13,159 $13,726 $13,779 04/30/00 $12,610 $13,313 $13,081
The above graph compares the growth of a hypothetical $10,000 investment in the Schwab MarketTrack All Equity Portfolio, made at its inception, with a similar investment in the S&P 500-Registered Trademark- Index and the All Equity Composite Index. The hypothetical $10,000 investment assumes investment on the first day of the month following inception and includes changes in share price and reinvestment of dividends and capital gains. THE INFORMATION PRESENTED IS HISTORICAL AND DOES NOT REPRESENT FUTURE RESULTS. TOTAL RETURNS ASSUME REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS. PRINCIPAL VALUE AND INVESTMENT RETURNS WILL FLUCTUATE, SO AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. Indices are unmanaged and do not reflect advisory fees and other expenses associated with an investment in the Portfolios. Investors cannot invest in an index directly. ASSETS - ---------------------------------------------------------------------- Total net assets as of 10/31/99 (000s) $202,884 - ---------------------------------------------------------------------- Total net assets as of 4/30/00 (000s) $329,119 - ---------------------------------------------------------------------- Percentage growth from 10/31/99 to 4/30/00 62.2% - ----------------------------------------------------------------------
9 SCHWAB MARKETTRACK ALL EQUITY PORTFOLIO PORTFOLIO SNAPSHOT Schwab MarketTrack All Equity Portfolio uses an indexing strategy to invest in three distinct equity asset classes: large-cap, small-cap and international stocks. The portfolio's target mix, as illustrated below, is achieved either directly or through investment in other SchwabFunds-Registered Trademark-. The portfolio employs an indexing strategy to capture the returns inherent in its target asset categories. The information below and on the following page provides a snapshot of the portfolio's characteristics as of 4/30/00, and is not indicative of its composition after that date. The terms used below are defined on page 28. A complete list of the securities in the portfolio as of 4/30/00 is provided in the Schedule of Investments later in this report. PORTFOLIO FACTS
SCHWAB MARKETTRACK PEER GROUP ALL EQUITY PORTFOLIO AVERAGE++ - ---------------------------------------------------------------------------------------------------------------- Number of Holdings 6** 138 - ---------------------------------------------------------------------------------------------------------------- Median Market Cap ($ Mil) $56,382++ $58,904 - ---------------------------------------------------------------------------------------------------------------- Price/Earnings (P/E) Ratio 33.6++ 35.4 - ---------------------------------------------------------------------------------------------------------------- Price/Book (P/B) Ratio 7.5++ 9.5 - ---------------------------------------------------------------------------------------------------------------- 12-Month Yield 0.43%++ 0.45% - ---------------------------------------------------------------------------------------------------------------- Portfolio Turnover Rate 3%* 75% - ---------------------------------------------------------------------------------------------------------------- Three-Year Beta N/A++ 0.94 - ---------------------------------------------------------------------------------------------------------------- Expense Ratio 0.60%+ 1.34% - ----------------------------------------------------------------------------------------------------------------
* Compiled by Charles Schwab & Co., Inc. This information is for illustrative purposes only and is not intended to show, predict or guarantee future composition of the Portfolio. ** The Portfolio invests in other SchwabFunds, whereas most funds invest primarily in individual securities. + Reflects a voluntary reduction by Charles Schwab Investment Management, (the investment adviser) and Schwab, which is guaranteed through at least 2/28/01 (excluding interest, taxes and certain non-routine expenses). ++ Source: Morningstar. The peer group average is based on 2,297 large-cap funds as tracked by Morningstar. 10 SCHWAB MARKETTRACK ALL EQUITY PORTFOLIO ASSET MIX
MIX AS OF 4/30/00 TARGET MIX - ----------------------------------------------------- U.S. Stocks: - ----------------------------------------------------- Large-Cap 44.0% 45.0% - ----------------------------------------------------- Small-Cap 25.7% 25.0% - ----------------------------------------------------- International Stocks 29.7% 30.0% - ----------------------------------------------------- Short-Term Investments 0.6% -- - ----------------------------------------------------- Total Stocks 100.0% 100.0% - -----------------------------------------------------
Large-cap stocks in the MarketTrack All Equity Portfolio are represented by the S&P 500-Registered Trademark- Index, a widely recognized, unmanaged index of 500 large-cap stocks selected by Standard & Poors. Small-cap stocks are represented by the Schwab Small-Cap Index-Registered Trademark-, an index created to represent the performance of common stocks of the second 1,000 largest U.S. companies, ranked by market capitalization. International stocks are represented by the Schwab International Index-Registered Trademark-, an index created to represent the performance of common stocks and other equity securities issued by large, publicly traded companies from countries around the world with major developed securities markets, excluding the United States. TOP HOLDINGS AS A PERCENTAGE OF FUND INVESTMENTS - --------------------------------------------------------------------- Schwab S&P 500 Fund-Select Shares 44.0% - --------------------------------------------------------------------- Schwab International Index Fund-Select Shares 29.7% - --------------------------------------------------------------------- Schwab Small-Cap Index Fund-Select Shares 25.7% - --------------------------------------------------------------------- Total 99.4% - ---------------------------------------------------------------------
11 SCHWAB MARKETTRACK GROWTH PORTFOLIO PORTFOLIO PERFORMANCE AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED 4/30/00
SINCE INCEPTION SIX MONTHS(1) ONE YEAR THREE YEARS (11/20/95) - ------------------------------------------------------------------------------------------------------------------------ SCHWAB MARKETTRACK GROWTH PORTFOLIO(2) 7.83% 12.57% 17.22% 16.06% - ------------------------------------------------------------------------------------------------------------------------ Growth Composite Index II(3,4) 13.10% 18.04% 17.73% -- - ------------------------------------------------------------------------------------------------------------------------ S&P 500-Registered Trademark- Index 7.19% 10.13% 23.69% 24.06% - ------------------------------------------------------------------------------------------------------------------------ Lehman Brothers Aggregate Bond Index 1.42% 1.26% 6.07% 5.62% - ------------------------------------------------------------------------------------------------------------------------
National Association of Securities Dealers (NASD) regulations require that we report fund performance data as of the most recent calendar quarter--in this case, the quarter ended 3/31/00. As of 3/31/00, the portfolio's six-month, one-year and since-inception average annual total returns were 15.96%, 20.96% and 17.28%, respectively. (1) Actual, not annualized, because period is less than one year. (2) A portion of the fund's expenses was reduced during the reporting period. Without such reductions, the fund's average annual returns would have been lower. (3) The Growth Composite Index II is composed of Morningstar category averages and cash equivalents as represented by the 90-day T-bill and is calculated using the following portfolio allocations: 40% large-cap stocks, 20% small-cap stocks, 20% foreign stocks, 15% bonds and 5% cash. (4) As of 4/30/00, there were 2,297 large-cap funds, 845 small-cap funds, 700 foreign funds and 561 intermediate-term bond funds tracked by Morningstar. Performance includes changes in price and reinvestment of dividends and capital gains. 12 EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
SCHWAB MARKETTRACK S&P 500 LEHMAN BROTHERS GROWTH COMPOSITE GROWTH PORTFOLIO INDEX AGGREGATE BOND INDEX INDEX II 11/20/95 $10,000 $10,000 $10,000 11/30/95 $10,080 $10,104 $10,076 12/31/95 $10,292 $10,299 $10,217 $10,247 01/31/96 $10,442 $10,649 $10,285 $10,411 02/29/96 $10,533 $10,748 $10,106 $10,553 03/31/96 $10,623 $10,852 $10,035 $10,678 04/30/96 $10,803 $11,011 $9,979 $10,982 05/31/96 $10,954 $11,294 $9,959 $11,174 06/30/96 $10,934 $11,337 $10,092 $11,108 07/31/96 $10,523 $10,836 $10,120 $10,638 08/31/96 $10,733 $11,064 $10,102 $10,912 09/30/96 $11,184 $11,686 $10,278 $11,324 10/31/96 $11,324 $12,009 $10,506 $11,386 11/30/96 $11,896 $12,917 $10,686 $11,876 12/31/96 $11,784 $12,661 $10,587 $11,839 01/31/97 $12,008 $13,451 $10,620 $12,151 02/28/97 $12,028 $13,557 $10,646 $12,097 03/31/97 $11,692 $13,001 $10,528 $11,767 04/30/97 $12,038 $13,776 $10,686 $11,974 05/31/97 $12,793 $14,614 $10,787 $12,718 06/30/97 $13,313 $15,268 $10,916 $13,199 07/31/97 $14,087 $16,482 $11,210 $13,911 08/31/97 $13,618 $15,559 $11,115 $13,545 09/30/97 $14,301 $16,410 $11,280 $14,228 10/31/97 $13,853 $15,862 $11,443 $13,731 11/30/97 $14,098 $16,597 $11,496 $13,817 12/31/97 $14,259 $16,882 $11,612 $13,956 01/31/98 $14,410 $17,070 $11,761 $14,046 02/28/98 $15,220 $18,300 $11,751 $14,846 03/31/98 $15,738 $19,237 $11,791 $15,422 04/30/98 $15,846 $19,432 $11,852 $15,568 05/31/98 $15,576 $19,097 $11,965 $15,298 06/30/98 $15,868 $19,873 $12,067 $15,497 07/31/98 $15,555 $19,662 $12,092 $15,218 08/31/98 $13,729 $16,823 $12,289 $13,309 09/30/98 $14,194 $17,901 $12,577 $13,717 10/31/98 $15,080 $19,357 $12,510 $14,407 11/30/98 $15,760 $20,530 $12,581 $15,085 12/31/98 $16,422 $21,712 $12,619 $15,796 01/31/99 $16,718 $22,620 $12,709 $16,066 02/28/99 $16,103 $21,916 $12,486 $15,488 03/31/99 $16,576 $22,793 $12,555 $15,919 04/30/99 $17,224 $23,675 $12,595 $16,552 05/31/99 $16,916 $23,116 $12,484 $16,332 06/30/99 $17,586 $24,399 $12,444 $17,069 07/31/99 $17,465 $23,638 $12,392 $16,944 08/31/99 $17,355 $23,520 $12,386 $16,805 09/30/99 $17,290 $22,875 $12,530 $16,710 10/31/99 $17,982 $24,323 $12,576 $17,274 11/30/99 $18,520 $24,817 $12,575 $18,040 12/31/99 $19,602 $26,279 $12,514 $19,403 01/31/00 $18,730 $24,960 $12,473 $18,812 02/29/00 $19,155 $24,487 $12,624 $19,746 03/31/00 $20,049 $26,883 $12,791 $20,347 04/30/00 $19,389 $26,074 $12,754 $19,538
The above graph compares the growth of a hypothetical $10,000 investment in the Schwab MarketTrack Growth Portfolio, made at its inception, with a similar investment in the S&P 500-Registered Trademark- Index, the Lehman Brothers Aggregate Bond Index and the Growth Composite Index II. The hypothetical $10,000 investment assumes investment on the first day of the month following inception and includes changes in share price and reinvestment of dividends and capital gains. THE INFORMATION PRESENTED IS HISTORICAL AND DOES NOT REPRESENT FUTURE RESULTS. TOTAL RETURNS ASSUME REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS. PRINCIPAL VALUE AND INVESTMENT RETURNS WILL FLUCTUATE, SO AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. Indices are unmanaged and do not reflect advisory fees and other expenses associated with an investment in the Portfolios. Investors cannot invest in an index directly. ASSETS - ---------------------------------------------------------------------- Total net assets as of 10/31/99 (000s) $427,659 - ---------------------------------------------------------------------- Total net assets as of 4/30/00 (000s) $527,987 - ---------------------------------------------------------------------- Percentage growth from 10/31/99 to 4/30/00 23.5% - ----------------------------------------------------------------------
13 SCHWAB MARKETTRACK GROWTH PORTFOLIO PORTFOLIO SNAPSHOT Schwab MarketTrack Growth Portfolio uses an indexing strategy to invest in three distinct asset classes--stocks, bonds and cash--and further allocates stock investments between large-cap, small-cap and international. The portfolio's target mix, as illustrated below, is achieved either directly or through investment in other SchwabFunds-Registered Trademark-. The portfolio employs an indexing strategy to capture the returns inherent in its target asset categories. The information below and on the following page provides a snapshot of the portfolio's characteristics as of 4/30/00, and is not indicative of its composition after that date. The terms used below are defined on page 28. A complete list of the securities in the portfolio as of 4/30/00 is provided in the Schedule of Investments later in this report. PORTFOLIO FACTS
SCHWAB MARKETTRACK PEER GROUP AV- GROWTH PORTFOLIO* ERAGE++ - ---------------------------------------------------------------------------------------------------------- Number of Holdings 498** 138 - ---------------------------------------------------------------------------------------------------------- Median Market Cap ($ Mil) 56,441 $58,904 - ---------------------------------------------------------------------------------------------------------- Price/Earnings (P/E) Ratio 34.3 35.4 - ---------------------------------------------------------------------------------------------------------- Price/Book (P/B) Ratio 7.7 9.5 - ---------------------------------------------------------------------------------------------------------- 12-Month Yield 1.05%++ 0.45% - ---------------------------------------------------------------------------------------------------------- Portfolio Turnover Rate 8% 75% - ---------------------------------------------------------------------------------------------------------- Three-Year Beta 0.73++ 0.94 - ---------------------------------------------------------------------------------------------------------- Expense Ratio 0.60%+ 1.34% - ----------------------------------------------------------------------------------------------------------
* Compiled by Charles Schwab & Co., Inc. This information is for illustrative purposes only and is not intended to show, predict or guarantee future composition of the Portfolio. ** The Portfolio invests in a combination of other SchwabFunds and individual securities. + Reflects a voluntary reduction by the investment adviser and Schwab, which is guaranteed through at least 2/28/01 (excluding interest, taxes and certain non-routine expenses). ++ Source: Morningstar. The peer group average is based on 2,297 large-cap funds as tracked by Morningstar. 14 SCHWAB MARKETTRACK GROWTH PORTFOLIO ASSET MIX
MIX AS OF 4/30/00 TARGET MIX - ------------------------------------------------------------------------------------ U.S. Stocks: - ------------------------------------------------------------------------------------ Large-Cap 40.0% 40.0% - ------------------------------------------------------------------------------------ Small-Cap 20.7% 20.0% - ------------------------------------------------------------------------------------ International Stocks 19.5% 20.0% - ------------------------------------------------------------------------------------ Total Stocks 80.2% 80.0% - ------------------------------------------------------------------------------------ Bonds 14.6% 15.0% - ------------------------------------------------------------------------------------ Short-Term Investments 5.2% 5.0% - ------------------------------------------------------------------------------------ Total 100.0% 100.0% - ------------------------------------------------------------------------------------
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC EQUITY INVESTMENT STYLE BOX(1) AS OF 4/30/00
- -STYLE- VALUE BLEND GROWTH -MARKET CAP- X Large Medium Small
Large-cap stocks in the MarketTrack Growth Portfolio are represented by the S&P 500-Registered Trademark- Index, small-cap stocks are represented by the Schwab Small-Cap Index-Registered Trademark-, international stocks are represented by the Schwab International Index-Registered Trademark-, bonds are represented by the Lehman Brothers Aggregate Bond Index (this index includes investment-grade government, corporate and mortgage- and asset-backed bonds that are denominated in U.S. dollars and have maturities longer than one year), and cash is represented by the three-month Treasury bill. TOP 10 HOLDINGS AS A PERCENTAGE OF FUND INVESTMENTS(2) - -------------------------------------------------------------------- Schwab Small-Cap Index Fund-Registered Trademark--Select Shares 20.7% - -------------------------------------------------------------------- Schwab International Index Fund-Registered Trademark--Select Shares 19.5% - -------------------------------------------------------------------- Schwab S&P 500 Fund-Select Shares 17.3% - -------------------------------------------------------------------- Schwab Total Bond Market Index Fund 14.6% - -------------------------------------------------------------------- Schwab Value Advantage Money Fund-Registered Trademark- 4.1% - -------------------------------------------------------------------- General Electric Co. 1.0% - -------------------------------------------------------------------- Cisco Systems, Inc. 0.9% - -------------------------------------------------------------------- Intel Corp. 0.8% - -------------------------------------------------------------------- Microsoft Corp. 0.7% - -------------------------------------------------------------------- Exxon Mobil Corp. 0.5% - -------------------------------------------------------------------- Total 80.1% - --------------------------------------------------------------------
(1) Source: Morningstar, Inc. The style box illustrates the composition of the fund's portfolio as of 4/30/00. It is not indicative of its holdings after that date, nor does it represent an exact assessment of risk or future assessment or any type of future performance. Placement is based on the fund's P/E and P/B ratios relative to the S&P 500-Registered Trademark- Index, as well as the size of the companies in which it invests, or median market capitalization. (2) Nothing in this report represents a recommendation of a security by the investment adviser. 15 SCHWAB MARKETTRACK BALANCED PORTFOLIO PORTFOLIO PERFORMANCE AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED 4/30/00
SINCE INCEPTION SIX MONTHS(1) ONE YEAR THREE YEARS (11/20/95) - ------------------------------------------------------------------------------------------------------------------------ SCHWAB MARKETTRACK BALANCED PORTFOLIO(2) 6.22% 9.69% 14.30% 13.20% - ------------------------------------------------------------------------------------------------------------------------ Balanced Composite Index(3,4) 10.04% 13.47% 14.62% -- - ------------------------------------------------------------------------------------------------------------------------ S&P 500-Registered Trademark- Index 7.19% 10.13% 23.69% 24.06% - ------------------------------------------------------------------------------------------------------------------------ Lehman Brothers Aggregate Bond Index 1.42% 1.26% 6.07% 5.62% - ------------------------------------------------------------------------------------------------------------------------
National Association of Securities Dealers (NASD) regulations require that we report performance data as of the most recent calendar quarter--in this case, the quarter ended 3/31/00. As of 3/31/00, the portfolio's six-month, one-year and since-inception average annual total returns were 12.37%, 15.91% and 14.15%, respectively. (1) Actual, not annualized, because period is less than one year. (2) A portion of the fund's expenses was reduced during the reporting period. Without such reductions, the fund's average annual returns would have been lower. (3) The Balanced Composite Index is composed of Morningstar category averages and cash equivalents as represented by the 90-day T-bill and is calculated using the following portfolio allocations: 30% large-cap stocks, 15% small-cap stocks, 15% foreign stocks, 35% bonds and 5% cash. (4) As of 4/30/00, there were 2,297 large-cap funds, 845 small-cap funds, 700 foreign funds and 561 intermediate-term bond funds tracked by Morningstar. Performance includes changes in price and reinvestment of dividends and capital gains. 16 EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
SCHWAB MARKETTRACK S&P 500 LEHMAN BROTHERS BALANCED BALANCED PORTFOLIO INDEX AGGREGATE BOND INDEX COMPOSITE INDEX 11/20/95 $10,000 $10,000 $10,000 11/30/95 $10,080 $10,104 $10,076 12/31/95 $10,270 $10,299 $10,217 $10,239 01/31/96 $10,390 $10,649 $10,285 $10,376 02/29/96 $10,410 $10,748 $10,106 $10,438 03/31/96 $10,460 $10,852 $10,035 $10,515 04/30/96 $10,581 $11,011 $9,979 $10,725 05/31/96 $10,691 $11,294 $9,959 $10,861 06/30/96 $10,711 $11,337 $10,092 $10,843 07/31/96 $10,410 $10,836 $10,120 $10,505 08/31/96 $10,551 $11,064 $10,102 $10,706 09/30/96 $10,912 $11,686 $10,278 $11,054 10/31/96 $11,082 $12,009 $10,506 $11,154 11/30/96 $11,534 $12,917 $10,686 $11,560 12/31/96 $11,415 $12,661 $10,587 $11,510 01/31/97 $11,589 $13,451 $10,620 $11,746 02/28/97 $11,589 $13,557 $10,646 $11,716 03/31/97 $11,334 $13,001 $10,528 $11,446 04/30/97 $11,620 $13,776 $10,686 $11,633 05/31/97 $12,183 $14,614 $10,787 $12,201 06/30/97 $12,593 $15,268 $10,916 $12,582 07/31/97 $13,217 $16,482 $11,210 $13,172 08/31/97 $12,849 $15,559 $11,115 $12,883 09/30/97 $13,391 $16,410 $11,280 $13,415 10/31/97 $13,125 $15,862 $11,443 $13,102 11/30/97 $13,309 $16,597 $11,496 $13,175 12/31/97 $13,443 $16,882 $11,612 $13,304 01/31/98 $13,582 $17,070 $11,761 $13,408 02/28/98 $14,149 $18,300 $11,751 $13,978 03/31/98 $14,523 $19,237 $11,791 $14,398 04/30/98 $14,608 $19,432 $11,852 $14,516 05/31/98 $14,448 $19,097 $11,965 $14,359 06/30/98 $14,672 $19,873 $12,067 $14,525 07/31/98 $14,469 $19,662 $12,092 $14,335 08/31/98 $13,262 $16,823 $12,289 $13,023 09/30/98 $13,668 $17,901 $12,577 $13,391 10/31/98 $14,309 $19,357 $12,510 $13,872 11/30/98 $14,800 $20,530 $12,581 $14,383 12/31/98 $15,281 $21,712 $12,619 $14,906 01/31/99 $15,523 $22,620 $12,709 $15,120 02/28/99 $15,028 $21,916 $12,486 $14,646 03/31/99 $15,369 $22,793 $12,555 $14,979 04/30/99 $15,820 $23,675 $12,595 $15,439 05/31/99 $15,567 $23,116 $12,484 $15,245 06/30/99 $16,018 $24,399 $12,444 $15,750 07/31/99 $15,930 $23,638 $12,392 $15,650 08/31/99 $15,842 $23,520 $12,386 $15,547 09/30/99 $15,853 $22,875 $12,530 $15,518 10/31/99 $16,337 $24,323 $12,576 $15,920 11/30/99 $16,711 $24,817 $12,575 $16,452 12/31/99 $17,420 $26,279 $12,514 $17,371 01/31/00 $16,823 $24,960 $12,473 $16,958 02/29/00 $17,150 $24,487 $12,624 $17,631 03/31/00 $17,815 $26,883 $12,791 $18,084 04/30/00 $17,353 $26,074 $12,754 $17,518
The above graph compares the growth of a hypothetical $10,000 investment in the Schwab MarketTrack Balanced Portfolio, made at its inception, with a similar investment in the S&P 500-Registered Trademark- Index, the Lehman Brothers Aggregate Bond Index and the Balanced Composite Index. The hypothetical $10,000 investment assumes investment on the first day of the month following inception and includes changes in share price and reinvestment of dividends and capital gains. THE INFORMATION PRESENTED IS HISTORICAL AND DOES NOT REPRESENT FUTURE RESULTS. TOTAL RETURNS ASSUME REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS. PRINCIPAL VALUE AND INVESTMENT RETURNS WILL FLUCTUATE, SO AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. Indices are unmanaged and do not reflect advisory fees and other expenses associated with an investment in the Portfolio. Investors cannot invest in an index directly. ASSETS - ---------------------------------------------------------------------- Total net assets as of 10/31/99 (000s) $403,271 - ---------------------------------------------------------------------- Total net assets as of 4/30/00 (000s) $462,402 - ---------------------------------------------------------------------- Percentage growth from 10/31/99 to 4/30/00 14.7% - ----------------------------------------------------------------------
17 SCHWAB MARKETTRACK BALANCED PORTFOLIO PORTFOLIO SNAPSHOT Schwab MarketTrack Balanced Portfolio uses an indexing strategy to invest in three distinct asset classes-- stocks, bonds and cash--and further allocates stock investments between large-cap, small-cap and international. The portfolio's target mix, as illustrated below, is achieved either directly or through investment in other SchwabFunds-Registered Trademark-. The portfolio employs an indexing strategy to capture the returns inherent in its target asset categories. The information below and on the following page provides a snapshot of the portfolio's characteristics as of 4/30/00, and is not indicative of its composition after that date. The terms used below are defined on page 28. A complete list of the securities in the portfolio as of 4/30/00 is provided in the Schedule of Investments later in this report. PORTFOLIO FACTS
SCHWAB MARKETTRACK PEER GROUP BALANCED PORTFOLIO* AVERAGE++ - ------------------------------------------------------------------------------------------------------------------- Number of Holdings 494** 228 - ------------------------------------------------------------------------------------------------------------------- Median Market Cap ($ Mil) 59,545 $43,966 - ------------------------------------------------------------------------------------------------------------------- Price/Earnings (P/E) Ratio 34.4 32.1 - ------------------------------------------------------------------------------------------------------------------- Price/Book (P/B) Ratio 8.0 7.9 - ------------------------------------------------------------------------------------------------------------------- 12-Month Yield 1.82%++ 2.49% - ------------------------------------------------------------------------------------------------------------------- Portfolio Turnover Rate 10% 95% - ------------------------------------------------------------------------------------------------------------------- Three-Year Beta 0.56++ 0.54 - ------------------------------------------------------------------------------------------------------------------- Expense Ratio 0.60%+ 1.29% - -------------------------------------------------------------------------------------------------------------------
* Compiled by Charles Schwab & Co., Inc. This information is for illustrative purposes only and is not intended to show, predict or guarantee future composition of the portfolio. ** The portfolio invests in a combination of other SchwabFunds and individual securities. + Reflects a voluntary reduction by the investment adviser and Schwab, which is guaranteed through at least 2/28/01 (excluding interest, taxes and certain non-routine expenses). ++ Source: Morningstar. The peer group average is based on 726 domestic hybrid funds as tracked by Morningstar. 18 SCHWAB MARKETTRACK BALANCED PORTFOLIO ASSET MIX
MIX AS OF 4/30/00 TARGET MIX - ------------------------------------------------------------------------------------ U.S. Stocks: - ------------------------------------------------------------------------------------ Large-Cap 30.4% 30.0% - ------------------------------------------------------------------------------------ Small-Cap 15.5% 15.0% - ------------------------------------------------------------------------------------ International Stocks 14.5% 15.0% - ------------------------------------------------------------------------------------ Total Stocks 60.4% 60.0% - ------------------------------------------------------------------------------------ Bonds 34.5% 35.0% - ------------------------------------------------------------------------------------ Short-Term Investments 5.1% 5.0% - ------------------------------------------------------------------------------------ Total 100.0% 100.0% - ------------------------------------------------------------------------------------
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC EQUITY INVESTMENT STYLE BOX(1) AS OF 4/30/00
- -STYLE- VALUE BLEND GROWTH -MARKET CAP- X Large Medium Small
Large-cap stocks in the MarketTrack Balanced Portfolio are represented by the S&P 500-Registered Trademark- Index, small-cap stocks are represented by the Schwab Small-Cap Index-Registered Trademark-, international stocks are represented by the Schwab International Index-Registered Trademark-, bonds are represented by the Lehman Brothers Aggregate Bond Index and cash is represented by the three-month Treasury bill. TOP 10 HOLDINGS AS A PERCENTAGE OF FUND INVESTMENTS(2) - -------------------------------------------------------------------- Schwab Total Bond Market Index Fund 34.5% - -------------------------------------------------------------------- Schwab Small-Cap Index Fund-Registered Trademark--Select Shares 15.5% - -------------------------------------------------------------------- Schwab International Index Fund-Registered Trademark--Select Shares 14.5% - -------------------------------------------------------------------- Schwab S&P 500 Fund-Select Shares 12.9% - -------------------------------------------------------------------- Schwab Value Advantage Money Fund-Registered Trademark- 4.3% - -------------------------------------------------------------------- General Electric Co. 0.7% - -------------------------------------------------------------------- Cisco Systems, Inc. 0.7% - -------------------------------------------------------------------- Intel Corp. 0.6% - -------------------------------------------------------------------- Microsoft Corp. 0.5% - -------------------------------------------------------------------- Exxon Mobil Corp. 0.4% - -------------------------------------------------------------------- Total 84.6% - --------------------------------------------------------------------
(1) Source: Morningstar, Inc. The style box illustrates the composition of the fund's portfolio as of 4/30/00. It is not indicative of its holdings after that date, nor does it represent an exact assessment of risk or future assessment or any type of future performance. Placement is based on the fund's P/E and P/B ratios relative to the S&P 500-Registered Trademark- Index, as well as the size of the companies in which it invests, or median market capitalization. (2) Nothing in this report represents a recommendation of a security by the investment adviser. 19 SCHWAB MARKETTRACK CONSERVATIVE PORTFOLIO PORTFOLIO PERFORMANCE AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED 4/30/00
SINCE INCEPTION SIX MONTHS(1) ONE YEAR THREE YEARS (11/20/95) - ------------------------------------------------------------------------------------------------------------------------ SCHWAB MARKETTRACK CONSERVATIVE PORTFOLIO(2) 4.58% 6.68% 11.28% 10.26% - ------------------------------------------------------------------------------------------------------------------------ Conservative Composite Index(3,4) 6.98% 8.98% 11.46% -- - ------------------------------------------------------------------------------------------------------------------------ S&P 500-Registered Trademark- Index 7.19% 10.13% 23.69% 24.06% - ------------------------------------------------------------------------------------------------------------------------ Lehman Brothers Aggregate Bond Index 1.42% 1.26% 6.07% 5.62% - ------------------------------------------------------------------------------------------------------------------------
National Association of Securities Dealers (NASD) regulations require that we report performance data as of the most recent calendar quarter--in this case, the quarter ended 3/31/00. As of 3/31/00, the portfolio's six-month, one-year and since-inception average annual total returns were 8.81%, 10.83% and 10.95%, respectively. (1) Actual, not annualized, because period is less than one year. (2) A portion of the fund's expenses was reduced during the reporting period. Without such reductions, the fund's average annual returns would have been lower. (3) The Conservative Composite Index is composed of Morningstar category averages and cash equivalents as represented by the 90-day T-bill and is calculated using the following portfolio allocations: 20% large-cap stocks, 10% small-cap stocks, 10% foreign stocks, 55% bonds and 5% cash. (4) As of 4/30/00, there were 2,297 large-cap funds, 845 small-cap funds, 700 foreign funds and 561 intermediate-term bond funds tracked by Morningstar. Performance includes changes in price and reinvestment of dividends and capital gains. 20 EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
SCHWAB MARKETTRACK S&P 500 LEHMAN BROTHERS CONSERVATIVE CONSERVATIVE PORTFOLIO INDEX AGGREGATE BOND INDEX COMPOSITE INDEX 11/20/95 $10,000 $10,000 $10,000 11/30/95 $10,080 $10,104 $10,076 12/31/95 $10,237 $10,299 $10,217 $10,230 01/31/96 $10,337 $10,649 $10,285 $10,341 02/29/96 $10,297 $10,748 $10,106 $10,324 03/31/96 $10,287 $10,852 $10,035 $10,352 04/30/96 $10,337 $11,011 $9,979 $10,471 05/31/96 $10,378 $11,294 $9,959 $10,555 06/30/96 $10,439 $11,337 $10,092 $10,582 07/31/96 $10,256 $10,836 $10,120 $10,370 08/31/96 $10,337 $11,064 $10,102 $10,501 09/30/96 $10,643 $11,686 $10,278 $10,785 10/31/96 $10,818 $12,009 $10,506 $10,922 11/30/96 $11,179 $12,917 $10,686 $11,248 12/31/96 $11,070 $12,661 $10,587 $11,186 01/31/97 $11,174 $13,451 $10,620 $11,349 02/28/97 $11,184 $13,557 $10,646 $11,341 03/31/97 $10,965 $13,001 $10,528 $11,127 04/30/97 $11,206 $13,776 $10,686 $11,296 05/31/97 $11,604 $14,614 $10,787 $11,697 06/30/97 $11,896 $15,268 $10,916 $11,985 07/31/97 $12,413 $16,482 $11,210 $12,463 08/31/97 $12,160 $15,559 $11,115 $12,245 09/30/97 $12,540 $16,410 $11,280 $12,639 10/31/97 $12,455 $15,862 $11,443 $12,489 11/30/97 $12,603 $16,597 $11,496 $12,550 12/31/97 $12,698 $16,882 $11,612 $12,669 01/31/98 $12,829 $17,070 $11,761 $12,786 02/28/98 $13,189 $18,300 $11,751 $13,145 03/31/98 $13,418 $19,237 $11,791 $13,425 04/30/98 $13,484 $19,432 $11,852 $13,518 05/31/98 $13,431 $19,097 $11,965 $13,460 06/30/98 $13,595 $19,873 $12,067 $13,597 07/31/98 $13,484 $19,662 $12,092 $13,486 08/31/98 $12,774 $16,823 $12,289 $12,708 09/30/98 $13,139 $17,901 $12,577 $13,037 10/31/98 $13,530 $19,357 $12,510 $13,319 11/30/98 $13,843 $20,530 $12,581 $13,671 12/31/98 $14,166 $21,712 $12,619 $14,023 01/31/99 $14,348 $22,620 $12,709 $14,186 02/28/99 $13,950 $21,916 $12,486 $13,807 03/31/99 $14,200 $22,793 $12,555 $14,049 04/30/99 $14,475 $23,675 $12,595 $14,353 05/31/99 $14,269 $23,116 $12,484 $14,185 06/30/99 $14,521 $24,399 $12,444 $14,483 07/31/99 $14,452 $23,638 $12,392 $14,406 08/31/99 $14,395 $23,520 $12,386 $14,335 09/30/99 $14,464 $22,875 $12,530 $14,363 10/31/99 $14,766 $24,323 $12,576 $14,621 11/30/99 $14,986 $24,817 $12,575 $14,950 12/31/99 $15,398 $26,279 $12,514 $15,491 01/31/00 $15,022 $24,960 $12,473 $15,227 02/29/00 $15,269 $24,487 $12,624 $15,678 03/31/00 $15,738 $26,883 $12,791 $16,006 04/30/00 $15,442 $26,074 $12,754 $15,642
The above graph compares the growth of a hypothetical $10,000 investment in the Schwab MarketTrack Conservative Portfolio, made at its inception, with a similar investment in the S&P 500-Registered Trademark- Index, the Lehman Brothers Aggregate Bond Index and the Conservative Composite Index. The hypothetical $10,000 investment assumes investment on the first day of the month following inception and includes changes in share price and reinvestment of dividends and capital gains. THE INFORMATION PRESENTED IS HISTORICAL AND DOES NOT REPRESENT FUTURE RESULTS. TOTAL RETURNS ASSUME REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS. PRINCIPAL VALUE AND INVESTMENT RETURNS WILL FLUCTUATE, SO AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. Indices are unmanaged and do not reflect advisory fees and other expenses associated with an investment in the portfolio. Investors cannot invest in an index directly. ASSETS - ---------------------------------------------------------------------- Total net assets as of 10/31/99 (000s) $167,402 - ---------------------------------------------------------------------- Total net assets as of 4/30/00 (000s) $181,569 - ---------------------------------------------------------------------- Percentage growth from 10/31/99 to 4/30/00 8.5% - ----------------------------------------------------------------------
21 SCHWAB MARKETTRACK CONSERVATIVE PORTFOLIO PORTFOLIO SNAPSHOT Schwab MarketTrack Conservative Portfolio uses an indexing strategy to invest in three distinct asset classes--stocks, bonds and cash--and further allocates stock investments between large-cap, small-cap and international. The portfolio's target mix, as illustrated below, is achieved either directly or through investment in other SchwabFunds-Registered Trademark-. The portfolio employs an indexing strategy to capture the returns inherent in its target asset categories. The information below and on the following page provides a snapshot of the portfolio's characteristics as of 4/30/00, and is not indicative of its composition after that date. The terms used below are defined on page 28. A complete list of the securities in the portfolio as of 4/30/00 is provided in the Schedule of Investments later in this report. PORTFOLIO FACTS
SCHWAB MARKETTRACK PEER GROUP CONSERVATIVE PORTFOLIO* AVERAGE++ - ----------------------------------------------------------------------------------------------------------------- Number of Issues 488** 228 - ----------------------------------------------------------------------------------------------------------------- Median Market Cap ($ Mil) 59,836 $43,966 - ----------------------------------------------------------------------------------------------------------------- Price/Earnings (P/E) Ratio 34.4 32.1 - ----------------------------------------------------------------------------------------------------------------- Price/Book (P/B) Ratio 8.0 7.9 - ----------------------------------------------------------------------------------------------------------------- 12-Month Yield 3.11%++ 2.49% - ----------------------------------------------------------------------------------------------------------------- Portfolio Turnover Rate 10% 95% - ----------------------------------------------------------------------------------------------------------------- Three-Year Beta 0.39++ 0.54 - ----------------------------------------------------------------------------------------------------------------- Expense Ratio 0.60%+ 1.29% - -----------------------------------------------------------------------------------------------------------------
* Compiled by Charles Schwab & Co., Inc. This information is for illustrative purposes only and is not intended to show, predict or guarantee future composition of the portfolio. ** The portfolio invests in a combination of other SchwabFunds and individual securities. + Reflects a voluntary reduction by the Investment Adviser and Schwab, which is guaranteed through at least 2/28/01 (excluding interest, taxes and certain non-routine expenses). ++ Source: Morningstar. The peer group average is based on 726 domestic hybrid funds as tracked by Morningstar. 22 SCHWAB MARKETTRACK CONSERVATIVE PORTFOLIO ASSET MIX
MIX AS OF 4/30/00 TARGET MIX - -------------------------------------------------- U.S. Stocks: - -------------------------------------------------- Large-Cap 20.5% 20.0% - -------------------------------------------------- Small-Cap 10.5% 10.0% - -------------------------------------------------- International Stocks 9.6% 10.0% - -------------------------------------------------- Total Stocks 40.6% 40.0% - -------------------------------------------------- Bonds 54.4% 55.0% - -------------------------------------------------- Short-Term Investments 5.0% 5.0% - -------------------------------------------------- Total 100.0% 100.0% - --------------------------------------------------
Large-cap stocks in the MarketTrack Conservative Portfolio are represented by the S&P 500-Registered Trademark- Index, small-cap stocks are represented by the Schwab Small-Cap Index-Registered Trademark-, international stocks are represented by the Schwab International Index-Registered Trademark-, bonds are represented by the Lehman Brothers Aggregate Bond Index and cash is represented by the three-month Treasury bill. TOP 10 HOLDINGS AS A PERCENTAGE OF FUND INVESTMENTS(1) - -------------------------------------------------------------------- Schwab Total Bond Market Index Fund 54.4% - -------------------------------------------------------------------- Schwab Small-Cap Index Fund-Registered Trademark--Select Shares 10.5% - -------------------------------------------------------------------- Schwab S&P 500 Fund-Select Shares 10.0% - -------------------------------------------------------------------- Schwab International Index Fund-Registered Trademark--Select Shares 9.6% - -------------------------------------------------------------------- Schwab Value Advantage Money Fund-Registered Trademark- 4.1% - -------------------------------------------------------------------- General Electric Co. 0.4% - -------------------------------------------------------------------- Cisco Systems, Inc. 0.4% - -------------------------------------------------------------------- Intel Corp. 0.4% - -------------------------------------------------------------------- Microsoft Corp. 0.3% - -------------------------------------------------------------------- Exxon Mobil Corp. 0.2% - -------------------------------------------------------------------- Total 90.3% - --------------------------------------------------------------------
(1) Nothing in this report represents a recommendation of a security by the investment adviser. 23 PORTFOLIO MANAGEMENT THE PORTFOLIO MANAGEMENT TEAM GERI HOM--vice president and senior portfolio manager, has primary responsibility for the day-to-day management of the equity securities in the MarketTrack Portfolios. Geri joined CSIM in March 1995 as portfolio manager and was promoted to her current position in December 1996. She currently manages approximately $19 billion in indexed equity mutual fund 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. KIMON DAIFOTIS--vice president and senior portfolio manager, has primary responsibility for the day-to-day management of the bonds and cash equivalents securities in the MarketTrack Portfolios. Kimon joined CSIM in his current capacity in October 1997. In addition to the MarketTrack Portfolios, he manages two bond index funds and the YieldPlus Fund. He was previously with Lehman Brothers, most recently as vice president of fixed income institutional sales and, prior to that, senior portfolio strategist. 24 PORTFOLIO DISCUSSION QUESTIONS TO THE PORTFOLIO MANAGEMENT TEAM Q. HOW DID THE FOUR SCHWAB MARKETTRACK PORTFOLIOS-TM- PERFORM DURING THE REPORTING PERIOD? A. As discussed in the MARKET OVERVIEW section and detailed in the table below, there was a wide range of returns for the various asset classes during the reporting period. Equities in general, and small-cap domestic equities in particular, emerged to be the best performing major asset class. As a result, the primary factor determining the relative performance of the four MarketTrack portfolios was the portion of the portfolio allocated to equity investments. As shown in the table below, the portfolios with the greatest exposure to equity investments had the highest returns. The portfolios with the greatest exposure to fixed income investments had lower returns on a relative basis. Because the MarketTrack Portfolios are designed to incorporate a mix of different asset classes, their returns over any given period are expected to lag the return of the strongest performing asset class. Conversely, the returns of the MarketTrack Portfolios are expected to exceed that of the worst performing asset class for any given period. By dampening the return volatility of any single asset class, the MarketTrack Portfolios are designed to provide more stable returns throughout market cycles which, on a risk-adjusted basis, are expected to be favorable over extended periods of time.
SIX-MONTHS RETURN AS OF ASSET CLASS INDEX(1) 04/30/00 - ------------------------------------------------------------------------------------------------- Large-Cap Stocks S&P 500-Registered Trademark- Index 7.19% - ------------------------------------------------------------------------------------------------- Small-Cap Stocks Russell 2000-Registered Trademark- Index 18.72% - ------------------------------------------------------------------------------------------------- International Stocks MSCI-EAFE-Registered Trademark- Index 6.72% - ------------------------------------------------------------------------------------------------- Bonds Lehman Aggregate Bond Index 1.42% - ------------------------------------------------------------------------------------------------- Cash Three-Month Treasury Bill 2.86% - -------------------------------------------------------------------------------------------------
EQUITY/FIXED SIX-MONTHS INCOME RETURN AS OF MARKETTRACK FUND TARGET MIX 04/30/00 - ---------------------------------------------------- All Equity Portfolio 100/0 9.28% - ---------------------------------------------------- Growth Portfolio 80/20 7.83% - ---------------------------------------------------- Balanced Portfolio 60/40 6.22% - ---------------------------------------------------- Conservative Portfolio 40/60 4.58% - ----------------------------------------------------
(1) The S&P Index is composed of 500 large-company common stocks representing key industries, including many from the most recognizable companies on the United States. The Schwab Small-Cap Index includes the second-largest 1,000 publicly traded companies in the United States. The Schwab International Index includes the stocks of 350 of the largest publicly traded non-U.S. companies from countries with developed securities markets. The Lehman Aggregate Bond Index includes fixed-rate debt issues rated investment grade or higher. Q. DO THE MARKETTRACK PORTFOLIOS USE TAX-SMART STRATEGIES? A. Yes. The MarketTrack Portfolios employ several management techniques that are designed to minimize capital gain distributions. First, they follow an indexing strategy by investing directly in index securities or index funds, which helps them keep their portfolio turnover low and thereby minimizes realized capital gains. Secondly, when securities need to be sold--either to raise cash for portfolio redemptions or when an index is rebalanced--the MarketTrack 25 PORTFOLIO DISCUSSION (continued) Portfolios or the underlying index funds generally will attempt to sell the shares with the highest tax basis to minimize capital gains. Finally, the investment managers strive to use efficient trading practices, which help to keep portfolio turnover down. Q. CAN YOU PROVIDE AN EXAMPLE OF HOW ASSET ALLOCATION REDUCES PORTFOLIO VOLATILITY? A. Adding bonds and cash equivalents to a stock portfolio can help reduce its overall risk. Three of the four MarketTrack Portfolios (all except the All Equity Portfolio) use this approach. The following chart displays the high, low, and average annual returns from 1970 to 1999 for five hypothetical portfolios representing the returns of stocks and bonds(1). As the chart demonstrates, adding bonds to a stock-heavy portfolio would have reduced risk while still producing competitive returns. A portfolio comprising 40% bonds and 60% stocks, for example, achieved an average annual return of 11.97%--roughly 1.75% less than the 13.72% return of the all-stock portfolio--and with significantly less volatility. The lowest annual return of the portfolio invested 40% in bonds and 60% in stocks, which was actually a loss of 13.60%, was about half of the 26.47% loss in the all-stock portfolio. This hypothetical example is for illustrative purposes only, and past performance does not guarantee future results. EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC THE EFFECTS OF ADDING BONDS TO AN ALL-STOCK PORTFOLIO Hypothetical Portfolios: 1970-1999 High, Low and Average Annual Returns for Portfolio Compositions
AVERAGE ANNUAL RETURN HIGHEST ANNUAL RETURN LOWEST ANNUAL RETURN 100% Stocks 13.72% 37.43% -26.47% 90% Stocks /10% Bonds 13.32% 35.37% -23.25% 80% Stocks/20% Bonds 12.89% 33.30% -20.04% 70% Stocks/30% Bonds 12.44% 31.24% -16.82% 60% Stocks/40% Bonds 11.97% 29.18% -13.60%
(1) The returns do not reflect actual investment in any security. The hypothetical returns are all weighted averages and assume reinvestment of dividends. The indices represented are the S&P 500-Registered Trademark- Index and the Ibbotson Intermediate Government Bond Index. Indices are unmanaged, do not incur costs and expenses, and cannot be invested in directly. 26 Q. WHY DOES INVESTING IN ALL THE MAJOR ASSET CLASSES MAKE SENSE? A. The following chart shows the performance of large-cap, small-cap, and international stocks over nine non-overlapping three-year periods spanning 1975 through 1999. The chart shows that the performance of the various asset classes varied considerably. Sometimes large-caps performed better than small-caps and sometimes the opposite occurred. Some international stocks performed better than domestic stocks and sometimes vice versa. These shifting results are driven by the fact that different asset classes tended to take turns leading the market and these "performance cycles" have varied in length and magnitude. While these cycles may not be entirely random, predicting them can prove to be very difficult. By investing in several asset classes, you can participate in the long-term return performance of the various classes, reduce portfolio volatility (compared to investing in just one asset class) and avoid the entire issue of trying to predict which asset class will be the next winner. EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC WHY DIVERSIFY? Non-Overlapping, Three-Year Intervals Three-Years Ended
LARGE-CAP STOCKS SMALL-CAP STOCKS INTERNATIONAL STOCKS 12/75 -4.87% -9.15% -2.88% 12/78 6.99% 28.49% 18.50% 12/81 14.25% 26.05% 9.35% 12/84 16.49% 16.47% 10.04% 12/87 18.11% 8.61% 49.29% 12/90 14.15% 4.73% 3.05% 12/93 15.63% 28.29% 9.65% 12/96 19.66% 14.94% 8.64% 12/99 27.56% 17.85% 16.06%
(1) The returns do not reflect actual investment in any security. The hypothetical returns are all weighted averages and assume reinvestment of dividends. The indices represented are the S&P 500-Registered Trademark- Index and the Ibbotson Intermediate Government Bond Index. Indices are unmanaged, do not incur costs and expenses, and cannot be invested in directly. 27 GLOSSARY ASSET ALLOCATION--The division of holdings among different types of assets, such as domestic stocks, international stocks, bonds and cashequivalent securities. BETA--A measure of a stock's volatility relative to the overall stock market. The beta of the S&P 500-Registered Trademark- Index is 1. Any investment that is more volatile than the market as a whole has a beta value higher than 1. If the beta is less than 1, the investment is considered to be less volatile than the market. CAPITAL GAIN (LOSS)--When a stock is sold for a profit, the difference between the net sales price and its net purchase price, or cost basis, is a capital gain. If a stock is sold below cost, the difference is a capital loss. EARNINGS GROWTH RATE--The average annual rate of growth in earnings over the past five years for the stocks in a fund's portfolio. EARNINGS PER SHARE (EPS)--The net income (or earnings) of a company for the past 12 months divided by the current number of shares outstanding. EXPENSE RATIO--Amount, expressed as a percentage of total investment, that shareholders pay annually for mutual fund operating expenses and management fees. MARKET CAPITALIZATION--The dollar value of a company or the amount someone would pay to buy the company today. It is calculated by multiplying the total number of outstanding shares by the current price per share. Median market cap is the midpoint of a fund's total market capitalization, weighted by the portion of assets invested in each holding. As a result, half of the fund's holdings will have market caps above the median, and the rest below it. NET ASSET VALUE (NAV)--The market value of a fund share. PRICE/BOOK (P/B) RATIO--Compares a stock's market value with the value of total assets minus intangible assets and total liabilities (the book value). It is determined by dividing the current price of the stock by common stockholder equity per share. In evaluating stocks, comparing P/B ratios often works well in situations where price/earnings ratios do not, because the P/B ratio is stable over time and is always a positive number. P/B ratios are best used for comparisons within an industry rather than between industries, as certain industries will usually contain stocks that have all high or all low P/B ratios. For mutual funds the P/B ratio is the weighted average of all the stocks' P/B ratios in the portfolio. PRICE/EARNINGS (P/E) RATIO--The ratio of a company's stock price to its earnings per share over the past year. For mutual funds the P/E ratio is the weighted average of all the stocks' P/E ratios in the mutual fund's portfolio. The P/E is an indicator of market expectations about a company's prospects. Typically, the higher the P/E, the greater the expectations for a company's future growth. Because earnings are volatile and sometimes "negative," however, the P/E has its limitations and may fail as a measure for a significant number of stocks at any given time. RETURN ON EQUITY--The average annual rate of return generated by the companies a fund holds during the past five years for each dollar of shareholders' equity (net income divided by shareholders' equity). STOCK--A share of ownership, or equity, in a corporation. 28 TOTAL RETURN--The sum of dividends, plus capital gains (or losses). TURNOVER RATE--An indication of a fund's trading activity. Funds with higher turnover rates typically incur higher transaction costs and are more likely to distribute capital gains, which are taxable to investors. YIELD--The income generated by an investment, expressed as a percentage of its price. 29 Schwab MarketTrack All Equity Portfolio Schedule of Investments April 30, 2000 (Unaudited)
Number Value of Shares (000s) --------- --------- Investment Funds-- 99.5% Schwab International Index Fund, Select Shares 5,173,183 $ 97,928 Schwab S&P 500 Fund, Select Shares 6,457,219 145,029 Schwab Small-Cap Index Fund, Select Shares 4,176,102 84,608 --------- Total Investment Funds (Cost $287,907) 327,565 --------- Par (000s) ------- U.S. Treasury Obligations-- 0.0% U.S. Treasury Bill (a)(b) 5.66%-5.71%, 06/15/00 $ 80 80 --------- Total U.S. Treasury Obligations (Cost $80) 80 --------- Number Value of Shares (000s) --------- --------- Short-Term Investments-- 0.7% Grand Cayman Time Deposit 5.44%*, 05/01/00 2,117,921 $ 2,118 --------- Total Short-Term InvestmentS (Cost $2,118) 2,118 --------- Total Investments-- 100.2% (Cost $290,105) 329,763 --------- OTHER ASSETS AND LIABILITIES, NET-- (0.2%) Other assets 582 Liabilities (1,226) --------- (644) --------- TOTAL Net Assets-- 100.0% $329,119 ---------
See accompanying Notes to Schedules of Investments and Notes to Financial Statements. 30 Schwab MarketTrack Growth Portfolio Schedule of Investments April 30, 2000 (Unaudited)
Number Value of Shares (000s) --------- --------- Common Stock-- 22.9% Aerospace / Defense-- 0.2% B.F. Goodrich Co. 1,100 $ 35 Boeing Co. 8,578 340 General Dynamics Corp. 2,000 117 Lockheed Martin Corp. 3,900 97 Northrop Grumman Corp. 700 50 Raytheon Co., Class B 3,400 75 Rockwell International Corp. 1,900 75 Textron, Inc. 1,500 93 TRW, Inc. 1,300 76 United Technologies Corp. 4,600 286 --------- 1,244 --------- Air Transportation-- 0.1% AMR Corp.+ 1,500 51 Delta Air Lines, Inc. 1,300 69 FedEx Corp.+ 2,920 110 Southwest Airlines Co. 4,987 108 U.S. Airways Group, Inc.+ 1,000 28 --------- 366 --------- Alcoholic Beverages-- 0.1% Adolph Coors Co., Class B 400 20 Anheuser-Busch Cos., Inc. 4,500 318 Brown-Forman Corp., Class B 700 38 --------- 376 --------- Apparel-- 0.0% Liz Claiborne, Inc. 600 28 Nike, Inc., Class B 2,800 122 Russell Corp. 200 4 Springs Industries, Inc. 300 12 VF Corp. 1,200 34 --------- 200 --------- Automotive Products / Motor Vehicles-- 0.3% Cooper Tire & Rubber Co. 500 7 Cummins Engine Co., Inc. 400 14 Dana Corp. 1,578 48 Danaher Corp. 1,400 80 Delphi Automotive Systems Corp. 5,743 110 Eaton Corp. 700 59 Ford Motor Co. 11,900 651 Number Value of Shares (000s) --------- --------- General Motors Corp. 6,300 $ 590 Genuine Parts Co. 1,800 47 Goodyear Tire & Rubber Co. 1,600 44 Harley-Davidson, Inc. 3,000 119 Navistar International Corp.+ 700 24 --------- 1,793 -------- Banks-- 1.1% AmSouth Bancorp 3,900 57 Bank of America Corp. 16,848 826 Bank of New York Co., Inc. 7,300 300 Bank One Corp. 11,375 347 BB&T Corp. 3,300 88 Chase Manhattan Corp. 7,980 575 Comerica, Inc. 1,500 64 Fifth Third Bancorp 3,025 191 First Union Corp. 9,684 309 Firstar Corp. 9,618 239 Fleet Boston Financial Corp. 8,974 318 Huntington Bancshares, Inc. 2,057 38 J.P. Morgan & Co., Inc. 1,700 218 KeyCorp, Inc. 4,400 81 Mellon Financial Corp. 5,200 167 National City Corp. 6,100 104 Northern Trust Corp. 2,200 141 Old Kent Financial Corp. 1,200 36 PNC Financial Services Group 2,800 122 Providian Financial Corp. 1,450 128 Regions Financial Corp. 2,100 43 SouthTrust Corp. 1,700 41 State Street Corp. 1,500 145 Summit Bancorp 1,800 46 SunTrust Banks, Inc. 3,100 157 Synovus Financial Corp. 2,750 51 U.S. Bancorp 7,150 145 Union Planters Corp. 1,300 37 Wachovia Corp. 1,900 119 Wells Fargo & Co. 16,250 667 --------- 5,800 --------- Business Machines & Software-- 3.8% 3Com Corp.+ 3,300 130 Adaptec, Inc.+ 1,000 27 Adobe Systems, Inc. 1,200 145 Apple Computer, Inc.+ 1,600 198
31 Schwab MarketTrack Growth Portfolio Schedule of Investments (continued) April 30, 2000 (Unaudited)
Number Value of Shares (000s) --------- --------- Autodesk, Inc. 600 $ 23 BMC Software, Inc.+ 2,400 112 Cabletron Systems, Inc.+ 1,800 41 Ceridian Corp.+ 1,456 32 Cisco Systems, Inc.+ 66,900 4,638 Compaq Computer Corp. 16,764 490 Compuware Corp.+ 3,600 45 Comverse Technology, Inc.+ 1,400 125 Dell Computer Corp.+ 25,100 1,258 EMC Corp.+ 9,893 1,375 Gateway, Inc.+ 3,100 171 Hewlett-Packard Co. 9,800 1,323 IKON Office Solutions, Inc. 1,000 6 International Business Machines Corp. 17,600 1,965 Lexmark International Group, Inc., Class A+ 1,300 153 Microsoft Corp.+ 50,900 3,550 NCR Corp.+ 1,000 39 Network Appliance, Inc.+ 2,800 207 Novell, Inc.+ 3,200 63 Oracle Corp.+ 27,224 2,176 Pitney Bowes, Inc. 2,700 110 Seagate Technology, Inc.+ 2,168 110 Silicon Graphics, Inc.+ 1,476 11 Sun Microsystems, Inc.+ 15,400 1,416 Unisys Corp.+ 3,100 72 Xerox Corp. 6,600 174 --------- 20,185 --------- Business Services-- 1.0% Allied Waste Industries, Inc.+ 1,900 12 America Online, Inc.+ 22,100 1,322 Automatic Data Processing, Inc. 6,200 334 Citrix Systems, Inc.+ 1,800 110 Computer Associates International, Inc. 5,325 297 Computer Sciences Corp.+ 1,680 137 Deluxe Corp. 700 18 Dun & Bradstreet Corp. 1,500 45 Ecolab, Inc. 1,400 55 Electronic Data Systems Corp. 4,600 316 Number Value of Shares (000s) --------- --------- Equifax, Inc. 1,200 $ 29 First Data Corp. 4,200 204 H&R Block, Inc. 1,000 42 IMS Health, Inc. 3,000 51 Interpublic Group of Cos., Inc. 2,700 111 National Service Industries, Inc. 500 11 Omnicom Group, Inc. 1,800 164 Parametric Technology Corp.+ 2,700 22 Paychex, Inc. 2,400 126 PeopleSoft, Inc.+ 2,300 32 Shared Medical Systems Corp. 300 12 Tyco International Ltd. 16,652 765 VERITAS Software Corp.+ 3,800 408 Waste Management, Inc. 6,117 97 Yahoo!, Inc.+ 5,100 664 Young & Rubicam, Inc. 700 39 --------- 5,423 --------- Chemical-- 0.4% Air Products & Chemicals, Inc. 2,300 71 Dow Chemical Co. 2,200 249 E. I. du Pont de Nemours & Co. 10,292 488 Eastman Chemical Co. 800 42 Great Lakes Chemical Corp. 600 16 Hercules, Inc. 900 14 Minnesota Mining & Manufacturing Co. 3,900 337 Pharmacia Corp. 12,269 613 PPG Industries, Inc. 1,800 98 Praxair, Inc. 1,600 71 Rohm & Haas Co. 2,205 79 Sigma-Aldrich Corp. 900 26 Union Carbide Corp. 1,300 77 --------- 2,181 --------- Construction-- 0.1% Armstrong Holdings, Inc.+ 500 10 Centex Corp. 600 14 Fluor Corp. 700 23 Kaufman & Broad Home Corp. 200 4 Masco Corp. 4,400 99 Owens Corning 400 7
32
Number Value of Shares (000s) --------- --------- Pulte Corp. 200 4 Sherwin-Williams Co. 1,400 35 The Stanley Works 800 24 Vulcan Materials Co. 1,000 44 --------- 264 --------- Consumer - Durable-- 0.0% Black & Decker Corp. 900 38 Leggett & Platt, Inc. 2,000 43 Maytag Corp. 900 31 Whirlpool Corp. 800 52 --------- 164 --------- Consumer - Nondurable-- 0.2% American Greetings Corp., Class A 500 9 Darden Restaurants, Inc. 1,200 22 Fortune Brands, Inc. 1,600 40 Harcourt General, Inc. 800 30 Hasbro, Inc. 1,650 26 Jostens, Inc. 200 5 Mattel, Inc. 4,150 51 McDonald's Corp. 13,400 511 Newell Rubbermaid, Inc. 2,745 69 Tricon Global Restaurants, Inc.+ 1,560 53 Tupperware Corp. 400 8 Wendy's International, Inc. 1,000 22 --------- 846 --------- Containers-- 0.0% Ball Corp. 200 6 Bemis Co., Inc. 500 18 Crown Cork & Seal Co., Inc. 1,000 16 Owens-Illinois, Inc.+ 1,500 20 Pactiv Corp.+ 1,400 11 Sealed Air Corp.+ 782 43 --------- 114 --------- Electronics-- 2.8% ADC Telecommunications, Inc.+ 3,000 182 Advanced Micro Devices, Inc.+ 1,420 125 Altera Corp.+ 1,540 157 Analog Devices, Inc.+ 3,400 261 Number Value of Shares (000s) --------- --------- Andrew Corp.+ 850 $ 25 Applied Materials, Inc.+ 7,400 753 Conexant Systems, Inc.+ 1,900 114 Intel Corp. 32,600 4,134 ITT Industries, Inc. 900 28 KLA-Tencor Corp.+ 1,800 135 Linear Technology Corp. 3,000 171 LSI Logic Corp.+ 3,000 187 Lucent Technologies, Inc. 31,092 1,934 Micron Technology, Inc.+ 2,700 376 Molex, Inc. 1,875 103 Motorola, Inc. 6,977 831 National Semiconductor Corp.+ 1,700 103 Nextel Communications, Inc., Class A+ 3,600 394 Nortel Networks Corp. 14,160 1,604 PE Corp.-PE Biosystems Group 2,000 120 PerkinElmer, Inc. 500 27 QUALCOMM, Inc.+ 7,200 781 Scientific-Atlanta, Inc. 1,600 104 Solectron Corp.+ 5,800 272 Tektronix, Inc. 450 26 Tellabs, Inc.+ 4,000 219 Teradyne, Inc.+ 1,700 187 Texas Instruments, Inc. 7,900 1,287 Thermo Electron Corp.+ 1,300 25 Thomas & Betts Corp. 481 15 Xilinx, Inc.+ 3,200 234 --------- 14,914 --------- Energy - Raw Materials-- 0.2% Anadarko Petroleum Corp. 1,200 52 Apache Corp. 1,100 53 Baker Hughes, Inc. 3,160 101 Burlington Resources, Inc. 2,105 83 Eastern Enterprises 100 6 Halliburton Co. 4,358 193 McDermott International, Inc. 300 2 Occidental Petroleum Corp. 3,600 77 Rowan Cos., Inc.+ 800 22 Schlumberger Ltd. 5,400 413 --------- 1,002 ---------
33 Schwab MarketTrack Growth Portfolio Schedule of Investments (continued) April 30, 2000 (Unaudited)
Number Value of Shares (000s) --------- --------- Food & Agriculture-- 0.6% Archer-Daniels Midland Co. 5,925 $ 59 Bestfoods, Inc. 2,800 141 Campbell Soup Co. 4,200 109 Coca-Cola Co. 24,100 1,134 Coca-Cola Enterprises, Inc. 4,000 85 ConAgra, Inc. 4,900 92 General Mills, Inc. 3,026 110 H.J. Heinz Co. 3,400 116 Hershey Foods Corp. 1,500 68 Kellogg Co. 3,900 95 Nabisco Group Holdings Corp. 3,200 41 PepsiCo, Inc. 14,400 528 Quaker Oats Co. 1,400 91 Ralston-Ralston Purina Group 3,100 55 Sara Lee Corp. 9,000 135 SUPERVALU, Inc. 1,400 29 SYSCO Corp. 3,300 124 Unilever NV 5,714 260 Wm. Wrigley Jr. Co. 1,100 80 --------- 3,352 --------- Gold-- 0.0% Barrick Gold Corp. 3,900 66 Homestake Mining Co. 2,600 16 Newmont Mining Corp. 1,701 40 Placer Dome, Inc. 3,200 26 --------- 148 --------- Healthcare / Drugs & Medicine-- 2.2% Abbott Laboratories 15,000 577 Aetna, Inc. 1,424 82 Allergan, Inc. 1,300 77 ALZA Corp.+ 800 35 American Home Products Corp. 12,700 714 Amgen, Inc.+ 10,100 566 Bausch & Lomb, Inc. 600 36 Baxter International, Inc. 2,800 182 Becton, Dickinson & Co. 2,600 67 Biogen, Inc.+ 1,500 88 Biomet, Inc. 1,100 39 Boston Scientific Corp.+ 4,074 108 Bristol-Myers Squibb Co. 19,400 1,017 C.R. Bard, Inc. 400 17 Cardinal Health, Inc. 2,800 154 Columbia / HCA Healthcare Corp. 5,600 159 Number Value of Shares (000s) --------- --------- Eli Lilly & Co. 10,600 $ 820 Guidant Corp.+ 3,000 172 HealthSouth Corp.+ 3,452 28 Humana, Inc.+ 1,400 11 Johnson & Johnson 13,700 1,130 Mallinckrodt, Inc. 700 19 Manor Care, Inc.+ 1,100 13 McKesson HBOC, Inc. 2,654 45 Medtronic, Inc. 11,800 613 Merck & Co., Inc. 22,800 1,585 Pfizer, Inc. 37,800 1,592 Quintiles Transnational Corp.+ 1,200 17 Schering-Plough Corp. 14,500 585 St. Jude Medical, Inc.+ 725 23 Tenet Healthcare Corp.+ 3,100 79 UnitedHealth Group, Inc. 1,700 113 Warner-Lambert Co. 8,400 956 Watson Pharmaceuticals, Inc.+ 1,000 45 Wellpoint Health Networks, Inc.+ 700 52 --------- 11,816 --------- Household Products-- 0.3% Alberto-Culver Co., Class B 600 14 Avon Products, Inc. 2,400 100 Clorox Co. 2,200 81 Colgate-Palmolive Co. 5,800 331 Gillette Co. 10,600 392 International Flavors & Fragrances, Inc. 1,100 38 Procter & Gamble Co. 13,000 775 --------- 1,731 --------- Insurance-- 0.7% AFLAC, Inc. 2,600 127 Allstate Corp. 7,900 187 American General Corp. 2,510 141 American International Group, Inc. 15,097 1,656 Aon Corp. 2,625 71 Chubb Corp. 1,700 108 CIGNA Corp. 1,600 128 Cincinnati Financial Corp. 1,800 73 Conseco, Inc. 3,220 18 Hartford Financial Services Group, Inc. 2,200 115 Jefferson-Pilot Corp. 1,075 72 Lincoln National Corp. 1,900 66
34
Number Value of Shares (000s) --------- --------- Loew's Corp. 1,000 $ 55 Marsh & McLennan Cos., Inc. 2,600 256 MBIA, Inc. 900 44 MGIC Investment Corp. 1,200 57 Progressive Corp. 700 46 SAFECO Corp. 1,100 24 St. Paul Cos., Inc. 2,450 87 Torchmark Corp. 1,100 28 UnumProvident Corp. 2,349 40 --------- 3,399 --------- Media-- 0.9% CBS Corp.+ 7,448 438 Clear Channel Communications, Inc.+ 3,300 238 Comcast Corp., Class A+ 9,100 365 Dow Jones & Co., Inc. 800 52 Gannett Co., Inc. 2,700 172 Knight-Ridder, Inc. 900 44 McGraw-Hill Cos., Inc. 2,000 105 MediaOne Group, Inc.+ 6,000 454 Meredith Corp. 500 14 New York Times Co., Class A 1,700 70 R.R. Donnelley & Sons Co. 1,200 25 Seagram Co. Ltd. 4,300 232 Time Warner, Inc. 12,500 1,124 Tribune Co. 2,300 89 Viacom, Inc., Class B+ 6,900 375 Walt Disney Co. 20,319 880 --------- 4,677 --------- Miscellaneous Finance-- 1.2% American Express Co. 4,400 660 Associates First Capital Corp. 7,242 161 Bear Stearns Cos., Inc. 1,182 51 Capital One Financial Corp. 1,800 79 Charles Schwab Corp. 8,050 358 Citigroup, Inc. 32,911 1,956 Countrywide Credit Industries, Inc. 1,100 30 Fannie Mae 10,100 609 Franklin Resources, Inc. 2,500 81 Freddie Mac 6,900 317 Golden West Financial Corp. 1,600 55 Household International, Inc. 4,759 199 Lehman Brothers Holdings, Inc. 1,200 98 Number Value of Shares (000s) --------- --------- MBNA Corp. 7,900 $ 210 Merrill Lynch & Co., Inc. 3,700 377 Morgan Stanley Dean Witter Discover & Co. 11,000 844 Paine Webber Group, Inc. 1,400 61 Sabre Group Holdings, Inc.+ 1,283 45 SLM Holding Corp. 1,700 53 T. Rowe Price Associates, Inc. 1,200 46 Washington Mutual, Inc. 5,655 145 --------- 6,435 --------- Non-Ferrous Metals-- 0.1% Alcan Aluminum Ltd. 2,214 73 Alcoa, Inc. 3,600 234 Engelhard Corp. 1,300 23 Freeport-McMoRan Copper & Gold, Inc., Class B+ 1,700 16 Inco Ltd.+ 1,900 30 Phelps Dodge Corp. 810 37 Reynolds Metals Co. 600 40 --------- 453 --------- Oil - Domestic-- 0.2% Amerada Hess Corp. 1,000 64 Ashland, Inc. 800 27 Conoco, Inc., Class B 6,300 157 Kerr-McGee Corp. 869 45 Phillips Petroleum Co. 2,400 114 Sunoco, Inc. 900 27 Tosco Corp. 1,500 48 Transocean Sedco Forex, Inc. 2,045 96 Union Pacific Resources Group, Inc. 2,239 43 Unocal Corp. 2,400 78 USX-Marathon Group, Inc. 3,100 72 --------- 771 --------- Oil - International-- 0.9% Chevron Corp. 6,500 553 Exxon Mobil Corp. 33,729 2,620 Royal Dutch Petroleum Co.-- Sponsored ADR 20,900 1,199 Texaco, Inc. 5,361 265 --------- 4,637 ---------
35 Schwab MarketTrack Growth Portfolio Schedule of Investments (continued) April 30, 2000 (Unaudited)
Number Value of Shares (000s) --------- --------- Optical & Photo-- 0.1% Corning, Inc. 2,500 $ 494 Eastman Kodak Co. 3,100 173 --------- 667 --------- Paper & Forest Products-- 0.2% Boise Cascade Corp. 600 20 Champion International Corp. 1,000 66 Fort James Corp. 2,000 48 Georgia-Pacific Group 1,700 62 International Paper Co. 4,139 152 Kimberly-Clark Corp. 5,360 311 Louisiana-Pacific Corp. 800 11 Mead Corp. 1,000 35 Potlatch Corp. 300 12 Temple-Inland, Inc. 600 30 Westvaco Corp. 1,000 31 Weyerhaeuser Co. 2,300 123 Willamette Industries, Inc. 1,100 42 --------- 943 --------- Producer Goods & Manufacturing-- 1.3% Avery Dennison Corp. 1,200 79 Briggs & Stratton Corp. 100 4 Caterpillar, Inc. 3,500 138 Cooper Industries, Inc. 900 31 Deere & Co. 2,300 93 Dover Corp. 2,000 102 Emerson Electric Co. 4,300 236 FMC Corp.+ 400 23 General Electric Co. 32,000 5,032 Honeywell International, Inc. 7,837 439 Illinois Tool Works, Inc. 3,000 192 Ingersoll-Rand Co. 1,650 77 Johnson Controls, Inc. 800 51 Milacron, Inc. 100 2 Millipore Corp. 400 29 NACCO Industries, Inc., Class A 100 4 Pall Corp. 1,000 22 Parker-Hannifin Corp. 1,150 53 Snap-On, Inc. 600 16 The Timken Co. 600 11 W.W. Grainger, Inc. 900 39 --------- 6,673 --------- Number Value of Shares (000s) --------- --------- Railroad & Shipping-- 0.1% Burlington Northern Santa Fe Corp. 4,500 $ 109 CSX Corp. 2,200 46 Kansas City Southern Industries, Inc. 1,100 79 Norfolk Southern Corp. 3,600 63 Union Pacific Corp. 2,500 105 --------- 402 --------- Retail-- 1.4% Albertson's, Inc. 4,138 135 AutoZone, Inc.+ 1,300 30 Bed, Bath & Beyond, Inc.+ 1,400 51 Best Buy Co., Inc.+ 1,900 153 Cendant Corp.+ 7,232 112 Circuit City Stores-Circuit City Group 2,000 118 Consolidated Stores Corp.+ 1,100 14 Costco Wholesale Corp.+ 4,400 238 CVS Corp. 3,900 170 Dillards, Inc., Class A 800 11 Dollar General Corp. 2,643 60 Federated Department Stores, Inc.+ 2,100 71 Gap, Inc. 8,300 305 Home Depot, Inc. 22,500 1,261 J.C. Penney Co., Inc. 2,500 35 Kmart Corp.+ 4,700 38 Kohl's Corp.+ 3,200 154 Kroger Co.+ 8,200 152 Limited, Inc. 2,097 95 Lowe's Cos., Inc. 3,800 188 May Department Stores Co. 3,200 88 Nordstrom, Inc. 1,300 36 Office Depot, Inc.+ 3,700 39 Rite Aid Corp. 2,600 13 Safeway, Inc.+ 4,900 216 Sears, Roebuck & Co. 3,700 136 Staples, Inc.+ 4,350 83 Tandy Corp. 1,900 108 Target Corp. 4,200 280 TJX Cos., Inc. 3,000 58 36
Number Value of Shares (000s) --------- --------- Toys `R' Us, Inc.+ 2,600 $ 40 Wal-Mart Stores, Inc. 43,500 2,409 Walgreen Co. 9,900 278 Winn-Dixie Stores, Inc. 1,500 25 --------- 7,200 --------- Steel-- 0.0% Allegheny Technologies, Inc. 735 18 Bethlehem Steel Corp.+ 768 4 Nucor Corp. 900 39 USX-U.S. Steel Group, Inc. 900 23 Worthington Industries, Inc. 900 11 --------- 95 --------- Telephone-- 1.6% Alltel Corp. 3,100 207 AT&T Corp. 31,249 1,459 Bell Atlantic Corp. 15,146 897 BellSouth Corp. 18,400 896 CenturyTel, Inc. 1,350 33 Global Crossing Ltd.+ 7,570 238 GTE Corp. 9,600 650 MCI WorldCom, Inc.+ 27,720 1,260 SBC Communications, Inc. 33,336 1,461 Sprint Corp. (FON Group) 8,600 529 Sprint Corp. (PCS Group)+ 8,500 467 US West, Inc. 4,958 353 --------- 8,450 --------- Tobacco-- 0.1% Philip Morris Cos., Inc. 23,400 512 UST, Inc. 1,600 24 --------- 536 --------- Travel & Recreation-- 0.1% Brunswick Corp. 900 17 Carnival Corp. 6,100 152 Harrah's Entertainment, Inc.+ 1,300 27 Hilton Hotels Corp. 3,600 31 Marriott International, Inc., Class A 2,600 83 Mirage Resorts, Inc.+ 1,500 31 --------- 341 --------- Number Value of Shares (000s) --------- --------- Trucking & Freight-- 0.0% PACCAR, Inc. 800 $ 38 Ryder Systems, Inc. 400 9 --------- 47 --------- Utilities - Electric & Gas-- 0.6% AES Corp.+ 2,000 180 Ameren Corp. 1,500 55 American Electric Power Co., Inc. 1,900 70 Carolina Power & Light Co. 1,600 58 Central & South West Corp. 2,100 46 Cinergy Corp. 1,600 43 CMS Energy Corp. 1,000 19 Coastal Corp. 2,200 110 Columbia Energy Group 800 50 Consolidated Edison, Inc. 2,100 74 Constellation Energy Group, Inc. 1,300 43 Dominion Resources, Inc. 2,378 107 DTE Energy Co. 1,400 46 Duke Energy Corp. 3,626 208 Edison International 3,200 61 El Paso Energy Corp. 2,300 98 Enron Corp. 7,100 495 Entergy Corp. 2,400 61 FirstEnergy Corp. 2,100 53 Florida Progress Corp. 1,000 49 FPL Group, Inc. 1,900 86 GPU, Inc. 1,200 34 New Century Energies, Inc. 1,000 33 Niagara Mohawk Holdings, Inc.+ 1,800 25 NICOR, Inc. 500 17 Northern States Power Co. 1,600 35 PECO Energy Co. 1,900 79 Peoples Energy Corp. 400 12 PG&E Corp. 3,600 93 Pinnacle West Capital Corp. 800 28 PPL Corp. 1,400 33 Public Service Enterprise Group, Inc. 2,000 72 Reliant Energy, Inc. 2,949 79 Sempra Energy 2,103 39 Southern Co. 6,600 165 Texas Utilities Co. 2,767 93
37 Schwab MarketTrack Growth Portfolio Schedule of Investments (continued) April 30, 2000 (Unaudited)
Number Value of Shares (000s) --------- --------- Unicom Corp. 2,100 $ 83 Williams Cos., Inc. 4,200 157 --------- 3,089 --------- Total Common Stock (Cost $62,899) 120,734 --------- INVESTMENT Funds-- 72.1% Schwab International Index Fund, Select Shares 5,440,203 102,983 Schwab S&P 500 Fund, Select Shares 4,064,257 91,283 Schwab Small-Cap Index Fund, Select Shares 5,403,818 109,481 Schwab Total Bond Market Index Fund 8,140,939 77,013 --------- Total investment Funds (Cost $323,780) 380,760 --------- Number Value of Shares (000s) --------- --------- Short-Term Investments-- 5.0% Grand Cayman Time Deposit 5.44%*, 05/01/00 4,478,539 $ 4,479 Schwab Value Advantage Money Fund, Investor Shares, 5.76%* 21,830,536 21,831 --------- Total Short-Term Investments (Cost $26,310) 26,310 --------- Total Investments-- 100.0% (Cost $412,989) 527,804 --------- OTHER ASSETS AND LIABILITIES, NET-- 0.0% Other assets 865 Liabilities (682) --------- 183 --------- TOTAL Net Assets-- 100.0% $ 527,987 ---------
See accompanying Notes to Schedules of Investments and Notes to Financial Statements. 38 Schwab MarketTrack Balanced Portfolio Schedule of Investments April 30, 2000 (Unaudited)
Number Value of Shares (000s) --------- --------- Common Stock-- 17.6% Aerospace / Defense-- 0.2% B.F. Goodrich Co. 700 $ 22 Boeing Co. 5,784 230 General Dynamics Corp. 1,300 76 Lockheed Martin Corp. 2,600 65 Northrop Grumman Corp. 500 35 Raytheon Co., Class B 2,300 51 Rockwell International Corp. 1,200 47 Textron, Inc. 1,000 62 TRW, Inc. 800 47 United Technologies Corp. 3,200 199 --------- 834 --------- Air Transportation-- 0.1% AMR Corp.+ 1,000 34 Delta Air Lines, Inc. 900 47 FedEx Corp.+ 1,960 74 Southwest Airlines Co. 3,525 76 U.S. Airways Group, Inc.+ 400 11 --------- 242 --------- Alcoholic Beverages-- 0.1% Adolph Coors Co., Class B 200 10 Anheuser-Busch Cos., Inc. 3,100 219 Brown-Forman Corp., Class B 500 27 --------- 256 --------- Apparel-- 0.0% Liz Claiborne, Inc. 400 19 Nike, Inc., Class B 1,900 83 Springs Industries, Inc. 200 8 VF Corp. 800 23 --------- 133 --------- Automotive Products / Motor Vehicles-- 0.3% Cooper Tire & Rubber Co. 200 3 Cummins Engine Co., Inc. 300 11 Dana Corp. 1,085 33 Danaher Corp. 900 51 Delphi Automotive Systems Corp. 3,884 74 Eaton Corp. 500 42 Ford Motor Co. 8,000 437 General Motors Corp. 4,200 393 Number Value of Shares (000s) --------- --------- Genuine Parts Co. 1,150 $ 30 Goodyear Tire & Rubber Co. 1,000 28 Harley-Davidson, Inc. 2,000 80 Navistar International Corp.+ 400 14 --------- 1,196 --------- Banks-- 0.8% AmSouth Bancorp 2,600 38 Bank of America Corp. 11,180 548 Bank of New York Co., Inc. 4,900 201 Bank One Corp. 7,557 230 BB&T Corp. 2,200 59 Chase Manhattan Corp. 5,464 394 Comerica, Inc. 1,000 42 Fifth Third Bancorp 2,025 128 First Union Corp. 6,536 208 Firstar Corp. 6,381 159 Fleet Boston Financial Corp. 6,054 215 Huntington Bancshares, Inc. 1,452 26 J.P. Morgan & Co., Inc. 1,100 141 KeyCorp, Inc. 3,200 59 Mellon Financial Corp. 3,400 109 National City Corp. 4,100 70 Northern Trust Corp. 1,400 90 Old Kent Financial Corp. 800 24 PNC Financial Services Group 1,900 83 Providian Financial Corp. 950 84 Regions Financial Corp. 1,400 29 SouthTrust Corp. 1,100 26 State Street Corp. 1,100 107 Summit Bancorp 1,200 30 SunTrust Banks, Inc. 2,100 107 Synovus Financial Corp. 1,900 35 U.S. Bancorp 4,880 99 Union Planters Corp. 900 25 Wachovia Corp. 1,400 88 Wells Fargo & Co. 10,920 448 --------- 3,902 --------- Business Machines & Software-- 2.9% 3Com Corp.+ 2,300 91 Adaptec, Inc.+ 700 19 Adobe Systems, Inc. 800 97 Apple Computer, Inc.+ 1,100 136 Autodesk, Inc. 400 15 39
Schwab MarketTrack Balanced Portfolio Schedule of Investments (continued) April 30, 2000 (Unaudited)
Number Value of Shares (000s) --------- --------- BMC Software, Inc.+ 1,600 $ 75 Cabletron Systems, Inc.+ 1,200 27 Ceridian Corp.+ 928 20 Cisco Systems, Inc.+ 45,000 3,120 Compaq Computer Corp. 11,264 329 Compuware Corp.+ 2,400 30 Comverse Technology, Inc.+ 1,000 89 Dell Computer Corp.+ 16,900 847 EMC Corp.+ 6,731 935 Gateway, Inc.+ 2,100 116 Hewlett-Packard Co. 6,600 891 International Business Machines Corp. 11,900 1,328 Lexmark International Group, Inc., Class A+ 800 94 Microsoft Corp.+ 34,300 2,392 NCR Corp.+ 600 23 Network Appliance, Inc.+ 2,000 148 Novell, Inc.+ 2,200 43 Oracle Corp.+ 18,500 1,479 Pitney Bowes, Inc. 1,800 74 Seagate Technology, Inc.+ 1,384 70 Silicon Graphics, Inc.+ 1,054 8 Sun Microsystems, Inc.+ 10,400 956 Unisys Corp.+ 2,100 49 Xerox Corp. 4,200 111 --------- 13,612 --------- Business Services-- 0.8% Allied Waste Industries, Inc.+ 1,300 8 America Online, Inc.+ 14,900 891 Automatic Data Processing, Inc. 4,200 226 Citrix Systems, Inc.+ 1,200 73 Computer Associates International, Inc. 3,625 202 Computer Sciences Corp.+ 1,090 89 Deluxe Corp. 500 13 Dun & Bradstreet Corp. 1,000 30 Ecolab, Inc. 1,000 39 Electronic Data Systems Corp. 3,100 213 Equifax, Inc. 900 22 First Data Corp. 2,800 136 H&R Block, Inc. 600 25 IMS Health, Inc. 2,000 34 Interpublic Group of Cos., Inc. 1,900 78 Number Value of Shares (000s) --------- --------- National Service Industries, Inc. 300 $ 6 Omnicom Group, Inc. 1,200 109 Parametric Technology Corp.+ 1,800 15 Paychex, Inc. 1,650 87 PeopleSoft, Inc.+ 1,500 21 Shared Medical Systems Corp. 200 8 Tyco International Ltd. 11,200 514 VERITAS Software Corp.+ 2,600 279 Waste Management, Inc. 4,112 65 Yahoo!, Inc.+ 3,400 443 Young & Rubicam, Inc. 500 28 --------- 3,654 --------- Chemical-- 0.3% Air Products & Chemicals, Inc. 1,500 47 Dow Chemical Co. 1,400 158 E. I. du Pont de Nemours & Co. 6,884 327 Eastman Chemical Co. 600 31 Great Lakes Chemical Corp. 400 11 Hercules, Inc. 700 11 Minnesota Mining & Manufacturing Co. 2,600 225 Pharmacia Corp. 8,365 418 PPG Industries, Inc. 1,200 65 Praxair, Inc. 1,000 44 Rohm & Haas Co. 1,421 51 Sigma-Aldrich Corp. 700 21 Union Carbide Corp. 900 53 --------- 1,462 --------- Construction-- 0.0% Armstrong Holdings, Inc.+ 400 8 Centex Corp. 400 10 Fluor Corp. 500 17 Kaufman & Broad Home Corp. 100 2 Masco Corp. 3,000 67 Owens Corning 300 5 Pulte Corp. 200 4 Sherwin-Williams Co. 1,100 27 Schwab MarketTrack Balanced Portfolio Schedule of Investments (continued) April 30, 2000 (Unaudited) The Stanley Works 600 18 Vulcan Materials Co. 700 31 --------- 189 ---------
40
Number Value of Shares (000s) --------- --------- Consumer - Durable-- 0.0% Black & Decker Corp. 600 $ 25 Leggett & Platt, Inc. 1,300 28 Maytag Corp. 600 21 Whirlpool Corp. 500 33 --------- 107 --------- Consumer - Nondurable-- 0.1% American Greetings Corp., Class A 400 7 Darden Restaurants, Inc. 900 17 Fortune Brands, Inc. 1,000 25 Harcourt General, Inc. 500 19 Hasbro, Inc. 1,275 20 Jostens, Inc. 100 2 Mattel, Inc. 2,825 35 McDonald's Corp. 9,000 343 Newell Rubbermaid, Inc. 1,872 47 Tricon Global Restaurants, Inc.+ 1,030 35 Tupperware Corp. 200 4 Wendy's International, Inc. 800 18 --------- 572 --------- Containers-- 0.0% Ball Corp. 100 3 Bemis Co., Inc. 300 11 Crown Cork & Seal Co., Inc. 900 15 Owens-Illinois, Inc.+ 1,000 13 Pactiv Corp.+ 1,000 8 Sealed Air Corp.+ 621 35 --------- 85 --------- Electronics-- 2.2% ADC Telecommunications, Inc.+ 2,000 121 Advanced Micro Devices, Inc.+ 1,020 89 Altera Corp.+ 1,073 110 Analog Devices, Inc.+ 2,300 177 Andrew Corp.+ 325 10 Applied Materials, Inc.+ 5,000 509 Conexant Systems, Inc.+ 1,300 78 Intel Corp. 21,900 2,777 ITT Industries, Inc. 600 19 KLA-Tencor Corp.+ 1,200 90 Linear Technology Corp. 2,000 114 LSI Logic Corp.+ 2,000 125 Number Value of Shares (000s) --------- --------- Lucent Technologies, Inc. 20,905 $ 1,300 Micron Technology, Inc.+ 1,800 251 Molex, Inc. 1,250 69 Motorola, Inc. 4,690 558 National Semiconductor Corp.+ 1,100 67 Nextel Communications, Inc., Class A+ 2,400 263 Nortel Networks Corp. 9,520 1,078 PE Corp.-PE Biosystems Group 1,400 84 PerkinElmer, Inc. 300 16 QUALCOMM, Inc.+ 4,800 520 Scientific-Atlanta, Inc. 1,000 65 Solectron Corp.+ 3,800 178 Tektronix, Inc. 250 14 Tellabs, Inc.+ 2,700 148 Teradyne, Inc.+ 1,100 121 Texas Instruments, Inc. 5,300 863 Thermo Electron Corp.+ 900 17 Thomas & Betts Corp. 381 12 Xilinx, Inc.+ 2,100 154 --------- 9,997 --------- Energy - Raw Materials-- 0.1% Anadarko Petroleum Corp. 800 35 Apache Corp. 800 39 Baker Hughes, Inc. 2,250 72 Burlington Resources, Inc. 1,410 55 Eastern Enterprises 100 6 Halliburton Co. 2,974 131 McDermott International, Inc. 200 2 Occidental Petroleum Corp. 2,400 51 Rowan Cos., Inc.+ 600 17 Schlumberger Ltd. 3,600 276 --------- 684 --------- Food & Agriculture-- 0.5% Archer-Daniels Midland Co. 4,034 40 Bestfoods, Inc. 1,900 95 Campbell Soup Co. 2,800 73 Coca-Cola Co. 16,200 762 Coca-Cola Enterprises, Inc. 2,700 58 ConAgra, Inc. 3,300 62 General Mills, Inc. 1,992 72 H.J. Heinz Co. 2,300 78
41 Schwab MarketTrack Balanced Portfolio Schedule of Investments (continued) April 30, 2000 (Unaudited)
Number Value of Shares (000s) --------- --------- Hershey Foods Corp. 1,000 $ 45 Kellogg Co. 2,700 66 Nabisco Group Holdings Corp. 2,200 28 PepsiCo, Inc. 9,700 356 Quaker Oats Co. 900 59 Ralston-Ralston Purina Group 2,100 37 Sara Lee Corp. 6,000 90 SUPERVALU, Inc. 900 19 SYSCO Corp. 2,200 83 Unilever NV 3,839 175 Wm. Wrigley Jr. Co. 800 58 --------- 2,256 --------- Gold-- 0.0% Barrick Gold Corp. 2,600 44 Homestake Mining Co. 1,700 10 Newmont Mining Corp. 1,129 26 Placer Dome, Inc. 2,200 18 --------- 98 --------- Healthcare / Drugs & Medicine-- 1.7% Abbott Laboratories 10,200 392 Aetna, Inc. 1,034 60 Allergan, Inc. 900 53 ALZA Corp.+ 700 31 American Home Products Corp. 8,700 489 Amgen, Inc.+ 6,800 381 Bausch & Lomb, Inc. 400 24 Baxter International, Inc. 1,900 124 Becton, Dickinson & Co. 1,800 46 Biogen, Inc.+ 1,000 59 Biomet, Inc. 700 25 Boston Scientific Corp.+ 2,774 73 Bristol-Myers Squibb Co. 13,000 682 C.R. Bard, Inc. 300 13 Cardinal Health, Inc. 1,850 102 Columbia / HCA Healthcare Corp. 3,700 105 Eli Lilly & Co. 7,200 557 Guidant Corp.+ 2,000 115 HealthSouth Corp.+ 2,776 22 Johnson & Johnson 9,100 751 Mallinckrodt, Inc. 400 11 Manor Care, Inc.+ 700 8 McKesson HBOC, Inc. 1,773 30 Medtronic, Inc. 7,800 405 Merck & Co., Inc. 15,300 1,063 Number Value of Shares (000s) --------- --------- Pfizer, Inc. 25,400 $ 1,070 Quintiles Transnational Corp.+ 800 11 Schering-Plough Corp. 9,800 395 St. Jude Medical, Inc.+ 430 13 Tenet Healthcare Corp.+ 2,100 54 UnitedHealth Group, Inc. 1,100 73 Warner-Lambert Co. 5,700 649 Watson Pharmaceuticals, Inc.+ 600 27 Wellpoint Health Networks, Inc.+ 500 37 --------- 7,950 --------- Household Products-- 0.3% Alberto-Culver Co., Class B 400 9 Avon Products, Inc. 1,500 62 Clorox Co. 1,600 59 Colgate-Palmolive Co. 3,900 223 Gillette Co. 7,100 263 International Flavors & Fragrances, Inc. 800 28 Procter & Gamble Co. 8,700 519 --------- 1,163 --------- Insurance-- 0.5% AFLAC, Inc. 1,800 88 Allstate Corp. 5,500 130 American General Corp. 1,710 96 American International Group, Inc. 10,175 1,116 Aon Corp. 1,725 47 Chubb Corp. 1,100 70 CIGNA Corp. 1,100 88 Cincinnati Financial Corp. 1,200 48 Conseco, Inc. 2,171 12 Hartford Financial Services Group, Inc. 1,400 73 Jefferson-Pilot Corp. 700 47 Lincoln National Corp. 1,300 45 Loew's Corp. 700 39 Marsh & McLennan Cos., Inc. 1,800 177 MBIA, Inc. 700 35 MGIC Investment Corp. 700 33 Progressive Corp. 500 33 SAFECO Corp. 800 18 St. Paul Cos., Inc. 1,424 51 Torchmark Corp. 800 20 UnumProvident Corp. 1,657 28 --------- 2,294 ---------
42
Number Value of Shares (000s) --------- --------- Media-- 0.7% CBS Corp.+ 5,086 $ 299 Clear Channel Communications, Inc.+ 2,200 158 Comcast Corp., Class A+ 6,100 244 Dow Jones & Co., Inc. 600 39 Gannett Co., Inc. 1,900 121 Knight-Ridder, Inc. 600 29 McGraw-Hill Cos., Inc. 1,400 73 MediaOne Group, Inc.+ 4,100 310 Meredith Corp. 300 8 New York Times Co., Class A 1,100 45 R.R. Donnelley & Sons Co. 800 17 Seagram Co. Ltd. 2,800 151 Time Warner, Inc. 8,500 764 Tribune Co. 1,600 62 Viacom, Inc., Class B+ 4,600 250 Walt Disney Co. 13,717 594 --------- 3,164 --------- Miscellaneous Finance-- 0.9% American Express Co. 2,900 435 Associates First Capital Corp. 4,798 106 Bear Stearns Cos., Inc. 802 34 Capital One Financial Corp. 1,300 57 Charles Schwab Corp. 5,450 243 Citigroup, Inc. 22,094 1,313 Countrywide Credit Industries, Inc. 800 22 Fannie Mae 6,800 410 Franklin Resources, Inc. 1,700 55 Freddie Mac 4,700 216 Golden West Financial Corp. 1,100 38 Household International, Inc. 3,033 127 Lehman Brothers Holdings, Inc. 800 66 MBNA Corp. 5,212 138 Merrill Lynch & Co., Inc. 2,400 245 Morgan Stanley Dean Witter Discover & Co. 7,310 561 Paine Webber Group, Inc. 1,000 44 Sabre Group Holdings, Inc.+ 922 32 SLM Holding Corp. 1,000 31 T. Rowe Price Associates, Inc. 800 30 Washington Mutual, Inc. 3,816 98 --------- 4,301 --------- Number Value of Shares (000s) --------- --------- Non-Ferrous Metals-- 0.1% Alcan Aluminum Ltd. 1,509 $ 49 Alcoa, Inc. 2,400 156 Engelhard Corp. 800 14 Freeport-McMoRan Copper & Gold, Inc., Class B+ 1,100 11 Inco Ltd.+ 1,300 20 Phelps Dodge Corp. 540 25 Reynolds Metals Co. 400 27 --------- 302 --------- Oil - Domestic-- 0.1% Amerada Hess Corp. 600 38 Ashland, Inc. 500 17 Conoco, Inc., Class B 4,200 104 Kerr-McGee Corp. 621 32 Phillips Petroleum Co. 1,700 81 Sunoco, Inc. 600 18 Tosco Corp. 1,000 32 Transocean Sedco Forex, Inc. 1,416 67 Union Pacific Resources Group, Inc. 1,562 30 Unocal Corp. 1,600 52 USX-Marathon Group, Inc. 2,100 49 --------- 520 --------- Oil - International-- 0.7% Chevron Corp. 4,300 366 Exxon Mobil Corp. 22,660 1,760 Royal Dutch Petroleum Co.-- Sponsored ADR 14,200 815 Texaco, Inc. 3,630 180 --------- 3,121 --------- Optical & Photo-- 0.1% Corning, Inc. 1,700 336 Eastman Kodak Co. 2,000 112 --------- 448 --------- Paper & Forest Products-- 0.1% Boise Cascade Corp. 400 13 Champion International Corp. 600 39 Fort James Corp. 1,500 36 Georgia-Pacific Group 1,100 40 International Paper Co. 2,742 101
43 Schwab MarketTrack Balanced Portfolio Schedule of Investments (continued) April 30, 2000 (Unaudited)
Number Value of Shares (000s) --------- --------- Kimberly-Clark Corp. 3,580 $ 208 Louisiana-Pacific Corp. 700 9 Mead Corp. 600 21 Potlatch Corp. 100 4 Temple-Inland, Inc. 400 20 Westvaco Corp. 700 22 Weyerhaeuser Co. 1,600 85 Willamette Industries, Inc. 700 27 --------- 625 --------- Producer Goods & Manufacturing-- 1.0% Avery Dennison Corp. 700 46 Briggs & Stratton Corp. 100 4 Caterpillar, Inc. 2,300 91 Cooper Industries, Inc. 600 21 Deere & Co. 1,500 61 Dover Corp. 1,400 71 Emerson Electric Co. 2,800 154 FMC Corp.+ 200 12 General Electric Co. 21,500 3,381 Honeywell International, Inc. 5,300 297 Illinois Tool Works, Inc. 2,000 128 Ingersoll-Rand Co. 1,100 52 Johnson Controls, Inc. 500 32 Millipore Corp. 200 14 NACCO Industries, Inc., Class A 100 4 Pall Corp. 800 18 Parker-Hannifin Corp. 700 33 Snap-On, Inc. 350 9 The Timken Co. 200 4 W.W. Grainger, Inc. 600 26 --------- 4,458 --------- Railroad & Shipping-- 0.1% Burlington Northern Santa Fe Corp. 2,900 70 CSX Corp. 1,500 31 Kansas City Southern Industries, Inc. 700 50 Norfolk Southern Corp. 2,500 44 Union Pacific Corp. 1,700 72 --------- 267 --------- Number Value of Shares (000s) --------- --------- Retail-- 1.1% Albertson's, Inc. 2,971 $ 97 AutoZone, Inc.+ 1,000 23 Bed, Bath & Beyond, Inc.+ 900 33 Best Buy Co., Inc.+ 1,400 113 Cendant Corp.+ 4,915 76 Circuit City Stores-Circuit City Group 1,400 82 Consolidated Stores Corp.+ 700 9 Costco Wholesale Corp.+ 3,000 162 CVS Corp. 2,600 113 Dillards, Inc., Class A 700 10 Dollar General Corp. 1,762 40 Federated Department Stores, Inc.+ 1,400 48 Gap, Inc. 5,662 208 Home Depot, Inc. 15,100 847 J.C. Penney Co., Inc. 1,700 23 Kmart Corp.+ 3,300 27 Kohl's Corp.+ 2,200 106 Kroger Co.+ 5,800 108 Limited, Inc. 1,344 61 Lowe's Cos., Inc. 2,500 124 May Department Stores Co. 2,100 58 Nordstrom, Inc. 900 25 Office Depot, Inc.+ 2,500 26 Rite Aid Corp. 1,800 9 Safeway, Inc.+ 3,300 146 Sears, Roebuck & Co. 2,400 88 Staples, Inc.+ 3,050 58 Tandy Corp. 1,300 74 Target Corp. 2,900 193 TJX Cos., Inc. 2,100 40 Toys `R' Us, Inc.+ 1,800 27 Wal-Mart Stores, Inc. 29,300 1,622 Walgreen Co. 6,600 186 Winn-Dixie Stores, Inc. 1,200 20 --------- 4,882 ---------
44
Number Value of Shares (000s) --------- --------- Steel 0.0% Allegheny Technologies, Inc. 492 $ 12 Bethlehem Steel Corp.+ 288 2 Nucor Corp. 600 26 USX-U.S. Steel Group, Inc. 500 13 Worthington Industries, Inc. 600 7 --------- 60 --------- Telephone-- 1.2% Alltel Corp. 2,100 140 AT&T Corp. 20,971 979 Bell Atlantic Corp. 10,272 609 BellSouth Corp. 12,500 609 CenturyTel, Inc. 900 22 Global Crossing Ltd.+ 5,150 162 GTE Corp. 6,500 440 MCI WorldCom, Inc.+ 18,819 855 SBC Communications, Inc. 22,388 981 Sprint Corp. (FON Group) 5,800 357 Sprint Corp. (PCS Group)+ 5,700 313 US West, Inc. 3,309 236 --------- 5,703 --------- Tobacco-- 0.1% Philip Morris Cos., Inc. 15,700 343 UST, Inc. 1,100 16 --------- 359 --------- Travel & Recreation-- 0.1% Brunswick Corp. 600 12 Carnival Corp. 4,100 102 Harrah's Entertainment, Inc.+ 900 19 Hilton Hotels Corp. 2,500 21 Marriott International, Inc., Class A 1,700 54 Mirage Resorts, Inc.+ 1,300 26 --------- 234 --------- Trucking & Freight-- 0.0% PACCAR, Inc. 600 29 Ryder Systems, Inc. 400 9 --------- 38 --------- Number Value of Shares (000s) --------- --------- Utilities - Electric & Gas-- 0.4% AES Corp.+ 1,400 $ 126 Ameren Corp. 900 33 American Electric Power Co., Inc. 1,300 48 Carolina Power & Light Co. 1,100 40 Central & South West Corp. 1,300 28 Cinergy Corp. 1,000 27 CMS Energy Corp. 700 13 Coastal Corp. 1,400 70 Columbia Energy Group 550 35 Consolidated Edison, Inc. 1,500 53 Constellation Energy Group, Inc. 1,000 33 Dominion Resources, Inc. 1,167 53 DTE Energy Co. 1,000 33 Duke Energy Corp. 2,426 139 Edison International 2,200 42 El Paso Energy Corp. 1,500 64 Enron Corp. 4,700 328 Entergy Corp. 1,500 38 FirstEnergy Corp. 1,500 38 Florida Progress Corp. 700 34 FPL Group, Inc. 1,300 59 GPU, Inc. 800 22 New Century Energies, Inc. 700 23 Niagara Mohawk Holdings, Inc.+ 1,200 17 NICOR, Inc. 300 10 Northern States Power Co. 1,000 22 PECO Energy Co. 1,200 50 Peoples Energy Corp. 200 6 PG&E Corp. 2,400 62 Pinnacle West Capital Corp. 600 21 PPL Corp. 1,000 24 Public Service Enterprise Group, Inc. 1,500 54 Reliant Energy, Inc. 1,924 51 Sempra Energy 1,360 25 Southern Co. 4,500 112 Texas Utilities Co. 1,922 65 Unicom Corp. 1,400 56 Williams Cos., Inc. 2,800 104 --------- 2,058 --------- Total Common Stock (Cost $42,935) 81,226 ---------
45 Schwab MarketTrack Balanced Portfolio Schedule of Investments (continued) April 30, 2000 (Unaudited)
Number Value of Shares (000s) --------- --------- Investment Funds-- 77.4% Schwab International Index Fund, Select Shares 3,549,009 $ 67,183 Schwab S&P 500 Fund, Select Shares 2,649,409 59,506 Schwab Small-Cap Index Fund, Select Shares 3,535,093 71,621 Schwab Total Bond Market Index Fund 16,861,208 159,507 --------- Total investment Funds (Cost $320,749) 357,817 --------- Short-Term Investments-- 5.0% Grand Cayman Time Deposit 5.44%*, 05/01/00 3,389,911 3,390 Schwab Value Advantage Money Fund, Investor Shares, 5.76%* 19,857,836 19,858 --------- Total Short-Term Investments (Cost $23,248) 23,248 --------- Total Investments-- 100.0% (Cost $386,932) 462,291 --------- OTHER ASSETS AND LIABILITIES, NET-- 0.0% Other assets 534 Liabilities (423) --------- 111 TOTAL Net Assets-- 100.0% $462,402 =========
See accompanying Notes to Schedules of Investments and Notes to Financial Statements. 46 Schwab MarketTrack Conservative Portfolio Schedule of Investments April 30, 2000 (Unaudited)
Number Value of Shares (000s) --------- --------- Common Stock-- 10.6% Aerospace / Defense-- 0.1% B.F. Goodrich Co. 200 $ 6 Boeing Co. 1,446 57 Crane Co. 150 4 General Dynamics Corp. 300 18 Lockheed Martin Corp. 600 15 Northrop Grumman Corp. 100 7 Raytheon Co., Class B 500 11 Rockwell International Corp. 300 12 Textron, Inc. 200 12 TRW, Inc. 200 12 United Technologies Corp. 800 50 --------- 204 --------- Air Transportation-- 0.0% AMR Corp. + 200 7 Delta Air Lines, Inc. 200 11 FedEx Corp. + 460 17 Southwest Airlines Co. 812 18 U.S. Airways Group, Inc. + 100 3 --------- 56 --------- Alcoholic Beverages-- 0.0% Adolph Coors Co., Class B 100 5 Anheuser-Busch Cos., Inc. 700 49 Brown-Forman Corp., Class B 100 5 --------- 59 --------- Apparel-- 0.0% Liz Claiborne, Inc. 100 5 Nike, Inc., Class B 400 17 Reebok International Ltd. + 100 2 Springs Industries, Inc. 100 4 VF Corp. 200 6 --------- 34 --------- Automotive Products / Motor Vehicles-- 0.2% Cooper Tire & Rubber Co. 100 1 Cummins Engine Co., Inc. 100 4 Dana Corp. 292 9 Danaher Corp. 200 11 Delphi Automotive Systems Corp. 868 17 Eaton Corp. 100 8 Number Value of Shares (000s) --------- --------- Ford Motor Co. 1,900 $ 104 General Motors Corp. 1,000 94 Genuine Parts Co. 250 7 Goodyear Tire & Rubber Co. 300 8 Harley-Davidson, Inc. 400 16 Navistar International Corp. + 100 3 --------- 282 --------- Banks-- 0.5% AmSouth Bancorp 600 9 Bank of America Corp. 2,711 133 Bank of New York Co., Inc. 1,100 45 Bank One Corp. 1,846 56 BB&T Corp. 500 13 Chase Manhattan Corp. 1,316 95 Comerica, Inc. 200 8 Fifth Third Bancorp 475 30 First Union Corp. 1,600 51 Firstar Corp. 1,518 38 Fleet Boston Financial Corp. 1,451 51 Huntington Bancshares, Inc. 385 7 J.P. Morgan & Co., Inc. 300 38 KeyCorp, Inc. 700 13 Mellon Financial Corp. 800 26 National City Corp. 1,000 17 Northern Trust Corp. 400 26 Old Kent Financial Corp. 200 6 PNC Financial Services Group 400 17 Providian Financial Corp. 200 18 Regions Financial Corp. 300 6 SouthTrust Corp. 200 5 State Street Corp. 300 29 Summit Bancorp 300 8 SunTrust Banks, Inc. 500 25 Synovus Financial Corp. 400 7 U.S. Bancorp 1,189 24 Union Planters Corp. 200 6 Wachovia Corp. 300 19 Wells Fargo & Co. 2,560 105 --------- 931 ---------
47 Schwab MarketTrack Conservative Portfolio Schedule of Investments (continued) April 30, 2000 (Unaudited)
Number Value of Shares (000s) --------- --------- Business Machines & Software-- 1.8% 3Com Corp. + 500 $ 20 Adaptec, Inc. + 200 5 Adobe Systems, Inc. 200 24 Apple Computer, Inc. + 200 25 Autodesk, Inc. 100 4 BMC Software, Inc. + 400 19 Cabletron Systems, Inc. + 300 7 Ceridian Corp. + 214 5 Cisco Systems, Inc. + 10,700 742 Compaq Computer Corp. 2,693 79 Compuware Corp. + 600 8 Comverse Technology, Inc. + 200 18 Dell Computer Corp. + 4,000 200 EMC Corp. + 1,525 212 Gateway, Inc. + 500 28 Hewlett-Packard Co. 1,600 216 International Business Machines Corp. 2,800 313 Lexmark International Group, Inc., Class A + 200 24 Microsoft Corp. + 8,100 565 NCR Corp. + 200 8 Network Appliance, Inc. + 400 30 Novell, Inc. + 500 10 Oracle Corp. + 4,300 344 Pitney Bowes, Inc. 400 16 Seagate Technology, Inc. + 376 19 Silicon Graphics, Inc. + 322 2 Sun Microsystems, Inc. + 2,500 230 Unisys Corp. + 500 12 Xerox Corp. 1,000 26 --------- 3,211 --------- Business Services-- 0.5% Allied Waste Industries, Inc. + 300 2 America Online, Inc. + 3,500 209 Automatic Data Processing, Inc. 1,000 54 Citrix Systems, Inc. + 300 18 Computer Associates International, Inc. 850 47 Computer Sciences Corp. + 258 21 Deluxe Corp. 100 3 Dun & Bradstreet Corp. 300 9 Ecolab, Inc. 200 8 Electronic Data Systems Corp. 700 48 Equifax, Inc. 200 5 First Data Corp. 700 34 Number Value of Shares (000s) --------- --------- H&R Block, Inc. 200 8 IMS Health, Inc. 500 9 Interpublic Group of Cos., Inc. 400 16 National Service Industries, Inc. 100 2 Omnicom Group, Inc. 300 27 Parametric Technology Corp. + 500 4 Paychex, Inc. 350 18 PeopleSoft, Inc. + 400 6 Tyco International Ltd. 2,644 121 VERITAS Software Corp. + 600 64 Waste Management, Inc. 1,007 16 Yahoo!, Inc. + 800 104 Young & Rubicam, Inc. 100 6 --------- 859 --------- Chemical-- 0.2% Air Products & Chemicals, Inc. 400 12 Dow Chemical Co. 300 34 E. I. du Pont de Nemours & Co. 1,625 77 Eastman Chemical Co. 100 5 Great Lakes Chemical Corp. 100 3 Hercules, Inc. 200 3 Minnesota Mining & Manufacturing Co. 600 52 Pharmacia Corp. 1,952 97 PPG Industries, Inc. 300 16 Praxair, Inc. 300 13 Rohm & Haas Co. 373 13 Sigma-Aldrich Corp. 200 6 Union Carbide Corp. 200 12 W.R. Grace & Co. + 100 1 --------- 344 --------- Construction-- 0.0% Armstrong Holdings, Inc.+ 100 2 Centex Corp. 100 2 Fluor Corp. 100 3 Masco Corp. 700 16 Owens Corning 100 2 Pulte Corp. 100 2
48
Number Value of Shares (000s) --------- --------- Sherwin-Williams Co. 300 $ 7 The Stanley Works 100 3 Vulcan Materials Co. 200 9 --------- 46 --------- Consumer - Durable-- 0.0% Black & Decker Corp. 100 4 Leggett & Platt, Inc. 300 6 Maytag Corp. 100 3 Whirlpool Corp. 100 6 --------- 19 --------- Consumer - Nondurable-- 0.1% American Greetings Corp., Class A 100 2 Darden Restaurants, Inc. 200 4 Fortune Brands, Inc. 300 7 Harcourt General, Inc. 100 4 Hasbro, Inc. 325 5 Jostens, Inc. 100 2 Mattel, Inc. 650 8 McDonald's Corp. 2,100 80 Newell Rubbermaid, Inc. 436 11 Tricon Global Restaurants, Inc. + 240 8 Tupperware Corp. 100 2 Wendy's International, Inc. 200 4 --------- 137 --------- Containers-- 0.0% Bemis Co., Inc. 100 4 Crown Cork & Seal Co., Inc. 200 3 Owens-Illinois, Inc. + 300 4 Pactiv Corp. + 300 2 Sealed Air Corp. + 153 8 --------- 21 --------- Electronics-- 1.3% ADC Telecommunications, Inc. + 400 24 Advanced Micro Devices, Inc. + 280 25 Altera Corp. + 255 26 Analog Devices, Inc. + 600 46 Applied Materials, Inc. + 1,200 122 Conexant Systems, Inc. + 300 18 Intel Corp. 5,200 659 ITT Industries, Inc. 100 3 KLA-Tencor Corp. + 300 22 Number Value of Shares (000s) --------- --------- Linear Technology Corp. 500 $ 29 LSI Logic Corp. + 400 25 Lucent Technologies, Inc. 4,919 306 Micron Technology, Inc. + 400 56 Molex, Inc. 250 14 Motorola, Inc. 1,072 128 National Semiconductor Corp. + 300 18 Nextel Communications, Inc., Class A + 500 55 Nortel Networks Corp. 2,260 256 PE Corp.-PE Biosystems Group 300 18 QUALCOMM, Inc. + 1,100 119 Scientific-Atlanta, Inc. 200 13 Solectron Corp. + 1,000 47 Tellabs, Inc. + 600 33 Teradyne, Inc. + 200 22 Texas Instruments, Inc. 1,200 195 Thermo Electron Corp. + 200 4 Xilinx, Inc. + 500 37 --------- 2,320 --------- Energy - Raw Materials-- 0.1% Anadarko Petroleum Corp. 200 9 Apache Corp. 200 10 Baker Hughes, Inc. 470 15 Burlington Resources, Inc. 300 12 Eastern Enterprises 100 6 Halliburton Co. 714 32 McDermott International, Inc. 100 1 Occidental Petroleum Corp. 600 13 Rowan Cos., Inc. + 100 3 Schlumberger Ltd. 900 69 --------- 170 --------- Food & Agriculture-- 0.3% Archer-Daniels Midland Co. 920 9 Bestfoods, Inc. 400 20 Campbell Soup Co. 700 18 Coca-Cola Co. 3,900 184 Coca-Cola Enterprises, Inc. 700 15 ConAgra, Inc. 800 15 General Mills, Inc. 432 16 H.J. Heinz Co. 600 20 Hershey Foods Corp. 300 14 Kellogg Co. 600 15
49 Schwab MarketTrack Conservative Portfolio Schedule of Investments (continued) April 30, 2000 (Unaudited)
Number Value of Shares (000s) --------- --------- Nabisco Group Holdings Corp. 500 6 PepsiCo, Inc. 2,300 84 Quaker Oats Co. 200 13 Ralston-Ralston Purina Group 500 9 Sara Lee Corp. 1,400 21 SUPERVALU, Inc. 200 4 SYSCO Corp. 500 19 Unilever NV 892 41 Wm. Wrigley Jr. Co. 200 14 --------- 537 --------- Gold-- 0.0% Barrick Gold Corp. 600 10 Homestake Mining Co. 400 2 Newmont Mining Corp. 243 6 Placer Dome, Inc. 600 5 --------- 23 --------- Healthcare / Drugs & Medicine-- 1.0% Abbott Laboratories 2,400 92 Aetna, Inc. 222 13 Allergan, Inc. 200 12 ALZA Corp. + 200 9 American Home Products Corp. 2,100 118 Amgen, Inc. + 1,600 90 Bausch & Lomb, Inc. 100 6 Baxter International, Inc. 500 33 Becton, Dickinson & Co. 400 10 Biogen, Inc. + 200 12 Biomet, Inc. 200 7 Boston Scientific Corp. + 634 17 Bristol-Myers Squibb Co. 3,100 163 C.R. Bard, Inc. 100 4 Cardinal Health, Inc. 400 22 Columbia / HCA Healthcare Corp. 900 26 Eli Lilly & Co. 1,700 131 Guidant Corp. + 500 29 HealthSouth Corp. + 700 6 Johnson & Johnson 2,200 181 Mallinckrodt, Inc. 100 3 Manor Care, Inc. + 200 2 McKesson HBOC, Inc. 422 7 Medtronic, Inc. 1,900 99 Merck & Co., Inc. 3,700 257 Pfizer, Inc. 6,100 257 Number Value of Shares (000s) --------- --------- Quintiles Transnational Corp. + 200 $ 3 Schering-Plough Corp. 2,300 93 St. Jude Medical, Inc. + 100 3 Tenet Healthcare Corp. + 500 13 UnitedHealth Group, Inc. 200 13 Warner-Lambert Co. 1,300 148 Watson Pharmaceuticals, Inc. + 100 4 Wellpoint Health Networks, Inc. + 100 7 --------- 1,890 --------- Household Products-- 0.2% Alberto-Culver Co., Class B 100 2 Avon Products, Inc. 400 17 Clorox Co. 300 11 Colgate-Palmolive Co. 900 51 Gillette Co. 1,700 63 International Flavors & Fragrances, Inc. 200 7 Procter & Gamble Co. 2,100 125 --------- 276 --------- Insurance-- 0.3% AFLAC, Inc. 400 20 Allstate Corp. 1,300 31 American General Corp. 400 22 American International Group, Inc. 2,411 264 Aon Corp. 375 10 Chubb Corp. 300 19 CIGNA Corp. 300 24 Cincinnati Financial Corp. 300 12 Conseco, Inc. 515 3 Hartford Financial Services Group, Inc. 300 16 Jefferson-Pilot Corp. 150 10 Lincoln National Corp. 300 10 Loew's Corp. 200 11 Marsh & McLennan Cos., Inc. 450 44 MBIA, Inc. 200 10 MGIC Investment Corp. 200 10 Progressive Corp. 100 7 SAFECO Corp. 200 4 St. Paul Cos., Inc. 356 13 Torchmark Corp. 200 5 UnumProvident Corp. 346 6 --------- 551 ---------
50
Number Value of Shares (000s) --------- --------- Media-- 0.4% CBS Corp. + 1,162 $ 68 Clear Channel Communications, Inc. + 500 36 Comcast Corp., Class A + 1,500 60 Dow Jones & Co., Inc. 100 6 Gannett Co., Inc. 400 26 Knight-Ridder, Inc. 100 5 McGraw-Hill Cos., Inc. 300 16 MediaOne Group, Inc. + 1,000 76 Meredith Corp. 100 3 New York Times Co., Class A 300 12 R.R. Donnelley & Sons Co. 200 4 Seagram Co. Ltd. 700 38 Time Warner, Inc. 2,000 180 Tribune Co. 400 16 Viacom, Inc., Class B + 1,100 60 Walt Disney Co. 3,227 140 --------- 746 --------- Miscellaneous Finance-- 0.6% American Express Co. 700 105 Associates First Capital Corp. 1,190 26 Bear Stearns Cos., Inc. 220 9 Capital One Financial Corp. 300 13 Charles Schwab Corp. 1,300 58 Citigroup, Inc. 5,283 314 Countrywide Credit Industries, Inc. 200 6 Fannie Mae 1,600 96 Franklin Resources, Inc. 400 13 Freddie Mac 1,100 51 Golden West Financial Corp. 300 10 Household International, Inc. 706 29 Lehman Brothers Holdings, Inc. 200 16 MBNA Corp. 1,305 35 Merrill Lynch & Co., Inc. 600 61 Morgan Stanley Dean Witter Discover & Co. 1,730 133 Paine Webber Group, Inc. 200 9 Sabre Group Holdings, Inc. + 244 9 SLM Holding Corp. 300 9 T. Rowe Price Associates, Inc. 200 8 Washington Mutual, Inc. 921 24 --------- 1,034 --------- Number Value of Shares (000s) --------- --------- Non-Ferrous Metals-- 0.0% Alcan Aluminum Ltd. 302 $ 10 Alcoa, Inc. 600 39 Engelhard Corp. 200 3 Freeport-McMoRan Copper & Gold, Inc., Class B + 300 3 Inco Ltd. + 300 5 Phelps Dodge Corp. 135 6 Reynolds Metals Co. 100 7 --------- 73 --------- Oil - Domestic-- 0.1% Amerada Hess Corp. 100 6 Ashland, Inc. 100 3 Conoco, Inc., Class B 1,000 25 Kerr-McGee Corp. 136 7 Phillips Petroleum Co. 400 19 Sunoco, Inc. 100 3 Tosco Corp. 200 6 Transocean Sedco Forex, Inc. 374 18 Union Pacific Resources Group, Inc. 369 7 Unocal Corp. 400 13 USX-Marathon Group, Inc. 500 12 --------- 119 --------- Oil - International-- 0.4% Chevron Corp. 1,000 85 Exxon Mobil Corp. 5,284 410 Royal Dutch Petroleum Co.-- Sponsored ADR 3,400 195 Texaco, Inc. 900 45 --------- 735 --------- Optical & Photo-- 0.1% Corning, Inc. 400 79 Eastman Kodak Co. 500 28 --------- 107 --------- Paper & Forest Products-- 0.1% Boise Cascade Corp. 100 3 Champion International Corp. 200 13 Fort James Corp. 300 7 Georgia-Pacific Group 300 11
51 Schwab MarketTrack Conservative Portfolio Schedule of Investments (continued) April 30, 2000 (Unaudited)
Number Value of Shares (000s) --------- --------- International Paper Co. 648 $ 24 Kimberly-Clark Corp. 856 50 Louisiana-Pacific Corp. 100 1 Mead Corp. 200 7 Temple-Inland, Inc. 100 5 Westvaco Corp. 200 6 Weyerhaeuser Co. 400 21 Willamette Industries, Inc. 100 4 --------- 152 --------- Producer Goods & Manufacturing-- 0.6% Avery Dennison Corp. 200 13 Caterpillar, Inc. 600 24 Cooper Industries, Inc. 100 3 Deere & Co. 400 16 Dover Corp. 300 15 Emerson Electric Co. 700 38 General Electric Co. 5,100 802 Honeywell International, Inc. 1,275 71 Illinois Tool Works, Inc. 500 32 Ingersoll-Rand Co. 250 12 Johnson Controls, Inc. 100 6 Milacron, Inc. 100 2 Millipore Corp. 100 7 Pall Corp. 200 4 Parker-Hannifin Corp. 150 7 Snap-On, Inc. 100 3 W.W. Grainger, Inc. 100 4 --------- 1,059 --------- Railroad & Shipping-- 0.0% Burlington Northern Santa Fe Corp. 700 17 CSX Corp. 300 6 Kansas City Southern Industries, Inc. 200 14 Norfolk Southern Corp. 600 11 Union Pacific Corp. 400 17 --------- 65 --------- Number Value of Shares (000s) --------- --------- Retail-- 0.6% Albertson's, Inc. 652 21 AutoZone, Inc. + 200 5 Bed, Bath & Beyond, Inc. + 200 7 Best Buy Co., Inc. + 300 24 Cendant Corp. + 1,159 18 Circuit City Stores-Circuit City Group 300 18 Consolidated Stores Corp. + 200 2 Costco Wholesale Corp. + 700 38 CVS Corp. 600 26 Dillards, Inc., Class A 200 3 Dollar General Corp. 412 9 Federated Department Stores, Inc. + 300 10 Gap, Inc. 1,362 50 Great Atlantic & Pacific Tea Co., Inc. 100 2 Home Depot, Inc. 3,600 202 J.C. Penney Co., Inc. 400 6 Kmart Corp. + 700 6 Kohl's Corp. + 600 29 Kroger Co. + 1,400 26 Limited, Inc. 309 14 Longs Drug Stores, Inc. 100 2 Lowe's Cos., Inc. 600 30 May Department Stores Co. 500 14 Nordstrom, Inc. 200 6 Office Depot, Inc. + 600 6 Rite Aid Corp. 400 2 Safeway, Inc. + 800 35 Sears, Roebuck & Co. 600 22 Staples, Inc. + 750 14 Tandy Corp. 300 17 Target Corp. 700 47 TJX Cos., Inc. 500 10 Toys `R' Us, Inc. + 500 8 Wal-Mart Stores, Inc. 7,000 388 Walgreen Co. 1,600 45 Winn-Dixie Stores, Inc. 300 5 --------- 1,167 ---------
52
Number Value of Shares (000s) --------- --------- Steel 0.0% Allegheny Technologies, Inc. 146 $ 4 Bethlehem Steel Corp. + 288 2 Nucor Corp. 100 4 USX-U.S. Steel Group, Inc. 100 2 Worthington Industries, Inc. 100 1 --------- 13 --------- Telephone-- 0.7% Alltel Corp. 500 33 AT&T Corp. 5,030 235 Bell Atlantic Corp. 2,458 146 BellSouth Corp. 3,000 146 CenturyTel, Inc. 250 6 Global Crossing Ltd. + 1,210 38 GTE Corp. 1,500 102 MCI WorldCom, Inc. + 4,525 206 SBC Communications, Inc. 5,375 235 Sprint Corp. (FON Group) 1,300 80 Sprint Corp. (PCS Group) + 1,300 71 US West, Inc. 824 59 --------- 1,357 --------- Tobacco-- 0.1% Philip Morris Cos., Inc. 3,700 81 UST, Inc. 300 4 --------- 85 --------- Travel & Recreation-- 0.0% Brunswick Corp. 100 2 Carnival Corp. 1,000 25 Harrah's Entertainment, Inc. + 200 4 Hilton Hotels Corp. 600 5 Marriott International, Inc., Class A 400 13 Mirage Resorts, Inc. + 300 6 --------- 55 --------- Trucking & Freight-- 0.0% PACCAR, Inc. 100 5 Ryder Systems, Inc. 100 2 --------- 7 --------- Number Value of Shares (000s) --------- --------- Utilities - Electric & Gas-- 0.3% AES Corp. + 300 $ 27 Ameren Corp. 200 7 American Electric Power Co., Inc. 300 11 Carolina Power & Light Co. 300 11 Central & South West Corp. 300 7 Cinergy Corp. 300 8 CMS Energy Corp. 200 4 Coastal Corp. 300 15 Columbia Energy Group 150 9 Consolidated Edison, Inc. 300 11 Constellation Energy Group, Inc. 200 7 Dominion Resources, Inc. 315 14 DTE Energy Co. 200 7 Duke Energy Corp. 604 35 Edison International 500 10 El Paso Energy Corp. 400 17 Enron Corp. 1,100 77 Entergy Corp. 400 10 FirstEnergy Corp. 400 10 Florida Progress Corp. 200 10 FPL Group, Inc. 300 14 GPU, Inc. 200 6 New Century Energies, Inc. 200 7 Niagara Mohawk Holdings, Inc. + 300 4 NICOR, Inc. 100 3 Northern States Power Co. 200 4 PECO Energy Co. 300 13 Peoples Energy Corp. 100 3 PG&E Corp. 600 16 Pinnacle West Capital Corp. 100 4 PPL Corp. 200 5 Public Service Enterprise Group, Inc. 300 11 Reliant Energy, Inc. 474 13 Sempra Energy 297 6 Southern Co. 1,100 27 Texas Utilities Co. 400 13 Unicom Corp. 300 12 Williams Cos., Inc. 700 26 --------- 494 --------- Total Common Stock (Cost $11,481) 19,238 ---------
53 Schwab MarketTrack Conservative Portfolio Schedule of Investments (continued) April 30, 2000 (Unaudited)
Number Value of Shares (000s) --------- --------- investment Funds-- 84.3% Schwab International Index Fund, Select Shares 915,909 $ 17,338 Schwab S&P 500 Fund, Select Shares 803,936 18,056 Schwab Small-Cap Index Fund, Select Shares 936,152 18,966 Schwab Total Bond Market Index Fund 10,426,160 98,631 --------- Total investment Funds (Cost $145,465) 152,991 --------- Number Value of Shares (000s) --------- --------- Short-Term Investments-- 5.1% Grand Cayman Time Deposit 5.44%*, 05/01/00 1,797,774 $ 1,798 Schwab Value Advantage Money Fund, Investor Shares, 5.76%* 7,389,317 7,389 --------- Total Short-Term Investments (Cost $9,187) 9,187 --------- Total Investments-- 99.9% (Cost $166,133) 181,416 --------- OTHER ASSETS AND LIABILITIES, NET-- 0.1% Other assets 187 Liabilities (34) --------- 153 --------- TOTAL Net Assets-- 100.0% $ 181,569 ---------
Notes to Schedules of Investments April 30, 2000 (Unaudited) + Non-income producing security. * Interest rates represent the yield on report date. ADR--American Depository Receipt. (a) Yields shown are effective yields at the time of purchases. (b) These securities, or a portion thereof, are being used to collateralize open futures contracts. See accompanying Notes to Financial Statements. 54 Statements of Assets and Liabilities (in thousands) April 30, 2000 (Unaudited)
Schwab MarketTrack Portfolios(TM) ----------------------------------------------------------------- All Equity Growth Balanced Conservative ------------- ------------- ------------- ------------- Assets Investments, at value (Cost: $290,105, $412,989, $386,932, and $166,133, respectively) $329,763 $527,804 $462,291 $181,416 Receivables: Fund shares sold 558 637 251 37 Dividends -- 210 251 121 Interest 1 2 2 1 Dividend tax reclaim -- 10 4 -- Prepaid expenses 23 6 26 28 --------- --------- --------- --------- Total assets 330,345 528,669 462,818 181,603 --------- --------- --------- --------- Liabilities Payables: Investments purchased 1,100 543 276 6 Fund shares redeemed -- 19 18 -- Variation margin 7 -- -- -- Investment advisory and administration fees 11 16 16 5 Transfer agency and shareholder service fees 9 14 13 5 Accrued expenses 99 90 100 18 --------- --------- --------- --------- Total liabilities 1,226 682 423 34 --------- --------- --------- --------- Net assets applicable to outstanding shares $329,119 $527,987 $462,402 $181,569 --------- --------- --------- --------- Net assets consist of: Paid-in capital $290,042 $410,283 $382,468 $165,346 Undistributed/(distributions in excess of) net investment income (530) 1,548 3,214 519 Accumulated net realized gain on investments sold and futures contracts 12 1,341 1,361 421 Net unrealized appreciation on investments and futures contracts 39,595 114,815 75,359 15,283 --------- --------- --------- --------- $329,119 $527,987 $462,402 $181,569 --------- --------- --------- --------- Pricing of shares: Outstanding shares, $0.00001 par value (unlimited shares authorized) 26,574 30,452 30,015 13,913 Net asset value, offering and redemption price per share $12.39 $17.34 $15.41 $13.05 See accompanying Notes to Financial Statements. 55
Statements of Operations (in thousands) For the six months ended April 30, 2000 (Unaudited)
Schwab MarketTrack Portfolios(TM) ----------------------------------------------------------------- All Equity Growth Balanced Conservative ------------- ------------- ------------- ------------- Investment income: Dividends (net of foreign tax withheld of $0, $1, $1 and $0, respectively) $ 1,902 $ 5,486 $ 7,010 $ 3,709 Interest 62 124 94 50 --------- --------- --------- --------- Total investment income 1,964 5,610 7,104 3,759 --------- --------- --------- --------- Expenses: Investment advisory and administration fees 715 1,324 1,171 476 Transfer agency and shareholder service fees 331 614 542 221 Custodian fees 16 31 30 6 Portfolio accounting fees 18 35 33 16 Registration fees 28 51 24 5 Professional fees 7 11 10 7 Shareholder reports 56 21 34 2 Trustees' fees 4 7 6 6 Proxy fees 10 16 12 5 Other expenses 3 11 11 8 --------- --------- --------- --------- 1,188 2,121 1,873 752 Less: expenses reduced (See Note 4) (383) (632) (560) (218) --------- --------- --------- --------- Net expenses incurred by fund 805 1,489 1,313 534 --------- --------- --------- --------- Net investment income 1,159 4,121 5,791 3,225 --------- --------- --------- --------- Net realized gain on investments and futures contracts: Net realized gain on investments sold 176 2,021 2,199 724 Net realized gain received from underlying funds 268 185 123 42 Net realized gain on futures contracts 39 -- -- -- - Net realized gain on investments and futures contracts 483 2,206 2,322 766 --------- --------- --------- --------- Change in net unrealized appreciation (depreciation) on investments and futures contracts: Net unrealized appreciation on investments 17,974 28,585 17,416 3,840 Net unrealized depreciation on futures contracts (94) -- -- -- --------- --------- --------- --------- Net unrealized appreciation on investments and futures contracts 17,880 28,585 17,416 3,840 --------- --------- --------- --------- Net gain on investments 18,363 30,791 19,738 4,606 --------- --------- --------- --------- Increase in net assets resulting from operations $19,522 $34,912 $25,529 $ 7,831 ========= ========= ========= ========= See accompanying Notes to Financial Statements.
56 Statements of Changes in Net Assets (in thousands)
Schwab MarketTrack Portfolios(TM) ----------------------------------------------------------------- All Equity Growth Balanced ------------------------- ------------------------- ------------------------- Six months Six months Six months ended Year ended Year ended Year 04/30/00 ended 04/30/00 ended 04/30/00 ended (Unaudited) 10/31/99 (Unaudited) 10/31/99 (Unaudited) 10/31/99 ----------- ----------- ----------- ----------- ----------- ----------- Operations: Net investment income $ 1,159 $ 194 $ 4,121 $ 4,272 $ 5,791 $ 7,538 Net realized gain (loss) on investments and futures contracts 215 192 2,021 (196) 2,199 (252) Net realized gain received from underlying funds 268 1,703 185 3,267 123 2,503 Net unrealized appreciation on investments and futures contracts 17,880 29,520 28,585 51,554 17,416 32,821 -------- ------- -------- -------- ------- ------- Increase in net assets resulting from operations 19,522 31,609 34,912 58,897 25,529 42,610 -------- ------- -------- -------- ------- ------- Dividends and distributions: Dividends to shareholders from net investment income (517) (22) (5,063) (4,540) (7,749) (6,924) Dividends in excess of net investment income (530) (642) -- -- -- -- Ditributions to shareholders from net capital gains (1,962) -- (3,458) (557) (2,431) (1,483) -------- ------- -------- -------- ------- ------- Total dividends and distributions to shareholders (3,009) (664) (8,521) (5,097) (10,180) (8,407) -------- ------- -------- -------- ------- ------- Capital share transactions: Proceeds from shares sold 155,857 114,034 157,447 195,487 112,419 191,766 Net asset value of shares issued in reinvestment of dividends 2,943 642 8,332 4,951 9,811 8,091 Payments for shares redeemed (49,078) (60,146) (91,842) (102,207) (78,448) (94,693) -------- ------- -------- -------- ------- ------- Increase in net assets from capital share transactions 109,722 54,530 73,937 98,231 43,782 105,164 -------- ------- -------- -------- ------- ------- Total increase in net assets 126,235 85,475 100,328 152,031 59,131 139,367 Net assets: Beginning of period 202,884 117,409 427,659 275,628 403,271 263,904 -------- ------- -------- -------- ------- ------- End of period (including undistributed net investment income (loss) of $(530), $(642), $1,548, $2,490, $3,214, $5,172, $519, and $497, respectively) $329,119 $202,884 $527,987 $427,659 $462,402 $403,271 -------- ------- -------- -------- ------- ------- Number of fund shares: Sold 12,640 10,710 9,191 12,686 7,344 13,521 Reinvested 238 64 483 335 643 589 Redeemed (3,977) (5,750) (5,339) (6,651) (5,123) (6,672) -------- ------- -------- -------- ------- ------- Net increase in shares outstanding 8,901 5,024 4,335 6,370 2,864 7,438 Shares outstanding: Beginning of period 17,673 12,649 26,117 19,747 27,151 19,713 -------- ------- -------- -------- ------- ------- End of period 26,574 17,673 30,452 26,117 30,015 27,151 -------- ------- -------- -------- ------- ------- See accompanying Notes to Financial Statements.
Schwab MarketTrack Portfolios(TM) ---------------------------------------------------- Conservative ------------------------- Six months ended Year 04/30/00 ended (Unaudited) 10/31/99 ----------- ----------- Operations: Net investment income $ 3,225 $ 4,714 Net realized gain (loss) on investments and futures contracts 724 (521) Net realized gain received from underlying funds 42 800 Net unrealized appreciation on investments and futures contracts 3,840 7,022 ------- -------- Increase in net assets resulting from operations 7,831 12,015 ------- -------- Dividends and distributions: Dividends to shareholders from net investment income (3,203) (4,511) Dividends in excess of net investment income -- -- Ditributions to shareholders from net capital gains (367) (661) ------- -------- Total dividends and distributions to shareholders (3,570) (5,172) ------- -------- Capital share transactions: Proceeds from shares sold 43,343 89,099 Net asset value of shares issued in reinvestment of dividends 3,322 4,821 Payments for shares redeemed (36,759) (48,259) ------- -------- Increase in net assets from capital share transactions 9,906 45,661 ------- -------- Total increase in net assets 14,167 52,504 Net assets: Beginning of period 167,402 114,898 ------- -------- End of period (including undistributed net investment income (loss) of $(530), $(642), $1,548, $2,490, $3,214, $5,172, $519, and $497, respectively) $181,569 $167,402 ------- -------- Number of fund shares: Sold 3,335 7,124 Reinvested 253 389 Redeemed (2,823) (3,854) ------- -------- Net increase in shares outstanding 765 3,659 Shares outstanding: Beginning of period 13,148 9,489 ------- -------- End of period 13,913 13,148 ------- -------- See accompanying Notes to Financial Statements.
57 Financial Highlights
11/1/99- 11/1/98- 5/19/98- 4/30/00 10/31/99 10/31/98 Schwab MarketTrack All Equity Portfolio (Unaudited) - ------------------------------------------------------------------------------- PER-SHARE DATA ($) - ------------------------------------------------------------------------------- Net asset value at beginning of period 11.48 9.28 10.00 ------------------------- Income from investment operations: Net investment income (loss) 0.07 0.03 (0.01) Net realized and unrealized gain (loss) on investments 0.99 2.22 (0.71) ------------------------- Total income (loss) from investment operations 1.06 2.25 (0.72) ------------------------- Less distributions: Dividends from net investment income (0.02) (0.01) -- Dividends in excess of net investment income (0.03) (0.04) -- Distributions from capital gains (0.10) -- -- ------------------------- Total distributions (0.15) (0.05) -- ------------------------- Net asset value at end of period 12.39 11.48 9.28 ------------------------- Total return (%) 9.28(1) 24.34 (7.20)(1) RATIOS/SUPPLEMENTAL DATA (%) - -------------------------------------------------------------------------------- Ratio of net operating expenses to average net assets 0.60(2,3) 0.54 0.39(2) Expense reductions reflected in above ratio 0.29(2) 0.43 0.74(2) Ratio of net investment income to average net assets 0.88(2) 0.13 (0.36)(2) Portfolio turnover rate 3 6 2 Net assets, end of period ($ x 1,000) 329,119 202,884 117,409
1 Not annualized. 2 Annualized. 3 Would have been 0.61% if certain non-routine expenses had been included. See accompanying Notes to Financial Statements. 58
11/1/99- 11/1/98- 11/1/97- 11/1/96- 11/20/95- 4/30/00 10/31/99 10/31/98 10/31/97 10/31/96 Schwab MarketTrack Growth Portfolio (Unaudited) per-share data ($) - ------------------------------------------------------------------------------------------------------------------------------- Net asset valueat beginning of period 16.37 13.96 13.59 11.30 10.00 -------------------------------------------------------------------- Income from investment operations: Net investment income 0.14 0.18 0.16 0.17 0.19 Net realized and unrealized gain on investments 1.14 2.48 0.99 2.32 1.13 -------------------------------------------------------------------- Total income from investment operations 1.28 2.66 1.15 2.49 1.32 -------------------------------------------------------------------- Less distributions: Dividends from net investment income (0.18) (0.22) (0.16) (0.20) (0.02) Distributions from capital gains (0.13) (0.03) (0.62) -- -- -------------------------------------------------------------------- Total distributions (0.31) (0.25) (0.78) (0.20) (0.02) -------------------------------------------------------------------- Net asset value at end of period 17.34 16.37 13.96 13.59 11.30 -------------------------------------------------------------------- Total return (%) 7.83 (1) 19.24 8.85 22.33 13.24 (1) RATIOS/SUPPLEMENTAL DATA (%) - ----------------------------------------------------------------------------------------------------------------------------- Ratio of net operating expenses to average net assets 0.60 (2,3) 0.58 0.60 0.75 0.89 (2) Expense reductions reflected in above ratio 0.26 (2) 0.33 0.50 0.49 0.61 (2) Ratio of net investment income to average net assets 1.68 (2) 1.21 1.34 1.58 2.03 (2) Portfolio turnover rate 8 7 14 113 46 Net assets, end of period ($ x 1,000) 527,987 427,659 275,628 167,700 105,954
1 Not annualized. 2 Annualized. 3 Would have been 0.61% if certain non-routine expenses had been included. See accompanying Notes to Financial Statements. Financial Highlights (continued)
11/1/99- 11/1/98- 11/1/97- 11/1/96- 11/20/95- 4/30/00 10/31/99 10/31/98 10/31/97 10/31/96 Schwab MarketTrack Balanced Portfolio (Unaudited) PER-SHARE DATA ($) - ----------------------------------------------------------------------------------------------------------------------------- Net asset valueat beginning of period 14.85 13.39 12.82 11.05 10.00 ----------------------------------------------------------------- Income from investment operations: Net investment income 0.20 0.29 0.25 0.22 0.25 Net realized and unrealized gain on investments 0.73 1.57 0.86 1.78 0.83 ----------------------------------------------------------------- Total income from investment operations 0.93 1.86 1.11 2.00 1.08 ----------------------------------------------------------------- Less distributions: Dividends from net investment income (0.28) (0.33) (0.23) (0.23) (0.03) Distributions from capital gains (0.09) (0.07) (0.31) -- -- ----------------------------------------------------------------- Total distributions (0.37) (0.40) (0.54) (0.23) (0.03) ----------------------------------------------------------------- Net asset value at end of period 15.41 14.85 13.39 12.82 11.05 ----------------------------------------------------------------- Total return (%) 6.22(1) 14.18 9.02 18.43 10.82 (1) RATIOS/SUPPLEMENTAL DATA (%) - ----------------------------------------------------------------------------------------------------------------------------- Ratio of net operating expenses to average net assets 0.60 (2,3) 0.58 0.59 0.78 0.89 (2) Expense reductions reflected in above ratio 0.25 (2) 0.33 0.51 0.52 0.67 (2) Ratio of net investment income to average net assets 2.67 (2) 2.25 2.33 2.48 2.79 (2) Portfolio turnover rate 10 7 32 104 44 Net assets, end of period ($ x 1,000) 462,402 403,271 263,904 151,418 80,980
1 Not annualized. 2 Annualized. 3 Would have been 0.61% if certain non-routine expenses had been included. See accompanying Notes to Financial Statements. 60
11/1/99- 11/1/98- 11/1/97- 11/1/96- 11/20/95- 4/30/00 10/31/99 10/31/98 10/31/97 10/31/96 Schwab MarketTrack Conservative Portfolio (Unaudited) PER-SHARE DATA ($) - ----------------------------------------------------------------------------------------------------------------------------- Net asset valueat beginning of period 12.73 12.11 11.71 10.51 10.00 ----------------------------------------------------------------- Income from investment operations: Net investment income 0.24 0.41 0.35 0.35 0.33 Net realized and unrealized gain on investments 0.35 0.68 0.64 1.21 0.48 ----------------------------------------------------------------- Total income from investment operations 0.59 1.09 0.99 1.56 0.81 ----------------------------------------------------------------- Less distributions: Dividends from net investment income (0.24) (0.40) (0.35) (0.36) (0.30) Distributions from capital gains (0.03) (0.07) (0.24) -- -- ----------------------------------------------------------------- Total distributions (0.27) (0.47) (0.59) (0.36) (0.30) ----------------------------------------------------------------- Net asset value at end of period 13.05 12.73 12.11 11.71 10.51 ----------------------------------------------------------------- Total return (%) 4.58(1) 9.13 8.64 15.12 8.18 (1) RATIOS/SUPPLEMENTAL DATA (%) - ----------------------------------------------------------------------------------------------------------------------------- Ratio of net operating expenses to average net assets 0.60 (2,3) 0.57 0.58 0.81 0.89 (2) Expense reductions reflected in above ratio 0.24 (2) 0.35 0.64 0.84 1.16 (2) Ratio of net investment income to average net assets 3.66 (2) 3.28 3.26 3.40 3.49 (2) Portfolio turnover rate 10 8 58 104 64 Net assets, end of period ($ x 1,000) 181,569 167,402 114,898 40,559 22,459
1 Not annualized. 2 Annualized. 3 Would have been 0.61% if certain non-routine expenses had been included. See accompanying Notes to Financial Statements. 61 Notes to Financial Statements For the six months ended April 30, 2000 (Unaudited) (All currency amounts are in thousands unless otherwise noted.) 1. DESCRIPTION OF THE FUNDS The Schwab MarketTrack All Equity Portfolio, Schwab MarketTrack Growth Portfolio, Schwab MarketTrack Balanced Portfolio and Schwab MarketTrack Conservative Portfolio (the "funds") are series of Schwab Capital Trust (the "trust"), a no-load, open-end investment management company organized as a Massachusetts business trust on May 7, 1993 and registered under the Investment Company Act of 1940, as amended (the "1940 Act"). In addition to the funds, the trust also offers the Schwab Total Stock Market Index Fund(TM), Schwab S&P 500 Fund, Schwab Small-Cap Index Fund(R), Schwab International Index Fund(R), Schwab Analytics Fund(R), Schwab MarketManager International Portfolio, Schwab MarketManager Growth Portfolio, Schwab MarketManager Balanced Portfolio, Schwab MarketManager Small Cap Portfolio, Institutional Select(TM) S&P 500 Fund, Institutional Select(TM) Large-Cap Value Index Fund and Institutional Select(TM) Small-Cap Value Index Fund. 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. 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 or in the over-the-counter market 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 funds' investment adviser pursuant to guidelines adopted in good faith by the Board of Trustees. Investments in underlying funds are valued at their respective net asset values as determined by those funds, in accordance with the 1940 Act, for a given day. Futures contracts, which are traded on exchanges, are valued at their settlement prices as of the close of such exchanges. Short-term securities with 60 days or less to maturity are stated at amortized cost, which approximates market value. SECURITY TRANSACTIONS, INVESTMENT INCOME AND REALIZED GAINS (LOSSES)--Security transactions are accounted for on a trade-date basis (date the order to buy or sell is executed). Dividend income and distributions to shareholders are recorded on the ex-dividend date. Interest income (including accretion of discount) is recorded on accrual basis. Realized gains and losses from security transactions are determined on an identified cost basis. 62 FUTURES CONTRACTS -- The funds may invest in futures contracts. The funds are required to deposit with the broker an amount of cash equivalents equal to a certain percentage of the contract amount. This is known as the "initial margin." The "variation margin" represents the daily fluctuation in the value of the contract. When the contract is closed, the funds record a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the time it was closed. The funds will invest in these instruments to participate in the return of an index. The use of futures contracts involves certain risks, which include (1) imperfect correlation between the price movement of the contracts and the underlying securities, or (2) inability to close out positions due to different trading hours, or the temporary absence of a liquid market, for either the contract or underlying securities. These risks may involve amounts exceeding the amount recognized in the funds' statement of operations at any given time. As of April 30, 2000, the Schwab MarketTrack All Equity Portfolio had the following open S&P 500 Index futures contracts:
Number of Contract Unrealized Contracts Value Expiration Depreciation -------- -------- -------- -------- 4 $1,460 06/16/00 $(63)
Eligible securities on deposit with broker available to cover margin requirements for open futures positions at April 30, 2000 were $80. The fund has segregated short-term investments with the custodian for the remaining portion of the contract value. FOREIGN CURRENCY TRANSLATION--The accounting records of the funds are maintained in U.S. dollars. Investment securities and all other assets and liabilities of the funds denominated in a foreign currency are translated into U.S. dollars at the exchange rates on April 30, 2000. Purchases and sales of securities, income receipts and expense payments are translated into U.S. dollars at the exchange rate in effect on the dates of the respective transactions. EXPENSES--Expenses arising in connection with a fund are charged directly to that 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 each fund's policy to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all net investment income and realized net capital gains, if any, to shareholders. Therefore, no federal income tax provision is required. Each fund is considered a separate entity for tax purposes. 63 Notes to Financial Statements (continued) The aggregate unrealized appreciation and depreciation for securities held by the funds at April 30, 2000, which was substantially the same for financial reporting and federal income tax purposes, was as follows:
Net Unrealized Appreciated Depreciated Portfolio Appreciation Securities Securities -------- -------- --------- Schwab MarketTrack All Equity Portfolio $ 39,595 $ 40,858 $ (1,263) Schwab MarketTrack Growth Portfolio 114,815 123,668 (8,853) Schwab MarketTrack Balanced Portfolio 75,359 85,949 (10,590) Schwab MarketTrack Conservative Portfolio 15,283 21,122 (5,839)
RECLASSIFICATIONS -- Generally accepted accounting principles require that certain components of net assets be reclassified between financial and tax reporting. These reclassifications have no effect on net assets or net asset values per share. As of April 30, 2000, there were no reclassifications. 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 adviser"). For advisory services and facilities furnished, each fund pays an annual fee, payable monthly, of 0.54% of the first $500 million of average daily net assets and 0.49% of such net assets over $500 million. The investment adviser has reduced a portion of its fee for the six months ended April 30, 2000 (see Note 4). Prior to February 28, 1999, each fund paid an annual fee, payable monthly, of 0.74% of the first $1 billion of average daily net assets, and 0.69% of the next $1 billion, and 0.64% of such net assets over $2 billion. 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 each fund's average daily net assets for transfer agency services and 0.20% of such net assets for shareholder services. OFFICERS AND TRUSTEES -- Certain officers and trustees of the trust are also officers and/or directors of the investment adviser and/or Schwab. For the period ended April 30, 2000, the trust made no direct payments to its officers or trustees who were "interested persons" within the meaning of the 1940 Act. The funds incurred fees aggregating $23 related to the trust's unaffiliated trustees. OTHER AFFILIATED PARTIES AND TRANSACTIONS --Pursuant to an Exemptive Order issued by the SEC, the funds may invest in other SchwabFunds(R). As of April 30, 2000 the Schwab MarketTrack All Equity Portfolio, Schwab MarketTrack Growth Portfolio, Schwab MarketTrack Balanced Portfolio and Schwab MarketTrack Conservative 64 Portfolio owned 8.1%, 8.5%, 5.5%, 1.4% respectively of the outstanding shares of the Schwab International Index Fund(R); 1.8%, 1.1%, 0.7%, 0.2%, respectively of the outstanding shares of the Schwab S&P 500 Fund(R); 0.0%, 13.3%, 27.7%, 17.1%, respectively of the outstanding shares of the Schwab Total Bond Market Index Fund(TM); 6.4%, 8.3%, 5.4%, 1.4%, respectively of the outstanding shares of the Schwab Small-Cap Index Fund(R) and 0.0%, 0.1%, 0.1%, 0.0%, respectively of the outstanding shares of the Schwab Value Advantage Money Fund. As of April 30, 2000, the Schwab MarketTrack Growth Portfolio, Schwab MarketTrack Balanced Portfolio and Schwab MarketTrack Conservative Portfolio held common stock of the Charles Schwab Corp., an affiliated issuer, with a current value of $358, $243 and $58, respectively. 4. EXPENSES REDUCED AND ABSORBED BY THE INVESTMENT ADVISER AND SCHWAB The investment adviser and Schwab guarantee that, through at least February 28, 2001, each fund's total operating expenses, including the expenses indirectly incurred through investment in underlying SchwabFunds(R), will not exceed 0.60% of the fund's average daily net assets, after waivers and reimbursements. For purposes of this guarantee, operating expenses do not include interest, taxes and certain non-routine expenses. The operating expense ratio for the six months ended April 30, 2000 did include non-routine expenses. For the six months ended April 30, 2000, the total of such fees and expenses reduced by the investment adviser were $383, $632, $560, and $218, respectively for the Schwab MarketTrack All Equity Portfolio, Schwab MarketTrack Growth Portfolio, Schwab MarketTrack Balanced Portfolio and Schwab MarketTrack Conservative Portfolio. 5. BORROWING AGREEMENTS The trusts have both committed and uncommitted lines of credit arrangements with PNCBank N.A., Bank of America NT & SA and The Bank of New York, whereby the trusts may borrow on behalf of the funds, as a temporary measure to satisfy redemption requests or for extraordinary or emergency purposes. The trusts may borrow in an aggregate amount of up to $150 million from PNC Bank N.A., $133 million from Bank of America NT &SA and $183 million from The Bank of New York. Amounts borrowed under these arrangements bear interest at periodically negotiated rates. The funds also pay annual fees for the unused balance of the committed line of credit. During the reporting period, the funds only borrowed against the uncommitted lines of credit. As of April 30, 2000, there were no borrowings outstanding. 65 NOTES TO FINANCIAL STATEMENTS (CONTINUED) 6. INVESTMENT TRANSACTIONS Purchases, sales and maturities of investment securities, other than short-term obligations and U.S. Government securities, for the six months ended April 30, 2000, were as follows: Proceeds of Sales Portfolio Purchases and Maturities - --------- -------- ------- Schwab MarketTrack All Equity Portfolio $115,983 $6,660 Schwab MarketTrack Growth Portfolio 100,652 36,506 Schwab MarketTrack Balanced Portfolio 78,008 42,053 Schwab MarketTrack Conservative Portfolio 23,921 16,198
66 THE SCHWABFUNDS FAMILY-REGISTERED TRADEMARK- 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 market funds. Please call 800-435-4000 for a free prospectus and brochure for any of these SchwabFunds.-Registered Trademark- This report must be preceded or accompanied by a current prospectus. METHODS FOR PLACING ORDERS The information below outlines how Schwab brokerage account investors can place orders. If you are investing through a third-party investment provider, methods for placing orders may be different. PHONE Call 800-435-4000, day or night (for TDD service, call 800-345-2550). INTERNET www.schwab.com/schwabfunds MAIL Write to SchwabFunds at: P. O. Box 7575, San Francisco, CA 94120-7575 When selling or exchanging shares, be sure to include the signatures of at least one of the persons whose name is on the account. IN PERSON Visit the nearest Charles Schwab office. SCHWAB ASSET ALLOCATION FUNDS Schwab MarketTrack All Equity Portfolio Schwab MarketTrack Growth Portfolio Schwab MarketTrack Balanced Portfolio Schwab MarketTrack Conservative Portfolio Schwab MarketManager Growth Portfolio Schwab MarketManager Balanced Portfolio SCHWAB STOCK FUNDS Schwab S&P 500-Registered Trademark- Fund Schwab 1000 Fund-Registered Trademark- Schwab Total Stock Market Index Fund-TM- Schwab Analytics Fund-Registered Trademark- Schwab Small-Cap Index Fund-Registered Trademark- Schwab MarketManager Small Cap Portfolio Schwab International Index Fund-Registered Trademark- Schwab MarketManager International Portfolio SCHWAB BOND FUNDS Schwab YieldPlus Fund-TM- Schwab Total Bond Market Index Fund Schwab Short-Term Bond Market Index Fund Schwab Long-Term Tax-Free Bond Fund Schwab Short/Intermediate Tax-Free Bond Fund Schwab California Long-Term Tax-Free Bond Fund Schwab California Short/Intermediate Tax-Free Bond Fund SCHWAB MONEY MARKET FUNDS Schwab offers an array of money market funds that seek high current income consistent with safety and liquidity.(1) 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.-Registered Trademark- (1) Investments in money market funds are neither insured nor guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency and, although they seek to preserve the value of your investment at $1 per share, it is possible to lose money. [LOGO] INVESTMENT ADVISER Charles Schwab Investment Management, Inc. 101 Montgomery Street, San Francisco, CA 94104 DISTRIBUTOR Charles Schwab & Co., Inc. P.O. Box 7575, San Francisco, CA 94120-7575 This report is not authorized for distribution to prospective investors unless preceded or accompanied by a current prospectus. -C- 2000 Charles Schwab & Co., Inc. All rights reserved. Member SIPC/NYSE. Printed on recycled paper. MKT3559-2 (6/00) SCHWABFUNDS-REGISTERED TRADEMARK- SCHWAB ANALYTICS FUND-REGISTERED TRADEMARK- SEMIANNUAL REPORT AND AN IMPORTANT NOTICE REGARDING DELIVERY OF SHAREHOLDER DOCUMENTS April 30, 2000 IMPORTANT NOTICE REGARDING DELIVERY OF SHAREHOLDER DOCUMENTS The Securities and Exchange Commission permits mutual funds to deliver only one copy of shareholder documents, including prospectuses and shareholder reports, to fund investors with multiple accounts at the same residential or post office box address. This practice is commonly called "householding" and is intended to eliminate duplicate mailings of shareholder documents. Mailings of your SchwabFunds shareholder documents may be householded indefinitely unless you instruct us otherwise. ADDITIONAL COPIES OF SHAREHOLDER DOCUMENTS ALL SCHWABFUNDS PROSPECTUSES AND SHAREHOLDER REPORTS ARE AVAILABLE FREE OF CHARGE AND MAY BE REQUESTED AT ANY TIME BY CALLING SCHWAB AS INDICATED BELOW. SCHWABFUNDS PROSPECTUSES ARE ALSO AVAILABLE ON OUR WEB SITE AT WWW.SCHWAB.COM. If you would prefer that your SchwabFunds mailings not be householded, please contact: - - SCHWAB SIGNATURE SERVICES-TM- CLIENTS: Schwab Signature Services. - - INVESTMENT MANAGER CLIENTS: Schwab at 1-800-515-2157, or your investment manager. - - ALL OTHER CLIENTS: Schwab at 1-800-435-4000. Your instructions that householding not apply to your accounts holding SchwabFunds will be effective within 30 days of receipt by Schwab. SCHWABFUNDS-REGISTERED TRADEMARK- SCHWAB ANALYTICS FUND-REGISTERED TRADEMARK- Semiannual Report April 30, 2000 SCHWAB ANALYTICS FUND-REGISTERED TRADEMARK- We are pleased to bring you this semiannual report for the Schwab Analytics Fund (the fund) for the six-month period ended April 30, 2000. The fund seeks to achieve long-term capital growth. To meet its objective, the fund uses quantitative techniques, proprietary software models and real-time databases to systematically select stocks that exhibit a combination of attributes that historically have been associated with aggregate total returns greater than that of the S&P 500-Registered Trademark- Index (the Index) over the long term. The fund also intends to maintain broad industry diversification similar to that of the Index. By doing so, the fund seeks to outperform the Index over the long term without significantly increasing the risk to the investor. FUND LISTINGS The fund is listed in THE WALL STREET JOURNAL, USA TODAY, INVESTOR'S BUSINESS DAILY and most local newspapers as ANALYTIC under the heading SCHWABFUNDS-Registered Trademark-. Its computer quotation symbol is SWANX. CONTENTS - --------------------------------------------- A Message from the Chairman 1 - --------------------------------------------- What Every Investor Should Know 2 - --------------------------------------------- Market Overview 4 - --------------------------------------------- Schwab Analytics Fund FUND PERFORMANCE 8 PORTFOLIO SNAPSHOT 10 - --------------------------------------------- Portfolio Management 12 - --------------------------------------------- Fund Discussion 13 - --------------------------------------------- Glossary 15 - --------------------------------------------- Financial Statements and Notes 17 - ---------------------------------------------
A MESSAGE FROM THE CHAIRMAN [PHOTO] Dear Shareholder, During the last few years, the benefits of investing have been readily apparent, while the risks have been somewhat less obvious. In recent months, however, investors have been subject to larger swings in the market, even within the span of a single day. Given this divergent environment, the message is clear: Expect volatility, maintain a long-term view and ensure your investment strategy is appropriate for your risk tolerance and time horizon. One way to lessen the impact of volatility on your portfolio is to adequately diversify your investments, both within and across asset sectors, namely cash equivalents, bonds and stocks. With its broad range of funds, SchwabFunds-Registered Trademark- can help form the foundation of a diversified investment plan. Our asset allocation funds can even provide diversification within a single fund. We recently added four new sector funds, the Schwab Focus Funds, to our SchwabFunds offering. Each invests in a group of industries within a specific sector--Communications, Financial Services, Healthcare and Technology--and can be an effective complement to individual stock investing. Each Focus Fund concentrates its investing in companies in a specific sector and may involve a greater degree of risk than an investment in mutual funds with greater diversification. For more information on the Schwab Focus Funds, please call 1-800-435-4000 and request a prospectus. The prospectus contains more information on fund fees and expenses as well as risks. Please read it carefully before investing. As a leader in online brokerage, we recognize the value of the web as a means of communicating timely, relevant information to investors. Regular updates on all the SchwabFunds, including performance data, are available on our Web site at WWW.SCHWAB.COM/SCHWABFUNDS. We encourage you to take advantage of this valuable resource. Thank you for your investment in SchwabFunds. For its part, SchwabFunds will do everything we can to warrant the trust you have placed in us. Sincerely, /s/ Charles R. Schwab Charles R. Schwab April 30, 2000 1 WHAT EVERY INVESTOR SHOULD KNOW WHY ASSET ALLOCATION MATTERS As most investors know, one of the most compelling reasons to invest in a mutual fund is diversification. By allocating your assets across many different securities, a fund can help reduce the risk that you might otherwise encounter by owning just a few stocks or bonds. But remember that diversification ACROSS asset classes can be just as important as diversification WITHIN one of the mutual funds you own. As you probably know, stocks historically have offered much higher returns over the long term than bonds, cash or other asset classes, but those returns have come at the price of higher volatility. To help mitigate some of that risk, many investors often include at least some bonds and cash in their portfolios. They also diversify their exposure across different stock market segments--such as large-cap and small-cap U.S. stocks and international stocks, which tend not to move in tandem. In short, allocating assets across market segments may help reduce your overall portfolio risk. REGULAR INVESTING STRATEGIES Another way to help dampen the effects of short-term market volatility is to invest the same amount of money on a regular basis. With this investment strategy, known as DOLLAR-COST AVERAGING, you automatically buy more shares when stock or bond prices are low and fewer when they're high.* A hypothetical example can help illustrate this concept. Let's say you invest $400 on a monthly basis in a single mutual fund, as shown below. Because of fluctuating prices, your per share purchase price varies monthly. A simple average of your five purchase prices would yield $8.20 per share; however, your AVERAGE COST BASIS (your total investment divided by the number of shares actually purchased) would be significantly lower--by more than $0.50 per share. The net result in this example is that your average cost per share is reduced and you'd have purchased more shares than you would have had you paid the average share price over the five-month period.
No. of Fixed Share Shares Investment Price Purchased - -------------------------------------------------------- Month 1 $400 $10 40 - -------------------------------------------------------- Month 2 $400 $8 50 - -------------------------------------------------------- Month 3 $400 $5 80 - -------------------------------------------------------- Month 4 $400 $8 50 - -------------------------------------------------------- Month 5 $400 $10 40 - -------------------------------------------------------- Totals $2,000 $41 260 - -------------------------------------------------------- AVERAGE SHARE PRICE ($41 DIVIDED BY 5 periods): $8.20 YOUR AVERAGE COST BASIS ($2,000 DIVIDED BY 260 shares) $7.69 PER-SHARE ADVANTAGE: $0.51
This example is for illustrative purposes only and is not intended to predict or guarantee the performance of any particular fund available through Schwab. (Of course, in this example, hindsight shows you that your best move would have been to invest your entire $2,000 in Month 3, when the share price was at a low of $5--but it's unlikely that you would have been able to predict that.) * Regular investing strategies such as dollar-cost averaging do not assure a profit or protect against a loss in declining markets. Since such a strategy involves continuous investment, investors should consider their ability to continue purchases through periods of low price levels. 2 SCHWAB'S 10 INVESTING PRINCIPLES 1. START WITH THE BASICS FOR LONG-TERM INVESTING. 2. GET STARTED NOW! 3. KNOW YOURSELF. 4. INVEST IN THE STOCK MARKET FOR GROWTH. 5. TAKE A LONG-TERM VIEW. 6. BUILD A DIVERSIFIED PORTFOLIO. 7. CONSIDER BONDS AND CASH FOR DIVERSIFICATION AND INCOME. 8. MINIMIZE YOUR EXPENSES. 9. STAY ON TRACK. 10. BECOME A LIFELONG INVESTOR. In addition to reducing your per-share costs over time, dollar-cost averaging provides another benefit: the discipline of investing regularly. You're more likely to maintain a regular investment plan if it's automatic: You don't have to think about it, and you minimize any propensity to skip an investment in favor of some other expenditure. To encourage this discipline, Schwab offers you two convenient, no cost ways to begin or maintain a program of regular investing: Schwab's AUTOMATIC INVESTMENT PLAN (AIP) allows you to automatically purchase--on a regular basis--additional shares in mutual funds that you already own. You can choose to invest as little as $100--twice a month, monthly or quarterly.(1) With Schwab MoneyLink-Registered Trademark- electronic funds transfer service, you can easily request fund transfers between your Schwab account and your accounts at other financial institutions. You can schedule automatically recurring transfers for easy long-term savings. Or request a transfer via the Web, by automated touch-tone phone, or through a Schwab representative anytime, day or night. Please be aware that these programs and dollar-cost averaging in general do not ensure a profit or protect against a loss, and investors should know that markets fall as well as rise. Because dollar-cost averaging involves continuous investment in securities regardless of fluctuating prices, you should consider your financial ability to purchase in both up and down markets. Over the long term, however, dollar-cost averaging may help to smooth out volatility caused by shortterm market trends. For more information on the Automatic Investment Plan or MoneyLink, please call us at 1-800-435-4000. WE MAKE IT EASY TO INVEST We try to make it easy and convenient for you to invest in SchwabFunds-Registered Trademark-. In addition to our automated methods that allow you to invest or transfer money to your Schwab account on a regular basis, you can also invest through our Web site at WWW.SCHWAB.COM/SCHWABFUNDS; through our automated touch-tone telephone service, TeleBroker-Registered Trademark-, by calling 1-800-272-4922; or in person at any of our nationwide branches. KEEPING YOU INFORMED You can find a wealth of information about our investment philosophy and funds, as well as updated fund performance data at our Web site: WWW.SCHWAB.COM/SCHWABFUNDS. (1) Includes uninvested cash and margin cash available. If sufficient cash is not available, your automatic purchases will not be made. 3 MARKET OVERVIEW U.S. ECONOMIC GROWTH April 2000 marked the beginning of the tenth year of the current expansion, making it the longest in U.S. history. Gross Domestic Product (GDP) grew at a real (inflation adjusted) rate of 4.6% during 1999--the fourth consecutive year at 4% or more and 5.4% during the first quarter of 2000. This rate is considered by most economists and the Federal Reserve (Fed) to be in excess of what the economy can absorb without experiencing inflationary pressures, perhaps 3.5% to 4.0%. High levels of consumer spending fueled by rising incomes, personal wealth and consumer confidence, as well as strong business capital investment and a healthy housing sector, have been the principal factors driving this lengthy expansion. EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC REAL GDP GROWTH RATE Quarterly Percentage Change (Annualized Rate) Q1 1990 5.0% Q2 1990 1.0% Q3 1990 -0.6% Q4 1990 -3.0% Q1 1991 -1.7% Q2 1991 2.6% Q3 1991 1.3% Q4 1991 2.5% Q1 1992 4.3% Q2 1992 4.0% Q3 1992 3.1% Q4 1992 5.2% Q1 1993 -0.7% Q2 1993 2.1% Q3 1993 1.5% Q4 1993 6.0% Q1 1994 3.6% Q2 1994 5.7% Q3 1994 2.2% Q4 1994 5.1% Q1 1995 1.5% Q2 1995 0.8% Q3 1995 3.2% Q4 1995 3.3% Q1 1996 2.9% Q2 1996 6.9% Q3 1996 2.2% Q4 1996 4.9% Q1 1997 4.9% Q2 1997 5.1% Q3 1997 4.0% Q4 1997 3.1% Q1 1998 6.7% Q2 1998 2.1% Q3 1998 3.8% Q4 1998 5.9% Q1 1999 3.7% Q2 1999 1.9% Q3 1999 5.7% Q4 1999 7.3% Q1 2000 5.4%
Source: BLOOMBERG L.P. Looking ahead, the availability of increasingly scarce labor resources and the domestic consumers' response to continued stock market volatility may be key determinants of whether the economy continues on its current course or softens throughout 2000. The Fed has raised the federal funds rate by 1.75% since June 1999 in an as yet unsuccessful effort to moderate the economy's rapid growth rate. The consensus of most economists is that the U.S. economy appears poised for continued strong growth and additional intervention by the Fed (increases in the federal funds rate) until the growth rate of the economy slows to a more sustainable level. UNEMPLOYMENT The unemployment rate dropped to 3.9% in April 2000, a three-decade low. Employment growth continues to outstrip population growth. Reflecting a shrinking pool of available workers, labor markets continue to be extremely tight in many areas of the country and there has been some regional evidence of labor shortages driving up wages. The labor force participation rate, which measures the employment population as a percent of the total population, is at a post-war high. Growth in the labor force has slowed, and the Fed has expressed its concern that strong demand and tight labor markets may continue to put pressure on manufacturers and service providers to raise prices. EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC U.S. UNEMPLOYMENT RATE Jan-90 5.4% Feb-90 5.3% Mar-90 5.2% Apr-90 5.4% May-90 5.4% Jun-90 5.2% Jul-90 5.5% Aug-90 5.7% Sep-90 5.9% Oct-90 5.9% Nov-90 6.2% Dec-90 6.3% Jan-91 6.4% Feb-91 6.6% Mar-91 6.8% Apr-91 6.7% May-91 6.9% Jun-91 6.9% Jul-91 6.8% Aug-91 6.9% Sep-91 6.9% Oct-91 7.0% Nov-91 7.0% Dec-91 7.3% Jan-92 7.3% Feb-92 7.4% Mar-92 7.4% Apr-92 7.4% May-92 7.6% Jun-92 7.8% Jul-92 7.7% Aug-92 7.6% Sep-92 7.6% Oct-92 7.3% Nov-92 7.4% Dec-92 7.4% Jan-93 7.3% Feb-93 7.1% Mar-93 7.0% Apr-93 7.1% May-93 7.1% Jun-93 7.0% Jul-93 6.9% Aug-93 6.8% Sep-93 6.7% Oct-93 6.8% Nov-93 6.6% Dec-93 6.5% Jan-94 6.8% Feb-94 6.6% Mar-94 6.5% Apr-94 6.4% May-94 6.1% Jun-94 6.1% Jul-94 6.3% Aug-94 6.0% Sep-94 5.8% Oct-94 5.8% Nov-94 5.6% Dec-94 5.5% Jan-95 5.6% Feb-95 5.4% Mar-95 5.3% Apr-95 5.8% May-95 5.8% Jun-95 5.6% Jul-95 5.6% Aug-95 5.7% Sep-95 5.6% Oct-95 5.5% Nov-95 5.7% Dec-95 5.6% Jan-96 5.6% Feb-96 5.5% Mar-96 5.6% Apr-96 5.5% May-96 5.6% Jun-96 5.3% Jul-96 5.5% Aug-96 5.1% Sep-96 5.2% Oct-96 5.2% Nov-96 5.3% Dec-96 5.4% Jan-97 5.3% Feb-97 5.3% Mar-97 5.1% Apr-97 5.0% May-97 4.7% Jun-97 5.0% Jul-97 4.7% Aug-97 4.9% Sep-97 4.7% Oct-97 4.7% Nov-97 4.6% Dec-97 4.7% Jan-98 4.5% Feb-98 4.6% Mar-98 4.6% Apr-98 4.3% May-98 4.3% Jun-98 4.5% Jul-98 4.5% Aug-98 4.5% Sep-98 4.5% Oct-98 4.5% Nov-98 4.4% Dec-98 4.3% Jan-99 4.3% Feb-99 4.4% Mar-99 4.2% Apr-99 4.3% May-99 4.2% Jun-99 4.3% Jul-99 4.3% Aug-99 4.2% Sep-99 4.2% Oct-99 4.1% Nov-99 4.1% Dec-99 4.1% Jan-00 4.0% Feb-00 4.1% Mar-00 4.1% Apr-00 3.9%
Source: BLOOMBERG L.P. 4 INFLATION Virtually all measures of price inflation exhibited upward trends during the reporting period. The Consumer Price Index (CPI) rose 3.0% for the year ended April 30, 2000. Its core rate (which excludes the more volatile food and energy components) was up 2.2%. The Personal Consumption Expenditures Index, a measure of inflation closely watched by the Fed, rose 2.3% for the same period. The GDP price deflator, the broadest measure of inflation, indicated prices rising at an annual rate of 3.2% during the first quarter of 2000. EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC MEASURES OF INFLATION
CONSUMER PRICE INDEX EMPLOYMENT COST-INDEX 12-MONTH CHANGE 12-MONTH CHANGE (MONTHLY) (QUARTERLY) Jan-90 5.2% 5.5% Feb-90 5.3% 5.5% Mar-90 5.2% 5.5% Apr-90 4.7% 5.4% May-90 4.4% 5.4% Jun-90 4.7% 5.4% Jul-90 4.8% 5.2% Aug-90 5.6% 5.2% Sep-90 6.2% 5.2% Oct-90 6.3% 4.9% Nov-90 6.3% 4.9% Dec-90 6.1% 4.9% Jan-91 5.7% 4.6% Feb-91 5.3% 4.6% Mar-91 4.9% 4.6% Apr-91 4.9% 4.6% May-91 5.0% 4.6% Jun-91 4.7% 4.6% Jul-91 4.4% 4.3% Aug-91 3.8% 4.3% Sep-91 3.4% 4.3% Oct-91 2.9% 4.3% Nov-91 3.0% 4.3% Dec-91 3.1% 4.3% Jan-92 2.6% 4.0% Feb-92 2.8% 4.0% Mar-92 3.2% 4.0% Apr-92 3.2% 3.6% May-92 3.0% 3.6% Jun-92 3.1% 3.6% Jul-92 3.2% 3.5% Aug-92 3.1% 3.5% Sep-92 3.0% 3.5% Oct-92 3.2% 3.5% Nov-92 3.0% 3.5% Dec-92 2.9% 3.5% Jan-93 3.3% 3.5% Feb-93 3.2% 3.5% Mar-93 3.1% 3.5% 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% 3.5% Nov-93 2.7% 3.5% Dec-93 2.7% 3.5% Jan-94 2.5% 3.2% Feb-94 2.5% 3.2% Mar-94 2.5% 3.2% Apr-94 2.4% 3.2% May-94 2.3% 3.2% Jun-94 2.5% 3.2% Jul-94 2.8% 3.2% Aug-94 2.9% 3.2% Sep-94 3.0% 3.2% Oct-94 2.6% 3.0% Nov-94 2.7% 3.0% Dec-94 2.7% 3.0% Jan-95 2.8% 2.9% Feb-95 2.9% 2.9% Mar-95 2.9% 2.9% Apr-95 3.1% 2.9% May-95 3.2% 2.9% Jun-95 3.0% 2.9% Jul-95 2.8% 2.7% Aug-95 2.6% 2.7% Sep-95 2.5% 2.7% Oct-95 2.8% 2.7% Nov-95 2.6% 2.7% Dec-95 2.5% 2.7% Jan-96 2.7% 2.8% Feb-96 2.7% 2.8% Mar-96 2.8% 2.8% Apr-96 2.9% 2.9% May-96 2.9% 2.9% Jun-96 2.8% 2.9% Jul-96 3.0% 2.8% Aug-96 2.9% 2.8% Sep-96 3.0% 2.8% Oct-96 3.0% 2.9% Nov-96 3.3% 2.9% Dec-96 3.3% 2.9% Jan-97 3.0% 2.9% Feb-97 3.0% 2.9% Mar-97 2.8% 2.9% Apr-97 2.5% 2.8% May-97 2.2% 2.8% Jun-97 2.3% 2.8% Jul-97 2.2% 3.0% Aug-97 2.2% 3.0% Sep-97 2.2% 3.0% Oct-97 2.1% 3.3% Nov-97 1.8% 3.3% Dec-97 1.7% 3.3% Jan-98 1.6% 3.3% Feb-98 1.4% 3.3% Mar-98 1.4% 3.3% Apr-98 1.4% 3.5% May-98 1.7% 3.5% Jun-98 1.7% 3.5% Jul-98 1.7% 3.7% Aug-98 1.6% 3.7% Sep-98 1.5% 3.7% Oct-98 1.5% 3.4% Nov-98 1.5% 3.4% Dec-98 1.6% 3.4% Jan-99 1.7% 3.0% Feb-99 1.6% 3.0% Mar-99 1.7% 3.0% Apr-99 2.3% 3.2% May-99 2.1% 3.2% Jun-99 2.0% 3.2% Jul-99 2.1% 3.1% Aug-99 2.3% 3.1% Sep-99 2.6% 3.1% Oct-99 2.6% 3.4% Nov-99 2.6% 3.4% Dec-99 2.7% 3.4% Jan-00 2.7% 4.3% Feb-00 3.2% 4.3% Mar-00 3.7% 4.3% Apr-00 3.0%
Source: BLOOMBERG L.P. Wage inflation also exhibited a marked upward trend during the reporting period. The Employment Cost Index, a measurement of the cost to employ workers, including both wages and benefits, rose 4.3% for the year ended March 31, 2000. Although these rates of price and employment cost inflation may not be alarmingly high by historical standards, the Fed has demonstrated its resolve to keep inflation at bay through its communications and its actions (six federal funds rate increases since June 1999). In particular, the Fed has expressed concern that if labor markets continue to tighten, increases in wages will outpace productivity growth and place additional upward pressure on prices. In such an environment, productivity growth becomes particularly critical, as it enables companies to pay higher wages without raising prices. Non-farm productivity grew 3.0% in 1999 and at a 2.4% annualized rate in the first quarter of 2000--strong gains to be sure, but likely not strong enough to offset recent increases in employment costs. ASSET CLASS PERFORMANCE EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC ASSET CLASS % RETURNS DURING REPORTING PERIOD
LEHMAN AGGREGATE MSCI-EAFE RUSSELL 2000 S&P 500 BOND INDEX (ND) INDEX SMALL-CAP INDEX INDEX Nov/5/99 0.61% 0.49% 3.23% 0.54% Nov/12/99 0.73% 2.02% 4.95% 2.44% Nov/19/99 0.32% 3.91% 7.62% 4.35% Nov/26/99 0.11% 5.22% 7.08% 3.95% Dec/3/99 0.15% 5.26% 8.43% 5.22% Dec/10/99 0.78% 6.67% 8.94% 4.10% Dec/17/99 -0.30% 6.78% 8.89% 4.39% Dec/24/99 -0.61% 10.69% 12.68% 7.13% Dec/31/99 -0.51% 12.55% 17.96% 8.04% Jan/7/00 -0.57% 7.42% 14.15% 6.00% Jan/14/00 -1.03% 10.06% 18.67% 7.74% Jan/21/00 -1.19% 7.61% 24.83% 5.99% Jan/28/00 -0.52% 7.11% 18.01% 0.02% Feb/4/00 -0.39% 9.34% 22.92% 4.81% Feb/11/00 -0.68% 9.96% 25.68% 2.07% Feb/18/00 -0.15% 8.31% 27.70% -0.95% Feb/25/00 0.50% 9.16% 30.29% -1.89% Mar/3/00 0.68% 11.46% 40.04% 3.81% Mar/10/00 0.48% 11.44% 41.37% 2.77% Mar/17/00 1.18% 10.11% 34.58% 7.88% Mar/24/00 1.05% 12.27% 34.49% 12.51% Mar/31/00 1.68% 12.10% 26.32% 10.49% Apr/7/00 2.49% 10.97% 27.26% 11.80% Apr/14/00 2.42% 7.09% 6.40% 0.02% Apr/21/00 2.33% 6.21% 12.97% 5.77% Apr/28/00 1.38% 6.10% 18.72% 7.17%
Compiled by CHARLES SCHWAB & CO., INC. As shown on the chart above, equity valuations, especially of the small-cap and technology stocks, exhibited extreme volatility during the reporting period. The price/earnings (P/E) ratio for the 5 MARKET OVERVIEW (continued) NASDAQ 100 Index fell by 33% in just 14 trading days during March and April. Remarkably, it remained at levels above 100 even after its precipitous decline. Reversing a five-year period of relative under performance, small-cap stocks outperformed both large-cap stocks and international stocks for the six-month reporting period ended 4/30/00. Small-cap stocks as represented by the Russell 2000-Registered Trademark- Index achieved a total return of 18.7%. Large-cap stocks, as represented by the S&P 500-Registered Trademark- Index, returned 7.2%. Dampened by relatively weak foreign currencies, International stocks, as represented by the Morgan Stanley Capital International Europe, Australia, Far East (MSCI-EAFE)-Registered Trademark- Index, achieved a return of 6.7% for the six-month reporting period ending 4/30/00. Reflecting the rise in intermediate-term interest rates, fixed income returns were generally weak for the period. Bond returns, as represented by the Lehman Brothers Aggregate Bond Index, were 1.4% for the six-month reporting period. U.S. EQUITY VALUATION The P/E ratio for the S&P 500-Registered Trademark- Index remained at very high levels during the reporting period and ended the period at a lofty 29.6 times earnings, slightly less than twice its long-term average. The P/E 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. Based on other traditional market valuation measures such as the price-to-book value ratio or dividend yield, the U.S. stock market continues to remain at record or near record high valuation levels. Reflecting the extraordinary valuations of the technology sector, the P/E ratio (12 months trailing) for the NASDAQ 100 Index ended the period at 120.2, as compared to an average of 67 over the last five years. EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC 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 14.90 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 25.50 Sep-92 24.37 Oct-92 23.94 Nov-92 24.08 Dec-92 24.01 Jan-93 24.20 Feb-93 24.25 Mar-93 24.22 Apr-93 23.20 May-93 23.21 Jun-93 22.58 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 20.10 May-94 20.16 Jun-94 19.76 Jul-94 18.64 Aug-94 18.90 Sep-94 18.26 Oct-94 17.55 Nov-94 16.58 Dec-94 16.98 Jan-95 16.23 Feb-95 16.20 Mar-95 16.50 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 19.30 Jul-96 18.31 Aug-96 18.62 Sep-96 19.75 Oct-96 19.60 Nov-96 21.05 Dec-96 20.70 Jan-97 20.55 Feb-97 20.98 Mar-97 19.87 Apr-97 20.24 May-97 21.43 Jun-97 22.45 Jul-97 23.92 Aug-97 22.64 Sep-97 24.00 Oct-97 22.84 Nov-97 24.02 Dec-97 24.51 Jan-98 24.99 Feb-98 26.44 Mar-98 27.76 Apr-98 26.51 May-98 26.12 Jun-98 27.09 Jul-98 26.78 Aug-98 22.77 Sep-98 24.23 Oct-98 27.58 Nov-98 30.14 Dec-98 31.97 Jan-99 33.29 Feb-99 32.65 Mar-99 33.78 Apr-99 33.90 May-99 32.74 Jun-99 34.70 Jul-99 31.62 Aug-99 31.21 Sep-99 29.90 Oct-99 29.92 Nov-99 30.65 Dec-99 32.53 Jan-00 29.78 Feb-00 28.59 Mar-00 31.50 Apr-00 29.58
30-Year Average 15.8
Source: BLOOMBERG L.P. TREASURY BOND YIELDS Continuing a trend which began in October 1998, both long-term and intermediate-term rates continued to climb upward during the first three months of the reporting period. The primary driver of this upward trend was the continued strong growth of the domestic economy. 6 EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC 10-YEAR AND 5-YEAR TREASURY BOND YIELDS
TEN-YEAR TREASURY FIVE-YEAR TREASURY BOND YIELD NOTE YIELD Oct/1/99 5.97% 5.86% Oct/8/99 6.03% 5.95% Oct/15/99 6.07% 5.97% Oct/22/99 6.19% 6.10% Oct/29/99 6.02% 5.95% Nov/5/99 5.93% 5.86% Nov/12/99 5.93% 5.86% Nov/19/99 6.06% 5.99% Nov/26/99 6.12% 6.05% Dec/3/99 6.16% 6.07% Dec/10/99 6.07% 5.98% Dec/17/99 6.28% 6.19% Dec/24/99 6.41% 6.31% Dec/31/99 6.44% 6.34% Jan/7/00 6.52% 6.41% Jan/14/00 6.68% 6.58% Jan/21/00 6.77% 6.63% Jan/28/00 6.66% 6.66% Feb/4/00 6.55% 6.65% Feb/11/00 6.60% 6.70% Feb/18/00 6.49% 6.68% Feb/25/00 6.33% 6.47% Mar/3/00 6.39% 6.59% Mar/10/00 6.38% 6.60% Mar/17/00 6.19% 6.45% Mar/24/00 6.19% 6.50% Mar/31/00 6.00% 6.31% Apr/7/00 5.58% 6.18% Apr/14/00 5.58% 6.11% Apr/21/00 5.99% 6.24% Apr/28/00 6.21% 6.54%
Source: BLOOMBERG L.P. Treasury bond yields exhibited an unusual pattern during the second half of the reporting period. Typically the yield on ten-year treasury securities exceeds those on five-year securities to compensate investors for the additional interest rate risk associated with longer duration securities. As shown in the graph above, late in January, this normal relationship reversed, resulting in what is referred to as a negative yield curve. This situation is a result of the accumulating budget surpluses, which are allowing the federal government to downsize its debt. The Treasury Department announced that it plans to buy back $30 billion in debt in 2000 starting with longer dated maturities because those payments carry the steepest interest payment. The anticipated reduction in supply resulting from this buyback program, as well as scaled back issuance, increased the price of the longer-term securities and resulted in a reduction in yields. INTERNATIONAL PERFORMANCE EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC MSCI-EAFE-Registered Trademark- COUNTRY US$ RETURNS For the Six-Month Period Ended 4/30/00 Belgium -21.4% Austria -14.3% Ireland -10.4% Switzerland -6.0% Norway -5.6% New Zealand -1.1% Australia -0.8% United Kingdom -0.3% Singapore 4.8% Netherlands 5.1% Portugal 6.0% Italy 6.2% Japan 7.8% Denmark 8.2% Spain 9.4% Hong Kong 17.9% France 21.0% Germany 21.8% Sweden 70.7% Finland 117.5%
Source: DATASTREAM The MSCI-EAFE Index gained 6.7% in U.S. dollar terms (excluding reinvested dividends) during the six-month reporting period. In local currency terms, it gained 15.6%, reflecting the relative weakness of most foreign currencies (compared to the dollar) during the period. The strongest performing countries for the period were Finland, Sweden and Germany. Those countries with the largest negative returns were Belgium, Austria and Ireland. 7 SCHWAB ANALYTICS FUND-REGISTERED TRADEMARK- FUND PERFORMANCE AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED 4/30/00
SINCE INCEPTION SIX MONTHS(1) ONE YEAR (7/1/96) - --------------------------------------------------------------------------------------------------------------- SCHWAB ANALYTICS FUND(2) 12.26% 20.13% 27.12% - --------------------------------------------------------------------------------------------------------------- S&P 500-Registered Trademark- Index 7.19% 10.13% 24.27% - --------------------------------------------------------------------------------------------------------------- Average Large-Cap Fund(3) 10.79% 12.86% 20.92% - ---------------------------------------------------------------------------------------------------------------
National Association of Securities Dealers, Inc. (NASD) regulations require that we report performance data as of the most recent calendar quarter -- in this case, the quarter ended 3/31/00. As of 3/31/00, the fund's six-month, one-year and since-inception average annual total returns were 26.93%, 31.36% and 29.31%, respectively.(2) (1) Actual, not annualized, since period is less than one year. (2) A portion of the fund's expenses was reduced during the reporting period. Without such reductions, the fund's average annual returns would have been lower. (3) Based on data supplied by Morningstar, Inc. Average annual total returns for 2,297 large-cap funds, for the six-month, one-year and since-inception periods. These funds may or may not follow a strategy similar to that followed by the Schwab Analytics Fund. 8 GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
SCHWAB ANALYTICS FUND S&P 500 07/01/96 $10,000 $10,000 07/31/96 $9,690 $9,558 08/31/96 $9,880 $9,760 09/30/96 $10,620 $10,308 10/31/96 $11,010 $10,593 11/30/96 $11,640 $11,393 12/31/96 $11,368 $11,168 01/31/97 $11,959 $11,865 02/28/97 $11,908 $11,958 03/31/97 $11,287 $11,468 04/30/97 $12,081 $12,152 05/31/97 $12,722 $12,890 06/30/97 $13,272 $13,468 07/31/97 $14,462 $14,539 08/31/97 $13,821 $13,724 09/30/97 $14,646 $14,475 10/31/97 $13,964 $13,992 11/30/97 $14,676 $14,640 12/31/97 $14,963 $14,891 01/31/98 $15,054 $15,057 02/28/98 $16,155 $16,142 03/31/98 $16,801 $16,969 04/30/98 $16,949 $17,140 05/31/98 $16,620 $16,845 06/30/98 $17,448 $17,529 07/31/98 $17,198 $17,343 08/31/98 $14,555 $14,839 09/30/98 $15,565 $15,790 10/31/98 $16,529 $17,074 11/30/98 $17,561 $18,109 12/31/98 $19,158 $19,152 01/31/99 $20,138 $19,952 02/28/99 $19,134 $19,332 03/31/99 $19,961 $20,105 04/30/99 $20,882 $20,883 05/31/99 $20,493 $20,390 06/30/99 $21,910 $21,522 07/31/99 $21,189 $20,850 08/31/99 $21,154 $20,746 09/30/99 $20,658 $20,177 10/31/99 $22,347 $21,455 11/30/99 $22,808 $21,891 12/31/99 $24,474 $23,180 01/31/00 $23,416 $22,017 02/29/00 $24,296 $21,600 03/31/00 $26,222 $23,713 04/30/00 $25,087 $22,999
The above graph compares the growth of a hypothetical $10,000 investment in the Schwab Analytics Fund-Registered Trademark-, made at its inception, with similar investments in the S&P 500-Registered Trademark- Index. THIS INFORMATION IS HISTORICAL AND DOES NOT REPRESENT FUTURE RESULTS. TOTAL RETURNS ASSUME REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS. PRINCIPAL VALUE AND INVESTMENT RETURNS WILL FLUCTUATE, SO AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. Indices are unmanaged and do not reflect advisory fees and other expenses associated with an investment in the fund. Investors cannot invest in an index directly. ASSETS - ---------------------------------------------------------------------- Total net assets as of 10/31/99 (000s) $288,655 - ---------------------------------------------------------------------- Total net assets as of 4/30/00 (000s) $375,091 - ---------------------------------------------------------------------- Percentage growth from 10/31/99 to 4/30/00 29.9% - ----------------------------------------------------------------------
9 SCHWAB ANALYTICS FUND-REGISTERED TRADEMARK- PORTFOLIO SNAPSHOT Schwab Analytics Fund (the fund) invests primarily in the common stocks of large- and mid-cap publicly traded U.S. companies. The fund will typically invest in the stocks of at least 50 issuers, and intends to maintain industry diversification similar to that of the S&P 500-Registered Trademark- Index. The information below and on the following page provides a snapshot of the fund's portfolio characteristics as of 4/30/00 and is not indicative of its composition after that date. The terms used below are defined on page 15. A complete list of the securities in the fund's portfolio as of 4/30/00 is provided in the Schedule of Investments later in this report. FUND FACTS
SCHWAB ANALYTICS FUND PEER GROUP AVERAGE+ - --------------------------------------------------------------------------------------------------------------------------- Number of Issues 99 138 - --------------------------------------------------------------------------------------------------------------------------- Median Market Cap ($ Mil) $66,757+ $58,904 - --------------------------------------------------------------------------------------------------------------------------- Price/Earnings (P/E) Ratio 35.9+ 35.4 - --------------------------------------------------------------------------------------------------------------------------- Price/Book (P/B) Ratio 10.8+ 9.5 - --------------------------------------------------------------------------------------------------------------------------- 12-Month Yield 0.21%+ 0.45% - --------------------------------------------------------------------------------------------------------------------------- Portfolio Turnover Rate 51% 75% - --------------------------------------------------------------------------------------------------------------------------- Three-Year Beta 1.02+ 0.94 - --------------------------------------------------------------------------------------------------------------------------- Expense Ratio 0.75%* 1.34% - ---------------------------------------------------------------------------------------------------------------------------
* Reflects a voluntary reduction by Charles Schwab Investment Management, Inc. (the investment adviser) and Schwab, which is guaranteed through at least 2/28/01 (excluding interest, taxes and certain non-routine expenses). + Source: Morningstar. This information is as of 4/30/00 and is for illustrative purposes only. It is not intended to show, predict or guarantee future composition of the fund. The peer group average is based on 2,297 large-cap funds as tracked by Morningstar. 10 EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC PORTFOLIO COMPOSITION BY INDUSTRY AS OF 4/30/00 Electronics 20.8% Other 17.8% Business Machines and Software 12.7% Healthcare/Drugs and Medicine 8.6% Telephone 7.0% Miscellaneous Finance 7.0% Banks 6.9% Retail 6.7% Oil-International 4.6% Producer Goods and Manufacturing 4.1% Insurance 3.8%
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC EQUITY INVESTMENT STYLE BOX(1) AS OF 4/30/00 - -Style- Value Blend Growth -Market Cap- x Large Medium Small
TOP 10 HOLDINGS AS A PERCENTAGE OF FUND INVESTMENTS(2) - ------------------------------------------- General Electric Co. 3.5% - ------------------------------------------- Citigroup, Inc. 3.2% - ------------------------------------------- Texas Instruments, Inc. 2.9% - ------------------------------------------- Cisco Systems, Inc. 2.8% - ------------------------------------------- Wal-Mart Stores, Inc. 2.6% - ------------------------------------------- - ------------------------------------------- Nortel Networks Corp. 2.6% - ------------------------------------------- BellSouth Corp. 2.6% - ------------------------------------------- Sun Microsystems, Inc. 2.3% - ------------------------------------------- Microsoft Corp. 2.2% - ------------------------------------------- Intel Corp. 2.2% - -------------------------------------------
(1) Source: Morningstar, Inc. The style box illustrates the composition of the fund's portfolio as of 4/30/00. It is not indicative of the fund's holdings after that date, nor does it represent an exact assessment of risk or future assessment or any type of future performance. Placement is based on the fund's P/E and P/B ratios relative to the S&P 500-Registered Trademark- Index, as well as the size of the companies in which it invests, or median market capitalization. (2) Nothing in this report represents a recommendation of a security by the investment adviser. 11 PORTFOLIO MANAGEMENT THE PORTFOLIO MANAGEMENT TEAM GERI HOM--vice president and senior portfolio manager, has primary responsibility for the day-to-day management for each of the funds. Geri joined CSIM in March 1995 as portfolio manager and was promoted to her current position in December 1996. She currently manages approximately $19 billion in indexed equity mutual fund 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. 12 FUND DISCUSSION QUESTIONS TO THE PORTFOLIO MANAGEMENT TEAM Q. HOW DID THE FUND PERFORM DURING THE REPORTING PERIOD? A. The Schwab Analytics Fund-Registered Trademark- achieved a total return of 12.26% for the six-month period ended April 30, 2000. That return exceeded the average large-cap fund by 0.85% according to data provided by Morningstar, Inc. From its inception on July 1, 1996, through April 30, 2000, the fund's average annual total return of 27.12% exceeded the average U.S. large cap fund by 6.20%. As shown in the table below, the fund also out-performed the S&P 500 Index for the reporting period.
INCEPTION (7/1/96) TO 4/30/00 SIX- AVERAGE ANNUAL MONTH ONE YEAR RETURN - ------------------------------------------------------------------------------- Schwab Analytics Fund 12.26% 20.13% 27.12% - ------------------------------------------------------------------------------- S&P 500 Index 7.19% 10.13% 24.27% - -------------------------------------------------------------------------------
Q. HOW ARE THE HOLDINGS OF THE ANALYTICS FUND DIFFERENT FROM THE STOCKS IN THE S&P 500 INDEX? A. First, there are significantly fewer holdings in the fund--99 as of April 30, 2000. The fund's management team 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 that our computer model identifies as having the best return potential based on valuation factors, projections of analysts identified for their superior forecasting skills and insider selling activity. Second, although historically the average market capitalization of the fund is somewhat smaller than the S&P 500 Index, during the most recent reporting period, the average market capitalization increased somewhat, relative to the S&P 500 Index. Since the management team picks securities from a universe of 1,300 companies, the fund has the capability of having relatively more or less mid-cap exposure by owning non-S&P 500 companies. Historically, the fund has held approximately 10% to 20% of its holdings in companies outside the S&P 500 Index. This percentage was maintained at approximately 10% during the reporting period. Finally, from an investment style perspective, the fund often has more of a value orientation than the S&P 500 Index. Frequently, the fund's selection criteria will favor stocks with a value orientation, or those stocks with relatively lower price-to-earnings and/or price-to-book value ratios. During this particular reporting period, this was not the case--the fund's growth/value orientation was very similar to the S&P 500 Index. Q. WHICH ELEMENTS OF THE FUND'S STRATEGY HAVE WORKED PARTICULARLY WELL? A. Successful stock selection within industries accounted for the majority of the fund's positive performance relative to the S&P 500 Index. Moreover, gradually over the six-month period, the fund has increased its exposure to stocks outside of the S&P 500, as they have exhibited appealing value characteristics. As of 10/31/99, the fund's fiscal year end, the fund's exposure to stocks not in the S&P 500 was approximately 11%. By the end of April 2000, that exposure had increased to 16%. This move has benefited the fund as the Mid-Cap 400 and the 13 FUND DISCUSSION (continued) Russell 2000 have out-performed the S&P 500 through April 30, 2000. Q. OF THOSE STOCKS HELD BY THE FUND THROUGHOUT THE PERIOD, WHICH EXPERIENCED THE GREATEST APPRECIATION? A. The five stocks with the greatest appreciation during the reporting period were:
PERCENTAGE APPRECIATION PERCENTAGE OF 6 MONTHS ENDED TOTAL INVESTMENT 4/30/00(1) (04/30/00) - ----------------------------------------------------------- Texas Instruments, Inc. 81.5% 2.9% - ----------------------------------------------------------- Nortel Networks Corp. 80.8% 2.6% - ----------------------------------------------------------- Ensco International Inc. 70.3% 1.0% - ----------------------------------------------------------- Intel Corp. 63.8% 2.2% - ----------------------------------------------------------- Lexmark Intl Group Inc. 50.3% 0.6% - -----------------------------------------------------------
(1) Past performance does not guarantee future results. This information measures the percentage change of each stock's price from 10/31/99 to 4/30/00. It is not intended to show, predict or guarantee future holdings, composition or performance of the fund, and it should not be considered a recommendation for any specific security. The gains in these stocks were influenced by various factors, and there is no guarantee that similar conditions will exist in the future or that the fund will realize all of the price appreciation that existed as of 4/30/00. Furthermore, the fund may sell or have already sold some or all of the stocks discussed herein at prices less favorable to the fund, and the fund may lose or have already lost money on these investments. Sales of stocks at appreciated prices may increase the level of income paid and distributed by the fund, and may result in additional tax liability to shareholders. 14 GLOSSARY ASSET ALLOCATION--The division of holdings among different types of assets, such as domestic stocks, international stocks, bonds and cashequivalent securities. BETA--A measure of a stock's volatility relative to the overall stock market. The beta of the S&P 500-Registered Trademark- Index is 1. Any investment that is more volatile than the market as a whole has a beta value higher than 1. If the beta is less than 1, the investment is considered to be less volatile than the market. CAPITAL GAIN (LOSS)--When a stock is sold for a profit, the difference between the net sales price and its net purchase price, or cost basis, is a capital gain. If a stock is sold below cost, the difference is a capital loss. EARNINGS GROWTH RATE--The average annual rate of growth in earnings over the past five years for the stocks in a fund's portfolio. EARNINGS PER SHARE (EPS)--The net income (or earnings) of a company for the past 12 months divided by the current number of shares outstanding. EXPENSE RATIO--Amount, expressed as a percentage of total investment, that shareholders pay annually for mutual fund operating expenses and management fees. MARKET CAPITALIZATION--The dollar value of a company or the amount someone would pay to buy the company today. It is calculated by multiplying the total number of outstanding shares by the current price per share. Median market cap is the midpoint of a fund's total market capitalization, weighted by the portion of assets invested in each holding. As a result, half of the fund's holdings will have market caps above the median, and the rest below it. NET ASSET VALUE (NAV)--The market value of a fund share. PRICE/BOOK (P/B) RATIO--Compares a stock's market value with the value of total assets minus intangible assets and total liabilities (the book value). It is determined by dividing the current price of the stock by common stockholder equity per share. In evaluating stocks, comparing P/B ratios often works well in situations where price/earnings ratios do not, because the P/B ratio is stable over time and is always a positive number. P/B ratios are best used for comparisons within an industry rather than between industries, as certain industries will usually contain stocks that have all high or all low P/B ratios. For mutual funds the P/B ratio is the weighted average of all the stocks' P/B ratios in the portfolio. PRICE/EARNINGS (P/E) RATIO--The ratio of a company's stock price to its earnings per share over the past year. For mutual funds the P/E ratio is the weighted average of all the stocks' P/E ratios in the mutual fund's portfolio. The P/E is an indicator of market expectations about a company's prospects. Typically, the higher the P/E, the greater the expectations for a company's future growth. Because earnings are volatile and sometimes "negative," however, the P/E has its limitations and may fail as a measure for a significant number of stocks at any given time. RETURN ON EQUITY--The average annual rate of return generated by the companies a fund holds during the past five years for each dollar of shareholders' equity (net income divided by shareholders' equity). STOCK--A share of ownership, or equity, in a corporation. 15 GLOSSARY (continued) TOTAL RETURN--The sum of dividends, plus capital gains (or losses). TURNOVER RATE--An indication of a fund's trading activity. Funds with higher turnover rates typically incur higher transaction costs and are more likely to distribute capital gains, which are taxable to investors. YIELD--The income generated by an investment, expressed as a percentage of its price. 16 SCHWAB ANALYTICS FUND(R) SCHEDULE OF INVESTMENTS April 30, 2000 (Unaudited)
Number Value of Shares (000s) --------- ------ COMMON STOCK -- 97.4% AEROSPACE / DEFENSE -- 2.3% Boeing Co. 28,500 $ 1,131 General Dynamics Corp. 47,200 2,761 United Technologies Corp. 75,500 4,695 -------- 8,587 -------- AUTOMOTIVE PRODUCTS / MOTOR VEHICLES -- 1.1% Ford Motor Co. 74,100 4,052 -------- BANKS -- 6.9% BancWest Corp. 224,500 4,111 Chase Manhattan Corp. 53,700 3,870 City National Corp. 149,400 5,500 Fleet Boston Financial Corp. 76,200 2,700 J.P. Morgan & Co., Inc. 34,100 4,378 PNC Financial Services Group 19,900 868 Providian Financial Corp. 40,600 3,575 Silicon Valley Bancshares+ 16,500 1,019 -------- 26,021 -------- BUSINESS MACHINES & SOFTWARE -- 12.8% Cabletron Systems, Inc.+ 40,200 919 Cisco Systems, Inc.+ 154,800 10,732 Dell Computer Corp.+ 44,600 2,236 Hewlett-Packard Co. 13,000 1,755 International Business Machines Corp. 41,100 4,588 Lexmark International Group, Inc., Class A+ 19,300 2,277 Microsoft Corp.+ 121,900 8,502 Novellus Systems, Inc.+ 31,100 2,074 Oracle Corp.+ 75,500 6,035 Sun Microsystems, Inc.+ 96,800 8,899 -------- 48,017 -------- BUSINESS SERVICES -- 1.8% Citrix Systems, Inc.+ 15,600 953 Electronic Data Systems Corp. 36,100 2,482 Flextronics International Ltd.+ 20,000 1,405 Qlogic Corp.+ 20,300 2,036 -------- 6,876 -------- Number Value of Shares (000s) --------- ------ CHEMICAL -- 1.0% E. I. du Pont de Nemours & Co. 77,800 $ 3,691 -------- CONSTRUCTION-- 0.1% Sawtek, Inc.+ 10,200 488 -------- CONSUMER - NONDURABLE -- 0.5% Darden Restaurants, Inc. 51,400 948 McDonald's Corp. 23,400 892 -------- 1,840 -------- ELECTRONICS -- 21.0% Advanced Fibre Communications, Inc.+ 24,200 1,106 Analog Devices, Inc.+ 73,500 5,646 Avnet, Inc. 20,000 1,572 Cadence Design Systems, Inc.+ 92,600 1,557 CommScope, Inc.+ 98,400 4,674 Cypress Semiconductor Corp.+ 88,600 4,602 Electro Scientific Industries, Inc.+ 41,900 2,642 Harmonic, Inc.+ 25,400 1,875 Intel Corp. 65,100 8,255 Kulicke & Soffa Industries, Inc.+ 12,200 955 LSI Logic Corp.+ 61,900 3,869 Micron Technology, Inc.+ 15,000 2,089 MMC Networks, Inc.+ 31,100 824 Motorola, Inc. 30,000 3,572 Nortel Networks Corp. 87,100 9,864 Remec, Inc.+ 21,000 797 Scientific-Atlanta, Inc. 33,000 2,147 Tektronix, Inc. 75,800 4,387 Tellabs, Inc.+ 30,800 1,688 Texas Instruments, Inc. 67,100 10,929 Vishay Intertechnology, Inc.+ 69,600 5,838 -------- 78,888 -------- ENERGY - RAW MATERIALS -- 1.7% ENSCO International, Inc. 111,500 3,700 Occidental Petroleum Corp. 130,700 2,802 -------- 6,502 -------- FOOD & AGRICULTURE -- 1.1% General Mills, Inc. 45,000 1,637 Quaker Oats Co. 39,500 2,575 -------- 4,212 --------
17 SCHWAB ANALYTICS FUND(R) SCHEDULE OF INVESTMENTS (continued) April 30, 2000 (Unaudited)
Number Value of Shares (000s) --------- ------ HEALTHCARE / DRUGS & MEDICINE -- 8.6% Allergan, Inc. 96,300 $ 5,670 Baxter International, Inc. 39,700 2,585 Bristol-Myers Squibb Co. 147,500 7,734 Edwards Lifesciences Corp.+ 7,940 119 Johnson & Johnson 53,900 4,447 Merck & Co., Inc. 116,000 8,062 Schering-Plough Corp. 93,900 3,785 -------- 32,402 -------- HOUSEHOLD PRODUCTS -- 1.0% Colgate-Palmolive Co. 62,400 3,565 -------- INSURANCE -- 3.8% American International Group, Inc. 39,100 4,289 AXA Financial, Inc. 237,700 7,755 Marsh & McLennan Cos., Inc. 23,100 2,277 -------- 14,321 -------- MEDIA -- 1.7% McGraw-Hill Cos., Inc. 52,800 2,772 Tribune Co. 74,800 2,908 Washington Post Co. 1,700 830 -------- 6,510 -------- MISCELLANEOUS FINANCE -- 7.1% Capital One Financial Corp. 65,100 2,848 Citigroup, Inc. 202,750 12,051 Fannie Mae 54,500 3,287 Freddie Mac 37,500 1,723 Lehman Brothers Holdings, Inc. 22,300 1,830 Morgan Stanley Dean Witter Discover & Co. 63,500 4,874 -------- 26,613 -------- NON-FERROUS METALS -- 0.8% Alcoa, Inc. 44,500 2,887 -------- Number Value of Shares (000s) --------- ------ OIL - INTERNATIONAL -- 4.7% Chevron Corp. 53,500 $ 4,554 Exxon Mobil Corp. 48,600 3,776 Royal Dutch Petroleum Co. - Sponsored ADR 116,100 6,661 Texaco, Inc. 50,800 2,515 -------- 17,506 -------- OPTICAL & PHOTO -- 0.5% Corning, Inc. 8,900 1,758 -------- PRODUCER GOODS & MANUFACTURING -- 4.2% General Electric Co. 85,300 13,413 Jabil Circuit, Inc.+ 52,800 2,161 -------- 15,574 -------- RETAIL -- 6.8% Albertson's, Inc. 45,400 1,478 Costco Wholesale Corp.+ 116,500 6,298 Gap, Inc. 67,337 2,475 Home Depot, Inc. 75,400 4,227 Safeway, Inc.+ 26,200 1,156 Wal-Mart Stores, Inc. 178,200 9,868 -------- 25,502 -------- TELEPHONE -- 7.1% AT&T Corp. 93,000 4,342 Bell Atlantic Corp. 31,100 1,843 BellSouth Corp. 201,100 9,791 Broadwing, Inc.+ 65,400 1,852 Carrier Access Corp.+ 54,000 2,356 CenturyTel, Inc. 81,400 1,994 GTE Corp. 37,700 2,554 US West, Inc. 25,700 1,829 -------- 26,561 --------
18
Number Value of Shares (000s) --------- -------- UTILITIES - ELECTRIC & GAS -- 0.8% Public Service Enterprise Group, Inc. 77,900 $ 2,795 --------- TOTAL COMMON STOCK (Cost $276,182) 365,168 --------- SHORT-TERM INVESTMENTS -- 3.7% Provident Institutional TempFund, 5.74%* 13,952,040 13,952 --------- TOTAL SHORT-TERM INVESTMENTS (Cost $13,952) 13,952 -------- TOTAL INVESTMENTS -- 101.1% (Cost $290,134) 379,120 --------- OTHER Assets ANDLIABILITIES, NET -- (1.1%) Other assets 396 Liabilities (4,425) --------- (4,029) --------- TOTAL NET ASSETS -- 100.0% $ 375,091 =========
NOTES TO SCHEDULE OF INVESTMENTS April 30, 2000 (Unaudited) + Non-income producing security. * Interest rate represents the yield on report date. ADR -- American Depository Receipt. See accompanying Notes to Schedules of Investments and Notes to Financial Statements. 19 SCHWAB ANALYTICS FUND(R) STATEMENT OF ASSETS AND LIABILITIES (in thousands) April 30, 2000 (Unaudited) ASSETS Investments, at value (Cost: $290,134) $379,120 Receivables: Fund shares sold 23 Dividends 264 Interest 44 Prepaid expenses 65 -------- Total assets 379,516 -------- LIABILITIES Payables: Investments purchased 4,326 Investment advisory and administration fees 19 Transfer agency and shareholder service fees 10 Accrued expenses 70 -------- Total liabilities 4,425 -------- Net assets applicable to outstanding shares $375,091 ======== NET ASSETS CONSIST OF: Pain-in capital $257,587 Undistributed net investment income 242 Accumulated net realized gain on investments sold and futures contracts 28,276 Net unrealized appreciation on investments 88,986 -------- $375,091 ======== PRICING OF SHARES Outstanding shares, $0.00001 par value (unlimited shares authorized) 19,072 Net asset value, offering and redemption price per share $19.67
See accompanying Notes to Financial Statements. 20 SCHWAB ANALYTICS FUND(R) STATEMENT OF OPERATIONS (in thousands) For the six months ended April 30, 2000 (Unaudited) Investment income: Dividends (net of foreign tax withheld of $1) $ 1,493 Interest 226 ------- Total investment income 1,719 ------- Expenses: Investment advisory and administration fees 959 Transfer agency and shareholder service fees 444 Custodian fees 19 Portfolio accounting fees 31 Registration fees 11 Professional fees 16 Shareholder reports 4 Trustees' fees 5 Proxy fees 11 Other expenses 5 ------- 1,505 Less: expenses reduced (see Note 4) (161) ------- Net expenses incurred by fund 1,344 ------- Net investment income 375 ------- Net realized gain on investments and futures contracts: Net realized gain on investments sold 28,393 Net realized gain on futures contracts 190 ------- Net realized gain on investments and futures contracts 28,583 ------- Change in net unrealized appreciation (depreciation) on investments and futures contracts: Net unrealized appreciation on investments 10,181 Net unrealized depreciation on futures contracts (145) ------- Net unrealized appreciation on investments and futures contracts 10,036 ------- Net gain on investments 38,619 ------- Increase in net assets resulting from operations $38,994 =======
See accompanying Notes to Financial Statements. 21 SCHWAB ANALYTICS FUND(R) STATEMENTS OF CHANGES IN NET ASSETS (in thousands)
Six months ended Year 04/30/00 ended (Unaudited) 10/31/99 ----------- -------- Operations: Net investment income $ 375 $ 787 Net realized gain on investments and futures contracts 28,583 25,589 Net unrealized appreciation on investments and futures contracts 10,036 40,876 -------- -------- Increase in net assets resulting from operations 38,994 67,252 -------- -------- Dividends and distributions: Dividends to shareholders from net investment income (764) (1,124) Distributions to shareholders from net capital gains (25,635) (7,390) -------- -------- Total dividends and distributions to shareholders (26,399) (8,514) -------- -------- Capital share transactions: Proceeds from shares sold 123,406 90,154 Net asset value of shares issued in reinvestment of dividends 24,672 7,968 Payments for shares redeemed (74,237) (59,718) -------- -------- Increase in net assets from capital share transactions 73,841 38,404 -------- -------- Total increase in net assets 86,436 97,142 Net assets: Beginning of period 288,655 191,513 -------- -------- End of period (including undistributed net investment income of $242 and $630, respectively) $375,091 $288,655 -------- -------- Number of fund shares: Sold 6,386 5,132 Reinvested 1,300 499 Redeemed (3,877) (3,510) -------- -------- Net increase in shares outstanding 3,809 2,121 Shares outstanding: Beginning of period 15,263 13,142 -------- -------- End of period 19,072 15,263 ======== ========
See accompanying Notes to Financial Statements. 22 FINANCIAL HIGHLIGHTS
11/1/99- 11/1/98- 11/1/97- 11/1/96- 7/1/96- 4/30/00 10/31/99 10/31/98 10/31/97 10/31/96 SCHWAB ANALYTICS FUND(R) (Unaudited0 - ------------------------------------------------------------------------------------------------------------- PER-SHARE DATA ($) - ------------------------------------------------------------------------------------------------------------- Net asset value at beginning of period 18.91 14.57 13.72 11.01 10.00 ------------------------------------------------------------- Income from investment operations: Net investment income 0.01 0.06 0.10 0.13 0.05 Net realized and unrealized gain on investments 2.26 4.94 2.20 2.79 0.96 ------------------------------------------------------------- Total income from investment operations 2.27 5.00 2.30 2.92 1.01 ------------------------------------------------------------- Less distributions: Dividends from net investment income (0.04) (0.09) (0.12) (0.08) -- Distributions from capital gains (1.47) (0.57) (1.33) (0.13) -- ------------------------------------------------------------- Total distributions (1.51) (0.66) (1.45) (0.21) -- ------------------------------------------------------------- Net asset value at end of period 19.67 18.91 14.57 13.72 11.01 ------------------------------------------------------------- Total return (%) 12.26(1) 35.20 18.37 26.83 10.10(1) RATIOS/SUPPLEMENTAL DATA (%) - ------------------------------------------------------------------------------------------------------------- Ratio of net operating expenses to average net assets 0.75(2,3) 0.75 0.75 0.74 0.75(2) Expense reductions reflected in above ratio 0.09(2) 0.18 0.37 0.41 0.76(2) Ratio of net investment income to average net assets 0.21(2) 0.34 0.70 1.04 1.41(2) Portfolio turnover rate 51 99 115 120 33 Net assets, end of period ($ x 1,000) 375,091 288,655 191,513 149,872 97,789 1 Not annualized. 2 Annualized. 3 Would have been 0.76% if certain non-routine expenses had been included.
See accompanying Notes to Financial Statements. 23 NOTES TO FINANCIAL STATEMENTS For the six months ended April 30, 2000 (Unaudited) (All currency amounts are in thousands unless otherwise noted) 1. DESCRIPTION OF THE FUND The Schwab Analytics Fund(R) (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 (the "1940 Act"). In addition to the fund, the trust also offers the Schwab Total Stock Market Index Fund(TM), Schwab S&P 500 Fund, Schwab Small-Cap Index Fund(R), Schwab International Index Fund(R), Schwab MarketTrack Growth Portfolio, Schwab MarketTrack Balanced Portfolio, Schwab MarketTrack Conservative Portfolio, Schwab MarketTrack All Equity Portfolio, Schwab MarketManager Growth Portfolio, Schwab MarketManager Balanced Portfolio, Schwab MarketManager Small Cap Portfolio, Schwab MarketManager International Portfolio, Institutional Select(TM) S&P 500 Fund, Institutional Select(TM) Large-Cap Value Index Fund and Institutional Select(TM) Small-Cap Value Index Fund. 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. 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 or in the over-the-counter market 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 adviser pursuant to guidelines adopted in good faith by the Board of Trustees. Futures contracts, which are traded on exchanges, are valued at their settlement prices as of the close of such exchanges. Short-term securities with 60 days or less to maturity are stated at amortized cost, which approximates market value. SECURITIES TRANSACTIONS, INVESTMENT INCOME AND REALIZED GAINS (LOSSES) -- Security transactions are accounted for on a trade date basis (date the order to buy or sell is executed). Dividend income and distributions to shareholders are recorded on the ex-dividend date. Interest income (including accretion of discount) is recorded on the accrual basis. Realized gains and losses from security transactions are determined on an identified cost basis. FUTURES CONTRACTS -- The fund may invest in futures contracts. The fund is required to deposit with the broker an amount of cash or cash equivalents equal to a certain percentage of the contract amount. This is known as the "initial margin." The "variation margin" represents the daily fluctuation in the value of the contract. When the contract is closed, the fund records a realized gain or loss equal to the difference between the value of the contract at the time is was opened and the time it was closed. 24 The fund will invest in these instruments to participate in the return of an index. The use of futures contracts involves certain risks, which include (1) imperfect correlation between the price movement of the contracts and the underlying securities, or (2) inability to close out positions due to different trading hours, or the temporary absence of a liquid market, for either the contract or underlying securities. These risks may involve amounts exceeding the amount recognized in the fund's statement of operations at any given time. As of April 30, 2000, there were no futures contracts held in this fund. 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 substantially all net investment income and realized net capital gains, if any, to shareholders. Therefore, no federal income tax provision is required. The fund is considered a separate entity for tax purposes. At April 30, 2000 net unrealized appreciation, which was substantially the same for financial reporting and federal income tax purposes, aggregated $88,986 of which $101,920 related to appreciated securities and $12,934 related to depreciated securities. RECLASSIFICATIONS -- Generally accepted accounting principles require that certain components of net assets be reclassified to reflect permanent differences between financial and tax reporting. Accordingly, current year's permanent book/tax differences of $1 for the fund has been reclassified from undistributed realized gain on investments to undistributed net investment income. These reclassifications have no effect on net assets or net asset value per share. 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 adviser"). For advisory services and facilities furnished, the fund pays an annual fee, payable monthly, of 0.54% of the first $500 million of average daily net assets, and 0.49% of such net assets over $500 million. The investment adviser has reduced a portion of its fee for the six months ended April 30, 2000 (see Note 4). Prior to February 28, 1999, the fund paid an annual fee, payable monthly, of 0.74% on the first $1 billion of average daily net assets, and 0.69% on the next $1 billion and 0.64% of such net assets over $2 billion. SUB-ADVISORY AGREEMENT -- The investment adviser 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 adviser pays Symphony an annual fee, payable monthly, of 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. 25 NOTES TO FINANCIAL STATEMENTS (continued) 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 fund's average daily net assets for transfer agency services and 0.20% of such net assets for shareholder services. OFFICERS AND TRUSTEES -- Certain officers and trustees of the trust are also officers and/or directors of the investment adviser and/or Schwab. During the six months ended April 30, 2000, the trust made no direct payments to its officers or trustees who are "interested persons" within the meaning of the 1940 Act. The fund incurred fees aggregating $5 related to the trust's unaffiliated trustees. 4. EXPENSES REDUCED AND ABSORBED BY THE INVESTMENT ADVISER AND SCHWAB The investment adviser and Schwab guarantee that, through at least February 28, 2001, the fund's total operating expenses will not exceed 0.75% of the fund's average daily net assets, after waivers and reimbursements. For purposes of this guarantee, operating expenses do not include interest, taxes and certain non-routine expenses. The operating expense ratio for six months ended April 30, 2000 did include non-routine expenses. For the six months ended April 30, 2000, the total of such fees reduced by the investment adviser was $161. 5. BORROWING AGREEMENTS The trusts have both committed and uncommitted lines of credit arrangements with PNC Bank N.A., Bank of America NT & SA and The Bank of New York, whereby the trusts may borrow on behalf of the funds, as a temporary measure to satisfy redemption requests or for extraordinary or emergency purposes. The trusts may borrow in an aggregate amount of up to $150 million from PNC Bank N.A., $133 million from Bank of America NT &SA and $183 million from The Bank of New York. Amounts borrowed under these arrangements bear interest at periodically negotiated rates. The funds also pay annual fees for the unused balance of the committed line of credit. During the reporting period, the funds only borrowed against the uncommitted lines of credit. As of April 30, 2000, there were no borrowings outstanding. 6. INVESTMENT TRANSACTIONS Purchases, sales and maturities of investment securities, other than short-term obligations and U.S. Government securities, for the six months ended April 30, 2000, were $229,882 and $175,637, respectively. 26 THE SCHWABFUNDS FAMILY-REGISTERED TRADEMARK- 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 market funds. Please call 800-435-4000 for a free prospectus and brochure for any of these SchwabFunds.-Registered Trademark- This report must be preceded or accompanied by a current prospectus. METHODS FOR PLACING ORDERS The information below outlines how Schwab brokerage account investors can place orders. If you are investing through a third-party investment provider, methods for placing orders may be different. PHONE Call 800-435-4000, day or night (for TDD service, call 800-345-2550). INTERNET www.schwab.com/schwabfunds MAIL Write to SchwabFunds at: P. O. Box 7575, San Francisco, CA 94120-7575 When selling or exchanging shares, be sure to include the signatures of at least one of the persons whose name is on the account. IN PERSON Visit the nearest Charles Schwab office. SCHWAB ASSET ALLOCATION FUNDS Schwab MarketTrack All Equity Portfolio Schwab MarketTrack Growth Portfolio Schwab MarketTrack Balanced Portfolio Schwab MarketTrack Conservative Portfolio Schwab MarketManager Growth Portfolio Schwab MarketManager Balanced Portfolio SCHWAB STOCK FUNDS Schwab S&P 500-Registered Trademark- Fund Schwab 1000 Fund-Registered Trademark- Schwab Total Stock Market Index Fund-TM- Schwab Analytics Fund-Registered Trademark- Schwab Small-Cap Index Fund-Registered Trademark- Schwab MarketManager Small Cap Portfolio Schwab International Index Fund-Registered Trademark- Schwab MarketManager International Portfolio SCHWAB BOND FUNDS Schwab YieldPlus Fund-TM- Schwab Total Bond Market Index Fund Schwab Short-Term Bond Market Index Fund Schwab Long-Term Tax-Free Bond Fund Schwab Short/Intermediate Tax-Free Bond Fund Schwab California Long-Term Tax-Free Bond Fund Schwab California Short/Intermediate Tax-Free Bond Fund SCHWAB MONEY MARKET FUNDS Schwab offers an array of money market funds that seek high current income consistent with safety and liquidity.(1) 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.-Registered Trademark- (1) Investments in money market funds are neither insured nor guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency and, although they seek to preserve the value of your investment at $1 per share, it is possible to lose money. SCHWABFUNDS-REGISTERED TRADEMARK- INVESTMENT ADVISER Charles Schwab Investment Management, Inc. 101 Montgomery Street, San Francisco, CA 94104 DISTRIBUTOR Charles Schwab & Co., Inc. P.O. Box 7575, San Francisco, CA 94120-7575 This report is not authorized for distribution to prospective investors unless preceded or accompanied by a current prospectus. - -C- 2000 Charles Schwab & Co., Inc. All rights reserved. Member SIPC/NYSE. Printed on recycled paper. MKT3561-2 (6/00) INSTITUTIONAL SELECT-TM- FUNDS APRIL 30, 2000 SEMIANNUAL REPORT AND AN IMPORTANT NOTICE REGARDING DELIVERY OF SHAREHOLDER DOCUMENTS IMPORTANT NOTICE REGARDING DELIVERY OF SHAREHOLDER DOCUMENTS The Securities and Exchange Commission permits mutual funds to deliver only one copy of shareholder documents, including prospectuses and shareholder reports, to fund investors with multiple accounts at the same residential or post office box address. This practice is commonly called "householding" and is intended to eliminate duplicate mailings of shareholder documents. Mailings of your Institutional Select-TM- Funds shareholder documents may be householded indefinitely unless you instruct us otherwise. ADDITIONAL COPIES OF SHAREHOLDER DOCUMENTS ALL INSTITUTIONAL SELECT FUNDS PROSPECTUSES AND SHAREHOLDER REPORTS ARE AVAILABLE FREE OF CHARGE, AND MAY BE REQUESTED AT ANY TIME BY CALLING 1-800-515-2157. If you would prefer that your Institutional Select Funds mailings not be householded, please contact Schwab at 1-800-515-2157, or your Investment Manager. Your instructions that householding not apply to accounts holding Institutional Select Funds will be effective within 30 days of receipt by Schwab. INSTITUTIONAL SELECT-TM- FUNDS SEMIANNUAL REPORT APRIL 30, 2000 INSTITUTIONAL SELECT S&P 500 FUND INSTITUTIONAL SELECT LARGE-CAP VALUE INDEX FUND INSTITUTIONAL SELECT SMALL-CAP VALUE INDEX FUND INSTITUTIONAL SELECT-TM- FUNDS We are pleased to bring you this semiannual report for the Institutional Select-TM- Funds (the funds) for the six-month period ended April 30, 2000. This report includes the following funds: - Institutional Select S&P 500 Fund - Institutional Select Large-Cap Value Index Fund - Institutional Select Small-Cap Value Index Fund The funds seek to achieve their respective goals by tracking the performance of different stock market indices. Because each fund typically only rebalances its portfolio periodically in order to track its index, the funds have experienced significantly lower portfolio turnover and transaction costs than non-index funds. This approach, combined with low fund operating expenses, makes these funds cost-effective investments for long-term investors. FUND LISTINGS The funds are listed in THE WALL STREET JOURNAL, USA TODAY, INVESTOR'S BUSINESS DAILY and most local newspapers under the heading INSTITUTIONAL SELECT:
NEWSPAPER LISTING SYMBOL S&P500 ISLCX LrgCapValue ISLVX SmCapValue ISSVX
S&P 500-REGISTERED TRADEMARK- IS A TRADEMARK OF THE MCGRAW-HILL COMPANIES, INC., AND HAVE BEEN LICENSED FOR USE BY SCHWAB CAPITAL TRUST. THE INSTITUTIONAL SELECT S&P 500 FUND IS NOT SPONSORED, SOLD OR PROMOTED BY STANDARD & POOR'S-REGISTERED TRADEMARK-, AND THEY MAKE NO REPRESENTATIONS REGARDING THE ADVISABILITY OF INVESTING IN THE FUND. CONTENTS - --------------------------------------------- A Message from the Chairman 1 - --------------------------------------------- Market Overview 2 - --------------------------------------------- Institutional Select S&P 500 Fund FUND PERFORMANCE 6 PORTFOLIO SNAPSHOT 8 - --------------------------------------------- Institutional Select Large-Cap Value Index Fund FUND PERFORMANCE 10 PORTFOLIO SNAPSHOT 12 - --------------------------------------------- Institutional Select Small-Cap Value Index Fund FUND PERFORMANCE 14 PORTFOLIO SNAPSHOT 16 - --------------------------------------------- Portfolio Management 18 - --------------------------------------------- Fund Discussion 19 - --------------------------------------------- Glossary 22 - --------------------------------------------- Financial Statements and Notes 24 - ---------------------------------------------
A MESSAGE FROM THE CHAIRMAN [PHOTO] Dear Shareholder, This semiannual report is designed to provide you with detailed information about the Institutional Select-TM- Funds, a family of institutional index funds to better serve the needs of Investment Managers and their clients. These funds have highly competitive expense ratios, and are generally only available through Investment Managers. With the support of investors such as yourselves, combined assets in the Institutional Select Funds exceeded $475 million on April 30, 2000. Charles Schwab Investment Management, Inc. (CSIM) is the Institutional Select Funds' investment adviser. CSIM is committed to providing investors with high-quality, cost-efficient investment solutions. CSIM was created in 1989, and as of April 30, 2000, managed more that $110 billion in assets for over five million shareholder accounts. In closing, I would like to thank you for your business. We will continue to do everything we can to warrant the trust you have placed in us. Sincerely, /s/ Charles R. Schwab Charles R. Schwab April 30, 2000 1 MARKET OVERVIEW U.S. ECONOMIC GROWTH April 2000 marked the beginning of the tenth year of the current expansion, making it the longest in U.S. history. Gross Domestic Product (GDP) grew at a real (inflation adjusted) rate of 4.6% during 1999--the fourth consecutive year at 4% or more and 5.4% during the first quarter of 2000. This rate is considered by most economists and the Federal Reserve (Fed) to be in excess of what the economy can absorb without experiencing inflationary pressures, perhaps 3.5% to 4.0%. High levels of consumer spending fueled by rising incomes, personal wealth and consumer confidence, as well as strong business capital investment and a healthy housing sector, have been the principal factors driving this lengthy expansion. EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC REAL GDP GROWTH RATE Quarterly Percentage Change (Annualized Rate) Q1 1990 5.0% Q2 1990 1.0% Q3 1990 -0.6% Q4 1990 -3.0% Q1 1991 -1.7% Q2 1991 2.6% Q3 1991 1.3% Q4 1991 2.5% Q1 1992 4.3% Q2 1992 4.0% Q3 1992 3.1% Q4 1992 5.2% Q1 1993 -0.7% Q2 1993 2.1% Q3 1993 1.5% Q4 1993 6.0% Q1 1994 3.6% Q2 1994 5.7% Q3 1994 2.2% Q4 1994 5.1% Q1 1995 1.5% Q2 1995 0.8% Q3 1995 3.2% Q4 1995 3.3% Q1 1996 2.9% Q2 1996 6.9% Q3 1996 2.2% Q4 1996 4.9% Q1 1997 4.9% Q2 1997 5.1% Q3 1997 4.0% Q4 1997 3.1% Q1 1998 6.7% Q2 1998 2.1% Q3 1998 3.8% Q4 1998 5.9% Q1 1999 3.7% Q2 1999 1.9% Q3 1999 5.7% Q4 1999 7.3% Q1 2000 5.4%
Source: BLOOMBERG L.P. Looking ahead, the availability of increasingly scarce labor resources and the domestic consumers' response to continued stock market volatility may be key determinants of whether the economy continues on its current course or softens throughout 2000. The Fed has raised the federal funds rate by 1.75% since June 1999 in an as yet unsuccessful effort to moderate the economy's rapid growth rate. The consensus of most economists is that the U.S. economy appears poised for continued strong growth and additional intervention by the Fed (increases in the federal funds rate) until the growth rate of the economy slows to a more sustainable level. UNEMPLOYMENT The unemployment rate dropped to 3.9% in April 2000, a three-decade low. Employment growth continues to outstrip population growth. Reflecting a shrinking pool of available workers, labor markets continue to be extremely tight in many areas of the country and there has been some regional evidence of labor shortages driving up wages. The labor force participation rate, which measures the employment population as a percent of the total population, is at a post-war high. Growth in the labor force has slowed, and the Fed has expressed its concern that strong demand and tight labor markets may continue to put pressure on manufacturers and service providers to raise prices. EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC U.S. UNEMPLOYMENT RATE Jan.90 5.4% Feb.90 5.3% Mar.90 5.2% Apr.90 5.4% May.90 5.4% Jun.90 5.2% Jul.90 5.5% Aug.90 5.7% Sep.90 5.9% Oct.90 5.9% Nov.90 6.2% Dec.90 6.3% Jan.91 6.4% Feb.91 6.6% Mar.91 6.8% Apr.91 6.7% May.91 6.9% Jun.91 6.9% Jul.91 6.8% Aug.91 6.9% Sep.91 6.9% Oct.91 7.0% Nov.91 7.0% Dec.91 7.3% Jan.92 7.3% Feb.92 7.4% Mar.92 7.4% Apr.92 7.4% May.92 7.6% Jun.92 7.8% Jul.92 7.7% Aug.92 7.6% Sep.92 7.6% Oct.92 7.3% Nov.92 7.4% Dec.92 7.4% Jan.93 7.3% Feb.93 7.1% Mar.93 7.0% Apr.93 7.1% May.93 7.1% Jun.93 7.0% Jul.93 6.9% Aug.93 6.8% Sep.93 6.7% Oct.93 6.8% Nov.93 6.6% Dec.93 6.5% Jan.94 6.8% Feb.94 6.6% Mar.94 6.5% Apr.94 6.4% May.94 6.1% Jun.94 6.1% Jul.94 6.3% Aug.94 6.0% Sep.94 5.8% Oct.94 5.8% Nov.94 5.6% Dec.94 5.5% Jan.95 5.6% Feb.95 5.4% Mar.95 5.3% Apr.95 5.8% May.95 5.8% Jun.95 5.6% Jul.95 5.6% Aug.95 5.7% Sep.95 5.6% Oct.95 5.5% Nov.95 5.7% Dec.95 5.6% Jan.96 5.6% Feb.96 5.5% Mar.96 5.6% Apr.96 5.5% May.96 5.6% Jun.96 5.3% Jul.96 5.5% Aug.96 5.1% Sep.96 5.2% Oct.96 5.2% Nov.96 5.3% Dec.96 5.4% Jan.97 5.3% Feb.97 5.3% Mar.97 5.1% Apr.97 5.0% May.97 4.7% Jun.97 5.0% Jul.97 4.7% Aug.97 4.9% Sep.97 4.7% Oct.97 4.7% Nov.97 4.6% Dec.97 4.7% Jan.98 4.5% Feb.98 4.6% Mar.98 4.6% Apr.98 4.3% May.98 4.3% Jun.98 4.5% Jul.98 4.5% Aug.98 4.5% Sep.98 4.5% Oct.98 4.5% Nov.98 4.4% Dec.98 4.3% Jan.99 4.3% Feb.99 4.4% Mar.99 4.2% Apr.99 4.3% May.99 4.2% Jun.99 4.3% Jul.99 4.3% Aug.99 4.2% Sep.99 4.2% Oct.99 4.1% Nov.99 4.1% Dec.99 4.1% Jan.00 4.0% Feb.00 4.1% Mar.00 4.1% Apr.00 3.9%
Source: BLOOMBERG L.P. 2 INFLATION Virtually all measures of price inflation exhibited upward trends during the reporting period. The Consumer Price Index (CPI) rose 3.0% for the year ended April 30, 2000. Its core rate (which excludes the more volatile food and energy components) was up 2.2%. The Personal Consumption Expenditures Index, a measure of inflation closely watched by the Fed, rose 2.3% for the same period. The GDP price deflator, the broadest measure of inflation, indicated prices rising at an annual rate of 3.2% during the first quarter of 2000. EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC MEASURES OF INFLATION
CONSUMER PRICE INDEX EMPLOYMENT COST-INDEX 12-MONTH CHANGE 12-MONTH CHANGE (MONTHLY) (QUARTERLY) Jan-90 5.2% 5.5% Feb-90 5.3% 5.5% Mar-90 5.2% 5.5% Apr-90 4.7% 5.4% May-90 4.4% 5.4% Jun-90 4.7% 5.4% Jul-90 4.8% 5.2% Aug-90 5.6% 5.2% Sep-90 6.2% 5.2% Oct-90 6.3% 4.9% Nov-90 6.3% 4.9% Dec-90 6.1% 4.9% Jan-91 5.7% 4.6% Feb-91 5.3% 4.6% Mar-91 4.9% 4.6% Apr-91 4.9% 4.6% May-91 5.0% 4.6% Jun-91 4.7% 4.6% Jul-91 4.4% 4.3% Aug-91 3.8% 4.3% Sep-91 3.4% 4.3% Oct-91 2.9% 4.3% Nov-91 3.0% 4.3% Dec-91 3.1% 4.3% Jan-92 2.6% 4.0% Feb-92 2.8% 4.0% Mar-92 3.2% 4.0% Apr-92 3.2% 3.6% May-92 3.0% 3.6% Jun-92 3.1% 3.6% Jul-92 3.2% 3.5% Aug-92 3.1% 3.5% Sep-92 3.0% 3.5% Oct-92 3.2% 3.5% Nov-92 3.0% 3.5% Dec-92 2.9% 3.5% Jan-93 3.3% 3.5% Feb-93 3.2% 3.5% Mar-93 3.1% 3.5% 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% 3.5% Nov-93 2.7% 3.5% Dec-93 2.7% 3.5% Jan-94 2.5% 3.2% Feb-94 2.5% 3.2% Mar-94 2.5% 3.2% Apr-94 2.4% 3.2% May-94 2.3% 3.2% Jun-94 2.5% 3.2% Jul-94 2.8% 3.2% Aug-94 2.9% 3.2% Sep-94 3.0% 3.2% Oct-94 2.6% 3.0% Nov-94 2.7% 3.0% Dec-94 2.7% 3.0% Jan-95 2.8% 2.9% Feb-95 2.9% 2.9% Mar-95 2.9% 2.9% Apr-95 3.1% 2.9% May-95 3.2% 2.9% Jun-95 3.0% 2.9% Jul-95 2.8% 2.7% Aug-95 2.6% 2.7% Sep-95 2.5% 2.7% Oct-95 2.8% 2.7% Nov-95 2.6% 2.7% Dec-95 2.5% 2.7% Jan-96 2.7% 2.8% Feb-96 2.7% 2.8% Mar-96 2.8% 2.8% Apr-96 2.9% 2.9% May-96 2.9% 2.9% Jun-96 2.8% 2.9% Jul-96 3.0% 2.8% Aug-96 2.9% 2.8% Sep-96 3.0% 2.8% Oct-96 3.0% 2.9% Nov-96 3.3% 2.9% Dec-96 3.3% 2.9% Jan-97 3.0% 2.9% Feb-97 3.0% 2.9% Mar-97 2.8% 2.9% Apr-97 2.5% 2.8% May-97 2.2% 2.8% Jun-97 2.3% 2.8% Jul-97 2.2% 3.0% Aug-97 2.2% 3.0% Sep-97 2.2% 3.0% Oct-97 2.1% 3.3% Nov-97 1.8% 3.3% Dec-97 1.7% 3.3% Jan-98 1.6% 3.3% Feb-98 1.4% 3.3% Mar-98 1.4% 3.3% Apr-98 1.4% 3.5% May-98 1.7% 3.5% Jun-98 1.7% 3.5% Jul-98 1.7% 3.7% Aug-98 1.6% 3.7% Sep-98 1.5% 3.7% Oct-98 1.5% 3.4% Nov-98 1.5% 3.4% Dec-98 1.6% 3.4% Jan-99 1.7% 3.0% Feb-99 1.6% 3.0% Mar-99 1.7% 3.0% Apr-99 2.3% 3.2% May-99 2.1% 3.2% Jun-99 2.0% 3.2% Jul-99 2.1% 3.1% Aug-99 2.3% 3.1% Sep-99 2.6% 3.1% Oct-99 2.6% 3.4% Nov-99 2.6% 3.4% Dec-99 2.7% 3.4% Jan-00 2.7% 4.3% Feb-00 3.2% 4.3% Mar-00 3.7% 4.3% Apr-00 3.0%
Source: BLOOMBERG L.P. Wage inflation also exhibited a marked upward trend during the reporting period. The Employment Cost Index, a measurement of the cost to employ workers, including both wages and benefits, rose 4.3% for the year ended March 31, 2000. Although these rates of price and employment cost inflation may not be alarmingly high by historical standards, the Fed has demonstrated its resolve to keep inflation at bay through its communications and its actions (six federal funds rate increases since June 1999). In particular, the Fed has expressed concern that if labor markets continue to tighten, increases in wages will outpace productivity growth and place additional upward pressure on prices. In such an environment, productivity growth becomes particularly critical, as it enables companies to pay higher wages without raising prices. Non-farm productivity grew 3.0% in 1999 and at a 2.4% annualized rate in the first quarter of 2000--strong gains to be sure, but likely not strong enough to offset recent increases in employment costs. ASSET CLASS PERFORMANCE EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC ASSET CLASS % RETURNS DURING REPORTING PERIOD
LEHMAN AGGREGATE MSCI-EAFE (ND) RUSSELL 2000 S&P 500 BOND INDEX INDEX SMALL-CAP INDEX INDEX 11/5/1999 0.61% 0.49% 3.23% 0.54% 11/12/1999 0.73% 2.02% 4.95% 2.44% 11/19/1999 0.32% 3.91% 7.62% 4.35% 11/26/1999 0.11% 5.22% 7.08% 3.95% 12/3/1999 0.15% 5.26% 8.43% 5.22% 12/10/1999 0.78% 6.67% 8.94% 4.10% 12/17/1999 -0.30% 6.78% 8.89% 4.39% 12/24/1999 -0.61% 10.69% 12.68% 7.13% 12/31/1999 -0.51% 12.55% 17.96% 8.04% 1/7/2000 -0.57% 7.42% 14.15% 6.00% 1/14/2000 -1.03% 10.06% 18.67% 7.74% 1/21/2000 -1.19% 7.61% 24.83% 5.99% 1/28/2000 -0.52% 7.11% 18.01% 0.02% 2/4/2000 -0.39% 9.34% 22.92% 4.81% 2/11/2000 -0.68% 9.96% 25.68% 2.07% 2/18/2000 -0.15% 8.31% 27.70% -0.95% 2/25/2000 0.50% 9.16% 30.29% -1.89% 3/3/2000 0.68% 11.46% 40.04% 3.81% 3/10/2000 0.48% 11.44% 41.37% 2.77% 3/17/2000 1.18% 10.11% 34.58% 7.88% 3/24/2000 1.05% 12.27% 34.49% 12.51% 3/31/2000 1.68% 12.10% 26.32% 10.49% 4/7/2000 2.49% 10.97% 27.26% 11.80% 4/14/2000 2.42% 7.09% 6.40% 0.02% 4/21/2000 2.33% 6.21% 12.97% 5.77% 4/28/2000 1.38% 6.10% 18.72% 7.17%
Compiled by CHARLES SCHWAB & CO., INC. As shown on the chart above, equity valuations, especially of the small-cap and technology stocks, exhibited extreme volatility during the reporting period. The price/earnings (P/E) ratio for the 3 MARKET OVERVIEW (continued) NASDAQ 100 Index fell by 33% in just 14 trading days during March and April. Remarkably, it remained at levels above 100 even after its precipitous decline. Reversing a five-year period of relative under performance, small-cap stocks outperformed both large-cap stocks and international stocks for the six-month reporting period ended 4/30/00. Small-cap stocks as represented by the Russell 2000-Registered Trademark- Index achieved a total return of 18.7%. Large-cap stocks, as represented by the S&P 500-Registered Trademark- Index, returned 7.2%. Dampened by relatively weak foreign currencies, International stocks, as represented by the Morgan Stanley Capital International Europe, Australia, Far East (MSCI-EAFE)-Registered Trademark- Index, achieved a return of 6.7% for the six-month reporting period ending 4/30/00. Reflecting the rise in intermediate-term interest rates, fixed income returns were generally weak for the period. Bond returns, as represented by the Lehman Brothers Aggregate Bond Index, were 1.4% for the six-month reporting period. U.S. EQUITY VALUATION The P/E ratio for the S&P 500-Registered Trademark- Index remained at very high levels during the reporting period and ended the period at a lofty 29.6 times earnings, slightly less than twice its long-term average. The P/E 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. Based on other traditional market valuation measures such as the price/book (P/B) ratio or dividend yield, the U.S. stock market continues to remain at record or near record high valuation levels. Reflecting the extraordinary valuations of the technology sector, the P/E ratio (12 months trailing) for the NASDAQ 100 Index ended the period at 120.2, as compared to an average of 67 over the last five years. EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC 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 14.90 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 25.50 Sep.92 24.37 Oct.92 23.94 Nov.92 24.08 Dec.92 24.01 Jan.93 24.20 Feb.93 24.25 Mar.93 24.22 Apr.93 23.20 May.93 23.21 Jun.93 22.58 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 20.10 May.94 20.16 Jun.94 19.76 Jul.94 18.64 Aug.94 18.90 Sep.94 18.26 Oct.94 17.55 Nov.94 16.58 Dec.94 16.98 Jan.95 16.23 Feb.95 16.20 Mar.95 16.50 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 19.30 Jul.96 18.31 Aug.96 18.62 Sep.96 19.75 Oct.96 19.60 Nov.96 21.05 Dec.96 20.70 Jan.97 20.55 Feb.97 20.98 Mar.97 19.87 Apr.97 20.24 May.97 21.43 Jun.97 22.45 Jul.97 23.92 Aug.97 22.64 Sep.97 24.00 Oct.97 22.84 Nov.97 24.02 Dec.97 24.51 Jan.98 24.99 Feb.98 26.44 Mar.98 27.76 Apr.98 26.51 May.98 26.12 Jun.98 27.09 Jul.98 26.78 Aug.98 22.77 Sep.98 24.23 Oct.98 27.58 Nov.98 30.14 Dec.98 31.97 Jan.99 33.29 Feb.99 32.65 Mar.99 33.78 Apr.99 33.90 May.99 32.74 Jun.99 34.70 Jul.99 31.62 Aug.99 31.21 Sep.99 29.90 Oct.99 29.92 Nov.99 30.65 Dec.99 32.53 Jan.00 29.78 Feb.00 28.59 Mar.00 31.50 Apr.00 29.58
30-Year Average 15.8
Source: BLOOMBERG L.P. TREASURY BOND YIELDS Continuing a trend which began in October 1998, both long-term and intermediate-term rates continued to climb upward during the first three months of the reporting period. The primary driver of this upward trend was the continued strong growth of the domestic economy. 4 EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC 10-YEAR AND 5-YEAR TREASURY BOND YIELDS
TEN-YEAR TREASURY FIVE-YEAR TREASURY BOND YIELD NOTE YIELD 10.01.1999 5.97% 5.86% 10.08.1999 6.03% 5.95% 10.15.1999 6.07% 5.97% 10.22.1999 6.19% 6.10% 10.29.1999 6.02% 5.95% 11.05.1999 5.93% 5.86% 11.12.1999 5.93% 5.86% 11.19.1999 6.06% 5.99% 11.26.1999 6.12% 6.05% 12.03.1999 6.16% 6.07% 12.10.1999 6.07% 5.98% 12.17.1999 6.28% 6.19% 12.24.1999 6.41% 6.31% 12.31.1999 6.44% 6.34% 1.07.2000 6.52% 6.41% 1.14.2000 6.68% 6.58% 1.21.2000 6.77% 6.63% 1.28.2000 6.66% 6.66% 2.04.2000 6.55% 6.65% 2.11.2000 6.60% 6.70% 2.18.2000 6.49% 6.68% 2.25.2000 6.33% 6.47% 3.03.2000 6.39% 6.59% 3.10.2000 6.38% 6.60% 3.17.2000 6.19% 6.45% 3.24.2000 6.19% 6.50% 3.31.2000 6.00% 6.31% 4.07.2000 5.58% 6.18% 4.14.2000 5.58% 6.11% 4.21.2000 5.99% 6.24% 4.28.2000 6.21% 6.54%
Source: BLOOMBERG L.P. Treasury bond yields exhibited an unusual pattern during the second half of the reporting period. Typically the yield on ten-year treasury securities exceeds those on five-year securities to compensate investors for the additional interest rate risk associated with longer duration securities. As shown in the graph above, late in January, this normal relationship reversed, resulting in what is referred to as a negative yield curve. This situation is a result of the accumulating budget surpluses, which are allowing the federal government to downsize its debt. The Treasury Department announced that it plans to buy back $30 billion in debt in 2000 starting with longer dated maturities because those payments carry the steepest interest payment. The anticipated reduction in supply resulting from this buyback program, as well as scaled back issuance, increased the price of the longer-term securities and resulted in a reduction in yields. INTERNATIONAL PERFORMANCE EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC MSCI-EAFE-Registered Trademark- COUNTRY US$ RETURNS For the Six-Month Period Ended 4/30/00 Belgium -21.4% Austria -14.3% Ireland -10.4% Switzerland -6.0% Norway -5.6% New Zealand -1.1% Australia -0.8% United Kingdom -0.3% Singapore 4.8% Netherlands 5.1% Portugal 6.0% Italy 6.2% Japan 7.8% Denmark 8.2% Spain 9.4% Hong Kong 17.9% France 21.0% Germany 21.8% Sweden 70.7% Finland 117.5%
Source: DATASTREAM The MSCI-EAFE Index gained 6.7% in U.S. dollar terms (excluding reinvested dividends) during the six-month reporting period. In local currency terms, it gained 15.6% reflecting the relative weakness of most foreign currencies (compared to the dollar) during the period. The strongest performing countries for the period were Finland, Sweden and Germany. Those countries with the largest negative returns were Belgium, Austria and Ireland. 5 INSTITUTIONAL SELECT-TM- S&P 500 FUND FUND PERFORMANCE AVERAGE ANNUAL RETURNS FOR THE PERIODS ENDED 4/30/00
SINCE INCEPTION SIX MONTHS(1) ONE YEAR (2/1/99) - ---------------------------------------------------------------------------------------------------------------- INSTITUTIONAL SELECT S&P 500 FUND(2) 7.08% 9.95% 11.90% - ---------------------------------------------------------------------------------------------------------------- S&P 500-Registered Trademark- Index 7.19% 10.13% 12.10% - ---------------------------------------------------------------------------------------------------------------- Index Tracking Differential (0.11)% (0.18)% (0.20)% - ----------------------------------------------------------------------------------------------------------------
National Association of Securities Dealers (NASD) regulations require that we report performance data as of the most recent calendar quarter--in this case, the quarter ended 3/31/00. As of 3/31/00, the fund's six-month, one-year and since-inception average annual total returns would have been 17.47%, 17.82% and 15.86%, respectively. Also shown is the difference between the total returns of the S&P 500 Index and the Institutional Select S&P 500 Fund, which is often referred to as the "tracking differential." The tracking differential arises due to several factors. For example, unlike the index, the fund has operating expenses and incurs trading costs when it buys or sells securities. The fund also may hold non-index securities that can produce either higher or lower returns than their index counterparts. Furthermore, unlike the index, the fund holds a portion of its assets in cash. (1) Actual, not annualized, because period is less than one year. (2) Charles Schwab Investment Management, Inc. (the investment adviser) and Schwab waived a portion of their fees during the reporting period and have guaranteed through at least 12/31/05 that total operating expenses will not exceed 0.15%. Without such reductions, the fund's average annual returns would have been lower. 6 EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
INSTITUTIONAL SELECT -TM- S&P 500 FUND S&P 500 -REGISTERED TRADEMARK- INDEX 02/01/99 $10,000 $10,000 02/28/99 $9,680 $9,689 03/31/99 $10,070 $10,077 04/30/99 $10,460 $10,467 05/31/99 $10,200 $10,220 06/30/99 $10,770 $10,787 07/31/99 $10,440 $10,450 08/31/99 $10,380 $10,398 09/30/99 $10,100 $10,113 10/31/99 $10,740 $10,753 11/30/99 $10,950 $10,972 12/31/99 $11,602 $11,618 01/31/00 $11,016 $11,035 02/29/00 $10,804 $10,826 03/31/00 $11,864 $11,885 04/30/00 $11,501 $11,527
The above graph compares the growth of a hypothetical $10,000 investment in the Institutional Select-TM- S&P 500 Fund, made at its inception, with a similar investment in the S&P 500-Registered Trademark- Index. A detailed analysis of the performance of the fund is provided in the Fund Discussion section later in this report. THE INFORMATION PRESENTED IS HISTORICAL AND DOES NOT REPRESENT FUTURE RESULTS. TOTAL RETURNS ASSUME REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS. PRINCIPAL VALUE AND INVESTMENT RETURNS WILL FLUCTUATE, SO AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. Indices are unmanaged and do not reflect advisory fees and other expenses associated with an investment in the fund. Investors cannot invest in an index directly. ASSETS - ---------------------------------------------------------------------- Total net assets as of 10/31/99 (000s) $238,476 - ---------------------------------------------------------------------- Total net assets as of 4/30/00 (000s) $341,107 - ---------------------------------------------------------------------- Percentage growth from 10/31/99 to 4/30/00 43.0% - ----------------------------------------------------------------------
7 INSTITUTIONAL SELECT-TM- S&P 500 FUND PORTFOLIO SNAPSHOT The Institutional Select S&P 500 Fund (the fund) seeks high total return by tracking the performance of the S&P 500-Registered Trademark- Index. To do this, it invests primarily in common stocks of the S&P 500 Index, a widely recognized, unmanaged index comprised of 500 mainly large-cap stocks selected by Standard & Poor's-Registered Trademark-. As of April 30, 2000, the aggregate market capitalization of the S&P 500 Index represented approximately 80% of the total value of the U.S. stock market.* Common stocks of the 50 largest companies in the S&P 500 Index accounted for approximately 57% of the index. Standard & Poor's rebalances the index periodically and with no set schedule. The information below, and on the following page, provides a snapshot of the fund's characteristics as of 4/30/00, and is not indicative of its composition after that date. The terms used below are defined on pages 22 and 23. A complete list of securities in the fund's portfolio as of 4/30/00 is provided in the Schedule of Investments later in this report. FUND FACTS
INSTITUTIONAL SELECT PEER GROUP S&P 500 FUND** AVERAGE+ - --------------------------------------------------------------------------------------------------------------------- Number of Issues 503 138 - --------------------------------------------------------------------------------------------------------------------- Median Market Cap ($ Mil) $71,141+ $58,904 - --------------------------------------------------------------------------------------------------------------------- Price/Earnings (P/E) Ratio 31.3+ 35.4 - --------------------------------------------------------------------------------------------------------------------- Price/Book (P/B) Ratio 8.0+ 9.5 - --------------------------------------------------------------------------------------------------------------------- 12-Month Yield 0.78%+ 0.45% - --------------------------------------------------------------------------------------------------------------------- Portfolio Turnover Rate 4% 75% - --------------------------------------------------------------------------------------------------------------------- Three-Year Beta N/A 0.94% - --------------------------------------------------------------------------------------------------------------------- Expense Ratio 0.15%*** 1.34% - ---------------------------------------------------------------------------------------------------------------------
* Source: Wilshire Associates. The U.S. stock market as represented by the Wilshire 5000 Index. ** Compiled by Charles Schwab & Co., Inc. This information is for illustrative purposes only and is not intended to show, predict or guarantee future composition of the fund. *** Reflects a voluntary reduction by the investment adviser and Schwab, which is guaranteed through at least 12/31/05 (excluding interest, taxes and certain non-routine expenses). + Source: Morningstar, Inc. This information is as of 4/30/00, and is for illustrative purposes only. It is not intended to show, predict or guarantee future composition of the fund. The peer group average is based on 2,297 large-cap funds as tracked by Morningstar. 8 EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC PORTFOLIO COMPOSITION BY INDUSTRY AS OF 4/30/00 Other 25.4% Business Machines and Software 16.5% Electronics 12.2% Healthcare/Drugs and Medicine 9.6% Telephone 6.8% Retail 5.9% Producer Goods and Manufacturing 5.4% Miscellaneous Finance 5.3% Banks 4.7% Business Services 4.4% Media 3.8%
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC EQUITY INVESTMENT STYLE BOX(1) AS OF 4/30/00
- --STYLE-- VALUE BLEND GROWTH --MARKET CAP-- X Large Medium Small
TOP 10 HOLDINGS AS A PERCENTAGE OF FUND INVESTMENTS(2) - -------------------------------------------- General Electric Co. 4.1% - -------------------------------------------- Cisco Systems, Inc. 3.8% - -------------------------------------------- Intel Corp. 3.4% - -------------------------------------------- Microsoft Corp. 2.9% - -------------------------------------------- Exxon Mobil Corp. 2.1% - -------------------------------------------- - -------------------------------------------- Wal-Mart Stores, Inc. 2.0% - -------------------------------------------- Oracle Corp. 1.8% - -------------------------------------------- International Business Machines Corp. 1.6% - -------------------------------------------- Citigroup, Inc. 1.6% - -------------------------------------------- Lucent Technologies, Inc. 1.6% - --------------------------------------------
(1) Source: Morningstar, Inc. The style box illustrates the composition of the fund's portfolio as of 4/30/00. It is not indicative of its holdings after that date, nor does it represent an exact assessment of risk or future assessment or any type of future performance. Placement is based on the fund's P/E and P/B ratios relative to the S&P 500-Registered Trademark- Index, as well as the size of the companies in which it invests, or median market capitalization. (2) Nothing in this report represents a recommendation of a security by the investment adviser. 9 INSTITUTIONAL SELECT-TM- LARGE-CAP VALUE INDEX FUND FUND PERFORMANCE AVERAGE ANNUAL RETURNS FOR THE PERIODS ENDED 4/30/00
SINCE INCEPTION SIX MONTHS(1) ONE-YEAR (2/1/99) - ------------------------------------------------------------------------------------------------------------- INSTITUTIONAL SELECT LARGE-CAP VALUE INDEX FUND(2) 2.59% 0.25% 7.62% - ------------------------------------------------------------------------------------------------------------- S&P 500/BARRA Value Index 2.70% 0.46% 7.97% - ------------------------------------------------------------------------------------------------------------- Index Tracking Differential (0.11)% (0.21)% (0.35)% - -------------------------------------------------------------------------------------------------------------
National Association of Securities Dealers (NASD) regulations require that we report performance data as of the most recent calendar quarter--in this case, the quarter ended 4/30/00. As of 4/30/00, the fund's six-month, one-year and since-inception average annual total returns would have been 9.19%, 9.51% and 8.88%, respectively. Also shown is the difference between the total returns of the S&P 500/BARRA Value Index and the Institutional Select Large-Cap Value Index Fund, which is often referred to as the "tracking differential." (See page 6 for a more detailed discussion). (1) Actual, not annualized, because period is less than one year. (2) The investment adviser and Schwab waived a portion of their fees during the reporting period and have guaranteed through at least 12/31/05 that total operating expenses will not exceed 0.25%. Without such reductions, the fund's average annual returns would have been lower. 10 EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
INSTITUTIONAL SELECT -TM- LARGE-CAP S&P 500/BARRA VALUE INDEX FUND VALUE INDEX 02/01/99 $10,000 $10,000 02/28/99 $9,780 $9,785 03/31/99 $10,080 $10,081 04/30/99 $10,930 $10,950 05/31/99 $10,730 $10,756 06/30/99 $11,140 $11,169 07/31/99 $10,790 $10,826 08/31/99 $10,520 $10,553 09/30/99 $10,110 $10,140 10/31/99 $10,680 $10,712 11/30/99 $10,620 $10,649 12/31/99 $11,008 $11,049 01/31/00 $10,650 $10,698 02/29/00 $9,996 $10,030 03/31/00 $11,039 $11,076 04/30/00 $10,957 $11,001
The above graph compares the growth of a hypothetical $10,000 investment in the Institutional Select Large-Cap Value Index Fund, made at its inception, with a similar investment in the S&P 500/BARRA Value Index. A detailed analysis of the performance of the fund is provided in the Fund Discussion section later in this report. THE INFORMATION PRESENTED IS HISTORICAL AND DOES NOT REPRESENT FUTURE RESULTS. TOTAL RETURNS ASSUME REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS. PRINCIPAL VALUE AND INVESTMENT RETURNS WILL FLUCTUATE, SO AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. Indices are unmanaged and do not reflect advisory fees and other expenses associated with an investment in the fund. Investors cannot invest in an index directly. ASSETS - ---------------------------------------------------------------------- Total net assets as of 10/31/99 (000s) $ 71,485 - ---------------------------------------------------------------------- Total net assets as of 4/30/00 (000s) $102,856 - ---------------------------------------------------------------------- Percentage growth from 10/31/99 to 4/30/00 43.9% - ----------------------------------------------------------------------
11 INSTITUTIONAL SELECT-TM- LARGE-CAP VALUE INDEX FUND PORTFOLIO SNAPSHOT The Institutional Select Large-Cap Value Index Fund (the fund) seeks high total return by tracking the performance of the S&P 500/BARRA Value Index. To do this, it invests primarily in common stocks of the S&P/ BARRA Value index, a widely recognized index comprised of approximately 350 large-cap common stocks determined by BARRA, Inc. and Standard & Poor's-Registered Trademark- to be "value" stocks. The total value of the index (as measured by the combined market capitalization of the companies included in the index) is approximately half the total value of the S&P 500-Registered Trademark- Index. The companies with the highest price/book ratios may be included in the index. BARRA, Inc., and Standard & Poor's rebalance the index at least semiannually. The information below, and on the following page, provides a snapshot of the fund's characteristics as of 4/30/00, and is not indicative of its composition after that date. The terms as used below are defined on pages 22 and 23. A complete list of securities in the fund's portfolio as of 4/30/00 is provided in the Schedule of Investments later in this report. FUND FACTS
INSTITUTIONAL SELECT LARGE-CAP PEER GROUP VALUE INDEX FUND* AVERAGE+ - ------------------------------------------------------------------------------------------------------------------------- Number of Issues 390 138 - ------------------------------------------------------------------------------------------------------------------------- Median Market Cap ($ Mil) $32,590+ $58,904 - ------------------------------------------------------------------------------------------------------------------------- Price/Earnings (P/E) Ratio 23.8+ 35.4 - ------------------------------------------------------------------------------------------------------------------------- Price/Book (P/B) Ratio 3.9+ 9.5 - ------------------------------------------------------------------------------------------------------------------------- 12-Month Yield 1.00%+ 0.45% - ------------------------------------------------------------------------------------------------------------------------- Portfolio Turnover Rate 15% 75% - ------------------------------------------------------------------------------------------------------------------------- Three-Year Beta N/A 0.94 - ------------------------------------------------------------------------------------------------------------------------- Expense Ratio 0.25%** 1.34% - -------------------------------------------------------------------------------------------------------------------------
* Compiled by Charles Schwab & Co., Inc. This information is for illustrative purposes only and is not intended to show, predict or guarantee future composition of the fund. ** Reflects a reduction by the investment adviser and Schwab, which is guaranteed through at least 12/31/05 (excluding interest, taxes and certain non-routine expenses). + Source: Morningstar, Inc. This information is as of 4/30/00, and is for illustrative purposes only. It is not intended to show, predict or guarantee future composition of the fund. The peer group average is based on 2,297 large-cap funds as tracked by Morningstar. 12 EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC PORTFOLIO COMPOSITION BY INDUSTRY AS OF 4/30/00 Other 30.5% Telephone 10.8% Miscellaneous Finance 10.2% Banks 10.0% Oil-International 8.2% Insurance 6.0% Media 5.5% Utilities-Electric and Gas 5.4% Business Machines and Software 4.8% Electronics 4.5% Retail 4.1%
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC EQUITY INVESTMENT STYLE BOX(1) AS OF 4/30/00
--STYLE-- WEIGHTED AVERAGE MATURITY VALUE BLEND GROWTH --MARKET CAP-- X Large Medium Small
TOP 10 HOLDINGS AS A PERCENTAGE OF FUND INVESTMENTS(2) - --------------------------------------------- Exxon Mobil Corp. 4.6% - --------------------------------------------- Citigroup, Inc. 3.5% - --------------------------------------------- American International Group, Inc. 2.9% - --------------------------------------------- AT&T Corp. 2.6% - --------------------------------------------- Hewlett-Packard Co. 2.3% - --------------------------------------------- - --------------------------------------------- MCI Worldcom, Inc. 2.2% - --------------------------------------------- Royal Dutch Petroleum Co. - Sponsored ADR 2.1% - --------------------------------------------- Bell Atlantic Corp. 1.6% - --------------------------------------------- BellSouth Corp. 1.6% - --------------------------------------------- Walt Disney Co. 1.6% - ---------------------------------------------
(1) Source: Morningstar, Inc. The style box illustrates the composition of the fund's portfolio as of 4/30/00. It is not indicative of its holdings after that date, nor does it represent an exact assessment of risk or future assessment or any type of future performance. Placement is based on the fund's P/E and P/B ratios relative to the S&P 500-Registered Trademark- Index, as well as the size of the companies in which it invests, or median market capitalization. (2) Nothing in this report represents a recommendation of a security by the investment adviser. 13 INSTITUTIONAL SELECT-TM- SMALL-CAP VALUE INDEX FUND FUND PERFORMANCE AVERAGE ANNUAL RETURNS FOR THE PERIODS ENDED 4/30/00
SINCE INCEPTION SIX MONTHS(1) ONE YEAR (2/1/99) - ------------------------------------------------------------------------------------------------------------- INSTITUTIONAL SELECT SMALL-CAP VALUE INDEX FUND(2) 9.21% 8.88% 6.39% - ------------------------------------------------------------------------------------------------------------- S&P Small-Cap 600/BARRA Value Index 8.77% 8.51% 6.33% - ------------------------------------------------------------------------------------------------------------- Index Tracking Differential 0.44% 0.37% (0.06)% - -------------------------------------------------------------------------------------------------------------
National Association of Securities Dealers (NASD) regulations require that we report performance data as of the most recent calendar quarter--in this case, the quarter ended 3/31/00. As of 3/31/00, the fund's six-month, one-year and since-inception average annual total returns would have been 5.89%, 17.38% and 6.14%, respectively. Also shown is the difference between the total returns of the S&P Small-Cap 600/BARRA Value Index and the Institutional Select Small-Cap Value Index Fund, which is often referred to as the "tracking differential." (See page 6 for a more detailed discussion). (1) Actual, not annualized, because period is less than one year. (2) The investment adviser and Schwab waived a portion of their fees during the reporting period and have guaranteed through at least 12/31/05 that total operating expenses will not exceed 0.32%. Without such reductions, as of 4/30/00 the fund's average annual returns would have been lower. 14 EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
INSTITUTIONAL SELECT -TM- SMALL-CAP VALUE INDEX FUND S&P 600/BARRA VALUE INDEX 02/01/99 $10,000 $10,000 02/28/99 $9,170 $9,186 03/31/99 $9,130 $9,150 04/30/99 $9,920 $9,947 05/31/99 $10,310 $10,345 06/30/99 $10,930 $10,973 07/31/99 $10,760 $10,802 08/31/99 $10,310 $10,349 09/30/99 $10,120 $10,159 10/31/99 $9,890 $9,924 11/30/99 $10,120 $10,147 12/31/99 $10,411 $10,425 01/31/00 $9,886 $9,891 02/29/00 $10,338 $10,338 03/31/00 $10,716 $10,720 04/30/00 $10,801 $10,795
The above graph compares the growth of a hypothetical $10,000 investment in the Institutional Select Small-Cap Value Index Fund, made at its inception, with a similar investment in the S&P Small-Cap 600/BARRA Value Index. A detailed analysis of the performance of the fund is provided in the Fund Discussion section later in this report. THE INFORMATION PRESENTED IS HISTORICAL AND DOES NOT REPRESENT FUTURE RESULTS. TOTAL RETURNS ASSUME REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS. PRINCIPAL VALUE AND INVESTMENT RETURNS WILL FLUCTUATE, SO AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. Indices are unmanaged and do not reflect advisory fees and other expenses associated with an investment in the fund. Investors cannot invest in an index directly. ASSETS - --------------------------------------------------------------------- Total net assets as of 10/31/99 (000s) $31,644 - --------------------------------------------------------------------- Total net assets as of 4/30/00 (000s) $34,533 - --------------------------------------------------------------------- Percentage growth from 10/31/99 to 4/30/00 9.1% - ---------------------------------------------------------------------
15 INSTITUTIONAL SELECT-TM- SMALL-CAP VALUE INDEX FUND PORTFOLIO SNAPSHOT The Institutional Select Small-Cap Value Index Fund (the fund) seeks high total return by tracking the performance of the S&P SmallCap 600/BARRA Value index. To do this, it invest primarily in common stocks of the S&P SmallCap 600/BARRA Value Index, a widely recognized index composed of approximately 375 small-cap common stocks determined by BARRA, Inc. and Standard & Poor's-Registered Trademark- to be "value" stocks. The total value of the index (as measured by the combined market capitalization of the companies included in the index) is approximately half the total value of the S&P SmallCap 600 Index. The companies with the highest price/book ratios may be included in the index. BARRA, Inc. and Standard & Poor's rebalance the index at least semiannually. The information below, and on the following page, provides a snapshot of the fund's characteristics as of 4/30/00, and is not indicative of its composition after that date. The terms used below are defined on pages 22 and 23. A complete list of the securities in the fund's portfolio as of 4/30/00 is provided in the Schedule of Investments later in this report. FUND FACTS
INSTITUTIONAL SELECT SMALL-CAP PEER GROUP VALUE INDEX FUND* AVERAGE+ - ----------------------------------------------------------------------------------------------------------- Number of Issues 404 180 - ----------------------------------------------------------------------------------------------------------- Median Market Cap ($ Mil) $513+ $1,019 - ----------------------------------------------------------------------------------------------------------- Price/Earnings (P/E) Ratio 19.0+ 30.3 - ----------------------------------------------------------------------------------------------------------- Price/Book (P/B) Ratio 2.2+ 6.7 - ----------------------------------------------------------------------------------------------------------- 12-Month Yield 0.87%+ 0.21% - ----------------------------------------------------------------------------------------------------------- Portfolio Turnover Rate 44% 92% - ----------------------------------------------------------------------------------------------------------- Three-Year Beta N/A 0.87 - ----------------------------------------------------------------------------------------------------------- Expense Ratio 0.32%** 1.59% - -----------------------------------------------------------------------------------------------------------
* Compiled by Charles Schwab & Co., Inc. This information is for illustrative purposes only and is not intended to show, predict or guarantee future composition of the fund. ** Reflects a reduction by the investment adviser and Schwab, which is guaranteed through at least 12/31/05 (excluding interest, taxes and certain non-routine expenses). + Source: Morningstar, Inc. This information is as of 4/30/00, and is for illustrative purposes only. It is not intended to show, predict or guarantee future composition of the fund. The peer group average is based on 845 small-cap funds as tracked by Morningstar. 16 EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC PORTFOLIO COMPOSITION BY INDUSTRY AS OF 4/30/00 Other 35.3% Electronics 10.8% Business Services 8.5% Healthcare/Drugs and Medicine 8.1% Producer Goods and Manufacturing 6.9% Banks 6.5% Miscellaneous Finance 6.1% Utilities-Energy and Gas 5.0% Retail 4.8% Oil-Domestic 4.3% Apparel 3.7%
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC EQUITY INVESTMENT STYLE BOX(1) AS OF 4/30/00
- --STYLE-- VALUE BLEND GROWTH --MARKET CAP-- Large Medium x Small
TOP 10 HOLDINGS AS A PERCENTAGE OF FUND INVESTMENTS(2) - --------------------------------------------- International Rectifier Corp. 1.6% - --------------------------------------------- Radian Group, Inc. 1.0% - --------------------------------------------- Snyder Communications, Inc. 0.9% - --------------------------------------------- Universal Health Services, Inc. 0.9% - --------------------------------------------- Newfield Exploration Co. 0.9% - --------------------------------------------- - --------------------------------------------- Centura Banks, Inc. 0.9% - --------------------------------------------- Zale Corp. 0.8% - --------------------------------------------- AmeriCredit Corp. 0.8% - --------------------------------------------- Coherent, Inc. 0.8% - --------------------------------------------- Silicon Valley Bancshares 0.8% - ---------------------------------------------
(1) Source: Morningstar, Inc. The style box illustrates the composition of the fund's portfolio as of 4/30/00. It is not indicative of its holdings after that date, nor does it represent an exact assessment of risk or future assessment or any type of future performance. Placement is based on the fund's P/E and P/B ratios relative to the S&P 500-Registered Trademark- Index, as well as the size of the companies in which it invests, or median market capitalization. (2) Nothing in this report represents a recommendation of a security by the investment adviser. 17 PORTFOLIO MANAGEMENT PORTFOLIO MANAGEMENT TEAM GERI HOM--vice president and senior portfolio manager, has overall responsibility for the management of the Institutional Select-TM- Funds. Geri also manages all of the Schwab Equity Index Funds and the Schwab Analytics Fund-Registered Trademark- and she co-manages the Schwab MarketTrack Portfolios-TM-. Geri joined CSIM in March 1995 as portfolio manager and was promoted to her current position in December 1996. She currently manages approximately $19 billion in indexed equity mutual fund 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. LARRY MANO--director and portfolio manager, has day-to-day portfolio management responsibilities for the Institutional Select Large-Cap Value Index Fund and the Institutional Select Small-Cap Value Index Fund. Prior to joining the firm in 1998, he spent 20 years at Wilshire Associates, where he directed the development of equity index investment products. 18 FUND DISCUSSION QUESTIONS TO THE PORTFOLIO MANAGEMENT TEAM Q. HOW DID THE FUNDS PERFORM DURING THE REPORTING PERIOD? A. As discussed in the MARKET OVERVIEW section of this report, large-cap domestic equities, such as the S&P 500 Index, relinquished a five year hold as being the strongest performing asset class to the small-cap asset class. Additionally, value stocks underperformed growth stocks across both large-cap and small-cap styles. INSTITUTIONAL SELECT S&P 500 FUND
BEFORE TAX: AFTER TAX:(1) SIX MONTHS ONE YEAR ONE YEAR - ------------------------------------------------------------ Institutional Select S&P 500 Fund 7.08% 9.95% 9.54% - ------------------------------------------------------------ S&P 500 Index 7.19% 10.13% N/A - ------------------------------------------------------------ Average Large-Cap Fund(2) 11.41% 14.32% 12.17% - ------------------------------------------------------------
INSTITUTIONAL SELECT LARGE-CAP VALUE FUND
BEFORE TAX: AFTER TAX:(1) SIX MONTHS ONE YEAR ONE YEAR - ------------------------------------------------------------ Institutional Select Large-Cap Value Fund 2.59% 0.25% (0.61)% - ------------------------------------------------------------ S&P 500/Barra Value Index 2.70% 0.46% N/A - ------------------------------------------------------------ Average Large-Cap Value Fund(3) 1.83% (1.67)% (3.77)% - ------------------------------------------------------------
INSTITUTIONAL SELECT SMALL-CAP VALUE FUND
BEFORE TAX: AFTER TAX:(1) SIX MONTHS ONE YEAR ONE YEAR - ------------------------------------------------------------ Institutional Select Small-Cap Value Fund 9.21% 8.88% 6.76% - ------------------------------------------------------------ S&P Small-Cap 600/ Barra Value Index 8.77% 8.51% N/A - ------------------------------------------------------------ Average Small-Cap Value Fund(4) 11.92% 11.24% 10.17% - ------------------------------------------------------------
(1) After-tax returns assume the maximum federal income tax rate of 39.6% on dividends and 20% on capital gains distributions. Tax rates vary and may be higher or lower than those shown. State and local taxes have not been considered. After-tax return information is not applicable to shareholders in tax-deferred accounts such as IRAs or 401ks. Past after-tax information is not a prediction of future tax efficiency. These after-tax returns do not reflect any taxes you may have to pay as a result of selling your shares. (2) Source: Morningstar, Inc. as of 4/30/00 the large-cap fund category contained 1,083 funds with six-month track records and 1,065 funds with one-year track records. (3) Source: Morningstar, Inc. as of 4/30/00 the large-cap value fund category contained 287 funds with six-month track records and 285 funds with one- year track records. (4) Source: Morningstar, Inc. as of 4/30/00 the small-cap value fund category contained 131 funds with six-month track records and 131 funds with one- year track records. Q. CAN YOU PROVIDE SOME HISTORICAL PERSPECTIVE ON VALUE STOCK RETURNS COMPARED TO GROWTH STOCK RETURNS? A. Schwab Center for Investment Research (SCIR) found that the value stocks historically have shown much less volatility. Whether looking at the past 10, 15, or 20 years, value stocks exhibited only three-quarters the volatility of growth stocks. Volatility was measured by the annualized standard deviation of monthly total returns for each index. On the return side, the data is less definitive. Although value stock returns have outperformed growth stock returns for the period from 1975 through 1998, there 19 FUND DISCUSSION (continued) have been periods when growth stocks have performed better than value stocks and vice versa. These shifting results are driven by the fact that value and growth stocks have tended to take turns leading the market and these "performance cycles" have varied in length and magnitude, as shown by the second graph below. Depending on which time period you consider, growth looked better than value and vice versa, although the value cycles tended to be longer. Although these cycles may not be entirely random, predicting them is difficult. EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC Growth of a Hypothetical $1 Investment
S&P/BARRA 500 GROWTH S&P/BARRA 500 VALUE 1/1/1975 $1.00 $1.00 1975 $1.32 $1.43 1976 $1.50 $1.93 1977 $1.32 $1.88 1978 $1.41 $2.00 1979 $1.63 $2.42 1980 $2.28 $3.00 1981 $2.05 $3.00 1982 $2.51 $3.63 1983 $2.91 $4.68 1984 $2.98 $5.17 1985 $3.97 $6.70 1986 $4.55 $8.15 1987 $4.85 $8.45 1988 $5.43 $10.28 1989 $7.40 $12.97 1990 $7.42 $12.08 1991 $10.26 $14.81 1992 $10.78 $16.37 1993 $10.96 $19.41 1994 $11.31 $19.29 1995 $15.62 $26.43 1996 $19.36 $32.24 1997 $26.43 $41.90 1998 $37.57 $48.05
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC VALUE AND GROWTH RELATIVE PERFORMANCE: 1975-1998
GROWTH VALUE RELATIVE PERFORMANCE RELATIVE PERFORMANCE 1975 11.66% 1976 21.09% 1977 9.25% 1978 -0.62% 1979 5.44% 1980 -15.81% 1981 9.83% 1982 -0.99% 1983 12.65% 1984 8.19% 1985 -3.63% 1986 7.17% 1987 -2.82% 1988 9.72% 1989 -10.27% 1990 -7.05% 1991 -15.81% 1992 5.46% 1993 16.92% 1994 -3.77% 1995 -1.14% 1996 -1.97% 1997 -6.54% 1998 -27.49%
Q. CAN YOU PROVIDE SOME BACKGROUND ON THE S&P/ BARRA VALUE INDICES? A. The S&P 500/BARRA Value Index, and its counterpart, the S&P 500/BARRA Growth Index, are based on methodology developed by 1990 Nobel Laureate William F. Sharpe, who determined that dividing S&P 500 stocks into growth and value indices can account for 90% of the monthly variation in return. Stocks from the S&P 500 Index are divided into value and growth indices based on book value relative to price. The S&P 500/BARRA VALUE INDEX is a widely recognized index designed to reflect the performance of large capitalization "value stocks." The Index includes those S&P 500 Index stocks with generally higher P/B ratios, and is rebalanced semiannually. Its market capitalization is about half the market capitalization of the S&P 500 Index. Conceptually 20 speaking, the Index is constructed by first ranking all S&P 500 stocks by their P/B ratios. Then, the stocks with higher P/B ratios are placed in the S&P/BARRA Value Index until the Index represents about half of the total market capitalization of the S&P 500 Index. This methodology has the benefits of being objective and easy to understand. The S&P SMALL-CAP 600/BARRA VALUE INDEX is a widely recognized index designed to reflect the performance of small capitalization "value stocks." The Index includes those S&P Small-Cap 600 Index stocks with generally higher P/B ratios, and is rebalanced semiannually. (The S&P Small-Cap 600 Index is composed of stocks selected by Standard & Poor's-Registered Trademark- to reflect the performance of U.S. small capitalization stocks.) Its market capitalization is about half the market capitalization of the S&P Small-Cap 600 Index. Conceptually speaking, the Index is constructed by first ranking all S&P 600 stocks by their P/B ratios. Then the stocks with higher P/B ratios are placed in the S&P Small-Cap 600/BARRA Value Index until the Index represents about half of the total market capitalization of the S&P Small-Cap 600 Index. This methodology has the benefits of being objective and easy to understand. 21 GLOSSARY ASSET ALLOCATION--The division of holdings among different types of assets, such as domestic stocks, international stocks, bonds and cashequivalent securities. BETA--A measure of a stock's volatility relative to the overall stock market. The beta of the S&P 500-Registered Trademark- Index is 1. Any investment that is more volatile than the market as a whole has a beta value higher than 1. If the beta is less than 1, the investment is considered to be less volatile than the market. CAPITAL GAIN (LOSS)--When a stock is sold for a profit, the difference between the net sales price and its net purchase price, or cost basis, is a capital gain. If a stock is sold below cost, the difference is a capital loss. EARNINGS GROWTH RATE--The average annual rate of growth in earnings over the past five years for the stocks in a fund's portfolio. EARNINGS PER SHARE (EPS)--The net income (or earnings) of a company for the past 12 months divided by the current number of shares outstanding. EXPENSE RATIO--Amount, expressed as a percentage of total investment, that shareholders pay annually for mutual fund operating expenses and management fees. MARKET CAPITALIZATION--The dollar value of a company or the amount someone would pay to buy the company today. It is calculated by multiplying the total number of outstanding shares by the current price per share. Median market cap is the midpoint of a fund's total market capitalization, weighted by the portion of assets invested in each holding. As a result, half of the fund's holdings will have market caps above the median, and the rest below it. NET ASSET VALUE (NAV)--The market value of a fund share. PRICE/BOOK (P/B) RATIO--Compares a stock's market value with the value of total assets minus intangible assets and total liabilities (the book value). It is determined by dividing the current price of the stock by common stockholder equity per share. In evaluating stocks, comparing P/B ratios often works well in situations where price/earnings ratios do not, because the P/B ratio is stable over time and is always a positive number. P/B ratios are best used for comparisons within an industry rather than between industries, as certain industries will usually contain stocks that have all high or all low P/B ratios. For mutual funds the P/B ratio is the weighted average of all the stocks' P/B ratios in the portfolio. PRICE/EARNINGS (P/E) RATIO--The ratio of a company's stock price to its earnings per share over the past year. For mutual funds the P/E ratio is the weighted average of all the stocks' P/E ratios in the mutual fund's portfolio. The P/E is an indicator of market expectations about a company's prospects. Typically, the higher the P/E, the greater the expectations for a company's future growth. Because earnings are volatile and sometimes "negative," however, the P/E has its limitations and may fail as a measure for a significant number of stocks at any given time. RETURN ON EQUITY--The average annual rate of return generated by the companies a fund holds during the past five years for each dollar of shareholders' equity (net income divided by shareholders' equity). STOCK--A share of ownership, or equity, in a corporation. 22 TOTAL RETURN--The sum of dividends, plus capital gains (or losses). TURNOVER RATE--An indication of a fund's trading activity. Funds with higher turnover rates typically incur higher transaction costs and are more likely to distribute capital gains, which are taxable to investors. YIELD--The income generated by an investment, expressed as a percentage of its price. 23 INSTITUTIONAL SELECT(TM) S&P 500 FUND SCHEDULE OF INVESTMENTS April 30, 2000 (Unaudited)
Number Value of Shares (000s) --------- ----------- - -------------------------------------------------------------------------------- COMMON STOCK -- 99.2% - -------------------------------------------------------------------------------- AEROSPACE / DEFENSE -- 1.0% B.F. Goodrich Co. 2,800 $ 89 Boeing Co. 23,700 941 Crane Co. 1,800 48 General Dynamics Corp. 5,500 322 Lockheed Martin Corp. 10,800 269 Northrop Grumman Corp. 1,900 135 Raytheon Co., Class B 9,300 206 Rockwell International Corp. 5,200 205 Textron, Inc. 4,300 266 TRW, Inc. 3,200 187 United Technologies Corp. 12,900 802 ------- 3,470 ------- - -------------------------------------------------------------------------------- AIR TRANSPORTATION -- 0.3% AMR Corp.+ 3,900 133 Delta Air Lines, Inc. 3,400 179 FedEx Corp.+ 7,800 294 Southwest Airlines Co. 13,500 293 U.S. Airways Group, Inc.+ 2,000 56 ------- 955 ------- - -------------------------------------------------------------------------------- ALCOHOLIC BEVERAGES -- 0.3% Adolph Coors Co., Class B 1,000 51 Anheuser-Busch Cos., Inc. 12,800 903 Brown-Forman Corp., Class B 1,800 98 ------- 1,052 ------- - -------------------------------------------------------------------------------- APPAREL -- 0.2% Liz Claiborne, Inc. 1,500 69 Nike, Inc., Class B 7,500 326 Reebok International Ltd.+ 1,500 25 Russell Corp. 800 16 Springs Industries, Inc. 1,000 41 VF Corp. 3,000 85 ------- 562 ------- - -------------------------------------------------------------------------------- AUTOMOTIVE PRODUCTS / MOTOR VEHICLES -- 1.5% Cooper Tire & Rubber Co. 1,800 24 Cummins Engine Co., Inc. 1,000 36 Dana Corp. 4,500 137 Danaher Corp. 4,100 234 Delphi Automotive Systems Corp. 15,249 292 Eaton Corp. 2,000 168 Ford Motor Co. 33,000 1,805 Number Value of Shares (000s) --------- ----------- General Motors Corp. 17,700 $ 1,657 Genuine Parts Co. 4,600 121 Goodyear Tire & Rubber Co. 4,300 119 Harley-Davidson, Inc. 8,300 330 Navistar International Corp.+ 1,700 59 ------- 4,982 ------- - -------------------------------------------------------------------------------- BANKS -- 4.8% AmSouth Bancorp. 10,500 153 Bank of America Corp. 47,000 2,303 Bank of New York Co., Inc. 20,200 829 Bank One Corp. 31,200 952 BB&T Corp. 9,300 248 Chase Manhattan Corp. 22,500 1,621 Comerica, Inc. 4,300 182 Fifth Third Bancorp. 8,400 530 First Union Corp. 26,900 857 Firstar Corp. 26,763 666 Fleet Boston Financial Corp. 25,031 887 Huntington Bancshares, Inc. 6,030 110 J.P. Morgan & Co., Inc. 5,100 655 KeyCorp, Inc. 12,200 226 Mellon Financial Corp. 13,700 440 National City Corp. 16,600 282 Northern Trust Corp. 6,200 398 Old Kent Financial Corp. 3,600 108 PNC Financial Services Group 8,100 353 Providian Financial Corp. 4,000 352 Regions Financial Corp. 5,900 121 SouthTrust Corp. 4,600 110 State Street Corp. 4,500 436 Summit Bancorp. 4,600 117 SunTrust Banks, Inc. 8,800 447 Synovus Financial Corp. 7,600 141 U.S. Bancorp. 20,300 412 Union Planters Corp. 3,900 110 Wachovia Corp. 5,600 351 Wells Fargo & Co. 45,100 1,852 ------- 16,249 ------- - -------------------------------------------------------------------------------- BUSINESS MACHINES & SOFTWARE -- 16.6% 3Com Corp.+ 9,300 367 Adaptec, Inc.+ 2,900 78 Adobe Systems, Inc. 3,200 387 Apple Computer, Inc.+ 4,400 546 Autodesk, Inc. 1,600 61 BMC Software, Inc.+ 6,600 309 24 Number Value of Shares (000s) --------- ----------- Cabletron Systems, Inc.+ 4,800 $ 110 Ceridian Corp.+ 3,700 80 Cisco Systems, Inc.+ 187,700 13,013 Compaq Computer Corp. 46,500 1,360 Compuware Corp.+ 9,500 119 Comverse Technology, Inc.+ 4,200 375 Dell Computer Corp.+ 70,400 3,529 EMC Corp.+ 28,312 3,934 Gateway, Inc.+ 8,700 481 Hewlett-Packard Co. 27,500 3,712 IKON Office Solutions, Inc. 3,900 23 International Business Machines Corp. 49,600 5,537 Lexmark International Group, Inc., Class A+ 3,600 425 Microsoft Corp.+ 143,000 9,974 NCR Corp.+ 2,600 100 Network Appliance, Inc.+ 8,400 621 Novell, Inc.+ 8,900 175 Oracle Corp.+ 77,400 6,187 Pitney Bowes, Inc. 7,400 302 Seagate Technology, Inc.+ 5,900 300 Silicon Graphics, Inc.+ 4,500 32 Sun Microsystems, Inc.+ 43,200 3,972 Unisys Corp.+ 8,400 195 Xerox Corp. 18,100 479 ------- 56,783 ------- - -------------------------------------------------------------------------------- BUSINESS SERVICES -- 4.5% Allied Waste Industries, Inc.+ 8,100 50 America Online, Inc.+ 62,700 3,750 Automatic Data Processing, Inc. 17,300 931 Citrix Systems, Inc.+ 5,000 305 Computer Associates International, Inc. 16,100 899 Computer Sciences Corp.+ 4,600 375 Deluxe Corp. 1,800 45 Dun & Bradstreet Corp. 4,300 130 Ecolab, Inc. 3,500 137 Electronic Data Systems Corp. 12,800 880 Equifax, Inc. 3,800 93 First Data Corp. 11,800 575 H&R Block, Inc. 2,700 113 IMS Health, Inc. 8,300 142 Interpublic Group of Cos., Inc. 7,600 312 National Service Industries, Inc. 1,000 21 Omnicom Group, Inc. 4,900 446 Parametric Technology Corp.+ 7,200 59 Number Value of Shares (000s) --------- ----------- Paychex, Inc. 6,750 $ 355 PeopleSoft, Inc.+ 7,400 103 Shared Medical Systems Corp. 800 33 Tyco International Ltd. 46,452 2,134 VERITAS Software Corp.+ 10,600 1,137 Waste Management, Inc. 16,900 268 Yahoo!, Inc.+ 14,600 1,902 Young & Rubicam, Inc. 1,800 100 ------- 15,295 ------- - -------------------------------------------------------------------------------- CHEMICAL -- 1.8% Air Products & Chemicals, Inc. 6,100 189 Dow Chemical Co. 6,100 689 E. I. du Pont de Nemours & Co. 28,582 1,356 Eastman Chemical Co. 2,000 105 Great Lakes Chemical Corp. 1,400 38 Hercules, Inc. 2,600 40 Minnesota Mining & Manufacturing Co. 11,300 977 Pharmacia Corp. 34,627 1,729 PPG Industries, Inc. 4,700 256 Praxair, Inc. 4,200 187 Rohm & Haas Co. 5,963 212 Sigma-Aldrich Corp. 2,700 79 Union Carbide Corp. 3,700 218 W.R. Grace & Co.+ 4,700 61 ------- 6,136 ------- - -------------------------------------------------------------------------------- CONSTRUCTION -- 0.2% Armstrong Holdings, Inc.+ 2,300 45 Centex Corp. 1,400 34 Fluor Corp. 2,000 67 Kaufman & Broad Home Corp. 1,000 19 Masco Corp. 12,100 271 Owens Corning 1,300 24 Pulte Corp. 1,000 22 Sherwin-Williams Co. 4,500 112 The Stanley Works 2,500 74 Vulcan Materials Co. 2,700 118 ------- 786 ------- - -------------------------------------------------------------------------------- CONSUMER - DURABLE -- 0.1% Black & Decker Corp. 2,300 97 Leggett & Platt, Inc. 5,300 113 Maytag Corp. 2,400 83 Whirlpool Corp. 2,000 130 ------- 423 ------- 25 INSTITUTIONAL SELECT(TM)S&P 500 FUND SCHEDULE OF INVESTMENTS (continued) April 30, 2000 (Unaudited) Number Value of Shares (000s) --------- ----------- - -------------------------------------------------------------------------------- CONSUMER - NONDURABLE -- 0.7% American Greetings Corp., Class A 1,500 $ 27 Darden Restaurants, Inc. 3,500 65 Fortune Brands, Inc. 4,400 110 Harcourt General, Inc. 2,100 78 Hasbro, Inc. 4,800 77 Jostens, Inc. 800 20 Mattel, Inc. 11,500 141 McDonald's Corp. 37,300 1,422 Newell Rubbermaid, Inc. 7,667 193 Tricon Global Restaurants, Inc.+ 4,200 143 Tupperware Corp. 1,600 30 Wendy's International, Inc. 3,200 72 ------- 2,378 ------- - -------------------------------------------------------------------------------- CONTAINERS -- 0.1% Ball Corp. 800 25 Bemis Co., Inc. 1,400 52 Crown Cork & Seal Co., Inc. 3,300 54 Owens-Illinois, Inc.+ 3,700 50 Pactiv Corp.+ 4,400 36 Sealed Air Corp.+ 2,200 122 ------- 339 ------- - -------------------------------------------------------------------------------- ELECTRONICS -- 12.3% ADC Telecommunications, Inc.+ 8,400 510 Advanced Micro Devices, Inc.+ 4,100 360 Altera Corp.+ 4,410 451 Analog Devices, Inc.+ 9,800 753 Andrew Corp.+ 2,100 62 Applied Materials, Inc.+ 21,100 2,148 Conexant Systems, Inc.+ 5,900 353 Intel Corp. 91,600 11,616 ITT Industries, Inc. 2,400 76 KLA-Tencor Corp.+ 5,400 404 Linear Technology Corp. 8,400 480 LSI Logic Corp.+ 8,200 513 Lucent Technologies, Inc. 87,345 5,432 Micron Technology, Inc.+ 7,400 1,030 Molex, Inc. 5,500 302 Motorola, Inc. 19,442 2,315 National Semiconductor Corp.+ 4,600 279 Nextel Communications, Inc., Class A+ 10,400 1,138 Nortel Networks Corp. 39,800 4,507 PE Corp.-PE Biosystems Group 5,600 336 PerkinElmer, Inc. 1,300 71 Number Value of Shares (000s) --------- ----------- QUALCOMM, Inc.+ 20,200 $ 2,190 Scientific-Atlanta, Inc. 4,300 280 Solectron Corp.+ 16,300 763 Tektronix, Inc. 1,200 69 Tellabs, Inc.+ 10,900 597 Teradyne, Inc.+ 4,700 517 Texas Instruments, Inc. 22,400 3,648 Thermo Electron Corp.+ 4,000 78 Thomas & Betts Corp. 1,500 46 Xilinx, Inc.+ 8,800 645 ------- 41,969 ------- - -------------------------------------------------------------------------------- ENERGY - RAW MATERIALS -- 0.9% Anadarko Petroleum Corp. 3,500 152 Apache Corp. 3,100 150 Baker Hughes, Inc. 9,000 286 Burlington Resources, Inc. 5,900 232 Eastern Enterprises 700 43 Halliburton Co. 12,400 548 McDermott International, Inc. 5,700 46 Occidental Petroleum Corp. 9,700 208 Rowan Cos., Inc.+ 2,500 70 Schlumberger Ltd. 15,400 1,179 ------- 2,914 ------- - -------------------------------------------------------------------------------- FOOD & AGRICULTURE -- 2.7% Archer-Daniels Midland Co. 16,305 162 Bestfoods, Inc. 7,600 382 Campbell Soup Co. 11,500 299 Coca-Cola Co. 67,800 3,191 Coca-Cola Enterprises, Inc. 11,600 247 ConAgra, Inc. 13,400 253 General Mills, Inc. 8,100 295 H.J. Heinz Co. 9,700 330 Hershey Foods Corp. 3,700 168 Kellogg Co. 11,000 269 Nabisco Group Holdings Corp. 8,400 108 PepsiCo, Inc. 40,100 1,471 Quaker Oats Co. 3,600 235 Ralston-Ralston Purina Group 7,900 140 Sara Lee Corp. 24,400 366 SUPERVALU, Inc. 4,000 83 SYSCO Corp. 9,100 342 Unilever NV 15,642 713 Wm. Wrigley Jr. Co. 3,300 239 ------- 9,293 ------- 26 Number Value of Shares (000s) --------- ----------- - -------------------------------------------------------------------------------- GOLD -- 0.1% Barrick Gold Corp. 10,800 $ 182 Homestake Mining Co. 6,700 40 Newmont Mining Corp. 4,300 101 Placer Dome, Inc. 8,100 66 ------- 389 ------- - -------------------------------------------------------------------------------- HEALTHCARE / DRUGS & MEDICINE -- 9.7% Abbott Laboratories 42,300 1,626 Aetna, Inc. 3,800 220 Allergan, Inc. 3,500 206 ALZA Corp.+ 2,800 123 American Home Products Corp. 36,100 2,028 Amgen, Inc.+ 28,300 1,585 Bausch & Lomb, Inc. 1,600 97 Baxter International, Inc. 7,900 514 Becton, Dickinson & Co. 6,600 169 Biogen, Inc.+ 4,200 247 Biomet, Inc. 3,000 107 Boston Scientific Corp.+ 11,300 299 Bristol-Myers Squibb Co. 54,600 2,863 C.R. Bard, Inc. 1,300 57 Cardinal Health, Inc. 7,600 418 Columbia / HCA Healthcare Corp. 15,400 438 Eli Lilly & Co. 30,200 2,335 Guidant Corp.+ 8,400 482 HealthSouth Corp.+ 9,800 79 Humana, Inc.+ 4,400 34 Johnson & Johnson 38,400 3,168 Mallinckrodt, Inc. 1,900 51 Manor Care, Inc.+ 2,700 32 McKesson HBOC, Inc. 7,400 125 Medtronic, Inc. 32,600 1,693 Merck & Co., Inc. 64,300 4,469 Pfizer, Inc. 105,900 4,461 Quintiles Transnational Corp.+ 2,900 42 Schering-Plough Corp. 40,500 1,633 St. Jude Medical, Inc.+ 2,400 75 Tenet Healthcare Corp.+ 8,500 217 UnitedHealth Group, Inc. 4,700 313 Warner-Lambert Co. 23,600 2,686 Watson Pharmaceuticals, Inc.+ 2,500 112 Wellpoint Health Networks, Inc.+ 1,800 133 ------- 33,137 ------- Number Value of Shares (000s) --------- ----------- - ------------------------------------------------------------------------------ HOUSEHOLD PRODUCTS -- 1.4% Alberto-Culver Co., Class B 1,500 $ 35 Avon Products, Inc. 6,500 270 Clorox Co. 6,400 235 Colgate-Palmolive Co. 15,900 908 Gillette Co. 29,300 1,084 International Flavors & Fragrances, Inc. 2,900 100 Procter & Gamble Co. 36,400 2,170 ------- 4,802 ------- - -------------------------------------------------------------------------------- INSURANCE -- 2.8% AFLAC, Inc. 7,300 356 Allstate Corp. 21,700 513 American General Corp. 6,700 375 American International Group, Inc. 42,425 4,653 Aon Corp. 7,000 189 Chubb Corp. 4,800 305 CIGNA Corp. 4,800 383 Cincinnati Financial Corp. 4,400 177 Conseco, Inc. 8,300 45 Hartford Financial Services Group, Inc. 6,200 324 Jefferson-Pilot Corp. 3,000 200 Lincoln National Corp. 5,300 185 Loew's Corp. 2,900 160 Marsh & McLennan Cos., Inc. 7,300 720 MBIA, Inc. 2,700 133 MGIC Investment Corp. 3,000 143 Progressive Corp. 1,900 124 SAFECO Corp. 3,300 73 St. Paul Cos., Inc. 6,100 217 Torchmark Corp. 3,600 90 UnumProvident Corp. 6,460 110 ------- 9,475 ------- - -------------------------------------------------------------------------------- MEDIA -- 3.8% CBS Corp.+ 20,134 1,183 Clear Channel Communications, Inc.+ 9,300 670 Comcast Corp., Class A+ 25,200 1,010 Dow Jones & Co., Inc. 2,400 156 Gannett Co., Inc. 7,600 485 Knight-Ridder, Inc. 2,300 113 McGraw-Hill Cos., Inc. 5,300 278 MediaOne Group, Inc.+ 16,100 1,218 27 INSTITUTIONAL SELECT(TM)S&P 500 FUND SCHEDULE OF INVESTMENTS (continued) April 30, 2000 (Unaudited) Number Value of Shares (000s) --------- ----------- Meredith Corp. 1,500 $ 42 New York Times Co., Class A 4,500 185 R.R. Donnelley & Sons Co. 3,500 74 Seagram Co. Ltd. 12,200 659 Time Warner, Inc. 35,500 3,193 Tribune Co. 6,400 249 Viacom, Inc., Class B+ 19,100 1,039 Walt Disney Co. 56,900 2,464 ------- 13,018 ------- - -------------------------------------------------------------------------------- MISCELLANEOUS FINANCE -- 5.3% American Express Co. 12,500 1,876 Associates First Capital Corp. 19,600 435 Bear Stearns Cos., Inc. 3,246 139 Capital One Financial Corp. 5,400 236 Charles Schwab Corp. 22,400 997 Citigroup, Inc. 92,400 5,492 Countrywide Credit Industries, Inc. 3,000 83 Fannie Mae 28,400 1,713 Franklin Resources, Inc. 6,600 213 Freddie Mac 18,900 868 Golden West Financial Corp. 4,400 150 Household International, Inc. 12,700 530 Lehman Brothers Holdings, Inc. 3,400 279 MBNA Corp. 21,900 582 Merrill Lynch & Co., Inc. 10,400 1,060 Morgan Stanley Dean Witter Discover & Co. 31,500 2,418 Paine Webber Group, Inc. 3,800 167 Sabre Group Holdings, Inc.+ 6,618 231 SLM Holding Corp. 4,200 132 T. Rowe Price Associates, Inc. 3,300 126 Washington Mutual, Inc. 15,600 399 ------- 18,126 ------- - -------------------------------------------------------------------------------- NON-FERROUS METALS -- 0.4% Alcan Aluminum Ltd. 5,900 193 Alcoa, Inc. 10,100 655 Engelhard Corp. 3,300 58 Freeport-McMoRan Copper & Gold, Inc., Class B+ 4,200 40 Inco Ltd.+ 5,100 80 Phelps Dodge Corp. 2,160 100 Reynolds Metals Co. 1,700 113 ------- 1,239 ------- Number Value of Shares (000s) --------- ----------- - -------------------------------------------------------------------------------- OIL - DOMESTIC -- 0.6% Amerada Hess Corp. 2,400 $ 153 Ashland, Inc. 1,900 65 Conoco, Inc., Class B 17,000 423 Kerr-McGee Corp. 2,773 144 Phillips Petroleum Co. 7,100 337 Sunoco, Inc. 2,400 73 Tosco Corp. 4,000 128 Transocean Sedco Forex, Inc. 5,620 264 Union Pacific Resources Group, Inc. 6,800 130 Unocal Corp. 6,400 207 USX-Marathon Group, Inc. 8,500 198 ------- 2,122 ------- - -------------------------------------------------------------------------------- OIL - INTERNATIONAL -- 3.8% Chevron Corp. 18,000 1,532 Exxon Mobil Corp. 94,610 7,350 Royal Dutch Petroleum Co. --Sponsored ADR 59,000 3,385 Texaco, Inc. 15,100 747 ------- 13,014 ------- - -------------------------------------------------------------------------------- OPTICAL & PHOTO -- 0.6% Corning, Inc. 7,600 1,501 Eastman Kodak Co. 8,500 475 Polaroid Corp. 1,100 22 ------- 1,998 ------- - -------------------------------------------------------------------------------- PAPER & FOREST PRODUCTS -- 0.8% Boise Cascade Corp. 1,400 46 Champion International Corp. 2,600 171 Fort James Corp. 5,800 139 Georgia-Pacific Group 4,500 165 International Paper Co. 11,188 411 Kimberly-Clark Corp. 15,200 883 Louisiana-Pacific Corp. 2,600 35 Mead Corp. 2,900 101 Potlatch Corp. 700 28 Temple-Inland, Inc. 1,400 70 Westvaco Corp. 2,600 80 Weyerhaeuser Co. 6,400 342 Willamette Industries, Inc. 3,000 115 ------- 2,586 ------- 28 Number Value of Shares (000s) --------- ----------- - -------------------------------------------------------------------------------- PRODUCER GOODS & MANUFACTURING -- 5.5% Avery Dennison Corp. 3,000 $ 197 Briggs & Stratton Corp. 500 19 Caterpillar, Inc. 9,800 386 Cooper Industries, Inc. 2,500 86 Deere & Co. 6,300 254 Dover Corp. 5,500 279 Emerson Electric Co. 11,700 642 FMC Corp.+ 800 47 General Electric Co. (b) 90,000 14,153 Honeywell International, Inc. 21,762 1,219 Illinois Tool Works, Inc. 8,200 525 Ingersoll-Rand Co. 4,500 211 Johnson Controls, Inc. 2,400 152 Milacron, Inc. 2,700 49 Millipore Corp. 1,500 108 NACCO Industries, Inc., Class A 200 9 Pall Corp. 3,300 74 Parker-Hannifin Corp. 3,000 140 Snap-On, Inc. 1,400 37 The Timken Co. 1,500 28 W.W. Grainger, Inc. 2,400 104 ------- 18,719 ------- - -------------------------------------------------------------------------------- RAILROAD & SHIPPING -- 0.3% Burlington Northern Santa Fe Corp. 12,400 299 CSX Corp. 5,700 119 Kansas City Southern Industries, Inc. 3,000 216 Norfolk Southern Corp. 10,100 178 Union Pacific Corp. 6,700 282 ------- 1,094 ------- - -------------------------------------------------------------------------------- RETAIL -- 5.9% Albertson's, Inc. 11,583 377 AutoZone, Inc.+ 3,700 85 Bed, Bath & Beyond, Inc.+ 3,700 136 Best Buy Co., Inc.+ 5,600 452 Cendant Corp.+ 18,970 293 Circuit City Stores-Circuit City Group 5,600 329 Consolidated Stores Corp.+ 2,900 36 Costco Wholesale Corp.+ 12,500 676 CVS Corp. 10,600 461 Dillards, Inc., Class A 2,500 35 Dollar General Corp. 7,000 160 Number Value of Shares (000s) --------- ----------- Federated Department Stores, Inc.+ 5,600 $ 190 Gap, Inc. 23,300 856 Great Atlantic & Pacific Tea Co., Inc. 2,600 48 Home Depot, Inc. 63,300 3,549 J.C. Penney Co., Inc. 7,100 98 Kmart Corp.+ 12,800 104 Kohl's Corp.+ 9,200 442 Kroger Co.+ 22,800 423 Limited, Inc. 6,000 271 Longs Drug Stores, Inc. 1,000 23 Lowe's Cos., Inc. 10,400 515 May Department Stores Co. 9,100 250 Nordstrom, Inc. 3,500 97 Office Depot, Inc.+ 8,400 89 Rite Aid Corp. 6,800 34 Safeway, Inc.+ 13,900 613 Sears, Roebuck & Co. 10,300 377 Staples, Inc.+ 12,700 242 Tandy Corp. 5,200 296 Target Corp. 12,000 799 TJX Cos., Inc. 8,800 169 Toys `R' Us, Inc.+ 6,300 96 Wal-Mart Stores, Inc. 122,300 6,772 Walgreen Co. 27,400 771 Winn-Dixie Stores, Inc. 3,900 65 ------- 20,229 ------- - -------------------------------------------------------------------------------- STEEL -- 0.1% Allegheny Technologies, Inc. 2,350 57 Bethlehem Steel Corp.+ 3,740 20 Nucor Corp. 2,300 99 USX-U.S. Steel Group, Inc. 2,500 63 Worthington Industries, Inc. 2,600 32 ------- 271 ------- - -------------------------------------------------------------------------------- TELEPHONE -- 6.9% Alltel Corp. 8,500 566 AT&T Corp. 87,503 4,085 Bell Atlantic Corp. 42,500 2,518 BellSouth Corp. 51,900 2,527 CenturyTel, Inc. 3,700 91 Global Crossing Ltd.+ 21,160 667 GTE Corp. 25,500 1,728 MCI WorldCom, Inc.+ 77,850 3,537 SBC Communications, Inc. 93,430 4,093 29 INSTITUTIONAL SELECT(TM)S&P 500 FUND SCHEDULE OF INVESTMENTS (continued) April 30, 2000 (Unaudited) Number Value of Shares (000s) --------- ----------- Sprint Corp. (FON Group) 23,900 $ 1,470 Sprint Corp. (PCS Group)+ 23,600 1,298 US West, Inc. 14,200 1,011 ------- 23,591 ------- - -------------------------------------------------------------------------------- TOBACCO -- 0.4% Philip Morris Cos., Inc. 64,800 1,418 UST, Inc. 4,500 68 ------- 1,486 ------- - -------------------------------------------------------------------------------- TRAVEL & RECREATION -- 0.3% Brunswick Corp. 2,400 46 Carnival Corp. 16,900 420 Harrah's Entertainment, Inc.+ 3,400 70 Hilton Hotels Corp. 9,700 82 Marriott International, Inc., Class A 6,700 214 Mirage Resorts, Inc.+ 5,100 104 ------- 936 ------- - -------------------------------------------------------------------------------- TRUCKING & FREIGHT -- 0.0% PACCAR, Inc. 2,000 95 Ryder Systems, Inc. 1,700 38 -------- 133 -------- - -------------------------------------------------------------------------------- UTILITIES - ELECTRIC & GAS -- 2.5% AES Corp.+ 5,700 513 Ameren Corp. 3,800 139 American Electric Power Co., Inc. 5,200 190 Carolina Power & Light Co. 4,400 161 Central & South West Corp. 5,800 126 Cinergy Corp. 4,100 110 CMS Energy Corp. 3,100 59 Coastal Corp. 5,700 286 Columbia Energy Group 2,200 138 Number Value of Shares (000s) --------- ----------- Consolidated Edison, Inc. 5,900 $ 208 Constellation Energy Group, Inc. 4,100 136 Dominion Resources, Inc. 6,491 292 DTE Energy Co. 3,900 127 Duke Energy Corp. 9,900 569 Edison International 9,400 179 El Paso Energy Corp. 6,300 268 Enron Corp. 19,700 1,372 Entergy Corp. 6,500 165 FirstEnergy Corp. 6,300 160 Florida Progress Corp. 2,700 132 FPL Group, Inc. 4,900 221 GPU, Inc. 3,200 90 New Century Energies, Inc. 3,200 104 Niagara Mohawk Holdings, Inc.+ 5,600 78 NICOR, Inc. 1,300 44 Northern States Power Co. 4,100 89 ONEOK, Inc. 2,100 53 PECO Energy Co. 5,000 208 Peoples Energy Corp. 900 28 PG&E Corp. 10,300 267 Pinnacle West Capital Corp. 2,300 81 PPL Corp. 3,700 88 Public Service Enterprise Group, Inc. 5,900 212 Reliant Energy, Inc. 8,100 216 Sempra Energy 5,585 104 Southern Co. 18,100 451 Texas Utilities Co. 7,500 253 Unicom Corp. 5,800 231 Williams Cos., Inc. 11,700 437 -------- 8,585 -------- TOTAL COMMON STOCK (Cost $310,155) 338,536 -------- 30 Par Value (000s) (000s) ------- ----------- - -------------------------------------------------------------------------------- U.S. TREASURY OBLIGATIONS -- 0.1% U.S. Treasury Bill (a)(b) 5.56%-5.79%, 06/15/00 $300 $ 298 ------- TOTAL U.S. TREASURY OBLIGATIONS (Cost $298) 298 ------- Number of Shares --------- - -------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS -- 1.1% Provident Institutional TempFund, 5.74%* 3,654,395 3,654 -------- TOTAL SHORT-TERM INVESTMENTS (Cost $3,654) 3,654 -------- TOTAL INVESTMENTS-- 100.4% (Cost $314,107) 342,488 -------- OTHER ASSETS AND LIABILITIES, NET -- (0.4%) Other assets 30,969 Liabilities (32,350) -------- (1,381) -------- TOTAL NET ASSETS -- 100.0% $341,107 ======== SEE ACCOMPANYING NOTES TO SCHEDULES OF INVESTMENTS AND NOTES TO FINANCIAL STATEMENTS. 31 INSTITUTIONAL SELECT(TM) LARGE-CAP VALUE INDEX FUND SCHEDULE OF INVESTMENTS April 30, 2000 (Unaudited) Number Value of Shares (000s) --------- ----------- - -------------------------------------------------------------------------------- COMMON STOCK -- 99.6% - -------------------------------------------------------------------------------- AEROSPACE / DEFENSE -- 2.2% B.F. Goodrich Co. 2,000 $ 64 Boeing Co. 15,600 619 Crane Co. 1,200 32 General Dynamics Corp. 3,600 211 Lockheed Martin Corp. 7,100 177 Northrop Grumman Corp. 1,300 92 Raytheon Co., Class B 5,900 131 Rockwell International Corp. 3,300 130 Textron, Inc. 2,700 167 TRW, Inc. 2,200 129 United Technologies Corp. 8,600 535 -------- 2,287 -------- - -------------------------------------------------------------------------------- AIR TRANSPORTATION -- 0.6% AMR Corp.+ 2,600 89 Delta Air Lines, Inc. 2,300 121 FedEx Corp.+ 5,200 196 Southwest Airlines Co. 8,900 193 -------- 599 -------- - -------------------------------------------------------------------------------- ALCOHOLIC BEVERAGES -- 0.1% Adolph Coors Co., Class B 700 36 Brown-Forman Corp., Class B 1,300 71 -------- 107 -------- - -------------------------------------------------------------------------------- APPAREL -- 0.4% Liz Claiborne, Inc. 1,000 46 Nike, Inc., Class B 5,000 217 Reebok International Ltd.+ 800 14 Russell Corp. 600 12 Springs Industries, Inc. 400 16 VF Corp. 2,100 59 -------- 364 -------- - -------------------------------------------------------------------------------- AUTOMOTIVE PRODUCTS/MOTOR VEHICLES -- 3.0% Cooper Tire & Rubber Co. 1,200 16 Cummins Engine Co., Inc. 800 28 Dana Corp. 3,000 91 Danaher Corp. 2,600 149 Delphi Automotive Systems Corp. 10,123 194 Eaton Corp. 1,300 109 Ford Motor Co. 21,600 1,181 General Motors Corp. 11,500 1,077 Number Value of Shares (000s) --------- ----------- Genuine Parts Co. 3,200 $ 84 Goodyear Tire & Rubber Co. 2,800 77 Navistar International Corp.+ 1,100 38 -------- 3,044 -------- - -------------------------------------------------------------------------------- BANKS -- 10.1% AmSouth Bancorp. 7,100 103 Bank of America Corp. 30,600 1,499 Bank of New York Co., Inc. 13,100 538 Bank One Corp. 20,600 628 BB&T Corp. 6,300 168 Chase Manhattan Corp. 14,900 1,074 Comerica, Inc. 2,800 119 Fifth Third Bancorp. 5,600 353 First Union Corp. 17,700 564 Firstar Corp. 17,482 435 Fleet Boston Financial Corp. 16,318 578 Huntington Bancshares, Inc. 4,310 79 J.P. Morgan & Co., Inc. 3,200 411 KeyCorp, Inc. 8,100 150 Mellon Financial Corp. 9,100 292 National City Corp. 11,100 189 Northern Trust Corp. 4,100 263 Old Kent Financial Corp. 2,300 69 PNC Financial Services Group 5,300 231 Regions Financial Corp. 4,000 82 SouthTrust Corp. 3,000 72 State Street Corp. 2,900 281 Summit Bancorp. 3,100 79 SunTrust Banks, Inc. 5,700 289 Synovus Financial Corp. 4,800 89 U.S. Bancorp. 13,400 272 Union Planters Corp. 2,500 71 Wachovia Corp. 3,700 232 Wells Fargo & Co. 29,600 1,215 -------- 10,425 -------- - -------------------------------------------------------------------------------- BUSINESS MACHINES & SOFTWARE -- 4.9% 3Com Corp.+ 6,200 245 Adaptec, Inc.+ 1,900 51 Apple Computer, Inc.+ 2,900 360 Autodesk, Inc. 1,000 38 Cabletron Systems, Inc.+ 3,100 71 Ceridian Corp.+ 2,400 52 Compaq Computer Corp. 30,400 889 Hewlett-Packard Co. 18,000 2,430 32 Number Value of Shares (000s) --------- ----------- IKON Office Solutions, Inc. 2,300 $ 14 NCR Corp.+ 1,800 70 Novell, Inc.+ 5,700 112 Seagate Technology, Inc.+ 3,900 198 Silicon Graphics, Inc.+ 3,100 22 Unisys Corp.+ 5,600 130 Xerox Corp. 11,900 315 -------- 4,997 -------- - -------------------------------------------------------------------------------- BUSINESS SERVICES -- 1.6% Allied Waste Industries, Inc.+ 3,400 21 Computer Sciences Corp.+ 3,000 245 Deluxe Corp. 1,200 30 Ecolab, Inc. 2,400 94 Electronic Data Systems Corp. 8,500 584 First Data Corp. 7,500 365 H&R Block, Inc. 1,800 75 National Service Industries, Inc. 800 17 Shared Medical Systems Corp. 500 21 Waste Management, Inc. 11,200 178 -------- 1,630 -------- - -------------------------------------------------------------------------------- CHEMICAL -- 3.9% Air Products & Chemicals, Inc. 4,100 127 Dow Chemical Co. 3,900 441 E. I. du Pont de Nemours & Co. 18,800 892 Eastman Chemical Co. 1,500 78 Great Lakes Chemical Corp. 1,000 27 Hercules, Inc. 2,000 31 Minnesota Mining & Manufacturing Co. 7,100 614 Pharmacia Corp. 22,463 1,122 PPG Industries, Inc. 3,100 169 Praxair, Inc. 2,800 124 Rohm & Haas Co. 3,905 139 Sigma-Aldrich Corp. 1,800 53 Union Carbide Corp. 2,500 147 -------- 3,964 -------- - -------------------------------------------------------------------------------- CONSTRUCTION -- 0.5% Armstrong Holdings, Inc.+ 600 12 Centex Corp. 1,000 24 Fluor Corp. 1,400 47 Kaufman & Broad Home Corp. 900 17 Masco Corp. 7,900 177 Number Value of Shares (000s) --------- ----------- Pulte Corp. 800 $ 17 Sherwin-Williams Co. 2,900 72 The Stanley Works 1,500 44 Vulcan Materials Co. 1,800 79 -------- 489 -------- - -------------------------------------------------------------------------------- CONSUMER - DURABLE -- 0.2% Black & Decker Corp. 1,600 67 Leggett & Platt, Inc. 3,400 73 Whirlpool Corp. 1,400 91 -------- 231 -------- - -------------------------------------------------------------------------------- CONSUMER - NONDURABLE -- 1.4% American Greetings Corp., Class A 1,400 25 Darden Restaurants, Inc. 2,200 41 Fortune Brands, Inc. 2,900 72 Harcourt General, Inc. 1,300 49 Hasbro, Inc. 3,250 52 Mattel, Inc. 7,200 88 McDonald's Corp. 24,300 926 Newell Rubbermaid, Inc. 4,900 123 Wendy's International, Inc. 2,000 45 -------- 1,421 -------- - -------------------------------------------------------------------------------- CONTAINERS -- 0.1% Ball Corp. 500 16 Bemis Co., Inc. 900 33 Crown Cork & Seal Co., Inc. 2,200 36 Owens-Illinois, Inc.+ 2,900 39 Pactiv Corp.+ 2,700 22 -------- 146 -------- - -------------------------------------------------------------------------------- ELECTRONICS -- 4.6% Advanced Micro Devices, Inc.+ 2,700 237 Analog Devices, Inc.+ 6,200 476 Andrew Corp.+ 1,500 44 ITT Industries, Inc. 1,500 47 KLA-Tencor Corp.+ 3,400 255 LSI Logic Corp.+ 5,400 337 Micron Technology, Inc.+ 5,000 696 Molex, Inc. 3,450 190 Motorola, Inc. 12,895 1,535 National Semiconductor Corp.+ 3,000 182 PerkinElmer, Inc. 800 44 Scientific-Atlanta, Inc. 2,800 182 33 INSTITUTIONAL SELECT(TM)LARGE-CAP VALUE INDEX FUND SCHEDULE OF INVESTMENTS (continued) April 30, 2000 (Unaudited) Number Value of Shares (000s) --------- ----------- Tektronix, Inc. 800 $ 46 Teradyne, Inc.+ 3,200 352 Thermo Electron Corp.+ 2,800 54 Thomas & Betts Corp. 1,100 34 -------- 4,711 -------- - -------------------------------------------------------------------------------- ENERGY - RAW MATERIALS -- 1.8% Anadarko Petroleum Corp. 2,300 100 Apache Corp. 2,100 102 Baker Hughes, Inc. 5,800 185 Burlington Resources, Inc. 3,900 153 Eastern Enterprises 500 30 Halliburton Co. 8,000 353 McDermott International, Inc. 1,300 11 Occidental Petroleum Corp. 6,400 137 Rowan Cos., Inc.+ 1,600 45 Schlumberger Ltd. 9,900 758 -------- 1,874 -------- - -------------------------------------------------------------------------------- FOOD & AGRICULTURE -- 0.6% Archer-Daniels Midland Co. 10,730 107 Coca-Cola Enterprises, Inc. 7,500 160 ConAgra, Inc. 8,600 162 Hershey Foods Corp. 2,400 109 Nabisco Group Holdings Corp. 6,000 77 SUPERVALU, Inc. 2,400 50 -------- 665 -------- - -------------------------------------------------------------------------------- GOLD -- 0.3% Barrick Gold Corp. 7,300 123 Homestake Mining Co. 4,300 26 Newmont Mining Corp. 3,000 70 Placer Dome, Inc. 5,500 45 -------- 264 -------- - -------------------------------------------------------------------------------- HEALTHCARE/DRUGS & MEDICINE -- 3.6% Aetna, Inc. 2,500 145 ALZA Corp.+ 1,800 79 American Home Products Corp. 23,400 1,315 Bausch & Lomb, Inc. 1,000 60 Baxter International, Inc. 5,300 345 Becton, Dickinson & Co. 4,700 120 Biomet, Inc. 2,100 75 Boston Scientific Corp.+ 7,500 199 C.R. Bard, Inc. 900 39 Cardinal Health, Inc. 5,000 275 Number Value of Shares (000s) --------- ----------- Columbia / HCA Healthcare Corp. 10,100 $ 287 HealthSouth Corp.+ 6,900 56 Humana, Inc.+ 3,000 23 Mallinckrodt, Inc. 1,300 35 Manor Care, Inc.+ 1,700 20 McKesson HBOC, Inc. 4,900 83 Quintiles Transnational Corp.+ 2,000 29 St. Jude Medical, Inc.+ 1,600 50 Tenet Healthcare Corp.+ 5,600 143 UnitedHealth Group, Inc. 3,000 200 Watson Pharmaceuticals, Inc.+ 1,800 81 Wellpoint Health Networks, Inc.+ 1,100 81 -------- 3,740 -------- - -------------------------------------------------------------------------------- HOUSEHOLD PRODUCTS -- 0.2% Alberto-Culver Co., Class B 900 21 Clorox Co. 4,200 154 International Flavors & Fragrances, Inc. 1,900 65 -------- 240 -------- - -------------------------------------------------------------------------------- INSURANCE -- 6.0% AFLAC, Inc. 4,800 234 Allstate Corp. 14,500 343 American General Corp. 4,500 252 American International Group, Inc. 27,750 3,044 Aon Corp. 4,450 120 Chubb Corp. 3,100 197 CIGNA Corp. 3,100 247 Cincinnati Financial Corp. 2,900 117 Conseco, Inc. 5,400 29 Hartford Financial Services Group, Inc. 3,900 204 Jefferson-Pilot Corp. 1,900 126 Lincoln National Corp. 3,400 118 Loew's Corp. 2,000 110 Marsh & McLennan Cos., Inc. 4,800 473 MBIA, Inc. 1,700 84 MGIC Investment Corp. 1,900 91 Progressive Corp. 1,400 92 SAFECO Corp. 2,200 49 St. Paul Cos., Inc. 4,100 146 Torchmark Corp. 2,300 58 UnumProvident Corp. 4,549 77 -------- 6,211 -------- 34 Number Value of Shares (000s) --------- ----------- - -------------------------------------------------------------------------------- MEDIA -- 5.6% CBS Corp.+ 13,129 $ 771 Clear Channel Communications, Inc.+ 6,200 446 Gannett Co., Inc. 5,100 326 Knight-Ridder, Inc. 1,500 74 McGraw-Hill Cos., Inc. 3,600 189 MediaOne Group, Inc.+ 10,600 802 Meredith Corp. 900 25 New York Times Co., Class A 3,200 132 R.R. Donnelley & Sons Co. 2,300 49 Seagram Co. Ltd. 7,700 416 Times Mirror Co., Series A 200 20 Tribune Co. 4,300 167 Viacom, Inc., Class B+ 12,600 685 Walt Disney Co. 37,100 1,607 -------- 5,709 -------- - -------------------------------------------------------------------------------- MISCELLANEOUS FINANCE -- 10.3% American Express Co. 8,000 1,200 Associates First Capital Corp. 13,000 288 Bear Stearns Cos., Inc. 2,101 90 Capital One Financial Corp. 3,600 157 Citigroup, Inc. 60,450 3,593 Countrywide Credit Industries, Inc. 1,900 52 Fannie Mae 18,300 1,104 Franklin Resources, Inc. 4,400 142 Freddie Mac 12,400 570 Golden West Financial Corp. 3,000 102 Household International, Inc. 8,500 355 Lehman Brothers Holdings, Inc. 2,200 181 Merrill Lynch & Co., Inc. 6,700 683 Morgan Stanley Dean Witter Discover & Co. 20,500 1,573 Paine Webber Group, Inc. 2,600 114 Sabre Group Holdings, Inc.+ 2,378 83 T. Rowe Price Associates, Inc. 2,100 80 Washington Mutual, Inc. 10,200 261 -------- 10,628 -------- - -------------------------------------------------------------------------------- NON-FERROUS METALS -- 0.8% Alcan Aluminum Ltd. 3,900 128 Alcoa, Inc. 6,600 428 Engelhard Corp. 2,100 37 Inco Ltd.+ 3,300 52 Number Value of Shares (000s) --------- ----------- Phelps Dodge Corp. 1,520 $ 70 Reynolds Metals Co. 1,100 73 -------- 788 -------- - -------------------------------------------------------------------------------- OIL - DOMESTIC -- 1.3% Amerada Hess Corp. 1,600 102 Ashland, Inc. 1,300 44 Conoco, Inc., Class B 11,300 281 Kerr-McGee Corp. 1,700 88 Phillips Petroleum Co. 4,600 218 Sunoco, Inc. 1,500 45 Tosco Corp. 2,600 83 Transocean Sedco Forex, Inc. 3,748 176 Union Pacific Resources Group, Inc. 4,400 84 Unocal Corp. 4,200 136 USX-Marathon Group, Inc. 5,500 128 -------- 1,385 -------- - -------------------------------------------------------------------------------- OIL - INTERNATIONAL -- 8.3% Chevron Corp. 11,900 1,013 Exxon Mobil Corp. (b) 61,925 4,811 Royal Dutch Petroleum Co. - Sponsored ADR 38,500 2,209 Texaco, Inc. 10,000 495 -------- 8,528 -------- - -------------------------------------------------------------------------------- OPTICAL & PHOTO -- 0.3% Eastman Kodak Co. 5,700 319 Polaroid Corp. 900 18 -------- 337 -------- - -------------------------------------------------------------------------------- PAPER & FOREST PRODUCTS -- 1.1% Boise Cascade Corp. 1,000 33 Champion International Corp. 1,800 118 Fort James Corp. 3,700 89 Georgia-Pacific Group 3,000 110 International Paper Co. 7,342 270 Louisiana-Pacific Corp. 1,800 24 Mead Corp. 1,800 63 Potlatch Corp. 500 20 Temple-Inland, Inc. 1,000 50 Westvaco Corp. 1,800 56 Weyerhaeuser Co. 4,300 230 Willamette Industries, Inc. 1,900 73 -------- 1,136 -------- 35 INSTITUTIONAL SELECT(TM)LARGE-CAP VALUE INDEX FUND SCHEDULE OF INVESTMENTS (continued) April 30, 2000 (Unaudited) Number Value of Shares (000s) --------- ----------- - -------------------------------------------------------------------------------- PRODUCER GOODS & MANUFACTURING -- 2.7% Briggs & Stratton Corp. 500 $ 19 Caterpillar, Inc. 6,400 252 Cooper Industries, Inc. 1,600 55 Deere & Co. 4,400 178 Dover Corp. 3,700 188 Emerson Electric Co. 7,700 423 FMC Corp.+ 500 29 Honeywell International, Inc. 14,287 800 Illinois Tool Works, Inc. 5,500 352 Ingersoll-Rand Co. 2,900 136 Johnson Controls, Inc. 1,500 95 Milacron, Inc. 700 13 NACCO Industries, Inc., Class A 300 13 Pall Corp. 2,100 47 Parker-Hannifin Corp. 2,000 93 Snap-On, Inc. 900 24 The Timken Co. 900 17 W.W. Grainger, Inc. 1,600 69 -------- 2,803 -------- - -------------------------------------------------------------------------------- RAILROAD & SHIPPING -- 0.7% Burlington Northern Santa Fe Corp. 8,100 195 CSX Corp. 3,900 82 Kansas City Southern Industries, Inc. 2,000 144 Norfolk Southern Corp. 6,900 122 Union Pacific Corp. 4,500 190 -------- 733 -------- - -------------------------------------------------------------------------------- RETAIL -- 4.2% Albertson's, Inc. 7,538 245 AutoZone, Inc.+ 2,300 53 Cendant Corp.+ 12,600 195 Circuit City Stores-Circuit City Group 3,700 218 Consolidated Stores Corp.+ 1,700 21 Costco Wholesale Corp.+ 8,000 432 CVS Corp. 7,100 309 Dillards, Inc., Class A 1,800 25 Dollar General Corp. 4,800 110 Federated Department Stores, Inc.+ 3,800 129 Number Value of Shares (000s) --------- ----------- Great Atlantic & Pacific Tea Co., Inc. 600 $ 11 J.C. Penney Co., Inc. 4,600 64 Kmart Corp.+ 8,700 71 Limited, Inc. 3,900 176 Longs Drug Stores, Inc. 900 21 Lowe's Cos., Inc. 6,800 337 May Department Stores Co. 6,000 165 Nordstrom, Inc. 2,400 67 Office Depot, Inc.+ 5,600 59 Rite Aid Corp. 5,100 25 Safeway, Inc.+ 9,100 402 Sears, Roebuck & Co. 6,700 245 Staples, Inc.+ 8,500 162 Target Corp. 7,800 519 TJX Cos., Inc. 5,600 107 Toys `R' Us, Inc.+ 4,300 66 Winn-Dixie Stores, Inc. 2,500 41 -------- 4,275 -------- - -------------------------------------------------------------------------------- STEEL -- 0.2% Allegheny Technologies, Inc. 1,550 37 Bethlehem Steel Corp.+ 2,200 12 Nucor Corp. 1,600 69 USX-U.S. Steel Group, Inc. 1,500 38 Worthington Industries, Inc. 1,700 21 -------- 177 -------- - -------------------------------------------------------------------------------- TELEPHONE -- 11.0% Alltel Corp. 5,700 380 AT&T Corp. 57,300 2,675 Bell Atlantic Corp. 27,900 1,653 BellSouth Corp. 33,800 1,646 CenturyTel, Inc. 2,600 64 Global Crossing Ltd.+ 14,000 441 GTE Corp. 16,700 1,131 MCI WorldCom, Inc.+ 50,950 2,315 Sprint Corp. (FON Group) 15,700 966 -------- 11,271 -------- - -------------------------------------------------------------------------------- TOBACCO -- 0.9% Philip Morris Cos., Inc. 42,400 927 -------- 36 Number Value of Shares (000s) --------- ----------- - -------------------------------------------------------------------------------- TRAVEL & RECREATION -- 0.5% Brunswick Corp. 1,600 $ 31 Carnival Corp. 11,100 276 Harrah's Entertainment, Inc.+ 2,300 47 Marriott International, Inc., Class A 4,500 144 Mirage Resorts, Inc.+ 3,100 63 -------- 561 -------- - -------------------------------------------------------------------------------- TRUCKING & FREIGHT -- 0.1% PACCAR, Inc. 1,400 67 Ryder Systems, Inc. 1,100 24 -------- 91 -------- - -------------------------------------------------------------------------------- UTILITIES - ELECTRIC & GAS -- 5.5% AES Corp.+ 3,700 333 Ameren Corp. 2,500 92 American Electric Power Co., Inc. 3,500 128 Carolina Power & Light Co. 3,000 110 Central & South West Corp. 3,700 80 Cinergy Corp. 2,800 75 CMS Energy Corp. 1,900 36 Coastal Corp. 3,800 191 Columbia Energy Group 1,400 88 Consolidated Edison, Inc. 4,000 141 Constellation Energy Group, Inc. 2,700 89 Dominion Resources, Inc. 4,348 196 DTE Energy Co. 2,500 82 Duke Energy Corp. 6,600 380 Edison International 6,400 122 El Paso Energy Corp. 4,100 174 Enron Corp. 12,800 892 Entergy Corp. 4,300 109 FirstEnergy Corp. 4,300 109 Florida Progress Corp. 1,800 88 FPL Group, Inc. 3,300 149 GPU, Inc. 2,200 62 New Century Energies, Inc. 2,200 72 Niagara Mohawk Holdings, Inc.+ 3,000 42 NICOR, Inc. 900 30 Northern States Power Co. 2,700 59 ONEOK, Inc. 500 13 PECO Energy Co. 3,400 142 Peoples Energy Corp. 500 16 Number Value of Shares (000s) --------- ----------- PG&E Corp. 6,900 $ 179 Pinnacle West Capital Corp. 1,400 49 PPL Corp. 2,600 62 Public Service Enterprise Group, Inc. 3,900 140 Reliant Energy, Inc. 5,400 144 Sempra Energy 3,500 65 Southern Co. 12,100 302 Texas Utilities Co. 5,000 168 Unicom Corp. 3,900 155 Williams Cos., Inc. 7,800 291 -------- 5,655 -------- TOTAL COMMON STOCK (Cost $100,681) 102,413 -------- Par (000s) ------- - -------------------------------------------------------------------------------- U.S. TREASURY OBLIGATION -- 0.0% U.S. Treasury Bill (a)(b) 5.75%, 06/15/00 $40 40 -------- Total U.S. Treasury Obligation (Cost $40) 40 -------- Number of Shares --------- - -------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS -- 1.2% Provident Institutional TempFund, 5.74%* 1,179,152 1,179 -------- TOTAL SHORT-TERM INVESTMENTS (Cost $1,179) 1,179 -------- TOTAL INVESTMENTS -- 100.8% (Cost $101,900) 103,632 -------- OTHER ASSETS AND LIABILITIES, NET-- (0.8%) Other assets 9,311 Liabilities (10,087) -------- (776) -------- TOTAL NET ASSETS-- 100.0% $102,856 -------- SEE ACCOMPANYING NOTES TO SCHEDULES OF INVESTMENTS AND NOTES TO FINANCIAL STATEMENTS. 37 INSTITUTIONAL SELECT(TM) SMALL-CAP VALUE INDEX FUND SCHEDULE OF INVESTMENTS April 30, 2000 (Unaudited) Number Value of Shares (000s) --------- ----------- - -------------------------------------------------------------------------------- COMMON STOCK -- 99.8% - -------------------------------------------------------------------------------- AEROSPACE / DEFENSE -- 0.4% GenCorp., Inc. 7,900 $ 79 Kaman Corp., Class A 4,500 48 -------- 127 -------- - -------------------------------------------------------------------------------- AIR TRANSPORTATION -- 0.9% AAR Corp. 5,000 75 Mesa Air Group, Inc.+ 6,500 42 SkyWest, Inc. 4,600 194 -------- 311 -------- - -------------------------------------------------------------------------------- ALCOHOLIC BEVERAGES -- 0.5% Canandaigua Brands, Inc., Class A+ 3,400 171 -------- - -------------------------------------------------------------------------------- APPAREL -- 3.7% Ashworth, Inc.+ 2,700 13 Brown Shoe Co., Inc. 3,300 34 Cone Mills Corp.+ 5,000 27 Cyrk International, Inc.+ 3,100 27 The Dixie Group, Inc.+ 2,300 9 The Dress Barn, Inc.+ 3,600 71 Footstar, Inc.+ 3,900 145 Goody's Family Clothing, Inc.+ 6,300 41 Guilford Mills 3,600 30 The Gymboree Corp.+ 4,400 16 Haggar Corp. 1,500 20 Hartmarx Corp.+ 5,600 14 J. Baker, Inc. 2,700 18 Jan Bell Marketing, Inc.+ 4,800 14 Jo-Ann Stores, Inc., Class A+ 3,300 31 K-Swiss, Inc., Class A 2,100 31 Kellwood Co. 4,900 84 Men's Wearhouse, Inc.+ 7,600 163 Nautica Enterprises, Inc.+ 6,300 71 OshKosh B'Gosh, Inc., Class A 2,300 37 Oxford Industries, Inc. 1,500 25 Phillips-Van Heusen Corp. 5,300 45 Pillowtex Corp. 1,700 9 Quiksilver, Inc.+ 4,200 79 Stride Rite Corp. 8,000 67 Wet Seal, Inc., Class A+ 2,700 48 Wolverine World Wide, Inc. 7,800 94 -------- 1,263 -------- Number Value of Shares (000s) --------- ----------- - -------------------------------------------------------------------------------- AUTOMOTIVE PRODUCTS/MOTOR VEHICLES -- 2.6% A.O. Smith Corp., Class B 4,300 $ 88 Arctic Cat, Inc. 5,000 50 Discount Auto Parts, Inc.+ 3,200 34 Fleetwood Enterprises, Inc. 6,300 92 Group 1 Automotive, Inc.+ 4,000 47 Monaco Coach Corp.+ 3,600 59 Myers Industries, Inc. 3,810 53 Oshkosh Truck Corp. 3,200 101 Simpson Industries, Inc. 3,500 36 Spartan Motors, Inc. 1,200 5 Standard Motor Products, Inc. 2,500 28 TBC Corp.+ 3,900 21 Thor Industries, Inc. 2,300 62 Titan International, Inc. 4,000 27 Tower Automotive, Inc.+ 8,900 139 Wynns International, Inc. 3,600 50 -------- 892 -------- - -------------------------------------------------------------------------------- BANKS -- 6.5% Anchor Bancorp Wisconsin, Inc. 4,900 77 Banknorth Group, Inc. 4,500 107 Centura Banks, Inc. 7,600 314 Community First Bankshares, Inc. 9,300 157 Cullen/Frost Bankers, Inc. 10,100 249 First Bancorp./Puerto Rico 5,400 95 First Midwest Bancorp, Inc. 7,700 192 MAF Bancorp., Inc. 4,400 82 Provident Bankshares Corp. 4,562 68 Riggs National Corp. 5,100 69 Silicon Valley Bancshares+ 4,200 259 The South Financial Group, Inc. 4,400 61 Southwest Bancorp. of Texas, Inc.+ 5,100 100 Susquehanna Bancshares, Inc. 6,500 90 United Bankshares, Inc. 7,700 168 Whitney Holding Corp. 4,100 143 -------- 2,231 -------- - -------------------------------------------------------------------------------- BUSINESS MACHINES & SOFTWARE-- 1.3% Analogic Corp. 2,400 98 Centigram Communications Corp.+ 1,200 18 Digi International, Inc.+ 2,900 16 Exabyte Corp.+ 4,400 21 Flow International Corp.+ 2,600 29 Hanger Orthopedic Group, Inc.+ 3,700 18 38 Number Value of Shares (000s) --------- ----------- InaCom Corp.+ 6,940 $ 11 Input/Output, Inc.+ 9,800 72 Komag, Inc.+ 10,700 31 Systems & Computer Technology Corp.+ 6,000 141 -------- 455 -------- - -------------------------------------------------------------------------------- BUSINESS SERVICES -- 8.4% Aaron Rents, Inc. 3,300 48 ABM Industries, Inc. 4,100 103 Actel Corp.+ 4,100 151 Analysts International Corp. 3,900 43 Angelica Corp. 1,700 11 Billing Concepts Corp.+ 7,300 39 Bowne & Co., Inc. 7,100 82 CDI Corp.+ 3,400 76 Cerner Corp.+ 6,300 139 Chemed Corp. 2,000 60 Franklin Covey Co.+ 3,200 29 G & K Services, Inc., Class A 3,600 88 HA-LO Industries, Inc.+ 8,300 61 Information Resources, Inc.+ 5,300 33 Insteel Industries, Inc. 1,700 10 Interim Services, Inc.+ 11,500 197 Interpublic Group of Cos., Inc. 2,916 120 Kroll-O'Gara Co.+ 3,500 27 Lason, Inc.+ 2,500 11 Nashua Corp.+ 2,000 16 National Data Corp. 6,100 169 New England Business Service, Inc. 2,200 36 Orbital Sciences Corp.+ 6,500 82 PAXAR Corp.+ 9,000 92 Performance Food Group Co.+ 2,700 71 Primark Corp.+ 3,800 103 Priority Healthcare Corp., Class B+ 4,100 227 S3, Inc.+ 14,300 201 SEACOR SMIT, Inc.+ 2,200 135 StaffMark, Inc.+ 4,900 32 Teledyne Technologies, Inc.+ 5,000 87 Tetra Technology, Inc.+ 7,200 170 Tetra Technology, Inc.+ 2,600 37 URS Corp.+ 2,400 31 Volt Information Sciences, Inc.+ 2,800 97 -------- 2,914 -------- Number Value of Shares (000s) --------- ----------- - -------------------------------------------------------------------------------- CHEMICAL -- 3.1% Amcol International Corp. 5,100 83 Arch Chemicals, Inc. 4,100 81 Brady Corp., Class A 4,300 126 Cambrex Corp. 4,600 189 Chemfirst, Inc. 3,300 64 Lilly Industries, Inc., Class A 3,800 41 McWhorter Technologies, Inc.+ 1,700 26 OM Group, Inc. 4,400 202 Omnova Solutions, Inc. 7,900 47 Quaker Chemical Corp. 1,700 29 Tredegar Industries, Inc. 7,100 183 -------- 1,071 -------- - -------------------------------------------------------------------------------- CONSTRUCTION -- 3.5% Apogee Enterprises, Inc. 5,500 20 Building Materials Holding Corp.+ 1,900 19 D.R. Horton, Inc. 11,000 142 Florida Rock Industries, Inc. 3,600 117 Interface, Inc. 8,600 31 Justin Industries, Inc. 4,700 86 Lawson Products, Inc. 2,000 48 Morrison Knudsen Corp.+ 10,100 93 Oakwood Homes Corp. 7,400 22 Republic Group, Inc. 2,300 26 The Ryland Group, Inc. 2,400 48 Simpson Manufacturing, Inc.+ 2,300 104 Standard Pacific Corp. 5,700 57 Stone & Webster, Inc. 2,600 34 Texas Industries, Inc. 3,900 127 Toll Brothers, Inc.+ 7,000 152 U.S. Home Corp.+ 2,600 93 -------- 1,219 -------- - -------------------------------------------------------------------------------- CONSUMER - DURABLE -- 2.3% Bassett Furniture Industries, Inc. 2,000 27 Champion Enterprises, Inc.+ 8,200 58 Coachmen Industries, Inc. 3,000 46 Griffon Corp.+ 5,700 38 La-Z-Boy, Inc. 11,700 184 National Presto Industries, Inc. 1,400 48 Royal Appliance Mfg. Co.+ 3,500 18 Skyline Corp. 1,500 31 SLI, Inc. 6,800 97 Sturm, Ruger & Co., Inc. 5,300 53 Swiss Army Brands, Inc.+ 700 4 39 INSTITUTIONAL SELECT(TM)SMALL-CAP VALUE INDEX FUND SCHEDULE OF INVESTMENTS (continued) April 30, 2000 (Unaudited) Number Value of Shares (000s) --------- ----------- Thomas Industries, Inc. 3,000 $ 60 Toro Co. 2,400 74 Windmere Durable Holdings, Inc. 4,000 64 -------- 802 -------- - -------------------------------------------------------------------------------- CONSUMER - NONDURABLE -- 1.9% A.T. Cross Co., Class A+ 3,300 18 CKE Restaurants, Inc. 7,800 29 Consolidated Products, Inc.+ 5,300 48 Department 56, Inc.+ 2,900 26 Huffy Corp. 2,100 9 IHOP Corp.+ 3,700 60 Landry's Seafood Restaurants, Inc.+ 4,700 41 Luby's Cafeterias, Inc. 4,200 38 Panera Bread Co.+ 2,300 19 Ruby Tuesday, Inc. 5,900 124 Russ Berrie & Co., Inc. 3,700 69 Ryan's Family Steak Houses, Inc.+ 7,000 68 Taco Cabana, Inc., Class A+ 2,600 16 TCBY Enterprises, Inc. 4,500 27 The Marcus Corp. 5,800 62 -------- 654 -------- - -------------------------------------------------------------------------------- ELECTRONICS -- 10.8% ADAC Laboratories+ 4,000 60 Allen Telecom, Inc.+ 5,200 92 Anixter International, Inc.+ 7,100 239 Audiovox Corp., Class A+ 3,900 134 Avid Technology, Inc.+ 4,100 56 Belden, Inc. 4,600 137 Benchmark Electronics, Inc.+ 3,100 125 Cable Design Technologies Corp.+ 5,300 182 Checkpoint Systems, Inc.+ 4,900 44 Coherent, Inc.+ 4,500 260 Esterline Technologies Corp.+ 2,700 33 Gerber Scientific, Inc. 3,800 53 Hadco Corp.+ 2,600 214 Harman International Industries, Inc. 3,300 216 Harmon Industries, Inc. 2,000 35 Hutchinson Technology, Inc.+ 4,600 59 Innovex, Inc. 2,200 19 Intermagnetics General Corp.+ 2,500 30 International Rectifier Corp.+ 11,300 555 Number Value of Shares (000s) --------- ----------- Itron, Inc.+ 2,000 $ 11 Kent Electronics Corp.+ 5,300 155 Park Electrochemical Corp. 1,900 49 Pioneer - Standard Electronics, Inc. 5,200 80 Silicon Valley Group, Inc.+ 6,300 180 Snyder Communications, Inc.+ 13,500 321 SpeedFam-IPEC, Inc.+ 5,600 89 Standard Microsystems Corp.+ 3,000 39 SymmetriCom, Inc.+ 2,900 34 Varian Medical Systems, Inc.+ 5,800 232 -------- 3,733 -------- - -------------------------------------------------------------------------------- ENERGY - RAW MATERIALS -- 2.4% Barrett Resources Corp.+ 6,100 194 Cabot Oil & Gas Corp., Class A 4,800 89 Dril-Quip, Inc.+ 3,200 130 Kirby Corp.+ 4,600 95 Louis Dreyfus Natural Gas Corp.+ 7,400 207 Offshore Logistics, Inc.+ 4,100 50 Sitel Corp.+ 3,700 23 Southwestern Energy Co. 4,800 41 -------- 829 -------- - -------------------------------------------------------------------------------- FOOD & AGRICULTURE -- 3.4% Agribrands International, Inc.+ 1,800 67 American Italian Pasta Co., Class A+ 3,500 87 Chiquita Brands International, Inc. 11,200 43 Corn Products International, Inc. 6,900 166 Dimon, Inc. 8,300 20 Earthgrains Co. 7,600 107 Fleming Cos., Inc. 7,400 122 J & J Snack Foods Corp.+ 1,700 27 Lindsay Manufacturing Co. 2,200 39 Michael Foods, Inc. 3,800 81 Mississippi Chemical Corp. 5,100 39 Nash - Finch Co. 2,300 17 Ralcorp Holdings, Inc.+ 5,900 81 Smithfield Foods, Inc.+ 10,300 220 United Natural Foods, Inc.+ 3,500 53 -------- 1,169 -------- - -------------------------------------------------------------------------------- HEALTHCARE/DRUGS & MEDICINE -- 8.1% Bindley Western Industries, Inc. 5,933 103 Conmed Corp.+ 2,800 73 Cooper Cos., Inc. 2,700 91 40 Number Value of Shares (000s) --------- ----------- Coventry Health Care, Inc.+ 11,100 $ 118 Curative Health Services, Inc.+ 1,900 11 Datascope Corp. 2,800 93 Diagnostic Products Corp. 2,600 80 Dura Pharmaceuticals, Inc.+ 7,600 99 Hologic, Inc.+ 3,000 23 Idexx Laboratories, Inc.+ 6,900 181 Invacare Corp. 5,700 152 Magellan Health Services, Inc.+ 6,000 22 Medicis Pharmaceutical Corp., Class A+ 5,700 249 Nature's Sunshine Products, Inc. 3,400 29 NBTY, Inc.+ 12,700 225 Orthodontic Centers of America, Inc.+ 9,100 193 Owens & Minor, Inc. 6,200 74 Parexel International Corp.+ 4,900 44 Pediatrix Medical Group, Inc.+ 2,200 18 Pharmaceutical Product Development, Inc.+ 4,800 81 Regeneron Pharmaceuticals, Inc.+ 5,900 169 Respironics, Inc.+ 5,700 93 Sierra Health Services, Inc.+ 4,100 15 Sola International, Inc.+ 3,700 17 Spacelabs Medical, Inc.+ 1,300 15 Sunrise Medical, Inc.+ 4,100 22 Syncor International Corp.+ 2,100 87 Universal Health Services, Class B+ 5,800 318 US Oncology, Inc.+ 16,000 55 Vital Signs, Inc. 2,400 48 -------- 2,798 -------- - -------------------------------------------------------------------------------- INSURANCE -- 2.8% Delphi Financial Group, Inc., Class A+ 3,745 108 Enhance Financial Services Group, Inc. 6,600 67 First American Financial Corp. 12,100 187 Fremont General Corp. 12,100 70 Insurance Auto Auctions, Inc.+ 2,200 37 Mutual Risk Management Ltd. 8,200 129 RLI Corp. 1,900 61 SCPIE Holdings, Inc. 2,300 68 Number Value of Shares (000s) --------- ----------- Selective Insurance Group, Inc. 5,200 $ 98 Trenwick Group, Inc. 3,700 52 Zenith National Insurance Corp. 3,300 81 -------- 958 -------- - -------------------------------------------------------------------------------- MEDIA -- 0.4% Carmike Cinemas, Inc., Class A+ 1,400 8 Consolidated Graphics, Inc.+ 2,600 31 GC Cos., Inc.+ 1,500 49 Network Equipment Technologies, Inc.+ 4,200 35 Thomas Nelson, Inc. 2,700 19 -------- 142 -------- - -------------------------------------------------------------------------------- MISCELLANEOUS FINANCE -- 6.1% AmeriCredit Corp.+ 14,100 263 Cash America International, Inc. 4,600 41 Commercial Federal Corp. 10,800 168 Dain Rauscher Corp. 2,400 149 Downey Financial Corp. 5,400 161 Fidelity National Financial, Inc. 12,400 183 Jefferies Group, Inc. 4,600 101 M.D.C. Holdings, Inc. 4,300 82 Midas, Inc. 3,100 78 Morgan Keegan, Inc. 5,000 80 National Discount Broker Group, Inc.+ 3,300 96 Penford Corp. 1,500 25 Radian Group, Inc. 7,000 357 Raymond James Financial, Inc. 8,900 179 Staten Island Bancorp., Inc. 7,600 131 -------- 2,094 -------- - -------------------------------------------------------------------------------- NON-FERROUS METALS -- 2.5% A.M. Castle & Co. 2,500 31 Brush Wellman, Inc. 3,100 57 Coeur d'Alene Mines Corp. 5,500 14 Commercial Metals Co. 2,700 79 Commonwealth Industries, Inc. 3,000 22 IMCO Recycling, Inc. 3,000 31 Mueller Industries, Inc.+ 6,500 214 Reliance Steel & Aluminum Co. 5,300 122 RTI International Metals, Inc.+ 3,900 41 Stillwater Mining Co.+ 7,100 199 41 INSTITUTIONAL SELECT(TM)SMALL-CAP VALUE INDEX FUND SCHEDULE OF INVESTMENTS (continued) April 30, 2000 (Unaudited) Number Value of Shares (000s) --------- ----------- Wolverine Tube, Inc.+ 2,300 $ 34 -------- 844 -------- - -------------------------------------------------------------------------------- OIL - DOMESTIC -- 4.3% HS Resources, Inc.+ 3,300 80 Newfield Exploration Co.+ 7,800 317 Pogo Producing Co. 7,500 192 Pride International, Inc.+ 11,300 256 Remington Oil & Gas Corp.+ 4,100 18 St. Mary Land & Exploration Co. 2,100 71 Stone Energy Corp.+ 3,400 161 Tuboscope Vetco International Corp.+ 8,000 139 Vintage Petroleum, Inc. 11,600 231 -------- 1,465 -------- - -------------------------------------------------------------------------------- OPTICAL & PHOTO -- 0.6% BMC Industries, Inc. 5,200 26 CPI Corp. 1,700 41 Photronics, Inc.+ 4,500 150 -------- 217 -------- - -------------------------------------------------------------------------------- PAPER & FOREST PRODUCTS -- 0.5% Deltic Timber Corp. 2,400 53 Lydall, Inc.+ 2,800 25 Pope & Talbot 2,900 61 Universal Forest Products, Inc. 3,400 46 -------- 185 -------- - -------------------------------------------------------------------------------- PRODUCER GOODS & MANUFACTURING -- 6.9% Applied Industrial Technologies, Inc. 3,700 64 Applied Power, Inc., Class A 7,400 212 AptarGroup, Inc. 6,800 194 Astec Industries, Inc.+ 3,600 90 Baldor Electric, Co. 6,800 126 Barnes Group, Inc. 3,500 59 BE Aerospace, Inc.+ 3,900 29 Butler Manufacturing Co. 1,300 31 CLARCOR, Inc. 4,600 83 Cuno, Inc.+ 3,100 84 Fedders Corp. 6,800 40 Foster Wheeler Corp. 7,800 72 Gardner Denver, Inc.+ 2,900 51 Hughes Supply, Inc. 4,000 61 IDEX Corp. 5,500 172 Ionics, Inc.+ 2,800 66 Number Value of Shares (000s) --------- ----------- JLG Industries, Inc. 7,700 $ 73 Lennox International, Inc. 9,912 84 MascoTech, Inc. 8,200 95 Material Sciences Corp.+ 3,000 32 Oceaneering International, Inc.+ 4,500 78 Regal Beloit 4,000 72 Robbins & Myers, Inc. 2,100 51 SPS Technologies, Inc.+ 2,400 75 Standex International Corp. 2,300 38 Tenneco Automotive, Inc. 6,600 59 Ultratech Stepper, Inc.+ 4,000 60 Valmont Industries, Inc. 4,500 89 Watsco, Inc. 5,500 71 Watts Industries, Inc., Class A 4,900 66 -------- 2,377 -------- - -------------------------------------------------------------------------------- RETAIL -- 4.8% Ames Department Stores, Inc.+ 5,500 99 AnnTaylor Stores Corp.+ 5,600 116 The Bombay Co., Inc.+ 6,300 23 Books-A-Million, Inc.+ 3,000 12 Casey's General Stores, Inc. 9,600 112 The Cato Corp., Class A 5,100 54 DEMARK International, Inc., Class A+ 1,100 29 Enesco Group 2,500 11 Gottschalks, Inc.+ 2,400 14 Hancock Fabrics, Inc. 3,500 14 Lillian Vernon Corp. 1,700 16 Michaels Stores, Inc.+ 5,800 229 Pep Boys-Manny, Moe, & Jack 10,000 63 Pier 1 Imports, Inc. 18,300 208 ShopKo Stores, Inc.+ 5,400 97 Stein Mart, Inc.+ 8,700 78 United Stationers, Inc.+ 6,400 214 Zale Corp.+ 6,600 272 -------- 1,661 -------- - -------------------------------------------------------------------------------- STEEL -- 0.7% Amcast Industrial Corp. 1,700 15 Birmingham Steel Corp. 5,800 25 Intermet Corp. 4,300 32 Quanex Corp. 2,700 44 Steel Dynamics, Inc.+ 8,700 99 Steel Technologies, Inc. 2,100 17 WHX Corp.+ 2,800 19 -------- 251 -------- 42 Number Value of Shares (000s) --------- ----------- - -------------------------------------------------------------------------------- TELEPHONE -- 0.5% Brightpoint, Inc.+ 10,100 $ 119 General Communication, Inc.+ 9,200 46 -------- 165 -------- - -------------------------------------------------------------------------------- TOBACCO -- 0.1% Schweitzer-Mauduit International, Inc. 2,800 41 -------- - -------------------------------------------------------------------------------- TRAVEL & RECREATION -- 1.7% Anchor Gaming, Inc.+ 2,100 85 Aztar Corp.+ 8,200 98 Central Parking Corp. 6,900 177 K2, Inc.+ 3,500 25 Pinnacle Entertainment, Inc.+ 4,900 98 Prime Hospitality Corp.+ 9,400 87 The Sports Authority, Inc.+ 6,400 18 -------- 588 -------- - -------------------------------------------------------------------------------- TRUCKING & FREIGHT -- 3.2% American Freightways Corp.+ 6,100 114 Arkansas Best Corp.+ 3,800 49 Circle International Group, Inc. 3,300 88 Fritz Cos., Inc.+ 6,900 66 Frozen Food Express Industries, Inc. 3,000 10 Heartland Express, Inc.+ 5,900 100 M.S. Carriers, Inc.+ 2,200 52 Rollins Truck Leasing Corp. 9,900 98 US Freightways Corp. 5,000 233 Wabash National Corp. 3,900 57 Werner Enterprises, Inc. 8,800 165 Yellow Corp.+ 4,700 90 -------- 1,122 -------- - -------------------------------------------------------------------------------- UTILITIES - ELECTRIC & GAS-- 4.9% American States Water Co. 1,700 51 Atmos Energy Corp. 5,400 86 Bangor Hydro-Electric Co. 1,400 23 Cascade Natural Gas Corp. 2,100 34 Number Value of Shares (000s) --------- ----------- Central Vermont Public Service Corp. 2,200 $ 24 CH Energy Group, Inc. 2,900 96 Energen Corp. 5,600 103 Green Mountain Power Corp. 600 4 New Jersey Resources Corp. 3,400 137 Northwest Natural Gas Co. 4,600 101 Northwestern Public Services Co. 4,400 101 Piedmont Natural Gas Co., Inc. 5,600 158 Southern Union Co.+ 8,957 154 Southwest Gas Corp. 5,400 103 Unisource Energy Corp. 3,000 49 United Illuminating Co. 2,600 120 United Water Resources, Inc. 7,300 254 Veritas DGC, Inc.+ 4,600 110 -------- 1,708 -------- TOTAL COMMON STOCK (Cost $33,105) 34,457 -------- - -------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS -- 0.6% Provident Institutional TempFund, 5.74%* 220,996 221 -------- TOTAL SHORT-TERM INVESTMENTS (Cost $221) 221 -------- TOTAL INVESTMENTS -- 100.4% (Cost $33,326) 34,678 -------- OTHER ASSETS AND LIABILITIES, NET -- (0.4%) Other assets 1,786 Liabilities (1,931) -------- (145) -------- TOTAL NET ASSETS -- 100.0% $34,533 ========
SEE ACCOMPANYING NOTES TO SCHEDULES OF INVESTMENTS AND NOTES TO FINANCIAL STATEMENTS. 43 NOTES TO SCHEDULES OF INVESTMENTS April 30, 2000 (Unaudited) + Non-income producing security. * Interest rate represents the yield on report date. ADR -- American Depository Receipt. (a) Yields shown are effective yields at time of purchase. (b) These securities, or portion thereof, are being used to collateralize open futures contracts. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 44 STATEMENTS OF ASSETS AND LIABILITIES (in thousands) April 30, 2000 (Unaudited)
Institutional Select(TM) Funds ------------------------------------------ Large-Cap Small-Cap S&P 500 Value Index Value Index ------- ------------ ------------ ASSETS Investments, at value (Cost: $314,107, $101,900, and $33,326, respectively) $342,488 $103,632 $34,678 Cash held as collateral for securities on loan (see Note 6) 30,010 9,138 1,673 Receivables: Fund shares sold 637 8 57 Dividends 259 113 20 Interest 23 6 -- Securities lending income 2 1 1 Advisory reimbursement to fund -- 7 21 Prepaid expenses 38 38 14 -------- -------- ------- Total assets 373,457 112,943 36,464 -------- -------- ------- LIABILITIES Collateral held for securities on loan (see Note 6) 30,010 9,138 1,673 Payables: Investments purchased 2,283 845 79 Borrowings on line of credit (see Note 5) -- -- 138 Variation margin 11 2 -- Transfer agency and shareholder service fees 1 2 -- Accrued expenses 45 100 41 -------- -------- ------- Total liabilities 32,350 10,087 1,931 -------- -------- ------- Net assets applicable to outstanding shares $341,107 $102,856 $34,533 ======== ======== ======= NET ASSETS CONSIST OF: Paid-in capital $313,585 $100,187 $33,514 Undistributed net investment income 1,109 500 89 Accumulated net realized gain (loss) on investments sold and futures contracts (2,072) 415 (422) Net unrealized appreciation on investments and futures contracts 28,485 1,754 1,352 -------- -------- ------- $341,107 $102,856 $34,533 ======== ======== ======= PRICING OF SHARES: Outstanding shares, $0.00001 par value (unlimited shares authorized) 29,951 9,595 3,362 Net asset value, offering and redemption price per share $11.39 $10.72 $10.27
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 45 STATEMENTS OF OPERATIONS (in thousands) For the six months ended April 30, 2000 (Unaudited)
Institutional Select(TM) Funds ------------------------------------------- Large-Cap Small-Cap S&P 500 Value Index Value Index ---------- ----------- ----------- Investment income: Dividends (net of foreign tax withheld of $2, $1, and $0, respectively) $ 1,663 $ 773 $ 193 Interest 192 51 9 Securities lending 27 7 6 ------- ------ ------ Total investment income 1,882 831 208 Expenses: Investment advisory and administration fees 281 87 41 Transfer agency and shareholder service fees 146 44 17 Custodian fees 44 94 41 Portfolio accounting fees 20 6 2 Registration fees 14 3 5 Professional fees 11 1 5 Shareholder reports 5 16 5 Trustees' fees 3 2 3 Interest expense 1 -- 1 Proxy fees 8 3 2 Other expenses 4 3 1 ------- ------ ------ 537 259 123 Less:expenses reduced (see Note 4) (309) (147) (86) ------- ------ ------ Net expenses incurred by fund 228 112 37 ------- ------ ------ Net investment income 1,654 719 171 ------- ------ ------ Net realized gain (loss) on investments and futures contracts: Net realized gain (loss) on investments sold (1,881) 472 (476) Net realized gain (loss) on futures contracts (46) (45) 48 ------- ------ ------ Net realized gain (loss) on investments and futures contracts (1,927) 427 (428) ------- ------ ------ Change in net unrealized appreciation (depreciation) on investments and futures contracts: Net unrealized appreciation on investments 18,215 1,263 3,146 Net unrealized appreciation (depreciation) on futures contracts (30) 12 14 ------- ------ ------ Net unrealized appreciation on investments and futures contracts 18,185 1,275 3,160 ------- ------ ------ Net gain on investments 16,258 1,702 2,732 ------- ------ ------ Increase in net assets resulting from operations $17,912 $2,421 $2,903 ======= ====== ======
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 46 STATEMENTS OF CHANGES IN NET ASSETS (in thousands)
Institutional Select(TM) Funds ---------------------------------------------------------------------- Large-Cap Small-Cap S&P 500 Value Index Value Index ----------------------- ---------------------- ----------------------- Six months Six months Six months ended Period ended Period ended Period 04/30/00 ended 04/30/00 ended 04/30/00 ended (Unaudited) 10/31/99+ (Unaudited) 10/31/99+ (Unaudited) 10/31/99+ ------------ ---------- ------------ --------- ------------ --------- Operations: Net investment income $ 1,654 $ 1,563 $ 719 $ 573 $ 171 $ 221 Net realized gain (loss) on investments and futures contracts (1,927) 309 427 873 (428) 1,310 Net unrealized appreciation (depreciation) on investments and futures contracts 18,185 10,300 1,275 479 3,160 (1,808) -------- -------- -------- ------- -------- ------- Increase (decrease) in net assets resulting from operations 17,912 12,172 2,421 1,925 2,903 (277) -------- -------- -------- ------- -------- ------- Dividends and distributions: Dividends to shareholders from net investment income (2,118) -- (801) -- (303) -- Distributions to shareholders from net capital gains (454) -- (885) -- (1,304) -- -------- -------- -------- ------- -------- ------- Total dividends and distributions to shareholders (2,572) -- (1,686) -- (1,607) -- Capital share transactions: Proceeds from shares sold 135,039 245,377 46,187 73,458 9,827 33,450 Net asset value of shares issued in reinvestment of dividends 2,148 25 1,533 11 1,280 7 Early withdrawal fees (see Note 8) 17 -- 18 -- 12 -- Payments for shares redeemed (49,913) (19,098) (17,102) (3,909) (9,526) (1,536) -------- -------- -------- ------- -------- ------- Increase in net assets from capital share transactions 87,291 226,304 30,636 69,560 1,593 31,921 -------- -------- -------- ------- -------- ------- Total increase in net assets 102,631 238,476 31,371 71,485 2,889 31,644 Net assets: Beginning of period 238,476 -- 71,485 -- 31,644 -- -------- -------- -------- ------- -------- ------- End of period (including undistributed net investment income of $1,109, $1,563, $500, $573, $89, and $221, respectively) $341,107 $238,476 $102,856 $71,485 $34,533 $31,644 ======== ======== ======== ======= ======= ======= Number of fund shares: Sold 12,091 24,038 4,398 7,066 999 3,351 Reinvested 193 -- 148 -- 134 -- Redeemed (4,543) (1,828) (1,646) (371) (970) (152) -------- -------- -------- ------- -------- ------- Net increase in shares outstanding 7,741 22,210 2,900 6,695 163 3,199 Shares outstanding: Beginning of period 22,210 -- 6,695 -- 3,199 -- -------- -------- -------- ------- -------- ------- End of period 29,951 22,210 9,595 6,695 3,362 3,199 ======== ======== ======== ======= ======== =======
+ For the period from February 1, 1999 (commencement of operations) to October 31, 1999. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 47 FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- 11/1/99- 2/1/99*- INSTITUTIONAL SELECT(TM) 4/30/00 10/31/99 S&P 500 FUND (Unaudited) - -------------------------------------------------------------------------------- PER-SHARE DATA ($) - -------------------------------------------------------------------------------- Net asset value at beginning of period 10.74 10.00 ---------------------- Income from investment operations: Net investment income 0.06 0.07 Net realized and unrealized gain on investments 0.70 0.67 ---------------------- Total income from investment operations 0.76 0.74 Less distributions: Dividends from net investment income (0.09) -- Distributions from capital gains (0.02) -- ---------------------- Total distributions (0.11) -- ---------------------- NET ASSET VALUE AT END OF PERIOD 11.39 10.74 ---------------------- Total return (%) 7.08(1) 7.40(1) RATIOS/SUPPLEMENTAL DATA (%) - -------------------------------------------------------------------------------- Ratio of net operating expenses to average net assets 0.15(2,3) 0.13(2) Expense reductions reflected in above ratio 0.21(2) 0.42(2) Ratio of net investment income to average net assets 1.13(2) 1.37(2) Portfolio turnover rate 4 1 Net assets, end of period ($ x 1,000) 341,107 238,476 (*) Commencement of operations. (1) Not annualized. (2) Annualized. (3) Would have been 0.16% if certain non-routine expenses had been included. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 48 - -------------------------------------------------------------------------------- 11/1/99- 2/1/99*- INSTITUTIONAL SELECT(TM) 4/30/00 10/31/99 LARGE-CAP VALUE INDEX FUND (Unaudited) - -------------------------------------------------------------------------------- PER-SHARE DATA ($) - -------------------------------------------------------------------------------- Net asset value at beginning of period 10.68 10.00 ---------------------- Income from investment operations: Net investment income 0.08 0.09 Net realized and unrealized gain on investments 0.19 0.59 ---------------------- Total income from investment operations 0.27 0.68 Less distributions: Dividends from net investment income (0.11) -- Distributions from capital gains (0.12) -- ---------------------- Total distributions (0.23) -- NET ASSET VALUE AT END OF PERIOD 10.72 10.68 ---------------------- Total return (%) 2.59(1) 6.80(1) RATIOS/SUPPLEMENTAL DATA (%) - -------------------------------------------------------------------------------- Ratio of net operating expenses to average net assets 0.25(2,3) 0.21(2) Expense reductions reflected in above ratio 0.33(2) 0.49(2) Ratio of net investment income to average net assets 1.65(2) 1.62(2) Portfolio turnover rate 15 19 Net assets, end of period ($ x 1,000) 102,856 71,485 (*) Commencement of operations. (1) Not annualized. (2) Annualized. (3) Would have been 0.26% if certain non-routine expenses had been included. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 49 FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- 11/1/99- 2/1/99*- INSTITUTIONAL SELECT(TM) 4/30/00 10/31/99 SMALL-CAP VALUE INDEX FUND (Unaudited) PER-SHARE DATA ($) - -------------------------------------------------------------------------------- Net asset value at beginning of period 9.89 10.00 ---------------------- Income from investment operations: Net investment income 0.05 0.07 Net realized and unrealized gain (loss) on investments 0.82 (0.18) ---------------------- Total income (loss) from investment operations 0.87 (0.11) ---------------------- Less distributions: Dividends from net investment income (0.09) -- Distributions from capital gains (0.40) -- ---------------------- Total distributions (0.49) -- NET ASSET VALUE AT END OF PERIOD 10.27 9.89 - -------------------------------------------------------------------------------- Total return (%) 9.21(1) (1.10)(1) RATIOS/SUPPLEMENTAL DATA (%) - -------------------------------------------------------------------------------- Ratio of net operating expenses to average net assets 0.21(2,3) 0.00(2) Expense reductions reflected in above ratio 0.52(2) 0.98(2) Ratio of net investment income to average net assets 1.03(2) 1.25(2) Portfolio turnover rate 44 38 Net assets, end of period ($ x 1,000) 34,533 31,644 (*) Commencement of operations. (1) Not annualized. (2) Annualized. (3) Would have been 0.22% if certain non-routine expenses had been included. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 50 NOTES TO FINANCIAL STATEMENTS For the six months ended April 30, 2000 (Unaudited) (All currency amounts are in thousands unless otherwise noted.) 1. DESCRIPTION OF THE FUNDS The Institutional Select(TM) S&P 500 Fund, Institutional Select(TM) Large-Cap Value Index Fund and Institutional Select(TM) Small-Cap Value Index Fund (the "funds") are series of Schwab Capital Trust (the "trust"), a no-load, open-end, investment management company organized as a Massachusetts business trust on May 7, 1993, and registered under the Investment Company Act of 1940, as amended (the "1940 Act"). In addition to the funds, the trust also offers the Schwab Total Stock Market Index Fund(TM), Schwab S&P 500 Fund, Schwab Small-Cap Index Fund(R), Schwab International Index Fund(R), Schwab MarketTrack Growth Portfolio, Schwab MarketTrack Balanced Portfolio, Schwab MarketTrack Conservative Portfolio, Schwab MarketTrack All Equity Portfolio, Schwab Analytics Fund(R), Schwab MarketManager Growth Portfolio, Schwab MarketManager Balanced Portfolio, Schwab MarketManager Small Cap Portfolio and Schwab MarketManager International Portfolio. 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. 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 or in the over-the-counter market 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 funds' investment adviser pursuant to guidelines adopted in good faith by the Board of Trustees. Futures contracts, which are traded on exchanges, are valued at their settlement prices as of the close of such exchanges. Short-term securities with 60 days or less to maturity are stated at amortized cost, which approximates market value. SECURITY TRANSACTIONS, INVESTMENT INCOME AND REALIZED GAINS (LOSSES) -- Security transactions are accounted for on a trade-date basis (date the order to buy or sell is executed). Dividend income and distributions to shareholders are recorded on the ex-dividend date. Interest income (including accretion of discount) is recorded on the accrual basis. Realized gains and losses from security transactions are determined on an identified cost basis. FUTURES CONTRACTS -- The funds may invest in futures contracts. The funds are required to deposit with the broker an amount of cash equivalents equal to a certain percentage of the contract amount. This is known as the "initial margin." The "variation margin" represents the daily fluctuation in the value of the contract. When the contract is closed, the funds record a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the time it was closed. 51 NOTES TO FINANCIAL STATEMENTS (continued) The funds will invest in these instruments to participate in the return of an index. The use of futures contracts involves certain risks, which include (1) imperfect correlation between the price movement of the contracts and the underlying securities, or (2) inability to close out positions due to different trading hours, or the temporary absence of a liquid market, for either the contract or underlying securities. These risks may involve amounts exceeding the amount recognized in each fund's statement of operations at any given time. As of April 30, 2000, the Institutional Select(TM) S&P 500 Fund and the Institutional Select(TM) Large-Cap Value Index Fund had the following open Index futures contracts:
Type of Number of Contract Unrealized Fund Contract Contracts Value Expiration Appreciation - ---- ---------- ---------- ---------- ---------- ------------ Institutional Select S&P 500 Fund S&P 500 Index 4 $1,460 6/16/00 $104 Institutional Select Large-Cap Value Index Fund S&P 500 Index 1 365 6/16/00 22
The eligible securities on deposit with brokers available to cover margin requirements for open futures positions at April 30, 2000, were $298 and $40, respectively, for the Institutional Select S&P 500 Fund and the Institutional Select Large-Cap Value Index Fund. The funds have segregated short-term investments and other securities for the remaining portion of the contract value. EXPENSES -- Expenses arising in connection with a fund are charged directly to that 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 each fund's policy to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all net investment income and realized net capital gains, if any, to shareholders. Therefore, no federal income tax provision is required. Each fund is considered a separate entity for tax purposes. The aggregate unrealized appreciation and depreciation for securities held by the funds at April 30, 2000, which was substantially the same for financial reporting and federal income tax purposes, was as follows:
Net Unrealized Appreciated Depreciated Fund Appreciation Securities Securities -------- ------------ ---------- ------------ Institutional Select S&P 500 Fund $28,485 $58,572 $(30,087) Institutional Select Large-Cap Value Index Fund 1,754 11,294 (9,540) Institutional Select(TM)Small-Cap Value Index Fund 1,352 5,728 (4,376)
52 RECLASSIFICATIONS -- Generally accepted accounting principles require that certain components of net assets be reclassified between financial and tax reporting. These reclassifications have no effect on net assets or net asset values per share. On the statements of assets and liabilities, the following reclassifications were made:
Undistributed Net Investment Portfolio Income Paid-In Capital ------ ------------ ------------ Institutional Select(TM)S&P 500 Fund $10 $(10) Institutional Select(TM)Large-Cap Value Index Fund 9 (9)
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 adviser"). For advisory services and facilities furnished, the Institutional Select S&P 500 Fund pays an annual fee, payable monthly, of 0.18% of the first $1 billion of average daily net assets and 0.15% of such net assets over $1 billion, the Institutional Select Large-Cap Value Index Fund pays 0.20% of the first $1 billion of average daily net assets and 0.18% of such net assets over $1 billion and the Institutional Select(TM) Small-Cap Value Index Fund pays 0.25% of the first $1 billion of average daily net assets and 0.23% of such net assets over $1 billion. The investment adviser has waived or reduced its fee for the six months ended April 30, 2000 (see Note 4). Prior to February 29, 2000, the Institutional Select S&P 500 Fund and the Institutional Select Large-Cap Value Index Fund paid an annual fee, payable monthly, of 0.20% of the first $1 billion of average daily net assets and 0.18% of such net assets over $1 billion for advisory services and facilities furnished. 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 each Fund's average daily net assets for transfer agency services and 0.05% of such net assets for shareholder services. Schwab has waived or reduced a portion of its transfer agency and shareholder service fees for the six months ended April 30, 2000 (see Note 4). OFFICERS AND TRUSTEES -- Certain officers and trustees of the trust are also officers and/or directors of the investment adviser and/or Schwab. During the period ended April 30, 2000, the trust made no direct payments to its officers or trustees who are "interested persons" within the meaning of the 1940 Act. The funds incurred fees aggregating $8 related to the trust's unaffiliated trustees. As of April 30, 2000, the Institutional Select S&P 500 Fund held common stock of the Charles Schwab Corp., an affiliated issuer, with a current value of $997. 53 NOTES TO FINANCIAL STATEMENTS (concluded) 4. EXPENSES REDUCED AND ABSORBED BY THE INVESTMENT ADVISER AND SCHWAB The investment adviser and Schwab guarantee that, through at least December 31, 2005, total operating expenses of Institutional Select(TM) S&P 500 Fund, Institutional Select(TM) Large-Cap Value Index Fund and Institutional Select(TM) Small-Cap Value Index Fund will not exceed 0.15%, 0.25% and 0.32%, respectively, of each fund's average daily net assets, after waivers and reimbursements. For the purpose of this guarantee, operating expenses do not include interest, taxes and certain non-routine expenses. The operating expense ratio for the six months ended April 30, 2000 did include non-routine expenses. For the six months ended April 30, 2000, the total of such fees and expenses reduced by the investment adviser was $222, $87, and $41, respectively, for the Institutional Select S&P 500 Fund, Institutional Select Large-Cap Value Index Fund and Institutional Select Small-Cap Value Index Fund. In addition, the total expenses reimbursed by the investment adviser was $20 and $39, respectively, for the Institutional Select Large-Cap Value Index Fund and Institutional Select Small-Cap Value Index Fund. The total of such fees reduced by Schwab was $87, $40, and $6, respectively, for the Institutional Select S&P 500 Fund, Institutional Select Large-Cap Value Index Fund and Institutional Select Small-Cap Value Index Fund. 5. BORROWING AGREEMENTS The trusts have both committed and uncommitted lines of credit arrangements with PNCBank N.A., Bank of America NT & SA and The Bank of New York, whereby the trusts may borrow on behalf of the funds, as a temporary measure to satisfy redemption requests or for extraordinary or emergency purposes. The trusts may borrow in an aggregate amount of up to $150 million from PNC Bank N.A., $133 million from Bank of America NT &SA and $183 million from The Bank of New York. Amounts borrowed under these arrangements bear interest at periodically negotiated rates. The funds also pay annual fees for the unused balance of the committed line of credit. During the reporting period, the funds only borrowed against the uncommitted lines of credit. As of April 30, 2000, the Institutional Select Small-Cap Value Index Fund had $138 in borrowings with an interest rate of 6.438%, and the balance was repaid on May 1, 2000. 54 6. SECURITIES LENDING The Institutional Select(TM) S&P 500 Fund, Institutional Select(TM) Large-Cap Value Index Fund and Institutional Select(TM) Small-Cap Value Index Fund loaned securities to certain brokers, dealers and other financial institutions who paid the funds negotiated lenders' fees. The funds received cash collateral, letters of credit or U.S. Government securities against the loaned securities in an amount equal to 102% of the market value of the loaned securities at the inception of each loan. The loans were and at all times will be collateralized in an amount equal to at least 100% of the market value of the securities loaned.
Market Value of Market Value of Fund Securities Loaned Collateral ---- ---------------- --------------- Institutional Select S&P 500 Fund $29,253 $30,010 Institutional Select Large-Cap Value Index Fund 8,876 9,138 Institutional Select Small-Cap Value Index Fund 1,595 1,673
7. INVESTMENT TRANSACTIONS Purchases, sales and maturities of investment securities, other than short-term obligations and U.S. Government securities, for the six months ended April 30, 2000, were as follows:
Proceeds of Sales Fund Purchases and Maturities -------- ----------- --------------- Institutional Select S&P 500 Fund $99,205 $10,803 Institutional Select Large-Cap Value Index Fund 42,475 12,638 Institutional Select Small-Cap Value Index Fund 15,586 14,672
8. EARLY WITHDRAWAL FEES The early withdrawal fees are retained by the funds and are treated as a contribution to capital.
Early withdrawal fees on Early withdrawal Fund redemption proceeds+ fees as of 4/30/00 -------- ---------------------- ------------------ Institutional Select S&P 500 Fund 0.25%* $17 Institutional Select Large-Cap Value Index Fund 0.50%* 18 Institutional Select Small-Cap Value Index Fund 0.75% 12
+Attributable to shares purchased and held less than 180 days. *Effective 05/01/00, the early withdrawal fees have been changed to 0.75%. 55 THIS SPACE RESERVED FOR YOUR COMMENTS AND QUESTIONS. A SCHWAB REPRESENTATIVE WILL BE HAPPY TO ASSIST YOU. THIS SPACE RESERVED FOR YOUR COMMENTS AND QUESTIONS. A SCHWAB REPRESENTATIVE WILL BE HAPPY TO ASSIST YOU. THIS SPACE RESERVED FOR YOUR COMMENTS AND QUESTIONS. A SCHWAB REPRESENTATIVE WILL BE HAPPY TO ASSIST YOU. INSTITUTIONAL SELECT-TM- FUNDS FUNDS DESIGNED TO MEET YOUR NEEDS The Institutional Select Funds were designed with input from Investment Managers, who indicated a need for low-cost, tax-efficient index fund alternatives. At Charles Schwab Investment Management, Inc. (CSIM), our goal is to understand the needs of our clients and then design investment tools that meet those needs. Through targeted research, we learned that our clients want low-cost index fund alternatives that are managed with an emphasis on tax efficiency and offer accurate tracking potential and a proven management team. The Institutional Select Funds are a direct result of that research, and offer real advantages designed specifically for institutional-type investors. CSIM--THE RIGHT RESOURCES FOR INVESTMENT ADVISERS When we began in 1989, CSIM's primary focus was the retail customer, and today--with more than 40 fund products, five million SchwabFunds-Registered Trademark- shareholder and more than $110 billion in assets under management--we are a market leader. Today, Investment Managers represent a large and growing part of the overall customer base for Charles Schwab & Co., Inc. (Schwab). The Institutional Select Funds are the first of what we hope will be many new CSIM funds that will provide high quality, cost-efficient portfolios for Investment Managers and their clients. We will continue to work closely with Investment Managers nationwide, with a view to provide them with the best institutional investment tools. CSIM serves as the investment adviser to the SchwabFunds, and is an affiliate of Schwab. Schwab is the distributor for the Institutional Select Funds and SchwabFunds. The Charles Schwab Corporation is the parent company of CSIM and Schwab. THIS REPORT MUST BE PRECEDED OR ACCOMPANIED BY A CURRENT PROSPECTUS. INSTITUTIONAL SELECT-TM- FUNDS 101 MONTGOMERY STREET, SAN FRANCISCO, CA 94104 INVESTMENT ADVISER Charles Schwab Investment Management, Inc. 101 Montgomery Street, San Francisco, CA 94104 DISTRIBUTOR Charles Schwab & Co., Inc. P.O. Box 7575, San Francisco, CA 94120-7575 This report is not authorized for distribution to prospective investors unless preceded or accompanied by a current prospectus. - -C-2000 Charles Schwab & Co., Inc. All rights reserved, Member SIPC/NYSE. Printed on recycled paper. MKT-3995-1 (6/00) -----END PRIVACY-ENHANCED MESSAGE-----